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EXHIBIT 2.1
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ACQUISITION AGREEMENT
by and between
CISCO SYSTEMS, INC.
and
INTEGRATED NETWORK CORPORATION
Dated as of July 27, 1997
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TABLE OF CONTENTS
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ARTICLE I ASSETS AND LIABILITIES............................................ 1
Section 1.1 Description of Assets to be Acquired.............................. 1
Section 1.2 Excluded Assets................................................... 3
Section 1.3 Assumed Liabilities............................................... 3
Section 1.4 Liabilities Not Assumed........................................... 3
ARTICLE II FORMATION OF COMPANY.............................................. 4
Section 2.1 Organization of Company........................................... 4
ARTICLE III PURCHASE AND SALE OF STOCK........................................ 4
Section 3.1 Purchase and Sale................................................. 4
Section 3.2 Purchase Price.................................................... 4
Section 3.3 Tax Treatment; Allocation of Purchase Price....................... 4
ARTICLE IV REPRESENTATIONS AND WARRANTIES.................................... 5
Section 4.1 Representations and Warranties of Seller.......................... 5
(a) Organization of Seller............................................ 5
(b) Authorization of Seller........................................... 5
(c) Financial Information............................................. 5
(d) No Sales.......................................................... 6
(e) Absence of Certain Changes and Events............................. 6
(f) Undisclosed Liabilities........................................... 6
(g) Inventory......................................................... 6
(h) Taxes............................................................. 6
(i) Compliance With Law............................................... 7
(j) Governmental Consents............................................. 7
(k) Proprietary Rights................................................ 8
(l) Contracts and Commitments......................................... 8
(m) Assets............................................................ 9
(n) Operating Condition of Assets..................................... 9
(o) Title to the Assets............................................... 9
(p) Litigation........................................................ 9
(q) No Conflict or Default............................................ 10
(r) Labor Relations................................................... 10
(s) Employee Benefit Plans............................................ 10
(t) Brokers' and Finders' Fees........................................ 11
(u) Books and Records................................................. 11
(v) Complete Disclosure............................................... 11
(w) Accounts Receivable............................................... 11
(x) Environmental Matters............................................. 11
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(y) Company Matters; Title to Shares.................................. 12
Section 4.2 Representations and Warranties of Purchaser....................... 13
(a) Organization of Purchaser......................................... 13
(b) Authorization of Purchaser........................................ 13
(c) Governmental Consents............................................. 13
(d) Litigation........................................................ 13
(e) No Conflict or Default............................................ 14
(f) Brokers' and Finders' Fees........................................ 14
(g) Complete Disclosure............................................... 14
(h) Purchaser's Funds................................................. 14
ARTICLE V COVENANTS......................................................... 14
Section 5.1 Non-Competition................................................... 14
Section 5.2 Maintenance of Assets and Technology.............................. 16
Section 5.3 Access to Information............................................. 17
Section 5.4 No Solicitation................................................... 18
Section 5.5 Post Closing Payments............................................. 18
Section 5.6 Post Closing Assistance........................................... 18
Section 5.7 Sales and Transfer Taxes.......................................... 18
Section 5.8 Tax Returns....................................................... 18
Section 5.9 Employees......................................................... 19
Section 5.10 Employee Benefit Plans; Assumption of Stock Options............... 19
Section 5.11 Bulk Sales Laws................................................... 22
Section 5.12 Public Disclosure................................................. 22
Section 5.13 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filings......................................... 22
Section 5.14 Escrow Agreement.................................................. 23
Section 5.15 License Agreement................................................. 23
Section 5.16 Indemnification................................................... 23
Section 5.17 Reimbursement of Certain Costs.................................... 23
ARTICLE VI CLOSING........................................................... 24
Section 6.1 Time of Closing................................................... 24
Section 6.2 Deliveries by Seller.............................................. 24
Section 6.3 Deliveries by Purchaser........................................... 25
Section 6.4 Further Assurances................................................ 25
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS......................................... 26
Section 7.1 Conditions to Obligations of Purchaser............................ 26
(a) Representations and Warranties.................................... 26
(b) Performance of Agreement.......................................... 26
(c) No Material Adverse Change........................................ 26
(d) Absence of Governmental or Other Objection........................ 26
(e) Evidence of Title................................................. 26
(f) Approval of Documentation......................................... 26
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(g) Assignment and Novations.......................................... 27
(h) Employment Arrangements........................................... 27
(i) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Compliance...................................... 27
Section 7.2 Conditions to Obligations of Seller............................... 27
(a) Representations and Warranties.................................... 27
(b) Performance of Agreement.......................................... 27
(c) Absence of Governmental or Other Objection........................ 27
(d) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Compliance...................................... 27
(e) Approval of Documentation......................................... 27
ARTICLE VIII ESCROW AND INDEMNIFICATION........................................ 28
Section 8.1 Escrow Fund....................................................... 28
Section 8.2 Indemnification................................................... 28
Section 8.3 Damage Threshold.................................................. 29
Section 8.4 Escrow Period..................................................... 29
Section 8.5 Claims upon Escrow Fund........................................... 30
Section 8.6 Objections to Claims.............................................. 30
Section 8.7 Resolution of Conflicts; Arbitration.............................. 30
Section 8.8 Third-Party Claims................................................ 31
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER................................. 31
Section 9.1 Termination....................................................... 31
Section 9.2 Effect of Termination............................................. 32
Section 9.3 Expenses and Termination Fees..................................... 32
Section 9.4 Extension; Waiver................................................. 33
ARTICLE X MISCELLANEOUS..................................................... 33
Section 10.1 Notice............................................................ 33
Section 10.2 Entire Agreement.................................................. 34
Section 10.3 Binding Effect; Assignment........................................ 34
Section 10.4 Expenses of Transaction........................................... 34
Section 10.5 Waiver; Consent................................................... 34
Section 10.6 Counterparts...................................................... 34
Section 10.7 Severability...................................................... 34
Section 10.8 Remedies of Purchaser............................................. 35
Section 10.9 Governing Law..................................................... 35
Section 10.10 Cooperation and Records Retention................................. 35
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SCHEDULES
1.1(a) List of Related Property
1.1(b) List of Inventory
1.1(c) List of Contracts
1.1(d) List of Permits
1.1(e) List of Proprietary Rights
1.1(f) List of Accounts Receivable
1.1(k) List of Other Assets
1.2 List of Excluded Assets
1.3 List of Assumed Liabilities
4(o) List of Liens
4(p) List of Litigation
4(r) List of Employees and Consultants
4(s) List of Employee Benefit Plans and Stock Options
4.1(e) Absence of Certain Changes
4.1(k) Title to Technology
5.9 List of Key Employees
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EXHIBITS
Exhibit A Form of ▇▇▇▇ of Sale
Exhibit B Form of License Agreement
Exhibit C Form of Escrow Agreement
Exhibit D-1 Form of Employment and Non-Competition Agreement
Exhibit D-2 Form of Employment Agreement
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ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT is dated as of July 27, 1997 by and between
CISCO SYSTEMS, INC., a California corporation ("Purchaser"), and INTEGRATED
NETWORK CORPORATION, a Delaware corporation ("Seller").
WHEREAS, Seller is engaged in, among other things, designing, developing,
manufacturing and selling technology related to the development of a Digital
Subscriber Loop ("DSL") Access Multiplexer and its associated Customer Premises
Equipment to provide multiprotocol communications services using Asynchronous
Transfer Mode ("ATM") and/or Internet Protocol ("IP") over various x-DSL loop
modulation technologies and techniques, as further defined in the list of
proprietary rights in Schedule 1.1(e) hereto (the "Technology");
WHEREAS, the parties intend that Seller form a wholly owned California
subsidiary ("Company") to which Seller will contribute, all of the properties,
assets, rights and obligations of Seller related to the Technology upon the
terms and conditions set forth in this Agreement; and
WHEREAS, immediately following such contribution, Purchaser desires to
purchase from Seller, and Seller desires to sell to Purchaser, all outstanding
capital stock of the Company, upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereby agree as follows:
ARTICLE I
ASSETS AND LIABILITIES
Section 1.1 Description of Assets to be Acquired. Upon the terms and
subject to the conditions set forth in this Agreement, at the Time of Closing
(as defined in Section 6.1 hereof), Seller agrees to contribute, convey, sell,
transfer, assign, and deliver to Company, all right, title, and interest of
Seller in and to the following assets, properties, and rights, wherever located:
(a) All interests in machinery, equipment, computer hardware,
peripherals, operating software, application software, development and debugging
tools, development environments and quality assurance equipment and testing
suites, and furniture and fixtures primarily related to the Technology (the
"Related Property"), including those listed on Schedule 1.1(a) hereto;
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(b) All inventory owned by Seller related to the Technology (wherever
located), including, without limitation, raw materials, work-in-progress,
finished goods and supplies related to the Technology, including those listed on
Schedule 1.1(b) hereto, excluding any excess, unusable or obsolete items (the
"Inventory");
(c) All claims and rights under all agreements, contracts, contract
rights, sales invoices, licenses, purchase and sale orders, quotations, and
other executory commitments to the extent associated with the Technology or any
other Assets, as such term is defined below (collectively, the "Contracts"),
including those listed on Schedule 1.1(c) hereto and all "Contracts Requiring
Novation or Consents to Assignment" as such phrase is defined in Section
4.1(l)(c) hereof;
(d) All franchises, licenses, permits, consents, authorizations,
certificates and approvals (collectively referred to herein as "Permits") of any
federal, state, or local regulatory, administrative, or other governmental
agency or body issued to or held by Seller which are necessary, related or
incidental to the Technology or any other Assets, including those listed on
Schedule 1.1(d) hereto;
(e) All rights, title and interest to patents, trademarks, patent
applications, trademark rights, trade secrets, information, proprietary rights,
license rights, service marks, inventions, tradenames, copyrights, processes,
technical information, software, licenses, designs, proprietary information and
confidentiality agreements, logos, and customer and supplier lists related to
the Technology or any other Assets, together with the goodwill associated
therewith (collectively, the "Proprietary Rights"), including those listed on
Schedule 1.1(e) hereto;
(f) All accounts receivable of Seller related to sales or sales orders
for the Technology or any other Assets, including those listed on Schedule
1.1(f) hereto (the "Accounts Receivable");
(g) All rights, if any, under express or implied warranties from
suppliers and vendors of Seller to the extent they are related to the Technology
or any other Assets;
(h) All of Seller's causes of action, judgments, and claims or demands
of whatever kind or description arising out of or relating to the Technology or
any other Assets;
(i) All goodwill associated with the Technology (the "Goodwill");
(j) All books, records, files and papers, whether in hard copy or
computer format, primarily related to the Technology or any other Assets,
including, without limitation, all originals of books of account, general
ledgers, accounts payable and payroll records, engineering information, sales
and promotional literature, manuals and data, sales and
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purchase correspondence, lists of present and former suppliers, lists of present
and former customers, personnel and employment records, Tax Returns (as defined
below) and supporting schedules, and any other Tax information; and
(k) Such other properties or assets ("Other Assets") that are used
primarily in connection with the Technology or are listed on Schedule 1.1(k)
hereto.
The assets, properties, and rights to be conveyed, sold, transferred,
assigned, and delivered to Purchaser pursuant to this Section 1.1 are sometimes
hereinafter collectively referred to as the "Assets."
Section 1.2 Excluded Assets. The Assets to be transferred to Company
pursuant to this Agreement shall only include the assets listed pursuant to
Section 1.1, and without limitation not include assets listed on Schedule 1.2
hereof (collectively, the "Excluded Assets").
Section 1.3 Assumed Liabilities. Upon the terms and subject to the
conditions of this Agreement, the parties agree that, effective at the Time of
Closing, Company shall assume from Seller, and satisfy and perform when due,
only the following liabilities and obligations (the "Assumed Liabilities"):
(a) those liabilities and obligations of Seller related to the Assets or
Technology that are specifically identified on Schedule 1.3 hereto; and
(b) all liabilities and obligations of Seller arising under the
Contracts that by the terms thereof are required to be performed after the Time
of Closing.
Section 1.4 Liabilities Not Assumed. The parties agree that Company shall
not assume, nor shall Company or any affiliate of Company (including, following
the Closing, Purchaser or any affiliate thereof) be deemed to have assumed or
guaranteed, any other liability or obligation of any nature of Seller, or claims
of such liability or obligation, whether accrued, matured or unmatured,
liquidated or unliquidated, fixed or contingent, or known or unknown, including
without limitation any liability or obligation arising out of or related to (i)
acts or occurrences, or any of the Assets, prior to the Time of Closing, (ii)
any Excluded Asset or (iii) any accounts payable, accrued liabilities,
indebtedness, or other liability or obligation of Seller that is not an Assumed
Liability (collectively, the "Unassumed Liabilities"). The Unassumed Liabilities
shall be retained by and remain liabilities and obligations of Seller.
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ARTICLE II
FORMATION OF COMPANY
Section 2.1 Organization of Company. As promptly as practicable following
the execution of this Agreement, Purchaser and Seller shall cause Company to be
organized under the laws of the State of California. The certificate of
incorporation and bylaws of Company shall be in such forms as shall be
determined by Purchaser. The authorized capital stock of Company shall initially
consist solely of 15,000,000 shares of common stock, $.01 par value per share
("Company Common Stock"), of which 1,000 shares (the "Shares") shall be issued
to Seller in consideration for the contribution of the Assets as provided
herein.
ARTICLE III
PURCHASE AND SALE OF STOCK
Section 3.1 Purchase and Sale. Subject to the terms and conditions of this
Agreement, Purchaser agrees to purchase at the Closing (as hereinafter defined),
and Seller agrees to sell to Purchaser at the Closing, the Shares, and all
rights existing with respect thereto.
Section 3.2 Purchase Price. In consideration for the Shares and the other
forms of consideration to be given by Seller and in full payment therefor,
Purchaser will pay, or cause to be paid, to Seller for the Shares and the other
forms of consideration to be given by Seller One Hundred Eight Million Seventeen
Thousand Dollars $108,017,000 (the "Purchase Price"), which shall be payable by
check or wire transfer to Seller at the Time of Closing, of which Ninety Seven
Million Two Hundred Fifteen Thousand Three Hundred Dollars ($97,215,300) will be
paid to Seller and Ten Million Eight Hundred One Thousand Seven Hundred Dollars
($10,801,700) will be paid to the Escrow Agent (as defined in Section 8.1
hereof).
Section 3.3 Tax Treatment; Allocation of Purchase Price. The parties agree
to treat the contribution of assets by Seller to the Company and the immediate
sale of the Shares to Purchaser as a "busted Section 351" transaction. In order
to assure that the assets of Company have a fair market value tax basis, the
parties also agree to join in making an election under Section 338(h)(10) of the
Internal Revenue Code of 1986, as amended (the "Code"), and comparable
provisions of any applicable state law, in connection with the transactions
contemplated thereby so that Purchaser shall be deemed to have purchased
Company's assets for tax purposes. The parties also agree that the Purchase
Price shall be allocated among the Assets and the noncompetition covenant
provided for in Section 5.1 hereof in such reasonable manner proposed by
Purchaser (and reasonably acceptable to Seller) using the allocation methods and
principles required by Section 1060 of the Code and the Treasury Regulations
promulgated thereunder. Neither Purchaser nor Seller shall take any
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position inconsistent with the foregoing tax treatment or such allocation, and
any and all filings with and reports made to any taxing authority will be
consistent with that allocation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of Seller. Seller hereby
represents and warrants to Purchaser that:
(a) Organization of Seller. Seller is a corporation 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, lease, and operate the Assets.
(b) Authorization of Seller. Seller has full corporate power and
authority to enter into this Agreement, to perform its obligations hereunder,
and to consummate the transactions contemplated hereby, including, without
limitation, the execution and delivery of this Agreement, bills of sale,
assignments and assumptions, novations and other instruments evidencing the
conveyance of the Assets and other agreements and instruments contemplated
hereunder (the "Closing Documents"). Seller has taken all necessary and
appropriate board of directors or other corporate action, with respect to the
execution and delivery of this Agreement and the Closing Documents, the
performance of its obligations hereunder and thereunder, and the transactions
contemplated hereby and thereby. This Agreement has been duly executed and
delivered by Seller and constitutes, and each other Closing Document will upon
execution and delivery thereof constitute, the legal, valid and binding
obligation of Seller, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the rights and remedies of creditors generally and subject to the
general principles of equity.
(c) Financial Information. Seller has delivered to Purchaser an
unaudited balance sheet of the Assets and the Technology at July 5, 1997, (the
"Balance Sheet") and will, as soon as practicable (and in any event within five
business days) after the date hereof, deliver to Purchaser an unaudited balance
sheet of the Assets and the Technology at the date hereof (the "Updated Balance
Sheet"). The Balance Sheet is complete and correct in all material respects and
has been prepared on a basis consistent with generally accepted accounting
principles ("GAAP") except that it is unaudited, does not include any accruals
for employee compensation and benefit items, and does not include footnotes. The
Updated Balance Sheet will be complete and correct in all material respects and
will be prepared on a basis consistent with GAAP except that it will be
unaudited, will not include any accruals for employee compensation and benefit
items, and will not include footnotes. The Balance Sheet accurately sets out and
describes (and the Updated Balance Sheet will accurately set out and describe)
the financial condition of the Assets and the Technology as of the date
indicated therein.
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(d) No Sales. Seller has not made any sales of any of its products
related to the Technology other than Seller's ODIN and Central Office products.
(e) Absence of Certain Changes and Events. Except as set forth on
Schedule 4.1(e), since January 1, 1997, there has not been:
(i) Any material adverse change in the Assets, Assumed Liabilities
or Technology or any occurrence, circumstance, or combination thereof which
reasonably could be expected to result in a material adverse change to the
Assets, Assumed Liabilities or Technology;
(ii) Any sale, lease, or disposition of, or any agreement to sell,
lease, or dispose of any of the Assets other than dispositions of Related
Property in the ordinary course of business;
(iii) Any modification, waiver, change, amendment, release,
rescission, accord and satisfaction, or termination of, or with respect to, any
term, condition, or provision of any Contract relating to or affecting the
Technology or the Assets;
(iv) Any adverse relationships or conditions with vendors,
suppliers or customers that may have a material adverse effect on the
Technology, Assumed Liabilities or the Assets; or
(v) Any other event or condition of any character that has had a
material adverse effect, or may reasonably be expected to have a material
adverse effect, on the Assets, Assumed Liabilities or the Technology.
(f) Undisclosed Liabilities. There are no debts, claims, liabilities, or
obligations with respect to the Technology (other than those that relate solely
to Seller's ODIN and Central Office products and are Unassumed Liabilities) or
to which the Assets are subject, liquidated, unliquidated, accrued, absolute,
contingent, or otherwise, that are not accurately identified, or required, by
nature and amount on the Balance Sheet.
(g) Inventory. Schedule 1.1(b) hereto lists all of Seller's inventory,
other than excess, unusable or obsolete items, to be delivered to Company. All
items included in the Inventory are the property of Seller and, as of the Time
of Closing, will be free and clear of any mortgage, pledge, lien, security
interest or other encumbrance. To Seller's knowledge all of the Inventory
consists of items of a quality and quantity usable and saleable in the ordinary
and usual course of the business of Seller.
(h) Taxes. Seller has completed and duly filed (or has received an
extension of time to file and will complete and file in such extended time) in
correct form with the appropriate United States, state and local governmental
agencies and with the appropriate foreign countries and political subdivisions
thereof, all Tax (as hereinafter
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defined) returns and reports required to be filed; all of such returns and
reports are accurate and complete; and Seller has paid in full or made adequate
provisions on its financial statements for all Taxes, assessments or
deficiencies shown to be due on such Tax returns and reports or claimed to be
due by any taxing authority or otherwise due or owing. Seller has made all
payments of estimated income Tax through the date hereof and all withholdings of
Tax required to be made under all applicable United States, foreign, state and
local tax laws and regulations, and such withholdings have either been paid to
the respective governmental agencies or set aside in accounts for such purpose
or accrued, reserved against and entered upon the books of such company. The
Assets are not subject to any liens for Taxes, except liens for current Taxes
not yet due. There is no contract, agreement, plan or arrangement, including but
not limited to the provisions of this Agreement, covering any current or former
employee employed in connection with the Technology that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to Section 280G or Section 162 of the Code.
For purposes of this Agreement, "Tax" (and, with correlative meaning,
"Taxes" and "Taxable") means (i) any net income, alternative or add-on minimum
tax, gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, environmental or windfall profit tax, custom,
duty or other tax, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest or any penalty, addition to tax or
additional amount imposed by any governmental, regulatory or administrative
entity or agency responsible for the imposition of any such tax (domestic or
foreign), (ii) any liability for the payment of any amounts of the type
described in clause (i) as a result of being a member of an affiliated,
consolidated, combined, unitary or other group for any Taxable period and (iii)
any liability for the payment of any amounts of the type described in clause (i)
or (ii) as a result of any express or implied obligation to indemnify any other
person.
(i) Compliance With Law. Seller has complied and is in compliance, in
all material respects, with all applicable federal, state, and, to the best of
Seller's knowledge, local laws, statutes, licensing requirements, rules, and
regulations, and judicial or administrative decisions applicable to the
Technology. Seller has been granted all permits from federal, state, and local
government regulatory bodies necessary with respect to the Technology, all of
which are currently valid and in full force and effect. There is no order
issued, investigation, or proceeding pending or, to Seller's knowledge,
threatened, or notice served with respect to any violation of any law,
ordinance, order, writ, decree, rule, or regulation issued by any federal,
state, local, or foreign court or governmental or regulatory agency or
instrumentality applicable to the Technology.
(j) Governmental Consents. No consent, approval, order, or authorization
of, or registration, qualification, designation, declaration, or filing with any
federal, state, local, or provincial governmental authority on the part of
Seller is required in connection with this Agreement or any Closing Document or
the consummation of the
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transactions contemplated hereunder or thereunder, other than under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇").
(k) Proprietary Rights. Set forth on Schedule 1.1(e) hereto is a
complete and accurate list and brief description of all Proprietary Rights owned
or held by Seller and related to the Assets and/or the Technology. Except as set
forth on Schedule 4.1(k) hereto, Seller has complete and undisputed title and
ownership of or adequate rights (license or otherwise) to utilize all
Proprietary Rights related to the Assets and/or the Technology without any
conflict with or infringement of the rights of others.
Except as set forth on Schedule 4.1(k) hereto, there are no outstanding
options, licenses, or agreements of any kind relating to the foregoing, nor is
Seller bound by or a party to any options, licenses or agreements of any kind
with respect to the proprietary rights of any other person or entity related to
the Assets or the Technology. Seller has not received any communications nor is
it aware of any entity alleging that Seller has violated or, by using the
Technology as current being used, would violate any proprietary rights of any
other person or entity. Seller is not aware that any of its employees or
consultants associated with the Assets and/or Technology is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his or her best
efforts to promote the interests of Seller. Neither the execution nor delivery
of this Agreement will conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees or consultants or the
Seller is now obligated.
Schedule 1.1(e) also indicates all patents, patent applications,
trademarks (registered or unregistered), licenses and, independent contractor or
consulting agreements and any other Proprietary Rights that require a consent or
waiver to consummate the transactions contemplated in this Agreement. All of
Seller's license agreements with respect to its Proprietary Rights are in
writing and evidence legitimate ownership of such rights in Seller.
(l) Contracts and Commitments.
(A) Set forth on Schedule 1.1(c) hereto is a list of all
outstanding Contracts, setting forth the parties and the dates, including
expiration dates, thereto, whether or not in writing, to which Seller is a party
or to which any of the Assets are subject.
(B) Seller has performed all of its material obligations
under the terms of each Contract and is not in default thereunder. No event or
omission has occurred which but for the giving of notice or lapse of time or
both would constitute a default by any party thereto under any such Contract,
where such default by any party could have a material adverse effect on the
Technology or the Assets. Each such Contract is valid and
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binding on all parties thereto and is in full force and effect. Seller has
received no notice of default, cancellation, or termination in connection with
any such Contract.
(C) Schedule 1.1(c) lists all Contracts, under the heading
"Contracts Requiring Novation or Consent to Assignment" that require a novation
for consent to assignment prior to the Time of Closing so that Purchaser shall
be made a party in place of Seller (the "Contracts Requiring Novation or Consent
to Assignment"). Such list is complete, accurate and includes every Contract
which, if no novation occurs to make Purchaser a party thereto or, if no consent
to assignment is obtained, would have a material adverse effect on the use by
Purchaser or Company of the Technology or the Assets or the obligations of
Purchaser or Company under the Assumed Liabilities.
(m) Assets. The Assets include all property in which Seller has any
right, title, and interest and which relate to the Technology (or, in the case
of Related Property or Assets described in Section 1.1(j), relate primarily
thereto).
(n) Operating Condition of Assets. All of the Assets are being
transferred to Company in good operating condition and repair (normal wear and
tear excepted).
(o) Title to the Assets.
(A) Except as set forth on Schedules 4.1(k) or 4(o) hereto,
and except for Permitted Encumbrances, Seller has good and marketable title to
the Assets free and clear of any pledges, liens, encumbrances, security
interests, equities, charges, and restrictions of any nature whatsoever
(collectively, the "Liens"). The term "Permitted Encumbrances" shall mean (a)
Liens for current taxes not due and payable, (b) Liens reflected on the Balance
Sheet and (c) Liens specifically identified as such on Schedule 4(o). Any and
all Liens set forth on Schedule 4(o), with the exception of Permitted
Encumbrances, shall be terminated as of or prior to the Time of Closing, and
Seller shall transfer the Assets to Company free and clear of any and all Liens.
(B) By virtue of the deliveries made at the Closing, Company
will obtain good and marketable title to the Assets, free and clear of all Liens
except for Permitted Encumbrances.
(p) Litigation. There is no claim, litigation, action, suit, or
proceeding, administrative or judicial, pending or, to Seller's knowledge,
threatened against Seller or any of its affiliates, at law or in equity, before
any federal, state, local or foreign court or regulatory agency, or other
governmental authority, including, without limitation, any unfair labor practice
or grievance proceedings or otherwise: (i) relating to the Technology or
involving any of the Assets or the Assumed Liabilities; or (ii) relating to this
Agreement or any Closing Document or any of the transactions contemplated
hereunder or thereunder, which could result in the institution of legal
proceedings to prohibit or restrain the
9.
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consummation or performance of this Agreement or any Closing Document or the
transactions contemplated hereby or thereby or claim damages as a result of this
Agreement or any Closing Document or the transactions contemplated hereby or
thereby.
(q) No Conflict or Default. Neither the execution and delivery of this
Agreement or any Closing Document nor, subject to compliance with the HSR Act,
the compliance with the terms and provisions hereof or thereof, including
without limitation, the consummation of the transactions contemplated hereby and
thereby, on the part of Seller will violate any law, statute, regulation, rule
or ordinance of any governmental authority, or conflict with or result in the
breach of any term, condition, or provision of Seller's Certificate of
Incorporation or Bylaws (each as amended), or of any material agreement, deed,
contract, mortgage, indenture, writ, order, decree, legal obligation, or
instrument to which Seller is a party or by which it or any of the Assets are or
may be bound, or constitute a default (or an event which, with the lapse of time
or the giving of notice, or both, would constitute a default) thereunder.
(r) Labor Relations. With respect to employees employed in connection
with the Technology:
(A) Seller is in compliance in all material respects with
Title VII of the Civil Rights Act of 1964, as amended, the Fair Labor Standards
Act, as amended, the Occupational Safety and Health Act of 1970, as amended, all
applicable federal, state, and local laws, statutes, rules, and regulations
relating to employment, and all applicable laws, statutes, rules and regulations
governing payment of minimum wages and overtime rates, and the withholding and
payment of taxes from compensation of employees.
(B) There are no written or oral separation, severance or
golden parachute agreements with the service providers of Seller. All employment
relationships, whether written or oral, between Seller and its employees
associated with the Technology are "at will."
(C) Schedule 4(r) attached hereto lists all the employees
of, under the heading "Employees," and all the consultants to, under the heading
"Consultants," Seller who provide services relating to the Technology and their
applicable position, and annual compensation as of the date hereof and the Time
of Closing.
(D) All payments due from Seller on account of employee
health and welfare insurance have been paid.
(E) All severance, bonus and vacation payments by Seller
which are or were due under the terms of any agreement have been paid.
(s) Employee Benefit Plans. Seller has no "Employee Pension Benefit
Plan" in effect, as such term is defined in Section 3(2) of the Employee
Retirement
10.
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Income Security Act of 1974, as amended ("ERISA"). Schedule 4(s) contains a list
of each "employee welfare benefit plan" (as defined in Section 3(1) of ERISA),
including plans providing for health coverage, disability, severance or life
insurance, maintained for the benefit of or contributed to by Seller for the
benefit of any employee or terminated employee of Seller. Schedule 4(s) sets
forth a true and complete list as of the date hereof of all holders of
outstanding options under the Seller's Stock Option Plans who are employed in
connection with the Technology, including the number of shares of Seller capital
stock subject to each such option, the exercise or vesting schedule, the
exercise price per share and the term of each such option. True and complete
copies of all agreements and instruments relating to or issued under the
Seller's Stock Option Plans have been made available to Purchaser and such
agreements and instruments have not been amended, modified or supplemented, and
there are no agreements to amend, modify or supplement such agreements or
instruments in any case from the form made available to Purchaser.
(t) Brokers' and Finders' Fees. Seller is not obligated to pay any fees
or expenses of any broker or finder in connection with the origin, negotiation,
or execution of this Agreement or in connection with any transactions
contemplated hereby, except the investment banking fees of Deutsche ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Inc., which will be paid by Seller.
(u) Books and Records. The books and records of Seller to which
Purchaser and its accountants, attorneys and other representatives have been
given access are the true books and records of Seller and truly and fairly
reflect the underlying facts and transactions in all respects.
(v) Complete Disclosure. No representation or warranty by Seller in this
Agreement, and no exhibit, schedule, statement, certificate, or other writing
furnished to Purchaser pursuant to this Agreement or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary to
make the statements contained herein and therein in the context in which they
were made not misleading.
(w) Accounts Receivable. There are no Accounts Receivable, unbilled
invoices and other debts due or recorded in the records and books of account of
Seller as being due to Seller as at the Closing relating to the Assets and/or
Technology (other than those that relate solely to Seller's ODIN and Central
Office products and are not included in the Assets).
(x) Environmental Matters.
(i) The following terms shall be defined as follows:
"Environmental and Safety Laws" shall mean any federal, state or
local laws, ordinances, codes, regulations, rules, policies and orders that are
intended to assure the protection of the environment, or that classify,
regulate, call for the remediation of,
11.
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require reporting with respect to, or list or define air, water, groundwater,
solid waste, hazardous or toxic substances, materials, wastes, pollutants or
contaminants, or which are intended to assure the safety of employees, workers
or other persons, including the public.
"Hazardous Materials" shall mean any toxic or hazardous substance,
material or waste or any pollutant or contaminant, or infectious or radioactive
substance or material, including without limitation, those substances, materials
and wastes defined in or regulated under any Environmental and Safety Laws.
"Property" shall mean all real property leased or owned by Seller or
its subsidiaries either currently or in the past.
"Facilities" shall mean all buildings and improvements on the
Property of Seller or its subsidiaries.
(ii) Seller represents and warrants, to its knowledge, as follows:
(A) no methylene chloride or asbestos is contained in or has been used at or
released from the Facilities; (B) all Hazardous Materials and wastes have been
disposed of in accordance with all Environmental and Safety Laws; and (C) Seller
and its subsidiaries have received no notice (verbal or written) of any
noncompliance of the Facilities or its past or present operations with
Environmental and Safety Laws; (D) no notices, administrative actions or suits
are pending or threatened relating to a violation of any Environmental and
Safety Laws; (E) neither Seller nor its subsidiaries are a potentially
responsible party under the federal Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA), or state analog statute, arising out of
events occurring prior to the Time of Closing; (F) there have not been in the
past, and are not now, any Hazardous Materials on, under or migrating to or from
the Facilities or Property; (G) there have not been in the past, and are not
now, any underground tanks or underground improvements at, on or under the
Property including without limitation, treatment or storage tanks, sumps, or
water, gas or oil ▇▇▇▇▇; (H) there are no polychlorinated biphenyls (PCBs)
deposited, stored, disposed of or located on the Property or Facilities or any
equipment on the Property containing PCBs at levels in excess of 50 parts per
million; (I) there is no formaldehyde on the Property or in the Facilities, nor
any insulating material containing urea formaldehyde in the Facilities; (J) the
Facilities and Seller's and its subsidiaries uses and activities therein have at
all times complied with all Environmental and Safety Laws; and (K) Seller and
its subsidiaries have all the permits and licenses required to be issued and are
in full compliance with the terms and conditions of those permits.
(y) Company Matters; Title to Shares. At the Time of Closing, (a) except
as specifically provided herein, Company will have (i) no assets or properties
other than the Assets, (ii) no liabilities, obligations or duties (whether
absolute, contingent or otherwise) other than the Assumed Liabilities, (iii) no
officers or directors other than those designated by Purchaser and (iv) no
employees other than those listed on Schedule 4(r) who accept employment by
Purchaser prior to the Time of Closing, (b) the authorized capital stock
12.
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of Company shall be 15,000,000 shares of Company Common Stock, of which only the
Shares shall be issued or outstanding, and (c) there will be no other authorized
or outstanding securities of Company except for the Designated Options provided
for in Section 5.10. Upon payment of the Purchase Price for the Shares,
Purchaser will acquire good and marketable title to the Shares, free and clear
of any and all Liens.
Section 4.2 Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to Seller that:
(a) Organization of Purchaser. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, and has all requisite power and authority to own and operate its
business.
(b) Authorization of Purchaser. Purchaser has full corporate power and
authority to enter into this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby, including, without
limitation, the execution and delivery of this Agreement and each other Closing
Document to which it is a party. Purchaser has taken all necessary and
appropriate corporate action, including obtaining all necessary board consents,
with respect to the execution and delivery of this Agreement and each other
Closing Document to which it is a party, the performance of its obligations
hereunder and thereunder, and the transactions contemplated hereby and thereby.
This Agreement has been duly executed and delivered by Purchaser and
constitutes, and each other Closing Document will upon execution and delivery
thereof constitute, the legal, valid and binding obligation of Purchaser,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the rights and
remedies of creditors and subject to general principles of equity.
(c) Governmental Consents. No consent, approval, order, or authorization
of, or registration, qualification, designation, declaration, or filing with any
federal, state, local or provincial governmental authority on the part of
Purchaser is required in connection with this Agreement or any Closing Documents
or the consummation of the transactions contemplated hereunder or thereunder
other than under the HSR Act.
(d) Litigation. There is no claim, litigation, action, suit or
proceeding, administrative or judicial, pending or, to Purchaser's knowledge,
threatened against Purchaser or any of its affiliates relating to this Agreement
or any Closing Document or the transactions contemplated hereunder or
thereunder, at law or in equity, before any federal, state, local or foreign
court, or regulatory agency, or other governmental authority, which could result
in the institution of legal proceedings to prohibit or restrain the consummation
or performance of this Agreement or any Closing Document or the transactions
contemplated hereby or thereby or claim damages as a result of this Agreement or
any Closing Document or the transactions contemplated hereby or thereby.
13.
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(e) No Conflict or Default. Neither the execution and delivery of this
Agreement or any Closing Document nor, subject to compliance with the HSR Act,
the compliance with the terms and provisions hereof or thereof, including,
without limitation, the consummation of the transactions contemplated hereby and
thereby, will violate any law, statute, regulation, rule or ordinance of any
governmental authority, or conflict with or result in the breach of any term,
condition, or provision of Purchaser's Articles of Incorporation or Bylaws (each
as amended), or of any material agreement, deed, contract, mortgage, indenture,
writ, order, decree, legal obligation, or instrument to which Purchaser is a
party or by which it is or may be bound, or constitute a default (or an event
which, with the lapse of time or the giving or notice, or both, would constitute
a default) thereunder.
(f) Brokers' and Finders' Fees. Purchaser is not obligated to pay any
fees or expenses of any broker or finder in connection with the origin,
negotiation, or execution of this Agreement or in connection with any
transactions contemplated hereby, except the investment banking fees of ▇▇▇▇▇▇▇
▇▇▇▇▇ & Co. Incorporated, which will be paid by Purchaser.
(g) Complete Disclosure. No representation or warranty by Purchaser in
this Agreement, and no exhibit, schedule, statement, certificate, or other
writing furnished to Seller pursuant to this Agreement or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary to
make the statements contained herein and therein in the context in which they
were made not misleading.
(h) Purchaser's Funds. Purchaser has and will have at the Closing the
funds necessary to pay the Purchase Price required by Section 3.2.
ARTICLE V
COVENANTS
Section 5.1 Non-Competition.
(a) At all times from the Time of Closing until the fifth anniversary of
the Time of Closing, without the prior written consent of Purchaser, Seller
shall not, and shall not permit any of its subsidiaries to:
(i) Enter into or engage, directly or indirectly, in the business
of designing, developing, marketing or distributing the Specified Technology;
the "Specified Technology" means (A) ATM or (B) IP over ATM, in the case of both
(A) and (B) over x-DSL products at speeds of 20 megabits per second or less,
other than Seller's existing Central Office products and derivative products
(which derivative products do not include ADSL products), and Seller's existing
ODIN product and derivative products (which
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derivative products do not constitute (x) ATM or (y) IP over ATM, in the case of
both (x) and (y) over x-DSL at speeds of 20 megabits per second or less) using
ATM over VDSL (very high-bit-rate digital subscriber line) technology in the
Fiber/Wireless Fiber-To-The-Curb markets;
(ii) Use, or permit any licensee to use, any technology subject to
the License Agreement (as defined below) to design, develop, build, market or
distribute the Specified Technology; or
(iii) Encourage or solicit any employee of Seller hired by Purchaser
or Company pursuant to this Agreement to leave the employment of Purchaser for
any reason.
(b) Seller will hold, and will use its best efforts to cause each of its
subsidiaries and each officer, director, employee, accountant, counsel,
consultant, advisor and agent of Seller and its subsidiaries to hold, in
confidence, unless compelled to disclose by judicial or administrative process
or by other requirements of law, all proprietary, non-public and other
confidential documents and information concerning the Technology or the Assets,
except as reasonably necessary to conduct Seller's businesses that it is not
prohibited to conduct pursuant to Section 5.1(a) above; provided that, without
in any way limiting the foregoing obligations, Seller may disclose such
information to its officers, directors, employees, accountants, counsel,
consultants, advisors and agents solely for purposes of the transactions
contemplated by this Agreement so long as such persons are informed by Seller of
the confidential nature of such information and are directed by Seller to treat
such information confidentially.
(c) At all times from the Time of Closing until the fifth anniversary
thereof, Purchaser shall not, and shall not permit any of its subsidiaries to,
(i) design or develop products substantially similar to ODIN or use ODIN's
space-switching architecture in conjunction with VDSL loop technology or permit
any of its licensees to do any of the foregoing, (ii) encourage or solicit any
employee of Seller, with whom Purchaser has had direct contact in connection
with the transactions contemplated hereby, to leave the employment of Seller for
any reason or (iii) permit Dr. ▇▇▇ ▇▇▇▇▇ to encourage or solicit any employee of
Seller to leave the employment of Seller for any reason.
(d) Without limitation, the parties agree and intend that the covenants
contained in this Section 5.1 shall be deemed to be a series of separate
covenants and agreements, one for each and every county or political subdivision
of each state of the United States. If, in any judicial proceeding, a court
shall refuse to enforce in such action any of the separate covenants deemed
included herein, then at the option of the party hereto entitled to the benefit
of such covenants, wholly-unenforceable covenants or components thereof shall be
deemed eliminated from the provisions hereof for the purpose of such proceeding
to the extent necessary to permit the remaining separate covenants to be
enforced
15.
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in such a proceeding. The parties intend to have covenants enforceable to the
fullest extent of the law as to scope, time and geography.
(e) The parties agree that due to the unique nature of the services and
capabilities of Seller and Purchaser, there can be no adequate remedy at law for
any breach of the obligations of Seller or Purchaser hereunder, that any such
breach by Seller or Purchaser may allow the other party hereto and/or third
parties to unfairly compete with Purchaser or Seller (as the case may be)
resulting in irreparable harm to Purchaser or Seller (as the case may be) and
therefore, that upon any such breach by Seller or Purchaser or any threat
thereof, the other party hereto shall be entitled to appropriate equitable
relief in addition to whatever remedies it might have at law. Further, each
party hereto shall be entitled to indemnification by the other party hereto from
any loss or harm, including, without limitation, attorneys' fees, including
attorneys' fees on appeal, and costs of suit, in connection with any breach, or
any enforcement, of their respective obligations pursuant to this Section 5.1.
(f) Each party hereto acknowledges, represents and warrants to the other
party that the covenants of the first such party in this Section 5.1 are
reasonably necessary for the protection of such other party's interests under
this Agreement and are not unduly restrictive upon the first such party.
(g) Each party hereto shall notify the other party of any breach or
alleged breach by the first such party of any provision of this Agreement and,
within thirty (30) days after the date of mailing of such notice or becoming
aware of such breach or alleged breach, the breaching party shall cure such
breach or alleged breach. Failure to cure such breach or alleged breach to the
non-breaching party's reasonable satisfaction within such time period shall
constitute a default under this Agreement and the non-breaching party shall be
entitled to exercise any of its available rights and remedies (including,
without limitation, pursuant to subsection (d) above).
Section 5.2 Maintenance of Assets and Technology.
(a) During the period from the date hereof through the Time of Closing,
Seller shall conduct its business in the ordinary course of business consistent
with past practice and shall carry on and use commercially reasonable efforts to
preserve the Assets and the Technology, in substantially the same manner as
Seller did prior to the date hereof.
(b) During the period from the date hereof through the Time of Closing,
Seller shall not, without the prior written consent of Purchaser, take any of
the following actions if such actions relate in whole or in part to the Assets
and/or Technology:
(i) Except for transfers in the ordinary course of business
consistent with past practice, transfer to any person or entity any rights to,
or interest in, any Proprietary Rights; provided, however, that Seller shall not
transfer any source code or the rights thereto, whether or not in the ordinary
course of business, to any person or entity
16.
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except pursuant to written agreements set forth on the schedules hereto and in
effect as of the date hereof;
(ii) Except in the ordinary course of business, amend, terminate or
otherwise modify the terms of any material Contract;
(iii) Sell, lease, license or otherwise dispose of any of Seller's
interest in the Assets and/or the Technology except dispositions of Related
Property in the ordinary course of business consistent with past practice;
(iv) Adopt or amend any employee benefit plans, programs, policies
or other arrangements, or enter into any employment contract, pay any special
bonus or special remuneration to any director, officer, employee employed or
consultant retained in connection with the Technology or the Assets, or increase
the salaries or wage rates of any such employees other than pursuant to
scheduled employee reviews under Seller's normal employee review cycle, or in
connection with the hiring of employees (other than officers) in the ordinary
course of business, in all cases consistent with past practice;
(v) Cancel, amend or renew any insurance policy relating, directly
or indirectly, to the Technology or the Assets, other than in the ordinary
course of business consistent with past practice;
(vi) Agree or commit in writing or otherwise to take any of the
actions described in subsections (i) through (v) above.
Section 5.3 Access to Information. Subject to the terms of any existing
written confidentiality agreement between the parties, from the date hereof,
Seller will (a) give Purchaser and its officers, directors, employees, agents
and representatives (collectively, "Representatives") full access, during normal
business hours, to all of the properties, books, contracts, commitments, records
and facilities relating to the Technology, the Assets and the Assumed
Liabilities, (b) furnish to Purchaser and its Representatives all such other
information concerning the Technology, the Assets and the Assumed Liabilities as
Purchaser may reasonably request and (c) make Seller's Representatives available
to discuss with Purchaser and its respective Representatives such aspects of the
business, operations, condition (financial or otherwise), operating results or
prospects of the Technology, the Assets and the Assumed Liabilities as Purchaser
may reasonably request; provided, that any furnishing of such information
pursuant hereto or any investigation by Purchaser shall not affect Purchaser's
right to rely on the representations, warranties, agreements and covenants made
by Seller in this Agreement. Following the Closing, with respect to the
Technology or any other Assets, Seller will continue to give Purchaser and its
Representatives full access, during normal business hours, to all books,
records, files and papers, in whatever form, which are not transferred by Seller
to Company pursuant to Section 1.1, and will upon request deliver copies thereof
to Purchaser at the sole expense of Purchaser.
17.
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Section 5.4 No Solicitation. Until the Closing, Seller and its
Representatives will not, directly or indirectly, (i) take any action to
solicit, initiate or encourage any Takeover Proposal (as defined below) or (ii)
engage in negotiations with, or disclose any nonpublic information relating to
Seller to, or afford access to the properties, books, contracts, records or
facilities of Seller to, any person that may make or consider making, or that
has made, a Takeover Proposal. Seller will promptly notify Purchaser after
receipt of any Takeover Proposal or any notice that any person is considering
making a Takeover Proposal or any request for nonpublic information relating to
Seller or for access to the properties, books, contracts, records or facilities
of Seller by any person that make or consider making, or that has made, a
Takeover Proposal and will keep Purchaser fully informed of the status and
details of any such Takeover Proposal notice or request. For purposes of this
Agreement, "Takeover Proposal" means any offer or proposal for, or any
indication of interest in, a merger or other business combination involving
Seller or the acquisition of any significant equity interest in Seller, or any
material Asset, other than the transactions contemplated by this Agreement.
Section 5.5 Post Closing Payments. Except for the Assumed Liabilities,
Seller shall remain solely liable for all payment obligations related to the
Technology whether accrued, matured or unmatured, liquidated or unliquidated,
fixed or contingent, known or unknown, arising out of acts or occurrences, or
related to any of the Assets, prior to the Time of Closing.
Section 5.6 Post Closing Assistance. For a period of 90 days after the
Time of Closing and without cost to Seller, Seller shall use its commercially
reasonable efforts to assist Purchaser and Company in transferring the operation
of the Assets and Technology in the same manner as the Technology was operated
prior to the Time of Closing. For a period of 90 days after the Time of Closing
and without cost to Purchaser, Purchaser shall use its commercially reasonable
efforts to assist Seller in the operation of Seller's businesses that are
affected by the transfer of the Assets and Technology to Purchaser.
Section 5.7 Sales and Transfer Taxes. Purchaser and Seller shall share
equally all liabilities and obligations for any sales, use, excise, ad valorem
and other transfer taxes imposed on the transaction contemplated hereby. Each of
the parties hereto agrees to take all actions reasonably requested by the other
to minimize any sales, use excise, ad valorem and other transfer taxes and fees
incurred in connection with the assignment, conveyance, transfer and/or delivery
of the Assets hereunder, including, without limitation the transfer via means of
electronic transmission of all assets capable of being so transmitted.
Section 5.8 Tax Returns. Seller shall properly file all returns,
statements reports, forms or other documents (collectively, "Tax Returns") that
Seller is required by any applicable law to file with respect to Taxes arising
in or related to periods on or prior to the Time of Closing or related to
transactions or events occurring prior to the Time of Closing, subject to
Purchaser's obligation set forth in Section 5.7 above, and shall pay all such
Taxes when due. With respect to state and local ad valorem taxes on the Assets
(whether personal
18.
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or real, owned or leased) for the current Tax year, Seller shall be responsible
for the payment of all such Taxes for the period up to and including the Time of
Closing and Purchaser shall be responsible for the payment of all such Taxes for
the period after the Time of Closing. All such Taxes assessed on an annual basis
shall be prorated on the assumption that an equal amount of Tax applies to each
day of the year, regardless of how installment payments are billed or made. Any
supplemental property Taxes or assessments which arise out of a revaluation of
an Asset which revaluation would not have occurred except for the change in
ownership of the Asset shall be borne by Purchaser. Any payment of Taxes due
from one party to the other pursuant to this Section 5.8 shall be paid at the
Time of Closing. If the current year's Taxes and assessments are not available
at the Time of Closing, for the purposes of apportionment between Seller and
Purchaser and payment pursuant to this Section 5.8, the amount thereof shall be
estimated on the basis of the prior year's Taxes and assessments, and any
incremental payment shall be adjusted after receipt of the final Tax statements,
but within fifteen (15) days after such statements are provided by the tax
authorities.
Section 5.9 Employees. Purchaser shall offer employment to the employees
of Seller listed on Schedule 4(r) hereto under the heading "Employees" (if
required to be listed thereon) on terms at least comparable to those being
received by such employees from Seller at the Time of Closing, and shall pay
expenses of such employees incurred in connection with their relocation to
Purchaser's offices in Boston, Massachusetts, in accordance with benefits at
least as favorable as Purchaser's existing relocation benefits policy. Purchaser
will negotiate in good faith to hire the employees listed on Schedule 4(r) and
will provide incentives and relocation packages to such employees consistent
with its policies regarding other employees of Purchaser, including the issuance
of options to purchase the common stock of Purchaser in such amounts and on such
terms as determined by Purchaser in its sole discretion. Seller shall use
commercially reasonable efforts to assist Purchaser in employing all such
employees. At or prior to the Effective Time, Purchaser shall, and Seller will
use its best efforts to cause the employees listed on Schedule 5.9 hereto (the
"Key Employees") to, execute and deliver Employment and Non-Competition
Agreements or Employment Agreements as contemplated in Section 7.1(h) hereof.
All of the foregoing employees and Key Employees who accept offers of employment
by Purchaser will be relocated to Purchaser's offices in Boston, Massachusetts,
as soon as practicable following the Time of Closing and in any event not later
than June 30, 1998. No such employee will be terminated by Purchaser during the
twelve month period after the Time of Closing, and no Key Employee will be
terminated by Purchaser during the term of such Key Employee's agreement with
Purchaser, without the approval of Dr. ▇▇▇ ▇▇▇▇▇.
Section 5.10 Employee Benefit Plans; Assumption of Stock Options.
(a) Seller shall disburse, in accordance with the terms of the
applicable employee benefit plan and applicable law, all funds from its employee
medical and benefit and other compensatory plans that are due and owing to
employees of Seller employed in connection with the Technology prior to their
employment by Purchaser.
19.
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(b) Effective at the Time of Closing, each outstanding option to
purchase shares of Seller common stock under the Seller's Stock Option Plans,
whether vested or unvested, which is held by any individual named in Schedule
4(r) (the "Designated Options") shall be assumed by Company and shall be
converted into the right to purchase that number of shares of Company Common
Stock equal to the number of shares of Seller common stock subject to each such
Designated Option immediately prior to the assumption multiplied by the
Assumption Ratio (as defined below) and rounded down to the nearest whole share
of Company Common Stock, and the per share exercise price for the shares of
Company Common Stock issuable upon exercise of such assumed option will be equal
to the dollar amount determined by dividing the exercise price per share of
Seller common stock for which the Designated Option was exercisable immediately
prior to the assumption by the Assumption Ratio, rounded up to the nearest whole
cent. Except for such adjustments to reflect the assumption by Company, each
Designated Option shall continue to have, and be subject to, the same terms and
conditions set forth in the Seller's Stock Option Plans and the documents
evidencing that option immediately prior to the assumption. Consistent with the
terms of the Seller's Stock Option Plans and the documents governing the
outstanding Designated Options under such Plans, neither the assumption of those
options by Company nor the Closing or any other transactions contemplated hereby
will accelerate the exercisability or vesting of such options or the shares of
Company Common Stock which will be subject to those options upon the assumption
of the Designated Options by Company. For purposes of such assumption, the
Assumption Ratio shall be that fraction the numerator of which is the fair
market value of all the Seller's assets and properties immediately prior to such
contribution, and the denominator of which is the fair market value of the
Assets to be contributed to Company pursuant to this Agreement, with such value
to be determined at the time of such contribution. It is the intention of the
parties that the Designated Options so assumed by Company will qualify
immediately after such assumption as incentive stock options as defined in
Section 422 of the Code, to the extent those options qualified as incentive
stock options immediately prior to the assumption. Prior to the Closing, Company
will issue to each person who is expected to be the holder of a Designated
Option assumed by Company a document evidencing the foregoing assumption of such
option.
(c) Effective at the Time of Closing, each outstanding Designated Option
assumed by Company pursuant to Section 5.10(b) that is disclosed accurately on
Schedule 4(s) and is held by any individual named in Schedule 4(r) who accepts
employment with Purchaser pursuant to Section 5.9 hereof will be assumed by
Purchaser. Each such Designated Option so assumed by Purchaser under this
Agreement shall continue to have, and be subject to, the same terms and
conditions in effect for that option immediately prior to the Effective Time,
except that (i) such option will be exercisable for that number of whole shares
of Purchaser Common Stock equal to the number of shares of Company Common Stock
subject to that option immediately prior to the Time of Closing multiplied by
the Exchange Ratio and rounded down to the nearest whole share of Purchaser
Common Stock, and (ii) the per share exercise price for the shares of Purchaser
Common Stock issuable upon exercise of such assumed option will be equal to the
dollar amount determined by dividing the exercise price per share of Company
Common Stock for which such option was exercisable immediately
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prior to the Time of Closing by the Exchange Ratio, rounded up to the nearest
whole cent, and (iii) with respect to Designated Options granted on July 18,
1997 to any Key Employee (other than Dr. ▇▇▇ ▇▇▇▇▇) which are so assumed, the
options to purchase Purchaser Common Stock will not be exercisable unless and
until such employee fulfills his or her obligation to relocate to Boston,
Massachusetts. Consistent with the terms of the Seller's Stock Option Plans
under which the Designated Options were originally issued and the documents
governing the Designated Options as granted by Seller and as assumed by Company
pursuant to Section 5.10(b), neither the Closing nor the other transactions
contemplated hereby will accelerate the exercisability or vesting of such
options or the shares of Purchaser Common Stock which will be subject to those
options upon the Purchaser's assumption of the options as provided herein. For
purposes of such assumption, the Exchange Ratio shall be that fraction the
numerator of which is the fair market value per share of Company Common Stock
immediately prior to the Time of Closing, with such value to be determined on
the basis of the valuation formula used in establishing the Assumption Ratio in
Section 5.10(b), and the denominator of which is the last reported sales price
per share of Purchaser Common Stock on July 25, 1997. It is the intention of the
parties that the Designated Options so assumed by Purchaser will qualify
following the Effective Time as incentive stock options as defined in Section
422 of the Code, to the extent such options qualified as incentive stock options
immediately prior to the Time of Closing. Within thirty (30) business days after
the Time of Closing, Purchaser will issue to each person who, immediately prior
to the Time of Closing, was a holder of a Designated Option and who accepts
employment with Purchaser pursuant to Section 5.9 hereof and whose options are
accordingly assumed hereunder, a document evidencing the foregoing assumption of
such option by Purchaser. As soon as practicable following the Time of Closing,
Purchaser agrees to file a registration statement on Form S-8 covering the
shares of Purchaser Common Stock issuable pursuant to Designated Options assumed
by Purchaser hereunder. Seller shall cooperate with and assist Purchaser in the
preparation of such registration statement.
(d) Effective at the Time of Closing, (i) each outstanding share of
Seller common stock which is held by any individual named in Schedule 4(r) (the
"Designated Shares") shall be exchanged for that number of shares of Company
Common Stock equal to the number of such Designated Shares immediately prior to
the exchange multiplied by the Assumption Ratio (as defined above) and rounded
down to the nearest whole share of Company Common Stock, and (ii) each
outstanding Designated Share that is so exchanged for Company Common Stock and
is held by any individual named in Schedule 5.10 who accepts employment with
Purchaser pursuant to Section 5.9 hereof will be exchanged for that number of
whole shares of Purchaser Common Stock equal to the number of shares of Company
Common Stock issued in exchange for such Designated Share multiplied by the
Exchange Ratio (as defined above) and rounded down to the nearest whole share of
Purchaser Common Stock. As soon as practicable following the Time of Closing,
Purchaser agrees to file a registration statement on Form S-3, to the extent
available, covering the shares of Purchaser Common Stock issued in exchange for
Designated Shares which have theretofore been exchanged for shares of Company
Common Stock hereunder. Seller shall cooperate with and assist Purchaser in the
preparation of such registration statement.
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Section 5.11 Bulk Sales Laws. Each of Seller and Purchaser hereby waives
compliance by the other with all "bulk sales" laws and any other similar laws in
any applicable jurisdiction in respect of the transactions contemplated by this
Agreement. Seller shall indemnify Purchaser and Company from and hold it
harmless against any liabilities, damages, costs, and expenses resulting from or
arising out of any action brought or levy made as a result of Seller's failure
to pay its liabilities owed to creditors, other than those liabilities which
have been expressly assumed, on such terms as expressly assumed, by Company
pursuant to this Agreement.
Section 5.12 Public Disclosure. Unless otherwise permitted by this
Agreement, Purchaser and Seller shall consult with each other before issuing any
press release or otherwise making any public statement or making any other
public (or non-confidential) disclosure (whether or not in response to an
inquiry) regarding the terms of this Agreement or any of the transactions
contemplated hereby, and neither party hereto shall issue any such press release
or make any such statement or disclosure without the prior approval of the other
(which approval shall not be unreasonably withheld), except as may be required
by law or by obligations pursuant to any listing agreement with any national
securities exchange or with the NASD; and except that Seller shall be permitted
to disclose information with respect to this Agreement that it deems necessary
to seek financing and otherwise operate its business.
Section 5.13 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filings.
(a) Each of Purchaser and Seller shall promptly (and, with respect to
notifiction under the HSR Act, within five business days after the date of this
Agreement) apply for or otherwise seek, and use reasonable commercial efforts to
obtain, all consents and approvals required to be obtained by it for the
consummation of the transactions contemplated hereby, including those required
under the HSR Act. The parties hereto will consult and cooperate with one
another, and consider in good faith the views of one another, in connection with
any analyses, appearances, presentations, memoranda, briefs, arguments, opinions
and proposals made or submitted by or on behalf of any party hereto in
connection with proceedings under or relating to the HSR Act or any other
federal or state antitrust or fair trade law. Each of Purchaser and Seller
agrees to use its best efforts to cause the conditions to closing referred to in
Section 7.1(i) and 7.2(d) to be met and agrees to take all reasonable steps
necessary to obtain early termination of the waiting period under the HSR Act.
(b) Each of Purchaser and Seller shall use all reasonable efforts to
resolve such objections, if any, as may be asserted by any governmental
authority with respect to the transactions contemplated by this Agreement under
the HSR Act, the ▇▇▇▇▇▇▇ Act, as amended, the ▇▇▇▇▇▇▇ Act, as amended, the
Federal Trade Commission Act, as amended, and any other Federal, state or
foreign laws, statutes, rules, regulations, orders or decrees that are designed
to prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade (collectively, "Antitrust Laws"). In
connection therewith, if any administrative or judicial action or proceeding is
instituted (or threatened to be
22.
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instituted) challenging any transaction contemplated by this Agreement as
violative of any Antitrust Law, each of Purchaser and Seller shall cooperate and
use all reasonable efforts vigorously to contest and resist any such action or
proceeding and to have vacated, lifted, reversed, or overturned any decree,
judgment, injunction or other order, whether temporary, preliminary or permanent
(each an "Order"), that is in effect and that prohibits, prevents, or restricts
consummation of the transactions contemplated hereby or any such other
transactions, unless by mutual agreement Purchaser and Seller decide that
litigation is not in their respective best interests. Notwithstanding the
provisions of the immediately preceding sentence, it is expressly understood and
agreed that Purchaser shall have no obligation to litigate or contest any
administrative or judicial action or proceeding or any Order beyond December 31,
1997. Each of Purchaser and Seller shall use all reasonable efforts to take such
action as may be required to cause the expiration of the notice periods under
the HSR Act or other Antitrust Laws with respect to such transactions as
promptly as possible after the execution of this Agreement.
(c) Notwithstanding anything to the contrary herein, (i) neither
Purchaser nor any of it subsidiaries shall be required to divest any of their
respective businesses, product lines or assets, or to take or agree to take any
other action or agree to any limitation that could reasonably be expected to
have a material adverse effect on Purchaser after the Time of Closing or (ii)
neither Seller nor its subsidiaries shall be required to divest any of their
respective businesses, product lines or assets, or to take or agree to take any
other action or agree to any limitation that could reasonably be expected to
have a material adverse effect on Seller.
Section 5.14 Escrow Agreement. At or before the Time of Closing, the
parties will, and will cause the Escrow Agent to, enter into the Escrow
Agreement in the form attached hereto as Exhibit C (the "Escrow Agreement").
Section 5.15 License Agreement. The parties shall enter into the License
Agreement in the form attached hereto as Exhibit B (the "License Agreement") at
or prior to the Time of Closing.
Section 5.16 Indemnification. Purchaser shall indemnify and hold harmless
Seller, any affiliate thereof and the directors, officers and employees of
Seller or any such affiliate from and against any and all losses arising out of
the Assumed Liabilities.
Section 5.17 Reimbursement of Certain Costs. Purchaser shall reimburse
Seller for any out-of-pocket costs relating to any of the Assets and employees
hired by Purchaser that have not been relocated out of Seller's facilities after
30 days following the Closing.
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ARTICLE VI
CLOSING
Section 6.1 Time of Closing. The transactions contemplated by this
Agreement shall be completed on the first business day on which the last of the
conditions contained in Article VII hereof is fulfilled or waived (the "Time of
Closing"), with the expectation that the Closing shall occur on August 29, 1997
at 10:00 A.M., P.S.T., unless otherwise agreed to by Purchaser and Seller. The
Closing shall take place at the offices of ▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP, 2200
Geng Road, Two ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other
place or time as may be agreed to by Purchaser and Seller. The "Closing" shall
mean the consummation of the purchase and sale of the Assets at the Time of
Closing in accordance with this Agreement.
Section 6.2 Deliveries by Seller. At the Closing, Seller shall deliver, or
cause to be delivered, to Purchaser and, as appropriate, Company, the following:
(a) A good and sufficient ▇▇▇▇ of Sale, Assignment and Assumption of
Liabilities Agreement for the Assets in the form attached hereto as Exhibit A
(the "▇▇▇▇ of Sale"), executed by Seller and Company and (i) selling,
delivering, transferring, conveying and assigning to Company all of Seller's
right, title, and interest in and to the Assets, free and clear of any and all
Liens (except for Permitted Encumbrances) and (ii) assigning to Company only
those liabilities provided in Section 1.3 hereof.
(b) An affidavit of Seller, in a form reasonably satisfactory to
Purchaser, stating, under penalty of perjury, Seller's United States taxpayer
identification number and that Seller is not a foreign person under Section
1445(b)(2) of the Code.
(c) Good and sufficient assumptions and assignments of the Proprietary
Rights and Contracts, which shall be in form and substance reasonably
satisfactory to Purchaser and shall include the written consents of all parties
necessary in order to transfer all of Seller's rights thereunder to Company.
(d) Good and sufficient novations of the Contracts listed on Schedule
1.1(c) under the heading "Contracts Requiring Novation", which shall be in form
and substance reasonably satisfactory to Purchaser in order to transfer all of
Seller's rights and obligations thereunder to Company.
(e) An Officer's Certificate executed by the President and Chief
Financial Officer of Seller, dated as of the Time of Closing, certifying (i)
that the conditions specified in subsections (a) to (d) of Section 7.1 have been
satisfied, (ii) that there shall have been no material adverse change in the
Technology or the Assets or Assumed Liabilities taken as a whole since the date
of the Balance Sheet.
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(f) Revised Schedules to this Agreement which shall be complete, true
and correct as of the Time of Closing. Seller acknowledges that any Schedules
not revised as of the Time of Closing shall be deemed true and correct as of the
Time of Closing.
(g) An opinion letter of ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, counsel for
Seller, dated as of the Time of Closing, in form and substance mutually agreed
to by Purchaser and Seller.
(h) The License Agreement, executed by Seller.
(i) The Escrow Agreement, executed by Seller.
(j) A certificate or certificates representing the Shares, accompanied
by stock powers duly endorsed in blank.
Section 6.3 Deliveries by Purchaser. At the Closing, Purchaser shall
deliver, or cause to be delivered, to Seller:
(a) The Purchase Price, in the manner set forth in Section 3.2 hereof;
(b) An Officer's Certificate executed by the President of Purchaser,
dated as of the Time of Closing, certifying that the conditions specified in
subsections (a) to (d) of Section 7.2 have been satisfied;
(c) An opinion letter of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel for
Purchaser, dated as of the Time of Closing, in form and substance mutually
agreed to by Purchaser and Seller; and
(d) The License Agreement, executed by Purchaser.
Section 6.4 Further Assurances. At or after the Time of Closing, each
party shall prepare, execute, and deliver, at the preparer's expense, such
further instruments of conveyance, sale, assignment, or transfer, and shall take
or cause to be taken such other or further action, as any party shall request of
any other party at any time or from time to time in order to perfect, confirm,
or evidence in Company title to all or any part of the Assets, transfer of all
or any part of the Assumed Liabilities to Company or to consummate, in any other
manner, the terms and provisions of this Agreement.
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ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS
Section 7.1 Conditions to Obligations of Purchaser. Each and every
obligation of Purchaser to be performed at the Closing shall be subject to the
satisfaction as of or before the Time of Closing of the following conditions
(unless waived in writing by Purchaser):
(a) Representations and Warranties. The representations and warranties
of Seller set forth in Section 4.1 of this Agreement shall have been true and
correct in all material respects when made and shall be true and correct in all
material respects at and as of the Time of Closing as if such representations
and warranties were made as of such date and time.
(b) Performance of Agreement. All covenants, conditions, and other
obligations under this Agreement which are to be performed or complied with by
Seller at or prior to the Time of Closing shall have been fully performed and
complied with in all material respects at or prior to the Time of Closing,
including the delivery of the instruments and documents in accordance with
Section 6.2 hereof.
(c) No Material Adverse Change. There shall have been no material
adverse change in the Technology, Assets or Assumed Liabilities, taken as a
whole, from the date of this Agreement until the Time of Closing.
(d) Absence of Governmental or Other Objection. There shall be no
pending or threatened lawsuit challenging the transaction by any body or agency
of the federal, state, or local government or by any third party, and the
consummation of the transaction shall not have been enjoined by a court of
competent jurisdiction as of the Time of Closing and any applicable waiting
period under any applicable federal law shall have expired.
(e) Evidence of Title. Purchaser shall have received evidence, prior to
the Time of Closing, reasonably satisfactory to it of Seller's exclusive title
to all of the Assets and right to fully convey all Assets to Company, free and
clear of any and all Liens (other than Permitted Encumbrances).
(f) Approval of Documentation. The form and substance of all
certificates, instruments, opinions, and other documents delivered or to be
delivered to Purchaser under this Agreement shall be reasonably satisfactory to
Purchaser and its counsel in all respects.
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(g) Assignment and Novations. Purchaser shall (i) have received all
appropriate assignment of rights and (ii) been made a party to the contracts
listed on Schedule 1.1(c) under the heading "Contracts Requiring Novation".
(h) Employment Arrangements. Purchaser shall be satisfied that at least
75% of the Key Employees of Seller (including Dr. ▇▇▇ ▇▇▇▇▇) have entered into
an Employment and Non-Competition Agreement substantially in the form attached
hereto as Exhibit D-1 or, in the case of six Key Employees identified on
Schedule 5.9 under the heading "One-Year Agreements", an Employment Agreement
substantially in the form attached hereto as Exhibit D-2. At least 75% of the
Key Employees shall have agreed in a writing satisfactory to Purchaser to
relocate to the offices of Purchaser in Boston, Massachusetts, within the period
specified in Section 5.9 hereof.
(i) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Compliance. All applicable waiting periods under
the HSR Act shall have expired or early termination shall have been granted by
either the Federal Trade Commission or the United States Department of Justice.
Section 7.2 Conditions to Obligations of Seller. Each and every obligation
of Seller to be performed at the Closing shall be subject to the satisfaction as
of or before the Time of Closing of the following conditions (unless waived in
writing by Seller):
(a) Representations and Warranties. The representations and warranties
of Purchaser set forth in Section 4.2 of this Agreement shall have been true and
correct when made and shall be true and correct at and as of the Time of Closing
as if such representations and warranties were made as of such date and time.
(b) Performance of Agreement. All covenants, conditions, and other
obligations under this Agreement which are to be performed or complied with by
Purchaser at or prior to the Time of Closing shall have been fully performed and
complied with at or prior to the Time of Closing.
(c) Absence of Governmental or Other Objection. There shall be no
pending or threatened lawsuit challenging the transaction by any body or agency
of the federal, state, or local government or by any third party, and the
consummation of the transaction shall not have been enjoined by a court of
competent jurisdiction as of the Time of Closing.
(d) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Compliance. All applicable waiting periods under
the HSR Act shall have expired or early termination shall have been granted by
either the Federal Trade Commission or the United States Department of Justice.
(e) Approval of Documentation. The form and substance of all
certificates, instruments, opinions, and other documents delivered or to be
delivered to Seller under this Agreement shall be reasonably satisfactory to
Seller and its counsel in all respects.
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ARTICLE VIII
ESCROW AND INDEMNIFICATION
Section 8.1 Escrow Fund. As soon as practicable after the Time of Closing,
10% of the Purchase Price (the "Escrow Fund") shall be deposited with State
Street Bank and Trust Company of California, N.A. (or another institution
selected by Purchaser), as escrow agent (the "Escrow Agent"), such deposit to
constitute the Escrow Fund and to be governed by the terms set forth herein and
in the Escrow Agreement. The Escrow Fund shall be available to compensate
Purchaser for the indemnification obligations of Seller.
Section 8.2 Indemnification.
(a) Subject to the limitations set forth in this Article VIII, Seller
will indemnify and hold harmless Purchaser and its officers, directors,
employees, agents and advisors, and each person, if any, who controls or may
control Purchaser within the meaning of the Securities Act of 1933, as amended
(hereinafter referred to individually as an "Indemnified Person" and
collectively as "Indemnified Persons"), from and against any and all losses,
costs, damages, liabilities and expenses arising from claims, demands, actions,
causes of action, including, without limitation, reasonable legal fees
(collectively, "Damages") arising out of (i) any misrepresentation or breach of
or default in any of the representations, warranties, covenants and agreements
given or made by Seller in this Agreement, any Closing Document or any exhibit
or schedule to this Agreement, (ii) any federal, state or local taxes relating
to any transactions or period prior to the Time of Closing, (iii) all Unassumed
Liabilities and any other matter related to the operation of Seller's business,
the Technology or the Assets prior to the Time of Closing, including, without
limitation, customer claims, obligations undertaken, accidents, injuries,
property damage, and product liability, and (iv) non-compliance with "bulk
sales" laws or other claims by or on behalf of creditors of Seller. Purchaser
and its affiliates shall promptly notify Seller upon becoming aware of any basis
for a claim of indemnification and shall act in good faith and in a commercially
reasonable manner to mitigate any Damages they may suffer. The Escrow Fund shall
be security for this indemnity obligation subject to the limitations set forth
in this Agreement.
(b) The representations and warranties of Seller contained in this
Agreement shall survive for twelve (12) months following the Time of Closing,
except that the representations and warranties of Seller contained in Sections
4.1(h) (Taxes), 4.1(k) (Proprietary Rights), 4.1(o) (Title to Assets), 4.1(r)
(Labor Relations), 4.1(s) (Employee Benefit Plans), 4.1(x) (Environmental
Matters) and 4.1(y) (Company Matters; Title to Shares) and all other
representations and warranties of Seller contained herein to the extent they
relate to title to the Assets or the Shares conveyed hereunder or intellectual
property, tax, environmental or employee benefit matters (collectively, the
"Specified Representations") shall survive for a period of twenty-four (24)
months following the Time of Closing. The foregoing indemnity obligation of
Seller for breaches of representations and warranties
28.
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(including the Specified Representations) shall be limited in aggregate amount
to $60,000,000, including the Escrow Fund. The Indemnified Persons shall only be
entitled to indemnification for breaches of representations and warranties of
Seller hereunder (including Specified Representations) to the extent that the
Damages exceed $150,000 in the case of any individual or particular Damage item.
Any claim for indemnification for Damages hereunder (i) shall be offset or
reduced by (A) any tax benefit received by Purchaser or its affiliates as a
result of such Damages (as computed after taking into account any
indemnification to be received with respect thereto) and (B) in the case of
third-party claims, by any amount actually recovered by Purchaser or its
affiliates pursuant to counterclaims made by any of them directly relating to
the facts giving rise to such third-party claims; and (ii) shall be paid first
from the Escrow Fund and, if not sufficient, by the Seller.
(c) Seller acknowledges that such Damages, if any, would relate to
unresolved contingencies existing at the Time of Closing, which if resolved at
the Time of Closing would have led to a reduction in the total consideration
that Purchaser would have agreed to pay in connection with the transactions
contemplated hereby. Except for the limitations in the immediately preceding
paragraph, nothing in this Agreement shall limit the liability (i) of Seller for
any breach of any representation, warranty or covenant if the Closing does not
occur, or (ii) of any shareholder of Seller in connection with any breach by
such shareholder of any agreement, instrument or proxy delivered in connection
herewith. Resort to the Escrow Fund shall not be the exclusive remedy of
Purchaser for any such breaches, misrepresentations or other claims following
the Time of Closing.
Section 8.3 Damage Threshold. Notwithstanding the foregoing, Purchaser may
not receive any assets from the Escrow Fund unless and until an Officer's
Certificate or Certificates (as defined in Section 8.4 below) identifying
Damages the aggregate amount of which exceeds $150,000 has been delivered to the
Escrow Agent as provided in Section 8.5 below and such amount is determined
pursuant to this Article VIII to be payable, in which case Purchaser shall
receive the full amount of Damages in excess of such $150,000 amount. In
determining the amount of any Damage attributable to a breach, any materiality
standard contained in a representation, warranty or covenant of Purchaser shall
be disregarded.
Section 8.4 Escrow Period. The Escrow Period shall terminate with respect
to the Escrow Fund at the expiration of twelve (12) months after the Time of
Closing; provided, however, that a portion of the Escrow Fund, which, in the
reasonable judgment of Purchaser, subject to the objection of the Seller and the
subsequent arbitration of the matter in the manner provided in Section 8.6
hereof, is necessary to satisfy any unsatisfied claims specified in any
Officer's Certificate theretofore delivered to the Escrow Agent prior to
termination of the Escrow Period with respect to facts and circumstances
existing prior to expiration of the Escrow Period, shall remain in the Escrow
Fund until such claims have been resolved.
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Section 8.5 Claims upon Escrow Fund. Upon receipt by the Escrow Agent on
or before the last day of the Escrow Period of a certificate signed by any
officer of Purchaser (an "Officer's Certificate"):
(a) stating that Damages exist in an aggregate amount greater than
$150,000, and
(b) specifying in reasonable detail the individual items of such Damages
included in the amount so stated, the date each such item was paid, or properly
accrued or arose, the nature of the misrepresentation, breach of warranty,
default or claim to which such item is related, the Escrow Agent shall, subject
to the provisions of Article VIII hereof, deliver to Purchaser out of the Escrow
Fund, as promptly as practicable, assets held in the Escrow Fund having a value
equal to such Damages in excess of $150,000.
Section 8.6 Objections to Claims. At the time of delivery of any Officer's
Certificate to the Escrow Agent, a duplicate copy of such Officer's Certificate
shall be delivered to Seller and for a period of forty-five (45) days after such
delivery, the Escrow Agent shall make no delivery of assets pursuant to Section
8.5 hereof unless the Escrow Agent shall have received written authorization
from Seller to make such delivery. After the expiration of such forty-five (45)
day period, the Escrow Agent shall make delivery of the assets in the Escrow
Fund in accordance with Section 8.5 hereof, provided that no such payment or
delivery may be made if Seller shall object in a written statement to the claim
made in the Officer's Certificate, and such statement shall have been delivered
to the Escrow Agent and to Purchaser prior to the expiration of such forty-five
(45) day period.
Section 8.7 Resolution of Conflicts; Arbitration.
(a) In case Seller shall so object in writing to any claim or claims by
Purchaser made in any Officer's Certificate, Purchaser shall have forty-five
(45) days to respond in a written statement to the objection of Seller. If after
such forty-five (45) day period there remains a dispute as to any claims, Seller
and Purchaser shall attempt in good faith for sixty (60) days to agree upon the
rights of the respective parties with respect to each of such claims. If Seller
and Purchaser should so agree, a memorandum setting forth such agreement shall
be prepared and signed by both parties and shall be furnished to the Escrow
Agent. The Escrow Agent shall be entitled to rely on any such memorandum and
shall distribute the assets from the Escrow Fund in accordance with the terms
thereof.
(b) If no such agreement can be reached after good faith negotiation,
either Purchaser or Seller may, by written notice to the other, demand
arbitration of the matter unless the amount of the damage or loss is at issue in
pending litigation with a third party, in which event arbitration shall not be
commenced until such amount is ascertained or both parties agree to arbitration;
and in either such event the matter shall be settled by arbitration
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conducted by three arbitrators. Within fifteen (15) days after such written
notice is sent, Purchaser and Seller shall each select one arbitrator, and the
two arbitrators so selected shall select a third arbitrator. The decision of the
arbitrators as to the validity and amount of any claim in such Officer's
Certificate shall be binding and conclusive upon the parties to this Agreement,
and notwithstanding anything in Section 8.6 hereof, the Escrow Agent shall be
entitled to act in accordance with such decision and make or withhold payments
out of the Escrow Fund in accordance therewith.
(c) Judgment upon any award rendered by the arbitrators may be entered
in any court having jurisdiction. Any such arbitration shall be held in Santa
▇▇▇▇▇ or San Mateo County, California under the commercial rules then in effect
of the American Arbitration Association. For purposes of this Section 8.6(c), in
any arbitration hereunder in which any claim or the amount thereof stated in the
Officer's Certificate is at issue, Purchaser shall be deemed to be the
Non-Prevailing Party unless the arbitrators award Purchaser more than one-half
(1/2) of the amount in dispute, plus any amounts not in dispute; otherwise, the
Seller shall be deemed to be the Non-Prevailing Party. The Non-Prevailing Party
to an arbitration shall pay its own expenses, the fees of each arbitrator, the
administrative fee of the American Arbitration Association, and the expenses,
including without limitation, attorneys' fees and costs, reasonably incurred by
the other party to the arbitration.
Section 8.8 Third-Party Claims. In the event Purchaser becomes aware of a
third-party claim which Purchaser believes may result in a demand against the
Escrow Fund or otherwise pursuant to this Article VIII, Purchaser shall promptly
notify Seller of such claim, and Seller shall be entitled, at its expense, to
participate in any defense of such claim. Purchaser shall have the right in its
sole discretion to settle any such claim; provided, however, that Purchaser may
not effect the settlement of any such claim without the prior consent of Seller,
which consent shall not be unreasonably withheld. Any disputes between the
parties hereto in the defense of such a claim, or in the appropriateness of any
settlement of such a claim, shall be the subject of arbitration between the
parties under Section 8.7. In the event that Seller has consented to any such
settlement, Seller shall have no power or authority to object under Section 8.5
or any other provision of this Article VIII to the amount of any claim by
Purchaser against the Escrow Fund for indemnity with respect to such settlement.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. At any time prior to the Time of Closing, this
Agreement may be terminated:
(a) by mutual consent of the Boards of Directors of Purchaser and
Seller;
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(b) by either Purchaser or Seller, if, without fault of the terminating
party, the Closing shall not have occurred on or before December 31, 1997
(provided, a later date may be agreed upon in writing by the parties hereto, and
provided further that the right to terminate this Agreement under this Section
9.1(b) shall not be available to any party whose action or failure to act has
been the cause of or resulted in the failure of the Closing to occur on or
before such date and such action or failure to act constitutes a breach of this
Agreement);
(c) by Purchaser (provided Purchaser is not otherwise in material
breach), if Seller shall materially breach any of its representations,
warranties or obligations hereunder and such breach shall not have been cured
within fifteen (15) business days of receipt by Seller of written notice of such
breach;
(d) by Seller (provided Seller is not otherwise in material breach), if
Purchaser shall materially breach any of its representations, warranties or
obligations hereunder and such breach shall not have been cured within fifteen
(15) days following receipt by Purchaser of written notice of such breach;
(e) by Purchaser if a Takeover Proposal shall have occurred and the
Seller or its Board of Directors endorses or accepts such Takeover Proposal or
takes any action consistent with such endorsement or acceptance; or
(f) by either Purchaser or Seller if any permanent injunction or other
order of a court or other competent authority preventing the consummation of the
Closing shall have become final and nonappealable.
Section 9.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 9.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Purchaser or Seller
or their respective officers, directors, shareholders or affiliates, except to
the extent that such termination results from the breach by a party hereto of
any of its representations, warranties or covenants set forth in this Agreement;
provided that, the provisions of Section 9.3 (Expenses and Termination Fees),
Section 10.4 (Expenses of Transaction), and this Section 9.2 shall remain in
full force and effect and survive any termination of this Agreement.
Section 9.3 Expenses and Termination Fees.
(a) Subject to subsection (b) of this Section 9.3, whether or not the
Closing is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisers, accountants and legal
counsel) shall be paid by the party incurring such expense.
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(b) In the event that Purchaser shall terminate this Agreement pursuant
to Section 9.1(e), then Seller shall reimburse Purchaser for all of the
out-of-pocket costs and expenses incurred by Purchaser in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisors, accountants and legal
counsel) and, in addition, Seller shall promptly pay to Purchaser the sum of
$4,320,680 (the "Breakup Fee").
(c) The parties hereto agree that the Breakup Fee and any other fees
payable pursuant to this Section 9 shall not be deemed to be liquidated damages
and that Purchaser's right to the payment of the Breakup Fee and any other fees
payable pursuant to this Section 9 shall be in addition to any other rights or
remedies under contract, at law or in equity to which Purchaser may be entitled
against (i) any shareholder or shareholders of Seller, or (ii) against Seller in
the event of any breach by Seller, provided that any additional monetary
recovery to which Purchaser would otherwise be entitled shall be reduced by the
cash actually received by Purchaser pursuant to Section 9 hereof. Nothing in
this Section shall be interpreted as limiting Purchaser's rights and remedies
under any circumstance in the event of Seller's breach of this Agreement.
Section 9.4 Extension; Waiver. At any time prior to the Time of Closing
any party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE X
MISCELLANEOUS
Section 10.1 Notice. All notices and other communications required or
permitted under this Agreement shall be delivered to the parties at the address
set forth below their respective signature blocks, or at such other address that
they designate by notice to all other parties in accordance with this Section
10.1. Any party delivering notice to Seller shall also deliver a copy to ▇▇▇▇▇,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, High Street Tower, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. and any party delivering notice to Purchaser shall
also deliver a copy to: ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, Two Embarcadero Place,
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq. All notices
and communications shall be deemed to have been received unless otherwise set
forth herein: (i) in the case of personal delivery, on the date of such
delivery; (ii) in the case of telex or facsimile transmission, on the date on
which the sender receives confirmation by telex or facsimile transmission that
such notice was received by the addressee, provided that a copy of
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such transmission is additionally sent by mail as set forth in (iv) below; (iii)
in the case of overnight air courier, on the second business day following the
day sent, with receipt confirmed by the courier; and (iv) in the case of mailing
by first class certified or registered mail, postage prepaid, return receipt
requested, on the fifth business day following such mailing.
Section 10.2 Entire Agreement. This Agreement, the exhibits and schedules
hereto, and the documents referred to herein or executed by both parties in
connection herewith embody the entire agreement and understanding of the parties
hereto with respect to the subject matter hereof, and supersede all prior and
contemporaneous agreements and understandings, oral or written, relative to such
subject matter.
Section 10.3 Binding Effect; Assignment. This Agreement and the various
rights and obligations arising hereunder shall inure to the benefit of and be
binding upon Seller, its successors and permitted assigns, and Purchaser and its
successors and permitted assigns. Neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be transferred or assigned (by
operation of law or otherwise) by either of the parties hereto without the prior
written consent of the other party.
Section 10.4 Expenses of Transaction. Except as otherwise provided in this
Agreement, each party shall bear its own costs and expenses in connection with
this Agreement and the transactions contemplated hereby.
Section 10.5 Waiver; Consent. This Agreement may not be changed, amended,
terminated, augmented, rescinded, or discharged (other than by performance), in
whole or in part, except by a writing executed by the parties hereto, and no
waiver of any of the provisions or conditions of this Agreement or any of the
rights of a party hereto shall be effective or binding unless such waiver shall
be in writing and signed by the party claimed to have given or consented
thereto. Except to the extent that a party hereto may have otherwise agreed in
writing, no waiver by that party of any condition of this Agreement or breach by
the other party of any of its obligations or representations hereunder or
thereunder shall be deemed to be a waiver of any other condition or subsequent
or prior breach of the same or any other obligation or representation by the
other party, nor shall any forbearance by the first party to seek a remedy for
any noncompliance or breach by the other party be deemed to be a waiver by the
first party of its rights and remedies with respect to such noncompliance or
breach.
Section 10.6 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but both of which taken
together shall constitute one and the same instrument.
Section 10.7 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this
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Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
Section 10.8 Remedies of Purchaser. Seller agrees that the Assets are
unique and not otherwise readily available to Purchaser. Accordingly, Seller
acknowledges that, in addition to all other remedies to which Purchaser is
entitled, Purchaser shall have the right to enforce the terms of this Agreement
by a decree of specific performance, provided Purchaser is not in material
default hereunder. The parties also agree that the rights and remedies of each
party to this Agreement set forth in this Agreement and in all of the exhibits
and schedules attached hereto and documents referred to herein shall be
cumulative and shall inure to the benefit of each such party.
Section 10.9 Governing Law. This Agreement shall in all respects be
construed in accordance with and be governed by the laws of the State of
California as applied to agreements among California residents entered into and
to be performed entirely within California.
Section 10.10 Cooperation and Records Retention. Seller and Purchaser
shall (i) each provide the other with such assistance as may reasonably be
requested by them in connection with the preparation of any Tax Returns, or in
connection with any audit or other examination by any taxing authority or any
judicial or administrative proceedings relating to liability for Taxes, (ii)
each retain and provide the other, with any records or other information which
may be relevant to any such Tax Return, audit or examination, proceeding or
determination, and (iii) each provide the other with any final determination of
any such audit or examination, proceeding or determination that affects any
amount required to be shown on any Tax Return of the other for any period.
Without limiting the generality of the foregoing, Seller and Purchaser shall
retain, until all applicable statutes of limitations (including any extensions
thereof) have expired, copies of all Tax Returns, supporting work schedules and
other records or information which may be relevant to such Tax Returns for all
tax periods or portions thereof ending before or including the Time of Closing
and shall not destroy or otherwise dispose of any such records without first
providing the other party with a reasonable opportunity to review and copy the
same. Purchaser shall keep the original copies of the records at its facilities,
if applicable, and, at Seller's expense, shall provide to Seller copies of such
Records as Seller may reasonably request.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
CISCO SYSTEMS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President, Finance and
Administration,
Chief Financial Officer and
Secretary
Address: _________________________________
_________________________________
INTEGRATED NETWORK CORPORATION
By: /s/ Yo ▇▇▇▇ ▇▇▇
----------------------------------------
Name: Yo ▇▇▇▇ ▇▇▇
Title: Chairman and Chief Executive
Officer
Address: _________________________________
_________________________________
