Exhibit 2.1
ASSET PURCHASE AGREEMENT
AGREEMENT (the "Agreement") entered into as of this 10th day of August,
2000, by and between Teltone Corporation, a Washington corporation
("Seller"), and C.P. Clare Corporation, a Massachusetts corporation ("Buyer").
RECITALS
WHEREAS, Buyer desires to purchase and Seller desires to sell for the
consideration specified herein and the assumption by Buyer of certain limited
obligations of Seller, certain of the assets used in Seller's integrated
circuit and component line of business which consists of Seller's call
progress band detectors, precise call progress detectors, call progress
detectors, relays, DTMF devices and MF trunk receivers (the "Business Unit");
WHEREAS, in connection with such purchase, Buyer desires to employ ▇▇.
▇▇▇▇▇▇ ▇▇▇▇ in the Business Unit and to continue to operate the Business Unit;
WHEREAS, following the sale of the Business Unit, to facilitate the
transfer of the assets and operations of the Business Unit from Seller to
Buyer, Seller desires to provide Buyer with engineering support and a license
for the use of the "Teltone" name; and
WHEREAS, after such purchase, Buyer desires to sell and Seller desires
to buy certain products from Buyer on an on going basis;
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants and conditions herein set forth, and intending to be legally bound
hereby, Seller and Buyer hereby agree as follows:
AGREEMENT
SECTION 1. PURCHASE AND SALE OF ASSETS.
1.1 PURCHASE AND SALE OF ASSETS. Upon the terms of and subject to the
conditions of this Agreement, Seller agrees to sell, convey, assign, transfer,
and deliver to Buyer, without recourse, representation or warranty, except as
otherwise expressly set forth in this Agreement, and Buyer agrees to acquire,
purchase, and accept from Seller all of Seller's right, title and interest in
the following Tangible Assets (as defined in Section 1.1(a)) and Intangible
Assets (as defined in Section 1.1(b)) (collectively, the "Purchased Assets"):
(a) TANGIBLE ASSETS. All inventories, machinery, computers,
equipment, and other tangible assets which are set forth on SCHEDULE 1.1(a)
hereto (the "Tangible Assets").
(b) INTANGIBLE ASSETS. All intangible assets ("Intangible
Assets") that are used by Seller exclusively in the operation of the Business
Unit comprised of:
8
(i) all intellectual property, listed on SCHEDULE 1.1(b)(i)
hereto (the "Intellectual Property");
(ii) all rights and obligations of the Seller under the
contracts, purchaser orders, sales orders, agreements, arrangements,
understandings and licenses listed on SCHEDULE 1.1(b)(ii) hereto relating to
the Business Unit (the "Contracts");
(iii) all transferable rights, if any, of Seller under the
confidentiality, non-competition, invention or similar written agreements with
current or former employees and independent contractors who provided services
to the Business Unit and/or participated in the development of the products
sold exclusively by Seller through the Business Unit (the "Products");
(iv) all books, records (other than primary accounting and other
records that Seller maintains in order to properly document the existence and
sale of the Products and the Purchased Assets), files, manuals, customer lists
and files, work-in-process, prepayments, deposits and other documents and
materials which are used by Seller exclusively in the operation of the Business
Unit;
(v) all transferable governmental or other third party permits,
certificates and licenses which are used by Seller exclusively in connection
with the operation of the Business Unit as presently conducted (collectively,
the "Permits") as listed on SCHEDULE 1.1(b)(v) hereto; and
(vi) all of the goodwill of Seller in, and the going concern
value of, the Business Unit.
1.2 EXCLUDED ASSETS. Other than the Purchased Assets, Buyer shall not
acquire any of Seller's other tangible or intangible assets, including but not
limited to cash, deposits and accounts receivables.
1.3 ASSUMED LIABILITIES AND EXCLUDED LIABILITIES.
(a) ASSUMED LIABILITIES. Upon the sale and purchase of the
Purchased Assets, Buyer hereby assumes and agrees to perform when due in
accordance with their respective terms the obligations of Seller arising after
the Closing (as defined in Section 1.4) under the Contracts (the "Assumed
Liabilities") and no others.
(b) EXCLUDED LIABILITIES. Except for the Assumed Liabilities, Buyer
shall not assume, and shall not have any liability or responsibility for,
any liabilities, obligations or commitments of Seller.
1.4 THE CLOSING. The transactions contemplated by this Agreement shall
take place at a closing (the "Closing"), 10:00 a.m., local time, at the offices
of ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP, or at such other location as is mutually agreed
to by the parties hereto on August 25, 2000, or such other date as mutually
agreed by the parties in writing (the "Closing Date").
9
1.5 PURCHASE PRICE. In consideration of the sale by Seller to Buyer of
the Purchased Assets, and subject to the assumption by Buyer of the Assumed
Liabilities and satisfaction of the conditions contained herein, Buyer shall pay
at the Closing by wire transfer of immediately available funds an amount equal
to $1,747,000 as adjusted pursuant to Section 1.6 below (the "Purchase Price").
1.6 ADJUSTMENTS TO PURCHASE PRICE.
(a) INVENTORY AMOUNT ADJUSTMENT. The Purchase Price shall be
increased, on a dollar-for-dollar basis, by the Inventory Amount. The "Inventory
Amount" means the total value of the inventory (as determined below). In
determining the "Inventory Amount", (i) inventory shall be valued at Seller's
standard costs (supplier's purchaser order price plus 25%).
(b) INVENTORY AMOUNT STATEMENT.
(i) No later than five (5) days following the Closing Date, Buyer
shall prepare and deliver to Seller a statement setting forth the Inventory
Amount (the "Inventory Amount Statement"). Subject to Section 1.6(b)(ii) below,
within five (5) days following the delivery of such Inventory Amount Statement
to Seller, Buyer shall pay to Seller, by wire transfer of immediately available
funds, the Inventory Amount, as shown on the Inventory Amount Statement.
(ii) In the event Seller objects to the Inventory Amount
Statement, Seller shall notify Buyer in writing of such objection within the
five (5) day period following the delivery thereof, stating in such written
objection the reasons therefor and setting forth the Seller's calculation of the
Inventory Amount as of the Closing Date. Upon receipt by Buyer of such written
objection, the parties shall attempt to resolve the disagreement concerning the
Inventory Amount Statement through negotiation. Notwithstanding any other
dispute resolution procedure provided for in this Agreement, if Buyer and Seller
cannot resolve such disagreement concerning the Inventory Amount Statement
within thirty (30) days following the end of the foregoing five (5) day period,
the parties shall submit the matter for resolution to a nationally recognized
firm of independent certified public accountants not affiliated with either
party, with the costs thereof to be shared equally by the parties. Such
accounting firm shall deliver a statement setting forth its own calculation of
the final adjustment to the parties within thirty (30) days of the submission of
the matter to such firm. The Inventory Amount shown to be due by Buyer on the
statement of such accounting firm shall be paid to Seller promptly, but in no
event later than five (5) days following the delivery of such statement by such
accounting firm to the parties.
1.7 PURCHASE PRICE ALLOCATION. At the Closing, Buyer and Seller shall
agree on the allocation of the Purchase Price as set forth on SCHEDULE 1.7
attached hereto, which schedule shall be adjusted to conform to the Purchase
Price in accordance with the Inventory Amount Statement. Such allocation shall
be binding upon Buyer and Seller for all purposes (including financial
accounting purposes, financial and regulatory reporting purposes and tax
purposes). Buyer and Seller each further agrees to file its federal
10
income tax returns and its other tax returns reflecting such allocation, Form
8594 and any other reports required by Section 1060 of the Internal Revenue Code
of 1986, as amended (the "Code").
1.8 RECORDS AND CONTRACTS. To the extent not previously provided to
Buyer, at the Closing, Seller shall deliver to Buyer all of the Contracts, with
such assignments thereof and consents to assignments as are necessary to assure
Buyer of the full transfer of the same. Seller shall also deliver to Buyer at
the Closing all of Seller's files and records constituting Purchased Assets
under Section 1.1, provided that Seller may keep a copy of any file or record
Seller deems necessary in order to prepare or defend any governmentally required
or necessary filing.
1.9 SALES AND TRANSFER TAXES; FILING OF TAX RETURNS. All sales,
transfer, use, recordation, documentary stamp, excise, and personal property
taxes, fees and duties which under applicable law are borne by the purchaser of
such assets, which are incurred in connection with this Agreement or the
transactions contemplated thereby will be borne and paid by Buyer. Seller hereby
covenants and agrees to promptly file final sales tax, income tax, payroll tax,
franchise tax, and all such other tax returns as may be required by federal or
state law as a result of the transaction contemplated by this Agreement to
reflect the operations of Seller prior to the Closing Date.
1.10 TRANSFER OF ASSETS. At the Closing, Seller shall deliver or cause
to be delivered to Buyer a ▇▇▇▇ of Sale substantially in the form as EXHIBIT A,
an Assignment and Assumption Agreement substantially in the form as EXHIBIT B,
and a License Agreement substantially in the form as EXHIBIT C.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER
As a material inducement to Buyer to enter into this Agreement, Seller
hereby represents and warrants to Buyer as follows:
2.1 ORGANIZATION; SUBSIDIARIES. Seller is a corporation duly organized,
validly existing and in good standing under the laws of Washington. Seller has
all requisite power and authority to conduct its business in the manner and in
the places where such business is currently conducted, to own, lease and operate
its properties and assets and to enter into and perform this Agreement. Seller
has furnished or made available to the Buyer complete and accurate copies of its
Certificate of Incorporation and By-laws, each as amended to date (collectively,
the "Charter"), and Seller is not in material violation of any term of its
Charter. Seller is duly qualified to do business as a foreign corporation in all
jurisdictions where such qualification is necessary in order to operate the
Business Unit as operated prior to the Closing, except where the failure to be
so qualified would not have a material adverse effect on the business, financial
condition or results of operations of the Business Unit as operated prior to the
Closing (a "Material Adverse Effect").
2.2 REQUIRED ACTION. Except as set forth in Section 5.6, all actions
and proceedings necessary to be taken by or on the part of Seller in connection
with the
11
transactions contemplated by this Agreement have been, or will be as of
the Closing Date, duly and validly taken, and this Agreement and each other
agreement, document and instrument to be executed and delivered by or on behalf
of Seller pursuant to, or as contemplated by, this Agreement (collectively, the
"Seller Documents") has been, or will be as of the Closing Date, duly and
validly authorized, executed and delivered by Seller and no other action on the
part of Seller is, or will be as of the Closing Date, required in connection
therewith. The transactions contemplated hereby do not require approval of
holders of Seller's capital stock or the approval of the holders of any other
equity interest in Seller. Seller has, or will have as of the Closing Date, full
right, authority, power and capacity, as applicable, to execute and deliver this
Agreement and each other Seller Document and to carry out the transactions
contemplated hereby and thereby. This Agreement and each other Seller Document
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of Seller enforceable in accordance with its respective
terms.
2.3 NON- CONTRAVENTION. The execution, delivery and performance by
Seller of this Agreement and each other Seller Document do not and will not (a)
violate any provision of the Charter of Seller, (b) constitute a violation of,
or conflict with or result in any breach of, acceleration of any obligation
under, right of termination under, or default under, any Contract or other
obligation to which the Purchased Assets are bound, (c) violate any judgment,
decree, order, statute, rule or regulation applicable to the Purchased Assets,
(d) require Seller to obtain any approval, consent or waiver of, or to make any
filing with, any person or entity (governmental or otherwise) that has not been
obtained or made, except for Form 8K,or (e) result in the creation or imposition
of any Lien (as defined in Section 2.6) on any of the Purchased Assets.
2.4 COMPLIANCE WITH LAWS. Seller is in compliance in all respects with
all (and the execution, delivery and performance of this Agreement will not
violate any) statutes, ordinances, orders, judgments, decrees, rules and
regulations promulgated by any governmental authority which apply to any of the
Purchased Assets or the Business Unit, except where such non-compliance would
not have a Material Adverse Effect. Seller has not received notice of a
violation or alleged violation of any such statute, ordinance, order, judgment,
decree rule or regulation nor will a filing with any regulatory authority be
required in connection with the transactions contemplated by this Agreement,
except for Form 8K.
2.5 CONTRACTS. The Contracts constitute all material leases, contracts
and arrangements, whether oral or written, under which Seller is bound or to
which Seller is a party which relate to the procurement of inventory relating
directly to the Business Unit. SCHEDULE 1.1(b)(ii) attached hereto contains a
true, correct and complete list of all Contracts. There are no oral agreement or
understanding involving the Business Unit. Each Contract is valid, in full force
and effect and binding upon Seller and the other parties thereto in accordance
with its terms except as such enforceability may be limited by the effect of
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
by general principles of equity. There have not been any defaults by Seller, or
to the knowledge of Seller, defaults or claims of default or claims of
nonenforceability
12
by the other party or parties under or with respect to any of the Contracts.
Seller has provided or made available to Buyer true and complete copies of all
of such Contracts.
2.6 TITLE. Seller has good and marketable title to all of the Purchased
Assets free and clear of all mortgages, pledges, security interests, charges,
liens, restrictions and encumbrances of any kind (collectively, "Liens"). Upon
the sale, assignment, transfer and delivery of the Purchased Assets to Buyer
hereunder and under the Seller Documents, there will be vested in Buyer good and
marketable title to the Purchased Assets, free and clear of all Liens.
2.7 LITIGATION. To Seller's knowledge, there is no (a) action, suit,
claim or proceeding pending or threatened, against or affecting the Business
Unit, any of the Purchased Assets (whether or not Seller is a party or
prospective party thereto), or any of the Contracts, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, (b)
arbitration proceeding relating to the Business Unit, any of the Purchased
Assets, or any of Contracts or (c) governmental inquiry pending or threatened
against, involving or affecting the Business Unit, any of the Purchased Assets,
or any of the Contracts. There are no outstanding orders, writs, judgments,
injunctions or decrees of any court, governmental agency or arbitration tribunal
against, involving or affecting, the Business Unit or any of the Purchased
Assets, or to the knowledge of Seller, against, involving or affecting any of
the Contracts.
2.8 FINANCIAL STATEMENT.
(a) Attached hereto as SCHEDULE 2.8 is a copy of the audited statement
of revenues and expenses of Seller for fiscal years 1998 and 1999 and the
unaudited statement of revenues and expenses of Seller for the fiscal year ended
2000 (the "Financial Statement"). The Financial Statement has been prepared in
accordance with generally accepted accounting principals consistently applied
and maintained throughout the periods indicated and presents fairly and
accurately the financial condition of the Business Unit at the dates of said
statements and the results of operations of the Business Unit for the periods
covered thereby.
(b) The projections and pro forma financial information furnished to
Buyer for fiscal years 2001 and 2002 are based on good faith estimates and
assumptions by the management of Seller, it being recognized by Buyer, however,
that projections as to future events are not to be viewed as fact and that
actual results during the period or periods covered by any such projections may
differ from projected results and that the differences may be material.
2.9 ABSENCE OF CERTAIN CHANGES. Since December 31, 1999, (a) Seller has
conducted the Business Unit in the ordinary course and consistent with past
practice and (b) there has not been a Material Adverse Effect.
2.10 PERMITS. SCHEDULE 1.1(b)(v) lists all Permits required by any
federal, state or local authorities to be held by Seller exclusively for the
operation of the Business Unit.
13
Seller has obtained and currently possesses all such Permits (all of which
Permits are valid and in full force and effect) and is operating in compliance
therewith.
2.11 CUSTOMERS AND SUPPLIERS. To Seller's knowledge, there are no pending
or threatened claims or controversies with any customer or supplier that is
material to the Purchased Assets or the Business Unit.
2.12 ASSETS. The Purchased Assets constitute all of the operating assets
which are owned, operated, or used exclusively in connection with, the
procurement and testing of Products. The Purchased Assets are in good condition,
ordinary wear and tear excepted.
2.13 INTELLECTUAL PROPERTY.
(a) All of the Intellectual Property and rights thereof of Seller
being purchased by Buyer are set forth on SCHEDULE 1.1(b)(i) attached hereto
(the "Intellectual Property Rights"). The Intellectual Property Rights represent
all of the (i) inventions (whether patentable or unpatentable and whether or not
reduced to practice), improvements thereto, and patents, patent applications,
and patent disclosures, together with all reissuances, continuations,
continuations in part, revisions, extensions, and reexaminations thereof; (ii)
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith; (iii) mask works and all applications,
registrations, and renewals in connection therewith; (iv) trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals); (v) computer software including, but not limited to, all past,
present and future versions, releases, updates and works-in-progress thereof, in
source and object code format, all data and documentation therefor, and all
registrations and applications for registration thereof; and (vi) other
proprietary rights; and (vii) copies, derivatives and tangible embodiments
thereof (in whatever form or medium), owned or licensed by Seller and
exclusively employed in the operation and testing of the Products. SCHEDULE
1.1(b)(i) specifies for each Intellectual Property Right, as applicable: (A) the
nature of such Intellectual Property Right; (B) the owner of such Intellectual
Property Right; (C) the jurisdictions by or in which such Intellectual Property
Right has been issued or registered or in which an application for such issuance
or registration has been filed, including the respective registration or
application numbers, if available; and (D) material licenses, sublicenses and
other agreements to which Seller is a party and pursuant to which any person is
authorized to use such Intellectual Property Right.
(b) Except as set forth in SCHEDULE 1.1(b)(i), to Seller's knowledge,
Seller has exclusive ownership of, or exclusive license to use, all Intellectual
Property and Seller's rights in all of such Intellectual Property are freely
transferable. Except as set forth on SCHEDULE 1.1(b)(i), to Seller's knowledge,
there are no rights, proprietary interests, claims or demands of any other
person pertaining to any of such Intellectual Property and no proceedings have
been instituted or are pending or, to Seller's
14
knowledge, threatened which challenge the rights of Seller in respect thereof.
Except as set forth in SCHEDULE 1.1(b)(i), to Seller's knowledge, no party other
than Seller (including, without any limitation, any stockholder, director,
officer, employee or consultant of the Seller) owns or holds any proprietary
interest in the Products or any of the Intellectual Property.
(c) Seller has taken all commercially reasonable steps to establish
and preserve its ownership of all Intellectual Property rights with respect to
the Products. Seller has not made any proprietary information directly related
to the operation of the Business Unit available to any person other than
employees of Seller except pursuant to written agreements requiring the
recipients to maintain the confidentiality of such information and appropriately
restricting the use thereof. Seller has no knowledge of any infringement by
others of any of its Intellectual Property rights.
(d) Except as set forth in SCHEDULE 1.1(b)(i), to Seller's knowledge,
the Products do not infringe any Intellectual Property of any other person. No
proceeding charging Seller with infringement of any adversely held Intellectual
Property has been filed or, to Seller's knowledge, is threatened to be filed.
Except as disclosed on SCHEDULE 1.1(b)(i), no Intellectual Property Right is
subject to any outstanding order, judgment, decree, stipulation or agreement
restricting the use thereof by Seller or restricting the licensing thereof by
Seller to any Person. Except as set forth in SCHEDULE 1.1(b)(i), Seller has not
entered into any special agreement to indemnify any other person against any
charge of infringement of any patent, trademark, service ▇▇▇▇ or copyright of
the Business Unit. To Seller's knowledge, Seller is not making unauthorized use
of any confidential information or trade secrets of any person, including
without limitation any former employer of any past or present employee of Seller
with respect to the Business Unit. Except as set forth in SCHEDULE 1.1(b)(i),
neither Seller nor, to Seller's knowledge, any of its employees have any
agreements or arrangements with any Person or entities other than Seller related
to confidential information or trade secrets of such persons or restricting any
such employee's ability to engage in business activities of any nature with
respect to the Business Unit. The activities of Seller's employees on behalf of
Seller do not violate any such agreements or arrangements known to Seller which
any such employees have with other Persons.
(e) Except as set forth on SCHEDULE 1.1(b)(i), to Seller's knowledge,
Seller has the exclusive right to use, license, distribute, transfer and bring
infringement actions with respect to the Products and the Intellectual Property.
Except as set forth on SCHEDULE 1.1(b)(i), Seller (i) has not licensed or
granted to anyone rights of any nature to use any of its Intellectual Property,
and (ii) is not obligated to and does not pay royalties or other fees to anyone
for its ownership, use, license or transfer of any of its Intellectual Property.
(f) To Seller's knowledge, none of the source or object code,
algorithms, or structure, sequence or organization included in the Products or
the Intellectual Property is copied from, based upon, or derived from any other
source or object code, algorithm or structure, sequence or organization in
violation of the rights of any third party. The Products and any medium by which
they are delivered to Buyer do
15
not contain any virus or any other contaminant, or disabling devices including,
but not limited to, codes, commands or instructions that may have the effect or
be used to delete, damage or disable the Products, or, to Seller's knowledge,
other software, Buyer information or other Buyer property.
(g) There is no pending or, to the knowledge of the Seller, threatened
claim or litigation against the Seller contesting the right to own or use any
Intellectual Property.
2.14 FINDER'S FEE. Except as set forth on SCHEDULE 2.14, Seller has not
incurred or become liable for any broker's commission or finder's fee, banking
fee or similar compensation relating to or in connection with this Agreement or
the transactions contemplated hereby.
2.15 INVENTORY. All of the types of the inventory of the Business Unit
(the "Inventory") are set forth on SCHEDULE 1.1(a) hereto. The Inventory is of a
quality and quantity usable by Seller in the ordinary course of the conduct of
the Business Unit, as operated by Seller consistent with past practice. None of
the Inventory is below standard quality or has become obsolete or unsaleable
(except at prices less than cost) through regular distribution channels in the
ordinary course of the conduct of the Business Unit. There have been no
write-downs of the Inventory since December 31, 1999. Purchase commitments for
raw materials and parts, a true, complete and correct list of which is set forth
on SCHEDULE 2.15 hereto, are not materially in excess of normal requirements and
none are at prices in excess of current market prices, excluding effects of
fluctuations in foreign exchange rates. Since December 31, 1999, no Inventory
items have been sold or disposed of except through sales in the ordinary course
of the conduct of the Business Unit. Seller hereby incorporates by reference,
and makes as an additional representation and warranty hereunder to the Buyer,
those representations and warranties set forth in Seller's standard terms and
conditions, sales or license agreement or other document containing warranties
with respect to the sale or license of the Products (including all finished
goods in Inventory). Buyer's sole remedy in the event of a breach of this
Section 2.14 shall be to return such Inventory to Seller and receive a refund of
the Purchase Price equal to the amount Buyer paid Seller for such returned
Inventory, provided that in order to receive this remedy such determination must
be made within 90 days of Closing.
2.16 EMPLOYEES. Seller is not delinquent in payments to any present or
former employee, contractor, consultant or other person or entity for any wages,
salaries, commissions, bonuses or other compensation for any services performed
for them to the date hereof or amounts required to be reimbursed to such persons
or entities directly relating to the Business Unit or the development of the
Purchased Assets.
2.17 DISCLOSURE. The representations, warranties and statements
contained in this Agreement and in the certificates, exhibits and schedules
delivered by Seller pursuant to this Agreement to Buyer do not contain any
untrue statement of a material fact, and, when taken together, do not omit to
state a material fact required to be stated therein or necessary in order to
make such representations, warranties or statements not misleading
16
in light of the circumstances under which they were made. There are no facts
which presently or, to Seller's knowledge, may in the future have a Material
Adverse Effect which have not been specifically disclosed herein or in a
schedule furnished herewith, other than general economic conditions affecting
Seller's industry.
2.18 LIMITATIONS ON WARRANTIES. SELLER MAKES NO REPRESENTATION OR
WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, EXCEPT THOSE REPRESENTATIONS AND
WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT. EXCEPT FOR THE EXPRESS
WARRANTIES CONTAINED IN THIS AGREEMENT, THE PURCHASED ASSETS, INCLUDING
INVENTORY, ARE BEING SOLD AS IS, WHERE IS, WITHOUT IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS OF THE PURCHASED ASSETS FOR A PARTICULAR PURPOSE.
EXCEPT AS EXPRESSLY SET FORTH HEREIN, SELLER MAKES NO REPRESENTATION OR WARRANTY
WHATSOEVER WITH RESPECT TO THE PERFORMANCE OF THE PURCHASED ASSETS, THE PRODUCTS
OR THE BUSINESS UNIT SUBSEQUENT TO THE CLOSING.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF BUYER.
As a material inducement to Seller entering into this Agreement, Buyer
hereby represents and warrants to Seller as follows:
3.1 ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Massachusetts.
Buyer has all requisite power and authority to conduct its business as it is now
conducted and to own, lease and operate its properties and assets.
3.2 REQUIRED ACTION; AUTHORITY. All actions and proceedings necessary
to be taken by or on the part of Buyer in connection with the transactions
contemplated by this Agreement have been duly and validly taken, and this
Agreement and each other agreement, document and instrument to be executed and
delivered by or on behalf of Buyer pursuant to, or as contemplated by, this
Agreement (collectively, the "Buyer Documents") has been duly and validly
authorized, executed and delivered by Buyer. Buyer has full right, authority and
power to execute and deliver this Agreement and each other Buyer Document and to
carry out the transactions contemplated hereby and thereby. This Agreement and
each other Buyer Document constitute, or when executed and delivered will
constitute, the legal, valid and binding obligation of Buyer enforceable in
accordance with their respective terms.
3.3 NO CONFLICTS. The execution, delivery and performance by Buyer of
this Agreement and each other Buyer Document does not and will not (a) violate
any provision of the Articles of Organization or By-laws of Buyer, as amended to
date, (b) constitute a violation of, or conflict with or result in any breach
of, acceleration of any obligation under, right of termination under, or default
under, any agreement or instrument to which Buyer is a party or by which it is
bound, (c) to the knowledge of Buyer, violate any judgment, decree, order,
statute, rule or regulation applicable to Buyer,
17
or (d) to the knowledge of Buyer, require Buyer to obtain any approval, consent
or waiver of, or to make any filing with, any person or entity (governmental or
otherwise) that has not been obtained or made. The officers who execute this
Agreement and the other Buyer Documents contemplated hereby on behalf of Buyer
have and shall have all requisite power to do so in the name of and on behalf of
Buyer.
3.4 FINDER'S FEE. Buyer has not incurred or become liable for any
broker's commission or finder's fee, banking fee or similar compensation
relating to or in connection with this Agreement or the transactions
contemplated hereby.
3.5 LITIGATION. To Buyer's knowledge, this Agreement and the
transactions contemplated hereby will not be affected by any (a) action, suit,
claim or proceeding pending or threatened, against or affecting Buyer, at law or
in equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (b) arbitration proceeding relating to Buyer, or (c) outstanding
orders, writs, judgments, injunctions or decrees of any court, governmental
agency or arbitration tribunal against, involving or affecting, the Buyer.
SECTION 4. COVENANTS OF SELLER.
Seller covenants and agrees as follows:
4.1 USE OF TRADE SECRETS. After the Closing Date, neither Seller, nor
any person controlling, controlled by or under common control with Seller will
for any reason, directly or indirectly, for itself or any other person, disclose
any trade secrets, confidential information, know-how, proprietary information
or other Intellectual Property transferred pursuant to this Agreement.
4.2 POST-CLOSING TRANSITIONAL MATTERS; TECHNICAL SUPPORT SERVICES. For
a period of ninety (90) days following the Closing Date, Seller shall provide,
without additional cost to Buyer, such assistance as is reasonably requested by
Buyer in order to effect an orderly transition in the ownership and operation of
the Purchased Assets, including, without limitation, technical support services
to be provided to the Business Unit ("Technical Support Services") consistent
with the past level of Technical Support Services which Seller has provided on
the Business Unit.
4.3 CONFIDENTIALITY. After the Closing Date, the Seller and its
representatives and affiliates will hold in strict confidence any confidential
or proprietary data or information with respect to the Business Unit's business
or financial condition as of the Closing Date except as may be required by law.
Information which is, or which becomes, part of the public domain or generally
known in the Business Unit's industry otherwise than by Seller's non-observance
of its obligation hereunder shall not be deemed confidential or proprietary
information for purposes of this Agreement.
4.4 WARRANTIES OF PRODUCTS PREVIOUSLY SOLD. Seller shall honor all
terms and conditions set forth in all of the Contracts with respect to any
products (including, without limitation, Products) sold prior to the Closing
Date and hereby agrees to indemnify, defend and hold harmless Buyer, pursuant to
the terms and conditions of
18
Section 9 of this Agreement, against all losses resulting from Sellers failure
to honor such terms and conditions.
4.5 FURTHER ASSURANCES. Seller, from time to time after the Closing at the
request of Buyer and without further consideration and at no cost to Seller,
shall execute and deliver further instruments of transfer and assignment and
take such other action as Buyer may reasonably require to more effectively
transfer and assign to, and vest in, Buyer the Purchased Assets free and clear
of all Liens.
4.6 CONTINUITY AND MAINTENANCE OF OPERATIONS OF THE BUSINESS UNIT. Except
as to actions of which Buyer has been advised and to which Buyer has consented
to in writing, and except as specifically permitted or required by this
Agreement, Seller shall:
(a) operate the Business Unit in the ordinary course consistent with
past practices, use its commercially reasonable efforts to keep available the
services of the employees who are directly and exclusively involved in the
operation of the Business Unit, and use commercially reasonable efforts to
preserve any beneficial Business Unit relationships with customers, suppliers
and others having Business Unit dealings with Seller;
(b) use and operate the Purchased Assets in a manner consistent with
past practice and maintain the Purchased Assets in good operating condition,
ordinary wear and tear excepted;
(c) maintain insurance upon the Purchased Assets in such amounts and
types as in effect on the date of this Agreement;
(d) keep all of its Business Unit books, records and files in the
ordinary course of business in accordance with past practices, and provide
Buyer with access thereto upon its reasonable request;
(e) perform and comply in all material respects with the terms
of the Contracts and keep such Contracts in full force and effect; and
(f) use its commercially reasonable efforts to preserve the goodwill
of the Business Unit.
4.7 NEGATIVE COVENANTS. Seller shall not, without the prior written consent
of Buyer:
(a) sell, transfer, lease, assign or otherwise dispose of, or agree
to sell, transfer, lease, assign or otherwise dispose of, any Purchased Assets
outside the ordinary course of business;
(b) enter into any contract or commitment for the acquisition
of goods or services relating to the Business Unit (other than in the ordinary
course of business) or which otherwise obligates Seller to perform in full or in
part beyond the Closing Date;
19
(c) renegotiate, modify, amend or terminate any Contract;
(d) create, assume, or permit to exist, or agree to incur, assume or
acquire, any Lien, claim or liability on the Purchased Assets, other than in the
ordinary course of business;
(e) make any modifications or changes to the existing rate
schedules or product offerings in effect with respect to the Business Unit;
(f) offer or employ any sales discounts, free services or other
extraordinary marketing practices or extraordinary promotions outside the
ordinary course of business and not consistent with Seller's past practices; or
(g) take any actions or permit its employees and agents to take any
actions which would materially interfere with or preclude the
transactions contemplated by this Agreement.
4.8 CONSENTS. Seller will use its reasonable best efforts to obtain, as
soon as practicable and at its expense, the consent of all third parties under
the Contracts for which the prior approval of such third party is required
pursuant to the terms of the Contract; PROVIDED, HOWEVER, that "reasonable best
effort" for this purpose shall not require Seller to undertake extraordinary or
unreasonable measures to obtain such approvals and consents, including, without
limitation, the initiation or prosecution of legal proceedings or the payment of
fees in excess of customary filing and processing fees.
4.9 NOTIFICATION OF CERTAIN MATTERS. Upon becoming known to Seller,
Seller shall promptly notify Buyer of (a) any fact, event, circumstances or
action the existence or occurrence of which would cause any of Seller's
representations or warranties under this Agreement, or the disclosures in any
schedules or exhibits attached hereto, not to be true in any material respect
and (b) any failure on its part to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement. Seller shall promptly notify Buyer in writing of the
assertion, commencement or threat of any claim, litigation, proceeding or
investigation in which Seller is a party or in which the Purchased Assets or
Business Unit may be affected and which could reasonably be expected to be
material or which relates to the transactions contemplated hereby.
4.10 ADVERSE CHANGE. Seller shall promptly notify Buyer in writing of
any materially adverse developments affecting the Purchased Assets or the
Business Unit which become known to Seller, including, without limitation, (a)
any damage, destruction or loss (whether or not covered by insurance) materially
and adversely affecting any of the Purchased Assets or the Business Unit, (b)
any material notice of violation, forfeiture or complaint under any material
Contract, or (c) anything which, if not corrected prior to
20
the Closing Date, would prevent Seller from fulfilling any condition to Closing
described in Section 6 hereof.
4.11 NO SOLICITATION. Seller shall not, and Seller shall cause its
officers, employees, members, agents and representatives (including, without
limitation, any investment banker, attorney or accountant retained by Seller)
and all other employees who perform services with respect to the operation of
the Business Unit not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any proposal with respect to the
Purchased Assets or the Business Unit, or engage in any negotiations concerning,
or provide to any other person any information or data relating to, the Business
Unit, the Purchased Assets or Seller for the purpose of, or have any discussions
with, any person relating to, or otherwise cooperate in any way with or assist
or participate in, facilitate or encourage, any inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, any effort
or attempt by any other Person to seek or effect a transaction, or enter into a
transaction with any Person or Persons, other than Buyer, concerning the
possible sale of the Purchased Assets or Business Unit, or the capital stock of
Seller. Seller shall promptly inform Buyer of any such inquiries or proposals
and provide all pertinent documentation related thereto. Nothing in this
paragraph shall impede Seller from operating in the best interests of its
shareholders.
SECTION 5. CONDITIONS PRECEDENT TO OBLIGATION OF BUYER.
Buyer's obligation to consummate the transactions contemplated by this Agreement
is subject to the satisfaction, on or prior to the Closing Date, of each of the
following conditions, unless otherwise waived by Buyer in writing:
5.1 PERFORMANCE OF AGREEMENTS AND DELIVERIES. Seller shall have
performed in all material respects all of its covenants, agreements and
obligations under this Agreement which are to be performed or complied with by
Seller prior to or upon the Closing Date and shall have delivered all documents
and items required to be delivered at or prior to the Closing, including,
without limitation, a certificate, dated the Closing Date, from Seller to the
effect that the conditions set forth in this Section 5.1 have been satisfied and
that the representations and warranties set forth in Section 2 are true and
correct.
5.2 ASSET TRANSFER. Seller shall have delivered to Buyer all of
Seller's right, title and interest in and to the Purchased Assets, free and
clear of all Liens; further, Seller shall have executed and delivered to Buyer
the ▇▇▇▇ of Sale.
5.3 ASSIGNMENT OF CONTRACTS AND AUTHORIZATIONS; APPROVALS. All
Contracts shall have been duly and validly assigned to Buyer by Seller and
Seller shall have executed and delivered to Buyer the Assignment and Assumption
Agreement, and all consents and approvals required in connection with the
consummation of the transactions contemplated hereby under any agreement or
authorization or otherwise shall have been obtained in form and substance
satisfactory to Buyer and without conditions materially and adversely affecting
Buyer and which do not require Buyer to pay money to any party
21
to any such agreement or authorization in excess of amounts required to be so
paid pursuant to the terms and conditions thereof. All such Contracts and
authorizations shall be in full force and effect and shall not have been
amended, modified or repudiated in any material respect by either party thereto.
Neither Seller nor, to the knowledge of Seller, the other party thereto, shall
have materially or adversely breached or defaulted under any agreement or
authorization. Seller shall not have received notice of or have knowledge of any
fact which could result in the termination, repudiation or breach of any
agreement or authorization.
5.4 NON-COMPETITION AGREEMENT. Seller shall have executed and delivered
to Buyer a Non-Competition Agreement in substantially the form attached hereto
as EXHIBIT D.
5.5 LICENSE AGREEMENT. Seller shall have executed and delivered to Buyer
the License Agreement.
5.6 RELEASE OF LIENS. Seller shall have obtained and delivered to Buyer
at or prior to the Closing a written assurance that Seller will deliver to Buyer
within three (3) business days of Closing, instruments (including payoff
letters, bills of sale and UCC-3 termination statements) releasing any and all
Liens on the Purchased Assets.
5.7 NOTIFICATION OF CERTAIN MATTERS. Buyer shall promptly notify Seller
of (a) any fact, event, circumstances or action the existence or occurrence of
which would cause any of Buyer's representations or warranties under this
Agreement, or the disclosures in any schedules or exhibits attached hereto, not
to be true in any material respect and (b) any failure on its part to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement. Buyer shall promptly
notify Seller in writing of the assertion, commencement or threat of any claim,
litigation, proceeding or investigation in which Buyer is a party or in which
the Purchased Assets or Business Unit may be affected and which could reasonably
be expected to be material or which relates to the transactions contemplated
hereby.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATION OF SELLER.
The obligation of Seller to consummate the transactions contemplated by this
Agreement is subject to the satisfaction, on or prior to the Closing Date, of
the following conditions, unless waived by Seller in writing:
6.1 PERFORMANCE OF AGREEMENT AND DELIVERIES. Buyer shall have performed
in all material respects all of its covenants, agreements and obligations under
this Agreement which are to be performed or complied with by Buyer prior to or
upon the Closing Date and shall have delivered all documents and items required
to be delivered at or prior to the Closing, including, without limitation:
(a) A certificate, dated the Closing Date, from Buyer to the
effect that the conditions set forth in this Section 6.1 have been satisfied and
that the representations and warranties in Section 3 are true and correct; and
22
(b) A certificate, dated the Closing Date, from Buyer's Secretary as
to the incumbency of all officers executing the Buyer Documents on behalf of
Buyer.
6.2 PROCUREMENT AGREEMENT. Buyer shall have executed and delivered to
Seller a Procurement Agreement in substantially the form attached hereto as
EXHIBIT E.
6.3 PURCHASE ORDERS. Buyer shall have substituted its purchase order to
replace Seller's with suppliers for the Business Unit. Buyer shall also have
accepted purchase orders from purchasers of Products that were placed with
Seller prior to the Closing Date.
SECTION 7. SURVIVAL.
7.1 SURVIVAL OF WARRANTIES. Each of the representations, warranties,
agreements, indemnifications, covenants and obligations herein or in any
schedule, exhibit, certificate or financial statement delivered by any party to
the other party incident to the transactions contemplated hereby are material,
shall be deemed to have been relied upon by the other party and shall survive
the Closing for a period of 15 months after the Closing Date, except that any
written claim for breach thereof made in accordance with Section 9 prior to such
expiration date shall survive thereafter until resolved and as to any such claim
such expiration will not affect Buyer's right of indemnification under Section
9.1 or Seller's rights of indemnification under Section 9.2.
SECTION 8. TERMINATION.
8.1 EVENTS OF TERMINATION. This Agreement and the transactions
contemplated by this Agreement may be terminated at any time prior to the
Closing:
(a) By the mutual written consent of Buyer and Seller.
(b) By Seller, if it is not in breach or default hereunder:
(i) if any representation or warranty of Buyer made herein is
untrue in any material respect and such breach is not cured within 30 days of
Buyer's receipt of a notice from Seller that such breach exists or has occurred;
(ii) if Buyer shall have defaulted in any material respect in the
performance of any material obligation under this Agreement and such breach is
not cured within 30 days of Buyer's receipt of a notice from Seller that such
default exists or has occurred;
(iii) if the Closing has not occurred prior to August 26, 2000.
(c) By Buyer, if it is not in breach or default hereunder:
23
(i) if any representation or warranty of Seller made herein is
untrue in any material respect and such breach is not cured within 30 days of
Seller's receipt of a notice from Buyer that such breach exists or has occurred;
(ii) if Seller shall have defaulted in any material respect in
the performance of any material obligation under this Agreement and such breach
is not cured within 30 days of Seller's receipt of a notice from Buyer that such
default exists or has occurred; or
(iii) if the Closing has not occurred prior to August 26, 2000.
8.2 MANNER OF EXERCISE. In the event of the termination of this
Agreement by either Buyer or Seller pursuant to Section 8.1 notice thereof shall
forthwith be given to the other party in accordance with the provisions set
forth in Section 10 hereto and this Agreement shall terminate and the
transactions contemplated hereunder shall be abandoned without further action by
Buyer or Seller.
8.3 EFFECT OF TERMINATION; LIABILITIES. In the event of the termination
of this Agreement pursuant to Section 8.1 and prior to the Closing, all
obligations of the parties hereunder (other than pursuant to Section 4.3) shall
terminate, and neither Seller nor Buyer shall have any further liability
hereunder, including for losses, liabilities, obligations, damages,
deficiencies, actions, suits, proceedings, demands, assessments, orders,
judgments, costs and expenses (including attorneys' fees) of any kind
whatsoever; except upon termination of this Agreement pursuant to Sections
8.1(c)(i) and 8.1(c)(ii), Buyer shall be entitled to any remedy which it may
have, whether at law or in equity, and except upon termination of this Agreement
pursuant to Sections 8.1(b)(i) and 8.1(b)(ii), Seller shall be entitled to any
remedy which it may have, whether at law or in equity.
8.4 WAIVER; EXTENSION OF TIME FOR PERFORMANCE. Seller may extend the
time for the performance of any of the obligations or other acts of Buyer
hereunder, waive any inaccuracies in the representations and warranties of Buyer
contained herein or in any document delivered pursuant hereto, or waive
compliance by Buyer with any of the agreements or conditions contained herein.
Any such extension or waiver shall be valid if set forth in an instrument in
writing signed by Seller. Buyer may extend the time for the performance of any
of the obligations or other acts of Seller, waive any inaccuracies in the
representations and warranties of Seller contained herein or in any document
delivered pursuant hereto, or waive compliance by Seller with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid if set forth in an instrument in writing signed by Buyer.
SECTION 9. INDEMNIFICATION.
9.1 INDEMNIFICATION BY SELLER. Seller hereby agrees to indemnify and
hold harmless Buyer, its affiliates and their respective directors, officers,
stockholders, partners, members, employees, and agents (the "Buyer Indemnified
Parties"), against and in respect of all losses, liabilities, obligations,
damages, deficiencies, actions, suits, proceedings, demands, assessments,
orders, judgments, costs and expenses (including the
24
reasonable fees, disbursements and expenses of attorneys and consultants) of any
kind or nature whatsoever, but net of the proceeds from any insurance policies
or other third party reimbursement for such loss, to the extent sustained,
suffered or incurred by or made against any Buyer Indemnified Party, to the
extent based upon, arising out of or in connection with: (a) any breach of any
representation or warranty made by Seller in this Agreement, the Seller
Documents or in any schedule, exhibit, certificate, agreement or other
instrument delivered pursuant to this Agreement; (b) any breach of any covenant
or agreement made by Seller in this Agreement, the Seller Documents or in any
schedule, exhibit, certificate, financial statement, agreement or other
instrument delivered pursuant to this Agreement; (c) any claim made by any
person or entity which relates to the operation of the Purchased Assets or the
Business Unit which arises in connection with or on the basis of events, acts,
omissions, conditions or any other state of facts occurring on or existing
before the Closing Date, except as otherwise stated herein; (d) any claim which
arises in connection with any liability or obligation of Seller, including,
without limitation, arising from (i) a failure to pay any federal, state, local,
foreign and other taxes, including, without limitation, income taxes, estimated
taxes, alternative minimum taxes, excise taxes, sales taxes, use taxes,
value-added taxes, gross receipts taxes, franchise taxes, capital stock taxes,
employment and payroll-related taxes, withholding taxes, stamp taxes, transfer
taxes, windfall profit taxes, environmental taxes and property taxes, whether or
not measured in whole or in part by net income, and all deficiencies, or other
additions to tax, interest, fines and penalties owed by it (collectively,
"Taxes") or (ii) a failure to file any tax returns; (e) any failure of Seller or
any of its affiliates, service providers or agents or any employee program to
comply with any provision of ERISA, the Code or other applicable law; (f) any
claim which arises in connection with any liability or obligation of Seller
other than the Assumed Liabilities; or (g) any claim or cause of action for
patent, trademark and/or copyright infringement, unlawful disclosure or use or
misappropriation of a trade secret or violation of any other intellectual
property right asserted against Buyer by virtue of Buyer's possession, use or
proprietary interest in any of the Purchased Assets, including, without
limitation, the Intellectual Property, provided that Buyer's actions giving rise
to the claim or cause of action is commercially consistent with Seller's prior
possession, ownership and use of the subject asset or right, and provided
further that, without limiting Seller's obligations hereunder, prior to any
action for indemnification Buyer notifies Seller of such infringement claim and
gives Seller a reasonable opportunity to procure for Buyer the right to continue
to market, use and have others use, the alleged infringing Product, or replace
or modify the infringing Product to make it non-infringing.
9.2 INDEMNIFICATION BY BUYER. Buyer hereby agrees to indemnify and hold
harmless Seller, its affiliates and their respective directors, officers,
stockholders, partners, members, employees, and agents (the "Seller Indemnified
Parties"), against and in respect of all losses, liabilities, obligations,
damages, deficiencies, actions, suits, proceedings, demands, assessments,
orders, judgments, costs and expenses (including the reasonable fees,
disbursements and expenses of attorneys and consultants) of any kind or nature
whatsoever, but net of the proceeds from any insurance policies or other third
party reimbursement for such loss, to the extent sustained, suffered or incurred
by or made against any Seller Indemnified Party, to the extent based upon,
arising out of or in connection with any breach of any representation, warranty
or covenant made by Buyer
25
in this Agreement, any Buyer Documents or in any exhibit, certificate, agreement
or other instrument delivered pursuant to this Agreement.
9.3 NOTICE; DEFENSE OF CLAIMS.
(a) NOTICE OF CLAIMS. Promptly after receipt by an indemnified party
of notice of any claim, liability or expense to which the indemnification
obligations hereunder would apply, the indemnified party shall give notice
thereof in writing to the indemnifying party, but the omission to so notify the
indemnifying party promptly will not relieve the indemnifying party from any
liability except to the extent that the indemnifying party shall have been
prejudiced as a result of the failure or delay in giving such notice. Such
notice shall state the information then available regarding the amount and
nature of such claim, liability or expense and shall specify the provision or
provisions of this Agreement under which the liability or obligation is
asserted.
(b) THIRD PARTY CLAIMS. With respect to third party claims, if within
20 days after receiving the notice described in clause (a) above the
indemnifying party (i) gives written notice to the indemnified party stating
that (A) it would be liable under the provisions hereof for indemnity in the
amount of such claim if such claim were successful and (B) that it disputes and
intends to defend against such claim, liability or expense at its own cost and
expense and (ii) provides reasonable assurance to the indemnified party that
such claim will be promptly paid in full if required, then counsel for the
defense shall be selected by the indemnifying party (subject to the consent of
the indemnified party which consent shall not be unreasonably withheld) and the
indemnified party shall not be required to make any payment with respect to such
claim, liability or expense as long as the indemnifying party is conducting a
good faith and diligent defense at its own expense; provided, however, that the
assumption of defense of any such matters by the indemnifying party shall relate
solely to the claim, liability or expense that is subject or potentially subject
to indemnification. The indemnifying party shall have the right, with the
consent of the indemnified party, which consent shall not be unreasonably
withheld, to settle all indemnifiable matters related to claims by third parties
which are susceptible to being settled provided the indemnifying parties'
obligation to indemnify the indemnified party therefor will be fully satisfied.
The indemnifying party shall keep the indemnified party apprised of the status
of the claim, liability or expense and any resulting suit, proceeding or
enforcement action, shall furnish the indemnified party with all documents and
information that the indemnified party shall reasonably request and shall
consult with the indemnified party prior to acting on major matters, including
settlement discussions. Notwithstanding anything herein stated, the indemnified
party shall at all times have the right to fully participate in such defense at
its own expense directly or through counsel; PROVIDED, HOWEVER, if the named
parties to the action or proceeding include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate under applicable standards of professional conduct, the expense
of separate counsel for the indemnified party shall be paid by the indemnifying
party. If no such notice of intent to dispute and defend is given by the
indemnifying party, or if such diligent good faith defense is not being or
ceases to be conducted, the indemnified party shall, at the expense of the
indemnifying party, undertake the defense of (with counsel selected by the
26
indemnified party), and shall have the right to compromise or settle (exercising
reasonable business judgment), such claim, liability or expense. If such claim,
liability or expense is one that by its nature cannot be defended solely by the
indemnifying party, then the indemnified party shall make available all
information and assistance that the indemnifying party may reasonably request
and shall cooperate with the indemnifying party in such defense.
(c) NON-THIRD PARTY CLAIMS. With respect to non-third party claims,
if within 20 days after receiving the notice described in clause (a) above the
indemnifying party does not give written notice to the indemnified party that it
contests such indemnity, the amount of indemnity payable for such claim shall be
as set forth in the indemnified party's notice. If the indemnifying party
provides written notice to the indemnified party within such 20-day period that
it contests such indemnity, the parties shall attempt in good faith to reach an
agreement with regard thereto within 30 days of delivery of the indemnifying
party's notice. If the parties cannot reach agreement within such 30-day period,
the matter may be submitted by either party for binding arbitration in
accordance with the provisions of Section 11.10 hereof.
SECTION 10. NOTICES.
All notices and other communications required to be given hereunder, or which
may be given pursuant or relative to the provisions hereof, shall be in writing
and shall be deemed to have been given (a) if delivered or sent by facsimile
transmission, upon acknowledgment of receipt by the recipient, (b) if sent by a
nationally recognized overnight courier, properly addressed with postage
prepaid, on the next business day (or Saturday or Sunday if sent for delivery on
such days), or (c) if sent by registered or certified mail, upon the earlier of
the date on which receipt is acknowledged and the date which is three (3) days
after deposit in United States post office facilities properly addressed with
postage prepaid as follows:
IF TO SELLER: Teltone Corporation
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
IF TO BUYER: C.P. Clare Corporation
▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President and
Chief Executive Officer
WITH A COPY TO: ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
27
Attn.: ▇▇▇▇▇▇ ▇. Cable, P.C.
SECTION 11. MISCELLANEOUS.
11.1 ASSIGNABILITY; BINDING EFFECT. This Agreement shall not be assignable
by Buyer or Seller except with the written consent of the other, except that
Buyer may assign its rights hereunder either (a) to any affiliate of Buyer or
its owners, (b) as a result of any merger, reorganization or other
consolidation, or (c) in connection with the granting of a security interest to
its senior lender. This Agreement shall be binding upon and shall inure to the
benefit of, the parties hereto and their respective successors, and assigns.
11.2 HEADINGS. The subject headings used in this Agreement are included
for purposes of convenience only and shall not affect the construction or
interpretation of any of its provisions.
11.3 AMENDMENTS; WAIVERS. This Agreement may not be amended or
modified, nor may compliance with any condition or covenant set forth herein be
waived, except by a writing duly and validly executed by Buyer and Seller or, in
the case of a waiver, the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any such right,
power or privilege, or any single or partial exercise of any such right, power
or privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.
11.4 BULK SALES LAW. Buyer hereby waives compliance by Seller of any
applicable bulk sales law and Seller agrees, to make full and timely payment
when due of all amounts owed by Seller to its creditors. Seller agrees to
indemnify and hold Buyer harmless from, and reimburse Buyer for, any loss, cost,
expense, liability or damage (including, without limitation, reasonable counsel
fees and disbursements and expenses) which Buyer may suffer or incur by virtue
of the non-compliance by Seller with such laws.
11.5 SEVERABILITY. In the event that any provision or any portion of
any provision of this Agreement shall be held to be void or unenforceable, then
the remaining provisions of this Agreement (and the remaining portion of any
provision held to be void or unenforceable in part only) shall continue in full
force and effect.
11.6 GOVERNING LAW. This Agreement and the transactions contemplated
hereby shall be governed and construed by and enforced in accordance with the
laws of the State of Washington without regard to conflict of laws principles.
11.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which shall
constitute the same instrument.
11.8 THIRD PARTY RIGHTS. This Agreement is for the benefit of the
parties hereto and is not entered into for the benefit of, and shall not be
construed to confer any benefit upon, any other party or entity.
28
11.9 REMEDIES. It is specifically understood and agreed that certain
breaches of this Agreement will result in irreparable injury to the parties
hereto, that the remedies available to the parties at law alone will be an
inadequate remedy for such breach, and that, in addition to any other legal or
equitable remedies which the parties may have, a party may enforce its rights by
an action for specific performance and the parties expressly waive the defense
that a remedy in damages will be adequate.
11.10 DISPUTE RESOLUTION. Except as set forth in Section 1.6 hereto,
any dispute arising out of or relating to this Agreement or the breach,
termination or validity hereof shall be finally settled solely and exclusively
by arbitration conducted expeditiously in accordance with the Rules of the
American Arbitration Association. The AAA shall appoint a neutral advisor from
its national panel. The arbitration shall be governed by the United States
Arbitration Act, 9 U.S.C. Sections 1-16, and judgment upon the award rendered
by the arbitrators may be entered by any court having jurisdiction thereof.
The place of arbitration shall be Boston, Massachusetts.
11.11 SCHEDULES. Each of the Schedules delivered pursuant to this
Agreement shall be updated to a mutually agreeable date on or prior to the
Closing.
11.12 FURTHER ASSURANCES. Following the Closing, Seller and Buyer
will, upon request of a party, and at the requesting parties' expense, do,
execute, acknowledge, and deliver, or will cause to be done, executed,
acknowledged, and delivered, all such further acts, assignments, transfers,
conveyances, authorizations, approvals, consents, waivers and provide such other
documentation or assistance as may be reasonably requested to carry out the
transactions contemplated by this Agreement and to permit each party to enjoy
its rights and benefits hereunder.
11.13 MUTUAL COOPERATION WITH RESPECT TO TAXES. The parties will
provide each other with such assistance as may reasonably be requested by any of
them in connection with the completion and filing of any form, preparation of
any tax return, any audit or other examination by any taxing authority, or any
judicial or administrative proceedings relating to liability for taxes relating
to the transactions contemplated by this Agreement. Each party will retain and
provide the others with any records or information that may be relevant to such
return, audit, examination, proceedings, or determination. Such assistance shall
include making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder and
shall include providing copies of any relevant tax returns and supporting work
schedules. The party requesting assistance hereunder shall reimburse the others
for reasonable out-of-pocket expenses incurred in providing such assistance.
11.14 COOPERATION IN LITIGATION. If, after the Closing Date, any party
shall require the participation of officers and employees employed by any other
party or any records or files transferred or retained by a party, to aid in the
defense or prosecution of a judicial action or claim, and so long as there
exists no conflict of interest between the parties with respect to such judicial
action or claim (without reference to any rights of indemnification), each party
shall use its best efforts to make such officers and employees, records, or
files available to participate in such defense or prosecution,
29
provided, that (a) the party requiring the participation of such officers or
employees shall pay all reasonable out-of-pocket costs, charges, and expenses
arising from such participation, and (b) with respect to records and files, the
requesting party shall be granted access to such records and files upon five (5)
business days' notice, shall have access only during regular business hours, and
shall pay all reasonable out-of-pocket expenses, charges, and expenses arising
from such access.
11.15 COMPLETE AGREEMENT. This Agreement, including the Schedules and
Exhibits attached hereto and the documents and agreements referred to herein,
shall constitute the entire agreement between the parties hereto with respect to
the subject matter hereof and shall supersede all previous negotiations,
commitments, and writings with respect to such subject matter.
11.16 EXPENSES. Whether the transactions contemplated by this
Agreement are consummated or fail to be consummated, each of the parties shall
pay its own expenses and the fees of its counsel, accountants, brokers, finders,
and other experts, except as expressly set forth in this Agreement.
11.17 LIABILITY. IN NO EVENT, OTHER THAN FOR AN ACTION FOR INFRINGEMENT
OF INTELLECTUAL PROPERTY RIGHTS, WHETHER FOR BREACH OF CONTRACT, WARRANTY,
NEGLIGENCE, STRICT LIABILITY IN TORT, OR OTHERWISE, WILL EITHER PARTY BE LIABLE
FOR INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR INDIRECT DAMAGES; OR FOR FRUSTRATION
OF ECONOMIC OR BUSINESS EXPECTATIONS, LOSS OF PROFITS, LOSS OF DATA, COST OF
CAPITAL, OR COST OF SUBSTITUTE PRODUCT(S), EVEN IF SUCH PARTY HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES. THE PARTIES EXPRESSLY AGREE THAT THE
LIMITATIONS ON INCIDENTAL, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES SET FORTH
HEREIN ARE AGREED ALLOCATIONS OF RISK CONSTITUTING IN PART THE CONSIDERATION FOR
THIS AGREEMENT, AND THAT SUCH LIMITATIONS SHALL SURVIVE THE DETERMINATION OF ANY
COURT OF COMPETENT JURISDICTION THAT ANY REMEDY PROVIDED HEREIN OR AVAILABLE AT
LAW FAILS OF ITS ESSENTIAL PURPOSE. IN NO EVENT, OTHER THAN FOR AN ACTION FOR
INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS, SHALL THE AGGREGRATE SUM OF CLAIMS
AGAINST A PARTY UNDER THIS AGREEMENT BE IN EXCESS OF A SUM EQUAL TO THE PURCHASE
PRICE.
30
11.18 ATTORNEY'S FEES. In the event of any dispute concerning, or
arising from, this Agreement, the prevailing party shall be entitled to recover
from the losing party such prevailing party's reasonable out-of-pocket costs and
expenses, including without limitation, any reasonable legal fees and
disbursements incurred in an effort to enforce this Agreement, whether such fees
and disbursements are incurred in prelitigation efforts or a trial or appellate
court.
11.19 CERTAIN DEFINITIONS. For the purposes of this Agreement:
(a) "Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity;
(b) "Material Adverse Effect" means any change in, or effect on, the
Business Unit that is (individually or in the aggregate with any other changes
therein or effects thereon that would be specifically addressed by a
representation or warranty contained in this Agreement but for a "Material
Adverse Effect" exception or qualification) materially adverse to the assets,
liabilities, financial condition or results of operations of the Business Unit.
11.20 RETURNED INVENTORY. Buyer and Seller acknowledge that as a result
of Seller's ongoing distributor agreements that provide for returns, Inventory
may be returned to Seller from distributors after Closing. Buyer, at its sole
discretion, agrees to purchase such returned saleable Inventory from Seller for
the same price Buyer would pay its supplier for such Inventory.
31
IN WITNESS WHEREOF, Seller and Buyer have caused this Asset Purchase
Agreement to be executed as of the date first above written.
SELLER:
TELTONE CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President & CEO
BUYER:
C.P. CLARE CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: CEO & President
INDEX TO EXHIBITS
Exhibit A - Form of ▇▇▇▇ of Sale
Exhibit B - Form of Assignment and Assumption Agreement
Exhibit C - Form of Non-Competition Agreement
Exhibit D - Form of Trademark License Agreement
Exhibit E - Procurement Agreement
Schedule 1.1(a) - Tangible Assets
Schedule 1.1(b)(i) - Intellectual Property
Schedule 1.1(b)(ii) - Contracts
Schedule 1.1(b)(v) - Permits
Schedule 1.7 - Purchase Price Allocation
Schedule 2.8 - Financial Statement
Schedule 2.14 - Finder's Fee
Schedule 2.15 - Purchase Commitments
None of the above-listed Exhibits and Schedules are being filed with the SEC.
The Registrant hereby agrees to furnish supplementally a copy of any Exhibit or
Schedule to the SEC upon request.
33