EXHIBIT 10.7(a)
Serus ASSET PURCHASE AGREEMENT
by and among
Netopia, Inc.
Serus, LLC,
Serus Acquisition Corporation, and
Xxxxxx XxXxxxx, Xxxx Xxxxxxxxx, Xxxx Xxxxxxxxx,
Xxxxx Xxxxxxx, Xxxx Xxxxxxxx and Studeo, Inc.
dated as of
December 16, 1998
TABLE OF CONTENTS
Page
ARTICLE 1: PURCHASE AND SALE OF ASSETS........................................1
1.1 Description of Assets to be Acquired....................................1
1.2 Excluded Assets.........................................................2
1.3 Non-Assignment of Certain Contracts.....................................2
ARTICLE 2: LIABILITIES ASSUMED................................................3
2.1 Liabilities Assumed.....................................................3
ARTICLE 3: PURCHASE PRICE.....................................................3
3.1 Consideration...........................................................3
3.2 Purchase Price..........................................................3
3.3 Earnout.................................................................3
ARTICLE 4: CLOSING............................................................3
4.1 Closing..................................................................3
4.2 Deliveries by Seller and the Members....................................3
4.3 Deliveries by Netopia and Purchaser.....................................3
4.4 Further Assurances......................................................3
ARTICLE 5: REPRESENTATIONS AND WARRANTIES.....................................3
5.1 Representations and Warranties of Netopia and Purchaser.................3
(a) Organization.................................................3
(b) Authorization................................................3
(c) Exchange Act Filings.........................................3
(d) Litigation...................................................3
(e) Shares Validly Issued........................................3
(f) Form 8-K.....................................................3
(g) No Conflict or Default.......................................3
5.2 Representations and Warranties of Seller and the Members................3
(a) Organization, Good Standing and Qualification of Seller......3
(b) Authorization of Seller......................................3
(c) Authorization of the Members.................................3
(d) Capital Structure............................................3
(e) Assets and Bulk Sales Laws...................................3
(f) Title to Assets..............................................3
(g) Financial Information........................................3
(h) Absence of Certain Changes and Events........................3
(i) Taxes........................................................3
(j) Compliance with Law..........................................3
(k) Proprietary Rights...........................................3
(l) Contracts and Commitments....................................3
(m) Litigation...................................................3
(n) No Conflict or Default.......................................3
(o) Third-Party Consents.........................................3
(p) Employees and Employee Benefit Plans.........................3
(q) Interested Party Relationships...............................3
(r) Indebtedness.................................................3
(s) Books and Records............................................3
(t) Complete Disclosure..........................................3
5.3 Additional Representations and Warranties of Seller and the Members.....3
(a) Investment Intent............................................3
(b) Information..................................................3
(c) Accredited Investor Status...................................3
(d) Knowledge and Experience.....................................3
ARTICLE 6: ADDITIONAL AGREEMENTS..............................................3
6.1 Restricted Securities...................................................3
6.2 Restrictions on Disposition of Shares...................................3
6.3 Restrictive Legends.....................................................3
6.4 Post-Closing Access to Information......................................3
6.5 Taxes 3
6.6 Publicity...............................................................3
6.7 Allocation of Purchase Price............................................3
ARTICLE 7: CONDITIONS.........................................................3
7.1 Conditions to Obligations of Purchaser..................................3
(a) Representations and Warranties...............................3
(b) Consents.....................................................3
(c) Performance of Agreement.....................................3
(d) Registration Rights Agreement................................3
(e) Absence of Governmental or Other Objection...................3
(f) Approval of Documentation....................................3
(g) Non-Competition Agreements...................................3
(h) Employee Confidential Information and Inventions Agreements..3
(i) Due Diligence Review.........................................3
(j) Board Approval...............................................3
(k) Escrow Agreement.............................................3
7.2 Conditions to Obligations of Members and Seller.........................3
(a) Representations and Warranties...............................3
(b) Performance of Agreement.....................................3
(c) Registration Rights Agreement................................3
(d) Absence of Governmental or Other Objection...................3
(e) Approval of Documentation....................................3
(f) Escrow Agreement.............................................3
ARTICLE 8: INDEMNIFICATION....................................................3
8.1 Survival of Representations, Warranties, and Agreements................3
8.2 Indemnification of Purchaser...........................................3
8.3 Indemnification of Seller and the Members..............................3
8.4 Procedure for Indemnification With Respect to Third-Party Claims.......3
8.5 Procedure for Indemnification with Respect to Non-Third Party Claims...3
8.6 Threshold Determination of and Limitations on Indemnification..........3
8.7 Escrow Fund............................................................3
8.8 Resolution of Disputed Claims..........................................3
ARTICLE 9: MEMBERS'REPRESENTATIVE.............................................3
9.1 Duties and Powers.......................................................3
9.2 Limit on Liability......................................................3
9.3 Use of Escrow Funds; Power of Attorney..................................3
ARTICLE 10: MISCELLANEOUS PROVISIONS..........................................3
10.1 Notices................................................................3
10.2 Entire Agreement.......................................................3
10.3 Binding Effect; Assignment.............................................3
10.4 Captions...............................................................3
10.5 Expenses of Acquisition................................................3
10.6 Waiver; Consent........................................................3
10.7 Third-Party Beneficiaries..............................................3
10.8 Counterparts...........................................................3
10.9 Gender.................................................................3
10.10 Severability..........................................................3
10.11 Remedies of the Purchaser.............................................3
10.12 Governing Law.........................................................3
10.13 Venue.................................................................3
10.14 Attorney's Fees.......................................................3
10.15 Rules of Construction.................................................3
10.16 Arbitration...........................................................3
SERUS ASSET PURCHASE AGREEMENT
THIS AGREEMENT is dated as of December 16, 1998. by and among
Netopia, Inc., a Delaware corporation ("Netopia"), Serus Acquisition
Corporation, a Delaware corporation and a wholly-owned subsidiary of Netopia
("Purchaser"), Serus, LLC, a Utah limited liability company ("Serus" or
"Seller"), and Xxxxxx XxXxxxx, Xxxx Xxxxxxxxx, Xxxx Xxxxxxxxx, Xxxxx Xxxxxxx,
Xxxx Xxxxxxxx and Studeo, Inc., who are all of the members of Seller (each, a
"Member," and collectively, the "Members").
WHEREAS, Serus is engaged in the business of designing,
developing, marketing and selling software products for internet applications
(the "Business"); and
WHEREAS, Purchaser desires to acquire from Seller, and Seller
desires to transfer to Purchaser, substantially all of the assets, properties,
and rights of Seller in the Business (except as provided in Section 1.2 below)
as provided by this Agreement, upon the terms and conditions of this Agreement
(the "Acquisition").
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein, the parties hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 Description of Assets to be Acquired. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing (as defined in Section
4.1), Seller agrees to convey, sell, transfer, assign and deliver to Purchaser,
and Purchaser shall purchase from Seller, all right, title and interest of
Seller at the Closing in and to the assets, properties, and rights of the
Business of every kind, nature and description, personal, tangible and
intangible, known or unknown, wherever located, including, without limiting the
generality of the foregoing (but excluding the "Excluded Assets," as such term
is defined in Section 1.2 below):
(a) All interests in machinery, equipment, copiers, computers, furniture,
fixtures, supplies, other tangible personal property and fixed assets and all
proprietary rights relating thereto (the "Personal Property"), including without
limitation those listed on Schedule 1.1(a) hereto;
(b) All lease deposits, prepaid expenses, prepaid property taxes and all other
current assets, including without limitation those listed on Schedule 1.1(b)
hereto;
(c) All claims and rights under all agreements, contracts, contract rights,
licenses, evidences of indebtedness, purchase and sale orders, quotations and
other executory commitments (but, except as provided in Section 2.1, excluding
any liabilities associated therewith) (collectively, the "Contracts"),
including, without limitation those listed on Schedule 1.1(c) hereto;
(d) All franchises, licenses, permits, consents, authorizations and approvals of
any federal, state or local regulatory, administrative or other governmental
agency or body;
(e) All Intellectual Property (as such term is defined in Section 4.2(l) below);
(f) Originals of all sales invoices, revenue registers and accounts receivable
records, and originals of all warranties on all supplies and equipment, files,
papers and all other records of Seller, that relate to the Business;
(g) All rights under express or implied warranties from suppliers of Seller
and/or the Business to the extent assignable;
(h) All causes of action, judgments and claims or demands of whatever kind or
description of Seller, or that arise out of or relate to the Business;
(i) All rights and interests of Seller to the proceeds of insurance claims
arising from damage to the Assets (as defined below) prior to Closing;
(j) All employee and customer lists and records of Seller;
(k) All interests in the lease of office space described in Schedule 1.1(k),
including all leasehold improvements thereto, and all related rights; and
(l) All goodwill of the Business.
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."
1.2 Excluded Assets. Notwithstanding the provisions of Section 1.1 hereof, the
Assets to be transferred to Purchaser pursuant to this Agreement shall not
include the assets, if any, listed on Schedule 1.2 (collectively, the "Excluded
Assets").
1.3 Non-Assignment of Certain Contracts. Notwithstanding anything to the
contrary in this Agreement, to the extent that the assignment hereunder of any
of the Assets shall require the consent of any other party (or in the event that
any of the same shall be nonassignable), neither this Agreement nor any action
taken pursuant to its provisions shall constitute an assignment or an agreement
to assign if such assignment or attempted assignment would constitute a breach
thereof or result in the loss or diminution thereof; provided, however, that in
each such case, Seller shall, at its own expense, use its commercially
reasonable efforts to obtain the consent of such other party to an assignment to
Purchaser.
ARTICLE 2
LIABILITIES ASSUMED
2.1 Liabilities Assumed. Purchaser hereby agrees to assume, satisfy, and/or
perform when due and to indemnify and hold harmless Seller and the Members from
those liabilities and obligations of Seller specifically listed on Schedule 2.1
attached hereto (the "Assumed Liabilities"). Purchaser shall not assume any
liabilities of Seller not specifically set forth on Schedule 2.1.
ARTICLE 3
PURCHASE PRICE
3.1 Consideration. Upon the terms and subject to the conditions contained in
this Agreement, in consideration for the Assets and the covenants set forth
herein and in the Related Agreements, Purchaser will pay to Seller (or cause to
be paid to Seller) the purchase price set forth in Section 3.2. The "Related
Agreements" shall mean the Registration Rights Agreement (as such term is
defined in Section 7.1(d)), the Non-Competition Agreements (as such term is
defined in Section 7.1(g)), the Employee Confidential Information and Inventions
Agreements (as such term is defined in Section 7.1(h)) and the Escrow Agreement
(as such term is defined in Section 7.1(k)).
3.2 Purchase Price. The purchase price ("Purchase Price") shall be as follows:
(a) The assumption of the Assumed Liabilities;
(b) Three Million Dollars ($3,000,000) in cash, payable to Seller by check or
wire transfer at the Closing (the "Initial Cash Consideration");
(c) Four Hundred Nine Thousand Five Hundred Fifty Six (409,556) validly issued,
fully paid and nonassessable shares of Purchaser's Common Stock issued to Seller
at the Closing (the "Stock Consideration" or the "Shares"), said Shares being
subject to the restrictions, rights and obligations described in this Agreement
and the Related Agreements; and
(d) The Earnout (as such term is defined in Section 3.3 below).
3.3 Earnout.
(a) Subject to offset pursuant to Section 8.2(b) hereof, Purchaser shall pay to
Seller up to One Million Dollars ($1,000,000) in cash, payable by check or wire
transfer (the "Earnout"), if, and only if, Earnout Revenues for the Earnout
Period shall meet certain targets as follows:
(i) If Earnout Revenues for the Earnout Period are equal to or greater than
Three Million Dollars ($3,000,000), then one hundred percent (100%) of the
Earnout shall be earned;
(ii) If Earnout Revenues for the Earnout Period are less than One Million Seven
Hundred Thousand Dollars ($1,700,000), then no portion of the Earnout shall be
earned; and
(iii) If Earnout Revenues are between One Million Seven Hundred Thousand Dollars
($1,700,000) and Three Million Dollars ($3,000,000), then the Earnout will be
equal to the product of (x) Earnout Revenues times (y) thirty-three percent
(33.0%). For example, if Earnout Revenues are Two Million Dollars ($2,000,000),
then the Earnout shall be Six Hundred and Sixty Thousand Dollars ($660,000), and
if Earnout Revenues are One Million Six Hundred Thousand Dollars ($1,600,000),
then no Earnout shall be earned.
(b) "Earnout Period" shall mean the eighteen (18)-month period commencing upon
the earlier to occur of (i) establishment of technological feasibility of the
Splash Site Software ("Splash Site") defined as completion of final beta prior
to acceptance for commercial shipment or (ii) April 30, 1999, whichever is
sooner.
(c) "Earnout Revenues" shall mean Purchaser's gross revenues during the Earnout
Period, plus any revenue paid before the Earnout Period as pre-payments or fees
for initiation of development, and subtracting from that sum actual returns
and/or accounts actually written off, and derived from the following:
(i) With respect to any new license of Splash Site on a stand-alone basis,
Earnout Revenues shall be all royalty, license and services, and integration
fees associated therewith;
(ii) With respect to any add-on license of Splash Site to existing Netopia
Virtual Office ("NVO") hosting partners, either (a) Earnout Revenues shall be
the add-on royalty and/or license fees associated therewith or (b) in the event
Splash Site is added with no incremental licensing fee, Earnout Revenues shall
be attributed 50-50;
(iii) With respect to any license of NVO and Splash Site to new hosting partners
on an integrated basis, Earnout Revenues shall be attributed 50-50;
(iv) With respect to any addition of Splash Site to Netopia's existing Hosted
Services, Earnout Revenues shall be based upon the incremental monthly fees
attributed to Splash Site (e.g. current $20/month services include only form
based editing. Current plans call for Java-based editing to be priced at
$25-30/month, yielding $5-$10/month revenue attribution for Splash Site). In the
event competitive requirements cause Java-based editing to be added to $20/month
services with no incremental charge, then Earnout Revenues shall be twenty
percent (20%) of revenues from such Hosted Services; and
(v) With respect to any new NVO Hosted Services with integrated Java-based
Splash Site editing, Earnout Revenues shall be attributed 50-50.
(d) Netopia's Chief Financial Officer shall prepare and deliver to Seller and
the Members a report detailing the Earnout Revenues for the Earnout Period not
later than ninety (90) days after the expiration of the Earnout Period (the
"Earnout Determination") or the date on which Earnout Revenues equal or exceed
Three Million Dollars ($3,000,000), whichever is sooner. The report will detail
gross revenues less any actual returns and accounts actually written off, and
any returns or write-offs after that period shall not reduce the amount of
Earnout Revenue. Seller and its Members shall have the right to inspect
Netopia's books and records or other supporting documentation to confirm the
report of Earnout Revenues. If Seller or its Members do not agree that the
Earnout Determination correctly states the Earnout Revenue for the Earnout
Period, Seller and the Members shall promptly (but not later than thirty (30)
days after the later of the delivery of the Earnout Determination or the receipt
by Seller and the Members of all supporting documentation reasonably requested
by Seller and the Members to confirm the Purchaser's report of Earnout Revenues)
give written notice to Netopia of any exceptions thereto (in reasonable detail
describing the nature of the disagreement asserted). If Seller and the Members
and Netopia reconcile their differences, such Earnout Determination shall be
adjusted accordingly and shall thereupon become final and conclusive upon all of
the parties hereto and enforceable in a court of law. If Seller and the Members
and Netopia are unable to reconcile their differences the items in dispute shall
be submitted to an outside independent accounting firm reasonably acceptable to
Seller, the Members and Netopia (the "Independent Auditors") for final
determination, and such Earnout Determination shall be deemed adjusted in
accordance with the determination of the Independent Auditors and shall become
binding, final and conclusive upon all of the parties hereto and enforceable in
a court of law. The Independent Auditors shall consider only the items in
dispute and shall be instructed to act within twenty (20) days of their
appointment (or such longer period as Seller, the Members and Netopia may agree)
to resolve all items in dispute. If Seller and the Members do not give notice of
any exception within thirty (30) days after delivery of such Earnout
Determination or if Seller and the Members in their discretion give written
notification of their acceptance of an Earnout Determination prior to the end of
such thirty (30) day period, such Earnout Determination shall thereupon become
binding, final and conclusive upon all the parties hereto and enforceable in a
court of law. The fees and expenses of the Independent Auditors shall be borne
equally by Netopia and Purchaser on the one hand and Seller and the Members on
the other hand.
ARTICLE 4
CLOSING
4.1 Closing. The transactions contemplated by this Agreement shall be effective
as of December 16, 1998 (the "Closing"). The Closing shall take place at the
offices of Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx & Xxxxxxxxx, LLP, Menlo
Park, California, or at such other place or date as may be agreed upon from time
to time in writing by the parties.
4.2 Deliveries by Seller and the Members. At the Closing, Seller and the Members
shall deliver to Purchaser, all duly and properly executed, the following:
(a) A good and sufficient Xxxx of Sale, which shall be in form and substance
reasonably satisfactory to Purchaser, selling, delivering, transferring and
assigning to Purchaser all right, title and interest to the Assets (other than
the Contracts), free and clear of all mortgages, pledges, liens, encumbrances,
security interests, equities, charges, clouds and restrictions of any nature
whatsoever, except for (i) liens for taxes not yet due and payable; (ii)
statutory liens that were created in the ordinary course of business and secure
obligations which are not past due; (iii) restrictions or rights required to be
granted to governmental authorities or otherwise imposed by governmental
authorities under applicable law; or (iv) liens and encumbrances disclosed in
the Disclosure Letter (as defined in Section 5.2) (the "Permitted Liens");
(b) Good and sufficient assignments of the Contracts, which shall be in form and
substance reasonably satisfactory to Purchaser and shall include, subject to
Section 1.3 hereof, the written consents of all parties necessary in order to
transfer all of Seller's rights thereunder to Purchaser.
(c) An opinion of Dow Xxxxxx & Xxxxxxxxx, counsel to Seller and the Members,
dated the Closing, in substantially the form attached hereto as Exhibit 4.2(c)
(the "Seller's Counsel Opinion").
(d) Executed copies of the Related Agreements to which each is a party.
4.3 Deliveries by Netopia and Purchaser. At the Closing, Purchaser and Netopia
shall deliver, or cause to be delivered to Seller and the Members, as
applicable, all duly and properly executed, the following:
(a) The portion of the Purchase Price set forth in Section 3.2(a) in the form of
executed assumption agreements or conclusive evidence of satisfaction of the
assumed liabilities, Section 3.2(b) and Section 3.2(c).
(b) An opinion of Xxxxxxxxx Xxxxxxx, counsel to Purchaser, dated the Closing, in
substantially the form attached hereto as Exhibit 4.3(b) (the "Purchaser's
Counsel Opinion").
(c) Executed copies of the Related Agreements to which it is a party.
4.4 Further Assurances. At or after the Closing, each party shall each prepare,
execute and deliver, at such party'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 reasonably request of any other
party at any time or from time to time in order to perfect, confirm or evidence
in Purchaser title to all or any part of the Assets or to consummate, in any
other manner, the terms and provisions of this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of Netopia and Purchaser. Each of Netopia and
Purchaser hereby represents and warrants jointly and severally to Seller that:
(a) Organization. It is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
(b) Authorization. It has full corporate power and authority to enter into this
Agreement and the Related Agreements to which it is a party, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby, including, without limitation, the execution
and delivery of this Agreement and the Related Agreements to which it is a
party. It has taken all necessary and appropriate corporate action with respect
to the execution and delivery of this Agreement and the Related Agreements, to
which it is a party, and this Agreement and each of the Related Agreements to
which it is a party (to the extent to which it is a party) constitute valid and
binding obligations of it enforceable against it in accordance with their
respective terms, except as limited by applicable bankruptcy, insolvency,
moratorium, reorganization or other laws affecting creditors' rights and
remedies generally.
(c) Exchange Act Filings. Netopia has timely filed all filings with the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
or under Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or under the rules and regulations promulgated by
the SEC (any such filing, an "SEC Filing") required to be filed by Netopia
pursuant to such acts and no SEC Filing contained, on the date on which such
document was filed with the SEC, any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary in
order to make the statements, in the light of the circumstances under which they
were made, not misleading. The financial statements of Netopia included in SEC
Filings (including any similar documents filed after the date of this Agreement)
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto), and fairly present the
consolidated financial position of Netopia and its consolidated subsidiaries as
of the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
(d) Litigation. Except as set forth in the statements, reports and other
documents filed or required to be filed by Netopia with the Securities and
Exchange Commission, there is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Purchaser, threatened
against Purchaser or any of its subsidiaries or any of their respective
properties or any of their respective officers or directors (in their capacities
as such) that, individually or in the aggregate, could reasonably be expected to
have a material adverse effect on the business of Purchaser. There is no
judgment, decree or order against Purchaser or any of its subsidiaries or, to
the knowledge of Purchaser or any of its subsidiaries, any of their respective
directors or officers (in their capacities as such) that could prevent, enjoin,
or materially alter or delay any of the transactions contemplated by this
Agreement or the Related Agreements.
(e) Shares Validly Issued. Netopia represents that the Shares when issued, sold
and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly issued, fully paid and
nonassessable and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and under applicable state and
federal securities laws.
(f) Form 8-K. Since the date of Netopia's most recent quarterly report on Form
10-Q or most recent periodic report on Form 8-K filed with the SEC, there has
not been any development that has not otherwise been publicly disclosed that is
reasonably likely to result in any material adverse change in the financial
condition or results of operations of Netopia.
(g) No Conflict or Default. Neither the execution and delivery of this Agreement
nor the Related Agreements by Purchaser or Netopia, nor compliance by each of
Purchaser and Netopia with the terms and provisions hereof or thereof, including
without limitation, the consummation of the transactions contemplated hereby and
thereby, will violate any statute, regulation, or ordinance of any governmental
authority, or conflict with or result in the breach of any term, condition, or
provision of the charter documents of Purchaser or Netopia or of any agreement,
deed, contract, mortgage, indenture, writ, order, decree, legal obligation, or
instrument to which Purchaser or Netopia is a party or by which Purchaser or
Netopia 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.
5.2 Representations and Warranties of Seller and the Members. Except as
otherwise set forth in the disclosure letter dated as of the date hereof and
delivered by Seller and the Members to Purchaser and its counsel (the
"Disclosure Letter") or as set forth in the Schedules to this Agreement, Seller
and the Members hereby jointly and severally represent and warrant to Purchaser
that:
(a) Organization, Good Standing and Qualification of Seller. Seller is a limited
liability company duly organized and validly existing under the laws of the
State of Utah and has all limited liability company power and authority to carry
on its business as now conducted. Seller is qualified to transact business and
in good standing in each jurisdiction where failure to qualify would have a
material adverse effect on the Business or the Assets.
(b) Authorization of Seller. Seller has full limited liability company power and
authority to enter into this Agreement and those Related Agreements to which it
is a party, to perform its obligations hereunder and thereunder, and to
consummate the transactions contemplated hereby and thereby, including, without
limitation, the execution and delivery of this Agreement, general conveyances,
bills of sale, assignments and other documents and instruments evidencing the
conveyance of the Assets or delivered in accordance with Section 4.2 or Article
7 hereunder (the "Closing Documents") and the Related Agreements to which it is
a party. Seller has taken all necessary and appropriate company action with
respect to the execution and delivery of this Agreement, the Closing Documents,
and the Related Agreements to which it is a party. This Agreement, the Closing
Documents and the Related Agreements to which Seller is a party (to the extent
to which it is a party) constitute valid and binding obligations of Seller
enforceable against it in accordance with their respective terms, except as
limited by applicable bankruptcy, insolvency, moratorium, reorganization or
other laws affecting creditors' rights and remedies generally.
(c) Authorization of the Members. Each of the Members has full power and
authority to enter into this Agreement and those Related Agreements to which he
or she or it is a party, to perform his or her or its obligations hereunder and
thereunder, and to consummate the transactions contemplated hereby and thereby.
The Members have taken all necessary and appropriate Member action with respect
to the execution and delivery of this Agreement, the Closing Documents, and the
Related Agreements to which he or she or it is a party. This Agreement, the
Closing Documents and the Related Agreements (to the extent to which he or she
or it is a party) constitute valid and binding obligations of each Member
enforceable against him or her or it in accordance with their respective terms,
except as limited by applicable bankruptcy, insolvency, moratorium,
reorganization, or other laws affecting creditors' rights and remedies
generally.
(d) Capital Structure. The membership interests of Serus are held by the
individuals and entities in the percentages set forth on Schedule 5.2(d). These
interests constitute all of the membership interests of Serus. There are no
outstanding subscriptions, options, warrants, calls, conversion rights, rights
of exchange, or other rights, plans, agreements or commitments of any character
whatsoever (including, without limitation, conversion or preemptive rights)
providing for the purchase, issuance or sale of any membership interest of Serus
or any securities convertible into or exchangeable for any membership interest
of Serus. There are no obligations, contingent or otherwise, of Serus to
repurchase, redeem or otherwise acquire any membership interest of Serus.
(e) Assets and Bulk Sales Laws. There are no "bulk sales" laws in the State of
Utah that impose any obligation on Purchaser regarding the sale and transfer of
the Assets contemplated hereunder.
(f) Title to Assets.
(i) Seller has good and marketable title to the Assets, free and clear of all
mortgages, pledges, liens, encumbrances, security interests, equities, charges
and restrictions of any nature whatsoever, except for Permitted Liens.
(ii) By virtue of the deliveries made at the Closing, Purchaser will obtain good
and marketable title to the Assets, free and clear of all liens, mortgages,
pledges, encumbrances, security interests, charges, equities, and restrictions
of any nature whatsoever, other than those described in Section 5.2(f)(i)
hereof.
(g) Financial Information. Seller has delivered to Purchaser unaudited financial
statements (Balance Sheet, Profit and Loss Statement, Statement of Cash Flows,
and Statement of Members Equity) for Seller for the period April 1, 1998 through
November 30, 1998 (collectively, the "Financial Statements"), a copy of which is
attached hereto as Schedule 5.2(g). The Financial Statements present fairly
Seller's financial condition and the results of its operations. Except as set
forth in the Financial Statements, there are no debts, liabilities or
obligations of Seller to which the Assets or the Business are subject,
contingent or otherwise (whether or not such debts, liabilities or obligations
would be required to be described or included under generally accepted
accounting principles), other than liabilities incurred in the ordinary course
of business subsequent to November 30, 1998.
(h) Absence of Certain Changes and Events. Except as contemplated herein, since
November 30, 1998, there has not been:
(i) Any material adverse change in the financial condition, assets or
liabilities, or, to the knowledge of Seller and the Members any occurrence,
circumstance, or combination thereof which reasonably could be expected to
result in any such material adverse change;
(ii) Any material transaction relating to or involving the Business or Seller
(other than the transactions contemplated herein) which was entered into or
carried out by Seller other than in the ordinary and usual course of business;
(iii) Any mortgage, pledge, lien, security interest, hypothecation, charge, or
other encumbrance imposed or agreed to be imposed on or with respect to Seller,
the Business or the Assets;
(iv) Any sale, lease, or disposition of, or any agreement to sell, lease or
dispose of any of the Assets, other than sales, leases, or dispositions in the
usual and ordinary course of business and consistent with prior practice;
(v) Any agreement to do any of the foregoing or any other change, event or
condition (whether or not covered by insurance) that has resulted in, or might
reasonably be expected to result in, a material adverse effect, on the financial
condition or assets or liabilities of Seller.
(i) Taxes. Seller has completed and duly and timely filed in correct form with
the appropriate tax authorities all tax returns and reports required to be filed
on or prior to the date hereof. All of such tax returns that have been filed
were accurate and complete as filed. Sellers have paid in full all taxes,
assessments or deficiencies shown to be due on those tax returns that have been
filed, claimed to be due by any taxing authority or otherwise due or owing.
Seller has made all withholdings of tax required to be made under all applicable
tax laws and regulations; and such withholdings have been or will be paid to the
respective governmental agencies when due and to the extent not yet due have
been set aside in accounts for purposes of such payment. The Assets are not
subject to any liens for taxes, except liens for current ad valorem taxes not
yet due, and neither Purchaser nor any affiliate thereof will become directly or
indirectly liable for, and no lien, claim or encumbrance will be placed upon the
Assets with respect to, (A) any taxes attributable to the ownership or use of
the Assets with respect to periods prior to and including the date of the
Closing (other than ad valorem taxes not yet due and payable as of the Closing)
or (B) any other taxes (regardless of whether attributable to periods prior to
and including the date of the Closing) imposed upon Seller or attributable to
the actions or activities of Seller.
(j) Compliance With Law. The use of the Assets and Seller's conduct of the
Business is and has been in compliance, in all material respects, with all
applicable laws, statutes, ordinances, rules regulations, decrees and orders
(each and all of the foregoing being herein referred to as "Laws"), including
Laws respecting employment, employment practices, labor and safety.
(k) Proprietary Rights. Seller is the sole and exclusive owner of all Seller
Intellectual Property (defined below) free of all contingent and noncontingent
liens, restrictions, interests, rights of reversion or termination, and all
other encumbrances of any nature. The conduct of Seller's business as currently
conducted or as proposed to be conducted will not infringe, misappropriate or
violate any Intellectual Property (defined below) of others. All Seller
Intellectual Property that is the subject of any application, registration or
issuance with or from any governmental entity is identified on Schedule 5.2(k);
all such registered or issued Intellectual Property is valid and subsisting and
is free from any challenge (or threat thereof) and Seller is not aware of any
specific basis therefor. All such applications, registrations and issuances have
been properly maintained. Seller has reasonably endeavored to adequately protect
all other Seller Intellectual Property through the use of confidentiality
agreements and otherwise and Seller is not aware of any use, exercise or
exploitation of any Seller Intellectual Property, except as authorized by
Seller. Each current and former employee and contractor of Seller has executed
and delivered (and to Seller's knowledge, is in compliance with) an enforceable
agreement in substantially the form of Seller's standard Proprietary Information
and Inventions Agreement (in the case of an employee) or Seller's standard
Consulting Agreement (in the case of a contractor) (which agreement provides
valid written assignments of all title and rights to any Seller Intellectual
Property conceived or developed thereunder or otherwise in connection with his
or her consulting or employment. "Intellectual Property" means patent rights;
trade name, trademark, service xxxx and similar rights ("Xxxx" rights);
copyrights; mask work rights; sui generis database rights; trade secret rights;
moral rights; software; source code; and all other intellectual and industrial
property rights of any sort throughout the world, and all applications,
registrations, issuances and the like with respect thereto. "Seller Intellectual
Property" also means all Intellectual Property that has been, is, or is proposed
to be owned by Seller, or used, exercised, or exploited, or otherwise necessary
for the Assets.
(l) Contracts and Commitments. Except as set forth in the Disclosure Letter,
there are no agreements or contracts, whether or not in writing, to which Seller
is a party which may:
(i) involve obligations of, or payments by (contingent or otherwise), Seller in
excess of $25,000;
(ii) contain provisions restricting and/or affecting the development,
distribution, marketing or sales of the Assets;
(iii) involve any joint venture or partnership contract or arrangement or any
other agreement which has involved or is expected to involve a sharing of
profits with other persons;
(iv) involve any agreement containing covenants purporting to limit the freedom
of Seller to compete in any line of business or geographic area or involve the
distribution of Seller's or the Business' products or services;
(v) involve any agreement of indemnification regarding Seller or the Business;
(vi) establish any powers of attorney regarding Seller or the Business;
(vii) obligate Seller for the repayment of borrowed money;
(viii) involve any license, sublicense or other agreement to which Seller is a
party (or by which it or any Seller Intellectual Property is bound or subject)
and pursuant to which any person has been or may be assigned, authorized to Use,
or given access to any Seller Intellectual Property;
(ix) involve any license, sublicense or other agreement pursuant to which Seller
has been or may be assigned or authorized to use, or has or may incurred any
obligation in connection with, (A) any third party Intellectual Property or (B)
any Seller Intellectual Property; or
(x) involve any other agreement, contract, or commitment which is material to
the Assets. Each such contract is valid and binding on all parties thereto and
in full force and effect. Neither Seller nor any of the Members have received
any notice of default, cancellation, or termination in connection with any such
contract.
(m) Litigation. Neither Seller nor any of Seller's officers or directors is
engaged in, or has received any threat of, any litigation, arbitration,
investigation, or other proceeding, at law or in equity, before any federal,
state, local or foreign court, or regulatory agency, or other governmental
authority, involving Seller, the Business, the Assets, or employees or
consultants of Seller; or against or affecting the transactions contemplated by
the Agreement and the Related Agreements. There is no action, suit, proceeding,
or investigation pending or to the knowledge of Seller and the Members
threatened against Seller or Seller's officers or directors that questions the
validity of this Agreement, the Related Agreements to which it is or they are a
party, or the right of Seller, to enter into this Agreement, the Related
Agreements, to consummate the transactions contemplated hereby or thereby, or
which might result in any material adverse change in Seller, the Business, the
Assets or the results of operations, prospects, or financial condition of the
Business or Seller. There is no action, suit, proceeding, or investigation by
Seller currently pending or which it currently intends to initiate. None of
Seller nor Seller's officers or directors is bound by any judgment, decree,
injunction, ruling, or order of any court, governmental, regulatory or
administrative department, commission, agency or instrumentality, arbitrator, or
any other person which has or could have a material adverse effect on the
Business, the Assets, or the results of operations, prospects, or financial
condition of the Business or Seller.
(n) No Conflict or Default. Neither the execution and delivery of this Agreement
nor the Related Agreements by Seller or the Members, nor compliance by each of
Seller and each of the Members with the terms and provisions hereof or thereof,
including without limitation, the consummation of the transactions contemplated
hereby and thereby, will violate any statute, regulation, or ordinance of any
governmental authority, or conflict with or result in the breach of any term,
condition, or provision of the charter documents of Seller or of any agreement,
deed, contract, mortgage, indenture, writ, order, decree, legal obligation, or
instrument to which Seller or any of the Members is a party or by which it or
her or she 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.
(o) Third-Party Consents. No consent, approval, or authorization of any third
party on the part of Seller is required in connection with the consummation of
the transactions contemplated hereunder.
(p) Employees and Employee Benefit Plans.
(i) The Disclosure Letter sets forth a full and complete list of all directors,
officers, employees, and consultants of Seller and the Business (collectively,
"Service Providers") who rendered services to Seller. Such list includes the
names, job title, and the total amount of base salary, whether fixed or
commission or a combination thereof, and bonus for each Service Provider. None
of the Service Providers is subject to any contracts, written or unwritten, that
specify a particular employment or service term, or limit Seller's right to
terminate the employment or service relationship of such Service Provider with
Seller. Seller does not have any contractual obligation (A) to provide any
particular form or period of notice prior to termination, or (B) to pay any of
such Service Providers any severance benefits in connection with their
termination of employment or service. In addition, no severance pay will become
due to any Service Providers in connection with the transactions contemplated by
this Agreement, as a result of any Seller agreement, plan, or program. Neither
the execution and delivery of this Agreement by Seller nor the consummation of
the transactions contemplated by this Agreement will result in the acceleration
or creation of any rights of any Service Provider to benefits under any employee
plan (including, without limitation, the acceleration of the vesting or
exercisability of any options or equity interests). Following the consummation
of the transactions contemplated by this Agreement, Purchaser will not have any
obligations towards any Service Provider, nor any former director, officer,
employee, or consultant of the Business, or of Seller, other than pursuant to
agreements directly entered into by Purchaser with such persons. Except for
employment with Netopia, neither Seller nor the Members are aware that any
Employee, or that any group of Employees, intends to terminate their employment
with Seller, nor does Seller have a present intention to terminate the
employment of any of the foregoing.
(ii) Seller has not failed to comply in any respect 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, the Safe Drinking Water
and Toxic Enforcement Act of 1986, as amended, all applicable federal, state,
and local laws, rules, and regulations relating to employment, and all
applicable laws, rules, and regulations governing payment of minimum wages and
overtime rates, and the withholding and payment of taxes from compensation of
employees.
(iii) Seller is not a party to any plan defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") including a
pension, profit sharing, savings, or retirement plan; any plan defined in
Section 3(2) of ERISA, including a cafeteria or group health plan; or other
deferred compensation plan, or any bonus (whether payable in cash or stock) or
incentive program; or any stock, stock purchase, option, or similar plan;
director or employee loan or fringe benefit program; or severance plan or
arrangement; or any other plan that provides any benefits to employees,
including but not limited to any plan defined in Section 3(3) of ERISA. If any
such plans exist, Seller has furnished to Purchaser and its counsel complete and
accurate copies of such plans, summaries, summary plan descriptions, annual
reports such as Form 5500s. Seller has prepared in good faith and timely filed
all requisite governmental reports including Form 5500s and a determination
letter with the IRS to the extent applicable and has properly and timely posted,
or distributed all notices and reports to employees required to be filed,
posted, or distributed with respect to each of such plans. The terms of each
such plans comply with all applicable laws, including ERISA, the Internal
Revenue Code of 1986, as amended (the "Code") and the Family Medical Leave Act
(FMLA) and the plans at all times have been operated and administered in all
material respects in accordance with its terms and all applicable laws currently
in effect, including ERISA, the Code and FMLA.
(iv) Seller has not violated any of the health care continuation coverage
requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") applicable to its employees prior to the Closing.
(v) There are no pending claims by or on behalf of any ERISA Plan by any
Employee or beneficiary covered under any such plan or otherwise involving any
such plan (other than routine claims for benefits).
(vi) All contributions, premiums or other payments due from Seller to (or under)
any Plan have been fully paid or adequately provided for on the books and
financial statements of Seller. All accruals (including, where appropriate,
proportional accruals for partial periods) have been made in accordance with
prior practices.
(q) Interested Party Relationships. Neither Seller, nor any officer or director
of Seller (nor any family member of such officer or director of Seller, nor any
corporation, partnership, or other entity that, directly or indirectly, alone or
together with others, controls, is controlled by, or is in common control with
Seller, any officer or director of Seller, or any such family member), have any
financial interest, direct or indirect, in any supplier or customer of or to
Seller or other party to any contract with Seller.
(r) Indebtedness. The Disclosure Letter sets forth a list of all agreements and
other instruments under which Seller is indebted for borrowed money. Seller has
furnished Purchaser with true and correct copies of each such agreement or other
instrument under or pursuant to which it has outstanding indebtedness for
borrowed money. Seller is not in default under any of such agreements or other
instruments, nor are Seller or the Members aware of any event that, with the
passage of time, or notice, or both, would result in an event of default
thereunder.
No employee or consultant of Seller or the Business is indebted to Seller.
(s) Books and Records. The books and records of Seller to which Purchaser has
been given access are the true books and records of Seller and truly and
accurately reflect the underlying facts and transactions in all material
respects.
(t) Complete Disclosure. No representation or warranty by Seller in this
Agreement, and no exhibit, schedule, statement, certificate, or other writing
furnished to Purchaser or its advisors pursuant to this Agreement or the Related
Agreements to which it is a party or in connection with the transactions
contemplated hereby and thereby, contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained herein and therein not misleading.
5.3 Additional Representations and Warranties of Seller and the Members. Seller
and the Members hereby jointly and severally represent and warrant to Purchaser
that:
(a) Investment Intent. The Shares are being acquired for Seller's own account
for investment purposes only, and not as a nominee or agent, and not with a view
to the resale or distribution of all or any part of the Shares. Seller is
prepared to hold the Shares for an indefinite period and has no present
intention of selling, granting any participation in, or otherwise distributing
any of the Shares. Seller does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant a participating interest
in, any of the Shares. Seller has no present plan or intention to engage in a
sale, exchange, transfer, distribution, redemption, reduction in any way of its
risk of ownership by short sale or otherwise, or other disposition, directly or
indirectly, of the Shares.
(b) Information. Seller has been furnished with, and has had access to, such
information as he considers necessary or appropriate for deciding whether to
invest in the Shares, and Seller has had an opportunity to ask questions and
receive answers from Netopia and its representatives regarding the terms and
conditions of the issuance of the Shares.
(c) Accredited Investor Status. Seller is an "accredited investor" within the
meaning of the United States Securities and Exchange Commission ("SEC") Rule
501(a) of Regulation D, as presently in effect.
(d) Knowledge and Experience. Seller is able to fend for itself in the
transactions contemplated by this Agreement, can bear the economic risk of
investment in the Shares and has such knowledge and experience in financial or
business matters to be capable of evaluating the merits and risks of the
investment in the Shares.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 Restricted Securities. The Shares have not been registered under the
Securities Act of 1933 as amended (the "1933 Act"), on the ground that the sale
provided for in this Agreement is exempt from the requirements of the 1933 Act
and Purchaser's reliance on such exemptions is predicated on Seller's
representations herein. Seller hereby confirms that Seller has been informed
that the Shares are restricted securities under the 1933 Act and may not be
resold or transferred unless the Shares are first registered under the federal
securities laws or unless an exemption from such registration is available.
Accordingly, Seller hereby acknowledges that Seller is prepared to hold the
Shares for an indefinite period and that Seller is aware that SEC Rule 144 under
the 1933 Act, which exempts certain resales of unrestricted securities, is not
presently available to exempt the resale of the Shares from the registration
requirements of the 1933 Act.
6.2 Restrictions on Disposition of Shares. Seller shall make no distribution or
other disposition of the Shares except pursuant to the exercise of registration
rights under the Registration Rights Agreement for twelve (12) months after the
Closing and Seller or the Members shall take no action which would result in the
termination, dissolution or winding up of Seller during such period. Seller
shall make no distribution or other disposition of the Shares unless and until
there is compliance with all requirements of this Agreement and any applicable
laws. Netopia shall not be required (i) to transfer on its books any Shares
which have been sold or transferred in violation of the provisions of this
Agreement or (ii) to treat as the owner of the Shares any transferee to whom the
Shares have been transferred in contravention of this Agreement.
6.3 Restrictive Legends. The stock certificates for the Shares shall be
endorsed with one or more of the following restrictive legends:
(a) "The securities represented hereby have not been registered or qualified
under the Securities Act of 1933, as amended, or the securities laws of any
state, and may be offered and sold only if registered and qualified pursuant to
the relevant provisions of federal and state securities laws or if an exemption
from such registration or qualification is available."
(b) Any other legend that may be required by applicable state law.
6.4 Post-Closing Access to Information. With respect to the originals of the
books and records of Seller relating to the Business prior to the Closing
provided to Purchaser pursuant to this Agreement, Purchaser shall allow Seller
or its representatives appropriate access to such original books and records.
Purchaser agrees that for three (3) years after the Closing such originals shall
not be removed from their principal places of business or destroyed without the
prior written consent of the Members, which shall not be unreasonably withheld.
6.5 Taxes. Seller and Members will complete and duly and timely file in correct
form with the appropriate tax authorities all tax returns and reports required
to be filed after the date hereof. All of such tax returns that will be filed
will be accurate and complete when filed. Seller and Members shall pay in full
when due all taxes imposed upon Seller and Members as a result of the sale of
the Assets, including without limitation all state and local sales or transfer
taxes.
6.6 Publicity. Purchaser and Seller agree not to issue any press release or
public statement regarding this Agreement or the transactions contemplated
hereunder without the prior consent of the other party, which shall not be
unreasonably withheld. A mutually agreed upon press release shall be made upon
the execution of the Agreement.
6.7 Allocation of Purchase Price. The Purchase Price shall be allocated among
the Assets in the manner required by Section 1060 of the Internal Revenue Code
of 1986, as amended (the "Code"), and in accordance with Schedule 6.7 hereto.
The parties agree that they will prepare and file their federal and any state or
local tax returns based on such allocation of Purchase Price. The parties
further agree that they will prepare and file any notices or other filings
required pursuant to Section 1060 of the Code, and that any such notices or
filings will be prepared based on such allocation of the Purchase Price.
ARTICLE 7
CONDITIONS
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 Closing of the following conditions (unless waived in writing
by Purchaser):
(a) Representations and Warranties. The representations and warranties of Seller
and the Members set forth in Article 5 of this Agreement shall be true and
correct.
(b) Consents. Seller shall have obtained and delivered to Purchaser all consents
Purchaser deems necessary or desirable, in Purchaser's sole discretion, in order
to consummate the transactions contemplated herein.
(c) Performance of Agreement. All covenants and other obligations under this
Agreement that are to be performed or complied with by Seller and the Members at
the Closing shall have been performed and complied with.
(d) Registration Rights Agreement. Seller shall have entered into a registration
rights agreement defining the rights and obligations of the parties with respect
to the Shares in substantially the form attached hereto as Exhibit 7.1(d) (the
"Registration Rights Agreement").
(e) Absence of Governmental or Other Objection. There shall be no pending or
threatened lawsuit challenging the Acquisition 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 Closing.
(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 satisfactory to Purchaser and its
counsel in all reasonable respects.
(g) Non-Competition Agreements. Purchaser shall have entered into a
non-competition agreement with each of the Members in substantially the form
attached hereto as Exhibit 7.1(g) (the "Non-Competition Agreements").
(h) Employee Confidential Information and Inventions Agreements. Purchaser shall
have entered into a employee confidential information and inventions agreement
with each of the individuals identified on Schedule 7.1(h) in substantially the
form attached hereto as Exhibit 7.1(h) (the "Employee Confidential Information
and Inventions Agreements").
(i) Due Diligence Review. The Purchaser shall have completed to its sole
satisfaction its due diligence review of Seller and the Assets, the Business and
its business operations, financial condition and prospects, and Purchaser shall
have received favorable review from its advisors of the results of their due
diligence review of the same.
(j) Board Approval. The Board of Directors of Purchaser shall have approved this
Agreement and the Acquisition.
(k) Escrow Agreement. Purchaser, Seller, the Members and Greater Bay Trust
Company, as escrow agent (the "Escrow Agent") shall have entered into an escrow
agreement in substantially the form attached hereto as Exhibit 7.1(k) (the
"Escrow Agreement").
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
such time of the following conditions (unless waived in writing by Seller):
(a) Representations and Warranties. The representations and warranties of
Purchaser and Netopia set forth in Article 5 of this Agreement shall have been
true and correct.
(b) Performance of Agreement. All covenants and other obligations under this
Agreement which are to be performed or complied with by Purchaser and Netopia at
or prior to the Closing shall have been fully performed and complied with.
(c) Registration Rights Agreement. Netopia shall have entered into the
Registration Rights Agreement.
(d) Absence of Governmental or Other Objection. There shall be no pending or
threatened lawsuit challenging the Acquisition 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 Closing;
(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 satisfactory to Seller and its counsel in
all reasonable respects.
(f) Escrow Agreement. Netopia, Purchaser, Seller, the Members and Escrow Agent
shall have entered into the Escrow Agreement.
ARTICLE 8
INDEMNIFICATION
8.1 Survival of Representations, Warranties, and Agreements.
(a) Subject to the terms and conditions of this Article 8, the representations,
warranties, covenants, and agreements of each party in this Agreement shall
survive the execution, delivery, and performance of this Agreement and shall in
no way be affected by any investigation of the subject matter thereof made by or
on behalf of the parties to this Agreement. The obligations of indemnity
provided herein with respect to the representations and warranties of Seller and
the Members set forth in Article 5 shall terminate on June 16, 2000, except with
respect to claims made prior to that date; provided, however, that obligations
of indemnity provided herein with respect to the representations and warranties
set forth in Section 5.2(e) (Assets and Bulk Sales Laws), Section 5.2(f) (Title
to Assets) and Section 5.2(j) (Compliance With Law) shall survive indefinitely,
and the obligations of indemnity provided herein with respect to representations
and warranties set forth in Section 5.2(i) (Taxes) shall survive until the
expiration of the applicable statutes of limitation. The obligations of
indemnity provided herein with respect to the representations and warranties of
Purchaser and Netopia set forth in Article 5 shall terminate June 16, 2000,
except with respect to claims made prior to that date.
(b) As used in this Article, any reference to a representation, warranty, or
covenant contained in this Agreement shall include any Schedule relating to such
representation, warranty, or covenant.
8.2 Indemnification of Purchaser.
(a) Seller and each of the Members hereby agrees, severally and not jointly, to
indemnify and hold harmless Purchaser and Netopia (and, insofar as such
indemnification is sought pursuant to a single proceeding with Purchaser and/or
Netopia, their respective officers and directors) against any and all losses,
liabilities, damages, demands, claims, suits, actions, judgments or causes of
action, assessments, costs and expenses, including, without limitation,
interest, penalties, attorneys' fees, any and all expenses incurred in
investigating, preparing, or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation (collectively, "Purchaser Damages"), asserted
against, resulting from, imposed upon, or incurred or suffered by Purchaser
and/or Netopia (or, insofar as such indemnification is sought pursuant to a
single proceeding with Purchaser and/or Netopia, their respective officers and
directors) directly or indirectly:
(i) as a result of or arising from any inaccuracy in or breach or nonfulfillment
of any of the representations, warranties, covenants, or agreements made by
Seller or the Members in this Agreement; or
(ii) except as specifically set forth on Schedule 2.1, without giving effect to
any of the disclosures set forth in this Agreement, any accompanying Schedule,
Exhibit, Certificate or the Disclosure Letter, any Purchaser Damages arising
from the operation of the Business prior to the Closing, or arising out of
Seller's status as employer of current or former employees or consultants of
Seller, or as a result of failure to comply with the requirements of the "bulk
sales" laws of any jurisdiction applicable to the sale of the Assets to
Purchaser.
All of the claims described in Section 8.2(a)(i) and Section 8.2(a)(ii) shall be
referred to as "Purchaser Indemnifiable Claims." (b) With respect to the payment
of such Purchaser Damages owed by Seller or the Members to Purchaser and/or
Netopia or their officers or directors, Seller and the Members agree that
Purchaser shall be entitled to offset as payment for such Purchaser Damages all
or any portion of the Earnout.
(c) Purchaser's rights to indemnity and to offset hereunder are in addition to,
and not in lieu of, any other rights, claims, or remedies that Purchaser may
have at law or in equity arising out of any breach by Seller or the Members of
any representation, warranty, covenant or agreement set forth in this Agreement
or the Related Agreements.
8.3 Indemnification of Seller and the Members.
(a) Purchaser and Netopia jointly and severally hereby agree to indemnify and
hold harmless Seller and the Members against any and all losses, liabilities,
damages, demands, claims, suits, actions, judgments or causes of action,
assessments, costs and expenses, including, without limitation, interest,
penalties, attorneys' fees, any and all expenses incurred in investigating,
preparing, or defending against any litigation, commenced or threatened, or any
claim whatsoever, and any and all amounts paid in settlement of any claim or
litigation (collectively, the "Seller Damages" or the "Member Damages"),
asserted against, resulting from, imposed upon, or incurred or suffered by
Seller or the Members directly or indirectly, as a result of or arising from any
inaccuracy in or breach or nonfulfillment of any of the representations,
warranties, covenants, or agreements made by Purchaser or Netopia in this
Agreement (all of which shall be referred to as "Member Indemnifiable Claims").
(Purchaser Indemnifiable Claims and Member Indemnifiable Claims are sometimes
referred to herein as "Indemnifiable Claims;" Purchaser Damages and Member
Damages and Seller Damages are sometimes referred to herein as "Damages.")
(b) Seller's and the Members' rights to indemnity hereunder are in addition to,
and not in lieu of, any other rights, claims, or remedies that Seller or the
Members may have at law or in equity arising out of any breach by Purchaser or
Netopia of any representation, warranty, covenant or agreement set forth in this
Agreement or the Related Agreements.
8.4 Procedure for Indemnification With Respect to Third-Party Claims.
(a) If Purchaser or Netopia or their respective officers or directors or Seller
or any of the Members determines to seek indemnification under this Article 8
with respect to Indemnifiable Claims (the party seeking such indemnification is
hereinafter referred to as the "Indemnified Party" and the party against whom
such indemnification is sought is hereinafter referred to as the "Indemnifying
Party") resulting from the assertion of liability by third parties, the
Indemnified Party shall give written notice to the Indemnifying Party within
thirty (30) days of the Indemnified Party becoming aware of any such
Indemnifiable Claim or of facts upon which any such Indemnifiable Claim will be
based; the notice shall set forth such material information with respect thereto
as is then reasonably available to the Indemnified Party. In case any such
liability is asserted against the Indemnified Party, and the Indemnified Party
notifies the Indemnifying Party thereof, the Indemnifying Party will be
entitled, if it so elects by written notice delivered to the Indemnified Party
within twenty (20) days after receiving the Indemnified Party's notice, to
assume the defense thereof with counsel satisfactory to the Indemnified Party.
Notwithstanding the foregoing, (i) the Indemnified Party shall also have the
right to employ its own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of the Indemnified Party unless the
Indemnified Party shall reasonably determine that there is a conflict of
interest between the Indemnified Party and the Indemnifying Party with respect
to such Indemnifiable Claim, in which case the fees and expenses of such counsel
will be borne by the Indemnifying Party, (ii) the Indemnified Party shall not
have any obligation to give any notice of any assertion of liability by a third
party unless such assertion is in writing, and (iii) the rights of the
Indemnified Party to be indemnified hereunder in respect of Indemnifiable Claims
resulting from the assertion of liability by third parties shall not be
adversely affected by its failure to give notice pursuant to the foregoing
unless, and, if so, only to the extent that, the Indemnifying Party is
materially prejudiced thereby. With respect to any assertion of liability by a
third party that results in an Indemnifiable Claim, the parties hereto shall
make available to each other all relevant information in their possession
material to any such assertion.
(b) In the event that the Indemnifying Party, within twenty (20) days after
receipt of the aforesaid notice of an Indemnifiable Claim, fails to assume the
defense of the Indemnified Party against such Indemnifiable Claim, the
Indemnified Party shall notify the Indemnifying Party of such failure, whereupon
the Indemnifying Party shall have ten (10) additional days to assume the defense
of the Indemnifiable Claim, after the expiration of which the Indemnified Party
shall have the right to undertake the defense, compromise, or settlement of such
action on behalf of and for the account and risk of the Indemnifying Party.
(c) Notwithstanding anything in this Section 8.4 to the contrary, (i) if there
is a reasonable probability that an Indemnifiable Claim may materially and
adversely affect the Indemnified Party, the Indemnified Party shall have the
right to participate, at its own cost and expense, in such defense, compromise,
or settlement and the Indemnifying Party shall not, without the Indemnified
Party's written consent (which consent shall not be unreasonably withheld),
settle or compromise any Indemnifiable Claim or consent to entry of any judgment
in respect thereof unless such settlement, compromise, or consent includes as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnified Party a release from all liability in respect of such Indemnifiable
Claim.
8.5 Procedure For Indemnification With Respect to Non-Third Party Claims. In the
event that the Indemnified Party asserts the existence of a claim giving rise to
Damages (but excluding claims resulting from the assertion of liability by third
parties), it shall give written notice to the Indemnifying Party. Such written
notice shall state that it is being given pursuant to this Section 8.5, specify
with particularity the nature and amount of the claim asserted, accompanied by
any written materials supporting such claim, and indicate the date on which such
assertion shall be deemed accepted and the amount of the claim deemed a valid
claim (such date to be established in accordance with the next sentence). If the
Indemnifying Party, within sixty (60) days after the mailing of notice by the
Indemnified Party, shall not give written notice to the Indemnified Party
announcing its intent to contest such assertion of the Indemnified Party, then
such assertion shall be deemed accepted and the amount of claim shall be deemed
a valid claim. In the event, however, that the Indemnifying Party contests the
assertion of a claim by giving such written notice to the Indemnified Party
within said period, then the parties shall act in good faith to reach agreement
regarding such claim.
Threshold Determination of and Limitations on Indemnification.
Notwithstanding anything in this Article 8 to the contrary, Seller and the
Members shall not be under any obligations of indemnity with respect to
Purchaser or Netopia or their respective officers or directors, and Purchaser
and Netopia shall not be under any obligations to Seller and the Members until
such time as Purchaser or Netopia or their respective officers or directors, on
the one hand, or Seller and the Members, on the other hand, shall have incurred
Purchaser Damages or Seller Damages or Member Damages, as the case may be, in
the aggregate in excess of $25,000, for which Purchaser or Netopia or their
respective officers or directors, or Seller or the Members, respectively, would
have been entitled to be indemnified against but for the provisions of this
Section 8.6; and upon reaching the $25,000 threshold set forth above, an
Indemnified Party shall be entitled to recover the full amount of such Damages,
including such $25,000 threshold. Notwithstanding anything in this Agreement to
the contrary, (i) the Members (as a group) shall not be liable for more than six
million dollars ($6,000,000), plus any portion to the Earnout by Purchaser to
Seller (after taking into account any portion of the Earnout used to offset
Purchaser Damages) less any amounts of Purchaser Damages paid by Seller, and
(ii) no individual Member shall be required to indemnify Purchaser or Netopia or
their respective officers or directors, for any amount of Purchaser Damages in
excess of such Member's Pro Rata Share of the amount of Purchaser Damages set
forth in the immediately preceding clause (i). Each Member's "Pro Rata Share"
shall be the percentages set forth opposite such Member's name on Schedule
5.1(d).
8.6 Escrow Fund. As security for the indemnity provided for in this Article 8,
One Hundred Sixty-Three Thousand Eight Hundred Twenty-Three (163,823) shares
shall be deposited by Purchaser in an escrow account with the Escrow Agent as of
the Closing, such deposit to constitute an escrow fund (the "Escrow Fund") to be
governed by the terms set forth in this Agreement, the Member's Agreements and
the provisions of the Escrow Agreement. Upon compliance with, and subject to the
provisions of this Agreement, the Member's Agreements, and the Escrow Agreement,
Purchaser and Netopia and their respective officers and directors shall be
entitled to obtain indemnity from the Escrow Fund for Damages covered by the
indemnity provided for in those agreements. Subject to the provisions of Article
6, all Shares held in the Escrow Fund at the expiry of 12 months from the
Closing shall be released to Seller free of encumbrance or restriction.
8.7 Resolution of Disputed Claims. In case Seller or the Members' Representative
or Purchaser or Netopia shall object in writing to any claim or claims for
Purchaser Damages or Seller Damages, Seller and the Members' Representative and
Purchaser and Netopia shall attempt in good faith for twenty (20) days to agree
upon the rights of the respective parties with respect to each of such claims.
If the Seller and the Members' Representative and Purchaser and Netopia should
so agree, a memorandum setting forth such agreement shall be prepared and signed
by both parties. If no such agreement can be reached after good faith
negotiation, either Purchaser or Netopia or Seller or the Members'
Representative 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 in accordance with Section
10.16 herein.
ARTICLE 9
MEMBERS' REPRESENTATIVE
9.1 Duties and Powers. Xx. Xxxx Xxxxxxxxx shall be constituted and appointed as
agent ("Members' Representative") for and on behalf of the Members to give and
receive notices and communications with respect to any disputes or matters
related to indemnification involving the Members, to authorize delivery to
Purchaser of the Shares or other property from the Escrow Fund in satisfaction
of claims by Purchaser or Netopia or their respective officers or directors, to
object to such deliveries, to agree to, negotiate, enter into settlements and
compromises of, and demand arbitration and comply with orders of courts and
awards of arbitrators with respect to such claims, and to take all actions
necessary or appropriate in the judgment of the Members' Representative for the
accomplishment of the foregoing. Such agency may be changed by a majority of the
Members from time to time upon not less than ten (10) days' prior written notice
to Purchaser. The Shareholder's Agent may resign upon ten (10) days' notice to
the parties to this Agreement. No bond shall be required of the Members'
Representative. Notices or communications to or from the Members' Representative
shall constitute notice to or from each of the Members.
9.2 Limit on Liability. The Members' Representative shall not be liable for any
act done or omitted hereunder as Members' Representative while acting in good
faith and in the exercise of reasonable judgment, and any act done or omitted
pursuant to the advice of counsel shall be conclusive evidence of such good
faith. The Members shall severally indemnify the Members' Representative and
hold him harmless against any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Members' Representative and arising
out of or in connection with the acceptance or administration of his duties
hereunder.
9.3 Use of Escrow Funds; Power of Attorney. By virtue of the execution of this
Agreement the Members have, without any further act by any such Members,
consented to: (A) the use of the Escrow Fund as collateral for damages arising
from the Members' indemnity obligations contained herein, (B) the appointment of
the Representative as their representative for purposes of this Agreement and as
attorney-in-fact and agents for all such Members and the taking by such Members'
Representative of any and all actions and the making of any decisions required
or permitted to be taken by it under this Agreement and the Escrow Agreement,
and (C) all of the other terms, conditions and limitations in this Agreement and
the Escrow Agreement. Accordingly, the Members' Representative has, subject to
the terms of this Agreement and the Escrow Agreement, authority and power to act
on behalf of the Members with respect to this Agreement and the Escrow
Agreement, and the disposition, settlement or other handling of all claims,
rights or obligations arising hereunder and thereunder. The Members will be
bound by all actions taken by the Members' Representative in compliance with
this Agreement and the Escrow Agreement, and the Escrow Agent and Purchaser
shall be entitled to rely on any action or decision of the Members'
Representative in accordance herewith.
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 Notices. All notices and other communications hereunder shall be in writing
and shall be deemed given (a) on the same day if delivered personally, (b) three
(3) business days after being mailed by registered or certified mail (return
receipt requested), or (c) on the same day if sent by facsimile, confirmation
received, to the parties at the following addresses and facsimile numbers (or at
such other address or number for a party as shall be specified by like notice):
If to Purchaser, to:
Netopia, Inc.
0000 Xxxxxxx Xxxxxx Xxxx
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxx
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
with copy (which shall not constitute notice) to:
Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx
Xxxxxxxx & Xxxxxxxxx, LLP
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
If to Seller or the Members:
Serus, LLC
c/o Xxxxxxxxx Xxxxxxxxx Law Office
000 Xxxxx Xxxxx Xxxx.
Xxxxx 0000
Xxxxxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxxxxx
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
with copies (which shall not constitute notice) to:
Studeo Inc.
0000 Xxxxx Xxxxxxxxxx Xxxxxx
0xx Xxxxx
Xxxxx, Xxxx 00000
Attention: Xxxxx X. Xxxxx
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
10.2 Entire Agreement. This Agreement, the exhibits and schedules hereto, and
the documents referred to herein 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 said subject matter including the letter of intent dated November
27, 1998, as amended by letter agreement dated December 11, 1998.
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, the Members, their 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; provided, however, that Purchaser may, without such written consent,
assign its rights in connection with a merger of Purchaser with or into another
entity, a sale of all or substantially all of Purchaser's assets, or a
reorganization involving Purchaser.
10.4 Captions. The Article and Section headings of this Agreement are inserted
for convenience only and shall not constitute a part of this Agreement in
construing or interpreting any provision hereof.
10.5 Expenses of Acquisition. Seller and the Members shall pay in full all fees
and expenses incurred by Seller and the Members in connection with this
Agreement, and the transactions contemplated hereby. The Purchaser shall pay all
fees and expenses incurred by Purchaser in connection with this Agreement, and
the transactions contemplated hereby.
10.6 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.
10.7 Third-Party Beneficiaries. Except as otherwise expressly provided for in
this Agreement, nothing herein, expressed or implied, is intended or shall be
construed to confer upon or give to any person, firm, corporation, or legal
entity, other than the parties hereto, any rights, remedies, or other benefits
under or by reason of this Agreement.
10.8 Counterparts. This Agreement may be executed simultaneously in multiple
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument. A facsimile signature may
be in lieu of an original signature provided that original signatures are
thereafter promptly delivered on demand.
10.9 Gender. Whenever the context requires, words used in the singular shall be
construed to mean or include the plural and vice versa, and pronouns of any
gender shall be deemed to include and designate the masculine, feminine, or
neuter gender.
10.10 Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
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.
10.11 Remedies of Purchaser. Seller and the Members agree that the Assets are
unique and not otherwise readily available to Purchaser. Accordingly, Seller and
the Members acknowledge 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.
10.12 Governing Law. This Agreement shall in all respects be construed in
accordance with and governed by the laws of the State of California, as applied
to contracts entered into and to be performed solely within the state, solely
between residents of the state.
10.13 Intentionally Omitted.
10.14 Attorney's Fees. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement or to protect the rights obtained
hereunder the prevailing party shall be entitled to its reasonable attorneys'
fees, costs, and disbursements in addition to any other relief to which it may
be entitled.
10.15 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
10.16 Arbitration. If the parties are unable to resolve any dispute arising in
connection with this Agreement and its exhibits, or the transactions
contemplated herein and therein, within twenty (20) days, either Purchaser or
Seller may, by written notice to the other, demand arbitration of the matter
(subject to the limitations contained in Section 8.7). 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 shall
be binding and conclusive upon the parties to this Agreement. Judgment upon any
award rendered by the arbitrators may be entered in any court having
jurisdiction. Any such arbitration shall be held in Salt Lake City, Utah under
the expedited rules then in effect of the American Arbitration Association. Each
party to an arbitration shall pay its own expenses and half of the fees of each
arbitrator and the administrative fee of the American Arbitration Association.
[The Remainder of this Page is Blank]
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
NETOPIA, INC.
By: /s/ Xxxxx X. Xxxxx
Address: 0000 Xxxxxxx Xxxxxx Xxxx
Xxxxxxx, XX 00000
PURCHASER:
SERUS ACQUISTION CORPORATION
By: /s/ Xxxxx X. Xxxxx
Address: 0000 Xxxxxxx Xxxxxx Xxxx
Xxxxxxx, XX 00000
SELLER:
SERUS, LLC
By: /s/ Xxxx X. Xxxxxxxxx
Name: Xxxx Xxxxxxxxx
Title: Managing Director
Address: Xxxxxxxxx Xxxxxxxxx Law Xxxxxx
000 Xxxxx Xxxxx Xxxx.
Xxxxx 0000
Xxxxxxxx, XX 00000-0000
MEMBERS:
/s/ Xxxxxx XxXxxxx
Address:
/s/ Xxxx Xxxxxxxxx
Address:
/s/ Xxxx Xxxxxxxxx
Address:
/s/ Xxxxx Xxxxxxx
Address:
/s/ Xxxx Xxxxxxxx
Address:
Studeo, Inc.
Address:
