Exhibit 2.01
ASSET SALE AGREEMENT
This ASSET SALE AGREEMENT is made and entered into April 3, 1998 (the
"Closing Date"), by and between Digital Link Corporation, a California
corporation ("Buyer") and Semaphore Communications Corporation, a Delaware
corporation ("Seller"). Seller's Federal identification number is 00-0000000 and
Buyer's federal tax identification number is 00-0000000.
PURCHASE AND SALE OF ASSETS
1.1 Purchased Assets. Upon the terms and subject to the conditions
contained herein, Seller hereby sells, conveys, transfers, assigns and delivers
to Buyer all its right title and interest in the Purchased Assets. The
"Purchased Assets" are all of the assets listed below:
(a) All of Seller's rights in the "Seller Intellectual
Property" as defined in Schedule 1.1A.
(b) All of Seller's rights in the word "Semaphore". Even
though Seller is assigning all its rights in the name "Semaphore",
Seller shall have three (3) months after the Closing Date Seller to
change its corporate name to a name which does not use the word
"Semaphore" or any confusingly similar name. After such three month
period Seller shall not retain any rights to the name "Semaphore".
(c) The Seller's inventory of finished products, work in
process and spare parts as evidenced by the inventory listing attached
as Schedule 1.1C (the "Inventory"). The Inventory includes a finished
goods inventory of not less than 581 IOENI adapter boards, 36 SMDS
adaptor units and 1150 Roadrunner chips.
(d) The equipment and other assets (excluding furniture,
fixtures and leasehold improvements) as evidenced by the list attached
as Schedule 1.1D (the "Fixed Assets").
(e) All Seller's rights in the Assumed Contracts (as defined
in Section 1.3).
(f) [Intentionally deleted]
(g) Marketing and sales material, including brochures,
displays, models, demonstration equipment, training materials,
advertising material, product documentation, support materials, books,
records, files and papers related to the portion of the Business
represented by the Purchased Assets including drawings, engineering
information, computer programs (including source code), software
programs, manuals and data, sales and advertising materials, sales and
purchases correspondence, trade association files, research and
development records, lists of present and former customers and
suppliers, and copies and recordings of the foregoing (the "Books and
Records");
(h) The goodwill of the Seller in connection with the
Purchased Assets.
(i) The trade receivables of Seller attached as Schedule 1.1I
("Receivables").
(j) The benefit of any pre-paid assets on Seller's balance
sheet as of the Closing Date (to the extent same pertain to the
Purchased Assets or Assumed Contracts) attached as Schedule 1.1J.
(k) To the extent assignable, all rights and interests under
or pursuant to all warranties, representations and guarantees, express,
implied or otherwise, of or made by suppliers or others in connection
with the Purchased Assets or the Assumed Liabilities and Obligations.
For purposes of this Agreement, "Business" means the business carried on by the
Seller which primarily involves development, marketing, distribution, sale and
servicing of the Software and those products in which the Software is
incorporated and "Related to the Business" means used primarily in, arising
primarily from, or relating primarily to the Business.
1.2 Excluded Assets. Anything in Section 1.1 to the contrary
notwithstanding, there shall be excluded from the assets, properties, rights and
business to be transferred to the Buyer hereunder cash, securities and other
cash equivalents and any assets that are not Purchased Assets (collectively, the
"Excluded Assets").
1.3 Assumed Liabilities and Obligations. Effective the Closing Date,
Buyer assumes and agrees to discharge in a due and timely manner the following
liabilities and obligations (the "Assumed Liabilities and Obligations"). For
purposes of this Agreement, "Liabilities" and "Obligations" means all costs,
expenses, charges, debts, liabilities, claims, demands and obligations, whether
primary or secondary, direct or indirect, fixed, contingent, absolute or
otherwise, under or in respect of any contract, agreement, arrangement, lease,
commitment, undertaking, law or tax.
(a) Seller's obligations under the Assumed Contracts.
"Assumed Contracts" are those contracts and agreements listed on
Schedule 1.3A.
(b) Buyer will assume Seller's warranty obligations stated in
the Termination Agreement between MCM Japan Ltd. and Seller dated 24
March 1998 ("MCM Settlement Agreement"). At the Closing Seller shall
pay Buyer $182,000 in consideration of Buyer's on-going customer
supports efforts and Buyer assuming this obligation and the other
Assumed Contracts.
(c) Buyer will assume Seller's responsibility to deliver (1)
the remaining 36 SMDS units to British Telecom that are included in
Data Innovation Limited's (Zergo) Purchase Order W548 and (2) the 581
units of product as stated in the MCM Settlement Agreement. Buyer shall
be entitled to amounts paid by the customer respecting the delivery of
"(1)" above but Seller shall be entitled to the amounts paid by the
customer respecting the units of "(2)" above.
(d) Buyer shall assume Seller's obligations under the
outstanding purchase orders issued to Seller's vendors listed on
Schedule 1.3D.
Seller transfers and assigns to Buyer the Assumed Contracts and all of Seller's
rights therein, and Buyer assumes and agrees to perform and discharge in a due
and timely manner the obligations of Seller pursuant to the Assumed Contracts.
To the extent that the assignment of any of the Assumed Contracts are not
permitted without the consent or approval of another party to such contract,
this Agreement shall not be deemed to be an assignment of same until such
consent or approval is given. After the Closing Date and until all such rights
are transferred to the Buyer, the Seller shall:
(1) maintain its existence and hold the rights in trust for
the Buyer;
(2) comply with the terms and provisions of the rights as
agent for the Buyer at the Buyer's cost and for the Buyer's benefit;
(3) cooperate with the Buyer in any reasonable and lawful
arrangements designed to provide the benefits of such rights to the
Buyer; and
(4) enforce, at the request of the Buyer and at the expense
and for the account of the Buyer, any rights of the Seller arising from
such rights against any third person, including the right to elect to
terminate any such rights in accordance with the terms of such rights
upon the written direction of the Buyer.
In order that the full value of the rights may be realized for the benefit of
the Buyer, the Seller shall, at the request and expense and under the direction
of the Buyer, in the name of the Seller or otherwise as the Buyer may specify,
take all such action and do or cause to be done all such things as are,
reasonable and necessary or proper in order that the obligations of the Seller
under such rights may be performed in such manner that the value of such rights
is preserved and enures to the benefit of the Buyer, and that any moneys due and
payable and to become due and payable to the Buyer in and under the rights are
received by the Buyer. The Seller shall promptly pay to the Buyer all moneys
collected by or paid to the Seller in respect of every such right. The Buyer
shall indemnify and hold the Seller harmless from and against any cost, expense,
claim or liability under or in respect of such rights arising because of any
action of the Seller taken pursuant to this Section.
1.4 Excluded Liabilities and Obligations. Except as expressly set forth
in Section 1.3 above, Buyer does not assume and shall not be liable for any
debt, Obligation, responsibility or Liability of Seller (the "Excluded
Liabilities and Obligations"). In particular, and for the avoidance of doubt but
without limiting the foregoing, Buyer shall have no right or responsibility with
respect to the following:
(a) Cancellation of DEC Purchase Order #18096.
(b) Any agreements or arrangements between Seller and Intel
concerning Roadrunner technology.
(c) Except as provided in Section 1.3(b) and (c), the MCM
Settlement Agreement.
(d) Any agreements or arrangements between Seller and Dovatron
International.
(e) Any agreements or arrangements between Seller and Xxxxxxxx
Technologies.
FINANCIAL ARRANGEMENT
2.1 Purchase Price. At the Closing on the Closing Date, Buyer shall
issue to Seller 291,182 shares of Buyer's common stock which is the number of
shares calculated by dividing $3,200,000 divided by the volume-weighted average
price per share (as reported by Bloomberg Financial Services) at which Buyer's
common stock traded on the five (5) business days immediately preceding the
Closing Date. The said shares are referred to herein as the "Purchase Price".
Buyer has granted certain registration rights in the Shares pursuant to a
Registration Rights Agreement dated the date of this Agreement. Except as
otherwise provided in Article 4 the Purchased Assets are being transferred and
sold "as is" "where is". In particular, and subject to Section 2.10, there shall
not be an adjustment in the Purchase Price (either an increase or decrease) if
any assets cannot be located or are in poor condition, or if any assets have a
fair market value which is more or less than book value, or if the Receivables
are collected in amounts greater or less than the value less reserves reflected
on Seller's books.
2.2 Assumed Contracts. (1) As provided above, Buyer is purchasing the
Receivables and the right to receive all amounts due from customers under the
Assumed Contracts. However, and subject to Section 2.2(2), Seller shall be
entitled to retain all amounts received prior to the Closing Date from customers
pursuant to the Assumed Contracts even if the amount received pertained to
services to be performed after the Closing Date.
(2) Buyer shall assume Seller's obligations under the outstanding
purchase orders from Seller's customers listed on Schedule 2.2. Buyer shall be
entitled to all amounts received from customers in respect of such purchase
orders.
2.3 SMDS Product. The parties agree that British Telecom
unconditionally accepted the Seller's SMDS product which satisfies one of the
conditions communicated by the Buyer to the Seller with respect to the execution
of this Agreement.
2.4 Digital Storage Scope. Seller shall promptly exercise the option to
purchase for $1.00 the TEK/TDS754A Digital Storage Scope ("DSS") leased for a
term of twelve months from AT&T Capital Services Corporation ("AT&T") pursuant
to an Alternative Purchase Plan agreement dated March 4, 1997. When Seller
acquires title to the DSS title shall transfer to Buyer without any additional
consideration. Seller will secure the release of the UCC-1 filing by AT&T
respecting the DSS.
2.5 Purchase Price Allocation. The Purchase Price shall be allocated
among the Purchased Assets as set forth on Schedule 2.5.
2.6 Tax. (a) Buyer is purchasing the Software for the purpose of
reproducing and reselling copies of the Software by Buyer and not for use or
consumption. Seller shall deliver to Buyer possession of the Seller Intellectual
Property, including documentation and other tangible manifestations thereof, at
Seller's office in Santa Clara, California.
(b) Buyer shall be responsible for paying sales tax applicable to
this Agreement.
(c) Buyer shall be responsible for all property and use taxes imposed
or assessed upon the Purchased Assets with assessment dates subsequent to the
Closing Date.
2.7 Real Estate. (a) Seller is conducting business in approximately
10,000 square feet of a facility ("Facility") located at 0000 Xxxxxx Xxxxx,
Xxxxx Xxxxx, Xxxxxxxxxx pursuant to a lease ("Lease") dated January 3, 1996
between Seller and Xxxx/Intereal Bay Area, a California general partnership.
Subject to any required landlord consent and compliance by Buyer with the Lease,
Seller gives Buyer permission to keep the Purchased Assets and Transferred
Employees in the Facility during a transition period until not later than
December 31, 1998. Buyer shall be financially responsible for amounts payable to
the landlord based the same financial and other terms and conditions as
currently applicable to Seller. Buyer shall be financially responsible for its
operating expenses such as office supplies and telephone calls (including lease
payments to Leasepartners for the Toshiba Strata DK280 and Octel 200SX equipment
but there shall not be a charge to Buyer for use of Seller's telephone sets).
(b) As an alternative to 2.7(a) Buyer may elect, by notice to Seller
given on or before April 15, 1998 to have the following arrangement apply in
lieu of Section 2.7(a). Subject to any required landlord consent, Seller will
give Buyer permission to keep the Purchased Assets and Transferred Employees in
the Facility during a transition period until June 30, 1998. During this period
Seller will continue to be financially responsible for the lease payments and
charges due to the landlord of the Facility. Buyer shall be financially
responsible for its operating expenses such as office supplies and telephone
calls (including lease payments to Leasepartners for the Toshiba Strata DK280
and Octel 200SX equipment but there shall not be a charge to Buyer for use of
Seller's telephone sets). After June 30, 1998 Buyer may not keep the Purchased
Assets and Transferred Employees in the Facility.
2.8 ITL. Seller shall be financially responsible for work done by
Infosys Technologies Ltd. through April 3, 1998 and Buyer shall be financially
responsible for work done thereafter.
2.9 Shares and Proceeds. For not less than one year following the
Closing Seller shall retain the Shares, and any proceeds from the sale of the
Shares should Seller sell any of the Shares, and, in particular, shall not
distribute the Shares (including any proceeds from the sale of any Shares) to
its stockholders unless, in any case, Xerox Corporation ("Xerox") (Seller's
majority stockholder) shall first fund the Seller with cash or a promissory note
of Xerox in an amount, or having a face value in an amount, of not less than the
value of the Shares or proceeds distributed or otherwise not retained.
2.10 Contingent Reduction in Purchase Price. Reference is made to that
certain License Agreement dated and effective as of December 1, 1994 between
Seller and Xerox Corporation ("Xerox") (the "SCC License"). If by May 1, 1998
Xerox has not agreed to do either "(a)" or "(b)" below Seller will pay Buyer
$250,000 and such amount shall be an adjustment in the Purchase Price. This
paragraph shall not apply if:
(a) Xerox agrees to amend the non-competition Section 5.1 of the SCC
License to make the clause apply for five years following the Closing so that
the first clause of Section 5.1 shall then read "During the period through April
3, 2003, Xerox . . . ", or
(b) Xerox agrees to amend the SCC License to Buyer's reasonable
satisfaction to the effect that Xerox will have no grant back rights under the
SCC License.
THE CLOSING
3.1 Closing. The closing ("Closing") of the transactions contemplated
by the Agreement is taking place contemporaneous with the execution of this
Agreement. The execution of this Agreement shall operate as an effective
conveyance, assignment and transfer of the Purchased Assets as contemplated
herein effective as of the Closing Date. However, in order to effectuate more
fully and completely the assignment, transfer and conveyance of the Purchased
Assets pursuant to the terms and conditions hereof, Seller shall
contemporaneously with the execution hereof or upon reasonable request after
execution hereof, deliver to Buyer such bills of sale, assignments and
instruments of conveyance as requested by Buyer, acting reasonably, to permit
the assignment, transfer and conveyance from Seller to Buyer and the acquisition
by Buyer from Seller of all right, title and interest in, to and under the
Purchased Assets, the whole with effect as of the Closing.
3.2 Deliveries by the Parties. At the Closing the parties shall deliver
the following in addition to this Agreement and the schedules hereto:
(1) Buyer shall deliver to Seller the Shares.
(2) Seller shall deliver to Buyer a cheque in the amount
specified in Section 1.3(b).
(3) Buyer and Seller shall deliver to each other the
Registration Right Agreement.
(4) Seller shall deliver to Buyer physical possession of the
Purchased Assets which shall be at Seller's office in Santa Clara,
California. To the extent physical assets are located other than at
Seller's office they shall be deemed delivered to Buyer on the Closing
Date "where is". Buyer shall have the right, at its cost, to relocate
any Purchased Assets to a site of its choice.
(5) Buyer shall deliver to Seller a re-sale certificate for
the Software and Inventory.
Also at the Closing Buyer and Xerox delivered to each other an Assignment
Agreement dated April 3, 1998 and Xerox delivered to Buyer a Waiver agreement.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as of the Closing Date as
follows:
4.1 Validity. Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and has
full corporate power and authority to execute, deliver and perform its
obligations under this Agreement and all other agreements and instruments to be
executed by it as contemplated by this Agreement, and this Agreement constitutes
the legal, valid and binding agreement of Seller, enforceable in accordance with
its terms. The execution and delivery of this Agreement and such other
agreements and instruments and the completion of the transactions contemplated
by this Agreement and such other agreements and instruments have been duly
authorized by all necessary corporate action on the part of the Seller and its
shareholders. The execution and delivery of this Agreement do not, and the
undertaking of the transactions and obligations contemplated to be undertaken by
Seller hereunder will not, subject to (a) Section 1.3 respecting assignment of
Assumed Contracts, (b) the approval and consent of Seller's stockholders (which
approval and consent has been obtained) and (c) landlord consents (i) violate
any provision of the Certificate of Incorporation or By Laws of Seller or any
statute, judgment, order, decree, injunction, regulation or ruling of any court
or governmental authority applicable to Seller; (ii) result in or constitute a
default, breach or violation or an event that, with notice or lapse of time or
both, would be a default, breach or violation of any of the terms, conditions or
provisions of any Assumed Contract; (iii) constitute an event which, pursuant to
the terms of any Assumed Contract, causes any right or interest of the Seller to
come to an end or be affected in any way that is materially adverse to the
portion of the Business represented by the Purchased Assets; (iv) result in the
creation or imposition of any lien on any Purchased Asset that is material to
the portion of the Business represented by the Purchased Assets; (v) constitute
the violation of any applicable law applicable to or affecting the Seller which
is Related to the portion of the Business represented by the Purchased Assets
and would have a material adverse effect on the portion of the Business
represented by the Purchased Assets. Subject to (a) Section 1.3 respecting
assignment of Assumed Contracts, (b) the approval and consent of Seller's
stockholders (which approval and consent has been obtained) and (c) landlord
consents, (x) none of the actions on the part of Seller contemplated by this
Agreement or (y) the conduct of the portion of the Business represented by the
Purchased Assets by Buyer after the Closing as that portion of the Business is
currently carried on by the Seller, are subject to the approval or consent of
any person or entity not a party to this Agreement and no authorization, consent
or approval of, or filing with, any public body or authority is necessary for
the consummation by Seller of the transactions contemplated by this Agreement.
4.2 Warranty. Seller warrants to Buyer that Buyer will acquire good and
marketable title in the Purchased Assets free of any security interest or other
lien or encumbrance. However, there exists a dispute with Intel concerning title
to the Roadrunner chips and Seller makes no warranty as to title to the
Roadrunner chips included in the Inventory. Seller transfers to Buyer whatever
rights of ownership it has in the Roadrunner chips including any title Seller
may acquire to such chips in the future. Should Seller or Buyer be required to
purchase the Roadrunner chips from Intel Seller shall be responsible for any
payments to Intel.
4.3 Investment. Seller is acquiring the Shares for investment for its
own account and not with a view to the public resale or distribution of same.
Seller has no present intention of selling, granting any participation in, or
otherwise distributing the Shares. Seller has received or has had full access to
all the information it considers necessary or appropriate to make an informed
investment decision with respect to the Shares to be acquired by it under this
Agreement. Seller further has had an opportunity to ask questions and receive
answers from the Buyer regarding the terms and conditions of the offering of the
Shares and to obtain additional information (to the extent the Buyer possessed
such information or could acquire it without unreasonable effort or expense)
necessary to verify any information furnished to Seller or to which such Seller
had access. Seller understands that the acquisition of the Shares involves
substantial risk and, by reason of Seller's business and financial experience,
is capable of evaluating the merits and risks of the acquisition of the Shares,
has the ability to protect its own interests in this transaction and financially
capable of bearing a total loss of the investment. Seller has a preexisting
business relationship with Buyer and certain of its officers, directors or
controlling persons of a nature and duration that enables Seller to be aware of
the character, business acumen and financial circumstances of such persons.
Seller is an "accredited investor" within the meaning of Regulation D
promulgated under the 1933 Act. Seller understands that the Shares have not been
registered under the Securities Act of 1933 and may not be transferred except
pursuant to the Securities Act of 1933 or an exemption therefrom or pursuant to
the Registration Rights Agreement. In this connection, Seller represents that it
is familiar with Rule 144 promulgated under the Securities Act of 1933, as
presently in effect, and understands the resale limitations imposed thereby and
by such Act.
Seller understands and agrees that the Shares shall bear a legend
substantially as follows:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE
AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
4.4 Seller Intellectual Property.
(a) The Seller Intellectual Property and Software is owned by
the Seller free and clear of all liens.
(b) There is no current or threatened litigation relating to
the Seller Intellectual Property or Software that would be material to
the portion of the Business represented by the Purchased Assets.
(c) To Seller's knowledge, no person has challenged the
validity of Seller's rights to any of the Seller Intellectual Property
or Software. To Seller's knowledge, no person has infringed the
Seller's rights to the Seller Intellectual Property or Software.
(d) Seller is not obligated to pay any compensation to any
person in respect of the use of the Seller Intellectual Property and
Software.
(e) Subject to Schedule 1.1A, Seller has the exclusive
ownership of the Seller Intellectual Property and Software and the
right to assign the Seller Intellectual Property and Software to Buyer.
(f) To Seller's knowledge, the Seller Intellectual Property
and the Software do not infringe the intellectual property rights of a
third party.
(g) Schedule 1.1A discloses all the third party rights in the
Seller Intellectual Property and the Software.
4.5 Disclaimer of Warranty. EXCEPT AS SET FORTH IN SECTIONS 4.2
AND 4.4 THE PURCHASED ASSETS ARE SOLD ON AN "AS IS" "WHERE IS" BASIS.
EXCEPT AS SET FORTH IN SECTIONS 4.2 AND 4.4 SELLER MAKES NO WARRANTY, EXPRESS OR
IMPLIED, CONCERNING THE PURCHASED ASSETS INCLUDING, WITHOUT LIMITATION, ANY
WARRANTY OR REPRESENTATION AS TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE, AND BUYER HEREBY WAIVES RELIANCE UPON ANY EXPRESS OR IMPLIED COVENANTS,
REPRESENTATIONS OR WARRANTIES INCLUDING FITNESS FOR A PARTICULAR PURPOSE OR
MERCHANTABILITY.
4.6 Survival of Representations and Warranties. The
representations and warranties of the Seller contained in Section 4.1 through
4.5 or any other agreement, certificate or instrument delivered pursuant to this
Agreement shall survive the Closing Date for a period of one year from the
Closing Date, and notwithstanding the Closing Date and any inspection or
inquiries made by or on behalf of the Buyer, shall continue in full force and
effect for the benefit of the Buyer, after which time the Seller shall be
released from all obligations in respect of such representations and warranties
except with respect to any claims asserted by the Buyer in writing (setting out
in reasonable detail the nature of the claim and the approximate amount of such
claim) before the expiration of such period, but there shall be no time limit on
the representations and warranties of the Seller set out in Section 4.1 which
relate to the incorporation of the Seller, the due authorization of this
Agreement by the Seller or the enforceability of the Seller's obligations under
this Agreement.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as of the Closing Date
as follows:
5.1 Validity. Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of California and has
full corporate power and authority to execute, deliver and perform its
obligations under this Agreement and all other agreements and instruments to be
executed by it as contemplated by this Agreement, and this Agreement constitutes
the legal, valid and binding agreement of Buyer, enforceable in accordance with
its terms. The execution and delivery of this Agreement and such other
agreements and instruments and the completion of the transactions contemplated
by this Agreement and such other agreements and instruments have been duly
authorized by all necessary corporate action on the part of the Buyer. The
execution and delivery of this Agreement do not, and the undertaking of the
transactions and obligations contemplated to be undertaken by Buyer hereunder
will not, (i) violate any provision of the Certificate of Incorporation or By
Laws of Buyer or any statute, judgment, order, decree, injunction, regulation or
ruling of any court or governmental authority applicable to Buyer. Except as
provided in Section 1.3 respecting assignment of Assumed Contracts, none of the
actions on the part of Buyer contemplated by this Agreement are subject to the
approval or consent of any person or entity not a party to this Agreement and no
authorization, consent or approval of, or filing with, any public body or
authority is necessary for the consummation by Buyer of the transactions
contemplated by this Agreement.
5.2 Issuance of Shares. (a) Upon consummation of the Closing the Shares
will be duly authorized, validly issued, fully paid and non-assessable and not
subject to preemptive or similar rights of security holders of Buyer.
(b) Since January 1, 1996, Buyer has made all filings with the Securities and
Exchange Commission that have been required to be made under the Securities Act
of 1933 and the Securities Exchange Act of 1934 (collectively, the "Public
Reports"). Each of the Public Reports complied with the requirements of the
Securities Act of 1933 and the Securities Exchange Act of 1934 in all material
respects and none of the Public Reports, as of their respective dates, contained
any untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The financial
statements included in the Public Reports were prepared from the books and
records of Buyer in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered thereby and present
fairly in all material respects the financial condition Buyer as of the
indicated dates and the results of operations and cash flows of Buyer for the
indicated periods.
5.3 Survival of Representations and Warranties. The representations and
warranties of the Buyer contained in Sections 5.1 and 5.2 or any other
agreement, certificate or instrument delivered pursuant to this Agreement shall
survive the Closing Date for a period of one year from the Closing Date, and
notwithstanding the Closing Date, shall continue in full force and effect for
the benefit of the Seller, after which time the Buyer shall be released from all
obligations in respect of such representations and warranties except with
respect to any claims asserted by the Seller in writing (setting out in
reasonable detail the nature of the claim and the approximate amount thereof)
before the expiration of such period, but there shall be no time limit on the
representations and warranties of the Buyer set out in Section 4.1 which relate
to the incorporation of the Buyer, the due authorization of this Agreement by
the Buyer and the enforceability of the Buyer's obligations under this
Agreement.
COVENANTS AND AGREEMENTS OF THE PARTIES
6.1 Continued Assistance. Following the Closing, Seller shall refer to
Buyer as promptly as practicable any telephone calls, letters, orders, notices,
requests, inquiries and other communications relating to the Purchased Assets or
Assumed Contracts. Seller shall cooperate in an orderly transfer of the
Purchased Assets. From time to time, at Buyer's reasonable request and without
further consideration, Seller shall execute, acknowledge and deliver such
documents, instruments or assurances and take such other action as Buyer may
reasonably request to more effectively assign, convey and transfer any of the
Purchased Assets.
6.2 Records and Documents. For six years following the Closing Date,
Buyer grants to Seller and its representatives, at Seller's reasonable request,
access to employees of Seller hired by Buyer and those records and documents
(including the right to make copies thereof), possession of which is transferred
to Buyer, as may be necessary in connection with Seller's obligations hereunder
and the conduct after the Closing of the affairs of Seller.
6.3 Bulk Sales Act. Buyer waives compliance by Seller with the
provisions of Article 6 of the Uniform Commercial Code, or equivalent bulk
transfer laws, of any applicable state. Seller shall indemnify and hold harmless
Buyer from and against any and all expense, loss or liability which Buyer may
suffer as a result of claims asserted by third parties against Buyer due to any
noncompliance by Seller and Buyer with applicable bulk transfer laws.
6.4 Roadrunner chips. Roadrunner chips will be used by Buyer only
installed in products and may not be sold or used individually. As any
agreements or arrangements between Seller and Intel concerning Roadrunner
technology is an Excluded Liability compliance with this covenant is the only
obligation Buyer has respecting same.
6.5 Audit Assistance. Seller understands that Buyer's independent
auditors desire to conclude an audit of the Business in April, 1998. Such audit
shall be at Buyer's cost. Seller agrees to cooperate in the conduct of the audit
as reasonably requested by Buyer.
6.6 UCC Filings. Seller will promptly secure the release of the
UCC-1 filing covering the Purchased Assets.
INDEMNIFICATION AND LIMITATION OF LIABILITY
7.1 Seller Indemnification. Seller indemnifies Buyer and its directors,
officers, employees, agents, representatives and affiliates from and against any
Liability, loss or claim, and all costs thereof, incurred in respect of (1) any
Excluded Assets and any Excluded Liabilities and Obligations, (2) the breach by
Seller of any representations, warranties or covenants of this Agreement or any
other agreement, certificate or instrument executed and delivered pursuant to
this Agreement, (3) the indemnity of Section 6.3 and (4) any claim by either
SNMP Research or Accelerated Technologies either (x) that Seller's products
infringe their respective intellectual property rights or (y) that there is any
royalty or other payment owed by Seller to them concerning intellectual property
licensed from them by Seller.
7.2 Buyer Indemnification. Buyer indemnifies Seller and its directors,
officers, employees, agents, representatives and affiliates from and against any
Liability, loss or claim, and all costs thereof, incurred in respect of (1) any
Assumed Liabilities and Obligations or the ownership or use of the Purchased
Assets, each occurring or accruing after the Closing Date and (2) the breach by
Buyer of any representations, warranties or covenants of this Agreement or any
other agreement, certificate or instrument executed and delivered pursuant to
this Agreement and (3) the indemnity of the last sentence of the last paragraph
of Section 1.3.
7.3 Limitation of Liability. NO PARTY SHALL BE LIABLE FOR PUNITIVE,
INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS)
ARISING UNDER OR RELATING TO THIS AGREEMENT EVEN IF THE PARTY HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES. NO PARTY'S AGGREGATE LIABILITY TO THE OTHER
PARTY FOR DAMAGES ARISING UNDER OR RELATING TO THIS AGREEMENT UNDER ANY AND ALL
CLAIMS OF ANY TYPE OR NATURE, BASED ON ANY THEORY OF LIABILITY (INCLUDING
CONTRACT, TORT, NEGLIGENCE, WARRANTY OR STRICT LIABILITY), SHALL EXCEED A TOTAL
OF $3,200,000. This paragraph shall not limit a party's obligation to indemnify
the other party in respect of third party claims against the other party for
which indemnity is available under Sections 7.1(1) or (3) or 7.2(1) or (3).
7.4 A party's obligation to indemnify the other is subject to (1) the
party seeking indemnity giving prompt (and in any event within thirty (30) days)
notice of any claim to the other party following the indemnified party having
knowledge of the matter in question (but the failure to give such notice in
respect of a third party claim shall not affect the right of the indemnified
party to indemnity hereunder unless and to the extent that such failure
materially and adversely affected the defense of such claims by the indemnifying
party) and (2) the indemnifying party having the right, at its sole cost and
expense, to assume and control the defense of any such third party claim (in
which case the indemnified party shall have the right, at no cost or expense to
the indemnifying party, to participate in such defense). If the indemnifying
party, having elected to assume such control, thereafter fails to defend the
third party claim within a reasonable time, the indemnified party shall be
entitled to assume such control and the indemnifying party shall be bound by the
results obtained by the indemnified party with respect to such third party
claim. If the indemnifying party makes a payment, by settlement of the third
party claim, which precludes a final determination of the merits of the third
party claim and the indemnified party and the indemnifying party are unable to
agree whether such payment was unreasonable in the circumstances having regard
to the amount and merits of the third party claim, then such dispute shall be
referred to and finally settled by binding arbitration from which there shall be
no appeal. If the indemnifying party fails to assume control of the defense of
any third party claim, the indemnified party shall have the exclusive right to
contest, settle or pay the amount claimed; provided, however, that any such
actions shall not affect the indemnifying party's right to contest in good faith
its indemnity obligation with respect to such claim or the reasonableness of any
settlement thereof. Whether or not the indemnifying party assumes control of the
negotiation, settlement or defense of any third party claim, the indemnifying
party shall not settle any third party claim without the written consent of the
indemnified party, which consent shall not be unreasonably withheld or delayed;
provided, however, that the liability of the indemnifying party shall be limited
to the proposed settlement amount if any such consent is not obtained for any
reason within a reasonable time after the request therefor. Following
indemnification the indemnifying party shall be subrogated to all rights of the
indemnified party with respect to all third parties relating to the matter for
which indemnification has been made. In the case of a claim that is not a third
party claim (a "Direct Claim"), the indemnifying party shall have 60 days from
receipt of notice of the claim within which to make such investigation of the
claim as the indemnifying party considers necessary or desirable. For the
purpose of such investigation, the indemnified party shall make available to the
indemnifying party the information relied upon by the indemnified party to
substantiate the claim, together with all such other information as the
indemnifying party may reasonably request. If both parties agree at or before
the expiration of such 60 day period (or any mutually agreed upon extension
thereof) to the validity and amount of such claim, the indemnifying party shall
immediately pay to the indemnified party the full agreed upon amount of the
claim, failing which the matter shall be referred to binding arbitration in such
manner as the parties may agree or shall be determined by a court of competent
jurisdiction.
EMPLOYEES AND EMPLOYEE BENEFITS
8.1 Offer of Employment. Buyer has offered or will offer employment to
the employees of Seller listed on Schedule 8.1 (the "Transferred Employees")
contingent on the happening of the Closing, at not less than the employee's
current rate of salary. The Transferred Employees will be eligible to
participate in the same employee benefit plans as are generally available to
similarly situated employees of Buyer.
8.2 Assistance. The Buyer shall not be obligated to any employee who
refuses the Buyer's offer of employment. The Seller shall render all reasonable
assistance to encourage each Employee to accept the Buyer's offer of employment.
8.3 Severance. Seller shall be responsible for any severance,
termination and all other similar benefits which may be due to Seller's
employees. In addition, Seller is responsible for any amounts owing to Seller's
employees that accrue prior to the Closing, including accrued vacation, whether
or not that employee is a Transferred Employee.
8.4 Information. Former Seller employees who become Transferred
Employees are hereby released by Seller from any confidence obligations to
Seller arising from their previous employee relationship with Seller which would
prevent them from using confidential information respecting the business
represented by the Purchased Assets for the benefit of Buyer.
GENERAL PROVISIONS
9.1 Waiver. No amendment or waiver of any provision of this Agreement
shall in any event be effective, unless the same shall be in writing and signed
by the parties hereto, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given. No waiver
shall be inferred from or implied by any failure to act or delay in acting by a
party in respect of any default, breach or non-observance or by anything done or
omitted to be done by the other party.
9.2 Notices. All official notices, requests, demands and other
communications hereunder shall be in writing and shall be sent by registered or
certified mail, postage prepaid, return receipt requested, by personal delivery,
prepaid courier or fax with confirmation of receipt as follows:
(a) If to Seller:
Semaphore Communications Corporation
000 Xxxx Xxxxx Xxxx
X.X. Xxx 0000
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Chief Financial Officer
With a copy to:
Semaphore Communications Corporation
000 Xxxx Xxxxx Xxxx
P.O. Box 1600
Stamford, Connecticut 06904
Attention: General Counsel
(b) If to Buyer:
Digital Link Corporation
000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Chief Financial Officer
Any party may change its address for receiving notice by written notice given to
the others named above.
Any such communication so given or made shall be deemed to have been given or
made and to have been received on the day of delivery if delivered, or on the
day of faxing or sending by other means of recorded electronic communication,
provided that such day in either event is a business day and the communication
is so delivered, faxed or sent before 4:30 p.m. on such day. Otherwise, such
communication shall be deemed to have been given and made and to have been
received on the next following business day. Any such communication sent by mail
shall be deemed to have been given and made and to have been received on the
fifth business day following the mailing thereof; provided, however, that no
such communication shall be mailed during any actual or apprehended disruption
of postal services. Any such communication given or made in any other manner
shall be deemed to have been given or made and to have been received only upon
actual receipt.
9.3 Expenses. Each party to this Agreement shall pay its own costs and
expenses in connection with the entering into of this Agreement including legal,
accounting and investment advisor fees. Each party acknowledges and to and
agrees with the other that it has not entered into an agreement that would
result in a broker or finder fee pertaining to the Agreement being payable by
the other party.
9.4 Entire Transaction. This Agreement and the documents referred to
herein contain the entire understanding among the parties with respect to the
transactions contemplated hereby and supersedes all other agreements and
understandings among the parties on the subject matter hereof. The obligations
and rights of this agreement shall inure to the parties hereto and their
respective successors and assigns.
9.5 Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
9.6 Publicity. Immediately after the Closing the parties shall issue a
mutually agreed press release. The parties will not make any other public
announcement of this transaction without the other party's written consent,
except as may be required by applicable Federal securities or other law.
9.7 Successors and Assigns. This Agreement shall enure to the benefit
of, and be binding on, the parties and their respective successors and permitted
assigns. Neither party may assign or transfer, whether absolutely, by way of
security or otherwise, all or any part of its respective rights or obligations
under this Agreement without the prior written consent of the other party.
9.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
taken together shall be deemed to constitute one and the same instrument.
Counterparts may be executed either in original or faxed form and the parties
adopt any signatures received by a receiving fax machine as original signatures
of the parties; provided, however, that any party providing its signature in
such manner shall promptly forward to the other party an original of the signed
copy of this Agreement which was so faxed.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by a duly authorized officer all as of the Closing Date.
DIGITAL LINK CORPORATION SEMAPHORE COMMUNICATIONS
CORPORATION
/s/ Xxxxxxx X. Xxxxxxxxxxx /s/ Xxxxxxx xx Xxxxx
By: _________________________ By: _________________________
Chief Financial Officer President & CEO
Its: __________________________ Its: _________________________
The following schedules were omitted from this filing:
Schedule 1.3A -- Assumed Contracts
Schedule 1.1A -- Seller Intellectual Property
Schedule 1.1C -- Inventory on Hand by Stock Room
Schedule 1.1D -- Property, Plant & Equipment Schedule
Schedule 1.1I -- Accounts Receivable Aging Report
Schedule 1.1J -- Prepaid Assets
Schedule 1.3B -- Deferred Revenue
Schedule 1.3D -- Open Purchase Orders from Customers
Schedule 2.2 -- Purchase Order Commitment Report
Schedule 2.5 -- Purchase Price Allocation
Schedule 8.1 -- Transferred Employees
