Exhibit 10.1
ASSET ACQUISITION AGREEMENT AND
PLAN OF REORGANIZATION
BETWEEN
JNI CORPORATION,
JAYMARK, INC.,
JAYCOR, INC.
AND
CALIFORNIA TUBE LABORATORIES, INC.
JULY 24, 2000
TABLE OF CONTENTS
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1. BASIC TRANSACTION........................................................................................1
1.1 Acquisition of Assets...........................................................................1
1.2 Liabilities.....................................................................................1
1.3 Further Assurances..............................................................................1
1.4 Purchase Price..................................................................................2
1.5 The Closing.....................................................................................2
2. REPRESENTATIONS AND WARRANTIES OF SELLER.................................................................2
2.1 Organization and Good Standing..................................................................2
2.2 Seller's Capital Structure......................................................................3
2.3 Power, Authorization and Validity...............................................................3
2.4 No Violation of Existing Agreements or Laws.....................................................4
2.5 Ownership of the Assets.........................................................................4
2.6 Litigation......................................................................................4
2.7 Taxes...........................................................................................4
2.8 Financial Statements............................................................................4
2.9 Absence of Certain Changes or Events............................................................5
2.10 Absence of Undisclosed Liabilities..............................................................6
2.11 Real and Leased Property........................................................................6
2.12 Contracts and Commitments.......................................................................6
2.13 Brokerage.......................................................................................7
2.14 Bank Accounts...................................................................................7
2.15 Employees.......................................................................................7
2.16 Employee Benefit Plans..........................................................................7
2.17 Environmental Matters...........................................................................8
2.18 Intellectual Property...........................................................................8
2.19 Restrictions on Business Activities............................................................11
2.20 Governmental Authorization.....................................................................11
2.21 Interested Party Transactions..................................................................12
2.22 No Existing Discussions........................................................................12
2.23 Real Property Holding Corporation..............................................................12
2.24 Corporate Documents............................................................................12
2.25 No Misrepresentation...........................................................................12
2.26 Liability Claims and Insurance.................................................................13
3. REPRESENTATIONS AND WARRANTIES OF BUYER.................................................................13
3.1 Organization and Good Standing.................................................................13
3.2 Power, Authorization and Validity; Adverse Changes.............................................13
3.3 No Violations of Existing Agreements or Laws...................................................14
3.4 Authorized/Outstanding Capital Stock...........................................................14
3.5 Litigation.....................................................................................14
4. SELLER PRECLOSING COVENANTS.............................................................................14
4.1 Maintenance of Business........................................................................14
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TABLE OF CONTENTS
(continued)
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4.2 Conduct of Business............................................................................14
4.3 Regulatory and Third Party Approvals...........................................................15
4.4 No Other Negotiations..........................................................................15
4.5 Access to Information..........................................................................15
4.6 Satisfaction of Conditions Precedent...........................................................15
4.7 Stockholder Approval...........................................................................15
5. BUYER PRECLOSING COVENANTS..............................................................................15
5.1 Regulatory and Third Party Approvals...........................................................16
5.2 Satisfaction of Conditions Precedent...........................................................16
6. ADDITIONAL AGREEMENTS...................................................................................16
6.1 Preparation of Information Statement...........................................................16
6.2 Divestiture....................................................................................16
6.3 Seller Liquidation.............................................................................16
6.4 Registration...................................................................................16
6.5 "Market Stand-Off" Agreement...................................................................16
7. CONDITIONS TO OBLIGATIONS OF SELLER.....................................................................18
7.1 Accuracy of Representations and Warranties.....................................................18
7.2 Covenants......................................................................................18
7.3 Compliance with Law............................................................................18
7.4 Government Consents............................................................................18
7.5 No Litigation..................................................................................19
7.6 Favorable Tax Ruling...........................................................................19
7.7 Compliance with Private Letter Ruling..........................................................19
7.8 Stockholder Approval...........................................................................19
7.9 Registration...................................................................................19
7.10 NASD...........................................................................................19
7.11 HSR Act........................................................................................19
7.12 Offering.......................................................................................19
8. CONDITIONS TO OBLIGATIONS OF BUYER......................................................................19
8.1 Accuracy of Representations and Warranties.....................................................19
8.2 Covenants......................................................................................20
8.3 Compliance with Law............................................................................20
8.4 Government Consents............................................................................20
8.5 No Litigation..................................................................................20
8.6 Third Party Consents...........................................................................20
8.7 Absence of Material Adverse Change.............................................................20
8.8 Favorable Tax Ruling...........................................................................20
8.9 Approvals......................................................................................20
8.10 Registration...................................................................................20
8.11 NASD...........................................................................................20
8.12 HSR Act........................................................................................21
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TABLE OF CONTENTS
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8.13 Asset Transfer.................................................................................21
9. TERMINATION OF AGREEMENT................................................................................21
9.1 Termination....................................................................................21
10. INDEMNIFICATION.........................................................................................22
10.1 Indemnification by Seller......................................................................22
10.2 Indemnification by Buyer.......................................................................22
10.3 Procedures for Indemnification.................................................................22
10.4 Defense of Third Party Claims..................................................................23
11. MISCELLANEOUS...........................................................................................24
11.1 Governing Law..................................................................................24
11.2 Assignment; Binding Upon Successors and Assigns................................................24
11.3 Severability...................................................................................24
11.4 Counterparts...................................................................................24
11.5 Amendment and Waivers..........................................................................24
11.6 No Waiver......................................................................................24
11.7 Notices........................................................................................24
11.8 Construction of Agreement......................................................................25
11.9 No Joint Venture...............................................................................25
11.10 Further Assurances.............................................................................25
11.11 Public Announcement............................................................................25
11.12 Time is of the Essence.........................................................................26
11.13 "Material Adverse Effect" and "Material Adverse Change"........................................26
11.14 Absence of Third Party Beneficiary Rights......................................................26
11.15 Entire Agreement...............................................................................26
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ASSET ACQUISITION AGREEMENT AND
PLAN OF REORGANIZATION
This Asset Acquisition Agreement and Plan of Reorganization
("AGREEMENT") is made and entered into effective as of the 24th day of July,
2000, by and among JNI Corporation, a Delaware corporation ("BUYER"),
Jaymark, Inc., a Delaware corporation ("SELLER"), Jaycor, Inc., a California
corporation ("JAYCOR") and California Tube Laboratories, Inc., a California
corporation ("CTL").
RECITALS
WHEREAS, Buyer will acquire the Assets (as defined below) of Seller,
for the consideration set forth below, subject to the terms and conditions of
this Agreement; and
WHEREAS, Buyer and Seller intend that the transaction be treated as a
tax-free reorganization pursuant to the provisions of Section 368(a)(l)(C) of
the Internal Revenue Code of 1986, as amended (the "CODE").
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereby agree as follows:
AGREEMENT
1. BASIC TRANSACTION
1.1 ACQUISITION OF ASSETS. Subject to and upon the terms and
conditions of this Agreement, at the closing of the transactions contemplated by
this Agreement (the "CLOSING"), Seller shall transfer, convey, assign and
deliver to Buyer, and Buyer shall acquire from Seller, 14,175,000 shares of
common stock, $0.001 par value per share, of Buyer owned by Seller (the
"ASSETS") on the date of Closing (the "CLOSING DATE"):
1.2 LIABILITIES. Buyer will not assume or have any
responsibility with respect to any obligation or liability of Seller.
1.3 FURTHER ASSURANCES. At any time and from time to time
after the Closing, at Buyer's request and without further consideration, Seller
shall promptly execute and deliver such instruments of transfer, conveyance,
assignment and confirmation, and take such other action, as Buyer may reasonably
request to more effectively transfer, convey and assign to Buyer, and to confirm
Buyer's title to, all of the Assets, to put Buyer in actual possession and
control thereof, to assist Buyer in exercising all rights with respect thereto
and to carry out the purpose and intent of this Agreement.
1.4 PURCHASE PRICE. The purchase price to be paid by Buyer to
Seller shall be 14,175,000 shares of common stock, $0.001 par value per share,
of Buyer ("BUYER'S COMMON SHARES").
1.5 THE CLOSING. The Closing shall take place at the offices
of Xxxx Xxxx Xxxx & Freidenrich LLP at 5:00 p.m., California time, on July 24,
2000 or at such other place, time or date as may be mutually agreed upon in
writing by Buyer and Seller. The transfer of the Assets by Seller to Buyer shall
be deemed to occur at 10:00 a.m., California time, on the Closing Date. The
transfer of the Assets shall be effected by the delivery by Seller of the stock
certificates representing the Assets along with a stock power executed in blank,
and the delivery by Buyer of stock certificates representing Buyer's Common
Shares.
2. REPRESENTATIONS AND WARRANTIES OF SELLER
In this Agreement, including for purposes of Articles II and
III, any reference to a "MATERIAL ADVERSE EFFECT" has the meaning as defined in
Section 11.13.
In this Agreement, any reference to a Party's "KNOWLEDGE,"
unless otherwise qualified, means such Party's actual knowledge or, if such
party is a corporation, the actual knowledge of such corporation's directors and
executive officer, made after reasonable inquiry of the directors and officers
reasonably believed to have knowledge of such matters, or expected to have
knowledge of such matters by virtue of their positions with such corporation.
In this Agreement, any reference to "PERMITTED LIENS" means
(a) liens for current taxes and assessments not yet past due, (b) mechanics and
materialmen liens for construction in progress to the extent not perfected by
filing, recording, giving of notice or other appropriate action in the relevant
jurisdiction, (c) workmen, repairmen, warehousemen, carriers, lessors and
operators liens arising in the ordinary course of business consistent with past
practice ("ORDINARY COURSE") to the extent not perfected by filing, recording,
giving of notice or other appropriate action in the relevant jurisdiction, (d)
easements, including agreements and deeds of easement, and other minor
imperfections of title which would not have a Material Adverse Effect on Seller;
pledges of deposits under workmen's compensation laws, employment insurance laws
or similar legislation and deposits to secure public or statutory obligations,
(f) easements or reservations or, or rights of others for, rights of way,
sewers, electric lines, pipelines, telegraph and telephone lines and other
similar purposes, (g) statutory landlord's liens under lease or other
encumbrances on leased property reserved in leases thereof for rent or for
compliance with the terms of such leases, and (h) encumbrances disclosed in the
Disclosure Schedule.
Except as disclosed in the Disclosure Schedule which
references the specific representations and warranties as to which the exception
is made and which is provided to Buyer on or before the date of this Agreement
(the "DISCLOSURE SCHEDULE"), Seller represents and warrants to Buyer as follows:
2.1 ORGANIZATION AND GOOD STANDING. Seller and its wholly
owned subsidiaries, Jaycor and CTL (collectively, the "SUBSIDIARIES"), are duly
organized, validly existing and in good standing under the laws of their
respective states of incorporation and have the corporate power and authority to
own, operate and lease their respective properties and to carry on their
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respective businesses. Seller and the Subsidiaries are qualified as a foreign
corporation in each jurisdiction where qualification is required and where the
failure to qualify would have a Material Adverse Effect (as defined in SECTION
11.13 below) on Seller.
2.2 SELLER'S CAPITAL STRUCTURE.
(a) The authorized capital stock of Seller consists
of Sixteen Million (16,000,000) shares of Common Stock, $.001 par value per
share ("SELLER COMMON STOCK"). As of the date hereof and the Closing Date, Three
Million Thirty Thousand Six Hundred Thirty-Five (3,030,635) shares of Seller's
Common Stock are and will be issued and outstanding. All such outstanding shares
of Seller Common Stock (i) are free and clear of all liens, claims and
encumbrances, (ii) have been duly authorized, validly issued, fully paid and are
nonassessable, (iii) have been issued in compliance with all applicable federal
and state securities laws, and (iv) are not subject to any preemptive rights or
rights of first refusal created by statute, the charter documents of Seller or
any agreement to which Seller is a party or by which it is bound.
(b) Other than the Three Million Thirty Thousand Six
Hundred Thirty-Five (3,030,635) issued and outstanding shares of Seller's Common
Stock, and the options granted by Seller to certain employees of Seller to
purchase from Seller Four Thousand One Hundred (4,100) shares of Seller's Common
Stock (or warrants to purchase such shares of Seller's Common Stock), there are
(i) no equity securities of any class of Seller, or any securities exchangeable
into or exercisable for such equity securities, issued, reserved for issuance,
or outstanding and (ii) no outstanding subscriptions, options, warrants, puts,
calls, rights, or other commitments or agreements, other than this Agreement, of
any character to which Seller is a party or by which Seller is bound obligating
Seller to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any equity securities of Seller or
obligating Seller to grant, extend, accelerate the vesting of, change the
exercise price of, or otherwise amend or enter into any such option, warrant,
call, right, commitment or agreement. There are no contracts, commitments or
agreements, other than this Agreement, relating to the voting, purchase or sale
of Seller's capital stock to which Seller is a party.
2.3 POWER, AUTHORIZATION AND VALIDITY.
(a) Seller has the corporate right, power, legal
capacity and authority to enter into and perform its obligations under this
Agreement. This Agreement has been or will be duly executed and delivered by
Seller. The execution, delivery and performance of this Agreement has been duly
and validly approved and authorized by all necessary corporate action on the
part of Seller (other than the approval and adoption of this Agreement by the
stockholders of Seller as required under Delaware law). The Board of Directors
of Seller (at a meeting duly called and held) has unanimously approved the
execution, delivery and performance of this Agreement by Seller, and unanimously
recommended the adoption and approval of this Agreement by Seller's stockholders
and directed that this Agreement be submitted for consideration by Seller's
stockholders.
(b) No filing, authorization or approval with or of
any governmental entity is necessary or required to be made or obtained to
enable Seller to enter into, and to perform its
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obligations under this Agreement (other than the approval and adoption of this
Agreement by the stockholders of Seller as required under Delaware law).
(c) Assuming the due authorization, execution and
delivery by Buyer, this Agreement is, or when executed and delivered by Seller
will be, valid and binding obligations of Seller, enforceable against Seller in
accordance with its terms, subject to approval of Seller's stockholders, except
as to the effect, if any, of (a) applicable bankruptcy and other similar laws
affecting the rights of creditors generally and (b) rules of law governing
specific performance, injunctive relief and other equitable remedies.
2.4 NO VIOLATION OF EXISTING AGREEMENTS OR LAWS. Neither the
execution and delivery of this Agreement, nor the consummation of the
transactions provided for herein, will conflict with, or (with or without notice
or lapse of time, or both) result in a termination, breach or violation of (a)
any provision of the Articles of Incorporation or Bylaws of Seller, as currently
in effect, (b) any instrument or contract to which Seller is a party or by which
Seller is bound or (c) any federal, state, local or foreign law judgment,
decree, order, statute, or regulation applicable to Seller or its assets or
properties, other than, with respect to (a), (b) and (c), any such conflict,
termination, breach or violation that would not have a Material Adverse Effect
on Seller.
2.5 OWNERSHIP OF THE ASSETS. Seller is and immediately prior
to the Closing will be, the true and lawful owner of the Assets, and will have
the right to sell and transfer to Buyer good, clear, record and marketable title
to such Assets, free and clear of any claim, liability, lien, pledge, mortgage,
security interest, restriction or encumbrance (collectively, "ENCUMBRANCES") of
any kind; and (ii) the delivery to Buyer of the instruments of transfer of
ownership contemplated by this Agreement will vest good and marketable title to
the Assets in Buyer, free and clear of all Encumbrances of any kind or nature
whatsoever.
2.6 LITIGATION. Seller is not a party to or, to the best of
Seller's knowledge, threatened with, and none of the Assets is subject in any
respect to, any litigation, suit, action, investigation, proceeding or
controversy before any court, administrative agency or other governmental
authority relating to or affecting the Assets.
2.7 TAXES. Seller and the Subsidiaries have filed all Tax
Returns that were required to be filed and all such Tax Returns were correct and
complete in all material respects. All Taxes owed by Seller and the Subsidiaries
have been paid or adequate provisions made therefor. For purposes of this
Agreement, "TAX" shall mean any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, franchise, profits,
withholding, social security, unemployment, disability, real property, sales,
use, transfer or other tax of any kind whatsoever, including any interest,
penalty or additions thereto, whether disputed or not. For purposes of this
Agreement, "TAX RETURN" shall mean any return, declaration, report, claim for
refund, or information return or statement relating to any Tax, including any
schedule or attachment thereto, and including any amendment thereof.
2.8 FINANCIAL STATEMENTS. Each of the financial statements of
Seller provided to Buyer has been based upon the information contained in
Seller's and the Subsidiaries' books and records and presents fairly, in all
material respects, the financial condition of Seller and the
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Subsidiaries and such financial statements have been prepared in accordance with
GAAP, consistently applied throughout the periods indicated.
2.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1999, Seller has conducted its business in the Ordinary Course and, since such
date, Seller has not:
(a) suffered any event or occurrence that has had or
can reasonably be expected to have a Material Adverse Effect on Seller;
(b) suffered any damage, destruction or loss, whether
covered by insurance or not, which in the aggregate has had or can reasonably be
expected to have a Material Adverse Effect on Seller;
(c) granted any material increase in the compensation
payable or to become payable by Seller to its officers or employees other than
increases in the Ordinary Course to employees who are not officers;
(d) declared, set aside or paid any dividend or made
any other distribution on or in respect of the shares of its capital stock or
declared any direct or indirect redemption, retirement, purchase or other
acquisition of such shares;
(e) issued any shares of its capital stock or any
warrants, rights, or options for, or entered into any commitment (other than
this Agreement) relating to such capital stock;
(f) made any change in the accounting methods or
practices it follows, whether for general financial or tax purposes, or any
change in depreciation or amortization policies or rates;
(g) sold, leased, abandoned or otherwise disposed of
any real property, machinery, equipment or other operating property other than
in the Ordinary Course;
(h) sold, assigned, transferred, licensed or
otherwise disposed of any patent, patent right, trademark, trade name, brand
name, copyright (or pending application for any patent, trademark or copyright),
invention, work of authorship, process, know-how, formula or trade secret or
interest thereunder or other material intangible asset;
(i) other than this Agreement, entered into any
material commitment or transaction (including without limitation any borrowing)
other than commitments or transactions entered into in the Ordinary Course that
are not reasonably likely to have a Material Adverse Effect;
(j) permitted or allowed any of its property or
assets to be subjected to any new mortgage, deed of trust, pledge, lien,
security interest or other encumbrance of any kind, except for liens for current
taxes not yet due and purchase money security interests incurred in the Ordinary
Course or Permitted Liens;
(k) made any capital expenditure or commitment for
additions to property, plant or equipment individually in excess of $25,000 or,
in the aggregate, in excess of $50,000;
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(l) paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets to, or entered into any agreement
or arrangement with, any of its officers, directors or Seller, or any affiliate
of any of the foregoing, other than employee compensation and benefits and
reimbursement of employment related business expenses incurred in the Ordinary
Course; or
(m) agreed to take any action described in this
Section 2.9, or any action which would constitute a breach of any of the
representations or warranties of Seller contained in this Agreement.
2.10 ABSENCE OF UNDISCLOSED LIABILITIES. As of the date
hereof, Seller and the Subsidiaries have no obligations or liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise, whether due or to
become due and regardless of when or by whom asserted) arising out of, relating
to or in connection with Seller and the Subsidiaries prior to the Closing or any
occurrences, events or transactions entered into at or prior to the Closing
Date, including Taxes with respect to or based upon transactions or events
occurring on or before the Closing Date, except (i) obligations under contracts
or commitments described on the Disclosure Schedules attached hereto or under
contracts and commitments entered into in the Ordinary Course, (ii) liabilities
reflected on the liability side of the consolidated balance sheet of Seller and
the Subsidiaries, (iii) liabilities and obligations which have arisen after the
date of Seller's consolidated balance sheet in the Ordinary Course (none of
which is a liability for breach of contract, tort, infringement, claim, lawsuit
or material breach of warranty), and (iv) other liabilities and obligations
expressly disclosed in or contemplated by this Agreement or the Disclosure
Schedules attached hereto.
2.11 REAL AND LEASED PROPERTY.
(a) Seller has provided to Buyer complete and
accurate copies of each of the leases to which Seller is a party, and none of
the leases have been modified in any respect, except to the extent that such
modifications are disclosed by the copies delivered to Buyer. Neither Seller nor
the Subsidiaries is in default in any respect, and to the best of Seller's
knowledge, no circumstances exist which could result in such default (including
upon the giving of notice or the passage of time or both), under any of such
leases.
(b) neither Seller nor the Subsidiaries are a lessor,
sublessor or grantor under any lease, sublease, consent, license or other
instrument granting to another person or entity any right to the possession,
use, occupancy or enjoyment of the plants, buildings, fixtures and other
improvements located on real property owned or leased by Seller or the
Subsidiaries other than (i) Buyer, or (ii) as described on an attached schedule.
2.12 CONTRACTS AND COMMITMENTS.
(a) as of the date hereof, neither Seller nor the
Subsidiaries are a party to any oral or written:
(i) contract with any labor union;
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(ii) agreement or indenture relating to the
borrowing of money or to mortgaging, pledging or otherwise placing a lien on any
of the Assets;
(iii) license or royalty agreements;
(iv) nondisclosure or confidentiality
agreements (other than with employees); or
(v) guaranty of any obligation for borrowed
money or otherwise that relates to the Assets.
2.13 BROKERAGE. There are no claims for brokerage commissions,
finders fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of Seller or the Subsidiaries.
2.14 BANK ACCOUNTS. The Disclosure Schedule sets forth the
names and locations of all banks and other financial institutions at which
Seller maintains accounts of any nature, the type of accounts maintained at each
such institution and the names of all persons authorized to draw thereon or make
withdrawals therefrom.
2.15 EMPLOYEES. There are no claims, actions, proceedings or
investigations pending or threatened against Seller with respect to or by any
employee or former employee of Seller and there are no claims, actions,
proceedings or investigations pending or threatened against any employees of
Seller. The Disclosure Schedule contains a list of the names of all employees
and consultants of Seller as of the date of this Agreement and their salaries or
wages, other compensation, dates of employment and positions.
2.16 EMPLOYEE BENEFIT PLANS.
(a) With respect to current or former employees,
Seller does not maintain, contribute to or have any liability with respect to
any (i) nonqualified deferred compensation or retirement plans or arrangements,
(ii) qualified defined contribution or defined benefit plans or arrangements
which are employee pension benefit plans (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974 ("ERISA")), (iii) multiemployer
plans (as defined in Section 3(37) of ERISA), (iv) employee benefit plans of the
type described in Section 4063 and 4064 of ERISA or in Section 413(c) of the
Code, (v) employee welfare benefit plans (as defined in Section 3(1) of ERISA),
or (vi) fringe benefit plans or programs (including, without limitation, bonus,
vacation pay, sick pay, incentive pay and severance plans or programs).
(b) With respect to the Jaymark Employee Stock Option
Plan, no actions, investigations, suits or claims with respect to such plan
(other than routine claims for benefits) are pending or threatened that could
subject Buyer to any liability and Seller has no knowledge of any facts which
could reasonably be expected to give rise to any such actions, investigations,
suits or claims.
(c) None of the employee benefit plans, programs and
policies of Seller or the Subsidiaries with respect to current or former
employees obligates Seller or the Subsidiaries
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to pay separation, severance, termination or similar-type benefits solely as a
result of any transaction contemplated by this Agreement or solely as a result
of a "change in control," as such term is described in or contemplated by
Section 28OG of the Code.
(d) There is no employee benefit plan, program,
policy or arrangement presently or formerly maintained or contributed to by
Seller or the Subsidiaries with respect to which Seller or the Subsidiaries has
any liability that could reasonably be expected to subject Buyer to any
liability.
2.17 ENVIRONMENTAL MATTERS.
(a) Seller and the Subsidiaries have complied and are
in compliance with, in all material respects, all environmental laws.
(b) Neither Seller nor the Subsidiaries have received
any written notice regarding any material liabilities or potential liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise), including
any investigatory, remedial or corrective obligations, arising under any
environmental law.
2.18 INTELLECTUAL PROPERTY.
(a) For purposes of this Agreement, "INTELLECTUAL
PROPERTY" means:
(i) all issued patents, reissued or
reexamined patents, revivals of patents, certificates of invention,
registrations of patents and extensions thereof, regardless of country or formal
name (collectively, "ISSUED PATENTS");
(ii) all published or unpublished,
nonprovisional or provisional, patent applications and reexamination proceedings
(collectively "PATENT APPLICATIONS" and, with the Issued Patents, the
"PATENTS");
(iii) all copyrights, copyrightable works,
including all rights of authorship, use, publication, reproduction,
distribution, performance and transformation, moral rights and rights of
ownership of copyrightable works, and all rights to register and obtain renewals
and extensions of registrations, together with all other interests accruing by
reason of international copyright, conventions (collectively, "COPYRIGHTS");
(iv) trademarks, registered trademarks,
applications for registration of trademarks, service marks, registered service
marks, applications for registration of service marks, trade names, registered
trade names and applications for registrations of trade names (collectively,
"TRADEMARKS");
(v) all technology, ideas, inventions,
designs, proprietary information, manufacturing and operating specifications,
know-how, formulae, trade secrets, technical data and proprietary processes;
(vi) all databases and all collected data
and all rights therein throughout the world;
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(vii) all computer software, including all
source code, object code, firmware, development tools, files, records and data;
and
(viii) all Web addresses, rights and domain
names.
(b) With respect to each item of Intellectual
Property incorporated into any product of Seller or used in connection with any
service offered or provided by Seller or otherwise used in the business of
Seller and in each case owned by Seller or licensed to Seller (except "off the
shelf" or other software widely available through regular commercial
distribution channels at a cost not exceeding $5,000 per copy or seat on
standard, non-negotiated terms and conditions), DISCLOSURE SCHEDULE 2.18
attached hereto lists as of the date of this Agreement the following:
(i) all Patents, all registered Trademarks,
and all registered Copyrights, including the jurisdictions in which each such
Intellectual Property has been issued or registered or in which any such
application for such issuance and registration has been filed.
(ii) the following agreements relating to
the products or service offerings or capabilities of Seller, including products
or service offerings or capabilities currently under development (collectively
the "SELLER SERVICES") or other Intellectual Property of Seller: all (A)
agreements granting any right to distribute or sublicense any of Seller Services
on any exclusive basis, (B) any exclusive licenses of Intellectual Property to
or from Seller, (C) agreements pursuant to which the amounts actually paid or
payable under firm commitments to or by Seller are $25,000 or more, (D) joint
development agreements, (E) any agreement by which Seller grants any ownership
right to any Intellectual Property owned by Seller other than nonexclusive
software licenses entered into with customers in the Ordinary Course, (F) any
option relating to any Intellectual Property of Seller, and (G) agreements
pursuant to which any party is granted any rights to access source code or to
use source code to create derivative works of any computer software, database or
other Copyright that is part of Seller Intellectual Property of Seller.
(c) DISCLOSURE SCHEDULE 2.18 contains an accurate
list as of the date of this Agreement of all licenses, sublicenses and other
agreements to which Seller is a party and pursuant to which Seller is authorized
to use any Intellectual Property owned by any third party (except "off the
shelf" or other software widely available through regular commercial
distribution channels at a cost not exceeding $5,000 per copy or seat on
standard non-negotiated terms and conditions and any rights implied by law)
("THIRD PARTY INTELLECTUAL PROPERTY").
(d) To the best of Seller's knowledge, there is no
unauthorized use, disclosure, infringement or misappropriation of any
Intellectual Property of Seller, including any Third Party Intellectual
Property, by any employee or former employee of Seller or by any other third
party. Except as set forth in DISCLOSURE SCHEDULE 2.18, Seller has not entered
into any agreement to indemnify any other person against any charge of
infringement of any Intellectual Property, other than indemnification provisions
contained in standard sales or agreements to end users arising in the ordinary
course of business, the forms of which have been delivered to Buyer or its
counsel. Except as set forth in DISCLOSURE SCHEDULE 2.18, there are no
royalties, fees or other payments payable by Seller to any Person, under any
written or oral contract or
9
understanding or otherwise, by reason of the ownership, use, sale or disposition
of any Intellectual Property.
(e) Seller is not in breach of any material portion
of any license, sublicense or other agreement relating to Intellectual Property
of Seller and the Subsidiaries or Third Party Intellectual Property Rights.
Except as set forth in DISCLOSURE SCHEDULE 2.18, neither the execution, delivery
or performance of this Agreement or any ancillary agreement contemplated hereby
nor the consummation of the transaction contemplated by this Agreement will
contravene, conflict with or result in an infringement on Buyer's right to own
or use any Seller Intellectual Property, including any Third Party Intellectual
Property.
(f) All Patents, registered Trademarks and registered
Copyrights held by Seller are valid and enforceable. Except for such as are not
past due, all maintenance and annual fees have been fully paid and all fees paid
during prosecution and after issuance of any patent comprising or relating to
such item have been paid in the correct entity status amounts. To the best of
Seller's knowledge, Seller has not infringed, misappropriated or made unlawful
use of, is not currently infringing, misappropriating or making unlawful use of,
and has not received any written notice or written communication alleging or
relating to any actual, alleged, possible or potential infringement,
misappropriation or unlawful use of, any Third Party Intellectual Property or
other proprietary right or asset owned or used by any third party. There is no
proceeding pending or, to the best of Seller's knowledge, threatened, nor has
any written claim or demand been made, which challenges the legality, validity,
enforceability or ownership of any item of Seller Intellectual Property or Third
Party Intellectual Property. Seller is involved in no pending or unresolved
proceedings alleging infringement of Seller Intellectual Property or breach of
any license or agreement involving Intellectual Property against any third
party.
(g) Except as set forth in DISCLOSURE SCHEDULE 2.18,
all current and former officers and managerial and technical employees and
employees engaged in development of Seller have executed and delivered to Seller
an agreement regarding the protection of proprietary information and the
assignment to Seller of any Intellectual Property arising from services
performed for Seller by such persons, the form of which has been supplied to
Buyer. Except as set forth in DISCLOSURE SCHEDULE 2.18, all current and former
consultants and independent contractors to Seller involved in the development,
modification, marketing and servicing of Seller's products, and/or Seller
Intellectual Property have executed and delivered to Seller an agreement
regarding the protection of proprietary information and the assignment to Seller
of any Intellectual Property arising from services performed for Seller by such
persons. To the knowledge of Seller, no employee or independent contractor of
Seller is in violation of any term relating to Intellectual Property of any
patent disclosure agreement or employment contract or any other contract or
agreement relating to the relationship of any such employee or independent
contractor with Seller or, to Seller's knowledge, of any other term of any such
agreements or contracts. Except as set forth in DISCLOSURE SCHEDULE 2.18, other
than with respect to Third Party Intellectual Property that is not used in
connection with Seller Services, no current or former officer, director,
stockholder, employee, consultant or independent contractor has any right, claim
or interest in or with respect to any Seller Intellectual Property. To the best
of Seller's knowledge, Seller is not using any trade secrets or other
confidential information of any former employer of any past or present
employees.
10
(h) Seller has taken all commercially reasonable and
customary measures and precautions necessary to protect and maintain the
confidentiality of all Seller Intellectual Property (except such Seller
Intellectual Property whose value would be unimpaired by public disclosure) and
otherwise to maintain and protect the full value of all Intellectual Property it
owns. All use, disclosure or appropriation of confidential and proprietary
information of any third party ("CONFIDENTIAL INFORMATION") has, to Seller's
knowledge, been pursuant to the terms of a written agreement between Seller and
the owner of such Confidential Information, or is otherwise lawful.
(i) A complete list of each of Seller Services,
together with a brief description of each, is set forth in DISCLOSURE SCHEDULE
2.18. Seller Services conform in all material respects with a published
specification, published documentation or written performance standard, if any,
provided with respect thereto by Seller.
(j) Seller is not subject to any proceeding or
outstanding decree, order, judgment, or stipulation which may affect the
validity, use or enforceability of any Seller Intellectual Property or
restricting in any manner the use, transfer, or licensing thereof by Seller.
Seller is not subject to any agreement which restricts in any material respect
the use, transfer, or licensing by Seller of Seller Intellectual Property or
Seller Services, excluding agreements relating to Third Party Intellectual
Property.
(k) To the best of Seller's knowledge, Seller owns
all right, title and interest in, or has the right to use, all Intellectual
Property that is material to or reasonably necessary to the conduct of its
business as presently conducted ("MATERIAL SELLER INTELLECTUAL PROPERTY").
Seller is not aware of any loss, cancellation, termination or expiration of any
Patent or Patent Application, registered Trademark, or registered Copyright
relating to any Material Seller Intellectual Property. Copies of all forms of
nondisclosure or confidentiality agreements currently utilized to protect Seller
Intellectual Property have been provided to Buyer. Except as set forth in
DISCLOSURE SCHEDULE 2.18, Seller has not granted any reseller, distributor,
sales representative, original equipment manufacturer, value added reseller or
other third party any right to reproduce, manufacture, sell, license, furnish or
distribute any Seller Services in any market segment or geographic location.
2.19 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no
agreement, judgment, injunction, order or decree binding upon Seller which has
or could reasonably be expected to have the effect of prohibiting or materially
impairing any current or currently proposed business practice of Seller or the
conduct of business by Seller as currently conducted or as currently proposed to
be conducted.
2.20 GOVERNMENTAL AUTHORIZATION. Seller has obtained each
governmental consent, license, permit, grant or other authorization of a
Governmental Entity that is required for the operation of the business of Seller
(collectively, the "AUTHORIZATIONS"), and all of such Authorizations are in full
force and effect, except where the failure to obtain such consent, license,
permit, grant, or other authorization would not have a Material Adverse Effect
on Seller.
2.21 INTERESTED PARTY TRANSACTIONS.
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(a) No director or officer of Seller has any interest
in (i) any material equipment or other material property or asset, real or
personal, tangible or intangible used in connection with or pertaining to the
business of Seller, (ii) any creditor, supplier, customer, manufacturer, agent,
representative, or distributor of any of Seller's products, (iii) any entity
that competes with Seller, or with which Seller is affiliated or has a business
relationship, or (iv) any material agreement, obligation or commitment, written
or oral, to which Seller is a party; PROVIDED, HOWEVER, that no such person
shall be deemed to have such an interest solely by virtue of ownership of less
than five percent (5%) of the outstanding stock or debt securities of any
company whose stock or debt securities are traded on a recognized stock exchange
or on the Nasdaq Stock Market.
(b) Except as contemplated by this Agreement and
except for any outstanding stock options, Seller is not a party to any (i)
agreement with any officer or other employee of Seller the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving Seller in the nature of any of the transactions
contemplated by this Agreement, or (ii) agreement or plan, including, without
limitation, any stock option plan, stock appreciation right plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement.
2.22 NO EXISTING DISCUSSIONS. As of the date hereof, Seller is
not engaged, directly or indirectly, in any discussions or negotiations with any
party other than Buyer with respect to any merger, consolidation, sale of
substantial assets, sale of shares of capital stock or similar transactions.
2.23 REAL PROPERTY HOLDING CORPORATION. Seller is not a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
2.24 CORPORATE DOCUMENTS. Seller has furnished to Buyer, or
its representatives, for its examination (i) copies of its minute book
containing all records required to be set forth of all proceedings, consents,
actions, and meetings of the stockholders, the Board of Directors and any
committees thereof and (ii) to the extent requested by Buyer, all permits,
orders, and consents issued by any Governmental Entity with respect to Seller.
Such corporate books and records of Seller are complete and accurate in all
material respects, and the signatures of all officers and directors of Sellers
and the signatures of all other persons appearing on all documents contained
therein are the true signatures of the persons purporting to have signed the
same. All actions reflected in such books and records were duly and validly
taken in material compliance with the laws of the applicable jurisdiction.
2.25 NO MISREPRESENTATION. No representation or warranty by
Seller in this Agreement, the officer's certificate referenced in Section 7.1
and 7.2 of this Agreement or the Disclosure Schedule furnished or to be
furnished by or on behalf of Seller pursuant to this Agreement, when taken
together, contains or shall contain any untrue statement of a material fact or
omits or shall omit to state a material fact required to be stated therein or
necessary in order to make such statements, in light of the circumstances under
which they were made, not
12
misleading. Seller has delivered or made available to Buyer or its
representatives true and complete copies of all documents which are referred to
in this Article II or in the Disclosure Schedule.
2.26 LIABILITY CLAIMS AND INSURANCE. Seller and the
Subsidiaries have maintained customary and adequate insurance covering claims
for injury to persons or property caused by Seller and the Subsidiaries'
products and services. Neither Seller nor the Subsidiaries have received notice
of or other communication regarding any actual or threatened (i) cancellation or
invalidation of any insurance policy, (ii) refusal of any coverage or rejection
of any claim under any insurance policy or (iii) material adjustment in the
amount of the premiums payable with respect to any insurance policy.
3. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants, that, except as disclosed in
Disclosure Schedules delivered by Buyer to Seller herewith as amended from time
to time in non-material respects prior to Closing:
3.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to own, operate and
lease its properties and to carry on its business as now conducted and as
proposed to be conducted and is qualified as a foreign corporation in each
jurisdiction where the nature of its business or location of its properties
requires such qualification and where the failure to qualify would have a
Material Adverse Effect on Buyer.
3.2 POWER, AUTHORIZATION AND VALIDITY; ADVERSE CHANGES.
(a) Buyer has the corporate right, power, legal
capacity and authority to enter into and perform its obligations under this
Agreement. This Agreement has been or will be duly executed and delivered by
Buyer. The execution, delivery and performance of this Agreement has been duly
and validly approved and authorized by Buyer's Board of Directors and no other
corporate approvals or proceedings on the part of Buyer are necessary to
authorize this Agreement and the transactions contemplated hereby.
(b) No filing, authorization or approval,
governmental or otherwise, is necessary or required to be made or obtained to
enable Buyer, to enter into, and to perform its obligations under this
Agreement, except for such filings as may be required to comply with federal and
state securities laws.
(c) Assuming the due authorization, execution and
delivery by Seller, this Agreement is, or when executed and delivered by Buyer
and the other parties thereto will be, valid and binding obligations of Buyer,
enforceable against Buyer in accordance with its terms, except as to the effect,
if any, of (a) applicable bankruptcy and other similar laws affecting the rights
of creditors generally and (b) rules of law governing specific performance,
injunctive relief and other equitable remedies.
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3.3 NO VIOLATIONS OF EXISTING AGREEMENTS OR LAWS. Neither the
execution nor delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will conflict with, or (with or without notice
or lapse of time, or both) result in a termination, breach or violation of (a)
any provision of the Certificate of Incorporation or Bylaws of Buyer, as
currently in effect or (b) any instrument or contract to which Buyer is a party
or by which Buyer is bound, or (c) any federal, state, local or foreign law,
judgment, writ, decree, order, statute, rule or regulation applicable to Buyer
or their respective assets or properties, other than, with respect to (a), (b)
and (c), any such, conflict, termination, breach or violation that would not
have a Material Adverse Effect on Buyer.
3.4 AUTHORIZED/OUTSTANDING CAPITAL STOCK. The authorized
capital stock of Buyer consists of: 100,000,000 shares of Common Stock, of which
22,677,954 shares are issued and outstanding; 5,000,000 shares of undesignated
Preferred Stock, of which no shares are issued and outstanding. Buyer's Common
Shares to be issued at the Closing will be duly and validly issued, fully paid
and nonassessable.
3.5 LITIGATION. Buyer is not a party to or, to Buyer's
knowledge, threatened with any litigation, suit, action, investigation,
proceeding or controversy before any court, administrative agency or other
governmental authority that could have a Material Adverse Effect on Buyer.
4. SELLER PRECLOSING COVENANTS
During the period from the date of this Agreement until the Closing,
Seller covenants to and agrees with Buyer as follows:
4.1 MAINTENANCE OF BUSINESS. The parties hereto understand and
acknowledge that it is their intent to work closely together during the period
from the date hereof until the Closing Date. Seller will use reasonable efforts
to carry on and preserve its current business practices.
4.2 CONDUCT OF BUSINESS. Except as provided in Section 4.1
above, Seller will continue to conduct its business and maintain its business
relationships in the Ordinary Course except as otherwise described in the
private letter ruling request submitted by Buyer and Seller to the Internal
Revenue Service on December 23, 1999, as such request may be modified or amended
and, except in the Ordinary Course, will not, without the prior written consent
of the Chief Executive Officer or Chief Financial Officer of Buyer, not to be
unreasonably withheld:
(a) encumber or permit to be encumbered any of the
Assets;
(b) dispose of any of the Assets;
(c) enter into any contract for the purchase or sale
of the Assets; or
(d) agree to do any of the things described in the
preceding clauses 4.2(a) through 4.2(c).
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4.3 REGULATORY AND THIRD PARTY APPROVALS. Seller will execute
and file, or join in the execution and filing, of any application or other
document that may be necessary in order to obtain the authorization, approval or
consent of any governmental body and any third party, which may be required, or
which Buyer may reasonably request, in connection with the consummation of the
transaction provided for in this Agreement including all filings under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 0000 (xxx "XXX XXX"). Such
documents to include, if necessary, a No Action letter (the "NO ACTION LETTER")
from the Division of Corporate Finance (the "DIVISION") of the Securities and
Exchange Commission (the "COMMISSION") affirming that (a) the distribution by
Seller of Buyers' Common Stock is not a "sale" or other "distribution for value"
of securities under Section 2(3) of the Securities Act of 1933 (the "ACT"), or
(b) confirm that the Division will not recommend to the Commission any
enforcement action if Seller distributes Buyer's Common Shares to Seller's
stockholders without registration under the Act, and a letter from the National
Association of Securities Dealers (the "NASD") indicating that the transactions
contemplated hereunder do not trigger the shareholder voting requirements under
NASD Rule 4310(c) 25(H)(i)(c) 2A or B (the "NASD LETTER"). Seller will use its
reasonable best efforts to obtain or assist Buyer in obtaining all such
authorizations, approvals and consents (including taking all actions requested
by Buyer to cause early termination of any applicable waiting period under the
HSR Act).
4.4 NO OTHER NEGOTIATIONS. Seller and its directors and
officers shall not, directly or indirectly, solicit or encourage the initiation
of (including by way of furnishing information) any inquiries or proposals
regarding any merger, sale of assets, sale of shares of capital stock or similar
transaction involving Seller.
4.5 ACCESS TO INFORMATION. Until the Closing Date, Seller will
provide Buyer and its agents with reasonable access to the files, books, and
records of Seller relating to the Assets. Seller will cause its accountants to
cooperate with Buyer and its agents in making available all financial
information reasonably requested.
4.6 SATISFACTION OF CONDITIONS PRECEDENT. Seller will use its
best efforts to satisfy or cause to be satisfied all the conditions precedent
which are set forth in SECTION 8, and Seller will use its best efforts to cause
the transaction provided for in this Agreement to be consummated.
4.7 STOCKHOLDER APPROVAL. Seller will either hold a special
meeting of its stockholders or distribute to its stockholders a written consent
at the earliest practicable date to submit this Agreement and related matters
for the consideration and approval of Seller's stockholders, which approval will
be recommended by Seller's Board of Directors. Such meeting will be called, held
and conducted, and any proxies or consent will be solicited, in compliance with
applicable law.
5. BUYER PRECLOSING COVENANTS
During the period from the date of this Agreement until the Closing,
Buyer covenants to and agrees with Buyer as follows:
15
5.1 REGULATORY AND THIRD PARTY APPROVALS. Buyer will execute
and file, or join in the execution and filing, of any application or other
document that may be necessary in order to obtain the authorization, approval or
consent of any governmental body or third party which may be reasonably
required, or which Seller may reasonably request, in connection with the
consummation of the transactions provided for in this Agreement (including all
filings under the HSR Act). Buyer will use all reasonable efforts to obtain all
such authorizations, approvals and consents.
5.2 SATISFACTION OF CONDITIONS PRECEDENT. Buyer will use its
reasonable efforts to satisfy or cause to be satisfied all the conditions
precedent which are set forth in SECTION 7, and Buyer will use reasonable
efforts to cause the transactions provided for in this Agreement to be
consummated.
6. ADDITIONAL AGREEMENTS
6.1 PREPARATION OF INFORMATION STATEMENT. As soon as
practicable after the execution of this Agreement, Seller shall prepare, with
the cooperation of Buyer, an information statement for the stockholders of
Seller to approve this Agreement and the transaction contemplated hereby. Each
of Seller and Buyer agrees to provide promptly to the other such information
concerning its business and financial statements and affairs as, in the
reasonable judgment of the providing party or its counsel, may be required or
appropriate for inclusion in the Information Statement, or in any amendments or
supplements thereto; PROVIDED, HOWEVER, Buyer shall not be required to provide
any information to Seller that is not otherwise available for public disclosure.
6.2 DIVESTITURE. As soon as reasonably practicable, after the
execution of this Agreement and in all events prior to the Closing, Seller shall
divest itself of all equity interests in any and all other corporate entities
such that immediately prior to Closing Sellers' sole assets will be the Assets
and cash.
6.3 SELLER LIQUIDATION. As soon as reasonably practical after
the Closing, Seller will initiate the process of corporate dissolution and will
distribute the Buyer's Common Shares, to its stockholders on a pro rata basis.
6.4 REGISTRATION. Buyer agrees that in the event that Seller
does not receive, or decides to abandon their request for, the No Action Letter,
then Buyer will take all commercially reasonable steps to register the Buyer's
Common Shares on a Registration Statement. The Registration Statement will be
filed concurrently with the execution of this Agreement and Buyer will use its
commercially reasonable efforts to cause the Registration Statement to become
effective as soon as is reasonably feasible.
6.5 "MARKET STAND-OFF" AGREEMENT.
(a) Except as provided in Section 6.5(b), 6.5(c),
6.5(d) and 6.5(e) below, Seller shall not directly or indirectly sell, offer to
sell, contract to sell (including, without limitation, any short sale), grant
any option to purchase or otherwise transfer or dispose of (other than to donees
who agree to be similarly bound) any Buyer's Common Shares held by Seller at any
time during such period other than as contemplated by this Agreement, PROVIDED,
HOWEVER,
16
that at least Two Million shares of Buyer's Common Shares will not be subject to
any transfer restrictions imposed by this Agreement to the extent that the
holders of the Two Million shares of Buyer's Common Shares participate in the
First Private Offering or the Second Private Offering (as defined below) and
PROVIDED FURTHER that in connection with the First Public Offering or the Second
Public Offering (as defined below) such shares of Buyer's Common Shares not
included in the First Public Offering or the Second Public Offering and held by
holders who participate in the First Public Offering or the Second Public
Offering, will be subject to any lock-up agreement, (A) as required by the
underwriters of the First Public Offering or the Second Public Offering, (B) on
the same terms and as agreed to by all other affiliates of Buyer participating
in the First Public Offering or the Second Public Offering and (C) without any
selective releasing of any obligations under any lock-up agreement. Any transfer
by Seller of Buyer's Common Shares to its stockholders will be transferred
subject to these transfer restrictions.
(b) Upon the closing of the transactions contemplated
by this Agreement up to Two Million shares of Buyer's Common Shares will be sold
in a private sale (the "FIRST PRIVATE OFFERING") and will not be subject to any
transfer restrictions imposed by this Agreement. All shares of Buyer's Common
Shares not sold in the First Private Offering will be subject to the transfer
restrictions imposed by Sections 6.5(c) and 6.5(d).
(c) In the event that Buyer initiates any public
offering of its shares of common stock within five months of the Closing Date
(the "FIRST PUBLIC OFFERING"), then Buyer shall include at least Two Million
shares of Buyer's Common Shares in any registration statement used by Buyer for
the purpose of effecting a registration of Buyer's shares of common stock (the
"REGISTRATION STATEMENT"). If the Registration Statement is declared effective
by the Securities and Exchange Commission (the "SEC"), and the offering
contemplated thereunder closes (the "REGISTRATION CLOSING DATE") prior to the
five month anniversary of the Closing Date, then all outstanding shares of
Buyer's Common Shares not sold or transferred pursuant to the First Private
Offering or the Registration Statement will be subject to the transfer
restrictions stated in Section 6.5(a), and subject to Section 6.5(a), above (i)
for a period of 180 days from the Registration Closing Date for 50% of Buyer's
Common Shares held by each holder of Buyer's Common Shares and (ii) for a period
of 360 days from the Registration Closing Date for 50% of Buyer's Common Shares
held by each holder of Buyer's Common Shares.
(d) In the even that the Registration Statement is
not declared effective by the SEC or the offering contemplated thereunder is not
closed prior to the five month anniversary of the Closing Date, then the holders
of Buyer's Common Shares may sell, or transfer in any manner, up to the number
of shares of Buyer's Common Shares equal to Two Million minus the number of
shares of Buyer's Common Shares sold in the First Private Offering (the "SECOND
PRIVATE OFFERING"). All outstanding shares of Buyer's Common Shares not sold or
transferred in the First Private Offering or Second Private Offering will be
subject to the transfer restrictions stated in Section 6.5(a), and subject to
Section 6.5(a), for 180 days from the date of the closing of the Second Private
Offering.
(e) In the event that Buyer initiates any public
offering, other than the First Public Offering, of its common stock (the "SECOND
PUBLIC OFFERING") during a time period when the sale or transfer of any of
Buyer's Common Shares is restricted pursuant to Sections
17
6.5(a), 6.5(b), 6.5(c) or 6.5(d) hereof, than Buyer agrees to include 20% of
Buyer's Common Shares so restricted in any registration statement filed with the
SEC for the purpose of effecting the Second Public Offering.
(f) Seller and Buyer expressly agree to assign to
Jaycor the right to enforce Section 6.5.
(g) The Board of Directors of Jaycor, in their sole
discretion, shall determine which holders of Buyer's Common Shares can
participate in the First Private Offering, the Second Private Offering, the
First Public Offering or the Second Public Offering and the extent to which such
holders can participate.
7. CONDITIONS TO OBLIGATIONS OF SELLER
Seller's obligations hereunder are subject to the fulfillment or
satisfaction, on and as of the Closing, of each of the following conditions (any
one or more of which may be waived by Seller):
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Buyer set forth in SECTION 3 (excluding any
representation or warranty that refers specifically to "the date of this
Agreement," "the date hereof" or any other date other than the Closing Date)
shall be accurate in all material respects on and as of the Closing Date as if
made on and as of the Closing Date, and the representations and warranties of
Buyer set forth in SECTION 3 that refer specifically to "the date of this
Agreement," "the date hereof" or any other date other than the Closing Date
shall have been accurate in all material respects as of such specified date,
except to the extent that in any of the foregoing cases the failure of such
representations and warranties to be accurate in all material respects does not
in the aggregate have a Material Adverse Effect on Buyer, and except to the
extent that such failure consists of or solely results from events,
transactions, liabilities and agreements arising or entered into by Buyer in the
Ordinary Course in accordance with the terms of this Agreement where the
aggregate effect of such events, transactions, liabilities and agreements does
not in the aggregate have a Material Adverse Effect on Buyer, and Seller shall
have received a certificate to such effect executed on behalf of Buyer by its
Chief Executive Officer or its Chief Financial Officer.
7.2 COVENANTS. Buyer shall have performed and complied in all
material respects with all of its covenants contained in SECTION 5 and SECTION 6
on or before the Closing Date, and Seller shall have received a certificate to
such effect executed on behalf of Buyer by its Chief Executive Officer or Chief
Financial Officer.
7.3 COMPLIANCE WITH LAW. There shall be no order, decree, or
ruling by any court or governmental agency or threat thereof, or any other fact
or circumstance, which would prohibit or render illegal the transaction
contemplated by this Agreement.
7.4 GOVERNMENT CONSENTS. There shall have been obtained at or
prior to the Closing Date such permits or authorizations, and there shall have
been taken such other actions, as may be required to consummate the transaction
contemplated by this Agreement by any regulatory authority having jurisdiction
over the parties and the actions herein proposed to be
18
taken, including but not limited to satisfaction of all requirements under
applicable federal and state securities laws.
7.5 NO LITIGATION. No litigation or proceeding shall be
pending which will have the probable effect of enjoining or preventing the
consummation of any of the transaction provided for in this Agreement.
7.6 FAVORABLE TAX RULING . Seller shall have received a
private letter ruling from the Internal Revenue Service (the "Private Letter
Ruling"), in a form reasonably acceptable to Seller, which provides that the
transfer of the Assets qualifies as a reorganization within the meaning of
Section 368 of the Code.
7.7 COMPLIANCE WITH PRIVATE LETTER RULING. In the reasonable
opinion of Seller, the transaction as contemplated by this Agreement complies in
all material respects with the terms and conditions as set forth in the Private
Letter Ruling on the Closing Date.
7.8 STOCKHOLDER APPROVAL. The principal terms of this
Agreement shall have been approved and adopted by Seller's stockholder's, as
required by applicable law.
7.9 REGISTRATION. Either Seller has received the No Action
Letter or the Buyer's Common Shares is registered under an effective
Registration Statement.
7.10 NASD. Seller shall have received the NASD Letter.
7.11 HSR ACT. The waiting periods (and any extensions thereof)
applicable to the transactions contemplated herein under the HSR Act shall have
been terminated or shall have expired.
7.12 OFFERING. Seller has received a firm commitment, in form
reasonably acceptable to Seller, from an underwriter reasonably acceptable to
Seller to sell at least Two Million shares of Buyer's Common Shares.
8. CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer hereunder are subject to the fulfillment or
satisfaction on, and as of the Closing, of each of the following conditions (any
one or more of which may be waived by Buyer):
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Seller set forth in SECTION 2 (excluding any
representation or warranty that refers specifically to "the date of this
Agreement," "the date hereof" or any other date other than the Closing Date)
shall be accurate in all material respects on and as of the Closing Date as if
made on and as of the Closing Date, and the representations and warranties of
Seller set forth in SECTION 2 that refer specifically to "the date of this
Agreement," "the date hereof" or any other date other than the Closing Date
shall have been accurate in all material respects as of such specified date;
except in any of the foregoing cases to the extent that the failure of all such
representations and warranties to be accurate in all material respects does not
in the aggregate have a Material Adverse Effect on Seller and except to the
extent that such failure consists of or
19
solely results from events, transactions, liabilities and agreements arising or
entered into by Seller in the Ordinary Course in accordance with the terms of
this Agreement where the aggregate effect of such events, transactions,
liabilities and agreements does not in the aggregate have a Material Adverse
Effect on Seller, and Buyer shall have received a certificate to such effect
executed on behalf of Seller by its Chief Executive Officer or its Chief
Financial Officer.
8.2 COVENANTS. Seller shall have performed and complied in all
material respects with all of its covenants contained in SECTION 4 on or before
the Closing and Buyer shall have received a certificate to such effect signed on
behalf of Seller by its Chief Executive Officer or its Chief Financial Officer.
8.3 COMPLIANCE WITH LAW. There shall be no order, decree, or
ruling by any court or governmental agency in effect that would prohibit or
render illegal the transactions provided for in this Agreement.
8.4 GOVERNMENT CONSENTS. There shall have been obtained at or
prior to the Closing Date such permits or authorizations, and there shall have
been taken such other action, as may be required to consummate the transactions
contemplated by this Agreement by any regulatory authority having jurisdiction
over the parties and the actions herein proposed to be taken, including but not
limited to satisfaction of all requirements under applicable federal and state
securities laws.
8.5 NO LITIGATION. No litigation or proceeding shall be
threatened or pending which will have the probable effect of enjoining or
preventing the consummation of any of the transactions provided for in this
Agreement.
8.6 THIRD PARTY CONSENTS. Buyer shall have received all
written consents, assignments, waivers, authorizations or other certificates
necessary to provide for the continuation in full force and effect of any and
all contracts and leases of Seller which if not continued would have a Material
Adverse Effect on Seller.
8.7 ABSENCE OF MATERIAL ADVERSE CHANGE. Since the date hereof,
there shall not have been any Material Adverse Change with respect to the
Assets.
8.8 FAVORABLE TAX RULING. Buyer shall have received a Private
Letter Ruling from the Internal Revenue Service, in a form reasonably acceptable
to Buyer, which provides that the transfer of the Assets qualifies as a
reorganization with the meaning of Section 368 of the Code
8.9 APPROVALS. The principal terms of this Agreement shall
have been approved and adopted by Seller's stockholders, as required by
applicable law.
8.10 REGISTRATION. Either Seller has received and delivered a
copy of the No Action Letter to Buyer or the Buyer's Common Shares is registered
under an effective Registration Statement.
8.11 NASD. Seller shall have received and delivered to Buyer a
copy of the NASD Letter.
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8.12 HSR ACT. If applicable, any waiting periods (and any
extensions thereof) applicable to the transactions contemplated herein under the
HSR Act shall have been terminated or shall have expired.
8.13 ASSET TRANSFER. Seller shall have executed and delivered
such instruments of assignment and assumption, in form and substance reasonably
satisfactory to Buyer, as shall be appropriate to provide to convey and assign
to, and to vest in, Buyer, good, clear, record and marketable title to the
Assets.
9. TERMINATION OF AGREEMENT
9.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing.
(a) by the mutual written consent of Buyer and
Seller;
(b) upon notice by either party, if the Closing shall
not have occurred by December 31, 2000 other than as the result of a breach of
this Agreement by the terminating party;
(c) by Seller, if there has been a breach by Buyer of
any representation, warranty, covenant or agreement set forth in this Agreement
on the part of Buyer which has or can reasonably be expected to have a Material
Adverse Effect on Buyer and which Buyer fails to cure within a reasonable time,
not to exceed thirty (30) days, after written notice thereof (except that no
cure period will be provided for a breach by Buyer which by its nature cannot be
cured);
(d) by Buyer, if there has been a breach by Seller of
any representation, warranty, covenant or agreement set forth in this Agreement
on the part of Seller which has or can reasonably be expected to have a Material
Adverse Effect on Seller and which Seller fails to cure within a reasonable time
not to exceed thirty (30) days after written notice thereof (except that no cure
period will be provided for a breach by Seller which by its nature cannot be
cured);
(e) by either party, if either the affirmative vote
of Seller's stockholders to approve the transaction, as required by Delaware law
by December 31, 2000; or
(f) by either party, if a permanent injunction or
other order by any federal or state court which would make illegal or otherwise
restrain or prohibit the consummation of the transaction will have been issued
and will have become final and nonappealable.
Any termination of this Agreement under this Section 9.1 will be
effective by the delivery of written notice of the terminating party to the
other party hereto.
10. INDEMNIFICATION
10.1 INDEMNIFICATION BY SELLER. Jaycor, CTL and Seller shall,
jointly and severally, indemnify, defend, protect and hold harmless Buyer, each
of its successors and assigns and each of its directors, officers, employees,
agents and affiliates (each a "BUYER INDEMNIFIED PARTY"), against all losses,
claims, damages, actions, suits, proceedings, demands, assessments,
21
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation ("LOSSES")) based upon,
resulting from or arising out of (i) any inaccuracy or breach of any
representation or warranty of Seller contained in or made in connection with
this Agreement, (ii) the breach by Seller of, or the failure by Seller to
observe, any of its respective covenants or other agreements contained in or
made in connection with this Agreement, (iii) the business of Jaycor or CTL, or
(iv) any other liability of Jaycor, CTL or Seller incurred as a result of the
transfer of the Assets under this Agreement. The indemnification provided for in
this Section 10.1 shall terminate twelve months after the Closing Date (and no
claims shall be made by Buyer under this Section 10.1 thereafter); PROVIDED,
HOWEVER, that Jaycor, CTL and Seller shall jointly and severally indemnify,
defend, protect and hold harmless any Buyer Indemnified Party for any and all
Taxes incurred by or attributable to the business or operations of Seller
(including the transfer of Assets pursuant to this Agreement), Jaycor or CTL on
or prior to the Closing; other than Taxes to which Buyer is concurrently liable
pursuant to that certain Tax Sharing Agreement dated as of October 1999 by and
between Seller and Buyer, and the indemnification period relating to any such
Taxes shall terminate on the tenth day after the expiration of the applicable
period of limitations on assessments and collections applicable to such taxes
under the Code. Seller's stockholders shall receive Buyer's Common Shares
subject to the indemnification obligations of Seller to the fullest extent
allowed under applicable law.
10.2 INDEMNIFICATION BY BUYER. Buyer shall indemnify,
defend, protect and hold harmless Seller, each of their respective successors
and assigns and each of their respective trustees, beneficiaries, employees,
agents and affiliates (each a "SELLER INDEMNIFIED PARTY"), against all
losses, claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without
limitation, reasonable attorneys' fees and expenses of investigation
("LOSSES")) based upon, resulting from or arising out of (i) any inaccuracy
or breach of any representation or warranty of Buyer contained in or made in
connection with this Agreement, and (ii) the breach by Buyer of, or the
failure by Buyer to observe, any of its respective covenants or other
agreements contained in or made in connection with this Agreement. The
indemnification provided for in this Section 10.2 shall terminate twelve
months after the Closing Date (and no claims shall be made by Buyer under
this Section 10.2 thereafter).
10.3 PROCEDURES FOR INDEMNIFICATION.
(a) As used in this Section 10, the term "INDEMNITEE"
means Buyer Indemnified Party or, as the case may be, the Seller Indemnified
Party and the term "Indemnifying Party" shall mean Buyer in the case where a
Seller Indemnified Party is the Indemnitee, and Seller in the case where a Buyer
Indemnified Party is the Indemnitee.
(b) An Indemnitee shall promptly give the
Indemnifying Party notice of any matter which the Indemnitee has determined has
given rise to a right of indemnification under this Agreement. Such notice shall
state the amount of the Loss, if known, the method of computation thereof and
the nature of such matter, all with reasonable particularity.
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(c) If the Indemnification Claim involves a Third
Party Claim, the procedures set forth in Section 10.4 hereof shall be observed
by Indemnitee and the Indemnifying Party.
10.4 DEFENSE OF THIRD PARTY CLAIMS. Should any claim be made
or suit or proceeding be instituted against an Indemnitee which, if prosecuted
successfully, would be a matter for which such Indemnitee is entitled to
indemnification under this Section 10 (a "THIRD PARTY CLAIM"), the obligations
and liabilities of the parties hereunder with respect to such Third Party Claim
shall be subject to the following terms and conditions:
(a) Indemnitee shall give the Indemnifying Party
written notice of any such Third Party Claim promptly after receipt by
Indemnitee of notice thereof, and the Indemnifying Party may undertake control
of the defense thereof by counsel of his or its own choosing reasonably
acceptable to Indemnitee. If Indemnifying Party has undertaken control of the
defense of the matter, Indemnitee may participate in the defense through his or
its own counsel at his or its own expense. In the event an Indemnitee desires to
assume the defense of the matter, the Indemnitee shall provide the Indemnitor
with reasonable assurances of the Indemnitee's ability to bear the costs of such
defense and any likely outcome. If, however, the Indemnifying Party fails or
refuses to undertake the defense of such Third Party Claim within fifteen (15)
days after written notice of such claim has been delivered by Indemnitee,
Indemnitee shall have the right to undertake the defense, compromise and
settlement of such Third Party Claim in any manner which the Indemnitee deems is
reasonable with counsel of its own choosing; PROVIDED, HOWEVER, that neither
party shall settle a third party claim except as provided in Section 10.4(c).
Failure of Indemnitee to furnish written notice to the Indemnifying Party of a
Third Party Claim shall not release the Indemnifying Party from his or its
obligations hereunder, except to the extent he or it is prejudiced by such
failure.
(b) Indemnitee and the Indemnifying Party shall
cooperate with each other in all reasonable respects in connection with the
defense of any Third Party Claim, including making available records relating to
such claim and furnishing employees of Buyer as may be reasonably necessary for
the preparation of the defense of any such Third Party Claim or for testimony as
witness in any proceeding relating to such claim.
(c) Unless the Indemnifying Party has failed to
fulfill his or its obligations under this Section 10, no settlement by
Indemnitee of a Third Party Claim shall be made without the prior written
consent by or on behalf of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed. If the Indemnifying Party has assumed the
defense of a Third Party Claim as contemplated by this Section 10.4, no
settlement of such Third Party Claim may be made by the Indemnifying Party
without the prior written consent by or on behalf of Indemnitee, which consent
shall not be unreasonably withheld or delayed.
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11. MISCELLANEOUS
11.1 GOVERNING LAW. The Delaware General Corporation Law
(irrespective of any choice of law principles) will govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto.
11.2 ASSIGNMENT; BINDING UPON SUCCESSORS AND ASSIGNS. No party
hereto may assign any of its rights or obligations hereunder without the prior
written consent of the other party hereto. This Agreement will be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
11.3 SEVERABILITY. If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.
11.4 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which will be an original as regards any party whose name
appears thereon and all of which together will constitute one and the same
instrument. This Agreement will become binding when one or more counterparts
hereof, individually or taken together, bear the signatures of all parties
reflected hereon as signatories.
11.5 AMENDMENT AND WAIVERS. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only by a writing signed by the party to be bound thereby.
The waiver by a party of any breach hereof or default in the performance hereof
will not be deemed to constitute a waiver of any other default or any succeeding
breach or default. This Agreement may be amended by the parties hereto at any
time before or after approval of Seller's stockholders.
11.6 NO WAIVER. The failure of any party to enforce any of the
provisions hereof will not be construed to be a waiver of the right of such
party thereafter to enforce such provisions. The waiver by any party of the
right to enforce any of the provisions hereof on any occasion will not be
construed to be a waiver of the right of such party to enforce such provision on
any other occasion.
11.7 NOTICES. Any notice or other communication required or
permitted to be given under this Agreement will be in writing, will be delivered
personally or by mail or express delivery, postage prepaid, and will be deemed
given upon actual delivery or, if mailed by registered or certified mail, on the
third business day following deposit in the mails, addressed as follows:
24
(i) If to Buyer:
JNI Corporation
0000 Xxxxx Xxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: President
Tel: (000) 000-0000
(ii) If to Seller:
Jaymark, Inc.
0000 Xxxxx Xxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: President
Tel: (000) 000-0000
or to such other address as the party in question may have furnished to
the other party by written notice given in accordance with this Section 11.7.
11.8 CONSTRUCTION OF AGREEMENT. The language hereof will not
be construed for or against any party based solely on that party being the
drafting party. A reference to an article, section or exhibit will mean an
article or section in, or an exhibit to, this Agreement, unless otherwise
explicitly set forth. The titles and headings in this Agreement are for
reference purposes only and will not in any manner limit the construction of
this Agreement. For the purposes of such construction, this Agreement will be
considered as a whole.
11.9 NO JOINT VENTURE. Nothing contained in this Agreement
will be deemed or construed as creating a joint venture or partnership between
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party will have
the power to control the activities and operations of any other, and the
parties' status is, and at all times, will continue to be, that of independent
contractors with respect to each other. No party will have any power or
authority to bind or commit any other. No party will hold itself out as having
any authority or relationship in contravention of this Section.
11.10 FURTHER ASSURANCES. Each party agrees to cooperate fully
with the other party and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by the other party to evidence and reflect the transactions provided
for herein and to carry into effect the intent of this Agreement.
11.11 PUBLIC ANNOUNCEMENT. Neither Buyer or Seller will make
any public announcement or disclosure of the transaction contemplated by this
Agreement without the consent of the other party; provided, however, that Buyer
may make independent disclosure, after notice to Seller, in Buyer's sole and
absolute judgment, based on the advice of counsel, if it determines that
disclosure is required under applicable provisions of federal or state security
laws.
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11.12 TIME IS OF THE ESSENCE. The parties hereto acknowledge
and agree that time is of the essence in connection with the execution, delivery
and performance of this Agreement, and that they will each utilize reasonable
best efforts to satisfy all the conditions to Closing on or before December 31,
2000.
11.13 "MATERIAL ADVERSE EFFECT" AND "MATERIAL ADVERSE CHANGE".
For purposes of this Agreement, the terms "Material Adverse Effect" and
"Material Adverse Change" mean or refer to, with respect to any entity, any
adverse change, circumstance or effect that, individually or in the aggregate
with all other adverse changes, circumstances and effects, is or is reasonably
likely to be materially adverse to the financial condition, properties, assets,
liabilities, material Intellectual Property rights, business or operating
results of such entity, and the Subsidiaries if any, taken as a whole, except
that a "Material Adverse Effect" or a "Material Adverse Change" with respect to
a company shall not include any adverse change, circumstance or effect (a) that
is attributable to a delay of, reduction in or cancellation or change in the
terms of customer orders or termination or modification by vendors or suppliers
of their relationships with the company, (b) that is due to employee attrition,
(c) resulting from or relating to general business, economic or industry
conditions; (d) relating to or resulting directly from implementation of the
transactions contemplated by this Agreement or (e) relating to any other
acquisition or investment made by Buyer after the date of this Agreement.
11.14 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provisions
of this Agreement are intended, nor will be interpreted, to provide or create
any third party beneficiary rights.
11.15 ENTIRE AGREEMENT. This Agreement and the exhibits hereto
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and supersede all prior and contemporaneous
agreements or understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect to the subject matter hereof.
The express terms hereof control and supersede any course of performance or
usage of trade inconsistent with any of the terms hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SELLER:
Jaymark, Inc.
By: /s/ Xxxx X. Xxxxxx
------------------------------
Name: Xxxx X. Xxxxxx
------------------------------
Title: President and CEO
------------------------------
BUYER:
JNI Corporation
By: /s/ Xxxxxx Xxxxx
------------------------------
Name: Xxxxxx Xxxxx
------------------------------
Title: Chief Financial Officer
------------------------------
ADDITIONAL SIGNATORIES:
Jaycor, Inc.
By: /s/ Xxxxx Xxxxxxx
------------------------------
Name: Xxxxx Xxxxxxx
------------------------------
Title: Vice President, Finance and CFO
------------------------------
California Tube Laboratories, Inc.
By: /s/ Xxxx X. Xxxxxx
------------------------------
Name: Xxxx X. Xxxxxx
------------------------------
Title: Chairman
------------------------------
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