Exhibit 10.5
[EXECUTION COPY]
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RECAPITALIZATION AGREEMENT
BY AND AMONG
NETCOM SYSTEMS, INC.,
THE PURCHASERS NAMED HEREIN
AND
THE SELLERS NAMED HEREIN
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August 29, 1997
TABLE OF CONTENTS
PAGE
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Section 1. Recapitalization . . . . . . . . . . . . . . . . . . . . . . . . . 1
1A. Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1B. Investment Transaction . . . . . . . . . . . . . . . . . . . . . . . 2
1C. Repurchase Transaction . . . . . . . . . . . . . . . . . . . . . . . 2
1D. Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2. Conditions of the Purchasers' Obligations at the Closing . . . . . 4
2A. Representations and Warranties; Covenants. . . . . . . . . . . . . . 4
2B. Amendment of Articles of Incorporation . . . . . . . . . . . . . . . 4
2C. Amendment of Bylaws. . . . . . . . . . . . . . . . . . . . . . . . . 4
2D. Shareholders Agreement . . . . . . . . . . . . . . . . . . . . . . . 4
2E. Registration Agreement . . . . . . . . . . . . . . . . . . . . . . . 4
2F. [Intentionally Omitted.] . . . . . . . . . . . . . . . . . . . . . . 4
2G. Escrow Agreement.. . . . . . . . . . . . . . . . . . . . . . . . . . 5
2H. Stock Purchase Agreement.. . . . . . . . . . . . . . . . . . . . . . 5
2I. Opinion of the Company's and the Sellers' Counsel. . . . . . . . . . 5
2J. Senior Debt Financing. . . . . . . . . . . . . . . . . . . . . . . . 5
2K. Repurchase Transaction . . . . . . . . . . . . . . . . . . . . . . . 5
2L. Release of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2M. Audit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2N. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2O. Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2P. Third Party Consents and Approvals . . . . . . . . . . . . . . . . . 6
2Q. Governmental Consents and Approvals. . . . . . . . . . . . . . . . . 6
2R. Material Adverse Change. . . . . . . . . . . . . . . . . . . . . . . 6
2S. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2T. Real Estate Matters. . . . . . . . . . . . . . . . . . . . . . . . . 6
2U. Solvency Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2V. Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2W. Closing Documents. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2X. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. Conditions of the Obligations of the Company and the
Sellers at the Closing . . . . . . . . . . . . . . . . . . . . . . 8
3A. Representations and Warranties; Covenants. . . . . . . . . . . . . . 8
3B. Amendment of Articles of Incorporation . . . . . . . . . . . . . . . 8
3C. Shareholders Agreement . . . . . . . . . . . . . . . . . . . . . . . 8
3D. Registration Agreement . . . . . . . . . . . . . . . . . . . . . . . 8
3E. Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3F. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3G. Governmental Consents and Approvals. . . . . . . . . . . . . . . . . 8
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TABLE OF CONTENTS
(CONTINUED)
3H. Investment Transaction . . . . . . . . . . . . . . . . . . . . . . . 9
3I. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3J. Waiver.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4. Pre-Closing Covenants and Agreements . . . . . . . . . . . . . . . 9
4A. General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4B. Maintenance of Business. . . . . . . . . . . . . . . . . . . . . . . 9
4C. Third Party Notices and Consents . . . . . . . . . . . . . . . . . . 9
4D. Governmental Notices and Consents. . . . . . . . . . . . . . . . . . 9
4E. Operation of Business. . . . . . . . . . . . . . . . . . . . . . . .10
4F. Full Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
4G. Compliance with Agreements and Laws. . . . . . . . . . . . . . . . .11
4H. Payment of Obligations.. . . . . . . . . . . . . . . . . . . . . . .11
4I. Notice of Material Developments. . . . . . . . . . . . . . . . . . .11
4J. Exclusivity. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
4K. Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
4L. Actions with Respect to Repurchased Shares . . . . . . . . . . . . .12
4M. Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Section 5. Representations and Warranties of the Company and the Sellers. . .12
5A. Organization, Corporate Power and Licenses.. . . . . . . . . . . . .12
5B. Capital Stock and Related Matters. . . . . . . . . . . . . . . . . .13
5C. Subsidiaries; Investments. . . . . . . . . . . . . . . . . . . . . .14
5D. Authorization; No Breach. . . . . . . . . . . . . . . . . . . . . .14
5E. Financial Statements.. . . . . . . . . . . . . . . . . . . . . . . .15
5F. Absence of Undisclosed Liabilities.. . . . . . . . . . . . . . . . .15
5G. Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . .15
5H. Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
5I. Product Warranty; Product Certifications . . . . . . . . . . . . . .16
5J. Product Liability. . . . . . . . . . . . . . . . . . . . . . . . . .17
5K. Product Recall, etc. . . . . . . . . . . . . . . . . . . . . . . . .17
5L. No Material Adverse Effect.. . . . . . . . . . . . . . . . . . . . .17
5M. Absence of Certain Developments. . . . . . . . . . . . . . . . . . .17
5N. Assets.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
5O. Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
5P. Contracts and Commitments. . . . . . . . . . . . . . . . . . . . . .21
5Q. International Trade Laws and Regulations.. . . . . . . . . . . . . .24
5R. Intellectual Property Rights.. . . . . . . . . . . . . . . . . . . .25
5S. Litigation, etc. . . . . . . . . . . . . . . . . . . . . . . . . . .26
5T. Brokerage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
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TABLE OF CONTENTS
(CONTINUED)
5U. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
5V. Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
5W. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
5X. Compliance with Laws; Permits; Certain Operations. . . . . . . . . .29
5Y. Environmental and Safety Matters.. . . . . . . . . . . . . . . . . .30
5Z. Affiliated Transactions. . . . . . . . . . . . . . . . . . . . . . .31
5AA. Names and Locations. . . . . . . . . . . . . . . . . . . . . . . . .31
5BB. Suppliers and Customers. . . . . . . . . . . . . . . . . . . . . . .31
5CC. Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . .32
5DD. Regulatory Status. . . . . . . . . . . . . . . . . . . . . . . . . .32
5EE. Margin Securities. . . . . . . . . . . . . . . . . . . . . . . . . .32
5FF. Small Business Matters.. . . . . . . . . . . . . . . . . . . . . . .32
5GG. Disclosure.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Section 6. Representations and Warranties of the Sellers. . . . . . . . . . .32
6A. Capacity; Power and Authority. . . . . . . . . . . . . . . . . . . .32
6B. Authorization; No Breach. . . . . . . . . . . . . . . . . . . . . .33
6C. Title to Shares, etc.. . . . . . . . . . . . . . . . . . . . . . . .33
6D. Brokerage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
6E. Litigation, etc. . . . . . . . . . . . . . . . . . . . . . . . . . .00
0X. Company Transactions.. . . . . . . . . . . . . . . . . . . . . . . .33
Section 7. Representations and Warranties of the Purchasers . . . . . . . . .34
7A. Organization, Power and Authority. . . . . . . . . . . . . . . . . .34
7B. Authorization; No Breach. . . . . . . . . . . . . . . . . . . . . .34
7C. Brokerage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
7D. Investment Representations.. . . . . . . . . . . . . . . . . . . . .34
Section 8. Indemnification and Other Agreements . . . . . . . . . . . . . . .35
8A. Survival of Representations and Warranties . . . . . . . . . . . . .35
8B. General Indemnification. . . . . . . . . . . . . . . . . . . . . . .36
8C. Press Release and Announcements. . . . . . . . . . . . . . . . . . .40
8D. Non-Compete; Non-Solicitation. . . . . . . . . . . . . . . . . . . .40
8E. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . .43
8F. Intellectual Property Rights Protection. . . . . . . . . . . . . . .44
8G. Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . .44
8H. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . .45
8I. Option Re-Pricing. . . . . . . . . . . . . . . . . . . . . . . . . .45
8J. Option Grants. . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Section 9. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . .45
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TABLE OF CONTENTS
(CONTINUED)
Section 10. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . .53
10A. Conditions of Termination. . . . . . . . . . . . . . . . . . . . . .53
10B. Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . .54
Section 11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . .54
11A. Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . .54
11B. Remedies.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
11C. Transfer of Restricted Securities. . . . . . . . . . . . . . . . . .55
11D. Consent to Amendments. . . . . . . . . . . . . . . . . . . . . . . .56
11E. Successors and Assigns.. . . . . . . . . . . . . . . . . . . . . . .56
11F. Severability.. . . . . . . . . . . . . . . . . . . . . . . . . . . .57
11G. Counterparts.. . . . . . . . . . . . . . . . . . . . . . . . . . . .57
11H. Descriptive Headings; Interpretation.. . . . . . . . . . . . . . . .57
11I. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .57
11J. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . .57
11K. Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
11L. Cooperation on Tax Matters . . . . . . . . . . . . . . . . . . . . .58
11M. Schedules and Exhibits . . . . . . . . . . . . . . . . . . . . . . .58
11N. Treatment of the Preferred Stock . . . . . . . . . . . . . . . . . .58
11O. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . .59
11P. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
11Q. No Strict Construction.. . . . . . . . . . . . . . . . . . . . . . .62
EXHIBITS AND SCHEDULES
Exhibit A - Amended and Restated Articles of Incorporation
Exhibit B - Escrow Agreement
Exhibit C - Amended and Restated Bylaws
Exhibit D - Shareholders Agreement
Exhibit E - Registration Agreement
Exhibit F - Stock Purchase Agreement
Exhibit G - Opinion of Counsel for the Company and the Sellers
DISCLOSURE SCHEDULES:
Schedule of Purchasers
Schedule of Sellers
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TABLE OF CONTENTS
(continued)
Contracts Schedule
Capitalization Schedule
Investments and Subsidiaries Schedule
Restrictions Schedule
Financial Statements Schedule
Liabilities Schedule
Accounts Receivable Schedule
Inventories Schedule
Product Warranty Schedule
Product Liability Schedule
Product Recall Schedule
Developments Schedule
Assets Schedule
Taxes Schedule
Intellectual Property Schedule
Employees Schedule
Employee Benefits Schedule
International Trade Compliance Schedule
Litigation Schedule
Insurance Schedule
Employees Schedule
Compliance Schedule
Permits Schedule
Environmental Schedule
Affiliated Transactions Schedule
Names and Locations Schedule
Suppliers and Customers Schedule
Indemnification Schedule
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RECAPITALIZATION AGREEMENT
THIS RECAPITALIZATION AGREEMENT (this "AGREEMENT") is made and
entered into as of August 29, 1997, by and among the Persons listed on the
SCHEDULE OF PURCHASERS attached hereto (each, a "PURCHASER" and collectively,
the "PURCHASERS"), Netcom Systems, Inc., a California corporation (the
"COMPANY"), and the Persons listed on the SCHEDULE OF SELLERS attached hereto
(each, a "SELLER" and collectively, the "SELLERS"). The Purchasers, the Company
and the Sellers are sometimes collectively referred to herein as the "PARTIES"
and individually as a "PARTY." Capitalized terms used herein and not otherwise
defined herein have the meanings given to such terms in Section 9 below.
WHEREAS, the Company desires to reconstitute its capital structure
through the sale of certain newly issued equity securities, the incurrence of
certain senior debt obligations and the repurchase of certain of its outstanding
equity securities, in each case on the terms and subject to the conditions set
forth herein;
WHEREAS, the Purchasers desire to purchase certain newly issued
equity securities of the Company on the terms and subject to the conditions set
forth herein; and
WHEREAS, the Sellers desire the Company to repurchase certain equity
securities of the Company held by the Sellers on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants, agreements
and understandings herein contained, the Parties hereby agree as follows:
Section 1. RECAPITALIZATION.
1A. AUTHORIZATION.
(i) The Company shall, and the Sellers shall cause the Company
to, authorize the filing under the laws of the State of California of amended
and restated articles of incorporation of the Company in the form of EXHIBIT A
attached hereto (as so amended and restated, the "ARTICLES OF INCORPORATION").
The Articles of Incorporation shall be duly filed by the Company on or prior to
the Closing Date and shall be in full force and effect under the laws of the
State of California as of the Closing.
(ii) The Company shall, and the Sellers shall cause the Company
to, authorize the purchase by the Company of all of the outstanding capital
stock of Netcom Systems Europe, a limited liability company organized under the
laws of the Republic of France ("NETCOM EUROPE"), from Xxxxx Xxxxx and Xxxx
Xxxxx for an aggregate purchase price of not more than $3,000,000.
(iii) The Company shall, and the Sellers shall cause the Company
to, authorize the issuance and sale to the Purchasers of an aggregate of
482,684 shares of its Class A Redeemable Preferred Stock, no par value per share
(the "REDEEMABLE PREFERRED STOCK"), having the rights and preferences set forth
in EXHIBIT A attached hereto.
(iv) The Company shall, and the Sellers shall cause the Company
to, authorize the issuance and sale to the Purchasers of an aggregate of
22,785,424 shares of its Class B Convertible Preferred Stock, no par value per
share (the "CONVERTIBLE PREFERRED STOCK" and, together with the Redeemable
Preferred Stock, the "PREFERRED STOCK"), having the rights and preferences set
forth in EXHIBIT A attached hereto. The Convertible Preferred Stock shall be
initially convertible into 22,785,424 shares of the Company's Common Stock, no
par value per share (the "COMMON STOCK"), as set forth in EXHIBIT A attached
hereto.
(v) The Company shall authorize the repurchase from the Sellers
of an aggregate of 9,133,332 shares of the Company's Common Stock (the
"REPURCHASED SHARES") for an aggregate purchase price equal to $139,666,913 (the
"REPURCHASE PRICE"). The Repurchase Price shall be paid in the manner provided
in Paragraph 1D below. The number of Repurchased Shares to be repurchased from
each Seller is set forth on the SCHEDULE OF SELLERS attached hereto.
(vi) The Company shall authorize the repurchase from the Other
Sellers of an aggregate of 447,645 shares of the Company's Common Stock pursuant
to the Stock Purchase Agreement for an aggregate purchase price equal to
$6,845,387.
1B. INVESTMENT TRANSACTION. On the basis of the representations,
warranties, covenants and agreements set forth herein and subject to the
satisfaction or waiver of the conditions set forth in Section 2 below, each of
the Purchasers and the Company agrees to and shall consummate, and the Sellers
shall cause the Company to consummate, at the Closing, the following transaction
(the "INVESTMENT TRANSACTION"): the Company shall sell to each Purchaser, and
each Purchaser shall purchase from the Company, the number of shares of
Redeemable Preferred Stock and Convertible Preferred Stock set forth opposite
such Purchaser's name on the SCHEDULE OF PURCHASERS attached hereto, upon
payment of immediately available funds in the amount set forth opposite such
Purchaser's name on the SCHEDULE OF PURCHASERS attached hereto, payable in the
manner set forth in Paragraph 1D(i) below. The aggregate purchase price for
such shares of Redeemable Preferred Stock shall be equal to $48,268,400 (the
"REDEEMABLE PREFERRED STOCK PURCHASE PRICE") and the aggregate purchase price
for such shares of Convertible Preferred Stock shall be equal to $48,268,400
(the "CONVERTIBLE PREFERRED STOCK PURCHASE PRICE" and, together with the
Redeemable Preferred Stock Purchase Price, the "PURCHASE PRICE").
1C. REPURCHASE TRANSACTION. On the basis of the representations,
warranties, covenants and agreements set forth herein and subject to the
satisfaction or waiver of the conditions set forth in Section 3 below and the
consummation of the Investment Transaction and the Senior Debt Transaction, the
Company and each of the Sellers agrees to and shall consummate, at the Closing,
the following transaction (the "REPURCHASE TRANSACTION"): the Company shall
repurchase
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from each Seller the number of Repurchased Shares set forth opposite such
Seller's name on the SCHEDULE OF SELLERS attached hereto and shall pay to each
such Seller (in the manner set forth in Paragraphs 1D(iv) and 1D(v) below) the
portion of the Repurchase Price set forth opposite such Seller's name on the
SCHEDULE OF SELLERS attached hereto. The Company shall report the Repurchase
Transaction as a redemption within the meaning of Section 302 of the Code in
which Section 302(b)(2) applies. All of the consideration paid by the Company
in the Repurchase Transaction shall be separately allocable to the Repurchased
Shares.
1D. CLOSING. The closing of each of the Investment Transaction
and the Repurchase Transaction (the "CLOSING") shall take place at the offices
of Wilson, Sonsini, Xxxxxxxx & Xxxxxx, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx
00000, or at such other place as may be mutually agreeable to each of the
Parties, at 10:00 a.m., local time, on August 29, 1997, or, if any of the
conditions to Closing set forth in Section 2 and Section 3 below have not been
satisfied or waived by the Party entitled to the benefit thereof on or prior to
such date, on the second business day following satisfaction or waiver of such
conditions (the "CLOSING DATE"). The Investment Transaction and the Repurchase
Transaction shall each constitute a separate transaction hereunder. At the
Closing, the Parties shall consummate the transactions contemplated by this
Agreement in the following order:
(i) Each Purchaser shall deliver to the Company such
Purchaser's portion of the Purchase Price as set forth opposite such Purchaser's
name on the SCHEDULE OF PURCHASERS attached hereto, by wire transfer of
immediately available funds to an account designated by the Company.
(ii) The Company shall deliver to each Purchaser stock
certificates evidencing the shares of Redeemable Preferred Stock and Convertible
Preferred Stock to be issued to such Purchaser as set forth opposite such
Purchaser's name on the SCHEDULE OF PURCHASERS attached hereto, registered in
such Purchaser's name, upon payment of such Purchaser's portion of the Purchase
Price in the manner described in clause (i) above.
(iii) The Company shall consummate the Senior Debt
Transaction.
(iv) The Company shall pay to each Seller by wire transfer
of immediately available funds to an account designated by such Seller an amount
equal to the "Closing Cash Amount" set forth opposite such Seller's name on the
SCHEDULE OF SELLERS attached hereto.
(v) The Company shall deliver $7,111,765 of the Repurchase
Price to the Escrow Agent for deposit into an escrow account (the "ESCROW
ACCOUNT") established pursuant to the terms of an escrow agreement in the form
of EXHIBIT B attached hereto (the "ESCROW AGREEMENT") among the Company, the
Seller Representative, the Purchaser Representatives (as defined in the Escrow
Agreement) and the Escrow Agent. The Escrow Amount shall be available to
satisfy amounts owing to the Company Parties pursuant to Paragraph 8B below.
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(vi) Each Seller shall deliver to the Company the stock
certificate or certificates evidencing the Repurchased Shares held by such
Seller upon payment of the Repurchase Price in the manner described in the first
sentence of clause (iv) and clause (v) above, duly endorsed in blank or
accompanied by duly executed stock powers. The Company shall deliver to each
such Seller a new stock certificate or certificates representing any shares of
Common Stock owned by such Seller which were represented by the certificates
delivered pursuant to this clause (vi) but which were not repurchased by the
Company in connection with the Repurchase Transaction.
Section 2. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT THE
CLOSING. The obligation of the Purchasers to purchase and pay for the Preferred
Stock at the Closing is subject to the satisfaction as of the Closing of the
following conditions:
2A. REPRESENTATIONS AND WARRANTIES; COVENANTS. The
representations and warranties contained in Sections 5 and 6 hereof shall be
true and correct in all material respects at and as of the date hereof and at
and as of the Closing as though then made and as though the Closing Date was
substituted for the date of this Agreement throughout such representations and
warranties, except to the extent of any changes expressly contemplated by this
Agreement and except for any representations and warranties that speak only as
of a certain date (which representations and warranties shall be true and
correct in all material respects as of such date), and the Company and the
Sellers shall have performed in all material respects all of the covenants
required to be performed by the Company and the Sellers hereunder prior to the
Closing.
2B. AMENDMENT OF ARTICLES OF INCORPORATION. The Articles of
Incorporation shall have been amended and restated in the form of EXHIBIT A
attached hereto, shall be in full force and effect under the laws of the State
of California as of the Closing as so amended and restated and shall not have
been further amended or modified.
2C. AMENDMENT OF BYLAWS. The Company's Bylaws (the "BYLAWS")
shall have been amended and restated in the form of EXHIBIT C attached hereto,
shall be in full force and effect as of the Closing as so amended and restated
and shall not have been further amended or modified.
2D. SHAREHOLDERS AGREEMENT. The Company and the Sellers shall
have entered into a shareholders agreement in the form of EXHIBIT D attached
hereto (the "SHAREHOLDERS AGREEMENT"), and the Shareholders Agreement shall be
in full force and effect as of the Closing and shall not have been amended or
modified.
2E. REGISTRATION AGREEMENT. The Company and the Sellers shall
have entered into a registration agreement in the form of EXHIBIT E attached
hereto (the "REGISTRATION AGREEMENT"), and the Registration Agreement shall be
in full force and effect as of the Closing and shall not have been amended or
modified.
2F. [Intentionally Omitted.]
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2G. ESCROW AGREEMENT. The Company, the Seller Representative and
the Escrow Agent shall have entered into the Escrow Agreement, and the Escrow
Agreement shall be in full force and effect as of the Closing and shall not have
been amended or modified.
2H. STOCK PURCHASE AGREEMENT. The Company and all of the other
parties thereto (the "OTHER SELLERS") shall have entered into a Stock Purchase
Agreement in the form of EXHIBIT F attached hereto (the "STOCK PURCHASE
AGREEMENT"), and the Stock Purchase Agreement shall be in full force and effect
as of the Closing and shall not have been amended or modified. The transactions
contemplated by the Stock Purchase Agreement shall have been consummated on the
First Repurchase Date and the Stock Purchase Agreement shall have been
consummated simultaneously with the Closing hereunder in accordance with the
terms thereof.
2I. OPINION OF THE COMPANY'S AND THE SELLERS' COUNSEL. The
Purchasers shall have received from Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, counsel
for the Company and the Sellers, an opinion in the form of EXHIBIT G attached
hereto, which shall be addressed to the Purchasers and dated as of the Closing
Date.
2J. SENIOR DEBT FINANCING. The Company shall have obtained
senior debt financing in an amount not less than $60,000,000 (consisting of a
term loan or loans in the aggregate amount of $50,000,000 and a revolving credit
facility in the amount of not less than $10,000,000) on terms satisfactory to
the Purchasers.
2K. REPURCHASE TRANSACTION. The Company and the Sellers shall
have simultaneously consummated the Repurchase Transaction in the manner set
forth in Paragraph 1D above.
2L. RELEASE OF LIENS. The Company shall have obtained releases
of all Liens (other than any Permitted Encumbrances) encumbering the assets and
properties of the Company and its Subsidiaries.
2M. AUDIT. The Purchasers shall have received and shall be
satisfied with the audited balance sheet of the Company as of July 31, 1997, and
the related statements of income and cash flows (or the equivalent) for the
fiscal year then ended (together with the opinion from Xxxxxx Xxxxxxxx LLP to be
delivered in connection therewith), and the matters set forth in the management
letters delivered with respect thereto.
2N. LITIGATION. No suit, action or other proceeding shall be
pending before any court or governmental or regulatory official, body or
authority in which it is sought to restrain or prohibit the transactions
contemplated hereby or that could reasonably be expected to have a Material
Adverse Effect (other than any such suit, action or proceeding brought by any of
the Parties against any of the other Parties), and no injunction, judgment,
order, decree or ruling with respect thereto shall be in effect.
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2O. FILINGS. The Company shall have made all filings required to
be made by the Company and shall have obtained all permits and other
authorizations required to be obtained by the Company under all applicable laws
(including federal and state securities laws) to consummate the transactions
contemplated by this Agreement in compliance with such laws (other than any
securities law filings required to be made after the Closing, which filings
shall be made promptly after the Closing).
2P. THIRD PARTY CONSENTS AND APPROVALS. The Company shall have
received or obtained all shareholder and material third party consents and
approvals that are necessary for the consummation of the transactions
contemplated hereby or that are required in order to prevent a breach of or
default under, a termination or modification of, or acceleration of the terms
of, any contract, agreement or document required to be listed on the attached
CONTRACTS SCHEDULE (collectively, the "THIRD PARTY APPROVALS"), in each case on
terms and conditions reasonably satisfactory to the Purchasers.
2Q. GOVERNMENTAL CONSENTS AND APPROVALS. The Parties shall have
received or obtained all governmental and regulatory consents and approvals that
are necessary for the consummation of the transactions contemplated hereby, in
each case on terms and conditions satisfactory to the Purchasers, and the
waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended (the "XXXX-XXXXX-XXXXXX ACT"), shall have expired or been terminated
(collectively, the "GOVERNMENTAL APPROVALS").
2R. MATERIAL ADVERSE CHANGE. Since July 31, 1997, there shall
have been no material adverse change or material adverse development in the
business, financial condition, operating results, assets, operations, business
prospects, cash flow, net worth or customer, supplier or employee relations of
the Company.
2S. EXPENSES. At the Closing, the Company shall have paid or
reimbursed the Purchasers for their fees and expenses as provided in Paragraph
11A below.
2T. REAL ESTATE MATTERS. The Purchasers shall have received a
letter of consent and estoppel certificate from each lessor of the Leased Real
Property in form and substance reasonably satisfactory to the Purchasers and
their special counsel and such other endorsements and affidavits and related
items as the Bank may request.
2U. SOLVENCY OPINION. The Purchasers shall have received an
opinion from Xxxxxxxx Xxxxx Xxxxxx & Xxxxx to the effect that, immediately
following the Closing and after giving effect to the transactions contemplated
hereby, (i) the fair market value and present fair saleable value of the
Company's assets exceed the Company's stated liabilities and identified
contingent liabilities, (ii) the Company should be able to pay its debts as they
become absolute and mature, and (iii) the capital remaining in the Company after
the consummation of the transactions contemplated by this Agreement will not be
unreasonably small for the business in which the Company is engaged and as
proposed to be conducted following the Closing.
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2V. PROCEEDINGS. All corporate proceedings taken or required to
be taken by the Company and the Sellers and the Other Sellers at or prior to the
Closing in connection with the transactions contemplated hereby shall have been
taken and all documents incident thereto shall be reasonably satisfactory in
form and substance to the Purchasers and their special counsel.
2W. CLOSING DOCUMENTS. At the Closing, the Company shall have
delivered to the Purchasers all of the following documents (except that the
documents referred to in clause (v) below shall only be delivered to the SBIC
Purchaser):
(i) a certificate of an officer of the Company, dated the Closing
Date, stating that the conditions specified in Section 1 and Paragraphs 2A
through 2V (other than Paragraphs 2D, 2E, 2G, 2I, 2J, 2S, 2T and 2V),
inclusive, have been fully satisfied;
(ii) certified copies of (a) the resolutions duly adopted by the
Company's board of directors authorizing the execution, delivery and
performance of this Agreement and each of the other agreements contemplated
hereby, the adoption and filing of the Articles of Incorporation referred
to in Paragraph 2B, the amendment and restatement of the Bylaws referred to
in Paragraph 2C, the Investment Transaction, the Repurchase Transaction,
the Senior Debt Transaction and the other transactions contemplated hereby
and (b) the resolutions duly adopted by the Company's shareholders adopting
the amendment and restatement of the Articles of Incorporation referred to
in Paragraph 2B the amendment and restatement of the Bylaws referred to in
Xxxxxxxxx 0X and approving the amendment and restatement of the Stock
Option Plans;
(iii) certified copies of the Articles of Incorporation and the
Bylaws, each as in effect at the Closing;
(iv) copies of all Third Party Approvals and Governmental
Approvals (including all blue sky law filings and waivers of all preemptive
rights and rights of first refusal);
(v) copies of (a) duly completed and executed SBA Forms 480, 652
and 1031 (Parts A and B), (b) a business plan showing the Company's
financial projections (including balance sheets and income and cash flow
statements) for a five-year period, (c) a written certification from the
Company regarding its intended use of the proceeds from the Financing and
(d) a list, after giving effect to the transactions contemplated hereby, of
(1) the name of each of the Company's directors, (2) the name and title of
each of the Company's officers and (3) the name of each of the Company's
shareholders setting forth the number and class of shares held;
(vi) good standing certificates of the Company from its
jurisdiction of incorporation and each jurisdiction in which the Company is
qualified to do business as a foreign corporation, in each case dated as of
a recent date prior to the Closing Date; and
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(vii) such other documents relating to the transactions
contemplated by this Agreement as the Purchasers or their special counsel
may reasonably request.
2X. WAIVER. Any condition specified in this Section 2 may be
waived if consented to in writing by the Requisite Purchasers.
Section 3. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY AND THE
SELLERS AT THE CLOSING. The obligation of the Company and the Sellers to
consummate the transactions contemplated hereby is subject to the satisfaction
as of the Closing of the following conditions:
3A. REPRESENTATIONS AND WARRANTIES; COVENANTS. The
representations and warranties contained in Section 7 hereof shall be true and
correct in all material respects at and as of the date hereof and at and as of
the Closing as though then made and as though the Closing Date was substituted
for the date of this Agreement throughout such representations and warranties,
except to the extent of any changes expressly contemplated by this Agreement and
except for any representations and warranties that speak only as of a certain
date (which representations and warranties shall be true and correct in all
material respects as of such date), and the Purchasers shall have performed in
all material respects all of the covenants required to be performed by the
Purchasers hereunder prior to the Closing.
3B. AMENDMENT OF ARTICLES OF INCORPORATION. The Articles of
Incorporation shall be in full force and effect under the laws of the State of
California as of the Closing.
3C. SHAREHOLDERS AGREEMENT. The Purchasers shall have entered
into the Shareholders Agreement, and the Shareholders Agreement shall be in full
force and effect as of the Closing and shall not have been amended or modified.
3D. REGISTRATION AGREEMENT. The Purchasers shall have entered
into the Registration Agreement, and the Registration Agreement shall be in full
force and effect as of the Closing and shall not have been amended or modified.
3E. ESCROW AGREEMENT. The Purchaser Representatives and the
Escrow Agent shall have entered into the Escrow Agreement, and the Escrow
Agreement shall be in full force and effect as of the Closing and shall not have
been amended or modified.
3F. LITIGATION. No suit, action or other proceeding shall be
pending before any court or governmental or regulatory official, body or
authority in which it is sought to restrain or prohibit the transactions
contemplated hereby (other than any such suit, action or proceeding brought by
any of the Parties against any of the other Parties), and no injunction,
judgment, order, decree or ruling with respect thereto shall be in effect.
3G. GOVERNMENTAL CONSENTS AND APPROVALS. The Parties shall have
received or obtained all Governmental Approvals that are necessary for the
consummation of the transactions
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contemplated hereby, and the waiting period under the Xxxx-Xxxxx-Xxxxxx Act
shall have expired or been terminated.
3H. INVESTMENT TRANSACTION. The Purchasers shall have
immediately prior thereto purchased the Preferred Stock and the Company shall
have received payment therefor in full, in the manner set forth in Paragraph 1D
above.
3I. EXPENSES. At the Closing, the Company shall have paid or
reimbursed the Sellers for their fees and expenses as provided in Paragraph 11A
below.
3J. WAIVER. Any condition specified in this Section 3 may be
waived if consented to in writing by the Company and the Seller Representative.
Section 4. PRE-CLOSING COVENANTS AND AGREEMENTS. Each of the
Parties agrees as follows with respect to the period between the date of this
Agreement and the Closing:
4A. GENERAL. Each of the Parties shall use reasonable best
efforts to take all action and to do all things necessary, proper or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the conditions set forth
in Sections 2 and 3 above). On the date hereof, the Company shall (and shall
cause the Other Sellers to) execute and deliver the Stock Purchase Agreement.
At the Closing, the applicable Parties shall execute and deliver the Escrow
Agreement, the Shareholders Agreement, the Registration Agreement and the other
agreements and instruments contemplated hereby to be executed and delivered at
the Closing.
4B. MAINTENANCE OF BUSINESS. The Company shall, and the Sellers
shall cause the Company to, (i) maintain its assets in good operating condition
and repair (normal wear and tear excepted), (ii) maintain insurance reasonably
comparable to that in effect on the date of the Latest Balance Sheet,
(iii) maintain inventory, supplies and spare parts at customary operating levels
consistent with current practices, and replace in accordance with past practice
any inoperable, worn out or obsolete assets with modern assets of comparable
quality, (iv) maintain its books, accounts and records in accordance with past
custom and practice as used in the preparation of the Latest Balance Sheet and
the financial statements described in Paragraph 5E below, and (v) maintain in
full force and effect the existence of all Intellectual Property Rights.
4C. THIRD PARTY NOTICES AND CONSENTS. The Company shall, and the
Sellers shall cause the Company to, use reasonable best efforts to give required
notices to third parties and obtain any required third party consents in
connection with the matters contemplated by this Agreement.
4D. GOVERNMENTAL NOTICES AND CONSENTS. Each of the Parties shall
give any notices to, make any filings with, and use reasonable best efforts to
obtain, any authorizations, consents and approvals of governments and
governmental agencies in connection with the matters contemplated by this
Agreement. Without limiting the generality of the foregoing, each of the
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Parties shall use reasonable best efforts to obtain an early termination of the
waiting period under the Xxxx-Xxxxx-Xxxxxx Act, and shall make any further
filings pursuant thereto that may be necessary, proper or advisable in
connection therewith, and the Company shall pay all filing and other fees
related to any filings under the Xxxx-Xxxxx-Xxxxxx Act.
4E. OPERATION OF BUSINESS. The Company shall, and the Sellers
shall cause the Company to, operate its business only in the usual and ordinary
course of business consistent with past practice and use reasonable best efforts
to preserve the goodwill and organization of its business and the relationships
with its customers, suppliers, employees and other Persons having business
relations with the Company. Without limiting the generality of the foregoing,
prior to the Closing, the Company shall not:
(i) take or omit to take any action that would require disclosure
under Paragraph 5M below or that would otherwise result in a material
breach of any of the representations, warranties or covenants made by the
Company or the Sellers in this Agreement;
(ii) take any action or omit to take any action which act or
omission would reasonably be anticipated to have a Material Adverse Effect;
(iii) (a) enter into any contract out of the ordinary course of
business or restricting in any material respect the conduct of its
business, (b) make any loans or Investments (other than advances to the
Company's employees in the ordinary course of business consistent with past
custom and practice), (c) increase any officer's or employee's
compensation, incentive arrangements or other benefits, except for
increases or bonuses made in the ordinary course of business consistent
with past custom and practice (it being understood, however, that no
bonuses or other extraordinary compensation may be paid (or authorized) to
the Seller Representative prior to the Closing), (d) redeem, purchase or
otherwise acquire directly or indirectly any of its issued and outstanding
capital stock, or any outstanding rights or securities exercisable or
exchangeable for or convertible into its capital stock, or make any
distribution or dividend to any of its shareholders or other Persons,
(e) amend its articles of incorporation or bylaws or issue or agree to
issue any capital stock or any rights to acquire, or securities convertible
into or exchangeable for, any of its capital stock, (f) directly or
indirectly engage in any transaction, arrangement or contract with any
officer, director, shareholder or other insider or Affiliate of the Company
which is not in the ordinary course of business consistent with past
practice and at arm's length, (g) execute any guaranty, issue any debt or
borrow any money, or (h) buy or sell any assets out of the ordinary course
of business consistent with past practice; or
(iv) enter into any transaction, arrangement or contract except on
an arm's-length basis in the ordinary course of business consistent with
past custom and practice.
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Notwithstanding the foregoing, nothing in this Paragraph 4E shall
prohibit the Company from taking any action or omitting to take any action as
required or as expressly contemplated by this Agreement.
4F. FULL ACCESS. The Company shall, and the Sellers shall cause
the Company to, afford, and cause its officers, directors, employees, attorneys,
accountants and other agents to afford, to the Purchasers and their accounting,
legal and other representatives and potential lenders, as well as their
respective officers, employees, affiliates and other agents, full and complete
access at all reasonable times and during normal business hours to the Company's
personnel and to business, financial, legal, tax, compensation and other data
and information concerning the Company's affairs and operations.
4G. COMPLIANCE WITH AGREEMENTS AND LAWS. The Company shall, and
the Sellers shall cause the Company to, (i) comply with all material obligations
pursuant to any contract or agreement, whether oral or written, express or
implied and (ii) comply with all material applicable laws.
4H. PAYMENT OF OBLIGATIONS. The Company shall, and the Sellers
shall cause the Company to, pay and discharge when payable all Taxes,
assessments and governmental charges imposed upon its properties or upon the
income or profits therefrom (in each case before the same becomes delinquent and
before penalties accrue thereon unless contested in good faith by appropriate
proceedings) and pay and discharge all claims for labor, materials or supplies
in the ordinary course of business consistent with past practice.
4I. NOTICE OF MATERIAL DEVELOPMENTS. Each Party shall give
prompt written notice to the other Parties of (i) any known material variances
in any of its representations or warranties contained in Sections 5, 6 or 7
below, as the case may be, (ii) any known breach of any covenant hereunder by
such Party and (iii) any other material development affecting the ability of
such Party to consummate the transactions contemplated by this Agreement.
4J. EXCLUSIVITY. None of the Company, the Sellers or any of
their respective Affiliates, representatives, officers, employees, directors, or
agents shall, directly or indirectly, (i) submit, solicit, initiate, encourage
or discuss any proposal or offer from any Person (other than the Purchasers in
connection with the transactions contemplated hereby) or enter into any
agreement or accept any offer relating to or consummate any (a) reorganization,
liquidation, dissolution or recapitalization of the Company, (b) merger or
consolidation involving the Company, (c) purchase or sale of any assets or
capital stock (or any rights to acquire, or securities convertible into or
exchangeable for, any such capital stock) of the Company (other than a purchase
or sale of inventory in the ordinary course of business consistent with past
custom and practice or a purchase of stock as contemplated by this Agreement),
or (d) similar transaction or business combination involving the Company or its
assets (each of the foregoing transactions described in clauses (a) through (d),
a "COMPANY TRANSACTION") or (ii) furnish any information with respect to, assist
or participate in or facilitate in any other manner any effort or attempt by any
Person to do or seek to do any of the
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foregoing. The Company and each of the Sellers agree to notify the Purchasers
immediately if any Person makes any proposal, offer, inquiry or contact with
respect to a Company Transaction. In the event that any of the Company or the
Sellers breaches the provisions of this Paragraph 4J and the transactions
contemplated hereby are not consummated for any reason, the Company shall
promptly reimburse the Purchasers and their Affiliates for all out-of-pocket
fees and expenses incurred before or after the date of this Agreement by the
Purchasers and their Affiliates related to the transactions contemplated hereby,
including fees and expenses of legal counsel, accountants and other consultants
and advisors retained by the Purchasers in connection with the transactions
contemplated hereby. The foregoing provisions are in addition to, and not in
derogation of, any statutory or other remedy that the Purchasers may have for a
breach of this Paragraph 4J.
4K. TAX MATTERS. Without the prior written consent of the
Purchasers, the Company shall not make or change any election, change an annual
accounting period, adopt or change any accounting method, file any amended Tax
Return, enter into any closing agreement, settle any Tax claim or assessment
relating to the Company, surrender any right to claim a refund of Taxes, consent
to any extension or waiver of the limitation period applicable to any Tax claim
or assessment relating to the Company, or take any other similar action, or omit
to take any action relating to the filing of any Tax Return or the payment of
any Tax, if such election, adoption, change, amendment, agreement, settlement,
surrender, consent or other action or omission would have the effect of
materially increasing the present or future Tax liability or decreasing any
present or future Tax asset of the Company or the Purchasers.
4L. ACTIONS WITH RESPECT TO REPURCHASED SHARES. Each Seller
agrees that such Seller shall not sell, redeem, convert, assign, exchange,
transfer, pledge or otherwise dispose of or encumber any interest in such
Seller's Repurchased Shares (or any other shares of Common Stock) or any stock
options, except as expressly contemplated by this Agreement.
4M. EMPLOYEES. The Company shall give the Purchasers prompt
written notice if any executive or key employee of the Company or any group of
employees of the Company terminates employment with the Company or if the
Company or any of the Sellers has knowledge that any executive or key employee
of the Company or group of employees of the Company has any plans to terminate
employment with the Company.
Section 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SELLERS. As a material inducement to the Purchasers to enter into this Agreement
and purchase the Preferred Stock hereunder, the Company and each of the Sellers
hereby represent and warrant to the Purchasers as follows:
5A. ORGANIZATION, CORPORATE POWER AND LICENSES. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California and is qualified to do business in every jurisdiction
in which its ownership of property or conduct of business requires it to
qualify, except where the failure to so qualify would not have a Material
Adverse Effect. The Company possesses all requisite corporate power and
authority necessary to
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own and operate its properties, to carry on its businesses as now conducted and
presently proposed to be conducted and to carry out the transactions
contemplated by this Agreement. The copies of the Company's charter documents
and bylaws which have been furnished to the Purchasers' special counsel reflect
all amendments made thereto at any time prior to the date of this Agreement and
are correct and complete and will be amended prior to the Closing as required by
Paragraphs 2B and 2C above.
5B. CAPITAL STOCK AND RELATED MATTERS.
(i) As of the date hereof, the authorized capital stock of the
Company consists of 30,000,000 shares of Common Stock, of which 11,060,000
shares are issued and outstanding and are held beneficially and of record by the
Sellers as set forth on the CAPITALIZATION SCHEDULE attached hereto (free and
clear of all Encumbrances) and of which 5,200,000 shares are reserved for
issuance upon exercise of stock options authorized pursuant to the Stock Option
Plans. As of the Closing and immediately thereafter (and after giving effect to
the issuance of the Preferred Stock), the authorized capital stock of the
Company shall consist of (a) 482,684 shares of Redeemable Preferred Stock, all
of which shall be issued and outstanding, (b) 22,790,000 shares of Convertible
Preferred Stock, of which 22,785,424 shall be issued and outstanding and
(c) 50,000,000 shares of Common Stock, of which 2,212,000 shares shall be issued
and outstanding and 22,790,000 shares shall be reserved for issuance upon
conversion of the Convertible Preferred Stock and 6,268,397 shares shall be
reserved for issuance upon exercise of stock options authorized pursuant to the
Stock Option Plans. Except as set forth in the immediately preceding sentence
or on the CAPITALIZATION SCHEDULE, the Company does not have and as of the
Closing Date will not have outstanding any, stock or securities convertible or
exchangeable for any shares of its capital stock or containing any profit
participation features, nor any rights or options to subscribe for or to
purchase its capital stock or any stock or securities convertible into or
exchangeable for its capital stock or any stock appreciation rights or phantom
stock plans, other than, as of the Closing Date, any options granted pursuant to
the Stock Option Plans as of the Closing Date. The Company is not subject to
any obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock or any warrants, options or other rights
to acquire its capital stock, other than as expressly provided in or
contemplated by this Agreement and, as of the Closing, pursuant to the Articles
of Incorporation and the Shareholders Agreement. As of the date hereof and as
of the Closing and immediately thereafter, all of the outstanding shares of the
Company's capital stock are or shall be validly issued, fully paid and
nonassessable.
(ii) There are no statutory or contractual shareholder preemptive
rights or rights of first refusal or other similar restrictions with respect to
the issuance of the Preferred Stock hereunder or the issuance of any Common
Stock upon the conversion of the Convertible Preferred Stock. Except for such
violation or violations which individually or in the aggregate have not had and
would not reasonably be expected to have a Material Adverse Effect, the Company
has not violated any applicable federal or state securities laws in connection
with the offer, sale or issuance of any of its capital stock and the offer, sale
and issuance of the Preferred Stock hereunder, the grant of any stock options
under the Stock Option Plans and the issuance of Common Stock upon the
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conversion of the Convertible Preferred Stock does not require registration
under the Securities Act or any applicable state securities laws. Except for
the Shareholders Agreement to be executed and delivered at the Closing, there
are no agreements or understandings between the Company's shareholders or among
any other Person with respect to the voting or transfer of the Company's capital
stock or with respect to any other aspect of the Company's governance.
5C. SUBSIDIARIES; INVESTMENTS. Except with respect to the
contemplated Netcom Europe transaction and as set forth on the attached
INVESTMENTS AND SUBSIDIARIES SCHEDULE, the Company does not own or hold the
right to acquire any shares of stock or any other security or interest in any
other Person. Except as set forth on the INVESTMENTS AND SUBSIDIARIES SCHEDULE
attached hereto, the Company has never had any Subsidiaries and the Company does
not have any obligation to make any Investments in any Person.
5D. AUTHORIZATION; NO BREACH. The execution, delivery and
performance of this Agreement and all of the other agreements and instruments
contemplated hereby to which the Company is a party, the offering, sale and
issuance of the Preferred Stock hereunder, the repurchase of the Repurchased
Shares pursuant hereto, the consummation of the transactions contemplated by the
Stock Purchase Agreement, the consummation of the Senior Debt Transaction, the
issuance of Common Stock upon the conversion of the Convertible Preferred Stock,
the amendment and restatement of the Articles of Incorporation and the amendment
and restatement of the Bylaws have been duly authorized by the Company. This
Agreement and the Stock Purchase Agreement each constitute a valid and binding
obligation of the Company, enforceable in accordance with their respective
terms, and the Articles of Incorporation, when filed under the laws of the State
of California in accordance with the terms hereof, and all other agreements and
instruments contemplated hereby to which the Company is a party, when executed
and delivered by the Company in accordance with the terms hereof, shall each
constitute a valid and binding obligation of the Company, enforceable in
accordance with their respective terms. Except as set forth on the attached
RESTRICTIONS SCHEDULE, the execution and delivery by the Company of this
Agreement and all other agreements and instruments contemplated hereby to which
the Company is a party, the offering, sale and issuance of the Preferred Stock
hereunder, the repurchase of the Repurchased Shares pursuant hereto, the
consummation of the transactions contemplated by the Stock Purchase Agreement,
the consummation of the Senior Debt Transaction, the issuance of Common Stock
upon the conversion of the Convertible Preferred Stock, the amendment and
restatement of the Articles of Incorporation, the amendment and restatement of
the Bylaws and the fulfillment of and compliance with the respective terms
hereof and thereof by the Company do not and shall not (i) conflict with or
result in a breach of the terms, conditions or provisions of, (ii) constitute a
default under (whether with or without the passage of time, the giving of notice
or both), (iii) result in the creation of any Lien upon the Company's capital
stock or material assets pursuant to, (iv) give any third party the right to
modify, terminate or accelerate any obligation under, (v) result in a violation
of, or (vi) require any authorization, consent, approval, exemption or other
action by or notice or declaration to, or filing with, any third party or any
court or administrative or governmental body or agency pursuant to, the
Company's articles of incorporation or bylaws, or any material law, statute,
rule or regulation to which the Company is subject, or any material agreement,
instrument,
-14-
order, judgment or decree to which the Company is subject. Neither the Company
nor any of the Sellers is a party to or bound by any written or oral agreement
or understanding with respect to a Company Transaction other than this
Agreement, and all of them have terminated all discussions with third parties
(other than the Purchasers) regarding Company Transactions (other than any
unsolicited communications from third parties as to which the Company and the
Sellers have responded that they are unable to discuss a Company Transaction).
5E. FINANCIAL STATEMENTS. Attached hereto as the FINANCIAL
STATEMENTS SCHEDULE are the following financial statements:
(i) the audited balance sheet of the Company as of July 31, 1996
and the audited balance sheet of the Company as of July 31, 1997 (the
"LATEST BALANCE SHEET"), and the related statements of income and cash
flows (or the equivalent) for the fiscal years then ended; and
(ii) the unaudited balance sheet of the Company as of July 31,
1995 and the related statements of income and cash flows (or the
equivalent) for the fiscal year then ended.
Each of the foregoing financial statements (including in all cases the notes
thereto, if any) is accurate and complete, is consistent with the books and
records of the Company (which, in turn, are accurate and complete), fairly
presents the financial condition and operating results of the Company and has
been prepared in accordance with GAAP consistently applied as of the dates of
each such financial statement, subject in the case of the unaudited financial
statements to the absence of footnote disclosures (none of which footnote
disclosures would, alone or in the aggregate, be materially adverse to the
business, operations, assets, liabilities, financial condition, operating
results, cash flow or net worth of the Company).
5F. ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on
the attached LIABILITIES SCHEDULE, the Company does not have any obligation or
liability (whether accrued, absolute, contingent, unliquidated or otherwise,
whether due or to become due and regardless of when asserted) arising out of
transactions entered into at or prior to the date hereof, or any action or
inaction at or prior to the date hereof, or any state of facts existing at or
prior to the date hereof, other than: (i) liabilities set forth on the
liabilities side of the Latest Balance Sheet (including any notes thereto),
(ii) liabilities that would not be required under GAAP to be set forth on a
balance sheet (or any notes thereto), (iii) liabilities and obligations which
have arisen after the date of the Latest Balance Sheet in the ordinary course of
business (none of which is a liability resulting from noncompliance with any
applicable laws, breach of contract, breach of warranty (in excess of any
warranty reserve specifically established with respect thereto and included on
the Latest Balance Sheet), tort, infringement, claim or lawsuit) and (iv) other
liabilities and obligations expressly disclosed in the Schedules referred to in
this Section 5.
5G. ACCOUNTS RECEIVABLE. Except as set forth on the attached
ACCOUNTS RECEIVABLE SCHEDULE, all accounts receivable reflected on the Latest
Balance Sheet and all accounts
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receivable to be reflected on the Company's books and records as of the Closing
Date (net of allowances for doubtful accounts as reflected thereon and as
determined in accordance with GAAP consistently applied) are or shall be valid
receivables arising in the ordinary course of business, and are or shall be
current and subject to no valid counterclaims or setoffs. No Person has any
Lien on such receivables or any part thereof, and no agreement for deduction,
free goods, discount or other deferred price or quantity adjustment has been
made with respect to any such receivables.
5H. INVENTORIES. Except as set forth on the attached INVENTORIES
SCHEDULE, the inventory shown on the Latest Balance Sheet and the inventory to
be shown on the Company's books and records as of the Closing Date (net of the
reserves applicable thereto as reflected thereon and as determined in accordance
with GAAP consistently applied), consists or shall consist of a quantity and
quality usable and saleable in the ordinary course of business, and is not
excess, obsolete or damaged (as determined in accordance with GAAP).
5I. PRODUCT WARRANTY; PRODUCT CERTIFICATIONS.
(i) All products and equipment manufactured, sold, leased or
delivered by the Company and all services rendered by the Company have been in
conformity in all material respects with all applicable contractual commitments
and all express and implied warranties, and to the best of the Company's
knowledge, the Company does not have any liability (and, to the Company's
knowledge, there is no reasonable basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand against
it giving rise to any such liability) for replacement or repair thereof or other
damages in connection therewith in excess of any warranty reserve established
with respect thereto and included on the Latest Balance Sheet. No products or
equipment manufactured, sold, leased or delivered by the Company and no services
rendered by the Company are subject to any guaranty, warranty or other indemnity
beyond the applicable standard terms and conditions of such sale, lease or
service (including as a result of any course of conduct between the Company and
any Person or as a result of any statements in any of the Company's product or
promotional literature). The attached PRODUCT WARRANTY SCHEDULE includes copies
of such standard terms and conditions of sale, lease and service for the Company
(containing applicable guaranty, warranty and indemnity provisions). The
Company has not been notified in writing of any claims for (and the Company has
no knowledge of any threatened claims for) any extraordinary product returns,
warranty obligations or product services relating to any of its products or
services.
(ii) The Company holds all material product registrations,
accreditations and other certifications required for the conduct of its business
(all of such registrations, accreditations and certifications being referred to
herein as "PRODUCT CERTIFICATIONS"). The Company is in compliance with the
terms and conditions of all such Product Certifications and no notices have been
received by the Company alleging the failure to hold any Product Certification.
To the Company's knowledge, there is no reasonable basis for any present or
future action rescinding any such Product Certifications and no loss or
expiration of any such Product Certifications has had or would reasonably be
expected to have a Material Adverse Effect. All of such Product Certifications
will be held by the Company on identical terms immediately following the
Closing.
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5J. PRODUCT LIABILITY. To the best of the Company's knowledge,
except as set forth on the attached PRODUCT LIABILITY SCHEDULE, the Company does
not have any liability (and, to the Company's knowledge, there is no reasonable
basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against it giving rise to any
liability) arising out of any injury to individuals or property as a result of
the ownership, possession or use of any products or equipment manufactured,
sold, leased or delivered by the Company or with respect to any services
rendered by the Company.
5K. PRODUCT RECALL, ETC. Except as set forth on the attached
PRODUCT RECALL SCHEDULE, there have been no product or equipment recalls,
withdrawals or seizures with respect to any products or equipment manufactured,
sold, leased or delivered by the Company or with respect to any services
rendered by the Company.
5L. NO MATERIAL ADVERSE EFFECT. Since July 31, 1997, there has
occurred no fact, event or circumstance which has had or would reasonably be
expected to have a Material Adverse Effect. Since July 31, 1997, the Company
has conducted its business only in the ordinary course of business consistent
with past practice.
5M. ABSENCE OF CERTAIN DEVELOPMENTS. Except as expressly
contemplated by this Agreement or as set forth on the attached DEVELOPMENTS
SCHEDULE, since July 31, 1997, the Company has not:
(i) issued any notes, bonds or other debt securities or any
capital stock or other equity securities or any securities or rights
convertible, exchangeable or exercisable into any capital stock or other equity
securities;
(ii) borrowed any amount or incurred or become subject to any
material liabilities, except current liabilities incurred in the ordinary course
of business consistent with past practice and liabilities under contracts
entered into in the ordinary course of business;
(iii) discharged or satisfied any material Lien or paid any
material obligation or liability, other than current liabilities paid in the
ordinary course of business;
(iv) declared, set aside or made any payment or distribution of
cash or other property to any of the Company's shareholders with respect to such
shareholder's capital stock or other equity securities or purchased, redeemed or
otherwise acquired any shares of its capital stock or other equity securities
(including any warrants, options or other rights to acquire its capital stock or
other equity securities);
(v) mortgaged or pledged any of its properties or assets or
subjected them to any Lien, except for Permitted Encumbrances;
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(vi) sold, assigned, transferred, leased, licensed or otherwise
encumbered any of its material tangible assets, except in the ordinary course of
business consistent with past practice, or canceled any material debts or
claims;
(vii) sold, assigned, transferred, leased, licensed or otherwise
encumbered any Intellectual Property Rights or other intangible assets,
disclosed any material proprietary confidential information to any Person (other
than to the Purchasers and other than in the ordinary course of business
consistent with past practice in circumstances in which it has imposed
reasonable confidentiality restrictions), or abandoned or knowingly permitted to
lapse any Intellectual Property Rights;
(viii) made or granted any bonus or any wage or salary increase to
any employee or group of employees (except as required by pre-existing contracts
described on the attached CONTRACTS SCHEDULE or in the ordinary course of
business consistent with past practice), or made or granted any increase in any
employee benefit plan or arrangement, or amended or terminated any existing
employee benefit plan or arrangement or adopted any new employee benefit plan or
arrangement;
(ix) suffered any extraordinary losses or waived any rights of
material value (whether or not in the ordinary course of business or consistent
with past practice);
(x) made capital expenditures or commitments therefor that
aggregate in excess of $250,000;
(xi) delayed or postponed the payment of any accounts payable or
any other liability or obligation or agreed or negotiated with any party to
extend the payment date of any accounts payable or accelerated the collection of
any accounts or notes receivable;
(xii) made any loans or advances to, guarantees for the benefit of,
or any Investments in, any Persons (other than advances to the Company's
employees in the ordinary course of business consistent with past practice);
(xiii) made any charitable contributions or pledges exceeding in the
aggregate $10,000;
(xiv) suffered any damage, destruction or casualty loss exceeding
in the aggregate $25,000, whether or not covered by insurance;
(xv) made any change in any method of accounting or accounting
policies, other than those required by GAAP which have been disclosed in writing
to the Purchasers, or made any write-down in the value of its inventory that is
material or that is other than in the usual, regular and ordinary course of
business consistent with past practice;
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(xvi) made any Investment in or taken any steps to incorporate any
Subsidiary;
(xvii) amended its articles of incorporation, by-laws or other
organizational documents;
(xviii) entered into any agreement or arrangement prohibiting or
restricting it from freely engaging in any business or otherwise restricting the
conduct of its business;
(xix) entered into any contract other than in the ordinary course
of business consistent with past practice, entered into any other material
transaction, whether or not in the ordinary course of business or consistent
with past practice, or materially changed any business practice; or
(xx) agreed, whether orally or in writing, to do any of the
foregoing.
5N. ASSETS.
(i) Except as set forth on the attached ASSETS SCHEDULE, the
Company has good and valid title to, a valid leasehold interest in, or a valid
license to use, the material properties and assets, tangible or intangible, used
by it, located on its premises or shown on the Latest Balance Sheet or acquired
thereafter, free and clear of all Liens, except for properties and assets
disposed of in the ordinary course of business since the date of the Latest
Balance Sheet and except for Liens disclosed on the Latest Balance Sheet
(including any notes thereto) and Permitted Encumbrances.
(ii) Except as set forth on the attached ASSETS SCHEDULE, all of
the Company's material buildings, equipment, machinery, fixtures, improvements
and other material tangible assets (whether owned or leased) are in good
condition and repair (ordinary wear and tear excepted) and are fit for use in
the ordinary course of the Company's business as presently conducted and as
presently proposed to be conducted. All such assets have been installed and
maintained in all material respects in accordance with all applicable laws,
regulations and ordinances.
(iii) Except as set forth on the attached ASSETS SCHEDULE, the
Company owns, has a valid leasehold interest in, or has a valid license to use,
all of the material assets, properties and rights, whether tangible or
intangible, necessary for the conduct of its business as presently conducted and
as presently proposed to be conducted.
5O. TAX MATTERS.
(i) Except as set forth on the attached TAXES SCHEDULE:
(a) the Company has filed all Tax Returns which it is
required to file under applicable laws and regulations, and all such Tax
Returns are complete and correct in
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all material respects and have been prepared in material compliance with
all applicable laws and regulations;
(b) the Company has paid all material Taxes due and owing
by it (whether or not such Taxes are shown or required to be shown on a Tax
Return) and has withheld and paid over to the appropriate taxing authority
all material Taxes which it is required to withhold from amounts paid or
owing to any employee, shareholder, creditor or other third party;
(c) the accrual for Taxes on the Latest Balance Sheet
would be adequate to pay all Tax liabilities of the Company if its current
tax year were treated as ending on the date of the Latest Balance Sheet
(excluding any amount recorded which is attributable solely to timing
differences between book and Tax income);
(d) the assessment of any additional Taxes for periods for
which Tax Returns have been filed by the Company shall not exceed the
recorded liability therefor on the Latest Balance Sheet (excluding any
amount recorded which is attributable solely to timing differences between
book and Tax income);
(e) the federal income Tax Returns of the Company have
never been audited;
(f) the Company has not received from any foreign,
federal, state or local taxing authority (including jurisdictions where the
Company has not filed Tax Returns) any (i) written notice indicating an
intent to open an audit or other review, (ii) request for information
related to Tax matters or (iii) notice of deficiency or proposed adjustment
for any amount of Tax proposed, asserted or assessed by any taxing
authority against the Company;
(g) no foreign, federal, state or local tax audits or
administrative or judicial Tax proceedings are pending or, to the Company's
knowledge, being conducted with respect to the Company;
(h) no claim has ever been made by a taxing authority in a
jurisdiction where the Company does not file Tax Returns that the Company
is or may be subject to Taxes assessed by such jurisdiction;
(i) the Company has not been a member of an Affiliated
Group or filed or been included in a combined, consolidated or unitary
income Tax Return;
(j) the Company is not a party to or bound by any Tax
allocation or Tax sharing agreement;
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(k) there are no Liens for Taxes (other than for current
Taxes not yet due and payable) upon the assets of the Company; and
(l) the Company shall not be required to (i) as a result
of a change in method of accounting for a taxable period ending on or prior
to the Closing Date, include any adjustment in taxable income for any
taxable period (or portion thereof) ending after the Closing Date, (ii) as
a result of any "closing agreement," as described in Section 7121 of the
Code (or any corresponding provision of state, local or foreign income Tax
law) executed on or before the Closing Date, include any item of income in,
or exclude any item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date, (iii) as a
result of any sale reported on the installment method where such sale
occurred on or prior to the Closing Date, include any item of income in, or
exclude any item of deduction from, taxable income for any taxable period
(or portion thereof) ending after the Closing Date, or (iv) as a result of
any prepaid amount received on or prior to the Closing Date, include any
item of income in, or exclude any item of deduction from, taxable income
for any taxable period (or portion thereof) ending after the Closing Date.
(ii) The Company has not made an election under Section 341(f) of
the Code. The Company is not presently liable for the Taxes of another Person
(1) under Treas. Reg. Section 1.1502-6 (or comparable provisions of state, local
or foreign law), (2) as a transferee or successor or (3) by contract or
indemnity or otherwise.
(iii) The materiality qualifications in clauses (i)(a) and (i)(b)
in this Paragraph 5O are included for disclosure purposes only and shall be
disregarded for purposes of determining whether there has been a breach of the
representations and warranties contained in such clauses and for purposes of
determining the amount of any resulting Loss and indemnification with respect
thereto.
5P. CONTRACTS AND COMMITMENTS.
(i) Except as expressly contemplated by this Agreement or as set
forth on the attached CONTRACTS SCHEDULE, the attached INTELLECTUAL PROPERTY
SCHEDULE, the attached EMPLOYEES SCHEDULE, or the attached EMPLOYEE BENEFITS
SCHEDULE, the Company is not a party to or bound by any written or oral:
(a) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit plan or material
arrangement or practice;
(b) collective bargaining agreement or any other contract
with any labor union, or severance agreements, programs, policies or
arrangements;
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(c) management agreement, contract for the employment of
any officer, individual employee or other Person on a full-time, part-time,
consulting or other basis providing annual cash or other compensation in
excess of $50,000 or providing for the payment of any cash or other
compensation or benefits upon the consummation of the transactions
contemplated hereby;
(d) contract or agreement requiring the consent of any
party thereto upon a change in control of the Company, containing any
provision which would result in a modification of any rights or obligations
of any party thereunder upon a change in control of the Company or which
would provide any party any remedy (including rescission or liquidated
damages) in the event of a change in control of the Company;
(e) contract under which it has advanced or loaned monies
to any other Person or otherwise agreed to advance, loan or invest any
funds (other than advances to the Company's employees in the ordinary
course of business consistent with past practice);
(f) agreement or indenture relating to borrowed money or
other Indebtedness or the mortgaging, pledging or otherwise placing a Lien
on any material asset or material group of assets of the Company or any
letter of credit arrangements;
(g) guaranty of any obligation for borrowed money or
otherwise (other than endorsements made for collection in the ordinary
course of business);
(h) lease or agreement under which the Company is lessee
of or holds or operates any property, real or personal, owned by any other
Person, except for any lease of personal property under which the aggregate
annual rental payments do not exceed $25,000;
(i) lease or agreement under which the Company is lessor
of or permits any third party to hold or operate any property, real or
personal, owned or controlled by the Company;
(j) license or royalty agreements;
(k) nondisclosure or confidentiality agreements (other
than those entered into in the ordinary course of business with customers,
suppliers and employees);
(l) contract or group of related contracts with the same
party or group of affiliated parties for the purchase of raw materials,
commodities, supplies, products, equipment or other personal property or
for the receipt of services under which the undelivered balance of such
products and services has a selling price in excess of $50,000 (other than
purchase orders entered into in the ordinary course of business or
contracts disclosed elsewhere in connection with this Paragraph 5P);
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(m) contract or group of related contracts with the same
party or group of affiliated parties for the sale of raw materials,
commodities, supplies, products or other personal property or for the
furnishing of services under which the undelivered balance of such products
or services due from the Company has a selling price in excess of $50,000
(other than purchase orders entered into in the ordinary course of business
or contracts disclosed elsewhere in connection with this Paragraph 5P);
(n) other contract or group of related contracts with the
same party or group of affiliated parties continuing over a period of more
than six months from the date or dates thereof, not terminable by the
Company upon 30 days' or less notice without penalty or involving more than
$50,000 (other than purchase orders entered into in the ordinary course of
business or contracts disclosed elsewhere in connection with this Paragraph
5P);
(o) contract or group of related contracts requiring the
payment of any fee, penalty or other amount by the Company in the event of
any failure to perform or late performance of such contract or contracts by
the Company;
(p) contract relating to the marketing, sale, advertising
or promotion of its products;
(q) warranty agreement with respect to products sold or
leased (other than any such agreement containing the standard terms and
conditions described on the attached PRODUCT WARRANTY SCHEDULE) or
indemnity agreement with any supplier under which it is obligated to
indemnify such supplier against product liability claims;
(r) agreements relating to the ownership of or investments
in any business or enterprise, including investments in joint ventures and
minority equity investments;
(s) assignment, license, indemnification or other
agreement with respect to any intangible property (including any
Intellectual Property Rights);
(t) agreement under which it has granted any Person any
registration rights (including demand or piggyback registration rights);
(u) sales representative, sales or distribution agreement
or material agreement relating to brokers or agents or the export and/or
import of any goods or equipment;
(v) power of attorney or other similar agreement or grant
of agency;
(w) contract or agreement prohibiting it from freely
engaging in any business or competing anywhere in the world; or
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(x) other agreement which is material to its operations or
business prospects or involves an annual consideration in excess of
$100,000, whether or not in the ordinary course of business.
(ii) With respect to the Company's obligations thereunder and, to
the Company's knowledge, with respect to the obligations of the other parties
thereto, all of the contracts, agreements and instruments set forth or required
to be set forth on the attached CONTRACTS SCHEDULE are valid, binding and
enforceable in accordance with their respective terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of debtors
and other laws of general application effecting enforcement of creditors' rights
generally, rules of law governing specific performance, injunctive relief or
other equitable remedies, and limitations of public policy; and shall be in full
force and effect without penalty in accordance with their terms upon
consummation of the transactions contemplated hereby. The Company has performed
all material obligations required to be performed by it and is not in default
under or in breach of nor in receipt of any claim of default or breach under any
contract, agreement or instrument set forth or required to be set forth on the
attached CONTRACTS SCHEDULE; no event has occurred which with the passage of
time or the giving of notice or both would result in a default, breach or event
of noncompliance by the Company under any such contract, agreement or
instrument; the Company does not have any present expectation or intention of
not fully performing on a timely basis all such obligations required to be
performed by the Company under any contract, agreement or instrument to which
the Company is subject; no partially-filled or unfilled customer purchase order
or sales order is subject to cancellation or any other material modification by
the other party thereto or is subject to any penalty, right of set-off or other
charge by the other party thereto for late performance or delivery; and the
Company does not have any knowledge of any cancellation or anticipated
cancellation or any material breach by the other parties to any contract,
agreement, instrument or commitment to which it is a party. The Company is not
a party to any contract, agreement or commitment the performance of which could
reasonably be expected to have a Material Adverse Effect.
(iii) The Purchasers' special counsel has been supplied with a true
and correct copy of each of the written instruments, plans, contracts and
agreements and an accurate description of each of the oral arrangements,
contracts and agreements which are referred to on the attached CONTRACTS
SCHEDULE, together with all amendments, waivers or other changes thereto.
5Q. INTERNATIONAL TRADE LAWS AND REGULATIONS. Except as set
forth on the attached INTERNATIONAL TRADE COMPLIANCE SCHEDULE:
(i) The Company and each of the Sellers have complied and are in
compliance with all International Trade Laws and Regulations applicable to such
Person in connection with the conduct of the Company's business (including as
the same relates to recordkeeping requirements).
(ii) Neither the Company nor any of the Sellers are or have been
the subject of any civil or criminal investigation, litigation, audit, penalty,
proceeding or assessment, liquidated damages proceeding or claim, forfeiture or
forfeiture action, claim for additional customs duties or
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fees, denial orders, suspension of export privileges, governmental sanctions, or
any other action, proceeding or claim by any foreign, federal, state or local
governmental agency involving or otherwise relating to any alleged or actual
violation of International Trade Laws and Regulations or relating to any alleged
or actual underpayment of customs duties, fees, taxes or other amounts owed
pursuant to any International Trade Laws and Regulations and, to the knowledge
of the Company, there is no basis for any of the foregoing.
(iii) Neither the Company nor any of the Sellers have made or
provided any material false statement or material omission to any agency of any
federal, state or local government, purchaser of products, or foreign government
or foreign agency, in connection with the exportation of merchandise (including
with respect to export licenses, exceptions, and other export authorizations and
any filings required for or related to exportation of any item), the importation
of merchandise (including the valuation or classification of imported
merchandise, the duty treatment of imported merchandise, the eligibility of
imported merchandise for favorable duty rates or other special treatment,
country-of-origin marking, NAFTA Certificates, or other statements or
certificates concerning origin, quota or visa rights) or other approvals
required by a foreign government or agency or any other requirement relating to
any International Trade Laws and Regulations.
(iv) Neither the Company nor any of the Sellers have made any
payment, offer, gift, promise to give, or authorized or otherwise participated
in, assisted or facilitated any payment or gift related to the Company's
business that is prohibited by the United States Foreign Corrupt Practices Act.
(v) Neither the Company nor any of the Sellers have engaged in or
otherwise participated in, assisted or facilitated any transaction related to
the Company's business that is prohibited by any applicable embargo or related
trade restriction imposed by the United States Office of Foreign Assets Control
or any other agency of the United States government.
(vi) The attached INTERNATIONAL TRADE COMPLIANCE SCHEDULE sets
forth a list of each foreign jurisdiction to which the Company exports any
products, equipment, software or technology, each foreign jurisdiction from
which the Company imports any products, equipment, software or technology and
each foreign jurisdiction to which the Company's products, equipment, software
or technology (or products of such technology) are reexported.
5R. INTELLECTUAL PROPERTY RIGHTS.
(i) The attached INTELLECTUAL PROPERTY SCHEDULE contains a
complete and accurate list of all (a) patented or registered Intellectual
Property Rights owned or, to the Company's knowledge, used by the Company,
(b) pending patent applications and applications for other registrations of
Intellectual Property Rights filed by or on behalf of the Company, and
(c) material unregistered Intellectual Property Rights owned or used by the
Company. The attached INTELLECTUAL PROPERTY SCHEDULE also contains a complete
and accurate list of all material licenses and other rights granted by the
Company to any third party with respect to any Intellectual Property Rights and
all
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material licenses and other rights granted by any third party to the Company
with respect to any Intellectual Property Rights, in each case identifying the
subject Intellectual Property Rights. The Company owns and possesses sufficient
title to and ownership of, or has sufficient valid and enforceable licenses to,
all Intellectual Property Rights necessary for the operation of its business as
presently conducted and as presently proposed to be conducted, free and clear of
all Liens. Without limiting the generality of the foregoing, the Company owns
and possesses all right, title and interest in and to all Intellectual Property
Rights created or developed by or under the direction or supervision of any of
the Sellers relating to the business of the Company. To the knowledge of the
Company, it is not and will not be necessary to utilize any Intellectual
Property Rights of any of its employees developed, invented or made prior to
their employment by the Company except for any such Intellectual Property Rights
that have previously been assigned to the Company. Except as set forth on the
attached INTELLECTUAL PROPERTY SCHEDULE, the loss or expiration of any
Intellectual Property Right or related group of Intellectual Property Rights
owned or used by the Company has not had and would not reasonably be expected to
have a Material Adverse Effect, and no loss or expiration of any Intellectual
Property Right is pending or, to the Company's knowledge, threatened or
reasonably foreseeable. The Company has taken commercially reasonable steps to
maintain and protect its trade secrets. To the Company's knowledge, the owners
of any Intellectual Property Rights licensed to the Company have taken
commercially reasonable action to maintain and protect the Intellectual Property
Rights which are subject to such licenses.
(ii) Except as set forth on the attached INTELLECTUAL PROPERTY
SCHEDULE, (a) there have been no claims made against the Company asserting the
invalidity, misuse or unenforceability of any of the Intellectual Property
Rights owned or used by the Company and, to the Company's knowledge, there is no
basis for any such claim, (b) the Company has not received any notices of, and
has no knowledge of any facts which indicate a likelihood of, any infringement
or misappropriation by, or conflict with, any third party with respect to any
Intellectual Property Rights (including any demand or request that the Company
license any rights from a third party), (c) the conduct of the Company's
business has not infringed, misappropriated or conflicted with and does not
infringe, misappropriate or conflict with any Intellectual Property Rights of
other Persons, and (d) to the Company's knowledge, the Intellectual Property
Rights owned by or licensed to the Company have not been infringed,
misappropriated or conflicted by other Persons. The transactions contemplated
by this Agreement will have no material adverse effect on the Company's right,
title or interest in and to the Intellectual Property Rights listed on the
INTELLECTUAL PROPERTY SCHEDULE and all of such Intellectual Property Rights
shall be owned or available for use by the Company on substantially identical
terms and conditions immediately after the Closing.
5S. LITIGATION, ETC. Except as set forth on the attached
LITIGATION SCHEDULE, there are no (and, during the five years preceding the date
hereof, there have not been any) actions, suits, proceedings (including any
arbitration proceedings), orders or, to the Company's knowledge, investigations
or claims pending or, to the Company's knowledge, threatened against the Company
(or to the Company's knowledge, pending or threatened against any of the
officers, directors or employees of the Company with respect to its business or
proposed business activities), or pending or threatened by the Company against
any Person, at law or in equity, or before or by any
-26-
governmental department, commission, board, bureau, agency or instrumentality
(including any actions, suits, proceedings or investigations with respect to the
transactions contemplated by this Agreement); the Company is not subject to any
arbitration proceedings under collective bargaining agreements or otherwise or,
to the Company's knowledge, any governmental investigations or inquiries; and,
to the Company's knowledge, there is no basis for any of the foregoing. The
foregoing includes, without limitation, actions pending or threatened involving
the prior employment of any of the Company's employees, their use in connection
with the Company's businesses of any information or techniques allegedly
proprietary to any of their former employers or their obligations under any
agreements with prior employers. Except as set forth thereon, the Company is
fully insured with respect to each of the matters set forth on the attached
LITIGATION SCHEDULE. The Company is not subject to any judgment, order or
decree of any court or other governmental agency, and the Company has not
received any opinion or memorandum or advice from its legal counsel to the
effect that it is exposed, from a legal standpoint, to any liability which could
have a Material Adverse Effect.
5T. BROKERAGE. Except for the Company's obligations to Broadview
Associates, LLC for up to $682,000 and Xxxxxxxxxx Securities for up to
$1,653,610 in each case pursuant to the agreements described on the CONTRACTS
SCHEDULE attached hereto, there are and shall be 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 to which the Company is a party or to which the Company is subject.
5U. INSURANCE. The attached INSURANCE SCHEDULE contains a
description of each insurance policy maintained by the Company with respect to
its properties, assets and business, and each such policy shall be in full force
and effect as of the Closing. The Company is not in default with respect to its
obligations under any insurance policy maintained by it, and the Company has
never been denied insurance coverage. Except as set forth on the attached
INSURANCE SCHEDULE, the Company has no self-insurance or co-insurance programs
and, to the Company's knowledge, the reserves set forth on the Latest Balance
Sheet are adequate to cover all anticipated liabilities with respect to any such
self-insurance or co-insurance programs.
5V. EMPLOYEES. To the Company's knowledge, as of the date
hereof, no executive or key employee of the Company and no group of employees of
the Company has any plans to terminate employment with the Company. The Company
has no material labor relations problems (including any union organization
activities, threatened or actual strikes or work stoppages or material
grievances). The EMPLOYEES SCHEDULE attached hereto contains a correct and
complete list of all employees of the Company who are not citizens of the United
States and who are not permanent residents of the United States (together with a
listing of each such employee's work authorization status and work authorization
expiration date). None of the Company, the Sellers nor, to Company's knowledge,
any of its other employees or consultants are subject to any noncompete,
nondisclosure, confidentiality, employment, consulting or other agreement or
judgment, decree or order of any court or administrative agency, relating to,
affecting or in conflict with the present or proposed business activities of the
Company or such Person's duties to the Company, except for
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agreements between the Company and its present and former employees. The
Company has not received any notice alleging that any violation of any such
agreements has occurred. The EMPLOYEES SCHEDULE attached hereto contains a
correct and complete list of all employees and consultants of the Company which
have executed and delivered to the Company any (i) agreement providing for the
nondisclosure by such Person of any confidential information of the Company or
(ii) agreement providing for the assignment or license by such Person to the
Company of any Intellectual Property Rights (an "INVENTIONS AGREEMENT"). No
current employee or consultant of the Company has, pursuant to an agreement
specified in clause (ii) of the preceding sentence, excluded works or inventions
made prior to his or her employment with the Company from any Inventions
Agreement between the Company and such Person.
5W. ERISA.
(i) The Company does not have any obligation to contribute to (or
any other liability, including current or potential withdrawal liability, with
respect to) any "multiemployer plan" (as defined in Section 3(37) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")).
(ii) The Company does not maintain or have any obligation to
contribute to (or any other liability with respect to) any plan or arrangement,
whether or not terminated, which provides medical, health, life insurance or
other welfare-type benefits for current or future retired or terminated
employees or any dependents of such employees (except for limited continued
medical benefit coverage required to be provided under Section 4980B of the Code
("COBRA") or as required under applicable state law).
(iii) The Company does not maintain, contribute to or have any
actual or potential liability under (or with respect to) any employee plan which
is a "defined benefit plan" (as defined in Section 3(35) of ERISA).
(iv) The Company does not maintain, contribute to or have any
actual or potential liability under (or with respect to) any employee plan which
is a "defined contribution plan" (as defined in Section 3(34) of ERISA), whether
or not terminated, other than the Netcom Systems, Inc. 401(k) Plan (the "401(K)
PLAN"). The 401(k) Plan is listed on the EMPLOYEE BENEFITS SCHEDULE.
(v) Except as set forth on the attached EMPLOYEE BENEFITS
SCHEDULE under the heading "Other Plans" (the "OTHER PLANS"), the Company does
not maintain, contribute to or have any actual or potential liability under (or
with respect to) any material plan or arrangement providing benefits or
remuneration to current or former employees or independent contractors,
including any employment contract, bonus or incentive plan, plan for deferred
compensation, employee health or other welfare benefit plan, severance
arrangement or other material policy, program or arrangement, whether or not
terminated.
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(vi) With respect to the 401(k) Plan and the Other Plans set forth
on the attached EMPLOYEE BENEFITS SCHEDULE (the "PLANS"), all required payments,
premiums, contributions, reimbursements or accruals for all periods ending prior
to or as of the Closing Date shall have been made or properly accrued. None of
the Plans has any material unfunded liabilities which are not reflected on the
Latest Balance Sheet.
(vii) The Plans and all related trusts, insurance contracts and
funds have been maintained, funded and administered in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
applicable laws. The Company has timely complied with all reporting and
disclosure obligations as they apply to the Plans, and the Company has complied
with the requirements of COBRA. To the Company's knowledge, none of the Company
or any trustee or administrator of any Plan has engaged in any transaction with
respect to the Plans which would subject the Company or any trustee or
administrator of the Plans, or any party dealing with any such Plan, nor do the
transactions contemplated by this Agreement constitute transactions which would
subject any such party, to either a civil penalty assessed pursuant to Part
502(i) of ERISA, or any other penalty or excise tax or the tax or penalty on
prohibited transactions imposed by Section 4975 of the Code or any other penalty
or excise tax. No actions, suits or claims with respect to the assets of the
Plans (other than routine claims for benefits) are pending or, to the Company's
knowledge, threatened which could result in or subject the Company to any
liability and there are no circumstances which would give rise to or be expected
to give rise to any such actions, suits or claims.
(viii) A favorable determination letter from the Internal Revenue
Service has been received by the Company with respect to the 401(k) Plan to the
effect that it is qualified under Section 401(a) of the Code (including
requirements imposed by the Tax Reform Act of 1986 and subsequent legislation),
and, to the Company's knowledge, there are no circumstances which would cause
the 401(k) Plan to lose such qualified status.
(ix) The Company has provided the Purchasers with (a) the most
recent favorable determination letter issued with respect to the 401(k) Plan and
(b) true and complete copies of all documents pursuant to which the Plans are
maintained and administered, including the most recent summary plan description.
(x) For purposes of this Paragraph 5W, the term "COMPANY"
includes all organizations under common control with the Company pursuant to
Section 414 of the Code.
5X. COMPLIANCE WITH LAWS; PERMITS; CERTAIN OPERATIONS. Except as
set forth on the attached COMPLIANCE SCHEDULE:
(i) The Company has complied and is in compliance with all
applicable laws, ordinances, codes, rules, requirements and regulations of
foreign, federal, state and local governments and all agencies thereof relating
to the operation of its business and the maintenance and operation of its
properties and assets. No notices have been received by and, to the Company's
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knowledge, no claims have been filed or threatened against the Company alleging
a violation of any such laws, ordinances, codes, rules, requirements or
regulations.
(ii) The Company holds and is in compliance with all
permits, licenses, bonds, approvals, certificates, registrations, accreditations
and other authorizations of all foreign, federal, state and local governmental
agencies required for the conduct of its business and the ownership of its
properties (including as the same relate to International Trade Laws and
Regulations and Environmental and Safety Requirements), and the attached PERMITS
SCHEDULE sets forth a list of all of such material permits, licenses, bonds,
approvals, certificates, registrations, accreditations and other authorizations.
No notices have been received by the Company alleging the failure to hold any of
the foregoing. All of such material permits, licenses, bonds, approvals,
accreditations, certificates, registrations and authorizations will be available
for use by the Company immediately after the Closing.
5Y. ENVIRONMENTAL AND SAFETY MATTERS.
(i) Except as set forth on the attached ENVIRONMENTAL SCHEDULE:
(a) The Company has complied with and is in compliance
with all Environmental and Safety Requirements. The Company has not
received any oral or written notice, report or information regarding any
actual or alleged violation of Environmental and Safety Requirements or any
liabilities or potential liabilities relating to it or its facilities
arising under Environmental and Safety Requirements.
(b) Neither this Agreement nor the consummation of the
transactions contemplated hereby will result in any obligations for site
investigation or cleanup, or notification to or consent of any government
agencies or third parties under any Environmental and Safety Requirements
(including any so called "transaction-triggered" or "responsible property
transfer" laws and regulations).
(c) To the best of the Company's knowledge, none of the
following exists at any property or facility owned, occupied or operated by
the Company:
(1) underground storage tanks;
(2) asbestos-containing material in any form
or condition;
(3) materials or equipment containing
polychlorinated biphenyls; or
(4) landfills, surface impoundments or other
disposal areas.
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(d) The Company has not treated, stored, disposed of,
arranged for or permitted the disposal of, transported, handled or Released
any substance (including any hazardous substance) or owned, occupied or
operated any facility or property in a manner that has given or could give
rise to any liabilities (including any liability for response costs,
corrective action costs, personal injury, natural resource damages,
property damage or attorneys fees or any investigative, corrective or
remedial obligations) pursuant to CERCLA or any other Environmental and
Safety Requirements.
(e) The Company has not, either expressly or by operation
of law, assumed or undertaken any liability or corrective, investigatory or
remedial obligation of any other Person relating to any Environmental and
Safety Requirements.
(f) No Environmental Lien has attached to any property
owned, leased or operated by the Company.
5Z. AFFILIATED TRANSACTIONS. Except as set forth on the attached
AFFILIATED TRANSACTIONS SCHEDULE, no officer, director, shareholder, employee or
Affiliate of the Company or, to the Company's knowledge, any individual related
by blood, marriage or adoption to any such individual or any entity in which any
such Person or individual owns any beneficial interest, is a party to any
agreement, contract, commitment or transaction with the Company or has any
material interest in any material property used by the Company (including any
Intellectual Property Rights).
5AA. NAMES AND LOCATIONS. Except as set forth on the attached
NAMES AND LOCATIONS SCHEDULE, during the five-year period prior to the execution
and delivery of this Agreement, the Company has not used any name or names under
which it has invoiced account debtors, maintained records concerning its assets
or otherwise conducted business. All of the tangible assets and properties of
the Company are located at the locations set forth on the attached NAMES AND
LOCATIONS SCHEDULE.
5BB. SUPPLIERS AND CUSTOMERS. The SUPPLIERS AND CUSTOMERS
SCHEDULE attached hereto accurately sets forth a list of the top ten customers
and suppliers of the Company by dollar volume of sales and purchases,
respectively, for each of the fiscal years ended July 31, 1997 and July 31,
1996. The Company has not received any indication from any material supplier to
the effect that, and the Company has no reason to believe that, such supplier
will stop, materially decrease the rate of, or materially change the terms
(whether related to payment, price or otherwise) with respect to, supplying
materials, products or services to the Company (whether as a result of the
consummation of the transactions contemplated hereby or otherwise). The Company
has not received any indication from any material customer of the Company to the
effect that, and the Company has no reason to believe that, such customer will
stop, or materially decrease the rate of, buying products of the Company
(whether as a result of the consummation of the transactions contemplated hereby
or otherwise).
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5CC. REAL PROPERTY. The Company does not own any real property.
The REAL PROPERTY SCHEDULE attached hereto sets forth a list of all of the
leases, subleases and licenses ("LEASES") of real property (the "LEASED REAL
PROPERTY") in which the Company has a leasehold, subleasehold and licensed
interest. The Company holds a valid and existing leasehold, subleasehold or
license interest under each of the Leases. With respect to each Lease listed on
the attached REAL PROPERTY SCHEDULE, there are no disputes, oral agreements, or
forbearance programs in effect as to such Lease and the Company has not
assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any
interest in the Lease. Except for the Leased Real Property, there is no real
property which is leased or otherwise used in the Company's business.
5DD. REGULATORY STATUS. Since its date of incorporation, the
Company has not been, and as of the Closing Date shall not be, a "United States
real property holding corporation," as defined in Section 897(c)(2) of the Code
and in Section 1.897-2(b) of the Treasury Regulations issued thereunder. The
Company is not an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company," as such
terms are defined under the Investment Company Act of 1940, as amended.
5EE. MARGIN SECURITIES. The Company is not engaged in the
business of extending credit for the purpose of buying or carrying "margin
securities" within the meaning of Regulations G, T, U or X promulgated by the
Board of Governors of the Federal Reserve Board.
5FF. SMALL BUSINESS MATTERS. The Company acknowledges that the
SBIC Purchaser is a federally licensed SBIC under the SBIC Act. The Company,
together with its "affiliates" (as that term is defined in 13 CFR Section
121.103), is a "small business concern" within the meaning of the SBIC
Regulations, including 13 CFR Section 121.301. The information regarding the
Company and its affiliates set forth in SBA Form 480, Form 652 and Parts A and B
of Form 1031 delivered at the Closing will be accurate and complete. The
Company does not presently engage in any activities for which an SBIC is
prohibited from providing funds by the SBIC Regulations (including 13 CFR
Section 107.720).
5GG. DISCLOSURE. To the knowledge of the Sellers (other than
Xxxxx Xxxxx and Xxxxxxxx Xxxxxxx), there is no fact which the Company has not
disclosed to the Purchasers in writing and of which any of its shareholders,
officers, directors or executive employees is aware which has had or would
reasonably be expected to have a Material Adverse Effect.
Section 6. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. As a
material inducement to the Purchasers to enter into this Agreement and purchase
the Preferred Stock hereunder, each Seller, with respect to itself and not
jointly with respect to any of the other Sellers, hereby represents and warrants
to the Purchasers and the Company as follows:
6A. CAPACITY; POWER AND AUTHORITY. Such Seller possesses all
requisite capacity, power and authority necessary to carry out the transactions
contemplated by this Agreement.
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6B. AUTHORIZATION; NO BREACH. This Agreement and all other
agreements contemplated hereby to which such Seller is a party, when executed
and delivered by such Seller in accordance with the terms hereof, shall each
constitute a valid and binding obligation of such Seller, enforceable against
such Seller in accordance with its terms. The execution and delivery by such
Seller of this Agreement and all other agreements contemplated hereby to which
such Seller is a party, the repurchase of the Repurchased Shares from such
Seller hereunder, and the fulfillment of and compliance with the respective
terms hereof and thereof by such Seller, do not and shall not (i) conflict with
or result in a breach of the terms, conditions or provisions of, (ii) constitute
a default under (whether with or without the passage of time, the giving of
notice or both), (iii) result in the creation of any lien, security interest,
charge or encumbrance upon such Seller's assets pursuant to, (iv) give any third
party the right to modify, terminate or accelerate any obligation under,
(v) result in a violation of, or (vi) require any authorization, consent,
approval, exemption or other action by or notice or declaration to, or filing
with, any third party or any court or administrative or governmental body or
agency pursuant to, or any law, statute, rule or regulation to which such Seller
is subject, or any agreement, instrument, order, judgment or decree to which
such Seller is subject, except for any filing, notice or authorization required
pursuant to the Xxxx-Xxxxx-Xxxxxx Act.
6C. TITLE TO SHARES, ETC. Such Seller is the record and
beneficial owner of, and has good and marketable title to, the Repurchased
Shares set forth opposite such Seller's name on the SCHEDULE OF SELLERS attached
hereto, free and clear of all Liens, agreements, voting trusts, proxies and
other arrangements or restrictions of any kind whatsoever (collectively,
"ENCUMBRANCES"). At the Closing, such Seller shall sell to the Company good and
marketable title to such Repurchased Shares free and clear of all Encumbrances.
6D. 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 to which
such Seller is a party or to which such Seller is subject. Such Seller shall
pay, and hold the Company and the Purchasers and the other Sellers harmless
against, any liability, loss or expense (including reasonable attorneys' fees
and out-of-pocket expenses) arising in connection with any such claim.
6E. LITIGATION, ETC. There are no actions, suits, proceedings
(including any arbitration proceedings), orders, investigations or claims
pending or, to such Seller's knowledge, threatened against or affecting such
Seller in which it is sought to restrain or prohibit or to obtain damages or
other relief in connection with the transactions contemplated hereby.
6F. COMPANY TRANSACTIONS. Such Seller is not a party to or bound
by any agreement with respect to a Company Transaction other than this
Agreement, and such Seller has terminated all discussions with third parties
(other than the Purchasers) regarding Company Transactions.
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Section 7. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. As a
material inducement to the Company and the Sellers to enter into this Agreement
and take the actions set forth in Section 1, each Purchaser, with respect to
itself and not jointly with respect to any of the other Purchasers, hereby
represents and warrants to the Company and the Sellers as follows:
7A. ORGANIZATION, POWER AND AUTHORITY. Such Purchaser (if not a
natural person) is duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization. Such Purchaser possesses all
requisite power and authority necessary to carry out the transactions
contemplated by this Agreement.
7B. AUTHORIZATION; NO BREACH. The execution, delivery and
performance of this Agreement and all other agreements contemplated hereby to
which such Purchaser is a party have been duly authorized by such Purchaser.
This Agreement and all other agreements contemplated hereby to which such
Purchaser is a party, when executed and delivered by such Purchaser in
accordance with the terms hereof, shall each constitute a valid and binding
obligation of such Purchaser, enforceable in accordance with its terms. The
execution and delivery by such Purchaser of this Agreement and all other
agreements contemplated hereby to which such Purchaser is a party, the purchase
of the Preferred Stock hereunder, and the fulfillment of and compliance with the
respective terms hereof and thereof by such Purchaser, do not and shall not
(i) conflict with or result in a breach of the terms, conditions or provisions
of, (ii) constitute a default under (whether with or without the passage of
time, the giving of notice or both), (iii) give any third party the right to
modify, terminate or accelerate any obligation under, (iv) result in a violation
of, or (v) require any authorization, consent, approval, exemption or other
action by or notice or declaration to, or filing with, any court or
administrative or governmental body or agency pursuant to, the organizational
documents of such Purchaser, or any material law, statute, rule or regulation to
which such Purchaser is subject, or any material agreement, instrument, order,
judgment or decree to which such Purchaser is subject, except for any filing,
notice or authorization required pursuant to the Xxxx-Xxxxx-Xxxxxx Act or the
SBIC Act.
7C. 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 to which
such Purchaser is a party or to which such Purchaser is subject. Such Purchaser
shall pay, and hold the Company and the Sellers and the other Purchasers
harmless against, any liability, loss or expense (including reasonable
attorneys' fees and out-of-pocket expenses) arising in connection with any such
claim.
7D. INVESTMENT REPRESENTATIONS.
(i) Such Purchaser is acquiring the Restricted Securities to be
purchased by it hereunder for its own account, not as a nominee or agent, with
the present intention of holding such securities for purposes of investment, and
such Purchaser has no intention of selling such securities in a public
distribution in violation of the federal securities laws or any applicable state
securities laws; PROVIDED THAT nothing contained herein shall prevent such
Purchaser or any subsequent holder
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of such Restricted Securities from transferring such securities in compliance
with the provisions of Paragraph 11C below.
(ii) Such Purchaser is an "accredited investor" as defined in Rule
501(a) under the Securities Act.
(iii) Such Purchaser understands that the purchase of the
Restricted Securities involves substantial risk. Such Purchaser or its
officers, members or partners has experience as an investor in securities of
companies in the development or growth stage and acknowledges that such
Purchaser is able to fend for itself, can bear the economic risk of such
Purchaser's investment in the Restricted Securities and has such knowledge and
experience in financial or business matters that such Purchaser is capable of
evaluating the merits and risks of its investment in the Restricted Securities.
(iv) Such Purchaser understands that the Restricted Securities to
be purchased by it hereunder have not been registered under the Securities Act
on the basis that the sale provided for in this Agreement is exempt from the
registration provisions thereof and that the Company's reliance on such
exemption is predicated in part upon the representations of such Purchaser set
forth herein.
(v) Such Purchaser acknowledges that the offer and sale of the
Restricted Securities to such Purchaser has not been accomplished by the
publication of any advertisement.
(vi) Such Purchaser has consulted its own tax advisor and is not
relying on the Company or any Seller for tax advice.
Section 8. INDEMNIFICATION AND OTHER AGREEMENTS.
8A. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties in this Agreement shall survive the Closing as
follows:
(i) the representations and warranties in Xxxxxxxxx 0X (Xxx
Xxxxxxx), Xxxxxxxxx 0X (International Trade Laws and Regulations), Paragraph 5W
(ERISA), Paragraph 5X (Compliance with Laws; Permits; Certain Operations),
Paragraph 5Y (Environmental and Safety Matters) and Paragraph 5FF (Small
Business Matters) shall terminate when the applicable statutes of limitations
with respect to the liabilities in question expire (after giving effect to any
extensions or waivers thereof), plus thirty (30) days;
(ii) the representations and warranties in Paragraph 5B (Capital
Stock and Related Matters), Paragraph 5T (Brokerage), Xxxxxxxxx 0X (Xxxxxxxx;
Xxxxx xxx Xxxxxxxxx), Xxxxxxxxx 0X (Title to Shares), Paragraph 6D (Brokerage),
Paragraph 6F (Company Transactions), Paragraph 7D (Brokerage), the first and
second and last sentences of Paragraph 5D (Authorization; No Breach), the first
sentence of Paragraph 6B (Authorization; No Breach) and the first and second
sentences of Paragraph 7B (Authorization; No Breach) shall not terminate;
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(iii) the representations and warranties in Paragraph 5R
(Intellectual Property Matters) shall terminate on the second anniversary of the
Closing Date; and
(iv) all other representations and warranties in this Agreement
and the Schedules and Exhibits attached hereto or in any writing delivered by
any Party to another Party in connection with this Agreement shall terminate
sixty (60) days after the receipt by the Purchasers of the Company's audited
financial statements for the fiscal year ended July 31, 1998 (together with a
duly executed opinion with respect thereto from the Company's independent public
accountants);
PROVIDED THAT any representation or warranty in respect of which indemnity may
be sought under Paragraph 8B, and the indemnity with respect thereto, shall
survive the time at which it would otherwise terminate pursuant to this
Paragraph 8A if notice of the inaccuracy or breach or potential inaccuracy or
breach thereof giving rise to such right or potential right of indemnity shall
have been given to the Party against whom such indemnity may be sought prior to
such time. The representations and warranties in this Agreement shall survive
for the periods set forth in this Paragraph 8A and shall in no event be affected
by any investigation, inquiry or examination made for or on behalf of any Party,
or the knowledge of any Party's officers, directors, shareholders, employees or
agents or the acceptance by any Party of any certificate or opinion hereunder.
8B. GENERAL INDEMNIFICATION.
(i) INDEMNIFICATION BY THE SELLERS. Each of the Sellers shall
indemnify each of the Company and the Purchasers and their respective
Affiliates, shareholders (other than the Sellers), partners, officers,
directors, employees, agents, representatives, successors and permitted assigns
(collectively, the "COMPANY PARTIES") and save and hold each of them harmless
against and pay on behalf of or reimburse such Company Parties as and when
incurred for any loss, liability, demand, claim, action, cause of action, cost,
damage, deficiency, Tax, penalty, fine or expense, whether or not arising out of
third party claims (including interest, penalties, reasonable attorneys' fees
and expenses and all amounts paid in investigation, defense or settlement of any
of the foregoing) (collectively, "LOSSES"), which any such Company Party may
suffer, sustain or become subject to, as a result of, in connection with,
relating or incidental to or by virtue of: (a) any breach of any representation
or warranty of the Company or the Sellers under Section 5 (other than
Xxxxxxxxx 0X) or Section 6 of this Agreement; (b) any breach of any
representation or warranty of the Company or the Sellers under Paragraph 5R of
this Agreement; (c) any nonfulfillment or breach of any covenant or agreement by
the Company or any of the Sellers under this Agreement required to be performed
or complied with by the Company or any of the Sellers at or prior to the
Closing; (d) any nonfulfillment or breach of any covenant or agreement by any of
the Sellers under this Agreement required to be performed or complied with by
any of the Sellers after the Closing; or (e) any claim by any Person (other than
the Purchasers) with respect to, or arising as a result of, any Company
Transaction (other than the Company Transaction that is the subject of this
Agreement); PROVIDED THAT the Sellers shall not have any liability under
clauses (a), (c), (d) or (e) above (other than with respect to the
representations and warranties contained in Paragraph 5B and Xxxxxxxxx 0X and
the covenants and agreements contained in this Section 8) unless the aggregate
of all Losses relating
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thereto for which the Sellers would, but for this proviso, be liable exceeds on
a cumulative basis an amount equal to $250,000, and then the Sellers shall be
liable only to the extent of such excess; and PROVIDED FURTHER that the Sellers
shall not have any liability under clause (b) above unless the aggregate of all
Losses relating thereto for which the Sellers would, but for this proviso, be
liable exceeds on a cumulative basis an amount equal to $1,000,000, and then the
Sellers shall be liable only to the extent of such excess; and PROVIDED FURTHER
that the Sellers' aggregate liability under clauses (a), (b), (c) and (d) above
(other than with respect to the representations and warranties contained in
Paragraph 5B and Xxxxxxxxx 0X and the covenants and agreements contained in this
Section 8) shall in no event exceed $15,000,000 (it being understood, however,
that nothing in this Agreement (including this Paragraph 8B) shall limit or
restrict any of the Company Parties' right to maintain or recover any amounts in
connection with any action or claim based upon fraudulent misrepresentation or
deceit). All indemnification payments for the benefit of the Company under this
Paragraph 8B shall be deemed to be adjustments to the Repurchase Price set forth
in Paragraph 1A above. All indemnification payments for the benefit of any
Purchaser under this Paragraph 8B shall be deemed to be adjustments to the
Purchase Price set forth in Paragraph 1B above. In no event shall the Sellers'
obligations in respect of the indemnification provided for in this Paragraph 8B,
or any expense reimbursement obligation of the Company provided for herein, be
treated as subordinated indebtedness of the Company or as a restricted payment
pursuant to any agreement to which the Company is a party or be otherwise
restricted or deferred. Subject to the limitations set forth above, if and to
the extent any provision of this Paragraph 8B is unenforceable for any reason,
each Seller hereby agrees to make the maximum contribution to the payment and
satisfaction of any Loss for which indemnification is provided for in this
Paragraph 8B which is permissible under applicable laws. Notwithstanding any
provision herein to the contrary, in no event shall the Sellers be obligated to
make duplicative indemnity payments hereunder (i.e., if the Company incurs a
Loss for which it is entitled to (and actually receives) indemnification from
the Sellers hereunder, the Sellers shall not thereafter be liable to the
Purchasers or any other Company Parties for the same Loss, unless the Purchasers
or any such other Company Parties have also incurred a Loss with respect to the
matter which gave rise to such indemnification obligation). Except with respect
to injunctive relief, the Company and the Purchasers acknowledge and agree (on
behalf of themselves and the other Company Parties) that from and after the
Closing their sole and exclusive remedy with respect to any and all claims
relating to the subject matter of this Agreement shall be pursuant to the
indemnification provisions set forth in this Paragraph 8B.
(ii) INDEMNIFICATION BY THE PURCHASERS. Each Purchaser shall,
with respect to the representations, warranties, covenants and agreements made
by such Purchaser and not with respect to the representations, warranties,
covenants or agreements made by any of the other Purchasers, indemnify the
Company and its Affiliates, shareholders, officers, directors, employees,
agents, representatives, successors and permitted assigns (collectively, the
"PURCHASER INDEMNIFIED PARTIES") and hold them harmless against any Losses which
the Purchaser Indemnified Parties may suffer, sustain or become subject to, as a
result of, in connection with, relating or incidental to or by virtue of: (a)
any breach of any representation or warranty of such Purchaser under Section 7
of this Agreement; or (b) any nonfulfillment or breach of any covenant or
agreement by such Purchaser under this Agreement.
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(iii) NATURE OF CERTAIN INDEMNIFICATION OBLIGATIONS. The
representations and warranties of each of the Sellers in Section 6 of this
Agreement and the covenants and agreements made by each of the Sellers under
this Agreement (other than as specifically set forth in this Paragraph 8B) in
such Seller's individual capacity that are required to be performed or complied
with by such Seller after the Closing (such as those set forth in Paragraphs 8D
and 8E of this Agreement) are several obligations. This means that the
particular Seller making the representation, warranty, covenant or agreement
will be solely responsible for any Losses the Company Parties may suffer as a
result of any breach or nonfulfillment of any such representations, warranties,
covenants or agreements. The other representations and warranties made in or
pursuant to this Agreement and the covenants and agreements made by the Company
and the Sellers under this Agreement that are required to be performed or
complied with by the Company or the Sellers at or prior to the Closing are
subject to the following provisions. Each Seller shall be responsible to the
extent provided in this Paragraph 8B only for its Pro Rata Share of any
particular Loss the Company Parties may suffer as a result of any breach or
nonfulfillment of such representations, warranties, covenants and agreements.
"PRO RATA SHARE" means with respect to the share of any Seller in a particular
Loss that fraction equal to the portion of the Repurchase Price allocable to the
Repurchased Shares held by such Seller over the Repurchase Price.
(iv) CALCULATION OF LOSSES; MANNER OF PAYMENT. The Parties shall
make appropriate adjustments for tax consequences and insurance coverage in
determining the amount of any Losses for purposes of this Paragraph 8B. Any
indemnification of the Company Parties or the Purchaser Indemnified Parties
pursuant to this Paragraph 8B shall be effected by wire transfer of immediately
available funds from one or more of the Sellers or the Purchasers, as the case
may be, to an account designated by any Company Party or Purchaser Indemnified
Party, as the case may be, within 15 days after the determination thereof. Any
such indemnification payments shall include interest at the Applicable Rate
calculated on the basis of the actual number of days elapsed over 360, from the
date any such Loss is suffered or sustained to the date of payment. Any amounts
owing from the Sellers pursuant to this Paragraph 8B shall first be made to the
extent possible from the Escrow Funds (as defined in the Escrow Agreement) in
the Escrow Account and thereafter shall be made directly by the Sellers in
accordance with the terms of this Paragraph 8B(iv).
(v) DEFENSE OF THIRD PARTY CLAIMS. Any Person making a claim for
indemnification under this Paragraph 8B (an "INDEMNITEE") shall notify the
indemnifying party (an "INDEMNITOR") of the claim in writing promptly after
receiving written notice of any action, lawsuit, proceeding, investigation or
other claim against it (if by a third party), describing the claim, the amount
thereof (if known and quantifiable) and the basis thereof; PROVIDED THAT the
failure to so notify an Indemnitor shall not relieve the Indemnitor of its
obligations hereunder except to the extent that (and only to the extent that)
such failure shall have caused the damages for which the Indemnitor is obligated
to be greater than such damages would have been had the Indemnitee given the
Indemnitor prompt notice hereunder. Any Indemnitor shall be entitled to
participate in the defense of such action, lawsuit, proceeding, investigation or
other claim giving rise to an Indemnitee's claim for indemnification at such
Indemnitor's expense, and at its option (subject to the limitations set forth
below) shall be entitled to assume the defense thereof by appointing a reputable
counsel reasonably
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acceptable to the Indemnitee to be the lead counsel in connection with such
defense; PROVIDED THAT, prior to the Indemnitor assuming control of such defense
it shall first verify to the Indemnitee in writing that such Indemnitor shall be
responsible (with no reservation of any rights) for all liabilities and
obligations relating to such claim for indemnification (to the extent provided
in this Paragraph 8B) and that it shall provide indemnification (whether or not
otherwise required hereunder) to the Indemnitee (to the extent provided in this
Paragraph 8B) with respect to such action, lawsuit, proceeding, investigation or
other claim giving rise to such claim for indemnification hereunder; and
PROVIDED FURTHER, that:
(1) the Indemnitee shall be entitled to participate in
the defense of such claim and to employ counsel of its choice for
such purpose; PROVIDED THAT the fees and expenses of such separate
counsel shall be borne by the Indemnitee (other than any reasonable
fees and expenses of such separate counsel that are incurred prior
to the date the Indemnitor effectively assumes control of such
defense which, notwithstanding the foregoing, shall be borne by the
Indemnitor);
(2) the Indemnitor shall not be entitled to assume control
of such defense and shall pay the fees and expenses of counsel
retained by the Indemnitee if (A) the claim for indemnification
relates to or arises in connection with any criminal proceeding,
action, indictment, allegation or investigation; (B) the claim seeks
an injunction or equitable relief against the Indemnitee; (C) the
Indemnitee has been advised in writing by counsel that a reasonable
likelihood exists of a conflict of interest between the Indemnitor
and the Indemnitee; (D) upon petition by the Indemnitee, the
appropriate court rules that the Indemnitor failed or is failing to
vigorously prosecute or defend such claim; or (E) the Indemnitee
reasonably believes that the Loss relating to the claim could exceed
the maximum amount that such Indemnitee could then be entitled to
recover under the applicable provisions of Paragraph 8B; and
(3) if the Indemnitor shall control the defense of any
such claim, the Indemnitor shall obtain the prior written consent of
the Indemnitee before entering into any settlement of a claim or
ceasing to defend such claim if, pursuant to or as a result of such
settlement or cessation, injunctive or other equitable relief will
be imposed against the Indemnitee or if such settlement does not
expressly and unconditionally release the Indemnitee from all
liabilities and obligations with respect to such claim, without
prejudice.
(vi) CERTAIN WAIVERS AND CONSENTS. Each Seller hereby agrees that
such Seller shall not make any claim for indemnification against the Company
(whether pursuant to the Articles of Incorporation or any indemnification
agreement existing between the Company and such Seller or under applicable law
or otherwise) by reason of the fact that such Seller is or was a shareholder,
director, officer, employee or agent of the Company or is or was serving at the
request of the Company as a partner, trustee, director, officer, employee or
agent of another entity (whether such
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claim is for judgments, damages, penalties, fines, costs, amounts paid in
settlement, losses, expenses or otherwise) with respect to any action, suit,
proceeding, complaint, claim or demand brought by any of the Company Parties
against such Seller pursuant to this Agreement and such Seller hereby
acknowledges and agrees that such Seller shall have no claims or right to
contribution or indemnity from the Company with respect to any amounts paid by
the Sellers pursuant to this Paragraph 8B. Except as provided in the
immediately preceding sentence, nothing in this Paragraph 8B(vi), however, shall
prohibit, restrict or modify any right of the Sellers to receive indemnification
from the Company to the extent such Seller is otherwise entitled to
indemnification pursuant to the Articles of Incorporation or any indemnification
agreement existing between the Company and such Seller and applicable law with
respect to any claim which does not give rise to or evidence the existence of a
breach of any of the representations, warranties, covenants or agreements of the
Company or the Sellers contained in this Agreement and which does not give rise
to or evidence the existence of an indemnification obligation by the Sellers
pursuant to this Paragraph 8B. Each of the Purchasers and the Sellers hereby
consents to the consummation of the Repurchase Transaction and the transactions
contemplated by the Stock Purchase Agreement pursuant to Sections 502, 503 and
506 of the General Corporation Law of the State of California as in effect as of
the date hereof and as of the Closing Date. Each of the Purchasers and the
Sellers has received historical financial information regarding the Company
(including the Latest Balance Sheet) and has also received pro forma financial
information after giving effect to the Repurchase Transaction and the
transactions contemplated by the Stock Purchase Agreements.
8C. PRESS RELEASE AND ANNOUNCEMENTS. Unless required by law (in
which case each Party agrees to consult with the other Parties prior to any such
disclosure as to the form and content of such disclosure), no press releases or
other releases of information related to this Agreement or the transactions
contemplated hereby will be issued or released prior to the Closing without the
consent of the Company, the Requisite Purchaser and the Seller Representative.
8D. NON-COMPETE; NON-SOLICITATION.
(i) Each Seller (which, for purposes of this Paragraph 8D only,
shall exclude Xxxxxxx Xxxx) acknowledges that such Seller is familiar with the
trade secrets of the Company and with other confidential information concerning
the Company, including all (a) inventions, technology and research and
development of the Company, (b) customers and clients and customer and client
lists of the Company, (c) products (including products under development) and
services of the Company and related costs and pricing structures and
manufacturing techniques, (d) accounting and business methods and practices of
the Company and (e) similar and related confidential information and trade
secrets of the Company. Each Seller further acknowledges that such Seller's
services have been and shall be of special, unique and extraordinary value to
the Company, that such Seller (in the case of the Seller Representative) is the
founder of the Company and that each such Seller has been substantially
responsible for the growth and development of the Company and the creation and
preservation of the Company's goodwill. Each Seller acknowledges and agrees
that the Company would be irreparably damaged if such Seller were to provide
services to any Person competing with the Company or engaged in a similar
business and that such
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competition by such Seller would result in a significant loss of goodwill by the
Company. Each Seller further acknowledges and agrees that the covenants and
agreements set forth in this Paragraph 8D were a material inducement to the
Purchasers to enter into this Agreement and to perform their obligations
hereunder, and that the Purchasers would not obtain the benefit of the bargain
set forth in this Agreement as specifically negotiated by the Parties if such
Seller breached the provisions of this Paragraph 8D. Therefore, in further
consideration of the Repurchase Price to be paid to the Sellers hereunder for
the Repurchased Shares (which Repurchase Price is being funded in part with the
proceeds from the Investment Transaction hereunder) and the goodwill of the
Company sold by the Sellers, each Seller agrees that until the second
anniversary of the date of such Seller's termination of employment with the
Company and its Subsidiaries, such Seller shall not directly or indirectly own
any interest in, manage, control, participate in (whether as an officer,
director, employee, partner, agent, representative or otherwise), consult with,
render services for, or in any other manner engage anywhere in the Restricted
Territories in any business competing with, or similar to, the business of the
Company and any of its Subsidiaries, including any business engaged in the
design, manufacture, assembly, development, sale or distribution of network test
and measurement equipment (including as the same is used in the LAN and WAN
equipment markets); PROVIDED THAT nothing herein shall prohibit such Seller from
being a passive owner of not more than 5% of the outstanding stock of any class
of a corporation which is publicly traded so long such Seller has no active
participation in the business of such Person, and PROVIDED, FURTHER, that,
notwithstanding anything herein to the contrary, in the event that either Xxxx
Xxxxx or Xxxxxxxx Xxxxxxx is involuntarily terminated by the Company without
Cause, the obligations of such Seller pursuant to this Paragraph 8D shall
terminate at the earlier of (x) the first anniversary of the date of such
Seller's termination of employment with the Company and its Subsidiaries or (y)
such time following such Seller's termination of Employment with the Company and
its Subsidiaries as the Company shall cease to pay such Seller an amount, in
accordance with the Company's regular payroll practices, equal to the base
salary payable to such Seller immediately prior to the termination of such
Seller's employment with the Company and its Subsidiaries. For purposes of this
Agreement, "CAUSE" shall mean (a) Seller's continued failure to perform his
duties and responsibilities in good faith and to the best of his ability for a
period of thirty days after written notice thereof from the Company to Seller;
(b) Seller personally engaging in fraud, (c) a Seller being convicted of a
felony; (d) a Seller breaching any material term of this Agreement or any other
agreement with the Company which continues uncured for a period of thirty days
after written notice; (e) a Seller's commencement of employment with another
employer while he is an employee of the Company; or (f) material nonconformance
with the Company's standard business practices and policies generally known by
Company's employees, made known or made available to a Seller or delivered in
writing to a Seller. In addition, for purposes of this Agreement, "RESTRICTIVE
TERRITORIES" shall mean (i) the California counties of Los Angeles, Orange, San
Bernadino, San Diego, Ventura, Fresno, Alameda, Alpine, Xxxxxx, Butte,
Calaveras, Colusa, Contra Costa, Del Norte, El Xxxxxx, Xxxxx, Humboldt,
Imperial, Inyo, Xxxx, Kings, Lake, Lassen, Madera, Marin, Mariposa, Mendocino,
Merced, Modoc, Mono, Monterey, Napa, Nevada, Placer, Plumas, Riverside,
Sacramento, San Xxxxxx, San Francisco, San Xxxxxxx, San Xxxx Obispo, San Mateo,
Santa Xxxxxxx, Santa Xxxxx, Santa Xxxx, Xxxxxx, Sierra, Siskiyou, Xxxxxx,
Sonoma, Stanislaus, Sutter, Tehama, Trinity, Tulare, Tuolumne, Yolo and Yuba,
and (ii) any other states, possessions, territories or
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jurisdictions of the United States of America and all other countries, nations,
territories and areas of the world. Each Seller acknowledges that the business
of the Company and its Subsidiaries has been conducted on a worldwide scale
(including as the same relates to the design, production, promotion, marketing
and sale of its products and services), that a significant percentage of the
Company's sales are made in foreign jurisdictions and that the geographic
restrictions set forth above are reasonable and necessary to protect the
goodwill of the Company's business being sold by the Sellers pursuant to this
Agreement.
(ii) For so long as a Seller has continuing obligations under
Paragraph 8D(i) above, such Seller shall not directly, or indirectly through
another entity, (a) induce or attempt to induce any employee of the Company or
any of its Subsidiaries to leave the employ of the Company or such Subsidiary,
or in any way interfere with the relationship between the Company or any of its
Subsidiaries and any employee thereof, (b) hire any person who was an employee
of the Company or any of its Subsidiaries at any time during the six month
period immediately prior to the date on which such hiring would take place (it
being conclusively presumed by the Parties so as to avoid any disputes under
this Paragraph 8D(ii) that any such hiring within such six month period is in
violation of clause (a) above), or (c) call on, solicit or service any customer,
supplier, licensee, licensor or other business relation of the Company or any of
its Subsidiaries in order to induce or attempt to induce such Person to cease
doing business with the Company or such Subsidiary, or in any way interfere with
the relationship between any such customer, supplier, licensee or business
relation and the Company or any of its Subsidiaries (including making any
negative statements or communications about the Company or any of its
Subsidiaries).
(iii) If, at the time of enforcement of the covenants contained in
this Paragraph 8D (the "RESTRICTIVE COVENANTS"), a court shall hold that the
duration, scope or area restrictions stated herein are unreasonable under
circumstances then existing, the Parties agree that the maximum duration, scope
or area reasonable under such circumstances shall be substituted for the stated
duration, scope or area and that the court shall be allowed to revise the
restrictions contained herein to cover the maximum period, scope and area
permitted by law. Each Seller has consulted with legal counsel regarding the
Restrictive Covenants and based on such consultation has determined and hereby
acknowledges that the Restrictive Covenants are reasonable in terms of duration,
scope and area restrictions and are necessary to protect the goodwill of the
Company's business and the substantial investment in the Company made by the
Purchasers hereunder. Each Seller further acknowledges and agrees that the
Restrictive Covenants are being entered into by such Seller solely in connection
with the sale by such Seller of the goodwill of the Company's business and not
directly or indirectly in connection with such Seller's employment or other
relationship with the Company.
(iv) If a Seller breaches, or threatens to commit a breach of, any
of the Restrictive Covenants, the Company shall have the following rights and
remedies, each of which rights and remedies shall be independent of the others
and severally enforceable, and each of which is in addition to, and not in lieu
of, any other rights and remedies available to the Company at law or in equity:
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(a) the right and remedy to have the Restrictive
Covenants specifically enforced by any court of competent jurisdiction, it
being agreed that any breach or threatened breach of the Restrictive
Covenants would cause irreparable injury to the Company and that money
damages would not provide an adequate remedy to the Company; and
(b) the right and remedy to require such Seller to
account for and pay over to the Company any profits, monies, accruals,
increments or other benefits derived or received by such Seller as the
result of any transactions constituting a breach of the Restrictive
Covenants.
(v) In the event of any breach or violation by a Seller of any of
the Restrictive Covenants, the time period of such covenant with respect to such
Seller shall be tolled until such breach or violation is resolved.
8E. CONFIDENTIALITY. The Purchasers acknowledge that all
"confidential information" (as defined in the Confidentiality Agreement)
provided to them by the Company is subject to the terms of a Confidentiality
Agreement between the Company and one or more of the Purchasers (the
"CONFIDENTIALITY AGREEMENT"), the terms of which are incorporated herein by
reference. If the transactions contemplated hereby are not consummated, the
Purchasers shall return to the Company and keep confidential all information and
materials regarding the Company and the Sellers reasonably designated by the
Company as confidential (except to the extent (i) disclosure of such information
is required by law, (ii) the information was previously known to the Purchasers
or (iii) the information becomes publicly known except through the actions or
inactions of the Purchasers). Effective upon the consummation of the
transactions contemplated hereby, the Confidentiality Agreement shall terminate.
Whether or not the transactions contemplated hereby are consummated, the Company
and the Sellers shall return to the Purchasers and keep confidential all
information and materials regarding any of the Purchasers reasonably designated
by any of the Purchasers as confidential (except to the extent (i) disclosure of
such information is required by law, (ii) the information was previously known
to the Company or the Sellers or (iii) the information becomes publicly known
except through the actions or inactions of the Company or the Sellers). If the
transactions contemplated hereby are consummated, each Seller agrees not to
disclose or use at any time, either during such Seller's employment or
consultancy with the Company or thereafter, any Confidential Information
(whether or not such information is or was developed by such Seller), except to
the extent that such disclosure or use is directly related to and required by
the performance of such Seller's duties to the Company. Such Seller further
agrees to take all appropriate steps to safeguard such Confidential Information
and to protect it against disclosure, misuse, espionage, loss and theft. In the
event any Seller is required by law to disclose any Confidential Information,
such Seller shall promptly notify the Company in writing, which notification
shall include the nature of the legal requirement and the extent of the required
disclosure, and shall cooperate with the Company to preserve the confidentiality
of such information consistent with applicable law.
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8F. INTELLECTUAL PROPERTY RIGHTS PROTECTION. The Sellers shall
provide the Company and its Subsidiaries and their respective successors,
assigns or other legal representatives full and reasonable cooperation and
assistance at the Company's or such Subsidiary's request and expense in the
protection of all Intellectual Property Rights now or hereafter owned or used by
the Company or any of its Subsidiaries against any claims or demands of
invalidity or unenforceability, and in the prosecution or defense of any
interference, opposition, reexamination, reissue, infringement or other
proceeding that may arise in connection with the Company's or any of its
Subsidiaries' right, title and interest in and to such Intellectual Property
Rights, including execution and delivery of any and all affidavits, testimonies,
declarations, oaths, exhibits, assignments, powers of attorney or other
documentation as may be reasonably required.
8G. DISPUTE RESOLUTION.
(i) In the event of any dispute or disagreement between the
Parties following the Closing as to the interpretation of any provision of this
Agreement or the performance of any obligations hereunder, the matter, upon the
written request of any Party, shall be referred to representatives of the
Parties for decision (the "REPRESENTATIVES"). The Representatives shall
promptly meet in a good faith effort to resolve the dispute. If the
Representatives do not agree upon a decision within 30 calendar days after
reference of the matter to them, each of the Parties shall be free to exercise
the remedies available to it under Paragraph 8G(ii) below.
(ii) Any controversy, dispute or claim arising out of or relating
in any way to this Agreement or the transactions arising hereunder which is not
resolved by negotiation pursuant to Paragraph 8G(i) above shall be settled
exclusively by arbitration in the City of Los Angeles, California. Such
arbitration shall be administered by the Center for Public Resources Institute
for Dispute Resolutions (the "INSTITUTE") in accordance with its then prevailing
Rules for Non-Administered Arbitration of Business Disputes (except as otherwise
provided herein) by one independent and impartial arbitrator who shall be
selected by the Sellers and the Purchasers in accordance with such Rules.
Notwithstanding anything to the contrary provided in Paragraph 11O hereof, the
arbitration shall be governed by the United States Arbitration Act, 9 U.S.C.
Section 1 ET SEQ. The fees and expenses of the Institute and the arbitrator
shall be shared equally by the Company on the one hand and the Sellers on the
other hand and advanced by them from time to time as required; PROVIDED THAT at
the conclusion of the arbitration, the arbitrator shall award costs and expenses
(including the costs of the arbitration previously advanced and the fees and
expenses of attorneys, accountants and other experts) and interest at the
Applicable Rate to the prevailing Party or Parties. The arbitrator shall permit
and facilitate such discovery as the Party initiating such claim shall
reasonably request. The arbitrator shall render his or her award within 90 days
of the conclusion of the arbitration hearing. The arbitrator shall be expressly
empowered to determine the amount of any Losses subject to indemnification
hereunder in accordance with the terms and provisions of this Agreement.
Notwithstanding anything to the contrary provided in this Paragraph 8G(ii) and
without prejudice to the above procedures, any Party may apply to any court of
competent jurisdiction for temporary injunctive or other provisional judicial
relief if such action is necessary to avoid irreparable damage or to preserve
the status quo until such time as the arbitrator is selected and
-44-
available to hear such Party's request for temporary relief. The award rendered
by the arbitrator shall be final and not subject to judicial review (absent
manifest error), and judgment thereon may be entered in any court of competent
jurisdiction. Notwithstanding anything to the contrary provided in Paragraph
8G(i) or this Paragraph 8G(ii), the Company or the Purchasers may elect to
enforce any of the provisions of Paragraphs 8D or 8E or the Exhibits attached
hereto by application to a court of competent jurisdiction for equitable or
legal relief (including damages or injunctive relief) rather than pursuant to
the above procedures.
8H. FURTHER ASSURANCES. In case at any time after the Closing
any further action is necessary or desirable to carry out the purposes of this
Agreement or the transactions contemplated hereby, each of the Parties will take
such further action (including the execution and delivery of such further
instruments and documents) as any other Party may reasonably request, all at the
sole cost and expense of the requesting Party (unless the requesting Party is
entitled to indemnification therefor under Paragraph 8B above).
8I. OPTION RE-PRICING. Promptly following the Closing, the
Company shall secure an independent third party valuation regarding the fair
market value of the Company's Common Stock. In the event that the subsequently
determined fair market value of the Company's Common Stock is less than the
exercise price of any stock options issued and outstanding as of the Closing,
the Company shall take all necessary action to re-price such stock options to
match the then-assessed fair market value of the Company's Common Stock.
8J. OPTION GRANTS. The Parties acknowledge that, following the
Closing, the Company intends to grant options to purchase an aggregate of
1,285,000 shares of the Company's Common Stock to the holders of options to
purchase the Company's Common Stock immediately prior to the Closing (other than
Xxxxx X. Xxxxxx), and that the exercise price for such options shall be equal to
the fair market value of the Company's Common Stock at the time of grant.
Section 9. DEFINITIONS. For the purposes of this Agreement, the
following terms have the meanings set forth below:
"AFFILIATE" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "CONTROL" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise.
"AFFILIATED GROUP" means any affiliated group as defined in Code
Section 1504 that has filed a consolidated return for federal income tax
purposes (or any similar group under state, local or foreign law) for a period
during which the Company or any of its Subsidiaries was a member.
"AGREEMENT" has the meaning set forth in the Preamble.
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"APPLICABLE RATE" means the base rate basis charged by the Bank from
time to time pursuant to the Senior Loan Documents.
"ARTICLES OF INCORPORATION" has the meaning set forth in Paragraph
1A(i).
"BANK" means NationsBank of Texas, N.A., a national banking
association.
"BYLAWS" has the meaning set forth in Paragraph 2C.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"CLOSING" has the meaning set forth in Paragraph 1D.
"CLOSING DATE" has the meaning set forth in Paragraph 1D.
"COBRA" has the meaning set forth in Paragraph 5W(ii).
"CODE" means the Internal Revenue Code of 1986, as amended, and any
reference to any particular Code section shall be interpreted to include any
revision of or successor to that section regardless of how numbered or
classified.
"COMMON STOCK" has the meaning set forth in Paragraph 1A(i).
"COMPANY PARTIES" has the meaning set forth in Paragraph 8B(i).
"COMPANY TRANSACTION" has the meaning set forth in Paragraph 4J.
"CONFIDENTIAL INFORMATION" means all information of a confidential
or proprietary nature (whether or not specifically labeled or identified as
"confidential"), in any form or medium, that is or was disclosed to, or
developed or learned by, any Seller and that relates to the business, products,
services or research or development of the Company or its Subsidiaries or their
respective suppliers, distributors or customers. Confidential Information
includes, but is not limited to, the following: (i) internal business
information (including information relating to strategic and staffing plans and
practices, business, training, marketing, promotional and sales plans and
practices, cost, rate and pricing structures and accounting and business
methods); (ii) identities of, individual requirements of, specific contractual
arrangements with, and information about, the Company's suppliers, distributors
and customers and their confidential information; (iii) trade secrets, know-how,
compilations of data and analyses, techniques, systems, formulae, research,
records, reports, manuals, documentation, models, data and data bases relating
thereto; (iv) inventions, innovations, improvements, developments, methods,
designs, analyses, drawings, reports and all similar or related information
(whether or not patentable) and (v) other Intellectual Property Rights.
Confidential Information shall not include information that a Seller can
demonstrate is publicly known through
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no wrongful act or breach of any obligation of confidentiality or was rightfully
received by such Seller from a third party without a breach of any obligation of
confidentiality by such third party.
"CONFIDENTIALITY AGREEMENT" has the meaning set forth in Paragraph
8E.
"ENCUMBRANCES" has the meaning set forth in Paragraph 6C.
"ENVIRONMENTAL LIEN" shall mean any Lien, whether recorded or
unrecorded, in favor of any governmental entity, relating to any liability of
the Company arising under any Environmental and Safety Requirements.
"ENVIRONMENTAL AND SAFETY REQUIREMENTS" shall mean all federal,
state, local and foreign statutes, regulations, ordinances and other provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law, in each case
concerning public health and safety, worker health and safety and pollution or
protection of the environment (including, without limitation, all those relating
to the presence, use, production, generation, handling, transport, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
Release, threatened Release, control or cleanup of any hazardous or otherwise
regulated materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise, radiation or radon),
each as amended and as now or hereafter in effect.
"ERISA" has the meaning set forth in Paragraph 5W(i).
"ESCROW ACCOUNT" has the meaning set forth in Paragraph 1D(iii).
"ESCROW AGENT" means First Trust of California, National
Association.
"ESCROW AGREEMENT" has the meaning set forth in Paragraph 1D(v).
"ESCROW AMOUNT" has the meaning set forth in the Escrow Agreement.
"EXCHANGE ACT" means, the Securities Exchange Act of 1934, as
amended, or any similar federal law then in force.
"401(K) PLAN" has the meaning set forth in Paragraph 5W(iv).
"FINANCING" means the purchase of Preferred Stock by the SBIC
Purchaser hereunder.
"GAAP" means United States generally accepted accounting principles.
"GOVERNMENTAL APPROVALS" has the meaning set forth in Paragraph 2Q.
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"XXXX-XXXXX-XXXXXX ACT" has the meaning set forth in Paragraph 2Q.
"INDEBTEDNESS" means at a particular time, without duplication,
(i) any indebtedness for borrowed money or issued in substitution for or
exchange of indebtedness for borrowed money, (ii) any indebtedness evidenced by
any note, bond, debenture or other debt security, (iii) any indebtedness for the
deferred purchase price of property or services with respect to which a Person
is liable, contingently or otherwise, as obligor or otherwise (other than trade
payables and other current liabilities incurred in the ordinary course of
business which are not more than six months past due), (iv) any commitment by
which a Person assures a creditor against loss (including contingent
reimbursement obligations with respect to letters of credit), (v) any
indebtedness guaranteed in any manner by a Person (including guarantees in the
form of an agreement to repurchase or reimburse), (vi) any obligations under
capitalized leases with respect to which a Person is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or with respect to which
obligations a Person assures a creditor against loss, (vii) any indebtedness
secured by a Lien on a Person's assets and (viii) any unsatisfied obligation for
"withdrawal liability" to a "multiemployer plan" as such terms are defined under
ERISA.
"INDEMNITEE" has the meaning set forth in Paragraph 8B(v).
"INDEMNITOR" has the meaning set forth in Paragraph 8B(v).
"INSTITUTE" has the meaning set forth in Paragraph 8G(ii).
"INTELLECTUAL PROPERTY RIGHTS" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) internet domain names,
trademarks, service marks, trade dress, trade names, logos and corporate names
and registrations and applications for registration thereof together with all of
the goodwill associated therewith, (iii) copyrights (registered or unregistered)
and copyrightable works and registrations and applications for registration
thereof, (iv) mask works and registrations and applications for registration
thereof, (v) computer software, data, data bases and documentation thereof,
(vi) trade secrets and other confidential information (including ideas,
formulas, compositions, inventions (whether patentable or unpatentable and
whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial and marketing plans and customer and supplier lists and information),
and (vii) copies and tangible embodiments thereof (in whatever form or medium).
"INTERNATIONAL TRADE LAWS AND REGULATIONS" shall mean all federal,
state, local and foreign statutes, executive orders, proclamations, regulations,
rules, directives, decrees, ordinances and similar provisions having the force
or effect of law and all judicial and administrative orders, rulings,
determinations and common law concerning the importation of merchandise, the
export or reexport of products, services and technology, the terms and conduct
of international transactions, making or receiving international payments and
the authorization to hold an ownership interest in a business located in a
country other than the United States, including but not limited to the Tariff
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Act of 1930 as amended and other laws administered by the United States Customs
Service, regulations issued or enforced by the United States Customs Service,
the Export Administration Act of 1979 as amended, the Export Administration
Regulations, the International Emergency Economic Powers Act, the Arms Export
Control Act, the International Traffic in Arms Regulations, any other export
controls administered by an agency of the United States government, Executive
Orders of the President regarding embargoes and restrictions on trade with
designated countries and Persons, the embargoes and restrictions administered by
the United States Office of Foreign Assets Control, the Foreign Corrupt
Practices Act, the antiboycott regulations administered by the United States
Department of Commerce, the antiboycott regulations administered by the United
States Department of the Treasury, legislation and regulations of the United
States and other countries implementing the North American Free Trade Agreement
(NAFTA), antidumping and countervailing duty laws and regulations, laws and
regulations by other countries concerning the ability of U.S. Persons to own
businesses and conduct business in those countries, restrictions by other
countries on holding foreign currency and repatriating funds and other laws and
regulations adopted by the governments or agencies of other countries relating
to the same subject matter as the United States statutes and regulations
described above.
"INVESTMENT" as applied to any Person means (i) any direct or
indirect purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interests (including partnership
interests and joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.
"INVESTMENT TRANSACTION" has the meaning set forth in Paragraph 1B.
"LATEST BALANCE SHEET" has the meaning set forth in Paragraph 5E(i).
"LEASED REAL PROPERTY" has the meaning set forth in Paragraph 5CC.
"LIEN" or "LIENS" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or other
title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Company, any filing or agreement to file a
financing statement as debtor under the Uniform Commercial Code or any similar
statute (other than to reflect ownership by a third party of property leased to
the Company under a lease which is not in the nature of a conditional sale or
title retention agreement), or any subordination arrangement in favor of another
Person.
"LOSS" or "LOSSES" has the meaning set forth in Paragraph 8B(i).
"MATERIAL ADVERSE EFFECT" means a material and adverse effect upon
the business, operations, assets, liabilities, financial condition, operating
results, cash flow, net worth or employee, customer or supplier relations of the
Company.
"NETCOM EUROPE" has the meaning set forth in Paragraph 1A(ii).
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"OTHER PLANS" has the meaning set forth in Paragraph 5W(v).
"OTHER SELLERS" has the meaning set forth in Paragraph 2H.
"PARTY" or "PARTIES" has the meaning set forth in the Preamble.
"PERMITTED ENCUMBRANCES" shall mean (i) statutory liens for current
Taxes or other governmental charges not yet due and payable or the amount or
validity of which is being contested in good faith by appropriate proceedings by
the Company and for which appropriate reserves have been established in
accordance with GAAP; (ii) mechanics', carriers', workers', repairers' and
similar statutory liens arising or incurred in the ordinary course of business
for amounts which are not delinquent and which are not, individually or in the
aggregate, material to the Company's business; (iii) zoning, entitlement,
building and other land use regulations imposed by governmental agencies having
jurisdiction over the Leased Real Property which are not violated by the current
use and operation of the Leased Real Property; (iv) covenants, conditions,
restrictions, easements and other similar matters of record affecting title to
the Leased Real Property which do not materially impair the occupancy or use of
the Leased Real Property for the purposes for which it is currently used in
connection with the Company's business; (v) Liens of landlords or lessors under
leases arising by contract or operation of law; (vi) Liens arising from purchase
money or capitalized leases for capital assets used in Company's business and
rights of lessors under capital leases; PROVIDED THAT no such Liens shall extend
to any assets of the Company other than those financed by such purchase money
obligation or capital lease (and the proceeds thereof); (vii) Liens incurred to
secure the purchase price, cost of construction or improvement of property or
Liens incurred to secure the Indebtedness incurred to finance such purchase
price or cost; PROVIDED THAT (a) any such Lien shall attach only to the property
so purchased, constructed or improved, and (b) the amount of Indebtedness
secured by any such Liens hall not exceed the purchase price of such property;
(viii) Liens in favor of customs and revenue authorities which secure payment of
customs in connection with the importation of goods in the ordinary course of
business; (ix) Liens which constitute rights of set-off of a customary nature or
bankers' Liens on amounts on deposit, whether arising by contract or by
operation of law, in connection with arrangements entered into with depository
institutions in the ordinary course of business; and (x) Liens on insurance
policies or the proceed of insurance policies incurred solely to secure the
financing of premiums owing with respect thereto.
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"PLANS" has the meaning set forth in Paragraph 5W(vi).
"PREFERRED STOCK" has the meaning set forth in Paragraph 1A(iii).
"PRODUCT CERTIFICATIONS" has the meaning set forth in Paragraph
5I(ii).
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"PURCHASE PRICE" has the meaning set forth in Paragraph 1B.
"PURCHASER INDEMNIFIED PARTIES" has the meaning set forth in
Paragraph 8B(ii).
"PURCHASER" or "PURCHASERS" has the meaning set forth in the
Preamble.
"REGISTRATION AGREEMENT" has the meaning set forth in Paragraph 2E.
"RELEASE" shall have the meaning set forth in CERCLA.
"REPRESENTATIVES" has the meaning set forth in Paragraph 8G(i).
"REPURCHASE PRICE" has the meaning set forth in Paragraph 1A(v);
PROVIDED THAT, for purposes of Paragraph 8B(iii), "REPURCHASE PRICE" means
$146,242,089.
"REPURCHASE TRANSACTION" has the meaning set forth in Paragraph 1C.
"REPURCHASED SHARES" has the meaning set forth in Paragraph 1A(v).
"REQUISITE PURCHASERS" means those Purchasers holding at least
66-2/3% of the Common Stock issued or issuable upon conversion of the
Convertible Preferred Stock held (or to be purchased) by all of the Purchasers.
"RESTRICTIVE COVENANTS" has the meaning set forth in Paragraph
8D(iii).
"RESTRICTED SECURITIES" means (i) the Preferred Stock issued
hereunder, (ii) the Common Stock issued upon conversion of the Convertible
Preferred Stock issued hereunder, (iii) any other securities of the Company held
by any of the Parties (including any Common Stock held by the Sellers) as of the
Closing Date and (iv) any securities issued or exchanged with respect to the
securities referred to in clauses (i), (ii) and (iii) above by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular Restricted Securities, such securities shall cease to be Restricted
Securities when they have been (a) effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering them,
(b) been distributed to the public through a broker, dealer or market maker
pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act or become eligible for sale pursuant to Rule 144(k) (or any
similar provision then in force) under the Securities Act or (c) been otherwise
transferred and new certificates for them not bearing the Securities Act legend
set forth in Paragraph 11C(v) have been delivered by the Company in accordance
with Paragraph 11C(v). Whenever any particular securities cease to be
Restricted Securities, the holder thereof shall be entitled to receive from the
Company, without expense, new securities of like tenor not bearing a Securities
Act legend of the character set forth in Paragraph 11C(v).
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"SBA" means the United States Small Business Administration, and any
successor agency performing the functions thereof.
"SBIC" means a Small Business Investment Company licensed by the SBA
under the SBIC Act.
"SBIC ACT" means the Small Business Investment Act of 1958, as
amended.
"SBIC PURCHASER" means NationsBanc Capital Corp.
"SBIC REGULATIONS" means the SBIC Act and the regulations issued by
the SBA thereunder, codified at Title 13 of the Code of Federal Regulations ("13
CFR"), Parts 107 and 121.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or
any similar federal law then in force.
"SELLER OR SELLERS" has the meaning set forth in the preamble.
"SELLER REPRESENTATIVE" means Xxxx Xxxxx.
"SENIOR DEBT TRANSACTION" means the financing to be provided to the
Company at the Closing pursuant to the Senior Loan Documents.
"SENIOR LOAN DOCUMENTS" means the Credit Agreement, dated as of the
Closing Date, by and among the Company, the Bank and the other lenders named
therein, and all other agreements and instruments contemplated thereby, in each
case as the same may be amended or modified from time to time in accordance with
their respective terms.
"SHAREHOLDERS AGREEMENT" has the meaning set forth in Paragraph 2D.
"STOCK OPTION PLANS" has the meaning set forth in Xxxxxxxxx 0X.
"STOCK PURCHASE AGREEMENT" has the meaning set forth in
Paragraph 2H.
"SUBSIDIARY" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to
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have a majority ownership interest in a limited liability company, partnership,
association or other business entity if such Person or Persons shall be
allocated a majority of limited liability company, partnership, association or
other business entity gains or losses or shall be or control any managing
director or general partner of such limited liability company, partnership,
association or other business entity.
"TAX" or "TAXES" means federal, state, county, local, foreign or
other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including
deficiencies, penalties, additions to tax, and interest attributable thereto)
whether disputed or not.
"TAX RETURN" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
"THIRD PARTY APPROVALS" has the meaning set forth in Paragraph 2P.
"TREASURY REGULATIONS" means the United States Treasury Regulations
promulgated under the Code, and any reference to any particular Treasury
Regulation section shall be interpreted to include any final or temporary
revision of or successor to that section regardless of how numbered or
classified.
Section 10. TERMINATION.
10A. CONDITIONS OF TERMINATION. This Agreement may be terminated
at any time prior to the Closing:
(i) by the mutual written consent of the Parties;
(ii) by the Requisite Purchasers if there has been a material
misrepresentation, material breach of warranty or material breach of a covenant
by the Company or any Seller in the representations and warranties or covenants
set forth in this Agreement or the Schedules and Exhibits attached hereto, which
in the case of any breach of covenant has not been cured within twenty (20) days
after written notification thereof by the Requisite Purchasers to the Company
and the Sellers;
(iii) by the Company and the Sellers if there has been a material
misrepresentation, material breach of warranty or material breach of covenant by
the Purchasers in the representations and warranties or covenants set forth in
this Agreement or the Schedules and Exhibits attached hereto, which in the case
of any breach of covenant has not been cured within twenty (20) days after
written notification thereof by the Company and the Sellers to the Purchasers;
or
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(iv) by the Requisite Purchasers or the Company and the Sellers if
the transactions contemplated hereby have not been consummated by September 15,
1997; PROVIDED THAT the Party electing termination pursuant to this clause (iv)
is not in breach of any of its representations, warranties, covenants or
agreements contained in this Agreement or the Schedules and Exhibits attached
hereto.
In the event of termination by either the Requisite Purchasers or the Company
and the Sellers pursuant to this Paragraph 10A, written notice thereof
(describing in reasonable detail the basis therefor) shall forthwith be
delivered to the other Parties.
10B. EFFECT OF TERMINATION. In the event of termination of this
Agreement by either the Requisite Purchasers or the Company and the Seller
Representative as provided above, this Agreement shall forthwith become void and
of no further force and effect, except that the covenants and agreements set
forth in the last two sentences of Paragraph 4J and Paragraphs 8E, 00X, 00X,
00X, 00X, 00X, 00X, 00X, 00X, 11H, 00X, 00X, 00X, 00X, 00X, 11Q and 11R shall
survive such termination indefinitely, and except that nothing in Paragraph 10A
or this Paragraph 10B shall be deemed to release any Party from any liability
for any breach by such Party of the terms and provisions of this Agreement or to
impair the right of any Party to compel specific performance by another Party of
its obligations under this Agreement.
Section 11. MISCELLANEOUS.
11A. FEES AND EXPENSES. Each Party shall pay all of its own fees
and expenses (including fees and expenses of legal counsel, accountants,
investment bankers and other representatives and consultants) in connection with
this Agreement and the consummation of the transactions contemplated hereby;
PROVIDED THAT upon the consummation of the Closing hereunder, the Company shall
pay all such fees and expenses incurred by the Parties or reimburse the Parties
for such fees and expenses. In addition, the Company shall pay, and shall hold
each Purchaser harmless against liability for the payment of, all stamp and
other Taxes which may be payable in respect of the execution and delivery of
this Agreement or the issuance, delivery or acquisition of any Preferred Stock
or the issuance of any Common Stock upon conversion of the Convertible Preferred
Stock. If any legal action or other proceeding relating to this Agreement, the
agreements contemplated hereby, the transactions contemplated hereby or thereby
or the enforcement of any provision of this Agreement or the agreements
contemplated hereby is brought against any Party, the prevailing Party in such
action or proceeding shall be entitled to recover all reasonable expenses
relating thereto (including attorneys' fees and expenses) from the Party against
which such action or proceeding is brought in addition to any other relief to
which such prevailing Party may be entitled.
11B. REMEDIES. The Purchasers shall have all rights and remedies
set forth in this Agreement and the Articles of Incorporation and all rights and
remedies which the Purchasers have been granted at any time under any other
agreement or contract executed in connection with the transactions contemplated
hereby and, with respect to any additional rights the Purchasers may have
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against the Company, all of the rights which the Purchasers have under
applicable law. Each of the Parties acknowledges and agrees that the other
Parties would be damaged irreparably in the event any of the provisions of this
Agreement are not performed in accordance with their specific terms or otherwise
are breached. Accordingly, each of the Parties agrees that the other Parties
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the matter.
11C. TRANSFER OF RESTRICTED SECURITIES.
(i) Restricted Securities are transferable only pursuant to (a)
public offerings registered under the Securities Act, (b) Rule 144 or Rule 144A
of the Securities and Exchange Commission (or any similar rule or rules then in
force) if such rule is available and (c) subject to the conditions specified in
subparagraph (ii) below, any other legally available means of transfer.
(ii) In connection with the transfer of any Restricted Securities
(other than a transfer described in clause (a) or (b) of subparagraph (i)
above), the holder thereof shall deliver written notice to the Company
describing in reasonable detail the transfer or proposed transfer, together with
an opinion of Xxxxxxxx & Xxxxx, Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx or other
counsel which (to the Company's reasonable satisfaction) is knowledgeable in
securities law matters to the effect that such transfer of Restricted Securities
may be effected without registration of such Restricted Securities under the
Securities Act. In addition, if the holder of the Restricted Securities
delivers to the Company an opinion of Xxxxxxxx & Xxxxx, Xxxxxx Xxxxxxx Xxxxxxxx
& Xxxxxx or such other counsel that no subsequent transfer of such Restricted
Securities shall require registration under the Securities Act, the Company
shall promptly upon such contemplated transfer deliver new certificates or
instruments, as the case may be, for such Restricted Securities which do not
bear the Securities Act legend set forth in Paragraph 11C(v) below. If the
Company is not required to deliver new certificates or instruments, as the case
may be, for such Restricted Securities not bearing such legend, the holder
thereof shall not transfer the same until the prospective transferee has
confirmed to the Company in writing its agreement to be bound by the conditions
contained in this Paragraph 11C(ii) and Paragraph 11C(v) below.
(iii) Upon the request of a holder of Restricted Securities, the
Company shall promptly supply to such holder or such holder's prospective
transferees all information regarding the Company required to be delivered in
connection with a transfer pursuant to Rule 144A of the Securities and Exchange
Commission.
(iv) If any Restricted Securities become eligible for sale
pursuant to Rule 144(k), the Company shall, upon the request of the holder of
such Restricted Securities, remove the legend set forth in Paragraph 11C(v) from
the certificates or instruments, as the case may be, representing such
Restricted Securities.
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(v) Each certificate or instrument representing Restricted
Securities shall be imprinted with a legend in substantially the following form:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended. The transfer of the securities
represented hereby is subject to the conditions specified in the
Recapitalization Agreement dated as of August 29, 1997, by and among
the issuer (the "COMPANY") and certain investors, and the Company
reserves the right to refuse the transfer of such securities until
such conditions have been fulfilled with respect to such transfer. A
copy of such conditions shall be furnished by the Company to the
holder hereof upon written request and without charge."
11D. CONSENT TO AMENDMENTS. This Agreement may be amended, or any
provision of this Agreement may be waived; PROVIDED THAT any such amendment or
waiver shall be binding upon the Company only if set forth in a writing executed
by the Company and referring specifically to the provision alleged to have been
amended or waived, any such amendment or waiver shall be binding upon the
Sellers only if set forth in a writing executed by the Seller Representative and
referring specifically to the provision alleged to have been amended or waived,
and any such amendment or waiver shall be binding upon the Purchasers only if
set forth in a writing executed by the Requisite Purchasers and referring
specifically to the provision alleged to have been amended or waived. No course
of dealing between or among the Parties shall be deemed effective to modify,
amend or discharge any part of this Agreement or any rights or obligations of
any Party under or by reason of this Agreement.
11E. SUCCESSORS AND ASSIGNS.
(i) This Agreement and all covenants and agreements
contained herein and rights, interests or obligations hereunder, by or on behalf
of any of the Parties hereto, shall bind and inure to the benefit of the
respective successors and assigns of the Parties hereto whether so expressed or
not, except that neither this Agreement nor any of the covenants and agreements
herein or rights, interests or obligations hereunder may be assigned or
delegated by any Seller, or assigned or delegated by the Company prior to the
Closing, without the prior written consent of the Requisite Purchasers.
(ii) Each of the Purchasers may (at any time prior to the
Closing), in its sole discretion, assign in whole or in part its rights and
obligations pursuant to this Agreement (including the right to purchase any
Preferred Stock) to one or more of its Affiliates, and each of the Purchasers
may, in its sole discretion, direct the Company to convey any Preferred Stock to
one or more of its Affiliates subject to compliance with applicable securities
laws. In connection with any such assignment, the assigning Purchaser shall
cause the prospective assignee to execute and deliver to the Parties a
counterpart to this Agreement and the Shareholders Agreement and an
acknowledgment by such Person agreeing to be bound by all terms and provisions
hereof as a "Purchaser" hereunder and as "Investor" and "Shareholder" under the
Shareholders Agreement.
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Each of the Purchasers and, following the Closing, the Company and its
Subsidiaries may assign its rights pursuant to this Agreement, including its
rights to indemnification, to any of its lenders as collateral security. Each
of the Purchasers and, following the Closing, the Company and its Subsidiaries
may assign this Agreement and its rights and obligations hereunder in connection
with a merger or consolidation involving the Company or any of its Subsidiaries
or in connection with a sale of stock or assets of the Company or any of its
Subsidiaries or other disposition of the Company or any of its Subsidiaries.
11F. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement or the application of any
such provision to any Person or circumstance shall be held to be prohibited by,
illegal or unenforceable under applicable law in any respect by a court of
competent jurisdiction, such provision shall be ineffective only to the extent
of such prohibition or illegality or unenforceability, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
11G. COUNTERPARTS. This Agreement may be executed simultaneously
in counterparts (including by means of telecopied signature pages), any one of
which need not contain the signatures of more than one Party, but all such
counterparts taken together shall constitute one and the same Agreement.
11H. DESCRIPTIVE HEADINGS; INTERPRETATION. The headings and
captions used in this Agreement and the table of contents to this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized terms used in any Schedule or
Exhibit attached hereto and not otherwise defined therein shall have the
meanings set forth in this Agreement. The use of the word "including" herein
shall mean "including without limitation." The Parties intend that each
representation, warranty and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty or
covenant contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty or covenant.
11I. ENTIRE AGREEMENT. This Agreement and the agreements and
documents referred to herein contain the entire agreement and understanding
between the Parties with respect to the subject matter hereof and supersede all
prior agreements and understandings (including that certain letter agreement,
dated July 20, 1997, between Summit Partners, L.P., Xxxxxxxxxx Securities and
the Company), whether written or oral, relating to such subject matter in any
way.
11J. NO THIRD-PARTY BENEFICIARIES. This Agreement is for the sole
benefit of the Parties and their permitted successors and assigns and nothing
herein expressed or implied shall give or be construed to give any Person, other
than the Parties and such permitted successors and assigns, any legal or
equitable rights hereunder.
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11K. SCHEDULES. Nothing in any Schedule attached hereto shall be
adequate to disclose an exception to a representation or warranty made in this
Agreement unless such Schedule identifies the exception with particularity.
Without limiting the generality of the foregoing, the mere listing (or inclusion
of a copy) of a document or other item shall not be adequate to disclose an
exception to a representation or warranty made in this Agreement, unless the
representation or warranty has to do with the existence of the document or other
item itself. No exceptions to any representations or warranties disclosed on
one Schedule shall constitute an exception to any other representations or
warranties made in this Agreement unless the substance of such exception is
disclosed as provided herein on each such other applicable Schedule or a
specific cross-reference to a disclosure on another Schedule is made.
11L. COOPERATION ON TAX MATTERS. The Parties shall cooperate
fully, as and to the extent reasonably requested by each Party and at the
requesting Party's expense, in connection with any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the retention
and (upon any Party's request) the provision of records and information which
are reasonably relevant to any such audit, litigation or other proceeding and
making employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The Parties
agree (i) to retain all books and records with respect to Tax matters pertinent
to the Company and its Subsidiaries relating to any taxable period beginning
before the Closing Date until the expiration of the statute of limitations (and,
to the extent notified by any Party, any extensions thereof) applicable to such
taxable periods, and to abide by all record retention agreements entered into
with any taxing authority, and (ii) to give each Party reasonable written notice
prior to transferring, destroying or discarding any such books and records and,
if any Party so requests, the Purchasers, the Company or the Sellers, as the
case may be, shall allow such party to take possession of such books and
records.
11M. SCHEDULES AND EXHIBITS. All Schedules and Exhibits attached
hereto or referred to herein are hereby incorporated in and made a part of this
Agreement as if set forth in full herein.
11N. TREATMENT OF THE PREFERRED STOCK. The Company covenants and
agrees that (i) so long as federal income tax laws prohibit a deduction for
distributions made by the Company with respect to preferred stock, it shall
treat all distributions paid by it on the Preferred Stock as nondeductible
dividends on all of its tax returns, (ii) it shall treat the Preferred Stock as
preferred stock in all of its financial statements and other reports and shall
treat all distributions paid by it on the Preferred Stock as dividends on
preferred stock in such statements and reports. The Company agrees that the
"issue price" of the Redeemable Preferred Stock for purposes of Code Section 305
is equal to $100 per share. Accordingly, the Company will not report the
Redeemable Preferred Stock as having any constructive distributions under Code
Section 305. The Company agrees that the Convertible Preferred Stock is stock
which participates in corporate growth to a significant extent within the
meaning of Treasury Regulation Section 1.305-5(a), and hence will not be treated
as preferred stock for purposes of Code Section 305 and the regulations
thereunder. Accordingly, the Company has determined
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that there will not be constructive dividends under Treasury Regulation Section
1.305-5(b) with respect to the Convertible Preferred Stock.
11O. GOVERNING LAW. The corporate law of the State of California
shall govern all issues and questions concerning the relative rights and
obligations of the Company and the holders of its equity securities. All other
issues and questions concerning the construction, validity, enforcement and
interpretation of this Agreement and the Schedules and Exhibits hereto shall be
governed by, and construed in accordance with, the laws of the State of
California without giving effect to any choice of law or conflict of law rules
or provisions (whether of the State of California or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of California. In furtherance of the foregoing, the internal law of the
State of California shall control the interpretation and construction of this
Agreement (and all Schedules and Exhibits hereto), even though under that
jurisdiction's choice of law or conflict of law analysis, the substantive law of
some other jurisdiction would ordinarily apply.
11P. NOTICES. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, one day after being sent to the recipient by reputable
overnight courier service (charges prepaid), upon machine-generated
acknowledgment of receipt after transmittal by facsimile or five days after
being mailed to the recipient by certified or registered mail, return receipt
requested and postage prepaid. Such notices, demands and other communications
shall be sent to the Purchasers, the Sellers and the Company at the addresses
indicated below or to such other address or to the attention of such other
person as the recipient party has specified by prior written notice to the
sending party.
THE COMPANY
Netcom Systems, Inc.
00000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
Attn: Chief Executive Officer
Phone: (000) 000-0000
Facsimile: (000) 000-0000
-59-
WITH A COPY TO:
(which shall not constitute notice to the Company)
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Summit Partners, L.P.
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xx. Xxxxxx X. Xxxxxxxxx
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Northstar Investors, LLC
c/x Xxxxxxxxxx Securities
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xx. Xxxxx Xxxxx
Phone: (000) 000-0000
Facsimile: (000) 000-0000
NationsBanc Capital Corp.
NationsBank Corporate Center
10th Floor
000 Xxxxx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xx. Xxxxxx X. Xxxxxxxx III
Phone: (000) 000-0000
Facsimile: (000) 000-0000
-60-
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxx X. Xxxx, Esq.
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Fennesbresque, Xxxxx, Xxxxxxxx & Hay
NationsBank Corporate Center
29th Floor
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxxxxxx, Esq.
Phone: (000) 000-0000
Facsimile: (000) 000-0000
THE SELLERS:
To the Sellers at their respective addresses listed on the SCHEDULE
OF SELLERS attached hereto.
WITH A COPY TO:
(which shall not constitute notice to the Sellers)
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Phone: (000) 000-0000
Facsimile: (000) 000-0000
THE PURCHASERS:
To the Purchasers at their respective addresses
listed on the SCHEDULE OF PURCHASERS attached hereto
-61-
WITH COPY TO:
(which shall not constitute notice to the Purchasers)
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxx X. Xxxx, Esq.
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Fennesbresque, Xxxxx, Xxxxxxxx & Hay
NationsBank Corporate Center
29th Floor
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxxxxxx, Esq.
Phone: (000) 000-0000
Facsimile: (000) 000-0000
11Q. NO STRICT CONSTRUCTION. The Parties have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the Parties, and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement.
* * * * *
-62-
IN WITNESS WHEREOF, the parties hereto have executed this
Recapitalization Agreement on the date first written above.
NETCOM SYSTEMS, INC.
By:
---------------------------------------
Its:
---------------------------------------
SUMMIT VENTURES IV., L.P.
By: Summit Partners, IV, L.P., its General
Partner
By: Stamps, Xxxxxxx & Co. IV, its General
Partner
By:
---------------------------------------
General Partner
SUMMIT INVESTORS III, L.P.
By:
---------------------------------------
Authorized Signatory
NATIONSBANC CAPITAL CORP.
By:
---------------------------------------
Xxxx X. Xxxxxxxxx, its
Authorized Signatory
NORTHSTAR INVESTORS, LLC
By:
---------------------------------------
Its:
---------------------------------------
[Signature Page to Recapitalization Agreement]
SPITFIRE CAPITAL PARTNERS, L.P.
By: MS Spitfire, LLC, its General Partner
By:
---------------------------------------
Xxxxxxx X. Xxxxxxx
Its:
---------------------------------------
Xxxxx Xxxxxx, as nominee for
BROADVIEW PARTNERS GROUP
By:
---------------------------------------
Its:
---------------------------------------
BAIN SECURITIES, INC.
By:
---------------------------------------
Xxxxxxx X. Xxxxx, its Vice President
WS INVESTMENT COMPANY 97B
By:
---------------------------------------
Its:
---------------------------------------
WSGR PROFIT SHARING TRUST FBO
XXXXXX X. XXXXXXX
By:
---------------------------------------
Its:
---------------------------------------
--------------------------------------------
Xxxxxx X. Xxxxxxx
--------------------------------------------
Xxxxx X. Xxxx
--------------------------------------------
Xxxx Xxxxxx
[Signature Page to Recapitalization Agreement]
--------------------------------------------
Xxxx Xxxxx
--------------------------------------------
Xxxxx Xxxxx
--------------------------------------------
Xxxxx X. Xxxxxx
--------------------------------------------
Xxxx Xxxxx
--------------------------------------------
Xxxxxx X. Xxxxxx III
--------------------------------------------
Xxxxxxxx Xxxxxxx
--------------------------------------------
Xxxxxxx Xxxx
[Signature Page to Recapitalization Agreement]
SCHEDULE OF PURCHASERS
Number of Shares Purchase Price Number of Shares Purchase Price Total Purchase
of Redeemable for Redeemable of Convertible for Convertible Price for
Name and Address Preferred Stock Preferred Stock Preferred Stock Preferred Stock Preferred Stock
---------------- --------------- --------------- --------------- --------------- ---------------
Summit Ventures IV, L.P. 236,856 $ 23,685,576 11,180,936 $23,685,576 $47,371,152
c/o Summit Partners, L.P.
000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Summit Investors III, L.P. 3,236 323,624 152,769 323,624 647,248
c/o Summit Partners, L.P.
000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx
Phone: (000) 000-0000
Facsimile: (000) 000-0000
NationsBanc Capital Corp. 80,000 8,000,000 3,776,454 8,000,000 16,000,000
c/o NationsBank Capital Investors
NationsBank Corporate Center, 10th
Floor
000 Xxxxx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx III
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Northstar Investors, LLC 145,092 14,509,200 6,849,166 14,509,200 29,018,400
c/x Xxxxxxxxxx Securities
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxxx
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Spitfire Capital Partners, L.P. 15,000 1,500,000 708,085 1,500,000 3,000,000
c/x Xxxxxxxxxx Securities
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx Xxxxxxx
Phone: (000 ) 000-0000
Facsimile: (000) 000-0000
Number of Shares Purchase Price Number of Shares Purchase Price Total Purchase
of Redeemable for Redeemable of Convertible for Convertible Price for
Name and Address Preferred Stock Preferred Stock Preferred Stock Preferred Stock Preferred Stock
---------------- --------------- --------------- --------------- --------------- ---------------
Bain Securities, Inc. 500 50,000 23,603 50,000 100,000
c/o Bain & Company, Inc.
Two Xxxxxx Place
Boston, Massachusetts 02116
Attn: Xxxxxxx X. Bands
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Xxxxx Xxxxxx, as nominee for 1,500 150,000 70,808 150,000 300,000
Broadview Partners Group
c/o Broadview Associates
000 Xxxxx Xxxx
00xx Xxxxx
Xxxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx
Phone: (000) 000-0000
Facsimile: (000) 000-0000
WS Investment Company 97B 250 25,000 11,801 25,000 50,000
c/o Wilson, Sonsini, Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Phone: (000) 000-0000
Facsimile: (000) 000-0000
WSGR Profit Sharing Trust 100 10,000 4,721 10,000 20,000
FBO Xxxxxx X. Xxxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Xxxxxx X. Xxxxxxx 93 9,300 4,343 9,200 18,500
c/o Wilson, Sonsini, Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Nevam X. Xxxx 50 500 2,360 5,000 10,000
c/o Wilson, Sonsini, Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Number of Shares Purchase Price Number of Shares Purchase Price Total Purchase
of Redeemable for Redeemable of Convertible for Convertible Price for
Name and Address Preferred Stock Preferred Stock Preferred Stock Preferred Stock Preferred Stock
---------------- --------------- --------------- --------------- --------------- ---------------
Xxxx Xxxxxx 7 700 378 800 1,500
c/o Wilson, Sonsini, Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Phone: (000) 000-0000
Facsimile: (000) 000-0000
-------------- ------------- ------------- ------------- -------------
482,684 $ 48,268,400 22,785,424 $ 48,268,400 $ 96,536,800
-------------- ------------- ------------- ------------- -------------
-------------- ------------- ------------- ------------- -------------
SCHEDULE OF SELLERS
Number of Repurchase Exercise Net Repurchase Escrow Closing Cash
Name and Address Repurchased Shares Price Price Price Amount Amount
----------------------------- ------------------ ----------- --------- -------------- ----------- -------------
Xxxx Xxxxx 8,000,000 $ 122,336,000 -- $ 122,336,000 $ 6,273,979 $ 116,062,021
00000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
Xxxxx X. Xxxxxx 840,000 12,845,280 795,000 12,050,280 617,996 11,432,284
00000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
Xxxxxx X. Xxxxxx III 26,666 407,776 33,332 374,444 19,204 355,240
00000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
Xxxx Xxxxx 80,000 1,223,360 133,333 1,090,027 55,902 1,034,125
00000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
Xxxxxxxx Xxxxxxx 26,666 407,776 33,332 374,444 19,204 355,240
00000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
Xxxxxxx Xxxx 160,000 2,446,720 0 2,446,720 125,480 2,321,240
___________________
___________________
------------------ ----------- --------- -------------- ----------- -------------
9,133,332 $ 139,666,912 $ 994,997 $ 138,671,915 $ 7,111,765 $ 131,560,150
------------------ ----------- --------- -------------- ----------- -------------
------------------ ----------- --------- -------------- ----------- -------------
