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ASSET PURCHASE AGREEMENT
BETWEEN
NEOWARE SYSTEMS, INC.
AND
TELEVIDEO, INC.
JANUARY 10, 2005
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS..........................................................2
ARTICLE II PURCHASE AND SALE OF ASSETS.........................................5
2.1 Purchase and Sale of Assets...........................................5
2.2 Excluded Assets.......................................................6
2.3 Purchase Price........................................................6
2.4 Payment of Purchase Price.............................................6
2.5 Closing...............................................................8
2.6 Ad Valorem Tax Adjustment.............................................9
2.7 Allocation of Purchase Price..........................................9
2.8 Assumed Liabilities...................................................9
2.9 Retained Liabilities..................................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER..........................10
3.1 Organization and Good Standing.......................................10
3.2 Authorization and Effect of Agreement................................10
3.3 No Restrictions Against Sale of the Assets...........................10
3.4 Financial Statements; SEC Reports....................................11
3.5 Operation of the Business Since October 31, 2003.....................12
3.6 Title to Assets; Licenses............................................12
3.7 No Litigation........................................................12
3.8 Income and Other Taxes...............................................13
3.9 Employee Benefit Matters.............................................13
3.10 Governmental Approvals...............................................14
3.11 Assumed Contracts....................................................14
3.12 Employee and Labor Matters...........................................15
3.13 Principal Customers and Suppliers....................................16
3.14 Compliance with Law..................................................16
3.15 Product Warranties...................................................16
3.16 Intellectual Property................................................16
3.17 Operation of the Business............................................19
3.18 Environmental Matters................................................19
3.19 Insurance............................................................20
3.20 Brokers' Fees........................................................20
3.21 Disclosure...........................................................20
3.22 Transactions with Affiliates.........................................20
3.23 No Liquidation or Winding-Up; Fairness of Consideration..............20
3.24 No Undisclosed Liabilities...........................................21
3.25 Information Supplied.................................................21
3.26 Approval and Adoption Requirements...................................21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER........................21
4.1 Organization and Good Standing.......................................21
4.2 Execution and Delivery...............................................22
4.3 No Conflicts.........................................................22
4.4 Compliance with Law..................................................22
4.5 No Restrictions Against Purchase of Assets...........................22
ARTICLE V OPERATION OF BUSINESS PENDING CLOSING...............................22
5.1 Conduct of Seller....................................................22
5.2 Tax Assessments and Audits...........................................24
ARTICLE VI ADDITIONAL COVENANTS...............................................24
6.1 Covenants of Seller.................................................24
6.2 Covenants of Purchaser...............................................25
6.3 Access and Information...............................................26
6.4 Information Statement................................................27
6.5 No Solicitation......................................................27
6.6 Expenses.............................................................29
6.7 Certain Notifications................................................29
6.8 Publicity; Employee Communications...................................29
6.9 Further Assurances...................................................29
6.10 Inconsistent Action..................................................29
6.11 Employee Matters.....................................................29
6.12 Assignments; Consents................................................31
6.13 Sufficiency of Assets................................................31
ARTICLE VII CONDITIONS PRECEDENT TO CLOSING...................................31
7.1 Conditions of Purchaser..............................................31
7.2 Conditions of Seller.................................................33
ARTICLE VIII POST-CLOSING OBLIGATIONS.........................................34
8.1 Seller-Assumed Warranty Obligations..................................34
8.2 Seller Supply of the Products........................................34
8.3 Seller-Assumed Support Services Obligations..........................35
8.4 Continued Operations; No Bankruptcy..................................35
8.5 Product Returns......................................................35
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER..................................35
9.1 Termination..........................................................35
9.2 Effect of Termination................................................36
9.3 Amendment............................................................37
9.4 Waiver...............................................................37
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ARTICLE X INDEMNIFICATION.....................................................37
10.1 Survival.............................................................37
10.2 Indemnification......................................................37
10.3 Procedures...........................................................38
10.4 Third Party Claims...................................................38
10.5 Indemnification Exclusive............................................39
10.6 Limitation on Amount.................................................39
ARTICLE XI REBATE AND MARKETING PROGRAMS......................................39
11.1 List of Programs.....................................................39
11.2 Payments.............................................................39
11.3 Marketing Rights.....................................................39
ARTICLE XII GENERAL PROVISIONS................................................40
12.1 Notices..............................................................40
12.2 Severability.........................................................40
12.3 Entire Agreement.....................................................40
12.4 Successors and Assigns...............................................41
12.5 Counterparts.........................................................41
12.6 Recitals, Schedules, Exhibits and Annexes............................41
12.7 Construction.........................................................41
12.8 Governing Law........................................................41
12.9 Passage of Title and Risk of Loss....................................41
12.10 Bulk Sales...........................................................41
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INDEX OF EXHIBITS
Exhibit A Escrow Agreement
Exhibit B Korea Distributor Agreement, as shall be agreed to by the parties
Exhibit C License Agreement
Exhibit D Noncompetition Agreements
Exhibit E Reseller Agreement
Exhibit F Transitional Services
Exhibit G Transitional Supply and Trademark License Agreement
Exhibit H Seller's Opinion
Exhibit I Warranties
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of
January 11, 2005 between NEOWARE SYSTEMS, INC., a Delaware corporation
("Purchaser"), and TELEVIDEO, INC., a Delaware corporation ("Seller").
RECITALS
A. Seller is presently engaged in the business of designing,
developing, manufacturing, distributing and selling Windows and Linux-based thin
client devices (the "Products") and general purpose terminal products.
B. Seller desires to Transfer (as hereinafter defined) to Purchaser,
and Purchaser desires to purchase from Seller, all of the assets owned or held
for use by Seller or used by Seller in connection with Seller's business of
designing, developing, manufacturing, distributing and selling the Windows and
Linux-based thin client devices (referred to herein as the "Business"), other
than the Excluded Assets (as hereinafter defined), on the terms and subject to
the conditions set forth in this Agreement.
C. Seller desires to delegate to Purchaser, and Purchaser is willing to
assume from Seller, the Assumed Liabilities (as hereinafter defined), on the
terms and subject to the conditions set forth in this Agreement.
D. Simultaneously with the execution of this Agreement, and as a
condition and inducement to Purchaser's willingness to enter into this
Agreement, certain stockholders of Seller (the "Principal Seller Stockholders")
are entering into an agreement (the "Stockholders' Agreement") with Purchaser,
pursuant to which each of the Principal Seller Stockholders agrees, among other
things, to take certain actions in furtherance of the Transfer, including
causing the execution and delivery of written consents in accordance with
Section 228 of Delaware Law (as hereinafter defined) pursuant to which the
record holders of the shares of Seller's Common Stock (as hereinafter defined)
beneficially owned by each of the Principal Seller Stockholders will consent to
the adoption of this Agreement and the approval of the Transfer without a
meeting of the stockholders, without prior notice and without a vote (the
"Written Consent").
E. Simultaneously with the execution of this Agreement, and as a
condition and inducement to Purchaser's willingness to enter into this
Agreement, Seller and Purchaser are entering into a reseller agreement (the
"Reseller Agreement") pursuant to which Purchaser will be the exclusive reseller
and sales agent for Seller's Products during the period commencing on the date
of this Agreement until the Closing.
F. Immediately following the execution and delivery of this Agreement,
each of the record holders of the shares of Seller's Common Stock beneficially
owned by the Principal Seller Stockholders will execute a Written Consent and
deliver it to the secretary of the Seller, and the secretary shall certify and
acknowledge that the Stockholder Approval (as hereinafter defined) has been
obtained.
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Unless otherwise defined herein or the context otherwise requires, the
terms defined in this Article I shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms of
any of the terms herein defined. Unless otherwise indicated, any reference
herein to a Section, Article, Exhibit or Schedule shall mean the applicable
section, article, exhibit or schedule of or to this Agreement. All accounting
terms used in this Agreement not defined in this Article I shall, except as
otherwise provided for herein, be construed in accordance with generally
accepted accounting principles, consistently applied.
"ACTION" shall mean any actual or threatened claim, action, suit,
arbitration, hearing, inquiry, proceeding, complaint, charge or investigation by
or before any Governmental Entity or arbitrator and any appeal from any of the
foregoing.
"AFFILIATE" of a Person shall mean any Person that directly or
indirectly controls, is controlled by, or is under common control with, the
indicated Person.
"AGREEMENT" shall mean this Asset Purchase Agreement, together with all
Schedules and Exhibits hereto.
"ANCILLARY AGREEMENTS" shall mean the Escrow Agreement, the License
Agreement, the Noncompetition Agreements, the Stockholders' Agreement, the
Reseller Agreement and the Transitional Supply and Trademark License Agreement.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"DAMAGES" shall mean any and all losses, liabilities, obligations,
costs, expenses, damages or judgments of any kind or nature whatsoever
(including reasonable attorneys', accountants' and experts' fees, disbursements
of counsel, and other costs and expenses incurred pursuing indemnification
claims under Article IX hereof).
"DELAWARE LAW" shall mean the Delaware General Corporation Law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
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"ERISA AFFILIATE" shall mean any Person which is (or at any relevant
time was) a member of a controlled group of corporations within the meaning of
Code Section 414(b), all trades or businesses under common control within the
meaning of Code Section 414(c), and all affiliated service groups within the
meaning of Code Section 414(m), of which Seller is (or at any relevant time was)
a member.
"ESCROW AGREEMENT" shall mean the form of Escrow Agreement attached
hereto as Exhibit A.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934.
"GOVERNMENTAL ENTITY" shall mean any local, state, federal or foreign
(i) court, (ii) government or (iii) governmental department, commission,
instrumentality, board, agency or authority, including, without limitation, the
IRS and other taxing authorities.
"INFORMATION STATEMENT" shall mean the Information Statement as defined
in Section 6.4.
"KNOWLEDGE" shall mean (a) knowledge of any of the senior management of
Seller, including Dr. K. Xxxxxx Xxxxx, Xxxxxxx Xxx, and Xxxxxxx Xxxx, and (b)
the knowledge that any of such persons would be reasonably expected to have
after making inquiry of those persons employed by such party who would
reasonably be expected to have knowledge of the issue in question.
"KOREA DISTRIBUTOR AGREEMENT" shall mean the Korea Distributor
Agreement as shall be agreed to by the parties.
"LEGAL REQUIREMENT" shall mean any statute, law, ordinance, rule,
regulation, permit, order, writ, judgment, injunction, decree or award issued,
enacted or promulgated by any Governmental Entity or any arbitrator.
"LICENSE AGREEMENT" shall mean the License Agreement in the form
attached hereto as Exhibit C.
"LIEN" shall mean all liens (including judgment and mechanics' liens,
regardless of whether liquidated), mortgages, assessments, security interests,
easements, claims, pledges, trusts (constructive or other), deeds of trust,
options or other charges, encumbrances or restrictions.
"MATERIAL ADVERSE EFFECT" shall mean any event, change or effect that
is (or could reasonably be expected to be) materially adverse to the Assets or
the Business or to Purchaser's ability to continue to operate the Business as
operated prior to the Closing.
"NONCOMPETITION AGREEMENT" shall mean the Noncompetition Agreement in
the form attached hereto as Exhibit D.
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"ORDINARY COURSE" shall mean, when used with reference to Seller, the
ordinary and normal course of the operation of the Business, consistent with
past practices.
"PERSON" shall mean all natural persons, corporations, business trusts,
associations, companies, partnerships and joint ventures.
"PLAN" shall mean any employee benefit plan within the meaning of
Section 3(3) of ERISA and any other written or oral employee plan (other than
arrangements merely involving the payment of wages) which are or at any time
have been established, maintained, or contributed to by Seller or any ERISA
Affiliate for the benefit of current or former employees, with respect to which
Seller or an ERISA Affiliate has or may in the future have any liability or
obligation to contribute or make payments of any kind.
"RESELLER AGREEMENT" shall mean the Reseller Agreement in the form
attached as Exhibit E.
"SEC" shall mean the United States Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933.
"SELLER COMMON STOCK" shall mean Seller's common stock, par value $0.01
per share.
"STOCKHOLDER APPROVAL" shall mean the approval of Seller stockholders
as defined in Section 3.26.
"SUBSIDIARY OF A PERSON" shall mean any corporation, partnership,
limited liability company, association or other business entity at least 50% of
the outstanding voting power of which is at the time owned or controlled
directly or indirectly by such Person or by one or more of such subsidiary
entities, or both.
"TAX" shall mean all taxes, including without limitation all Federal,
state, local or foreign income, gross receipts, license, payroll, unemployment,
excise, severance, stamp, occupation, premium, windfall profits, environmental
(including, without limitation, taxes under Code Section 59A), customs duties,
capital stock, franchise, profits, withholding, social security (or similar),
employment, disability, real property, personal property, ad valorem, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated tax or other tax, assessment or charge of any kind whatsoever, and any
interest, fine, penalty or addition thereto, whether disputed or not.
"TAX RETURN" shall mean any return, declaration, report, claim for
refund or information, or statement relating to Taxes, and any exhibit,
schedule, attachment or amendment thereto.
"TRANSITIONAL SERVICES" shall mean the Transitional Services included
in Exhibit F.
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"TRANSITIONAL SUPPLY AND TRADEMARK LICENSE AGREEMENT" shall mean the
Transitional Supply and Trademark License Agreement in the form attached hereto
as Exhibit G.
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale of Assets. On the terms and subject to the
conditions hereof, at the Closing (as defined in Section 2.5), Seller will sell,
transfer, grant, convey, assign and deliver ("Transfer") to Purchaser, and
Purchaser will purchase and accept from Seller, the rights, properties and
assets owned, held for use or used by Seller in connection with the operation or
conduct of the Business, including any technology under development, as of the
date hereof, or acquired by Seller in connection with the operation of the
Business between the date hereof and the Closing Date (as defined in Section
2.5), or used by Seller in connection with the operation of the Business
including, but not limited to, the rights, properties and assets described in
this Section 2.1 (collectively the "Assets"):
(a) Personal Property. The software, files, books, records,
fixtures, equipment, supplies, computers, printers and all other tangible
personal property owned or held by Seller in connection with the operation of
the Business, as of the date hereof or acquired by Seller in connection with the
operation of the Business between the date hereof and the Closing Date or used
by Seller in connection with the operation of the Business, including those
items listed or described on Schedule 2.1(a), except for property excluded under
Section 2.2 (collectively, the "Owned Tangible Personal Property");
(b) Contract Rights. All rights and incidents of interest of
Seller existing as of the date hereof or acquired by Seller between the date
hereof and the Closing Date in, to or under all licenses, leases, agreements,
customer orders, contracts, written or verbal (including product warranty
claims, rebates and indemnity or other rights of action against any person
arising out of acts, omissions or occurrences before, at or after the Closing),
prepaid items, deposits and refunds relating to the Business, including those
items listed on Schedule 2.1(b) (collectively, the "Contracts");
(c) Intellectual Property. The entire right, title and
interest of Seller existing as of the date hereof or acquired by Seller between
the date hereof and the Closing Date in connection with the operation of the
Business or used by Seller in connection with the operation of the Business in,
to or under (i) all United States, international and foreign patents and
applications therefor and all reissues, divisions, renewals, extensions,
provisionals, continuations and continuations-in-part thereof, (ii) all
software, licenses, inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information, know how,
technology, technical data and customer lists, and all documentation relating to
any of the foregoing, (iii) all copyrights, copyrights registrations and
applications therefor, and all other rights corresponding thereto throughout the
world, (iv) all industrial designs and any registrations and applications
therefor, (v) all trade names, logos, common law trademarks and service marks,
trademark and service xxxx registrations and applications therefor (except that
the ownership of the TeleVideo tradename shall be excluded, subject to a license
to Purchaser pursuant to the License Agreement), (vi) all databases and data
collections and all rights therein, (vii) Seller's list
5
of customer prospects pertaining to the Business (including customer data base
and contact information related to historic sales of general purpose terminals
by Seller and databases and contact information of customer prospects maintained
by Seller's sales personnel), (viii) all moral and economic rights of authors
and inventors, however denominated, and (ix) any similar or equivalent rights to
any of the foregoing (as applicable), including the items listed on Schedule
2.1(c) (collectively, the "Intellectual Property");
(d) Governmental Licenses, Permits and Approvals. To the
extent Transferable, all rights and incidents of interest of Seller existing as
of the date hereof or acquired by Seller between the date hereof and the Closing
Date in, to or under all licenses, permits and authorizations (collectively, the
"Approvals") issued or requested to be issued by any Governmental Entity in
connection with the operation of the Business, including the Approvals listed or
described on Schedule 2.1(d);
(e) Books and Records. All books, records, ledgers, files,
documents, correspondence, studies, reports and other documents of Seller
relating to the Business or the Assets; and
(f) Goodwill. The goodwill of the Business.
2.2 Excluded Assets. Notwithstanding anything contained in this
Agreement to the contrary, the following rights, properties and assets
(collectively, the "Excluded Assets") will not be included in the Assets:
(a) Inventory. All raw material, works-in-progress and
finished goods inventories relating to the Business.
(b) Accounts Receivable. All accounts receivable arising from
the conduct of the Business prior to the Closing.
(c) The Televideo tradename, which shall be subject to a fully
paid license to Purchaser to use the name in connection with the Business in
accordance with the License Agreement.
(d) Real Estate.
(e) Certain personal property not directly related to the
design or manufacture of the Products, as listed or described on Schedule
2.2(e).
2.3 Purchase Price. Purchaser will pay for the Assets a purchase price
in the amount of Five Million Dollars ($5,000,000), subject to adjustment as
provided in Sections 2.4(b) and 2.6 (the "Purchase Price").
2.4 Payment of Purchase Price.
(a) Closing Payment and Escrow. At the Closing (as defined in
Section 2.5):
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(i) Purchaser shall pay to Seller an amount equal to
Four Million Five Hundred Thousand Dollars ($4,500,000), subject to adjustment,
as provided in Sections 2.4(b) and 2.6 (the "Closing Payment"); and
(ii) Purchaser shall deposit into an escrow account
(the "Escrow Account") Five Hundred Thousand Dollars ($500,000) (the "Escrow
Amount"), to be held and disbursed by Wachovia Bank (or if Wachovia Bank is
unable to serve, by another party appointed by the parties), as escrow agent
(the "Escrow Agent"). The Escrow Amount shall be held by the Escrow Agent
pursuant to the Escrow Agreement. The Escrow Amount, or a portion thereof, as
set forth in the Escrow Agreement, will be subject to set-off for any
indemnification claims arising during the thirty six-month period commencing on
the Closing Date (the "Escrow Period"), and as otherwise provided herein and in
the Escrow Agreement.
The Escrow Agreement shall terminate at the close of business on the last day of
the Escrow Period (the "Escrow Termination Date"), unless there are any
unresolved indemnification or other claims or disputes on such date pursuant to
which Purchaser may be entitled to all or a portion of the Escrow Amount. In the
event of any such unresolved claims or disputes, the Escrow Agreement will
continue in force, but any portion of the Escrow Amount which exceeds the amount
for which a claim has been made or a dispute exists shall be released to Seller,
except as provided in the Escrow Agreement. Seller's liability for the claims
identified in this Section 2.4(b), or any other claims of Purchaser hereunder,
shall not be limited to the Escrow Amount.
(b) Earn-Out.
(i) Purchaser shall pay to Seller additional cash
consideration (the "Contingent Consideration") equal
to the sum of the following:
(1) $500,000, if revenues to Purchaser from the
sale of Seller's Products or Purchaser's products by Purchaser to Seller's
Customers (as defined below) and revenues from sales of the Products to
Purchaser's customers (the "Earn-Out Revenues") exceed $12,000,000 for the
12-month period commencing on the date of this Agreement (the "Earn-Out
Period"); and
(2) $500,000, if the Earn-Out Revenues exceed
$13,000,000 for the Earn-Out Period; and
(3) an amount equal to 0.20 multiplied by the
excess of the Earn-Out Revenues over $14,000,000 for the Earn-Out Period.
(ii) "Seller's Customers" shall be those customers
listed on Schedule 2.4(b). Calculation of the Earn-Out Revenues shall be subject
to the following qualifications:
(1) Revenues from Seller's Customers who are
also customers of Purchaser ("Mutual Customers") shall be excluded for purposes
of calculating Earn-Out Revenues, provided however, that revenues from Mutual
Customers who are resellers or distributors shall be included for purposes of
calculating Earn-Out Revenues for that portion of revenues that relates to the
shipment of a Seller's Product.
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(2) Revenues from Seller's end user customers
whose names are set forth on the attached list who are not Mutual Customers
shall apply whether Purchaser sells a Seller's Product or transitions the
Seller's end user customer to a Purchaser's product.
(3) No revenues shall be included to the extent
that they are related to Purchaser's products sold to Purchasers customers.
(4) Earn-Out Revenues shall include revenues
from the sale of any Seller Product to any of Purchaser's existing customers.
(iii) The amount of Contingent Consideration payable to
Seller under this Section 2.4(b) shall be subject to adjustment for credits
related to product returns, price adjustments and non-payment of invoices.
(iv) Subject to adjustment under Section 2.4(b)(ii),
Contingent Consideration, if any, payable under Section 2.4(b)(i) shall be
payable to Seller within 45 days after the end of the Earn-Out Period. Seller
shall have the right, at its sole expense, to audit Purchaser's records related
and limited to Purchaser's performance under Section 2.4(b)(i) as is necessary
to verify the amount of Contingent Consideration payable, upon at least three
days prior notice, in a manner not disruptive of Purchaser's business during
Purchaser's normal business hours.
2.5 Closing. The purchase and sale of the Assets and the consummation
of the other transactions contemplated by this Agreement (the "Closing") shall
occur at 10:00 a.m., local time, on March 15, 2005 at the offices of Neoware or
at such other time or on such other date as shall be agreed by Seller and
Purchaser upon fulfillment of all conditions precedent to the Closing, such hour
and date being herein generally referred to as the "Closing Date. At the
Closing:
(a) Seller shall deliver or cause to be delivered to
Purchaser, against payment by Purchaser to Seller of the Closing Payment:
(i) all of the agreements, documents, certificates
and instruments required to be delivered by Seller pursuant to Section 7.1
hereof.
(b) Purchaser shall deliver or cause to be delivered to Seller
against delivery of the agreements, documents, certificates and instruments
required to be delivered by Seller pursuant to Section 7.1:
(i) a wire transfer of immediately available funds to
an account designated in writing by Seller in an amount representing the Closing
Payment; and
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(ii) all of the documents, if any, required to be
delivered by Purchaser pursuant to Section 7.2 hereof.
2.6 Ad Valorem Tax Adjustment. All ad valorem Taxes imposed by any
taxing authority upon the Assets will be prorated between Seller and Purchaser
as of the Closing Date based on the most current available tax rates and
assessed values (such prorations to be adjusted when final rates and assessed
values are established). All such Taxes attributable to the period up to the
Closing Date and which remain unpaid as of the Closing Date shall be deducted
from the Purchase Price. All such Taxes, if any, attributable to the period
following the Closing Date and which have been paid by Seller prior to the
Closing Date shall be added to the Purchase Price. All adjustments to the
Purchase Price will be calculated as of 11:59 p.m. on the Closing Date.
2.7 Allocation of Purchase Price. The Purchase Price represents the
amount agreed upon by Purchaser and Seller to be the aggregate fair market value
of the Assets. Purchaser and Seller have agreed that the Purchase Price will be
allocated based upon an appraisal to be obtained by Purchaser within sixty (60)
days following the Closing Date. Purchaser and Seller will allocate the Purchase
Price to the Assets in such manner consistently for all purposes, including in
connection with all federal, foreign, state, local and other Tax Returns and
reports prepared and filed by or for either of Purchaser or Seller.
2.8 Assumed Liabilities. On the terms and subject to the conditions
hereof, as of the Closing, Purchaser will assume only and thereafter in due
course pay, perform and discharge the following, and only the following,
liabilities and obligations of Seller (the "Assumed Liabilities"):
(a) all liabilities and obligations of Seller arising under
the terms of the Contracts that are included in the Assets and listed or
described on Schedule 3.11(a) (the "Assumed Contracts"), but only to the extent
such liabilities and obligations arise after the Closing Date (and are not based
on events occurring on or prior to the Closing Date) under the terms of such
Assumed Contracts, provided, however, that Purchaser will not assume or be
responsible for any such liabilities or obligations which arise under or in
relation to any Plan or from any breach or default by Seller under any Contract,
all of which liabilities and obligations will constitute Retained Liabilities
(as defined in Section 2.9); and
(b) such liabilities and obligations as are listed on Schedule
2.8(b).
2.9 Retained Liabilities. Except as provided in Section 2.8, Seller
will retain, and Purchaser will not assume or be responsible or liable with
respect to, any liabilities or obligations of Seller or its Affiliates or their
respective predecessors-in-interest, whether or not arising out of or relating
to the operation of the Business or associated with or arising from any of the
Assets or any other rights, properties or assets used in or associated with the
Business at any time, and whether fixed or contingent, direct or indirect, or
known or unknown, including, but not limited to, liabilities relating to
warranties and service obligations relating to the operation of the Business by
the Seller, liabilities for Taxes relating to the sale of the Assets and
liabilities with respect to any of Seller's employees (collectively the
"Retained Liabilities").
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to, and covenants and agrees
with, Purchaser that as of the date hereof and as of the Closing Date:
3.1 Organization and Good Standing.
(a) Each of Seller and its Subsidiaries has been duly
organized and is existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation with full power and authority (corporate
and other) to own and lease its assets and properties and to conduct its
business and the operation of the Business as currently conducted. Each of
Seller and its Subsidiaries has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of each
jurisdiction set forth on Schedule 3.1(a), such jurisdictions comprising all
jurisdictions in which Seller or any of its Subsidiaries owns or leases any
property, or conducts any business, so as to require such qualification, except
where any failure to qualify would not have a Material Adverse Effect, as
defined in Article I.
(b) Except as set forth in Schedule 3.1(b), Seller has no
Subsidiary nor owns or controls, or has any other equity investment or other
interest in, directly or indirectly, any corporation, joint venture,
partnership, association or other entity.
3.2 Authorization and Effect of Agreement. Seller has the requisite
corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements to which Seller is a party and to perform the transactions
contemplated hereby and thereby to be performed by Seller. The execution and
delivery by Seller of this Agreement and the Ancillary Agreements and the
performance by Seller of the transactions contemplated hereby and thereby to be
performed by Seller has been duly authorized by all necessary action on the part
of Seller's board of directors and, if applicable, holders of the Seller's
indebtedness. This Agreement has been duly executed and delivered by Seller, and
this Agreement is, and the Ancillary Agreements to which Seller is a party will
be, when duly executed and delivered by Seller, assuming the due execution and
delivery of this Agreement and the Ancillary Agreements to which Purchaser is a
party by Purchaser, legal, valid and binding obligations of Seller enforceable
in accordance with their respective terms.
3.3 No Restrictions Against Sale of the Assets. Except as listed or
described on Schedule 3.3, the execution and delivery of this Agreement and the
Ancillary Agreement to which Seller is a party by Seller do not, and the
performance by Seller of the transactions contemplated hereby and thereby to be
performed by it will not, conflict with, or result in any violation of, or
constitute a default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, (a) the certificate of
incorporation or bylaws of Seller, (b) any Legal Requirement to which Seller or
any of the Assets is subject, (c) any Contract or other material agreement,
instrument or obligation of Seller, or (d) any licenses of Seller. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Person or Governmental Entity is required to be obtained or made by or
with respect to Seller under any Legal Requirement in connection with the
execution and delivery of this Agreement or the Ancillary Agreements by Seller
or the performance by Seller of the transactions contemplated hereby or thereby
to be performed by it, except as set forth on Schedule 3.3.
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3.4 Financial Statements; SEC Reports.
(a) Schedule 3.4 hereto contains true and complete copies of
(i) the audited balance sheets of Seller at October 31, 2002 and 2003, and the
related audited statements of income, shareholders' equity and cash flows for
the years then ended (the "Audited Financial Statements"), and (ii) the
unaudited balance sheet of Seller at October 31, 2004, (the "Interim Balance
Sheet") and the related statement of income, for the year then ended (and
quarterly balance sheets and income statements for the quarters ended January
31, April 30 and July 31, 2004, respectively,) including, where available, in
each case, the notes thereto (the financial statements described in clause (i)
and (ii) above are collectively referred to as the "Financial Statements").
(b) The Financial Statements fairly present, in all material
respects, the financial condition of the Seller and the Business as of the dates
indicated therein and the results of operations and changes in financial
position of the Seller and the Business for the periods specified therein, have
been prepared in conformity with generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods covered thereby and
prior periods (except in each case as stated in the applicable footnotes or
auditor's report and except, in the case of interim financial statements, for
year end adjustments).
(c) The Seller has no liabilities or obligations which would
be required under GAAP to be reflected on a balance sheet of the Seller as of
the date of this Agreement, except for liabilities and obligations (i) reflected
or reserved against in the Interim Balance Sheet, (ii) incurred or arising in
the ordinary course of business since October 31, 2004, (iii) incurred or
arising other than in the ordinary course of business since October 31, 2004 and
not, individually or in the aggregate, material, or (iv) described on Schedule
3.4(c).
(d) As of their respective dates, Seller's annual reports on
Form 10-K for the fiscal years ended October 31, 2002 and 2003, and all
quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements
and other forms and reports filed with the SEC since November 1, 2002 (other
than the financial statements (including the notes thereto) filed as a part
thereof or incorporated by reference therein about which no representation is
made hereby) (the "Seller SEC Documents"), in so far as they relate to the
Assets or the Business, complied in all material respects with the requirements
of the Exchange Act and the Xxxxxxxx-Xxxxx Act and the rules and regulations of
the SEC promulgated thereunder applicable to such Seller SEC Documents, and none
of the Seller SEC Documents when filed contained any untrue statement of a
material fact or omitted to state a material fact, in either case only in so far
as such fact or omission relates to the Assets or the Business, required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Seller has filed
with the SEC all reports and forms required to be filed by Seller with the SEC
since November 1, 2001.
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3.5 Operation of the Business Since October 31, 2003.
Except as described on Schedule 3.5, since October 31, 2003 (the "Balance Sheet
Date"), Seller has conducted the operation of the Business in the Ordinary
Course, and no change has occurred which materially and adversely affects the
Assets or the condition (financial or otherwise), results of operations or
prospects of the Business, nor, to Seller's knowledge, have any events occurred
nor do there exist any circumstances which might reasonably be expected to
result, either before or after the Closing Date, in any such change.
3.6 Title to Assets; Licenses.
(a) Seller has, and immediately prior to the Closing will
have, good, marketable and exclusive title to all of the Assets reflected on the
Balance Sheet as owned by Seller and all of the Assets acquired by Seller since
the Balance Sheet Date, in each case free and clear of all Liens except as set
forth on Schedule 3.6(a). Seller has the valid and enforceable power and
unqualified right to use and Transfer to Purchaser, the Assets.
(b) Schedule 3.6(b) contains a list of all licenses relating
to the Business under which Seller is the licensee, together with (i) the nature
of each of the licensed Assets, (ii) the termination date of each such license,
(iii) the name of the licensor, (iv) all payments made or required to be made
for the fiscal year ended October 31, 2004, and (v) all prepaid payments made
thereunder. All licenses pursuant to which Seller licenses from others property
are valid, subsisting in full force and effect in accordance with their
respective terms, and there is not, under any license, any existing default or
event of default (or event that, with notice or passage of time, or both, would
constitute a default, or would constitute a basis of force majeure or other
claim of excusable delay or nonperformance). Seller has the valid and
enforceable right to use and Transfer to Purchaser Seller's rights in and to the
licensed Assets. True and complete copies of all licenses listed on Schedule
3.6(b) have been delivered to Purchaser heretofore. Except as set forth on
Schedule 3.6(b), no such license will require the consent of the licensor to, or
as a result of, the consummation of the transactions contemplated by this
Agreement.
(c) The delivery to Purchaser at Closing of the instruments of
Transfer contemplated by this Agreement will vest in Purchaser good, marketable
and exclusive title to the Assets, free and clear of all Liens, except for Liens
listed or described on Schedule 3.6(a).
(d) Except as set forth in Schedule 3.6(d), no Person, other
than Seller, has any rights or interests in the Assets or the Business.
(e) The Assets include all of the assets, property and rights,
tangible or intangible, required by Purchaser to operate the Business, as
currently operated on a stand alone basis after the Closing and which are held
and used in or held for use in the operation of the Business by Seller.
3.7 No Litigation. Except as set forth on Schedule 3.7, there is no
outstanding judgment, order, decree, award, stipulation or injunction of any
Governmental Entity or arbitrator against or Action pending or, to Seller's
Knowledge, threatened, against Seller relating to or affecting the Business or
the Assets or affecting Seller's ability to perform its obligations under this
Agreement or under any agreement or instrument contemplated by this Agreement.
Any Action for defective or allegedly defective products or workmanship pending
or threatened against Seller, and the details of such Action, are described on
Schedule 3.7.
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3.8 Income and Other Taxes. Except as set forth on Schedule 3.8:
(a) All Tax Returns required to be filed through and including
the date hereof in connection with the operations of the Business are true,
complete and correct in all respects and have been properly and timely filed.
Seller has not requested any extension of time within which to file any Tax
Return, which Tax Return has not since been filed. No Liens have been imposed on
or asserted against any of the Assets as a result of or in connection with any
failure to pay any Taxes;
(b) All Taxes required to be paid or withheld and deposited
through and including the date hereof in connection with the Business have been
duly and timely paid or deposited by Seller. Seller has properly withheld or
collected all amounts required by law for income Taxes and employment Taxes
relating to its employees, creditors, independent contractors and other third
parties, and for sales Taxes on sales, and has properly and timely remitted such
withheld or collected amounts to the appropriate Governmental Entity. Seller has
no liabilities for any Taxes for any taxable period ending prior to or
coincident with the Closing Date; and
(c) No Tax Return of Seller is currently being audited or is
the subject of other Action by any Governmental Entity. Seller has not received
any notice from any Governmental Entity of any pending examination or any
proposed deficiency, addition, assessment, demand for payment or adjustment
relating to or affecting Seller, the Business or the Assets and Seller has no
reason to believe that any Governmental Entity may assess (or threaten to
assess) any Taxes for any periods ending on or prior to the Closing Date.
3.9 Employee Benefit Matters. Schedule 3.9 contains a complete list of
all Plans. Each Plan and related trust, annuity, or other funding agreement
complies and has been maintained in compliance with all applicable Legal
Requirements. Purchaser is not assuming, and shall not be subject to, any
liabilities or obligations to Seller's employees as a result of the consummation
of the transactions contemplated by this Agreement. All contributions, premiums,
and other payments, including, without limitation, employer contributions and
employee salary reduction contributions, have been paid when due or accrued in
accordance with the past custom and practice of Seller and any ERISA Affiliate.
There are no pending or, to Seller's knowledge, threatened Actions (other than
routine claims for benefits) asserted or instituted against any Plan or the
assets of any Plan, or against Seller, or ERISA Affiliate, trustee,
administrator, or fiduciary of such Plan, and Seller has no knowledge of any
facts that could form the basis of any such Action. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will constitute a termination of employment or other event entitling any
Person to any additional or other benefits, or that would otherwise modify
benefits or the vesting of benefits, provided under any Plan. No event has
occurred which could subject Seller or any ERISA Affiliate to any material
liability (i) under any Legal Requirement relating to any Plan, or (ii)
resulting from any obligation of Seller or an ERISA Affiliate to indemnify any
Person against liability incurred with respect to or in connection with any
Plan.
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3.10 Governmental Approvals.
(a) Seller possesses, and is operating in compliance with, all
approvals material to the operation of the Business ("Approvals"). Schedule
3.10(a) contains a true and complete list of all Approvals. Each Approval has
been lawfully and validly issued, and no proceeding is pending or, to Seller's
knowledge, threatened looking toward the revocation, suspension or limitation of
any Approval. Each of the Approvals is in full force and effect, and Seller is
in compliance with all of the provisions of the Approvals.
(b) Except as set forth on Schedule 3.10(b), each of the
Approvals (i) is assignable by Seller to Purchaser as contemplated by the
Agreement and (ii) will be Transferred to Purchaser by Seller's delivery to
Purchaser at Closing of the instruments of Transfer contemplated by this
Agreement and will thereafter remain in full force and effect. Except as set
forth on Schedule 3.10(b), no notice to or consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity or other third party is required to be obtained or made in connection
with the Transfer to Purchaser of the Approvals.
(c) The Approvals are all of the rights and authorizations
required by Legal Requirements for the operation of the Business. All of the
Approvals are owned or held by Seller free and clear of all Liens or other
encumbrances of any nature whatsoever.
(d) To Seller's knowledge, Seller or Purchaser would be able
to renew all such Approvals by the terms thereof or in the ordinary course of
business without the need to comply with any special qualifications procedures
or to pay any amounts other than regular fees prescribed by law.
3.11 Assumed Contracts.
(a) Schedule 3.11(a) contains a true and complete list and
description of all Assumed Contracts, other than the Plans. True and complete
copies of all such Assumed Contracts have been delivered to Purchaser
heretofore.
(b) Except as described in Schedule 3.11(b):
(i) each Contract is legal, valid, binding,
enforceable and in full force and effect;
(ii) no event or condition has occurred or become
known to Seller or, to Seller's knowledge, is alleged to have occurred that
constitutes or, with notice or the passage of time, or both, would constitute a
default or a basis of force majeure or other claim of excusable delay,
termination, nonperformance or accelerated or increased rights by Seller or any
other Person under any of the Contracts;
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(iii) no person with whom Seller has a Contract is in
default thereunder or has failed to perform fully thereunder by reason of force
majeure or other claim of excusable delay, termination or nonperformance
thereunder;
(iv) none of the Contracts currently is in the
process of renegotiation, either in whole or in part;
(v) no consent of any third party is required under
any Contract as a result of or in connection with, and the enforceability of any
Contract will not be affected in any manner by, the execution, delivery and
performance of this Agreement;
(vi) no Contract has materially impaired or will
materially impair the ability of Seller to perform its obligations under this
Agreement; and
(vii) no Assumed Contract which is a license contains
any minimum quantity commitments.
3.12 Employee and Labor Matters.
(a) Schedule 3.12(a) contains a true and complete list of all
labor, collective bargaining, union and similar agreements under or by which
Seller is obligated, and true and complete copies of all such agreements have
been delivered to Purchaser heretofore.
(b) Purchaser does not and will not have any responsibility
for retaining any person in the employ (or retaining any person as a consultant)
from and after the Closing or have any liability for any severance payments to
or similar arrangements with any such Person.
(c) There is not occurring or, to Seller's knowledge,
threatened, any strike, slow down, picket, work stoppage or other concerted
action by any union or other group of employees or other persons against Seller
or its products. Except for activities by the unions that are parties to any of
the agreements listed on Schedule 3.12(a) with respect to the existing members
of such unions, to Seller's knowledge, no union or other labor organization has
attempted to organize any of the employees of Seller engaged in the Business.
(d) Seller has complied with all Legal Requirements relating
to employment and labor, and, to Seller's knowledge, no facts or circumstances
exist that could provide a reasonable basis for a claim of wrongful termination
by any current or former employee of Seller engaged in the Business.
(e) Schedule 3.12(e) contains a complete list of all of the
current employees of Seller who are employed in connection with the Business
("Employees") and, for each Employee, his or her current title, current annual
base salary or wages and date of hire. None of the Employees listed on Schedule
3.12(e) is a member of any collective bargaining unit or is a party to any
employment agreement with Seller.
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3.13 Principal Customers and Suppliers.
(a) Schedule 3.13(a) contains a true and complete list of the
name and address of each customer that purchased in excess of 5% of Seller's
sales of goods or services of the Business during the twelve months ended on
October 31, 2004, and since that date no such customer has terminated its
relationship with or adversely curtailed its purchases from Seller or indicated
(for any reason) its intention so to terminate its relationship or curtail its
purchases.
(b) Schedule 3.13(b) contains a true and complete list of each
supplier from whom Seller purchased in excess of 5% of Seller's purchases of
goods or services of the Business during the twelve months ended on October 31,
2004 and since that date no such supplier has terminated its relationship with
or adversely curtailed its accommodations, sales or services to Seller or
indicated (for any reason) its intention to terminate such relationship or
curtail its accommodations, sales or services.
(c) Except as set forth on Schedule 3.13(c), Seller is not
involved in any claim or controversy with any of the customers or suppliers who
are listed on Schedule 3.13(a) or 3.13(b).
3.14 Compliance with Law. Through and including the date hereof, Seller
(i) has not violated or operated the Business in violation of, and has not used
the Assets in violation of, any Legal Requirement, (ii) to Seller's knowledge,
has not been alleged to be in violation of any Legal Requirement, and (iii) has
not received any notice of any alleged violation of, or any citation for
noncompliance with, any Legal Requirement.
3.15 Product Warranties. Except as set forth in Schedule 3.15, (a)
there are no warranties express or implied, written or oral, with respect to the
Business and (b) there are no pending or threatened claims with respect to any
such warranty, and Seller has no liability with respect to any such warranty,
whether known or unknown, absolute, accrued, contingent or otherwise and whether
due or to become due.
3.16 Intellectual Property.
(a) Title. Schedule 3.16(a) contains a complete and correct
list of all Intellectual Property that is owned by Seller and primarily related
to, used in, held for use in connection with, or necessary for the conduct of,
or otherwise material to the Business (the "Owned Intellectual Property").
Seller owns or has the right to use pursuant to license, sublicense, agreement
or permission all Intellectual Property, including all Intellectual Property
Rights, free and clear of any Liens (except as set forth on Schedule 3.6(a)) and
free from any requirement of any past, present or future royalty payments,
license fees, charges or other payments, or conditions or restrictions
whatsoever. The Intellectual Property comprises all of the Intellectual Property
and Intellectual Property Rights used in and/or necessary to the conduct and
operation of the Business as now being conducted by Seller or as currently
contemplated to be conducted.
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(b) Development. Other than "shrink-wrap" and similar widely
available binary code and commercial end-user licenses, to the extent that any
Intellectual Property has been developed or created independently or jointly by
any Person other than Seller for which Seller has, directly or indirectly, paid,
Seller has a written agreement with such Person with respect thereto, and Seller
thereby has obtained ownership of, and is the exclusive owner of, all such
Intellectual Property and associated Intellectual Property Rights by operation
of law or by valid assignment. None of the Intellectual Property was developed
by or on behalf of or using grants or any other subsidies of any governmental
entity.
(c) Transfer. Immediately after the Closing, Purchaser will
own all of the Owned Intellectual Property and will have a right to use all
other Intellectual Property, free and clear of any Liens (except as set forth on
Schedule 3.6(a)) and on the same terms and conditions as in effect prior to the
Closing.
(d) No Infringement. The operation of the Business does not,
and will not, when conducted by Purchaser, infringe or otherwise conflict with
any rights of any Person in respect of any Intellectual Property. Except as set
forth on Schedule 3.16(d), Seller has not received any notice from any Person
claiming that such operation or any act, product, technology or service of
Seller infringes or misappropriates the Intellectual Property of any Person (nor
does Seller have knowledge of any claims or any basis therefor). There have been
no assertions to Seller by any Persons relating to the invalidity or
unenforceability of any Intellectual Property. To Seller's knowledge, none of
the Intellectual Property is being infringed or otherwise used or available for
use, by any other Person.
(e) Licensing Arrangements. Schedule 3.16(e) sets forth all
agreements, arrangements or laws (i) pursuant to which Seller has licensed
Intellectual Property to, or the use of Intellectual Property is otherwise
permitted (through non-assertion, settlement or similar agreements or otherwise)
by, any other Person and (ii) pursuant to which Seller has had Intellectual
Property licensed to it, or has otherwise been permitted to use Intellectual
Property (through non-assertion, settlement or similar agreements or otherwise).
All of the agreements or arrangements set forth on Schedule 3.16(e)(x) are in
full force and effect in accordance with their terms and no default exists
thereunder by Seller, or to the knowledge of Seller after due inquiry, by any
other party thereto, (y) are free and clear of all Liens, and (z) do not contain
any change in control or other terms or conditions that will become applicable
or inapplicable as a result of the consummation of the transactions contemplated
by this Agreement. The consummation of the transactions contemplated by this
Agreement will neither violate nor result in the breach, modification,
cancellation, termination or suspension of such arrangements and agreements.
Seller has delivered to Purchaser true and complete copies of all licenses and
arrangements (including amendments) set forth on Schedule 3.16(e). All
royalties, license fees, charges and other amounts payable by, on behalf of, to,
or for the account of, the Seller in respect of any Intellectual Property are
disclosed in the Financial Statements.
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(f) No Intellectual Property Litigation or Disputes. No claim
or demand of any Person has been made nor is there any proceeding that is
pending, or to the knowledge of Seller after due inquiry, threatened, nor is
there a reasonable basis therefor, which (i) challenges the rights of Seller in
respect of any Intellectual Property, (ii) asserts that Seller is infringing or
otherwise in conflict with, or is, except as set forth in Schedule 3.16(f),
required to pay any royalty, license fee, charge or other amount with regard to,
any Intellectual Property, or (iii) claims that any default exists under any
agreement or arrangement listed on Schedule 3.16(f). None of the Intellectual
Property is subject to any outstanding order, ruling, decree, judgment or
stipulation by or with any court, arbitrator, or administrative agency, or has
been the subject of any litigation within the last five years, whether or not
resolved in favor of Seller. Except as set forth in Schedule 3.16(f), there are
no contracts, licenses or agreements between Seller and any other Person with
respect to the Intellectual Property under which there is any dispute regarding
the scope of such agreement or performances under such agreement, including with
respect to any payments to be made or received by Seller thereunder.
(g) Due Registration, Etc. To the extent deemed necessary or
appropriate by Seller, the Owned Intellectual Property has been duly registered
with, filed in or issued by, as the case may be, the United States Patent and
Trademark Office, United States Copyright Office or such other filing offices,
domestic or foreign, and Seller has taken such other reasonable steps to ensure
full protection under any applicable laws or regulations, and such
registrations, filings, issuances and other actions remain in full force and
effect. Seller has no knowledge of any necessary steps to protect the
Intellectual Property which have not been taken, which if not taken would
jeopardize Seller's Rights to the Intellectual Property. In each case in which
Seller has acquired any Intellectual Property related to the Business from any
Person, Seller has obtained a valid and enforceable assignment sufficient to
irrevocably transfer all rights in such Intellectual Property to Seller and, to
the maximum extent provided for by, and in accordance with, applicable laws and
regulations, Seller has recorded each such assignment with the relevant
governmental authorities, including the PTO, the U.S. Copyright Office, or
respective equivalents in any relevant foreign jurisdiction, as the case may be.
(h) Use of Name and Xxxx. Except as set forth in Schedule
3.16(h), there are, and immediately after the Closing will be, no contractual
restriction or limitations pursuant to any orders, decisions, injunctions,
judgments, awards or decrees of any Governmental Authority on the Purchaser's
right to use the names and marks identified in Schedule 3.16(a) in the conduct
of the Business as presently carried on by Seller or as such Business may be
extended by Purchaser.
(i) Protection of Information. Seller has taken reasonable
steps to protect Seller's rights in Seller's confidential information and trade
secrets that it wishes to protect or any trade secrets or confidential
information of third parties provided to Seller relating to the Business, and,
without limiting the foregoing, Seller has and enforces a policy requiring each
employee and consultant engaged in the Business to execute a proprietary
information/ confidentiality agreement substantially in the form provided to
Seller and all current and former employees and consultants of Seller engaged in
the Business have executed such an agreement.
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(j) Effect of Agreement. Neither this Agreement nor the
transactions contemplated by this Agreement, including the assignment to
Purchaser expressly, by operation of law or otherwise of any contracts or
agreements, will result in (i) Purchaser or Seller granting to any third party
any right to or with respect to any Intellectual Property owned by, or licensed
to, any of them (ii) Purchaser being bound by, or subject to, any
non-competition or other material restriction on the operation or scope of its
businesses or (iii) Purchaser being obligated to pay any royalties or other
material amounts to any third party in excess of those payable by Seller with
respect to the Business, in the absence of this Agreement or the transactions
contemplated hereby.
3.17 Operation of the Business. Except as set forth in Schedule 3.17,
(a) Seller has operated the Business only through Seller and not through any
other divisions or any direct or indirect subsidiary or affiliate of Seller and
(b) no part of the operation of the Business is operated by or through any
entity other than Seller.
3.18 Environmental Matters.
(a) Hazardous Material. Except as would not result in material
liability to Seller, no underground storage tanks and no amount of any substance
that has been designated by any Governmental Entity or by applicable Legal
Requirement to be radioactive, toxic, hazardous or otherwise a danger to health
or the environment, including, without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding office and janitorial supplies,
(a "Hazardous Material") are present, as a result of the actions of Seller or
any affiliate of Seller, or, to Seller's knowledge, as a result of any actions
of any third Person or otherwise, in, on or under any property, including the
land and the improvements, ground water and surface water thereof, that Seller
has at any time owned, operated, occupied or leased in connection with the
operation of the Business.
(b) Hazardous Materials Activities. Except as would not result
in a material liability to Seller (in any individual case or in the aggregate)
(i) Seller has not transported, stored, used, manufactured, disposed of,
released or exposed its employees or others to Hazardous Materials in violation
of any Legal Requirement in effect on or before the Closing Date in connection
with the operation of the Business, and (ii) Seller has not disposed of,
transported, sold, used, released, exposed its employees or others to or
manufactured any product containing a Hazardous Material (collectively
"Hazardous Materials Activities") in violation of any Legal Requirement
promulgated by any Governmental Entity in effect prior to or as of the date
hereof to prohibit, regulate or control Hazardous Materials or any Hazardous
Material Activity in connection with the operation of the Business.
(c) Permits. Seller currently holds all environmental
approvals, permits, licenses, clearances and consents (the "Seller Environmental
Permits") necessary for the conduct of Seller's Hazardous Material Activities
and other activities of the Business.
(d) Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ or injunction is pending, and
to Seller's knowledge, no action, proceeding, revocation proceeding, amendment
procedure, writ or injunction has been threatened by any Governmental Entity
against Seller in a writing delivered to Seller concerning any Seller
Environmental Permit, Hazardous Material or any Hazardous Materials Activity of
Seller. Seller knows of no fact or circumstance which could involve Seller in
any environmental litigation or impose upon Seller any material environmental
liability.
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3.19 Insurance. Schedule 3.19 contains a true and complete list of all
insurance policies and bonds and self insurance arrangements currently in force
that cover or purport to cover risks or losses to or associated with the
Business, the Assets, employees and agents relating to the Business and sets
forth, with respect to each such policy, bond and self insurance arrangement, a
description of the insured loss coverage, the expiration date and time of
coverage, the dollar limitations of coverage, a general description of each
deductible feature and principal exclusion and the premiums paid and to be paid
prior to expiration. The insurance policies, bonds and arrangements described on
Schedule 3.19 (the "Policies") provide such coverage against such risk of loss
and in such amounts as are customary for corporations of established reputation
engaged in the same or similar operations as the Business.
3.20 Brokers' Fees. No broker, finder or similar agent has been
employed by or on behalf of Seller in connection with this Agreement or the
transactions contemplated hereby, and Seller has not entered into any agreement
or understanding of any kind with any person or entity for the payment of any
brokerage commission, finder's fee or any similar compensation in connection
with this Agreement or the transactions contemplated hereby.
3.21 Disclosure. No representation or warranty of Seller in this
Agreement and no information contained in any Schedule or other writing
delivered pursuant to this Agreement or at the Closing contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make any of them herein or therein, in light of the
circumstances in which it was made, not misleading.
3.22 Transactions with Affiliates. Except as set forth on Schedule
3.22, there are no written or oral contracts or agreements between Seller and
its Affiliates relating to the Business.
3.23 No Liquidation or Winding-Up; Fairness of Consideration.
(a) No order has been made or petition presented, or
resolution passed for the winding-up or liquidation of Seller and there is not
outstanding: (i) any petition or order for the winding-up of Seller; (ii) any
appointment of a receiver over the whole or part of the undertaking of assets of
Seller; (iii) any petition or order for administration of Seller; (iv) any
voluntary arrangement between Seller and any of its creditors; (v) any distress
or execution or other process levied in respect of Seller which remains
undischarged; or (vi) any unfulfilled or unsatisfied judgment or court order
against Seller relating to the Business or the Assets.
(b) There are no circumstances which would entitle any Person
to present a petition for the winding-up or administration of Seller or to
appoint a receiver over the whole or any part of the Assets of Seller.
(c) Seller is not deemed unable to pay its debts within the
meaning of applicable law.
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(d) Neither the execution and delivery of this Agreement nor
the performance of the transactions contemplated hereby will result in a
transfer which is fraudulent under 6 Del. C. ss.ss.1304 or 1305.
(e) The operations of Seller have not been terminated.
(f) The consideration paid by Purchaser under this Agreement
for the Assets represents reasonably equivalent value for the Assets. Seller is
not entering into this Agreement with the intent to defraud, delay or hinder its
creditors and the consummation of the transactions contemplated by this
Agreement will not have any such effect.
3.24 No Undisclosed Liabilities. Except (i) as set forth on Schedule
3.24, (ii) as reflected in Seller's audited financial statements for the year
ended October 31, 2003 and (iii) for liabilities incurred in the ordinary and
usual course of business and consistent with past practice since October 31,
2003, the Business does not have any liability of any nature, whether or not
absolute, accrued, contingent or otherwise, whether known or unknown, that
individually or in the aggregate have had or are reasonably likely to have, a
Material Adverse Effect on the Business.
3.25 Information Supplied. None of the information included or
incorporated by reference in the Information Statement will, on the date it is
first mailed to the stockholders of Seller, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, except that no
representation or warranty is made by Seller with respect to statements made or
incorporated by reference therein based on information supplied in writing by
Purchaser to Seller specifically for inclusion or incorporation by reference in
the Information Statement. The Information Statement will comply as to form in
all material respects with the requirements of the Exchange Act.
3.26 Approval and Adoption Requirements. The only approval or consent
of the holders of any class or series of capital stock necessary to adopt this
Agreement and approve the transactions contemplated hereby is the affirmative
vote of the holders of a majority of the outstanding shares of Seller's Common
Stock (the "Stockholder Approval"), which the parties hereto expect to obtain by
written consent pursuant to Section 228 of the Delaware Law. The execution and
delivery to the Secretary of the Written Consents, in the form attached to the
Stockholders' Agreement, is sufficient to adopt this Agreement and approve the
transactions contemplated hereby, and no other corporate proceedings are
necessary to adopt or approve this Agreement or to consummate the transactions
contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to, and covenants and agrees
with, Seller that:
4.1 Organization and Good Standing. Purchaser has been duly organized
and is existing as a corporation in good standing under the laws of the State of
Delaware with full corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby.
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4.2 Execution and Delivery. This Agreement and the Ancillary Agreements
have been duly authorized by all necessary corporate action on the part of
Purchaser, this Agreement has been duly executed and delivered by Purchaser and
the Ancillary Agreements when duly executed and delivered by Purchaser, assuming
the due execution and delivery by Seller, will be legal, valid and binding
agreements of Purchaser enforceable against Purchaser in accordance with their
respective terms.
4.3 No Conflicts. The execution, delivery and performance of this
Agreement and the Ancillary Agreements by Purchaser and the consummation by
Purchaser of the transactions contemplated hereby will not conflict with or
result in the violation of the provisions of the Certificate of Incorporation or
Bylaws of Purchaser.
4.4 Compliance with Law. Through and including the date hereof,
Purchaser (i) to Purchaser's knowledge, has not been alleged to be in violation
of any Legal Requirement, and (ii) has not received any notice of any alleged
violation of, or any citation for noncompliance with, any Legal Requirement.
4.5 No Restrictions Against Purchase of Assets. Except as listed or
described on Schedule 4.5, the execution and delivery of this Agreement and the
Ancillary Agreements by Purchaser do not and the performance by Seller of the
transactions contemplated hereby and thereby to be performed by it will not,
conflict with, or result in any violation of, or constitute a default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, (a) the certificate of incorporation or bylaws of
Purchaser, (b) any Legal Requirement to which Purchaser is subject, (c) any
material agreement of Purchaser, or (d) any material licenses of Purchaser. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required to be obtained or made by or
with respect to Purchaser under any Legal Requirement in connection with the
execution and delivery of this Agreement or the Ancillary Agreements by
Purchaser or the performance by Purchaser of the transactions contemplated
hereby and thereby to be performed by it.
ARTICLE V
OPERATION OF BUSINESS PENDING CLOSING
5.1 Conduct of Seller. Without the prior written consent of Purchaser,
between the date hereof and the Closing Date, Seller covenants and agrees that
it shall:
(a) not, except as required or permitted pursuant to the terms
hereof and under the Reseller Agreement, make any change in the operation of the
Business or the Assets or enter into any transaction with respect to the
Business other than in the Ordinary Course;
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(b) except as required or permitted pursuant to the terms of
the Reseller Agreement, continue to operate the Business in the Ordinary Course
consistent with past practice, provided, however, that Purchaser will not (i)
acquire or dispose of, or grant a license with respect to any of the Assets,
(ii) enter into, amend or terminate any other agreement affecting or relating to
the Business or the Assets, (iii) make any capital expenditure related to the
Business, (iv) award any bonuses or salary increases (except for normal
recurring bonus or salary increases to staff and any executive officers), or (v)
act in any manner which would adversely affect its existing business
relationships associated with the Business.
(c) maintain the Assets in good operating condition and
repair;
(d) preserve, protect and promote the Business;
(e) perform all obligations under the Contracts;
(f) use its best efforts to retain its Employees and maintain
its relationships with suppliers, customers and others having business
relationships with it;
(g) pay accounts payable and other obligations of the
operation of the Business when they become due and payable in the Ordinary
Course consistent with past practices;
(h) comply promptly with all Legal Requirements applicable to
it and the operation of the Business and with respect to the transactions
contemplated by this Agreement, and cooperate promptly with, and furnish
information to, Purchaser in connection with any such requirements imposed upon
Seller, or upon any of its Affiliates, in connection therewith or herewith;
(i) not sell, transfer, license, lease or otherwise dispose
of, or suffer or cause the encumbrance by any Lien upon, any of the Assets or
any interest therein, except for sales of Inventory in the Ordinary Course and
as required or permitted under the Reseller Agreement;
(j) not terminate or modify, or commit or cause or suffer to
be committed any act that will result in breach or violation of any term of or
(with or without notice or passage of time, or both) constitute a default under
or otherwise give any person a basis for non-performance under, any of the
Contracts;
(k) maintain adequate property damage, liability and other
insurance in full force and effect and not do, permit or willingly allow to be
done any act by which any of the insurance policies may be suspended, impaired
or cancelled;
(l) maintain in full force and effect, and comply with, all
Permits;
(m) not enter into or assume any contract, agreement,
obligation or instrument relating to the Business or the Assets in an amount in
excess of $10,000, or any sales orders with customers in excess of $50,000, or
enter into or permit any material amendment, supplement, waiver or other
modification in respect thereof;
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(n) not grant (or commit to grant) any increase in the
compensation (including incentive or bonus compensation) of any Employee (except
for bonuses to key employees (as identified in Schedule 6.11(a)(ii) if necessary
to retain them as employees, as determined by Seller, or for normal recurring
bonus or salary adjustments to staff and any executive officers), or adopt or
amend any Plan;
(o) not take any action or omit to take any action which would
result in a breach of any of the representations and warranties set forth in
Section 3;
(p) maintain the Inventory in such volume and quality as is
consistent with the past practices of Seller in connection with the operation of
the Business;
(q) only as it relates directly to the Business, make any
capital expenditure;
(r) only as it relates directly to the Business, not cancel,
compromise, release or discharge any claim of Seller upon any person or waive
any right of Seller of material value, and not discharge any Lien (other than
those listed and described on Schedule 3.6(a)) upon any of the Assets or pay or
settle any debts;
(s) only as it relates directly to the Business, pay any
dividends or make any distributions to the holders of its capital stock; and
(t) only as it relates directly to the Business, not
institute, settle or agree to settle any Action before any Governmental Entity.
5.2 Tax Assessments and Audits. Seller shall furnish promptly to
Purchaser a copy of all notices of proposed assessment or similar notices or
reports that are received from any taxing authority and which relate to the
Business or the Assets for periods ending on or prior to the Closing Date.
ARTICLE VI
ADDITIONAL COVENANTS
6.1 Covenants of Seller. Except as otherwise provided under this
Agreement, during the period from the date hereof through the Closing Date,
Seller agrees to:
(a) comply promptly with all requirements that applicable
Legal Requirements may impose upon it with respect to the transactions
contemplated by this Agreement, and shall cooperate promptly with, and furnish
information to, Purchaser in connection with any such requirements imposed upon
Purchaser or upon any of its affiliates in connection therewith or herewith;
(b) use its best efforts to obtain (and to cooperate with
Purchaser in obtaining) any consent, authorization or approval of, or exemption
by, any Person required to be obtained or made by Seller in connection with the
transactions contemplated by this Agreement;
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(c) use its best efforts to bring about the satisfaction of
the conditions precedent to Closing set forth in Article VII of this Agreement;
(d) (i) maintain the present quality of Seller's operations of
the Business; (ii) preserve the value of the Business; (iii) preserve intact
Seller's Business organizations; and (iv) preserve Seller's existing
relationships with employees (including the use of its best efforts to maintain
the employment of those key employees listed on Schedule 6.11(a)(i)), suppliers
and customers;
(e) promptly, and in any event within two business days of
Seller obtaining knowledge thereof, notify Purchaser in writing of:
(i) any representation or warranty contained in this
Agreement on the part of Seller becoming untrue or inaccurate or any breach of
any term or provision of this Agreement on the part of Seller, whether or not
any requirement for notice or lapse of time or other condition precedent has
been satisfied, which is then continuing, in each case together with a
certificate of Seller specifying the details thereof and the action which Seller
has taken or proposes to take with respect thereto;
(ii) any pending or threatened Action, challenging
this Agreement or any of the transactions
contemplated hereby;
(iii) any notice or other communication from any
third party alleging that the consent of such party is or may be required in
connection with the transactions contemplated by this Agreement;
(iv) any other development which would prevent or
raise a substantial doubt regarding the possibility of the satisfaction of any
condition set forth in Section 7.1 of this Agreement;
(v) any notice or other communication from any
Governmental Entity, the approval or consent of which is being sought in
connection with the transactions contemplated by this Agreement; and
(vi) enter into legally binding and enforceable
non-disclosure agreements, in a form satisfactory to Purchaser, with each of the
key employees, as identified on Schedule 6.11(a)(i).
6.2 Covenants of Purchaser. During the period from the date hereof to
the Closing Date, Purchaser shall:
(a) comply promptly with all requirements that applicable
Legal Requirements may impose upon it with respect to the transactions
contemplated by this Agreement, and shall cooperate promptly with, and furnish
information to, Seller in connection with any such requirements imposed upon
Seller or upon any of Seller's Affiliates in connection therewith or herewith;
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(b) use its best efforts to bring about the satisfaction of
the conditions precedent to Closing set forth in Section 7.2 of this Agreement.
6.3 Access and Information.
(a) During the period commencing on the date hereof and
continuing through the Closing Date, Seller shall afford to Purchaser and to
Purchaser's accountants, counsel, investment bankers, consultants, engineers and
other representatives, reasonable access to all of its properties, including
without limitation to the books, contracts, Assets, commitments, records and
personnel and, during such period, to furnish promptly to Purchaser all
information (the "Confidential Information") concerning the Business and the
Assets and such items as Purchaser may reasonably request. In addition, during
such period, Seller shall afford to Purchaser and its counsel, consultants,
engineers and other representatives the right to inspect, investigate, review
and perform tests on the Assets, provided such does not materially interfere
with the normal business activities of Seller.
(b) Except to the extent permitted by the provisions of
Section 6.8 hereof, Purchaser shall hold in confidence, and shall use reasonable
efforts to ensure that its employees and representatives hold in confidence, all
such Confidential Information supplied to it by Seller concerning Seller and
shall not disclose such Confidential Information to any third party except as
may be required by any Legal Requirement and except for Confidential Information
that (i) is or becomes generally available to the public other than as a result
of disclosure by Purchaser or its representatives, (ii) becomes available to
Purchaser or its representatives from a third party other than Seller, and
Purchaser or its representatives have no reason to believe that such third party
is not entitled to disclose such Confidential Information, (iii) is known to
Purchaser or its representatives on a nonconfidential basis prior to its
disclosure by Seller or (iv) is made available by Seller to any other Person on
a nonrestricted basis. Purchaser's obligations under the foregoing sentence
shall expire on the Closing Date or, if the Closing does not occur, two years
after the date hereof.
(c) Except to the extent permitted by the provisions of
Sections 6.4 and 6.8 hereof, Seller shall hold in confidence, and shall use
reasonable efforts to ensure that its employees and representatives hold in
confidence, all such Confidential Information supplied to it by Purchaser
concerning Purchaser and shall not disclose such Confidential Information to any
third party except as may be required by any Legal Requirement and except for
Confidential Information that (i) is or becomes generally available to the
public other than as a result of disclosure by Seller or its representatives,
(ii) becomes available to Seller or its representatives from a third party other
than Purchaser, and Seller or its representatives have no reason to believe that
such third party is not entitled to disclose such Confidential Information,
(iii) is known to Seller or its representatives on a nonconfidential basis prior
to its disclosure by Purchaser or (iv) is made available by Purchaser to any
other Person on a nonrestricted basis. Seller's obligations under the foregoing
sentence shall expire on the Closing Date or, if the Closing does not occur, two
years after the date hereof.
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6.4 Information Statement.
(a) As soon as practicable following the date of this
Agreement, Seller shall file with the SEC under the Exchange Act, and shall use
commercially reasonable efforts to respond as promptly as practicable to any
comments of the SEC with respect to, and to have cleared by the SEC, an
information statement (such information statement as amended or supplemented
from time to time referred to as the "Information Statement") relating to the
transactions contemplated by this Agreement. The Information Statement shall
comply in all material respects with the Exchange Act and the rules and
regulations thereunder. The Information Statement shall not, at the time the
Information Statement (or any amendment or supplement thereto), is filed in
final form with the SEC or first sent to the stockholders of Seller, and at the
time of the execution and delivery of the Written Consent, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statement made therein, in
light of the circumstances under which they are made, not misleading, except
that no representation or warranty is being made by Seller with respect to any
information supplied to Seller in writing by Purchaser specifically for
inclusion in the Information Statement. Prior to the filing or distribution of
the Information Statement or any other filing with any federal or state agency
relating hereto, Seller shall give Purchaser and its counsel an opportunity to
review and comment upon such documents. As soon as practicable, but in any event
within seven (7) days after the SEC has cleared the Information Statement for
mailing to stockholders, Seller shall mail the Information Statement and
exhibits thereto to its stockholders, providing notice that the Written Consent
has been executed and delivered that approves the transactions contemplated by
this Agreement.
(b) Immediately following the execution and delivery of this
Agreement, this Agreement will be submitted to the record holders of the shares
of Seller Common Stock beneficially owned by the Principal Seller Stockholders
for adoption and approval. Without limiting the generality of the foregoing,
Seller agrees that its obligations pursuant to this Section 6.4 shall not be
affected by the commencement, public proposal, public disclosure or
communication to Seller or any other person of any Acquisition Proposal.
(c) In addition to the actions specified in Sections 6.4(a)
and (b), Seller, from time to time, shall promptly take, or shall cause its
executive officers to promptly take, any action required under Section 228 of
the Delaware Law necessary to give operative effect to the Written Consent.
6.5 No Solicitation. Seller shall not, nor shall it authorize or permit
its Subsidiaries, and their respective officers, directors, employees,
representatives, or agents to, directly or indirectly, for or on its behalf (i)
initiate, solicit or encourage any inquiries or proposals that constitute, or
could reasonably be expected to lead to, a proposal or offer for a merger,
consolidation, or business combination of Seller or any of its Subsidiaries, or
the sale of a portion or all of the assets of Seller and its Subsidiaries, taken
as a whole, or the sale of shares of capital stock of Seller or any of its
Subsidiaries, including, without limitation, by way of a tender offer
27
or exchange offer by any Person (any of the foregoing inquiries or proposals
being referred to in this Agreement as an "Acquisition Proposal"), (ii) engage
in negotiations or discussions concerning, or provide to any Person any
Confidential Information or data relating to Seller or any of its Subsidiaries
for the purposes of, or otherwise cooperate with or assist or participate in,
facilitate or encourage, any inquiries or the making of any Acquisition
Proposal, or (iii) enter into any letter of intent, memorandum of understanding,
agreement in principle, merger agreement, acquisition agreement, option
agreement, joint venture agreement, partnership agreement or other similar
contract, agreement or commitment contemplating or otherwise relating to any
transaction or series of transactions ("Acquisition Transaction") involving an
Acquisition Proposal; provided, however, that nothing contained in this
Agreement shall prevent Seller or its Board of Directors from furnishing
Confidential Information to, or entering into discussions or negotiations with,
any Person in connection with an unsolicited bona fide written Acquisition
Proposal to Seller or its stockholders, if and only to the extent that (i) the
Board of Directors of Seller determines in good faith (after consultation with
outside legal counsel) that the Acquisition Proposal is a Superior Proposal
("Superior Proposal"), as defined herein, and that such action is required for
such Board of Directors to comply with its fiduciary duties to its stockholders
under applicable law, and (2) prior to furnishing such Confidential Information
to, or entering into discussions or negotiations with, such Person, Seller
receives from such Person an executed confidentiality agreement substantially in
the form of the Confidentiality Agreement dated February 24, 2004 entered into
by Purchaser and Seller. Seller and its representatives will immediately cease
and cause to be terminated any existing activities, discussions or negotiations
by Seller, its Subsidiaries, or any of their respective officers, directors,
employees, representatives or agents with any parties conducted heretofore with
respect to any of the foregoing. Seller shall (i) promptly notify Purchaser in
writing after receipt by Seller or any of its Subsidiaries or their respective
officers, directors, employees, representatives or agents of any Acquisition
Proposal or any inquiries indicating that any Person is considering making or
wishes to make an Acquisition Proposal, which notification shall be in writing
and shall contain the principal financial terms of any such Acquisition
Proposal, and (ii) promptly notify Purchaser in writing after receipt of any
request for Confidential Information relating to it or any of its Subsidiaries
or for access to its or any of its Subsidiaries' properties, books or records by
any Person that may be considering making, or has made, an Acquisition Proposal.
"Superior Proposal" means any bona fide Acquisition Proposal submitted
to the Company or the Board of Directors (or any committee thereof) which did
not result from a breach of this Section 6.5 and which the Board of Directors
(or any committee thereof) concludes in good faith after (A) taking into account
all relevant factors, facts and circumstances, including, without limitation,
(x) the respective terms, conditions and structure of the transaction
contemplated by this Agreement and the transaction contemplated by such
Acquisition Proposal, including, without limitation, pricing terms, the type of
consideration, financing conditions and contingencies, regulatory conditions and
impediments, other conditions, termination rights, break-up or similar fees,
expense reimbursement obligations and the timing of the closing of the
transaction, (y) the likelihood that each such transaction will be consummated
and (z) any changes to the terms of this Agreement which have been proposed by
Purchaser, and (B) consulting with its advisors, is, given all relevant factors,
more favorable to Seller's stockholders (other than any stockholder party to the
Stockholders' Agreement) than the terms of the transactions contemplated by this
Agreement.
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6.6 Expenses. All costs and expenses (including, without limitation,
all legal fees and expenses and fees and expenses of any brokers, finders or
similar agents) incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring the same.
6.7 Certain Notifications. At all times from the date hereof to the
Closing Date, each party shall promptly notify the other in writing of the
occurrence of any event that will or may result in the failure to satisfy any of
the conditions specified in Article VII hereof.
6.8 Publicity; Employee Communications. At all times prior to the
Closing Date, each party shall obtain the consent of all other parties hereto
prior to issuing, or permitting any of its directors, officers, employees or
agents to issue, any press release or other information to the press, employees
of Seller or any third party with respect to this Agreement or the transactions
contemplated hereby; provided, however, that no party shall be prohibited from
supplying any information to any of is representatives, agents, attorneys,
advisors, financing sources and others to the extent necessary to complete the
transactions contemplated hereby so long as such representatives, agents,
attorneys, advisors, financing sources and others are made aware of the terms of
this Section 6.8. Nothing contained in this Agreement shall prevent any party to
this Agreement at any time from furnishing any required information to any
Governmental Entity or authority pursuant to a Legal Requirement or from
complying with its legal or contractual obligations.
6.9 Further Assurances.
(a) Subject to the terms and conditions of this Agreement,
each of the parties hereto agrees to use its best efforts to take, or cause to
be taken, all action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable Legal Requirements, to consummate and make
effective the transactions contemplated by this Agreement.
(b) If at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, Seller and
Purchaser, and the proper officers or directors of Seller and Purchaser, as the
case may be, shall take or cause to be taken all such necessary or convenient
action and execute, and deliver and file, or cause to be executed, delivered and
filed, all necessary or convenient documentation.
6.10 Inconsistent Action. Seller shall not take or cause or suffer to
be taken, any action that would cause any of the representations or warranties
of Seller in this Agreement to be untrue, incorrect, incomplete or misleading.
6.11 Employee Matters.
(a) Seller acknowledges and agrees that after the Closing (a)
except as set forth on Schedule 6.11(a)(i), neither Purchaser nor Seller shall
be required to employ or retain any employee of Seller or any other Person, and
(b) Purchaser, in its sole and absolute discretion, may hire all, some, or none
of the Employees. Schedule 6.11(a)(ii) contains a list of key employees of
Seller which Seller shall use best efforts to retain as employees until Closing.
Seller agrees not to terminate the employment of any such employees for the
period commencing on the date hereof through the period ending 30 days after the
Closing Date unless such employee engages in willful or grossly negligent
misconduct to the detriment of Seller or the Business. Seller shall not be
required to maintain the employment of any employee who does not desire to
remain employed by Seller or Purchaser.
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(b) Except to the extent expressly included in Assumed
Liabilities or in another paragraph of this Section 6.10, Purchaser does not,
and shall not, assume or be responsible for any obligation or liability arising
out of any employment relationship of Seller, and without limiting the
foregoing, Purchaser shall have no liability or obligation in connection with
current or former employees or agents of Seller or any dependent or beneficiary
of any of them by reason of their relationship to Seller. Without limiting the
foregoing, Seller shall remain liable for, and shall pay on or before the
Closing, the following in connection with current or former employees or agents
of Seller (or any dependent or beneficiary of them):
(i) unpaid wages, salaries or other compensation;
(ii) contributions to or payments under employee
benefit plans, programs, policies, arrangements or
understandings;
(iii) accrued, but unused, holiday, sick leave and
severance pay, if any;
(iv) liabilities or obligations under any collective
bargaining agreement or bargaining relationship;
or
(v) claims, demands, administrative proceedings or
suits arising out of, or in connection with,
alleged unlawful employment practices of Seller.
(c) Seller shall remain responsible for all liabilities and
obligations in connection with claims for post-employment medical, vision and
dental benefits that may be required under IRC Section 4980B made by or in
respect of any employee of Seller whose employment terminated on or prior to the
Closing Date and any "qualified beneficiary" (within the meaning of IRC Section
4980B) of any such employee who is receiving post-employment medical and dental
benefits or whose "qualifying event" (within the meaning of IRC Section 4980B)
entitling such individual to such benefits occurred on or before the Closing
Date.
(d) Seller shall be responsible for giving any notice that may
be required by the Worker Adjustment and Retraining Notification Act ("WARN"),
or any similar state or local statue or ordinance, as a result of the purchase
of the Business both as to (i) layoffs or facility closings ordered prior to the
Closing Date, including layoff of employees who are not employed or retained by
Purchaser, or (ii) decisions to layoff employees employed or retained by
Purchaser made within 90 days after the Closing Date. Purchaser agrees to give
Seller notice of any decision to layoff employees employed or retained by
Purchaser made within 90 days after the Closing Date.
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6.12 Assignments; Consents. To the extent that the assignment of any
Contract, license or other agreement or arrangement or any claim, right or
benefit arising thereunder or resulting therefrom is not permitted without the
consent of a third party, this Agreement shall constitute an agreement to assign
such Contract, license or other agreement or arrangement, subject only to such
consent; and any transfer or assignment to Purchaser by Seller of any interest
under any such Contract, license or other agreement or arrangement that requires
the consent of a third party shall be made subject to such consent or approval
being obtained. In the event any such consent or approval is not obtained on or
prior to the Closing Date, Seller shall continue to use its best efforts to
obtain any such approval or consent after the Closing Date until such time as
such consent or approval has been obtained, and Seller will cooperate with
Purchaser in any lawful and economically feasible arrangement to provide that
Purchaser shall receive the interest of Seller in the benefits under any such
Contract, license or other agreement or arrangement, including performance by
Seller, as agent, if economically feasible, provided that Purchaser shall
undertake to pay or satisfy the corresponding liabilities for the enjoyment of
such benefit to the extent Purchaser would have been responsible therefor
hereunder if such consent or approval had been obtained. Seller shall pay and
discharge, and shall indemnify and hold Purchaser harmless from and against, any
and all out-of-pocket costs of seeking to obtain or obtaining any such consent
or approval whether before or after the Closing Date. Nothing in this Section
6.11 shall be deemed a waiver by Purchaser of its right to have received on or
before the Closing an effective assignment of all of the Assets nor shall this
Section 6.12 be deemed to constitute an agreement to exclude from Purchaser any
of the Assets described under Section 2.1.
6.13 Sufficiency of Assets. Following the Closing, if Purchaser
determines that Seller has failed to Transfer to Purchaser any assets,
properties or rights, tangible or intangible, except for the Excluded Assets,
necessary for Purchaser to operate the Business as currently operated, and to
produce, sell, distribute, maintain, design, enhance and license, and design and
develop derivatives of, the Products, or derivatives thereof, Seller shall
promptly take all actions as shall be necessary, or otherwise reasonably
requested by Purchaser, to transfer such assets, properties and rights to
Purchaser.
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING
7.1 Conditions of Purchaser. Notwithstanding any other provision of
this Agreement, the obligations of Purchaser to consummate the transactions
contemplated hereby shall be subject to the satisfaction, at or prior to the
Closing Date, of the following conditions:
(a) There shall not be instituted and pending or threatened
any Action before any Governmental Entity (i) challenging or otherwise seeking
to restrain or prohibit the consummation of the transactions contemplated hereby
or (ii) seeking to prohibit the direct or indirect ownership or operation by
Purchaser of all or a material portion of the Business or Assets, or to compel
Purchaser or Seller to dispose of or hold separate all or a material portion of
the Business or Assets of Seller or Purchaser;
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(b) The representations and warranties of Seller in this
Agreement shall be true and correct as of the date of this Agreement and shall
be true and correct in all material respects (or in all respects in the case of
any representation or warranty subject to a materiality qualification) on and as
of the Closing Date with the same effect as if made on the Closing Date, except
for those representations and warranties which address matters only as of a
particular date (which shall be true and correct as of such date) and Seller
shall have complied with all covenants and agreements and satisfied all
conditions on Seller's part in this Agreement or any Ancillary Agreement to be
performed or satisfied on or prior to the Closing Date, and Seller shall have
provided Purchaser with a certificate with respect to the foregoing signed by an
authorized officer of Seller;
(c) Purchaser shall have received from counsel for Seller, a
written opinion dated the Closing Date and addressed to Purchaser, in
substantially the form attached as Exhibit H hereto;
(d) Purchaser shall have received from the President of Seller
a certificate dated the Closing Date to the effect that the conditions set forth
in Section 7.1(b) have been satisfied and that Seller's Board of Directors and
the stockholders of Seller have approved the Agreement and the transactions
contemplated hereby;
(e) Purchaser will have received such bills of sale,
assignments, certificates of title and other instruments of transfer (the
"Transfer Documents") duly executed by Seller, in such forms and covering such
matters as Purchaser may reasonably request, Transferring the Assets to
Purchaser;
(f) Seller and Dr. K. Xxxxxx Xxxxx shall each have entered
into and delivered to Purchaser the Noncompetition Agreements;
(g) Purchaser shall have concluded (through its
representatives, accountants, counsel and other experts) an investigation of the
condition (financial and other), results of operations, properties, assets,
prospects and operations of the Business and shall be satisfied, in its sole
discretion, with the results thereof;
(h) All corporate and other proceedings and actions taken in
connection with the transactions contemplated hereby and all certificates,
opinions, agreements, instruments, releases and documents referenced herein or
incident to the transactions contemplated hereby shall be in form and substance
satisfactory to Purchaser and its counsel;
(i) All consents and assignments from third parties, including
from any Governmental Entity or other Person, relating to the Contracts listed
on Schedule 2.1(a) or the conduct and operation of the Business as currently
conducted and operated, shall have been obtained;
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(j) No act, event or condition shall have occurred after the
date hereof which Purchaser determines has had or could have a Material Adverse
Effect on the Business or the Assets;
(k) The Board of Directors Seller shall have authorized and
approved this Agreement and the transactions contemplated hereby and the
Stockholder Approval shall have been obtained and a period of at least twenty
days shall have elapsed from the date the Information Statement was first mailed
to Seller's stockholders;
(l) The Information Statement shall have been filed with the
SEC and cleared by the SEC for mailing to Seller's stockholders;
(m) Seller, Purchaser and the Escrow Agent shall have entered
into the Escrow Agreement;
(n) Seller and Purchaser shall have entered into the
Transitional Supply and Trademark License Agreement;
(o) Seller and Purchaser shall have entered into the License
Agreement;
(p) Seller and Purchaser shall have entered into the Reseller
Agreement;
(q) Seller and each of the key employees listed on Schedule
6.11(a)(ii) shall have entered into legally binding and enforceable
non-disclosure agreements in a form satisfactory to Purchaser;
(r) The Stockholder Approval shall have been obtained and
delivered to the Secretary of Seller and a period of at least twenty (20) days
shall have elapsed from the date the Information Statement was first mailed to
Seller's stockholders;
(s) The promissory note and the security agreement between
Xxxxx Xxxxx and Seller shall have been amended to release Xxxxx Xxxxx'x security
interest in all of the Assets, and amendments to all UCC Financing Statements
related thereto shall have been filed by Seller releasing the Assets from the
collateral under such filing; and
(t) Seller shall have acquired any intellectual property
currently owned by Gempack and will deliver such intellectual property to
Purchaser as part of the Assets transferred hereunder, free and clear of all
Liens. In addition, Seller shall have provided copies of all Gempack contracts
to Purchaser, together with a representation that the terms thereof shall not
limit Purchaser's ability to design, source or distribute its products in any
manner.
7.2 Conditions of Seller. Notwithstanding any other provision of this
Agreement, and except as set forth below, the obligations of Seller to
consummate the transactions contemplated hereby shall be subject to the
satisfaction, at or prior to the Closing, of the conditions set forth in
subsections (a), (m), (n), (o), (p), (q) and (r) of Section 7.1 of this
Agreement, and the condition that the representations and warranties of
Purchaser in this Agreement shall be true and correct as of the date of this
Agreement and the true and correct in all material respects (or in all respects
in the case of any representations or warranty subject to a materiality
qualification) on and as of the Closing Date with the same effect as if made on
the Closing Date and Purchaser shall have complied with all covenants and
agreements and satisfied all conditions on its part to be performed or satisfied
on or prior to the Closing Date, and Purchaser shall have provided Seller with a
certificate with respect to the foregoing signed by an authorized officer of
Purchaser.
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ARTICLE VIII
POST-CLOSING OBLIGATIONS
8.1 Seller-Assumed Warranty Obligations. Notwithstanding, and not in
limitation of, any other provision herein, Seller shall assume, commencing at
the Closing, all obligations and liabilities of any nature whatsoever arising
out of, relating to, or in connection with the matters set forth in this Section
8.1.
(a) Seller shall retain sole responsibility for, and shall
bear the cost of complying with, all warranties (the "Warranties") in existence
on the Closing Date with respect to Products sold by Seller on or prior to the
Closing Date and for any product purchased by Purchaser from Seller under the
Transitional Supply and Trademark License Agreement until the expiration of such
Warranties.
(b) Exhibit I hereto sets forth the Warranties.
(c) Seller agrees to provide all services required to correct,
repair or replace Products or parts thereof covered by the Warranties in
accordance with the terms of the Warranties. Such services shall be consistent,
in all material respects, with the quality and manner of performance of similar
services provided by or made available to under the Warranties prior to the
Closing Date. Seller shall use business practices, standards and internal
controls that are substantially the same as those used by Seller prior to the
Closing Date and consistent with past practices, with only such changes as are
agreed to between Seller and Purchaser. Not in limitation of the foregoing,
Seller shall repair or replace and ship at least 95% of units of Products
returned pursuant to the terms of the Warranties in accordance with the
following time schedule:
(i) within 10 business days after receipt of the
Products, for Products that were in production in the 12 calendar month period
prior to the return; and
(ii) within 10 business days after receipt of the
Products, for Products that were in production in the 13 to 36 calendar month
period prior to the return.
8.2 Seller Supply of the Products. Pursuant to the terms and conditions
of the Transitional Supply Agreement, Purchaser will purchase Seller's existing
inventory of its Products at such time that Purchaser makes sales of such
Products.
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8.3 Seller-Assumed Support Services Obligations. Notwithstanding any
other provision herein to the contrary, Seller shall assume, commencing on the
date hereof, all obligations and liabilities of any nature whatsoever arising
out of, relating to, or in connection with the matters set forth in this Section
8.3.
(a) For the period that ends on the later of the date that is
(i) ninety days after the date hereof or (ii) thirty days after the Closing
Date, Seller shall have the responsibility for and shall bear the cost of
providing engineering and technical support services, access to Seller's key
personnel and documentation, introductions to vendors and customers and other
similar support (the "Transitional Services") to assist Purchaser with respect
to the manufacturing, distribution and sales of the Products, as set forth in
Exhibit F hereto. Services provided by Seller under this Section 8.3(a) shall be
consistent, in all material respects, with the quality and manner of performance
of similar services provided by or made available to support the Products in
connection with Seller's operations prior to the Closing Date. Seller shall use
business practices, standards and internal controls that are substantially the
same as those used by Seller prior to the Closing Date and consistent with past
practices, with only such changes as are agreed to between Seller and Purchaser.
(b) Seller shall designate at least one contact person within
Seller who is knowledgeable and experienced in the design, workings,
capabilities and use of the Products who will be responsible for initially
responding to inquiries relating to the support services to be provided on
behalf of Purchaser.
8.4 Continued Operations; No Bankruptcy. Seller intends to continue its
operations consistent with its past practices after the Closing Date, other than
as contemplated by this Agreement. As of the date hereof and as of the Closing
Date, Seller does not intend or expect to file or seek relief under the United
States Bankruptcy Code or any other insolvency or similar law after the Closing
Date. Seller intends to use its commercially reasonable best efforts to
discourage and avoid any involuntary petition by creditors or others to place
Seller in any bankruptcy case or proceeding under the United States Bankruptcy
Code or any other insolvency law or similar law.
8.5 Product Returns. Seller agrees that it will accept for return and
for full credit, at any time upon a customer's request, any and all units of
Products that are in the worldwide distribution channel on the Closing Date that
are subject to any rights of return from distribution customers.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination.
(a) This Agreement may be terminated at any time prior to the
Closing Date, whether before or after receipt of the Stockholder Approval:
(i) by mutual written consent of Purchaser and
Seller;
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(ii) by Purchaser or Seller if the Closing shall not
have occurred on or before April 30, 2005 provided that the right to terminate
this Agreement under this Section 9.1 shall not be available to any party whose
action or failure to act has been a principal cause of or resulted in the
failure of the Closing to occur on or before such date;
(iii) by Purchaser or Seller if a Governmental Entity
shall have issued a final, non-appealable order, decree or ruling or taken any
other action, in any case having the effect of permanently restraining,
enjoining or otherwise preventing the consummation of the transactions
contemplated by this Agreement;
(iv) by the Purchaser or Seller if Seller's
stockholders fail to approve this Agreement and the transactions contemplated
hereunder by delivering the Seller Stockholders Approval, provided that the
right to terminate this Agreement under this Section 9.1(a)(iv) shall not be
available to Seller where the failure to obtain the Seller's Stockholders
Approval shall have been caused by the action or failure to act of Seller;
(v) by Purchaser, upon a breach of any
representation, warranty, covenant or agreement on the part of Seller set forth
in this Agreement, or if any representation or warranty of Seller shall have
become untrue, in either case such that the conditions set forth in Section
7.1(b) would not be satisfied as of the time of such breach or as of the time
such representation or warranty shall have become untrue, provided that
Purchaser may not terminate this Agreement pursuant to this Section 9.1(a)(v) if
it is, at such time, in material breach of any representation, warranty,
covenant or agreement of this Agreement;
(vi) by Seller, upon a breach of any representation,
warranty, covenant or agreement on the part of Purchaser set forth in this
Agreement, or if any representation or warranty of Purchaser shall have become
untrue, in either case such that the conditions set forth in Section 7.2 would
not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided that Seller may
not terminate this Agreement pursuant to this Section 9.1(a)(vi) if it is, at
such time, in material breach of any representation, warranty, covenant or
agreement of this Agreement; or
(vii) by Seller, for the purpose of entering into an
Acquisition Transaction.
(b) If: (i) this Agreement is terminated pursuant to Section
9.1(a)(vii); (ii) Seller violates the provisions of Section 6.5 or (iii)
Seller's stockholders fail to approve this Agreement and the transactions
contemplated hereunder by delivering the Seller Stockholders Approval, then
Seller shall within ten days from the termination of this Agreement pay to
Purchaser a termination fee equal to $300,000 in cash.
9.2 Effect of Termination. In the case of any termination of this
Agreement, this Agreement shall be of no further force and effect and there
shall be no liability or obligation on the part of any party hereto or their
respective directors, officers, employees, agents or other representatives,
except (i) the provisions of Section 6.3, this Section 9.2 and Article X shall
each remain in full force and effect, (ii) each party shall remain liable for
any breach of this Agreement prior to its termination, and (iii) in the event of
termination of this Agreement pursuant to Section 9.1(a)(v) or (vi), such
termination shall be without prejudice to any rights that the terminating party
may have against the breaching party or parties or any other person under the
terms of this Agreement or otherwise.
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9.3 Amendment. This Agreement may be amended at any time by a written
instrument executed by Purchaser and Seller. Any amendment effected pursuant to
this Section 9.3 shall be binding upon all parties hereto.
9.4 Waiver. Any term or provision of this Agreement may be waived in
writing at any time by the party or parties entitled to the benefits thereof.
Any waiver effected pursuant to this Section 9.4 shall be binding upon all
parties hereto. No failure to exercise and no delay in exercising any right,
power or privilege shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege preclude the exercise of any
other right, power or privilege. No waiver of any breach of any covenant or
agreement hereunder shall be deemed a waiver of any preceding or subsequent
breach of the same or any other covenant or agreement. The rights and remedies
of each party under this Agreement are in addition to all other rights and
remedies, at law or in equity, that such party may have against the other
parties.
ARTICLE X
INDEMNIFICATION
10.1 Survival. Notwithstanding any investigation conducted at any time
with regard thereto by or on behalf of Purchaser, the representations and
warranties of Seller hereto contained in this Agreement or in any Exhibit or
Schedule hereto shall survive the Closing and the consummation of the
transactions contemplated hereby (and any examination or investigation by or on
behalf of any party hereto); provided, however, that (i) the representations and
warranties contained in Sections 3.3 and 3.6, and the related claims for
indemnification, shall survive until the fifth anniversary of the Closing Date;
(ii) the representations and warranties contained in Section 3.8, and the
related claims for indemnification, shall survive until sixty (60) days after
the expiration of the applicable statute of limitations, and (iii) all other
representations and warranties, and related claims for indemnification, shall
survive until the third anniversary of the Closing Date. The termination of the
representations and warranties provided herein shall not affect the rights of a
party in respect of any claim made by Purchaser prior to the expiration of the
applicable survival period. The agreements and covenants contained in this
Agreement shall survive the Closing Date indefinitely or in accordance with
their terms, if any.
10.2 Indemnification. Seller covenants and agrees to defend, indemnify
and hold harmless Purchaser and each Person who controls Purchaser from and
against any Damages arising out of or resulting from: (i) any inaccuracy in or
breach of any representation or warranty made by Seller in this Agreement or in
any writing delivered pursuant to this Agreement or at the Closing; (ii) the
failure of Seller to perform or observe fully any covenant, agreement or
provision to be performed or observed by Seller pursuant to this Agreement;
(iii) Purchaser's waiver of any applicable bulk sales laws; or (iv) any claim
arising out of any oral or written agreement between Seller and DT Research,
Inc. or its affiliates.
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10.3 Procedures. If Purchaser seeks indemnification under this Article
X, it shall give notice ("Claim Notice") to Seller of the basis of the claim
(the "Claim") (i) within a reasonable time after discovery of the facts and (ii)
in any event, within the time periods set forth in Section 10.1, provided that
the failure to give such notice shall not relieve Seller of any liability
hereunder except to the extent that Seller is materially adversely prejudiced by
such failure. Seller shall give notice to Purchaser within fifteen (15) business
days after receipt of the notice requested by this Section 10.3 advising whether
it (i) acknowledges its obligation to indemnify Purchaser or (ii) disputes its
obligation to indemnify Purchaser. If Seller acknowledges its indemnification
obligation with respect to the Claim, and (i) such Claim is based upon an
asserted liability or obligation to a person or entity that is not a party to
this Agreement (a "Third Party Claim"), Seller shall have the right to defend or
settle such Third Party Claim or (ii) if such Claim is not a Third Party Claim,
Purchaser shall be entitled to immediate satisfaction of such Claim. If Seller
does not notify Purchaser within fifteen (15) business days following receipt of
notice of a Claim that is not a Third Party Claim that it disputes such Claim,
such Claim shall be deemed a liability of Seller and Seller shall pay the amount
of the Claim on demand by Purchaser, or in the case of any notice in which the
amount of the Claim is estimated, on such later date when the amount of the
Claim is finally determined. If Seller disputes the Claim in a timely manner as
set forth herein, Seller and Purchaser shall proceed in good faith to negotiate
a resolution of the dispute, or, if necessary, to final judgment or order of a
court of equity of competent jurisdiction determining the amount of the Damages
or by any other means elected by Purchaser.
10.4 Third Party Claims.
(a) Seller shall have thirty (30) days after receipt of the
Claim Notice to undertake, conduct and control, through counsel satisfactory to
Purchaser, and at Seller's expense, the settlement or defense of a Third Party
Claim, and Purchaser shall cooperate with Seller in connection therewith,
provided that (i) Seller shall permit Purchaser to participate in such
settlement or defense through counsel chosen by Purchaser, provided that the
fees and expenses of such counsel shall not be borne by Seller, and (ii) Seller
shall not settle any Third Party Claim without Purchaser's consent. So long as
Seller is vigorously contesting any such Third Party Claim in good faith,
Purchaser shall not pay or settle such claim without Seller's consent, which
consent shall not be unreasonably withheld. Notwithstanding the foregoing, if
Seller assumes control of such defense, and there exists a conflict of interest
between the interests of Seller and those of Purchaser with respect to such
Third Party Claim, Purchaser may retain counsel satisfactory to it and the
reasonable fees and expenses of such counsel to Purchaser shall be paid by
Seller.
(b) If Seller does not notify Purchaser within thirty days after
receipt of the Claim Notice that it elects to undertake the defense of the Third
Party Claim described therein, Purchaser shall have the right to contest, settle
or compromise the Third Party Claim in the exercise of its reasonable
discretion, on behalf of and for the account and risk of Seller; provided that
Purchaser shall notify Seller of any compromise or settlement of any such Third
Party Claim.
(c) Seller shall not be entitled to assume the defense for any Third
Party Claim (and shall be liable for the reasonable fees and expenses incurred
by Purchaser in defending such claim) if the Third Party Claim seeks an order,
injunction or other equitable relief or relief for other than money damages
against Purchaser which Purchaser determines, after conferring with its counsel,
cannot be separated from any related claim for money damages and which, if
successful, would adversely affect the Assets or the Business, properties or
prospects of the Business.
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10.5 Indemnification Exclusive. Except as provided herein, the
foregoing indemnification provisions shall be the sole and exclusive remedy
after the Closing Date for money damages available to Purchaser for breach of
any representations, warranties or covenants contained herein, but shall not
limit any other remedy to which Purchaser may be entitled. Nothing in this
Agreement shall be construed as limiting in any way the remedies that may be
available to Purchaser in the event of fraud relating to the representations,
warranties or covenants made by Seller in this Agreement.
10.6 Limitation on Amount. Seller shall not be liable for claims made
under this Article X until the aggregate amount of the Damages incurred by
Purchaser shall exceed $50,000, in which event the indemnification obligations
of Seller shall apply to the amount of all claims made under this Article X,
provided, however, that any amount recoverable by Purchaser in accordance with
Section 2.6 shall not be subject to the $50,000 threshold.
ARTICLE XI
REBATE AND MARKETING PROGRAMS
11.1 List of Programs. Schedule 11.1 contains a true and complete list
and description of, and amounts that Purchaser may be contingently obligated to
pay under, all market development fund ("MDF"), marketing and rebate programs.
Purchaser shall assume no liability or obligations for any such claims under
Seller's MDF, marketing or rebate programs except for the items specifically set
forth on Schedule 11.1. In particular, but not in limitation of the foregoing,
Purchaser shall not assume any liability or obligations for Seller's special
price quote ("SPQ") program with regard to inventory of the Products in the
worldwide distribution channel and in transit to distributors worldwide on the
Closing Date. Any claims arising under Seller's SPQ program from customers will
be the sole responsibility of Seller.
11.2 Payments. Seller agrees to pay to Purchaser, within thirty (30)
days of the date of invoice by Purchaser, the amounts of any and all claims made
to Purchaser arising under Seller's MDF, marketing or rebate programs for which
Seller is responsible under Section 11.1, provided that Purchaser provides
Seller with a copy of the claim made to Purchaser, Seller reasonably concludes
such claim is a valid obligation of the Seller as determined in accordance with
this Article XI and Purchaser makes appropriate payments to the customer.
11.3 Marketing Rights. Seller shall provide a prominent link, with the
content approved by Purchaser, from the main page of Seller's website at
xxx.xxxxxxxxx.xxx, from the products page at xxx.xxxxxxxxx.xxx and such other
pages as Purchaser may reasonably request to Purchaser's website at
xxx.xxxxxxx.xxx for a two (2)-year period commencing on the Closing Date.
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ARTICLE XII
GENERAL PROVISIONS
12.1 Notices. All notices and other communications under or in
connection with this Agreement shall be in writing and shall be deemed given (a)
if delivered personally (including by overnight express or messenger), upon
delivery, (b) if delivered by registered or certified mail (return receipt
requested), upon the earlier of actual delivery or three days after being
mailed, or (c) if given by telecopy, upon confirmation of transmission by
telecopy, in each case to the parties at the following addresses:
(a) If to the Purchaser, addressed to:
Neoware Systems, Inc.
000 Xxxxxxx Xxxxx
Xxxx xx Xxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxx, President and
Chief Executive Officer
Facsimile: (000) 000-0000
With a copy to:
XxXxxxxxxx, Keen & Xxxxxxx
Radnor Court, Suite 160
000 X. Xxxxxx-Xxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esquire
Facsimile: (000) 000-0000
(b) If to Seller, addressed to:
TeleVideo, Inc.
0000 Xxxxxx Xxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx Xxx, Vice President
Facsimile: (000) 000-0000
12.2 Severability. If any term or provision of this Agreement or the
application thereof to any circumstance shall, in any jurisdiction and to any
extent, be invalid or unenforceable, such term or provision shall be ineffective
as to such jurisdiction to the extent of such invalidity or unenforceability
without invalidating or rendering unenforceable such term or provision in any
other jurisdiction, the remaining terms and provisions of this Agreement or the
application of such terms and provisions to circumstances other than those as to
which it is held invalid or enforceable.
12.3 Entire Agreement. This Agreement, including the annexes and
schedules attached hereto and other documents referred to herein, contains the
entire understanding of the parties hereto in respect of its subject matter and
supersedes all prior and contemporaneous agreements and understandings, oral and
written, between the parties with respect to such subject matter.
40
12.4 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Purchaser and Seller and their respective successors,
heirs and assigns; provided, however, that Seller shall not directly or
indirectly transfer or assign any of Seller's rights or obligations hereunder in
whole or in part without the prior written consent of Purchaser. Subject to the
foregoing, this Agreement is not intended to benefit, and shall not run to the
benefit of or be enforceable by, any other person or entity other than the
parties hereto and their permitted successors and assigns.
12.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same Agreement.
12.6 Recitals, Schedules, Exhibits and Annexes. The recitals,
schedules, exhibits and annexes to this Agreement are incorporated herein and,
by this reference, made a part hereof as if fully set forth at length herein.
12.7 Construction.
(a) The article, section and subsection headings used herein
are inserted for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
(b) As used in this Agreement, the masculine, feminine or
neuter gender, and the singular or plural, shall be deemed to include the others
whenever and wherever the context so requires.
(c) For the purposes of this Agreement, unless the context
clearly requires, "or" is not exclusive.
12.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the
Commonwealth of Pennsylvania.
12.9 Passage of Title and Risk of Loss. Legal title, equitable title
and risk of loss with respect to the Assets will not pass to Purchaser until
such Assets are Transferred at the Closing, which transfer, once it has
occurred, will be deemed effective for tax, accounting and other computational
purposes as of 11:59 P.M. (Eastern Time) on the Closing Date.
12.10 Bulk Sales. Purchaser hereby waives compliance by Seller with the
provisions of the bulk sales laws of any jurisdiction, if applicable, provided
that Seller agrees to indemnify Purchaser for claims of creditors of Seller with
respect to liabilities not expressly assumed by Purchaser pursuant to this
Agreement.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or has caused this Agreement to be executed on its behalf by a
representative duly authorized, all as of the date first above set forth.
NEOWARE SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxxx
--------------------------------------
Title: Chief Financial Officer
-------------------------------------
TELEVIDEO, INC.
By: /s/ K. Xxxxxx Xxxxx
----------------------------------------
Name: K. Xxxxxx Xxxxx
--------------------------------------
Title: Chief Executive Officer
-------------------------------------
42
