EXHIBIT 2.1
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ASSET PURCHASE AGREEMENT
among:
TELINNOVATION,
a California general partnership;
TELINNOVATION SERVICE CORPORATION,
a California corporation;
TELINNOVATION CORPORATION,
a California corporation;
XXXXXXX XXXXX,
an individual;
XXXXX XXXXXXX,
an individual;
and
DITECH COMMUNICATIONS CORPORATION,
a Delaware corporation
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Dated as of December 8, 1999
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is entered into as of December
8, 1999, by and among: TELINNOVATION, a California general partnership (the
"Partnership"), TELINNOVATION SERVICE CORPORATION, a California corporation
("TSC"), TELINNOVATION CORPORATION, a California corporation (the "Corporation"
and jointly and severally with the Partnership and TSC, the "Sellers"); XXXXXXX
XXXXX ("Xxxxx") and XXXXX XXXXXXX ("Xxxxxxx") (Xxxxx and Xxxxxxx are
individually referred to herein as "General Partner" and collectively as
"General Partners"); and DITECH COMMUNICATIONS CORPORATION, a Delaware
corporation (the "Purchaser"). Certain capitalized terms used in this Agreement
are defined in EXHIBIT A.
RECITALS
A. The General Partners are: (i) the sole general partners of the
Partnership; and (ii) officers and directors of TSC and the Corporation.
B. The General Partners or their respective family trusts are the
shareholders of TSC and the Corporation.
C. Concurrently with the execution of this Agreement, the Purchaser,
and Xxxxxxx Xxxxx ("Hardy") will enter into an Asset Purchase Agreement, dated
as of the date hereof (the "Hardy Agreement"), providing for the sale of certain
assets of Hardy to the Purchaser pursuant to the terms set forth therein.
D. The General Partners and the Sellers wish to provide for the sale of
substantially all of the assets of the Sellers to the Purchaser on the terms set
forth in this Agreement.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
1. SALE OF ASSETS; RELATED TRANSACTIONS.
1.1 SALE OF ASSETS. The General Partners and the Sellers shall sell,
assign, transfer, convey and deliver to the Purchaser, at the Closing, good and
valid title to the Assets (as defined below), free of any Encumbrances (except
for those licenses set forth in Part 2.11 of the Disclosure Schedule), on the
terms and subject to the conditions set forth in this Agreement. For purposes of
this Agreement, "Assets" shall mean and include: (a) all of the properties,
rights, interests and other tangible and intangible assets of the Sellers
(wherever located and whether or not required to be reflected on a balance sheet
prepared in accordance with generally accepted accounting principles); (b)
contracts and contractual rights and all of the Sellers' rights thereunder; and
(c) any other assets that are owned by any of the General Partners or any other
Related Party and that are needed for the conduct of, or are useful in
connection with, the business of the Sellers; PROVIDED, HOWEVER, that the Assets
shall not include any Excluded Assets. Without limiting the generality of the
foregoing, the Assets shall include:
(1) all equipment, materials, prototypes, tools,
supplies, vehicles, furniture, fixtures, improvements and other tangible assets
of the Sellers (including without limitation the tangible assets identified in
Part 2.8 of the Disclosure Schedule);
(2) all Proprietary Assets and goodwill of the
Sellers (including without limitation the Proprietary Assets identified in Part
2.10 of the Disclosure Schedule);
(3) all rights of the Sellers under the Sellers
Contracts (including without limitation the Sellers Contracts identified in Part
2.11 of the Disclosure Schedule);
(4) all Governmental Authorizations held by the
Sellers (including the Governmental Authorizations identified in Part 2.14 of
the Disclosure Schedule);
(5) all claims (including claims for past
infringement of Proprietary Assets) and causes of action of the Sellers against
other Persons (regardless of whether or not such claims and causes of action
have been asserted by the Sellers), and all rights of indemnity, warranty
rights, rights of contribution, rights to refunds, rights of reimbursement and
other rights of recovery possessed by the Sellers (regardless of whether such
rights are currently exercisable); and
(6) all books, records, files and data of the Sellers
relating to any of the Assets.
1.2 PURCHASE PRICE.
(a) As consideration for the sale of the Assets to the
Purchaser:
(i) at the Closing, the Purchaser shall issue to the
Sellers an aggregate of five hundred forty thousand (540,000) shares of the
Purchaser's common stock (the "Shares"), of which Purchaser shall deposit three
hundred sixty thousand (360,000) shares (the "Escrow Shares") in an escrow
account (the "Escrow Account") to be established as of the Closing Date pursuant
to an Escrow Agreement among the General Partners, the Sellers, the Purchaser
and an escrow agent mutually selected by the parties hereto (the "Escrow
Agent"), in substantially the form of EXHIBIT B (the "Escrow Agreement") to be
disposed of in accordance with the provisions of Sections 1.3 and 4.13 and
Article 9 below; and
(ii) at the Closing, the Purchaser shall assume the
Assumed Liabilities (as defined below) by delivering to the Sellers an
Assumption Agreement in substantially the form of EXHIBIT C (the "Assumption
Agreement").
(b) For purposes of this Agreement, "Assumed Liabilities"
shall mean only the obligations of the Sellers under the Contracts identified on
EXHIBIT D to the Agreement, but only to the extent such obligations (A) arise
after the Closing Date, (B) do not arise from or relate to any Breach by the
Sellers of any provision of any of such Contracts, (C) do not arise from or
relate to any event, circumstance or condition occurring or existing on or prior
to the Closing Date that, with notice or lapse of time, would constitute or
result in a Breach of any of such
Contracts, and (D) are ascertainable (in nature and amount) solely by reference
to the express terms of such Contracts; PROVIDED, HOWEVER, that notwithstanding
the foregoing, and notwithstanding anything to the contrary contained in this
Agreement, the "Assumed Liabilities" shall not include, and the Purchaser shall
not be required to assume or to perform or discharge:
(1) any Liability of any General Partner or any other
Person;
(2) any Liability of the Sellers or the General
Partners arising out of or relating to the execution, delivery or performance of
any of the Transactional Agreements;
(3) any Liability of the Sellers or the General
Partners for any fees, costs or expenses of the type referred to in Section
6.3(a) of the Agreement;
(4) any Liability of the Sellers or the General
Partners arising from or relating to any action taken by the Sellers or the
General Partners , or any failure on the part of the Sellers or the General
Partners to take any action, at any time after the Closing Date;
(5) any Liability of the Sellers or the General
Partners arising from or relating to (x) any services performed by the Sellers
or the General Partners for any customer, or (y) any claim or Proceeding against
the Sellers or the General Partners;
(6) any Liability of the Sellers or the General
Partners for the payment of any Tax;
(7) any Liability of the Sellers or the General
Partners to any employee or former employee of the Sellers or the General
Partners under or with respect to any Employee Benefit Plan, profit sharing plan
or dental plan or for severance pay;
(8) any Liability of the Sellers to any General
Partner or any other Related Party;
(9) any Liability under any Contract, if the Sellers
shall not have obtained, prior to the Closing Date, any Consent required to be
obtained from any Person with respect to the assignment or delegation to the
Purchaser of any rights or obligations under such Contract;
(10) any Liability that is inconsistent with or
constitutes an inaccuracy in, or that arises or exists by virtue of any Breach
of, (x) any representation or warranty made by the Sellers or any General
Partner in any of the Transactional Agreements, or (y) any covenant or
obligation of the Sellers or any General Partner contained in any of the
Transactional Agreements; or
(11) any other Liability that is not referred to
specifically in the opening paragraph of this Section 1.2(b).
1.3 SELLERS' AGREEMENT TO DELIVER AND SUPPORT PRODUCIBLE PRODUCT
DESIGNS. The Sellers agree to allow the Purchaser to hire the General Partners.
The Purchaser desires to hire and
retain each of the General Partners as employees of the Purchaser to assist the
Purchaser in maintaining the goodwill associated with the technology being
acquired pursuant to the Transactions. As a result, in the event that Xxxxx
and/or Xxxxxxx, voluntarily terminates his employment relationship with the
Purchaser prior to the fourth (4th) anniversary of the Closing Date, the
Purchaser shall have the right to recover a portion of the Escrow Shares held in
the Escrow Account pursuant to the terms of the Escrow Agreement. The rights of
the parties to make a claim for any distribution from the Escrow Account, the
terms and conditions by which the Escrow Account shall be held, invested and
distributed and the manner of resolving disputes pertaining to claims made on
the Escrow Account by a party shall be as set forth in the Escrow Agreement.
1.4 SELLERS' FACILITIES. The Sellers agree to maintain their current
facility at 000 Xxxxx Xxxxxx #000, Xxxxxxxx Xxxx, Xxxxxxxxxx 00000 (the
"Facility") as a product development center for as long as the Purchaser, in its
sole discretion, desires to use such Facility. The Purchaser shall reimburse, on
a monthly basis, the Sellers' pre-approved, out-of-pocket expenses, including
rental payments, incurred in connection with maintaining the Facility until such
time as the Purchaser no longer desires to use such Facility. The Purchaser
shall give the Sellers not fewer than sixty (60) days' notice of its decision to
terminate its use of the Facility.
1.5 SALES TAXES. The Sellers shall bear and pay, and shall reimburse
the Purchaser and the Purchaser's affiliates for, any sales taxes, use taxes,
transfer taxes, documentary charges, recording fees or similar taxes, charges,
fees or expenses that may become payable in connection with the sale of the
Assets to the Purchaser or in connection with any of the other Transactions.
1.6 ALLOCATION. At or prior to the Closing, the Purchaser shall deliver
to the Sellers a statement setting forth the Purchaser's good faith
determination of the manner in which the consideration referred to in Sections
1.2(a) is to be allocated among the Assets. The allocation prescribed by such
statement shall be conclusive and binding upon the General Partners and the
Sellers for all purposes, and neither the Sellers nor any General Partner shall
file any Tax Return or other document with, or make any statement or declaration
to, any Governmental Body that is inconsistent with such allocation.
1.7 CLOSING.
(a) The Closing shall take place at the offices of Xxxxxx
Godward LLP, Five Xxxx Xxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000 at 10:00 a.m. on
January 6, 2000 or at such other time and place as the parties may mutually
agree.
(b) At the Closing:
(i) the Sellers shall execute and deliver to the
Purchaser such bills of sale, endorsements, assignments and other documents as
may (in the reasonable judgment of the Purchaser or its counsel) be necessary or
appropriate to assign, convey, transfer and deliver to the Purchaser good and
valid title to the Assets free of any Encumbrances (except for those licenses
set forth in Part 2.11 of the Disclosure Schedule);
(ii) the Purchaser shall issue and deliver to the
Sellers stock certificates representing an aggregate one hundred eighty thousand
(180,000) shares of the Shares;
(iii) the parties hereto shall execute and deliver
the Escrow Agreement;
(iv) the Purchaser shall issue to the Sellers stock
certificates representing the Escrow Shares and deposit such certificates in the
Escrow Account as contemplated by Section 1.2(a)(i) above;
(v) the Purchaser shall execute and deliver to the
Sellers the Assumption Agreement;
(vi) each of the General Partners shall execute and
deliver to the Purchaser a Noncompetition Agreement in the form of EXHIBIT F
hereto (each, a "Noncompetition Agreement");
(vii) each of the General Partners shall execute and
deliver to the Purchaser a General Release in the form of EXHIBIT G hereto
(each, a "Release");
(viii) each of the General Partners shall execute and
deliver to the Purchaser five (5) Stock Assignments in the form of EXHIBIT J
hereto (each, a "Stock Assignment");
(ix) the Sellers shall deliver to Purchaser a FIRPTA
statement, if applicable;
(x) each of the General Partners and the Sellers
shall execute and deliver to the Purchaser a certificate (the "Closing
Certificate") setting forth the representations and warranties of the General
Partners and the Sellers that (A) each of the representations and warranties
made by the General Partners and the Sellers in this Agreement was accurate in
all respects as of the date of this Agreement, (B) except as expressly set forth
in the Closing Certificate, each of the representations and warranties made by
the General Partners and the Sellers in this Agreement is accurate in all
respects as of the Closing Date as if made on the Closing Date, (C) each of the
covenants and obligations that any of the General Partners or the Sellers is
required to have complied with or performed pursuant to this Agreement at or
prior to the Closing has been duly complied with and performed in all respects,
and (D) except as expressly set forth in the Closing Certificate, each of the
conditions set forth in Article 6 has been satisfied in all respects;
(xi) Berliner Xxxxx shall deliver to Purchaser a
legal opinion, dated as of the Closing Date, in the form of EXHIBIT H hereto
(the "Opinion"); and
(xii) the Purchaser shall execute and deliver to the
General Partners and the Sellers the Registration Rights Agreement, in the form
of EXHIBIT K hereto (the "Registration Rights Agreement").
(c) On the Closing Date or other date as mutually agreed upon
by the parties hereto, the General Partners and the Sellers shall transfer to
the Purchaser all intangible Assets by electronic means.
2. REPRESENTATIONS AND WARRANTIES OF THE GENERAL PARTNERS AND THE SELLERS.
The General Partners and the Sellers, jointly and severally, represent
and warrant, to and for the benefit of the Indemnitees, except, in each case, as
set forth on the Disclosure Schedule attached hereto, as follows:
2.1 DUE ORGANIZATION; NO SUBSIDIARIES; ETC. The Partnership is a
general partnership duly organized, validly existing and in good standing under
the laws of the State of California. Each of TSC and the Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California. No Seller is not required to be qualified,
authorized, registered or licensed to do business as a foreign entity in any
jurisdiction other than the jurisdictions listed in Part 2.1 of the Disclosure
Schedule. Each Seller is in good standing as a foreign entity in each of the
jurisdictions listed in Part 2.1 of the Disclosure Schedule. No Seller has any
subsidiaries, or owns, beneficially or otherwise, any shares or other securities
of, or any direct or indirect interest of any nature in, any other Entity. The
Sellers have never conducted any business under or otherwise used, for any
purpose or in any jurisdiction, any fictitious name, assumed name, trade name or
other name, other than "Telinnovation."
2.2 CERTIFICATE OF FORMATION AND BYLAWS; RECORDS. The Sellers have
delivered to (or made available for inspection by) the Purchaser accurate and
complete copies of: (i) the certificate of formation, partnership agreement,
articles of incorporation, bylaws and any other charter documents of the
Sellers, including all amendments thereto; (ii) the partnership or corporate
records of the Sellers, if any; and (iii) the minutes and other records of the
meetings and other proceedings (including any actions taken by written consent
or otherwise without a meeting) of the general partners, shareholders, directors
or other controlling body of the Sellers. There have been no meetings or other
proceedings of the general partners, shareholders, directors or other
controlling body of the Sellers, the managers of the Sellers or any committee of
any of the foregoing that are not fully reflected in such minutes or other
records. The books of account, partnership and corporate records, minute books
and other records of the Sellers are accurate, up-to-date and complete, and have
been maintained in accordance with sound and prudent business practices. All of
the records of the Sellers are in the actual possession and direct control of
the Sellers.
2.3 CAPITALIZATION. The General Partners are, and will be as of the
Closing Date, the sole general partners of the Partnership. All of the
shareholders of TC and TSC are identified in Part 2.3 of the Disclosure
Schedule. Except as set forth in Part 2.3 of the Disclosure Schedule, there is
no: (a) outstanding subscription, option, call, warrant or right (whether or not
currently exercisable) to acquire any interest, stock or other securities of any
of the Sellers; (b) outstanding security, instrument or obligation that is or
may become convertible into or exchangeable for any interest or other securities
of any of the Sellers; or (c) Contract under which any of the Sellers is or may
become obligated to sell or otherwise issue any interest or any other
securities. Except as set forth in Part 2.3 of the Disclosure Schedule, no
person other than the General Partners has any right to vote with respect to the
sale of the Assets to the Purchaser or any of the other Transactions.
2.4 FINANCIAL STATEMENTS. The Sellers have delivered to the Purchaser
the following
financial statements (collectively, the "Financial Statements"): (a) the
unaudited balance sheets of the Sellers as of December 31, 1997 and December 31,
1998, and the related statements of income and retained earnings and cash flows
for the years then ended, together with the notes thereto any reports with
respect thereto; and (b) the balance sheet of the Sellers as of October 31, 1999
(the "Unaudited Interim Balance Sheet"), and the related statements of income
and retained earnings and cash flows for the ten months then ended. The
Financial Statements are accurate and complete in all respects, have been
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods covered (except that the
financial statements referred to in clause "(b)" of this Section 2.4 do not have
notes) and present fairly the financial position of the Sellers as of the
respective dates thereof and the results of operations and cash flows of the
Sellers for the periods covered thereby.
2.5 ABSENCE OF CHANGES. Except as set forth in Part 2.5 of the
Disclosure Schedule, since December 31, 1998:
(a) there has not been any adverse change in, and no event has
occurred that might have an adverse effect on, the business, condition, assets,
liabilities, operations, financial performance, net income or prospects of the
Sellers;
(b) there has not been any loss, damage or destruction to, or
any interruption in the use of, any of the assets of the Sellers (whether or not
covered by insurance);
(c) the Sellers have not (i) declared, accrued, set aside or
paid any dividend or made any other distribution in respect of any interest or
other securities, or (ii) repurchased, redeemed or otherwise reacquired any
interest or other securities;
(d) the Sellers have not sold or otherwise transferred, or
leased or licensed, any asset (including without limitation any Proprietary
Asset) to any other Person;
(e) the Sellers have not written off as uncollectible, or
established any extraordinary reserve with respect to, any account receivable or
other indebtedness;
(f) the Sellers have not made any loan or advance to any other
Person;
(g) the Sellers have not (i) established or adopted any
Employee Benefit Plan, or (ii) paid any bonus or made any profit-sharing or
similar payment to, or increased the amount of the wages, salary, commissions,
fees, fringe benefits or other compensation or remuneration payable to, any of
their directors, officers, employees or independent contractors;
(h) there has been no amendment or termination of any Contract
by which the Sellers or any of the assets owned or used by the Sellers is or was
bound, or under which the Sellers have or had any rights or interest;
(i) the Sellers have not incurred, assumed or otherwise become
subject to any Liability;
(j) the Sellers have not discharged any Encumbrance or
discharged or paid any
indebtedness or other Liability, except for accounts payable that are reflected
as current liabilities in the "liabilities" column of the Unaudited Interim
Balance Sheet;
(k) the Sellers have not forgiven any debt or otherwise
released or waived any right or claim; and
(l) the Sellers have not agreed, committed or offered (in
writing or otherwise) to take any of the actions referred to in clauses "(c)"
through "(k)" above.
2.6 TITLE TO ASSETS. The Sellers own, and have good and valid title to,
all of the assets purported to be owned by them, including: all assets reflected
on the Unaudited Interim Balance Sheet; all assets acquired by the Sellers since
October 31, 1999; all assets referred to in Parts 2.8, 2.11, 2.10 and 2.14 of
the Disclosure Schedule; all rights of the Sellers under Sellers Contracts; and
all other assets reflected in the books and records of the Sellers as being
owned by the Sellers. Except as set forth in Part 2.6 of the Disclosure
Schedule, all of said assets are owned by the Sellers free and clear of any
Encumbrances. Part 2.6 of the Disclosure Schedule identifies all of the assets
that are being leased or licensed to the Sellers. The Assets will collectively
constitute, as of the Closing Date, all of the properties, rights, interests and
other tangible and intangible assets necessary to enable the Sellers to conduct
their business in the manner in which such business is currently being conducted
and in the manner in which such business is proposed to be conducted.
2.7 CUSTOMERS; DISTRIBUTORS. Part 2.7 of the Disclosure Schedule
accurately identifies, and provides an accurate and complete breakdown of the
revenues received from, each customer or other Person that (together which such
customer's or other Person's affiliates) accounted for (i) more than $25,000 of
the gross revenues of the Sellers in 1997, 1998 or 1999, or (ii) more than
$25,000 of the gross revenues of the Sellers in the first ten (10) months of
1999. Neither the Sellers nor any General Partner has received any notice or
other communication (in writing or otherwise), and neither the Sellers nor any
General Partner has received any other information, indicating that any customer
or other Person identified or required to be identified in Part 2.7 of the
Disclosure Schedule may cease dealing with the Sellers or may otherwise reduce
the volume of business transacted by such Person with the Sellers below
historical levels. Neither the Sellers nor any General Partner has received any
notice or other communication (in writing or otherwise), or has received any
other information, indicating that any distributor of any of the Sellers'
products may cease acting as a distributor of such products or otherwise dealing
with the Sellers.
2.8 EQUIPMENT, ETC. Part 2.8 of the Disclosure Schedule accurately
identifies all equipment, materials, prototypes, tools, supplies, vehicles,
furniture, fixtures, improvements and other tangible assets owned by the
Sellers, and accurately sets forth the date of acquisition, original cost and
book value of each of said assets. Part 2.8 of the Disclosure Schedule also
accurately identifies all tangible assets leased to the Sellers. Each asset
identified or required to be identified in Part 2.8 of the Disclosure Schedule:
(i) is structurally sound, free of defects and deficiencies and in good
condition and repair (ordinary wear and tear excepted); (ii) complies in all
respects with, and is being operated and otherwise used in full compliance with,
all applicable Legal Requirements; and (iii) is adequate and appropriate for the
uses to which it is being put.
The assets identified in Part 2.8 of the Disclosure Schedule are adequate for
the conduct of the business of the Sellers in the manner in which such business
is currently being conducted and in the manner in which such business is
proposed to be conducted.
2.9 REAL PROPERTY. The Sellers do not own any real property or any
interest in real property, except for the leaseholds created under the real
property leases identified in Part 2.9 of the Disclosure Schedule. Part 2.9 of
the Disclosure Schedule provides an accurate and complete description of the
premises covered by said leases and the facilities located on such premises. The
Sellers enjoy peaceful and undisturbed possession of such premises.
2.10 PROPRIETARY ASSETS.
(a) Part 2.10(a)(1) of the Disclosure Schedule identifies and
provides a brief description of all Proprietary Assets owned by the Sellers.
Part 2.10(a)(2) of the Disclosure Schedule identifies and provides a brief
description of each Proprietary Asset that is owned by any other Person and that
is licensed to or used by the Sellers (except for any Proprietary Asset that is
licensed to the Sellers under any third party software license that (1) is
generally available to the public, and (2) imposes no future monetary obligation
on the Sellers) and identifies the license agreement or other agreement under
which such Proprietary Asset is being licensed to or used by the Sellers. The
Sellers have good and valid title to all of the Proprietary Assets identified in
Part 2.10(a)(1) of the Disclosure Schedule, free of any Encumbrances, and have a
valid right to use and otherwise exploit, and to license others to use and
otherwise exploit, all Proprietary Assets identified in Part 2.10(a)(2) of the
Disclosure Schedule. Except as set forth in Part 2.10(a)(3) of the Disclosure
Schedule, the Sellers are not obligated to make any payment to any Person for
the use or other exploitation of any Proprietary Asset. Except as set forth in
Part 2.10(a)(4) of the Disclosure Schedule, the Sellers are free to use, modify,
copy, distribute, sell, license or otherwise exploit each of the Sellers
Proprietary Assets on an exclusive basis (other than Proprietary Assets
consisting of software licensed to the Sellers under third party licenses
generally available to the public, with respect to which the Sellers' rights are
not exclusive).
(b) The Sellers have taken all reasonable measures and
precautions necessary to protect and maintain the confidentiality and secrecy of
all Sellers Proprietary Assets and otherwise to maintain and protect the value
of all Sellers Proprietary Assets. The Sellers have not disclosed or delivered
or permitted to be disclosed or delivered to any Person, and no Person (other
than the Sellers) has access to or has any rights with respect to, the source
code, or any portion or aspect of the source code, of any Sellers Proprietary
Asset, except as set forth in Part 2.10(b) of the Disclosure Schedule.
(c) All patents, trademarks, service marks and copyrights that
are registered with any Governmental Body and held by the Sellers are valid and
subsisting. None of the Sellers Proprietary Assets infringes or conflicts with
any Proprietary Asset owned or used by any other Person. The Sellers are not
infringing, misappropriating or making any unlawful use of, and the Sellers have
not at any time infringed, misappropriated or made any unlawful use of, or
received any notice or other communication of any actual, alleged, possible or
potential infringement, misappropriation or unlawful use of, any Proprietary
Asset owned or used by any other Person. To the best of the knowledge of the
Sellers and the General Partners, no other Person is
infringing, misappropriating or making any unlawful use of, and no Proprietary
Asset owned or used by any other Person infringes or conflicts with, any Sellers
Proprietary Asset.
(d) The Proprietary Assets constitute all the Proprietary
Assets necessary to enable the Sellers to conduct their business in the manner
in which such business is being conducted and in the manner in which such
business is proposed to be conducted. The Sellers have not licensed any of the
Sellers Proprietary Assets to any Person on an exclusive basis. The Sellers have
not entered into any covenant not to compete or Contract limiting their ability
to exploit fully any of the Sellers Proprietary Assets or to transact business
in any market or geographical area or with any Person.
(e) Except as set forth in Part 2.10(e) of the Disclosure
Schedule, the Sellers have not entered into and are not bound by any Contract
under which any Person has the right to distribute or license any Proprietary
Asset. The Sellers have not disclosed or delivered to any Person, or permitted
the disclosure or delivery to any Person, of the source code, or any portion or
aspect of the source code, or any proprietary information or algorithm contained
in any source code, of any Proprietary Asset. No event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time)
will, or could reasonably be expected to, result in the disclosure or delivery
to any Person of the source code, or any portion or aspect of the source code,
or any proprietary information or algorithm contained in any source code, of any
Proprietary Asset.
(f) To the Sellers' knowledge, (i) all of the products
manufactured by the Sellers and all of the Proprietary Assets developed and
licensed by Sellers are able to accurately process date data, including but not
limited to calculating, comparing and sequencing from, into and between the
twentieth century (through year 1999), the year 2000 and the twenty-first
century, including leap year calculations, and (ii) the computer systems and
software owned or licensed by the Sellers have performed successfully in
connection with year 2000 compliance testing.
2.11 CONTRACTS.
(a) Part 2.11 of the Disclosure Schedule identifies and
provides an accurate and complete description of all Sellers' Contracts. The
Sellers have delivered to the Purchaser accurate and complete copies of all
Contracts identified in Part 2.11 of the Disclosure Schedule, including all
amendments thereto. Each Sellers Contract is valid and in full force and effect.
(b) Except as set forth in Part 2.11 of the Disclosure
Schedule: (i) no Person has violated or breached, or declared or committed any
default under, any Sellers Contract; (ii) no event has occurred, and no
circumstance or condition exists, that might (with or without notice or lapse of
time) (A) result in a violation or breach of any of the provisions of any
Sellers Contract, (B) give any Person the right to declare a default or exercise
any remedy under any Sellers Contract, (C) give any Person the right to
accelerate the maturity or performance of any Sellers Contract, or (D) give any
Person the right to cancel, terminate or modify any Sellers Contract; (iii) the
Sellers have not received any notice or other communication (in writing or
otherwise) regarding any actual, alleged, possible or potential violation or
breach of, or default under, any Sellers Contract; and (iv) the Sellers have not
waived any right under any Sellers Contract.
(c) To the best of the knowledge of the Sellers and the
General Partners, each Person against which the Sellers have or may acquire any
rights under any Sellers Contract is solvent and is able to satisfy all of such
Person's current and future monetary obligations and other obligations and
Liabilities thereunder.
(d) Except as set forth in Part 2.11 of the Disclosure
Schedule, the Sellers have never guaranteed or otherwise agreed to cause, insure
or become liable for, and the Sellers have never pledged any of their assets to
secure, the performance or payment of any obligation or other Liability of any
other Person.
(e) The performance of the Sellers Contracts will not result
in any violation of or failure to comply with any Legal Requirement.
(f) No Person is renegotiating, or has the right to
renegotiate, any amount paid or payable to the Sellers under any Sellers
Contract or any other term or provision of any Sellers Contract.
(g) The Sellers have no knowledge of any basis upon which any
party to any Sellers Contract may object to (i) the assignment to the Purchaser
of any right under such Sellers Contract, or (ii) the delegation to or
performance by the Purchaser of any obligation under such Sellers Contract.
(h) The Contracts identified in Part 2.11 of the Disclosure
Schedule collectively constitute all of the Contracts necessary to enable the
Sellers to conduct their business in the manner in which such business is
currently being conducted and in the manner in which such business is proposed
to be conducted.
(i) Part 2.11 of the Disclosure Schedule identifies and
provides an accurate and complete description of each proposed Contract as to
which any bid, offer, written proposal, term sheet or similar document has been
submitted or received by the Sellers.
2.12 LIABILITIES; MAJOR SUPPLIERS.
(a) Except as set forth in Part 2.12 of the Disclosure
Schedule, the Sellers have no Liabilities, except for: (i) liabilities
identified as such in the "liabilities" columns of the Unaudited Interim Balance
Sheet; and (ii) obligations under the Contracts listed in Part 2.11 of the
Disclosure Schedule, to the extent that the existence of such obligations is
ascertainable solely by reference to such Contracts.
(b) Part 2.12 of the Disclosure Schedule: (i) provides an
accurate and complete breakdown and aging of the accounts payable of the Sellers
as of October 31, 1999; (ii) provides an accurate and complete breakdown of any
customer deposits or other deposits held by the Sellers as of the Closing Date;
and (iii) provides an accurate and complete breakdown of all notes payable and
other indebtedness of the Sellers as of the Closing Date.
(c) Except as set forth in Part 2.12 of the Disclosure
Schedule, the Sellers have not
paid, and the Sellers are not and will not become liable for the payment of, any
fees, costs or expenses of the type referred to in Section 11.3(a).
(d) Part 2.12 of the Disclosure Schedule accurately
identifies, and provides an accurate and complete breakdown of the amounts paid
to, each supplier or other Person that (together which such Person's affiliates)
received (i) more than $25,000 in the aggregate from the Sellers in 1997 or
1998, or (ii) more than $25,000 in the aggregate from the Sellers in the first
ten (10) months of 1999.
(e) The Sellers have not, at any time, (i) made a general
assignment for the benefit of creditors, (ii) filed, or had filed against them,
any bankruptcy petition or similar filing, (iii) suffered the attachment or
other judicial seizure of all or a substantial portion of their assets, (iv)
admitted in writing their inability to pay their debts as they become due, (v)
been convicted of, or pleaded guilty or no contest to, any felony, or (vi) taken
or been the subject of any action that may have an adverse effect on their
ability to comply with or perform any of their covenants or obligations under
any of the Transactional Agreements.
2.13 COMPLIANCE WITH LEGAL REQUIREMENTS. Except as set forth in Part
2.13 of the Disclosure Schedule: (a) the Sellers are in full compliance with
each Legal Requirement that is applicable to them or to the conduct of their
business or the ownership or use of any of their assets; (b) the Sellers have at
all times been in full compliance with each Legal Requirement that is or was
applicable to them or to the conduct of their business or the ownership or use
of any of their assets; (c) no event has occurred, and no condition or
circumstance exists, that might (with or without notice or lapse of time)
constitute or result directly or indirectly in a violation by the Sellers of, or
a failure on the part of the Sellers to comply with, any Legal Requirement; and
(d) the Sellers have not received, at any time, any notice or other
communication (in writing or otherwise) from any Governmental Body or any other
Person regarding (i) any actual, alleged, possible or potential violation of, or
failure to comply with, any Legal Requirement, or (ii) any actual, alleged,
possible or potential obligation on the part of the Sellers to undertake, or to
bear all or any portion of the cost of, any cleanup or any remedial, corrective
or response action of any nature. The General Partners and the Sellers have
delivered to the Purchaser an accurate and complete copy of each report, study,
survey or other document to which the General Partners or the Sellers have
access that addresses or otherwise relates to the compliance of the Sellers
with, or the applicability to the Sellers of, any Legal Requirement. To the best
of the knowledge of the Sellers and the General Partners, no Governmental Body
has proposed or is considering any Legal Requirement that, if adopted or
otherwise put into effect, (i) may have an adverse effect on the business,
condition, assets, liabilities, operations, financial performance, net income or
prospects of the Sellers or on the ability of the General Partners or the
Sellers to comply with or perform any covenant or obligation under any of the
Transactional Agreements, or (ii) may have the effect of preventing, delaying,
making illegal or otherwise interfering with any of the Transactions.
2.14 GOVERNMENTAL AUTHORIZATIONS. Part 2.14 of the Disclosure Schedule
identifies: (a) each Governmental Authorization that is held by the Sellers; and
(b) each other Governmental Authorization that, to the best of the knowledge of
each of the General Partners and the Sellers,
is held by any employee of the Sellers and relates to or is useful in connection
with the business of the Sellers. The General Partners and the Sellers have
delivered to the Purchaser accurate and complete copies of all of the
Governmental Authorizations identified in Part 2.14 of the Disclosure Schedule,
including all renewals thereof and all amendments thereto. Each Governmental
Authorization identified or required to be identified in Part 2.14 of the
Disclosure Schedule is valid and in full force and effect. Except as set forth
in Part 2.14 of the Disclosure Schedule: (i) the Sellers are and have at all
times been in full compliance with all of the terms and requirements of each
Governmental Authorization identified or required to be identified in Part 2.14
of the Disclosure Schedule; (ii) no event has occurred, and no condition or
circumstance exists, that might (with or without notice or lapse of time) (A)
constitute or result directly or indirectly in a violation of or a failure to
comply with any term or requirement of any Governmental Authorization identified
or required to be identified in Part 2.14 of the Disclosure Schedule, or (B)
result directly or indirectly in the revocation, withdrawal, suspension,
cancellation, termination or modification of any Governmental Authorization
identified or required to be identified in Part 2.14 of the Disclosure Schedule;
(iii) the Sellers have never received any notice or other communication (in
writing or otherwise) from any Governmental Body or any other Person regarding
(A) any actual, alleged, possible or potential violation of or failure to comply
with any term or requirement of any Governmental Authorization, or (B) any
actual, proposed, possible or potential revocation, withdrawal, suspension,
cancellation, termination or modification of any Governmental Authorization; and
(iv) all applications required to have been filed for the renewal of the
Governmental Authorizations required to be identified in Part 2.14 of the
Disclosure Schedule have been duly filed on a timely basis with the appropriate
Governmental Bodies, and each other notice or filing required to have been given
or made with respect to such Governmental Authorizations has been duly given or
made on a timely basis with the appropriate Governmental Body. The Governmental
Authorizations identified in Part 2.14 of the Disclosure Schedule constitute all
of the Governmental Authorizations necessary (i) to enable the Sellers to
conduct their business in the manner in which such business is currently being
conducted and in the manner in which such business is proposed to be conducted,
and (ii) to permit the Sellers to own and use their assets in the manner in
which they are currently owned and used and in the manner in which they are
proposed to be owned and used.
2.15 TAX MATTERS.
(a) Each Tax required to have been paid, or claimed by any
Governmental Body to be payable, by the Sellers has been duly paid in full on a
timely basis. Any Tax required to have been withheld or collected by the Sellers
has been duly withheld and collected; and (to the extent required) each such Tax
has been paid to the appropriate Governmental Body.
(b) Part 2.15 of the Disclosure Schedule accurately identifies
each examination or audit of any Tax Return of the Sellers that has been
conducted since January 1, 1997. The General Partners and the Sellers have
delivered to the Purchaser accurate and complete copies of all audit reports and
similar documents (to which any General Partner or the Sellers have access)
relating to such Tax Returns.
(c) Except as set forth in Part 2.15 of the Disclosure
Schedule, no claim or other
Proceeding is pending or has been threatened against or with respect to the
Sellers in respect of any Tax. There are no unsatisfied Liabilities for Taxes
(including liabilities for interest, additions to tax and penalties thereon and
related expenses) with respect to any notice of deficiency or similar document
received by the Sellers. The Sellers have not entered into or become bound by
any agreement or consent pursuant to Section 341(f) of the Code.
(d) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Sellers that, individually or collectively, could
give rise directly or indirectly to the payment of any amount that would not be
deductible pursuant to Section 280G or Section 162 of the Code.
(e) The General Partners and the Sellers have delivered to (or
made available for inspection by) the Purchaser accurate and complete copies of
all Tax Returns that have been filed on behalf of or with respect to the Sellers
since January 1, 1997. The information contained in such Tax Returns is accurate
and complete in all respects.
2.16 EMPLOYEE AND LABOR MATTERS.
(a) Part 2.16 of the Disclosure Schedule accurately sets
forth, with respect to each employee of the Sellers (including any employee who
is on a leave of absence or on layoff status): (i) the name and title of such
employee; (ii) the aggregate dollar amounts of the compensation (including
wages, salary, commissions, director's fees, fringe benefits, bonuses,
profit-sharing payments and other payments or benefits of any type) received by
such employee from the Sellers with respect to services performed in 1998 and
with respect to services performed in 1999; (iii) such employee's annualized
compensation as of the Closing Date; (iv) the number of hours of sick-time which
such employee has accrued as of the date hereof and the aggregate dollar amount
thereof; and (v) the number of hours of vacation time which such employee has
accrued as of the date hereof and the aggregate dollar amount thereof.
(b) Part 2.16 of the Disclosure Schedule accurately identifies
each former employee of the Sellers who is receiving or is scheduled to receive
(or whose spouse or other dependent is receiving or is scheduled to receive) any
benefits from the Sellers relating to such former employee's employment with the
Sellers; and Part 2.16 of the Disclosure Schedule accurately describes such
benefits.
(c) Except as set forth in Part 2.16 of the Disclosure
Schedule, the Sellers are not a party to or bound by, and have never been a
party to or bound by, any employment contract or any union contract, collective
bargaining agreement or similar Contract.
(d) The employment of the employees of the Sellers is
terminable by the Sellers at will and no employee is entitled to severance pay
or other benefits following termination or resignation, except as otherwise
provided by law. The General Partners and the Sellers have delivered to the
Purchaser accurate and complete copies of all employee manuals and handbooks,
disclosure materials, policy statements and other materials relating to the
employment of the current and former employees of the Sellers.
(e) Except as set forth in Part 2.16 of the Disclosure
Schedule, to the best of the knowledge of the Sellers and the General Partners:
(i) no employee of the Sellers intends to terminate his employment; (ii) no
employee of the Sellers has received an offer to join a business that may be
competitive with the business of the Sellers; and (iii) no employee of the
Sellers is a party to or is bound by any confidentiality agreement,
noncompetition agreement or other Contract (with any Person) that may have an
adverse effect on (A) the performance by such employee of any of his duties or
responsibilities as an employee of the Sellers or as an employee of the
Purchaser, or (B) the business of the Sellers or the Purchaser.
(f) The Sellers are not engaged in any unfair labor practice
of any nature. There has never been any slowdown, work stoppage, labor dispute
or union organizing activity, or any similar activity or dispute, affecting the
Sellers or any of their employees, and no Person has threatened to commence any
such slowdown, work stoppage, labor dispute or union organizing activity or any
similar activity or dispute.
(g) Part 2.16 of the Disclosure Schedule sets forth the name
of, and a general description of the services performed by, each independent
contractor to whom the Sellers have made any payment since January 1, 1997.
2.17 BENEFIT PLANS; ERISA.
(a) Part 2.17 of the Disclosure Schedule identifies and
provides an accurate and complete description of each Plan. The Sellers have
never established, adopted, maintained, sponsored, contributed to, participated
in or incurred any Liability with respect to any Employee Benefit Plan, except
for the Plans identified in Part 2.17 of the Disclosure Schedule; and the
Sellers have never provided or made available any fringe benefit or other
benefit of any nature to any of their employees, except as set forth in Part
2.17 of the Disclosure Schedule.
(b) No Plan: (i) provides or provided any benefit guaranteed
by the Pension Benefit Guaranty Corporation; (ii) is or was a "multiemployer
plan" as defined in Section 4001(a)(3) of ERISA; or (iii) is or was subject to
the minimum funding standards of Section 412 of the Code or Section 302 of
ERISA. There is no Person that (by reason of common control or otherwise) is or
has at any time been treated together with the Sellers as a single employer
within the meaning of Section 414 of the Code.
(c) The General Partners and the Sellers have caused to be
delivered to the Purchaser, with respect to each Plan: (i) an accurate and
complete copy of such Plan and all amendments thereto (including any amendment
that is scheduled to take effect in the future); (ii) an accurate and complete
copy of each Contract (including any trust agreement, funding agreement, service
provider agreement, insurance agreement, investment management agreement or
recordkeeping agreement) relating to such Plan; (iii) an accurate and complete
copy of any description, summary, notification, report or other document that
has been furnished to any employee of the Sellers with respect to such Plan;
(iv) an accurate and complete copy of any form, report, registration statement
or other document that has been filed with or submitted to any Governmental Body
with respect to such Plan; and (v) an accurate and complete copy of any
determination letter, notice or other document that has been issued by, or that
has been received
by the Sellers from, any Governmental Body with respect to such Plan.
(d) Each Plan is being and has at all times been operated and
administered in full compliance with the provisions thereof. Each contribution
or other payment that is required to have been accrued or made under or with
respect to any Plan has been duly accrued and made on a timely basis. Each Plan
has at all times complied and been operated and administered in full compliance
with all applicable reporting, disclosure and other requirements of ERISA and
the Code and all other applicable Legal Requirements. The Sellers have never
incurred any Liability to the Internal Revenue Service or any other Governmental
Body with respect to any Plan; and no event has occurred, and no condition or
circumstance exists, that might (with or without notice or lapse of time) give
rise directly or indirectly to any such Liability. Neither the Sellers nor any
Person that is or was an administrator or fiduciary of any Plan (or that acts or
has acted as an agent of the Sellers or any such administrator or fiduciary) has
engaged in any transaction or has otherwise acted or failed to act in a manner
that has subjected or may subject the Sellers to any Liability for breach of any
fiduciary duty or any other duty. No Plan, and no Person that is or was an
administrator or fiduciary of any Plan (or that acts or has acted as an agent of
any such administrator or fiduciary): (i) has engaged in a "prohibited
transaction" within the meaning of Section 406 of ERISA or Section 4975 of the
Code; (ii) has failed to perform any of the responsibilities or obligations
imposed upon fiduciaries under Title I of ERISA; or (iii) has taken any action
that (A) may subject such Plan or such Person to any Tax, penalty or Liability
relating to any "prohibited transaction," or (B) may directly or indirectly give
rise to or serve as a basis for the assertion (by any employee or by any other
Person) of any claim under, on behalf of or with respect to such Plan.
(e) No inaccurate or misleading representation, statement or
other communication has been made or directed (in writing or otherwise) to any
current or former employee of the Sellers (i) with respect to such employee's
participation, eligibility for benefits, vesting, benefit accrual or coverage
under any Plan or with respect to any other matter relating to any Plan, or (ii)
with respect to any proposal or intention on the part of the Sellers to
establish or sponsor any Employee Benefit Plan or to provide or make available
any fringe benefit or other benefit of any nature.
(f) The Sellers have not advised any of their employees (in
writing or otherwise) that they intend or expect to establish or sponsor any
Employee Benefit Plan or to provide or make available any fringe benefit or
other benefit of any nature in the future.
2.18 ENVIRONMENTAL MATTERS.
(a) The Sellers are not liable or potentially liable for any
response cost or natural resource damages under Section 107(a) of CERCLA, or
under any other so-called "superfund" or "superlien" law or similar Legal
Requirement, at or with respect to any site.
(b) The Sellers have never received any notice or other
communication (in writing or otherwise) from any Governmental Body or other
Person regarding any actual, alleged, possible or potential Liability arising
from or relating to the presence, generation, manufacture, production,
transportation, importation, use, treatment, refinement, processing, handling,
storage,
discharge, release, emission or disposal of any Hazardous Material. No Person
has ever commenced or threatened to commence any contribution action or other
Proceeding against the Sellers in connection with any such actual, alleged,
possible or potential Liability; and no event has occurred, and no condition or
circumstance exists, that may directly or indirectly give rise to, or result in
the Sellers becoming subject to, any such Liability.
(c) Except as set forth in Part 2.18 of the Disclosure
Schedule, the Sellers have never generated, manufactured, produced, transported,
imported, used, treated, refined, processed, handled, stored, discharged,
released or disposed of any Hazardous Material (whether lawfully or unlawfully).
Except as set forth in Part 2.18 of the Disclosure Schedule, the Sellers have
never permitted (knowingly or otherwise) any Hazardous Material to be generated,
manufactured, produced, used, treated, refined, processed, handled, stored,
discharged, released or disposed of (whether lawfully or unlawfully): (i) on or
beneath the surface of any real property that is, or that has at any time been,
owned by, leased to, controlled by or used by the Sellers; (ii) in or into any
surface water, groundwater, soil or air associated with or adjacent to any such
real property; or (iii) in or into any well, pit, pond, lagoon, impoundment,
ditch, landfill, building, structure, facility, improvement, installation,
equipment, pipe, pipeline, vehicle or storage container that is or was located
on or beneath the surface of any such real property or that is or has at any
time been owned by, leased to, controlled by or used by the Sellers.
(d) All property that is owned by, leased to, controlled by or
used by the Sellers, and all surface water, groundwater, soil and air associated
with or adjacent to such property: (i) is in clean and healthful condition; (ii)
is free of any Hazardous Material and any harmful chemical or physical
conditions; and (iii) is free of any environmental contamination of any nature.
(e) Each storage tank or other storage container that is or
has been owned by, leased to, controlled by or used by the Sellers, or that is
located on or beneath the surface of any real property owned by, leased to,
controlled by or used by the Sellers: (i) is in sound condition; and (ii) has
been demonstrated by accepted testing methodologies to be free of any corrosion
or leaks.
2.19 PERFORMANCE OF SERVICES. All services that have been performed on
behalf of the Sellers were performed properly and in full conformity with the
terms and requirements of all applicable warranties and other Contracts and with
all applicable Legal Requirements. The Purchaser will not incur or otherwise
become subject to any Liability arising directly or indirectly from any services
performed by the Sellers. There is no claim pending or being threatened against
the Sellers relating to any services performed by the Sellers, and, to the best
of the knowledge of the General Partners and the Sellers, there is no basis for
the assertion of any such claim.
2.20 INSURANCE.
(a) Part 2.20 of the Disclosure Schedule accurately sets forth
with respect to each insurance policy maintained by or at the expense of, or for
the direct or indirect benefit of, the Sellers, a description of any claims
pending, and any claims that have been asserted in the past, with respect to
such policy or any predecessor insurance policy. Part 2.20 of the Disclosure
Schedule also identifies each self-insurance or risk-sharing arrangement
affecting the Sellers or
any of the assets of the Sellers and all material risks for which the Sellers do
not maintain insurance coverage. The General Partners and the Sellers have
delivered to the Purchaser accurate and complete copies of all of the insurance
policies identified in Part 2.20 of the Disclosure Schedule (including all
renewals thereof and endorsements thereto). Each of the policies identified in
Part 2.21 of the Disclosure Schedule is valid, enforceable and in full force and
effect. All of the information contained in the applications submitted in
connection with said policies was (at the times said applications were
submitted) accurate and complete, and all premiums and other amounts owing with
respect to said policies have been paid in full on a timely basis.
(b) Part 2.20 of the Disclosure Schedule identifies each
insurance claim made by the Sellers since January 1, 1997. To the knowledge of
the Sellers, no event has occurred, and no condition or circumstance exists,
that might (with or without notice or lapse of time) directly or indirectly give
rise to or serve as a basis for any such insurance claim.
2.21 RELATED PARTY TRANSACTIONS. Except as set forth in Part 2.21 of
the Disclosure Schedule: (a) no Related Party has any direct or indirect
interest of any nature in any of the assets of the Sellers; (b) no Related Party
is, or has at any time since January 1, 1997 been, indebted to the Sellers; (c)
since January 1, 1997, no Related Party has entered into, or has had any direct
or indirect financial interest in, any Sellers Contract, transaction or business
dealing of any nature involving the Sellers; (d) no Related Party is competing,
or has at any time since January 1, 1997 competed, directly or indirectly, with
the Sellers; (e) no Related Party has any claim or right against the Sellers;
and (f) no event has occurred, and no condition or circumstance exists, that
might (with or without notice or lapse of time) directly or indirectly give rise
to or serve as a basis for any claim or right in favor of any Related Party
against the Sellers.
2.22 CERTAIN PAYMENTS, ETC. The Sellers and the General Partners have
not, and no officer, employee, agent or other Person associated with or acting
for or on behalf of the Sellers or the General Partners has, at any time,
directly or indirectly: (a) used any corporate funds (i) to make any unlawful
political contribution or gift or for any other unlawful purpose relating to any
political activity, (ii) to make any unlawful payment to any governmental
official or employee, or (iii) to establish or maintain any unlawful or
unrecorded fund or account of any nature; (b) made any false or fictitious
entry, or failed to make any entry that should have been made, in any of the
books of account or other records of the Sellers; (c) made any payoff, influence
payment, bribe, rebate, kickback or unlawful payment to any Person; (d)
performed any favor or given any gift which was not deductible for federal
income tax purposes; (e) made any payment (whether or not lawful) to any Person,
or provided (whether lawfully or unlawfully) any favor or anything of value
(whether in the form of property or services, or in any other form) to any
Person, for the purpose of obtaining or paying for (i) favorable treatment in
securing business, or (ii) any other special concession; or (f) agreed,
committed or offered (in writing or otherwise) to take any of the actions
described in clauses "(a)" through "(e)" above.
2.23 PROCEEDINGS; ORDERS. Except as set forth in Part 2.23 of the
Disclosure Schedule, there is no pending Proceeding, and no Person has
threatened to commence any Proceeding: (i) that involves the Sellers or the
General Partners or that otherwise relates to or might affect the
business of the Sellers or any of the Assets (whether or not the Sellers are
named as a party thereto); or (ii) that challenges, or that may have the effect
of preventing, delaying, making illegal or otherwise interfering with, any of
the Transactions. Except as set forth in Part 2.23 of the Disclosure Schedule,
no event has occurred, and no claim, dispute or other condition or circumstance
exists, that might directly or indirectly give rise to or serve as a basis for
the commencement of any such Proceeding. Except as set forth in Part 2.23 of the
Disclosure Schedule, no Proceeding has ever been commenced by or against the
Sellers. The General Partners and the Sellers have delivered to the Purchaser
accurate and complete copies of all pleadings, correspondence and other written
materials (to which any of the General Partners or the Sellers have access) that
relate to the Proceedings identified in Part 2.23 of the Disclosure Schedule.
There is no Order to which the Sellers, or any of the assets owned or used by
the Sellers, is subject; and none of the General Partners or any other Related
Party is subject to any Order that relates to the Sellers' business or to any of
the assets of the Sellers. To the best of the knowledge of the Sellers and the
General Partners, no employee of the Sellers is subject to any Order that may
prohibit such employee from engaging in or continuing any conduct, activity or
practice relating to the business of the Sellers. There is no proposed Order
that, if issued or otherwise put into effect, (i) may have an adverse effect on
the business, condition, assets, liabilities, operations, financial performance,
net income or prospects of the Sellers or on the ability of any General Partner
or the Sellers to comply with or perform any covenant or obligation under any of
the Transactional Agreements, or (ii) may have the effect of preventing,
delaying, making illegal or otherwise interfering with any of the Transactions.
2.24 AUTHORITY; BINDING NATURE OF AGREEMENTS.
(a) The Sellers and the General Partners have the absolute and
unrestricted right, power and authority to enter into and to perform their
obligations under each of the Transactional Agreements to which they are or may
become a party; and the execution, delivery and performance by the Sellers of
the Transactional Agreements to which they are or may become a party have been
duly authorized by all necessary action on the part of the Sellers, the General
Partners, the boards of directors, the shareholders and officers. This Agreement
constitutes the legal, valid and binding obligation of the Sellers, enforceable
against the Sellers in accordance with its terms. Upon the execution of each of
the other Transactional Agreements at the Closing, each of such other
Transactional Agreements to which the Sellers are a party will constitute the
legal, valid and binding obligation of the Sellers and will be enforceable
against the Sellers in accordance with its terms.
(b) Each of the General Partners has the absolute and
unrestricted right, power and capacity to enter into and to perform his
obligations under each of the Transactional Agreements to which he is or may
become a party. This Agreement constitutes the legal, valid and binding
obligation of each of the General Partners, enforceable against each of the
General Partners in accordance with its terms. Upon the execution of each of the
other Transactional Agreements at the Closing, each of such other Transactional
Agreements to which any of the General Partners is a party will constitute the
legal, valid and binding obligation of such General Partner and will be
enforceable against such General Partner in accordance with its terms.
2.25 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.25 of
the Disclosure Schedule, neither the execution and delivery of any of the
Transactional Agreements, nor the consummation or performance of any of the
Transactions, will directly or indirectly (with or without notice or lapse of
time):
(a) contravene, conflict with or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of the
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which any of the General Partners or the Sellers, or
any of the assets of the Sellers, is subject;
(b) cause the Purchaser or any affiliate of the Purchaser to
become subject to, or to become liable for the payment of, any Tax;
(c) cause any of the Assets to be reassessed or revalued by
any taxing authority or other Governmental Body;
(d) contravene, conflict with or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is to be included in the Assets or is held by the Sellers or
any employee of the Sellers;
(e) contravene, conflict with or result in a violation or
breach of, or result in a default under, any provision of any Contract;
(f) give any Person the right to (i) declare a default or
exercise any remedy under any Contract, (ii) accelerate the maturity or
performance of any Contract, or (iii) cancel, terminate or modify any Contract;
or
(g) result in the imposition or creation of any Encumbrance
upon or with respect to any of the Assets.
Except as set forth in Part 2.25 of the Disclosure Schedule, neither the Sellers
nor any General Partner was, is or will be required to make any filing with or
give any notice to, or to obtain any Consent from, any Person in connection with
the execution and delivery of any of the Transactional Agreements or the
consummation or performance of any of the Transactions.
2.26 BROKERS. Neither the Sellers nor any General Partner has agreed or
become obligated to pay, or has taken any action that might result in any Person
claiming to be entitled to receive, any brokerage commission, finder's fee or
similar commission or fee in connection with any of the Transactions.
2.27 THE GENERAL PARTNERS.
(a) No General Partner has ever (i) made a general assignment
for the benefit of creditors, (ii) filed, or had filed against such General
Partner, any bankruptcy petition or similar filing, (iii) suffered the
attachment or other judicial seizure of all or a substantial portion of such
General Partner's assets, (iv) admitted in writing such General Partner's
inability to pay his or
her debts as they become due, or (v) taken or been the subject of any action
that may have an adverse effect on his ability to comply with or perform any of
his covenants or obligations under any of the Transactional Agreements.
(b) No General Partner is subject to any Order or is bound by
any Contract that may have an adverse effect on his ability to comply with or
perform any of his or her covenants or obligations under any of the
Transactional Agreements. There is no Proceeding pending, and no Person has
threatened to commence any Proceeding, that may have an adverse effect on the
ability of any General Partner to comply with or perform any of his covenants or
obligations under any of the Transactional Agreements. No event has occurred,
and no claim, dispute or other condition or circumstance exists, that might
directly or indirectly give rise to or serve as a basis for the commencement of
any such Proceeding.
(c) The General Partners own, and have good and valid title
to, their general partnership interests in the Partnership and their shares in
the Corporation and TSC free and clear of all Encumbrances.
2.28 FULL DISCLOSURE. None of the Transactional Agreements contains or
will contain any untrue statement of fact; and none of the Transactional
Agreements omits or will omit to state any fact necessary to make any of the
representations, warranties or other statements or information contained therein
not misleading. All of the information set forth in the Disclosure Schedule, and
all other information regarding the Sellers and their business, condition,
assets, liabilities, operations, financial performance, net income and prospects
that has been furnished to the Purchaser or any of the Purchaser's
Representatives by or on behalf of any General Partner or the Sellers or by any
Representative of any General Partner or of the Sellers, is accurate and
complete in all respects.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser represents and warrants, to and for the benefit of the
Sellers, as follows:
3.1 CORPORATE EXISTENCE AND POWER. The Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and has all corporate power required to conduct its business as now
conducted, and is duly qualified to do business and is in good standing in each
jurisdiction in which the conduct of its business or the ownership or leasing of
its properties requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on Purchaser's business,
financial condition or results of operations.
3.2 AUTHORITY; BINDING NATURE OF AGREEMENTS. The Purchaser has the
absolute and unrestricted right, power and authority to enter into and perform
its obligations under this Agreement, and the execution and delivery of this
Agreement by the Purchaser have been duly authorized by all necessary action on
the part of the Purchaser and its board of directors. The Purchaser has the
absolute and unrestricted right, power and authority to enter into and perform
its obligations under the Escrow Agreement and the Assumption Agreement, and the
execution,
delivery and performance of the Escrow Agreement and the Assumption Agreement by
the Purchaser have been duly authorized by all necessary action on the part of
the Purchaser and its board of directors. This Agreement constitutes the legal,
valid and binding obligation of the Purchaser, enforceable against it in
accordance with its terms. Upon the execution and delivery of the Escrow
Agreement and the Assumption Agreement at the Closing, the Escrow Agreement and
the Assumption Agreement will constitute the legal, valid and binding
obligations of the Purchaser, enforceable against the Purchaser in accordance
with their terms.
3.3 BROKERS. The Purchaser has not become obligated to pay, and has not
taken any action that might result in any Person claiming to be entitled to
receive, any brokerage commission, finder's fee or similar commission or fee in
connection with any of the Transactions.
3.4 NO CONFLICT; CONSENTS. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by Purchaser are
not prohibited by, and will not violate or conflict with, any provision of the
certificate of incorporation or bylaws of Purchaser, or of any Legal Requirement
or any provision of any Contract to which Purchaser is a party, except where any
of the foregoing would not have, individually or in the aggregate, a material
adverse effect on the business, financial condition or results of operation, of
Purchaser. No Consent of any Governmental Body is necessary on the part of
Purchaser for the consummation by Purchaser of the transactions contemplated by
this Agreement.
3.5 VALID ISSUANCE. The Shares to be issued in the Transactions will,
when issued in accordance with the provisions of this Agreement, be validly
issued, fully paid and nonassessable.
4. PRE-CLOSING COVENANTS OF THE SELLERS AND THE GENERAL PARTNERS
4.1 ACCESS AND INVESTIGATION. During the period from the date of this
Agreement through the Closing Date or earlier termination of this Agreement
pursuant to the provisions of Section 8.1 (the "Pre-Closing Period"), the
Sellers shall, and shall cause their Representatives to: (a) provide Purchaser
and Purchaser's Representatives with reasonable access to the Sellers'
Representatives, personnel and assets and to all existing books, records, tax
returns, work papers and other documents and information relating to the
Sellers; and (b) provide Purchaser and Purchaser's Representatives with copies
of such existing books, records, tax returns, work papers and other documents
and information relating to the Sellers, and with such additional financial,
operating and other data and information regarding the Sellers, as Purchaser may
reasonably request.
4.2 OPERATION OF THE BUSINESS OF THE SELLERS. Without the prior written
consent of Purchaser, during the Pre-Closing Period:
(a) the Sellers shall conduct their business and operations in
the ordinary course and in substantially the same manner as such business and
operations have been conducted prior to the date of this Agreement (except that
no Seller may grant any licenses to any Proprietary Asset without Purchaser's
prior written consent, which may be withheld in Purchaser's sole discretion);
(b) the Sellers shall use commercially reasonable efforts to
preserve intact their current business organization, keep available the services
of their current officers and employees and maintain their relations and good
will with all suppliers, customers, landlords, creditors, employees and other
Persons having business relationships with the Sellers;
(c) the Sellers shall keep in full force all insurance
policies identified in Part 2.20 of the Disclosure Schedule;
(d) except as contemplated by this Agreement, the Sellers
shall not amend or permit the adoption of any amendment to the certificate of
incorporation or bylaws of the Sellers, or effect or permit the Sellers to
become a party to any Acquisition Transaction, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction;
(e) the Sellers shall not form any subsidiary or acquire any
equity interest or other interest in any other Entity;
(f) the Sellers shall not (i) enter into, or permit any of the
assets owned or used by them to become bound by, any Contract or (ii) amend or
prematurely terminate, or waive any material right or remedy under, any
Contract;
(g) the Sellers shall not (i) establish, adopt or amend any
Employee Benefit Plan or (ii) hire any new employee;
(h) the Sellers shall not commence or settle any Legal
Proceeding; and
(i) the Sellers shall not agree or commit to take any of the
actions described in clauses "(d)" through "(h)" above.
4.3 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, the Sellers shall promptly
notify Purchaser in writing of: (i) the discovery by the Sellers of any event,
condition, fact or circumstance that occurred or existed on or prior to the date
of this Agreement and that caused or constitutes in any material respect an
inaccuracy in or breach of any representation or warranty made by the Sellers in
this Agreement; (ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute in any material respect an inaccuracy in or breach of any
representation or warranty made by the Sellers in this Agreement if (A) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance or (B)
such event, condition, fact or circumstance had occurred, arisen or existed on
or prior to the date of this Agreement; (iii) any breach of any covenant or
obligation of the Sellers; and (iv) any event, condition, fact or circumstance
that would make the satisfaction of any of the conditions set forth in Article 6
impossible or unlikely on or prior to the Closing Date.
(b) If any event, condition, fact or circumstance that is
required to be disclosed pursuant to Section 4.3(a) requires any change in the
Disclosure Schedule, or if any such event,
condition, fact or circumstance would require such a change assuming the
Disclosure Schedule were dated as of the date of the occurrence, existence or
discovery of such event, condition, fact or circumstance, then the Sellers shall
promptly deliver to Purchaser an update to the Disclosure Schedule specifying
such change. Except as expressly set forth in this Agreement, no such update
shall be deemed to supplement or amend the Disclosure Schedule for the purpose
of (i) determining the accuracy of any of the representations and warranties
made by the Sellers in this Agreement or (ii) determining whether any of the
conditions set forth in Article 6 has been satisfied.
4.4 NO NEGOTIATION. During the Pre-Closing Period, the Sellers and the General
Partners shall not, directly or indirectly:
(a) solicit or encourage the initiation of any inquiry,
proposal or offer from any Person (other than Purchaser) relating to a possible
Acquisition Transaction;
(b) participate in any discussions or negotiations or enter
into any agreement with, or provide any non-public information to, any Person
(other than the Purchaser or the Purchaser's representatives) relating to or in
connection with a possible Acquisition Transaction; or
(c) consider, entertain or accept any proposal or offer from
any Person (other than Purchaser) relating to a possible Acquisition
Transaction.
The Sellers and the General Partners shall promptly notify Purchaser in writing
of any material inquiry, proposal or offer relating to a possible Acquisition
Transaction that is received by the Sellers, the General Partners or any of
their Affiliates or Representatives during the Pre-Closing Period.
4.5 FILINGS AND CONSENTS. As promptly as practicable after the
execution of this Agreement, the Sellers (a) shall make all filings, if any, and
give all notices, if any, required to be made and given by such party in
connection with the Transactions and the other transactions contemplated by this
Agreement, and (b) shall use all commercially reasonable efforts to obtain all
Consents, if any, required to be obtained (pursuant to any applicable Legal
Requirement or Contract, or otherwise) by such party in connection with the
Transactions and the other transactions contemplated by this Agreement. The
Sellers shall (upon request) promptly deliver to Purchaser a copy of each such
filing made, each such notice given and each such Consent obtained by the
Sellers during the Pre-Closing Period.
4.6 SELLERS SHAREHOLDERS' MEETING. The Sellers shall, in accordance
with their charter documents and the applicable requirements of the California
General Corporation Law and applicable partnership laws, call and hold a special
meeting of their shareholders as promptly as practicable for the purpose of
permitting them to consider and to vote upon and approve the Transactions and
this Agreement (the "Sellers Shareholders' Meeting"). As promptly as
practicable, the Sellers shall use their best efforts (i) to solicit from each
of such shareholders a proxy in favor of the approval of the Transactions and
this Agreement, (ii) to cause each of such shareholders who is not an
"accredited investor" (as defined in Rule 501 under the Securities Act) to
identify a "purchaser representative" (as defined in Rule 501 under the
Securities Act) in
connection with evaluating the merits and risks of investing in Purchaser Common
Stock and (iii) to cause each of such shareholders to execute and deliver to
Purchaser a Stockholder Representation Letter in the form of EXHIBIT E hereto.
In lieu of calling and holding the Sellers Shareholders' Meeting, the Sellers
may solicit written consents in accordance with their charter documents and the
applicable requirements of the California General Corporation Law and applicable
partnership laws.
4.7 PUBLIC ANNOUNCEMENTS. During the Pre-Closing Period, the Sellers
shall not (and the Sellers shall not permit any of their Representatives to)
issue any press release or make any public statement regarding this Agreement or
the Transaction, or regarding any of the other transactions contemplated by this
Agreement, without Purchaser's prior written consent.
4.8 BEST EFFORTS. During the Pre-Closing Period, the Sellers shall use
best efforts to cause the conditions set forth in Article 6 to be satisfied on a
timely basis.
4.9 EMPLOYEE AND RELATED MATTERS. Each General Partner shall execute
and deliver to the Purchaser a Noncompetition Agreement and a Release.
4.10 PROTECTION OF PROPRIETARY ASSETS. The Sellers and the General
Partners shall use best efforts to cause all current and former employees,
consultants and independent contractors that are or were involved in the
creation, invention, research or development of the Sellers Proprietary Assets,
to execute and deliver to the Sellers and Purchaser an agreement that is
substantially identical to the form of the Confidential Information and
Invention Assignment Agreement or Consultant Confidential Information and
Invention Assignment Agreement, as applicable, used by Purchaser in its
operations.
4.11 VOTING AGREEMENT OF THE GENERAL PARTNERS. Each of the General
Partners shall vote all of his respective outstanding shares of the capital
stock or partnership units of the Sellers, as applicable, in favor of or consent
thereto in writing, the Transactions and this Agreement.
4.12 CONDITION TO EXECUTION OF THIS AGREEMENT. Concurrent with the
execution of this Agreement, the Company and Hardy shall enter into the Hardy
Agreement.
4.13 Unassigned License Agreements.
(a) The Sellers and the General Partners shall each, both
prior and subsequent to the Closing, use its respective best efforts to obtain
the necessary consents from each of the licensees or other parties, to the
assignment to the Purchaser of the respective license agreements set forth in
Part 2.11 of the Disclosure Agreement and the other agreements relating thereto
(the "License Agreements"). In the event that the necessary Consent relating to
any of the License Agreements (each, an "Unassigned License Agreement") is not
obtained on or after the Closing, the Purchase Price shall accordingly be
reduced by the amount of revenues collected by the Sellers under such Unassigned
License Agreement. At any time any fees, royalties or other revenues are
collected by the Sellers pursuant to any of the Unassigned License Agreements (a
"Price Reduction"), the Sellers shall promptly notify the Purchaser of such, and
within five (5) business days of the date such Price Reduction is collected by
the Sellers, the Sellers shall deliver to the Purchaser a check
representing the amount of such Price Reduction. If the Purchaser does not
receive a check representing a Price Reduction within five (5) business days of
the date such Price Reduction was collected by the Sellers, the Purchaser may
make a claim to the Escrow Agent against the Escrow Account for the number of
Escrow Shares having the Fair Market Value (as defined in the Escrow Agreement)
equal to the amount of the Price Reduction, pursuant to the terms and conditions
set forth in the Escrow Agreement.
(b) If the necessary Consent is obtained by the Sellers and
the General Partners for any of the License Agreements (the "Assigned License
Agreements"), then all fees, royalties and other revenues relating to each such
Assigned License Agreement that are generated but uncollected prior to the
Closing Date shall belong to the Sellers, so long as such fees are collected by
the Sellers during the nine-month period after the Closing Date. All other fees,
royalties and other payments shall promptly be paid to the Purchaser upon
collection by the Sellers.
(c) The Purchaser or its representatives shall have the right
to review, at any time but upon five (5) business days' notice to the Sellers,
all of the books and records of the Sellers during normal business hours, as
necessary to audit all of the Price Reductions relating to the Unassigned
License Agreements pursuant to Section 4.13(a) above and all of the fees,
royalties and other revenues relating to the Assigned License Agreements
pursuant to Section 4.13(b) above. Notwithstanding Section 4.13(b) above, any
deficiencies resulting from such audit(s) (the "Deficiency Amount") shall belong
to the Purchaser and be promptly paid to the Purchaser within five (5) business
days of the date a written notice (a "Deficiency Notice") is provided by the
Purchaser to the Sellers setting forth such Deficiency Amount. If a check
representing the Deficiency Amount as set forth in the respective Deficiency
Notice is not received by the Purchaser from the Sellers within five (5)
business days of the date of such Deficiency Notice, then the Purchaser may make
a claim to the Escrow Agent against the Escrow Account for the number of Escrow
Shares having the Fair Market Value equal to the Deficiency Amount, pursuant to
the terms and conditions set forth in the Escrow Agreement.
5. PRE-CLOSING COVENANTS OF THE PURCHASER
5.1 BEST EFFORTS. During the Pre-Closing Period, the Purchaser shall
use best efforts to cause the conditions set forth in Article 7 to be satisfied
on a timely basis.
5.2 NASDAQ NATIONAL MARKET LISTING. Purchaser shall file an application
to list on the Nasdaq National Market the Shares as soon as practicable and will
pay all necessary filing fees in connection therewith.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser to effect the Transactions and
otherwise consummate the transactions contemplated by this Agreement are subject
to the satisfaction (or waiver by Purchaser), at or prior to the Closing, of
each of the following conditions:
6.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by the
Sellers and the General Partners in this Agreement and in each of the other
agreements and instruments delivered to Purchaser in connection with the
transactions contemplated by this Agreement shall have been accurate as of the
date of this Agreement (without giving effect to any update to the Disclosure
Schedule) and shall be accurate as of the Closing Date as if made at the Closing
(without giving effect to any update to the Disclosure Schedule), except to the
extent such representations and warranties expressly relate to an earlier date
(in which case such representations and warranties shall be accurate on and as
of such date (without giving effect to any update to the Disclosure Schedule)).
6.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
the Sellers and the General Partners are required to comply with or to perform
at or prior to the Closing shall have been complied with and performed.
6.3 CONSENTS. The following Consents shall have been obtained and shall
be in full force and effect:
(a) All Consents required to be obtained from any Governmental
Entity; and
(b) All Consents otherwise required to be obtained, except to
the extent that the failure to obtain any such Consents has not had, and is not
reasonably likely to have, a material adverse effect on the Sellers or
Purchaser, in each case in connection with the Transactions and the other
transactions contemplated by this Agreement; PROVIDED HOWEVER, that with respect
to Consents relating to the License Agreements as set forth on Exhibit D,
Consents from at least the following licensees shall have been obtained:
(I) Any two (2) of the following: (A) Alcatel, N.V.,
Alcatel SEL AG, Xxxx Telephone Manufacturing Company, N.C., and any of their
subsidiaries or affiliates, as applicable; (B) Northern Telecom Inc.; and (C)
Cisco Systems, Inc.; and
(II) The licensees of any four (4) of the License
Agreements, other than: (A) the two licensees used to satisfy Section 6.3(b)(i);
(B) the License Agreement between the General Partners and TSC; and (C) any of
the license agreements to which the Purchaser is a party.
6.4 EMPLOYEE MATTERS. Purchaser shall have received satisfactory
evidence that General Partners will be employed by the Purchaser after the
Closing.
6.5 AGREEMENTS AND DOCUMENTS. Purchaser and the Sellers shall have
received the following agreements and documents, each of which shall be in full
force and effect:
(a) a Noncompetition Agreement, a Release and Stock
Assignments executed by each of the General Partners and Hardy;
(b) a FIRPTA statement executed by the Sellers, if applicable;
(c) an Escrow Agreement, executed by the Escrow Agent, the
Purchaser, the General Partners and the Sellers;
(d) an Opinion executed by Berliner Xxxxx;
(e) a Closing Certificate pursuant to Section 1.7(b)(x),
executed by the Sellers and the General Partners;
(f) an escrow agreement as contemplated by the Hardy
Agreement;
(g) the audited balance sheets of the Sellers as of December
31, 1997, and December 31, 1998, and the related statements of income and
retained earnings and cash flows for the years then ended, together with the
notes thereto and any reports with respect thereto, which shall have been
prepared in accordance with GAAP principles applied on a consistent basis
throughout the periods covered and shall fairly present the financial position
of the Sellers as of the respective dates thereof and the results of operations
and cash flows of the Sellers for the period covered thereby.
6.6 ABSENCE OF MATERIAL ADVERSE EFFECT. There shall have been no change
in the business, properties, condition (financial or otherwise), or results of
operations of the Sellers since the date of this Agreement which has had or
would reasonably be expected to have a material adverse effect on the Sellers.
6.7 FIRPTA COMPLIANCE. The Sellers shall have filed with the Internal
Revenue Service, if applicable, the notification required under Section
1.897-2(h)(2) of the United States Treasury Regulations.
6.8 LISTING. The shares of Purchaser Common Stock to be issued in the
Transactions and such other shares of Purchaser Common Stock required to be
reserved for issuance in connection with the Transactions shall have been
approved for listing (subject to notice of issuance) on the Nasdaq National
Market.
6.9 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the
Transactions shall have been issued by any court of competent jurisdiction and
remain in effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Transactions that makes consummation of the Transactions
illegal.
6.10 NO LEGAL PROCEEDINGS. No Governmental Body or other Person shall
have commenced or threatened to commence any Legal Proceeding challenging or
seeking the recovery of a material amount of damages in connection with the
Transactions.
6.11 RULE 506 EXEMPTION. The issuance of Purchaser Common Stock to the
Sellers shall be exempt from registration under the Securities Act pursuant to
Rule 506 under the Securities Act and each General Partner and shareholder of
Sellers shall have executed and delivered to Purchaser the Stockholder
Representation Letter in the form of EXHIBIT E hereto.
6.12 CONCURRENT CLOSING. The Closing must occur concurrently with the
closing of those certain transactions contemplated by the Hardy Agreement.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
The obligations of the Sellers to effect the Transactions and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction (or waiver), at or prior to the Closing, of the following
conditions:
7.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by Purchaser in this Agreement and in each of the other
agreements and instruments delivered to the Sellers in connection with the
transactions contemplated by this Agreement shall have been accurate as of the
date of this Agreement and shall be accurate as of the Closing Date as if made
at the Closing, except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations and
warranties shall be accurate on and as of such date).
7.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
Purchaser is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all material respects.
7.3 AGREEMENTS AND DOCUMENTS. The Sellers and the General Partners
shall have received the following documents.
(a) a certificate executed by Purchaser containing the
representation and warranty of the Purchaser that the conditions set forth in
Sections 7.1, 7.2 and 7.4 have been duly satisfied; and
(b) the Registration Rights Agreement executed by the
Purchaser.
7.4 LISTING. The shares of Purchaser Common Stock to be issued in the
Transactions and such other shares of Purchaser Common Stock required to be
reserved for issuance in connection with the Transactions shall have been
approved for listing (subject to notice of issuance) on the Nasdaq National
Market.
7.5 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the
Transactions shall have been issued by any court of competent jurisdiction and
remain in effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Transactions that makes consummation of the Transactions
illegal.
8. TERMINATION
8.1 TERMINATION EVENTS. This Agreement may be terminated prior to the
Closing:
(a) by either the Purchaser or the Sellers if (i) the Sellers
Shareholders' Meeting (including any adjournments or postponements thereof)
shall have been held and completed and the Sellers' stockholders shall have
taken a final vote on a proposal to approve and adopt this Agreement and to
approve the Transactions and (ii) this Agreement shall not have been adopted and
approved and the Transactions shall not have been approved at such meeting by
the
necessary stockholder vote (the "Necessary Stockholder Vote") (provided,
however, that the right to terminate this Agreement under this Section 8.1(a)
shall not be available to the Sellers where the failure to obtain the Necessary
Stockholder Vote shall have been caused by the action or failure to act of the
Sellers and such action or failure to act constitutes a material breach by the
Sellers of this Agreement);
(b) by the Purchaser (at any time prior to the approval and
adoption of this Agreement and the approval of the Transactions by the Necessary
Stockholder Vote) or by the Sellers (at any time after (i) the Sellers
Shareholders' Meeting has been held and completed, (ii) a final vote on the
proposal to approve and adopt this Agreement and to approve the Transactions has
been taken at such Sellers Shareholders' Meeting and (iii) the Necessary
Stockholder Vote has not been obtained at such Sellers Shareholders' Meeting) if
a Sellers Triggering Event shall have occurred;
(c) by the Purchaser if any of the Sellers' or the General
Partners' representations and warranties contained in this Agreement shall be or
shall have become materially inaccurate, or if any of the Sellers' or the
General Partners' covenants contained in this Agreement shall have been breached
in any material respect; provided, however, that if any inaccuracy in the
Sellers' or the General Partners' representations and warranties or a breach of
a covenant by the Sellers or the General Partners, as the case may be, is
curable by the Sellers or the General Partners and the Sellers or the General
Partners, as the case may be, is continuing to exercise all reasonable efforts
to cure such inaccuracy or breach during the 30-day period commencing upon
delivery by the Purchaser of a written notice to the Sellers or the General
Partner, as the case may be, describing such inaccuracy or breach, then the
Purchaser may not terminate this Agreement under this Section 8.1(c) on account
of such inaccuracy or breach until the end of such cure period (if such
inaccuracy or breach then remains uncured);
(d) by the Sellers if any of the Purchaser's representations
and warranties contained in this Agreement shall be or shall have become
materially inaccurate, or if any of the Purchaser's covenants contained in this
Agreement shall have been breached in any material respect; provided, however,
that if any inaccuracy in the Purchaser's representations and warranties or a
breach of a covenant by the Purchaser is curable by the Purchaser and the
Purchaser is continuing to exercise all reasonable efforts to cure such
inaccuracy or breach during the 30-day period commencing upon delivery by the
Sellers of a written notice to the Purchaser describing such inaccuracy or
breach, then the Sellers may not terminate this Agreement under this Section
8.1(d) on account of such inaccuracy or breach until the end of such cure period
(if such inaccuracy or breach then remains uncured);
(e) by the Purchaser if the Closing has not taken place on or
before January 31, 2000 (other than as a result of any failure on the part of
the Purchaser to comply with or perform any covenant or obligation of Purchaser
set forth in this Agreement or in any other agreement or instrument delivered to
the Sellers);
(f) by the Sellers if the Closing has not taken place on or
before January 31, 2000 (other than as a result of the failure on the part of
the Sellers to comply with or perform any covenant or obligation of the Sellers
set forth in this Agreement or
in any other agreement or instrument delivered to Purchaser);
(g) by either the Purchaser or the Sellers if a court of
competent jurisdiction or other Governmental Body shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other action,
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Transaction; or
(h) by the mutual written consent of the Purchaser and the
Sellers.
8.2 TERMINATION PROCEDURES. If the Purchaser wishes to terminate this
Agreement pursuant to Section 8.1(a), (b), (c) or (e), Purchaser shall deliver
to the Sellers a written notice stating that Purchaser is terminating this
Agreement and setting forth a brief description of the basis on which Purchaser
is terminating this Agreement. If the Sellers wish to terminate this Agreement
pursuant to Section 8.1(a), (b), (d) or (f), the Sellers shall deliver to
Purchaser a notice, in writing, stating that the Sellers are terminating this
Agreement and setting forth a brief description of the basis on which they are
terminating this Agreement.
8.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Sections 8.1 and 8.2, all further obligations of the parties under this
Agreement shall terminate; PROVIDED, HOWEVER, that: (a) none of the parties
shall be relieved of any obligation or liability arising from any prior willful
breach by such party of any provision of this Agreement and (b) the parties
shall, in all events, remain bound by and continue to be subject to the
provisions set forth in Article 11 and Section 4.7.
8.4 TERMINATION FEE. In consideration of the substantial time, expense
and forgoing of other opportunities that the Purchaser has invested in the
transactions contemplated hereby, if this Agreement is terminated:
(a) pursuant to Section 8.1(a) or (b) by the Purchaser or the
Sellers;
(b) pursuant to Section 8.1(c) by the Purchaser (provided that
such termination under Section 8.1(c): (A) is not as a result of the Purchaser's
breach of or failure to perform its covenants as set forth in this Agreement,
(B) is not as a result of the Purchaser's breach of or inaccuracy of any of its
representations and warranties as set forth in Article 3 herein that resulted
from facts, circumstances, events or conditions which existed at any time prior
to and through the date of this Agreement, (C) is not as a result of the
Sellers' failure to perform their covenant relating only to Consents to certain
License Agreements as set forth in Section 6.3(b), PROVIDED that the Sellers
have used their respective best efforts to obtain the Consents set forth in
Section 6.3(b) pursuant to Section 4.8; or (D) if such termination is by the
Purchaser because of the Sellers' failure to meet a Closing condition, and such
failure is as a result of an act or an omission or failure to act, by the
Sellers, the General Partners or Hardy, occurring or arising after the effective
date of this Agreement); or
(c) pursuant to Section 8.1(e) by the Purchaser (provided that
such termination under Section 8.1(e): (A) is not as a result of the Sellers'
failure to perform their covenant relating only to Consents to certain License
Agreements as set forth in Section 6.3(b), PROVIDED that the Sellers
have used their respective best efforts to obtain the Consents set forth in
Section 6.3(b) pursuant to Section 4.8; or (B) if such termination is by the
Purchaser because of the Sellers' failure to meet a Closing condition, and such
failure is as a result of an act or an omission or failure to act, by the
Sellers, the General Partners or Hardy, occurring or arising after the effective
date of this Agreement);
then the Sellers shall (i) pay to the Purchaser a fee, in immediately available
funds, of Ten Million Dollars ($10,000,000.00) and (ii) reimburse, on demand in
immediately available funds, the Purchaser for all fees and expenses incurred or
assumed by the Purchaser in connection with the Transactions (including
financial advisory fees, legal, accounting and other professional fees and
expenses) (the payments and reimbursements contemplated by clauses (i) and (ii)
being referred to collectively as the "Termination Amount"). The Termination
Amount shall be paid within three business days of the termination of the
Agreement pursuant to this Article 8. In the event that, subsequent to initial
payment of the Termination Amount, the Purchaser shall request any additional
reimbursements in accordance with clause (ii) above in this Section 8.4, the
Sellers shall make such additional reimbursements on demand.
9. INDEMNIFICATION, ETC.
9.1 SURVIVAL OF REPRESENTATIONS AND COVENANTS.
(a) The representations, warranties, covenants and obligations
of each party to this Agreement shall survive (without limitation): (i) the
Closing and the sale of the Assets to the Purchaser; (ii) any sale or other
disposition of any or all of the Assets by the Purchaser; and (iii) the death or
dissolution of any party to this Agreement.
(b) The representations, warranties, covenants and obligations
of the General Partners and the Sellers, and the rights and remedies that may be
exercised by the Indemnitees, shall not be limited or otherwise affected by or
as a result of any information furnished to, or any investigation made by or any
knowledge of, any of the Indemnitees or any of their Representatives.
(c) For purposes of this Agreement, a "Claim Notice" relating
to a particular representation or warranty shall be deemed to have been given if
any Indemnitee, acting in good faith, delivers to the General Partners and the
Sellers a written notice stating that such Indemnitee believes that there is or
has been a possible Breach of such representation or warranty and containing (i)
a brief description of the circumstances supporting such Indemnitee's belief
that there is or has been such a possible Breach, and (ii) a non-binding,
preliminary estimate of the aggregate dollar amount of the actual and potential
Damages that have arisen and may arise as a direct or indirect result of such
possible Breach.
(d) For purposes of this Agreement, each statement or other
item of information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a representation and warranty made by
the General Partners and the Sellers in this Agreement.
9.2 INDEMNIFICATION BY THE GENERAL PARTNERS AND THE SELLERS. The
General Partners and
the Sellers, jointly and severally, shall hold harmless and indemnify each of
the Indemnitees from and against, and shall compensate and reimburse each of the
Indemnitees for, any Damages that are directly or indirectly suffered or
incurred by any of the Indemnitees or to which any of the Indemnitees may
otherwise become subject at any time (regardless of whether or not such Damages
relate to any third-party claim) and that arise directly or indirectly from or
as a direct or indirect result of, or are directly or indirectly connected with:
(a) any Breach of any of the representations or warranties
made by the General Partners or the Sellers in this Agreement (without giving
effect to any update to the Disclosure Schedule) or in the Closing Certificate
or any of the other Transactional Agreements;
(b) any Breach of any representation, warranty, statement,
information or provision contained in the Disclosure Schedule or in any other
document delivered or otherwise made available to the Purchaser or any of its
Representatives by or on behalf of any General Partner, the Sellers or any
Representative of any General Partner or of the Sellers;
(c) any Breach of any covenant or obligation of any General
Partner or the Sellers contained in any of the Transactional Agreements;
(d) any Liability of the Sellers or of any Related Party,
other than the Assumed Liabilities;
(e) any Liability (other than the Assumed Liabilities) to
which the Purchaser or any of the other Indemnitees may become subject and that
arises directly or indirectly from or relates directly or indirectly to (A) any
product produced or sold or any services performed or any license entered into
by or on behalf of the Sellers, (B) the presence of any Hazardous Material at
any site owned, leased, occupied or controlled by the Sellers on or at any time
prior to the Closing Date, (C) the generation, manufacture, production,
transportation, importation, use, treatment, refinement, processing, handling,
storage, discharge, release or disposal of any Hazardous Material (whether
lawfully or unlawfully) by or on behalf of the Sellers, (D) the operation by the
Sellers of their business, or (E) any failure to comply with any bulk transfer
law or similar Legal Requirement in connection with any of the Transactions;
(f) any Proceeding relating directly or indirectly to any
Breach, alleged Breach, Liability or matter of the type referred to in clause
"(i)," "(ii)," "(iii)," "(iv)," or "(v)" above (including any Proceeding
commenced by any Indemnitee for the purpose of enforcing any of its rights under
this Article 9).
9.3 SETOFF. In addition to any rights of setoff or other rights that
the Purchaser or any of the other Indemnitees may have pursuant to Section 1.3
or 4.13, at common law or otherwise, the Purchaser shall have the right to
withhold and deduct any sum that may be owed to any Indemnitee under this
Article 9 from any amount otherwise payable by any Indemnitee to the Sellers or
any General Partner. The withholding and deduction of any such sum shall operate
for all purposes as a complete discharge (to the extent of such sum) of the
obligation to pay the amount from which such sum was withheld and deducted.
Without limiting the generality of the foregoing, the Purchaser shall have the
right to offset any sum that may be owed to the Purchaser
under this Article 9 from the Shares deposited in the Escrow Account at the then
fair market value of such Shares based on the price per share of such common
stock as of the close of business on the day the Purchaser gives notice to
Sellers of its intent to offset against the Shares.
9.4 NONEXCLUSIVITY OF INDEMNIFICATION REMEDIES. The indemnification
remedies and other remedies provided in this Article 9 shall not be deemed to be
exclusive. Accordingly, the exercise by any Person of any of its rights under
this Article 9 shall not be deemed to be an election of remedies and shall not
be deemed to prejudice, or to constitute or operate as a waiver of, any other
right or remedy that such Person may be entitled to exercise (whether under this
Agreement, under any other Contract, under any statute, rule or other Legal
Requirement, at common law, in equity or otherwise).
9.5 DEFENSE OF THIRD PARTY CLAIMS. In the event of the assertion or
commencement by any Person of any claim or Proceeding (whether against the
Purchaser, against any other Indemnitee or against any other Person) with
respect to which any of the General Partners or the Sellers may become obligated
to indemnify, hold harmless, compensate or reimburse any Indemnitee pursuant to
this Article 9, the Purchaser shall have the right, at its election, to
designate the General Partners and the Sellers to assume the defense of such
claim or Proceeding at the sole expense of the General Partners and the Sellers.
If the Purchaser so elects to designate the General Partners and the Sellers to
assume the defense of any such claim or Proceeding:
(a) the General Partners and the Sellers shall proceed to
defend such claim or Proceeding in a diligent manner with counsel satisfactory
to the Purchaser;
(b) the Purchaser shall make available to the General Partners
and the Sellers any non-privileged documents and materials in the possession of
the Purchaser that may be necessary to the defense of such claim or Proceeding;
(c) the General Partners and the Sellers shall keep the
Purchaser informed of all material developments and events relating to such
claim or Proceeding;
(d) the Purchaser shall have the right to participate in the
defense of such claim or Proceeding;
(e) the General Partners and the Sellers shall not settle,
adjust or compromise such claim or Proceeding without the prior written consent
of the Purchaser; and
(f) the Purchaser may at any time (notwithstanding the prior
designation of the General Partners and the Sellers to assume the defense of
such claim or Proceeding) assume the defense of such claim or Proceeding.
If the Purchaser does not elect to designate the General Partners and the
Sellers to assume the defense of any such claim or Proceeding (or if, after
initially designating the General Partners and the Sellers to assume such
defense, the Purchaser elects to assume such defense), the Purchaser may proceed
with the defense of such claim or Proceeding on its own. If the Purchaser so
proceeds with the defense of any such claim or Proceeding on its own:
(i) all reasonable expenses relating to the defense
of such claim or Proceeding (whether or not incurred by the Purchaser) shall be
borne and paid exclusively by the General Partners and the Sellers;
(ii) the General Partners and the Sellers shall make
available to the Purchaser any documents and materials in the possession or
control of either of the General Partners or the Sellers that may be necessary
to the defense of such claim or Proceeding;
(iii) the Purchaser shall keep the General Partners
and the Sellers informed of all material developments and events relating to
such claim or Proceeding; and
(iv) the Purchaser shall have the right to settle,
adjust or compromise such claim or Proceeding with the consent of the General
Partners and the Sellers; PROVIDED, HOWEVER, that the General Partners and the
Sellers shall not unreasonably withhold such consent.
9.6 EXERCISE OF REMEDIES BY INDEMNITEES OTHER THAN PURCHASER. No
Indemnitee (other than the Purchaser or any successor thereto or assign thereof)
shall be permitted to assert any indemnification claim or exercise any other
remedy under this Agreement unless the Purchaser (or any successor thereto or
assign thereof) shall have consented to the assertion of such indemnification
claim or the exercise of such other remedy.
10. CERTAIN POST-CLOSING COVENANTS.
10.1 FURTHER ACTIONS. From and after the Closing Date, the General
Partners and the Sellers shall cooperate with the Purchaser and the Purchaser's
affiliates and Representatives, and shall execute and deliver such documents and
take such other actions as the Purchaser may reasonably request, for the purpose
of evidencing the Transactions and putting the Purchaser in possession and
control of all of the Assets. The General Partners and the Sellers hereby
irrevocably nominate, constitute and appoint the Purchaser as the true and
lawful attorney-in-fact of the General Partners and the Sellers (with full power
of substitution) effective as of the Closing Date, and hereby authorize the
Purchaser, in the name of and on behalf of the General Partners and the Sellers,
to execute, deliver, acknowledge, certify, file and record any document, to
institute and prosecute any Proceeding and to take any other action (on or at
any time after the Closing Date) that the Purchaser may deem appropriate for the
purpose of (i) collecting, asserting, enforcing or perfecting any claim, right
or interest of any kind that is included in or relates to any of the Assets,
(ii) defending or compromising any claim or Proceeding relating to any of the
Assets, or (iii) otherwise carrying out or facilitating any of the Transactions.
The power of attorney referred to in the preceding sentence is and shall be
coupled with an interest and shall be irrevocable, and shall survive the death,
dissolution or insolvency of the General Partners or the Sellers.
10.2 PUBLICITY. Each General Partner and the Sellers shall ensure that,
on and at all times after the Closing Date: (a) no press release or other
publicity concerning any of the Transactions is issued or otherwise disseminated
by or on behalf of any General Partner or the Sellers without the Purchaser's
prior written consent; (b) the General Partners and the Sellers continue to keep
the terms of this Agreement and the other Transactional Agreements strictly
confidential; and (c)
the General Partners and the Sellers keep strictly confidential, and neither the
Sellers nor any General Partner uses or discloses to any other Person, any
non-public document or other information that relates directly or indirectly to
the business of the Sellers, the Purchaser or any affiliate of the Purchaser.
10.3 [Reserved.]
10.4 [RESERVED.]
10.5 RESTRICTION ON SELLERS' NAME. The Sellers and the General Partners
agree that, the Sellers and the General Partners shall not, and shall not permit
any of their Affiliates, at any time (whether during or after the Noncompetition
Period) directly or indirectly, to engage, permit or encourage the use of the
name "Telinnovation" in connection with any business, operation, project or any
other activity in the telecommunication field. The Sellers and the General
Partner agree to take all necessary actions to change the names of each of the
Sellers within 30 days of the Closing such that no such name shall include the
word "Telinnovation" or any similar word.
10.6 CONFIDENTIALITY. The Sellers and the General Partners agree that
they shall hold all Confidential Information in strict confidence and shall not
at any time (whether during or after the Noncompetition Period): (a) reveal,
report, publish, disclose or transfer any Confidential Information to any Person
(other than the Purchaser or the Sellers) (b) use any Confidential Information
for any purpose or (c) use any Confidential Information for the benefit of any
Person (other than the Purchaser).
10.7 CLIENT REFERRALS. The General Partners and Sellers agree to refer
any and all inquiries for products, services or licenses from any and all
existing or potential customers, whether pursuant to agreements assumed by
Purchaser or otherwise, to Purchaser.
11. MISCELLANEOUS PROVISIONS.
11.1 JOINT AND SEVERAL LIABILITY. Each General Partner and each Seller
agrees that such General Partner and such Seller shall be jointly and severally
liable with each other General Partner and each other Seller for the due and
timely compliance with and performance of each of the covenants and obligations
of the General Partners and the Sellers set forth in the Transactional
Agreements. Each General Partner's obligations and liability under this
Agreement and the other Transactional Agreements shall survive such General
Partner's death (and shall be binding upon such General Partner's personal
representatives, executors, administrators, estate, heirs and successors) and
shall not be limited in any way by: (i) any failure on the part of the Purchaser
or any other Indemnitee to exercise any right or assert any claim against the
Sellers; (i) the dissolution or insolvency of, or the appointment of any
receiver, conservator or liquidator for, or the commencement of any bankruptcy,
reorganization, moratorium, arrangement or other proceeding by, against or with
respect to, the Sellers; (iii) any merger or consolidation of the Sellers with
or into any other Entity; or (iv) the sale or other disposition by such General
Partner of any or all of such General Partner's shares of the stock of the
Sellers.
1
11.2 FURTHER ASSURANCES. Each party hereto shall execute and/or cause
to be delivered to each other party hereto such instruments and other documents,
and shall take such other actions, as such other party may reasonably request
(prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the Transactions.
11.3 FEES AND EXPENSES.
(a) The General Partners and the Sellers shall bear and pay
all fees, costs and expenses (including all legal fees and expenses payable to
Berliner Xxxxx) that have been incurred or that are in the future incurred by,
on behalf of or for the benefit of the General Partners or the Sellers in
connection with: (i) the negotiation, preparation and review of any letter of
intent or similar document relating to any of the Transactions; (ii) the
investigation and review conducted by the Purchaser and its Representatives with
respect to the business of the Sellers (and the furnishing of information to the
Purchaser and its Representatives in connection with such investigation and
review); (iii) the negotiation, preparation and review of this Agreement
(including the Disclosure Schedule), the other Transactional Agreements and all
bills of sale, assignments, certificates, opinions and other instruments and
documents delivered or to be delivered in connection with the Transactions; (iv)
the preparation and submission of any filing or notice required to be made or
given in connection with any of the Transactions, and the obtaining of any
Consent required to be obtained in connection with any of the Transactions; and
(v) the consummation and performance of the Transactions.
(b) Subject to the provisions of Section 8.4 and Article 9
(including the indemnification and other obligations of the Sellers thereunder),
the Purchaser shall bear and pay all fees, costs and expenses (including all
legal fees and expenses payable to Xxxxxx Godward LLP) that have been incurred
or that are in the future incurred by or on behalf of the Purchaser in
connection with: (i) the negotiation, preparation and review of any letter of
intent or similar document relating to any of the Transactions; (ii) the
investigation and review conducted by the Purchaser and its Representatives with
respect to the business of the Sellers; (iii) the negotiation, preparation and
review of this Agreement, the other Transactional Agreements and all bills of
sale, assignments, certificates, opinions and other instruments and documents
delivered or to be delivered in connection with the Transactions; and (iv) the
consummation and performance of the Transactions.
11.4 ATTORNEYS' FEES. If any legal action or other legal proceeding
relating to any of the Transactional Agreements or the enforcement of any
provision of any of the Transactional Agreements is brought against any party to
this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees, costs and disbursements (in addition to any other relief to
which the prevailing party may be entitled).
11.5 NOTICES. Any notice or other communication required or permitted
to be delivered to any party under this Agreement shall be in writing and shall
be deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
if to the General Partners:
Mr. Xxxxxxx Xxxxx
Facsimile: ; and
Xx. Xxxxx Xxxxxxx
Facsimile:
if to the Sellers:
Telinnovation
Facsimile:
with a copy to:
Berliner Xxxxx
00 Xxxxxxx Xxxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
if to the Purchaser:
Ditech Communications Corporation
000 X. Xxxxxxxxxxx Xxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx Xxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx Godward LLP
5 Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
11.6 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
11.7 HEADINGS. The underlined headings contained in this Agreement are
for convenience of
reference only, shall not be deemed to be a part of this Agreement and shall not
be referred to in connection with the construction or interpretation of this
Agreement.
11.8 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
11.9 GOVERNING LAW; VENUE.
(a) This Agreement shall be construed in accordance with, and
governed in all respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of laws).
(b) Any legal action or other legal proceeding relating to
this Agreement or the enforcement of any provision of this Agreement may be
brought or otherwise commenced in any state or federal court located in the
County of Santa Clara, California. Each party to this Agreement:
(i) expressly and irrevocably consents and submits to
the jurisdiction of each state and federal court located in the County of Santa
Clara, California (and each appellate court located in the State of California)
in connection with any such legal proceeding;
(ii) agrees that each state and federal court located
in the County of Santa Clara, California shall be deemed to be a convenient
forum; and
(iii) agrees not to assert (by way of motion, as a
defense or otherwise), in any such legal proceeding commenced in any state or
federal court located in the County of Santa Clara, California, any claim that
such party is not subject personally to the jurisdiction of such court, that
such legal proceeding has been brought in an inconvenient forum, that the venue
of such proceeding is improper or that this Agreement or the subject matter of
this Agreement may not be enforced in or by such court.
(c) The General Partners and the Sellers agree that, if any
Proceeding is commenced against any Indemnitee by any Person in or before any
court or other tribunal anywhere in the world, then such Indemnitee may proceed
against the General Partners and the Sellers in or before such court or other
tribunal with respect to any indemnification claim or other claim arising
directly or indirectly from or relating directly or indirectly to such
Proceeding or any of the matters alleged therein or any of the circumstances
giving rise thereto.
(d) Nothing in this Section 11.9 shall be deemed to limit or
otherwise affect the right of any Indemnitee to commence any legal proceeding
against the General Partners or the Sellers in any forum or jurisdiction.
11.10 SUCCESSORS AND ASSIGNS; PARTIES IN INTEREST.
(a) This Agreement shall be binding upon: the Sellers and
their successors and assigns (if any); each General Partner and such General
Partner's personal representatives, executors, administrators, estate, heirs,
successors and assigns (if any); and the Purchaser and its
successors and assigns (if any). This Agreement shall inure to the benefit of:
the Sellers; the General Partners; the Purchaser; the other Indemnitees (subject
to Section 9.6); and the respective successors and assigns (if any) of the
foregoing.
(b) The Purchaser may freely assign any or all of its rights
under this Agreement (including its indemnification rights under Article 9), in
whole or in part, to any other Person without obtaining the consent or approval
of any other Person. Neither the Sellers nor any General Partner shall be
permitted to assign any of his or their rights or delegate any of his or their
obligations under this Agreement without the Purchaser's prior written consent.
(c) Except for the provisions of Article 9 hereof, none of the
provisions of this Agreement is intended to provide any rights or remedies to
any Person other than the parties to this Agreement and their respective
successors and assigns (if any). Without limiting the generality of the
foregoing, (i) no employee of the Sellers shall have any rights under this
Agreement or under any of the other Transactional Agreements, and (ii) no
creditor of the Sellers shall have any rights under this Agreement or any of the
other Transactional Agreements.
11.11 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and
remedies of the parties hereto shall be cumulative (and not alternative). The
General Partners and the Sellers agree that: (a) in the event of any Breach or
threatened Breach by any General Partner or the Sellers of any covenant,
obligation or other provision set forth in this Agreement, the Purchaser shall
be entitled (in addition to any other remedy that may be available to it) to (i)
a decree or order of specific performance or mandamus to enforce the observance
and performance of such covenant, obligation or other provision, and (ii) an
injunction restraining such Breach or threatened Breach; and (b) neither the
Purchaser nor any other Indemnitee shall be required to provide any bond or
other security in connection with any such decree, order or injunction or in
connection with any related action or Proceeding.
11.12 WAIVER.
(a) No failure on the part of any Person to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of any Person in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
11.13 AMENDMENTS. This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of the Purchaser, the Sellers and the General Partners.
11.14 SEVERABILITY. In the event that any provision of this Agreement,
or the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
11.15 ENTIRE AGREEMENT. The Transactional Agreements set forth the
entire understanding of the parties relating to the subject matter thereof and
supersede all prior agreements and understandings among or between any of the
parties relating to the subject matter thereof.
11.16 KNOWLEDGE. For purposes of this Agreement, a Person shall be
deemed to have "knowledge" of a particular fact or other matter if:
(a) Such Person is actually aware of such fact or other
matter;
(b) A prudent Person could be expected to discuss or otherwise
become aware of such fact or other matter in the course of conducting a diligent
and comprehensive investigation concerning the truth or existence of such fact
or other matter; or
(c) any Representative of such Person has knowledge of such
fact or other matter.
11.17 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Articles," "Sections" and "Exhibits" are intended to refer to
Sections of this Agreement and Exhibits to this Agreement.
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be executed and delivered as of December 8, 1999.
TELINNOVATION,
a California general partnership
By: /s/ Xxxxxxx Xxxxx
------------------------------------
Xxxxxxx Xxxxx, General Partner
By: /s/ Xxxxx Xxxxxxx
------------------------------------
Xxxxx Xxxxxxx, General Partner
TELINNOVATION SERVICE CORPORATION,
a California corporation
By: /s/ Xxxxxxx Xxxxx
------------------------------------
Xxxxxxx Xxxxx, Chief Executive Officer
TELINNOVATION CORPORATION,
a California corporation
By: /s/ Xxxxxxx Xxxxx
------------------------------------
Xxxxxxx Xxxxx, Chief Executive Officer
/s/ Xxxxxxx Xxxxx
----------------------------------------
Xxxxxxx Xxxxx, an individual
/s/ Xxxxx Xxxxxxx
----------------------------------------
Xxxxx Xxxxxxx, an individual
DITECH COMMUNICATIONS CORPORATION,
a Delaware corporation
By: /s/ Xxxxxxx Xxxxxxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxxxxxx
Title: President
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction involving: (a) the sale or other disposition of all or any portion
of the business or assets of the Sellers; (b) the issuance, sale or other
disposition of (i) any capital stock or other securities of the Sellers, (ii)
any option, call, warrant or right (whether or not immediately exercisable) to
acquire any capital stock or other securities of the Sellers, or (iii) any
security, instrument or obligation that is or may become convertible into or
exchangeable for any capital stock or other securities of the Sellers; (c) any
merger, consolidation, business combination, share exchange, reorganization or
similar transaction involving the Sellers; or (d) any other transaction
contemplating the performance of any services (whether as an employee,
consultant, advisor, designer, developer of technology, or otherwise) by Xxxxx
and/or Xxxxxxx.
AFFILIATE. "Affiliate" means, with respect to any specified Person, any
other Person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by or is under common control with such specified
Person.
AGREEMENT. "Agreement" shall mean the Asset Purchase Agreement to which
this Exhibit A is attached (including the Disclosure Schedule), as it may be
amended from time to time.
BEST EFFORTS. "Best Efforts" shall mean the efforts that a prudent
Person desiring to achieve a particular result would use to ensure that such
result is achieved as expeditiously as possible.
BREACH. There shall be deemed to be a "Breach" of a representation,
warranty, covenant, obligation or other provision if there is or has been (a)
any inaccuracy in or breach (including any inadvertent or innocent breach) of,
or any failure (including any inadvertent failure) to comply with or perform,
such representation, warranty, covenant, obligation or other provision, or (b)
any claim (by any Person) or other circumstance that is inconsistent with such
representation, warranty, covenant, obligation or other provision; and the term
"Breach" shall be deemed to refer to any such inaccuracy, breach, failure, claim
or circumstance.
CLOSING. "Closing" shall mean the closing of the sale of the Assets to
the Purchasers.
CLOSING DATE. "Closing Date" shall mean the date on which the Closing
actually occurs in accordance with the terms of this Agreement.
CERCLA. "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act.
CODE. "Code" shall mean the Internal Revenue Code of 1986, as amended.
A-
COMPETITION. A Person shall be deemed to be in "Competition" if such
Person, without the prior written consent of the Purchaser, (i) own, manage,
operate, join, control, finance or participate in the ownership, management,
operation, control or financing of, or be connected as an officer, director,
employee, partner, principal, agent, representative, consultant, licensor or
otherwise with, any business or enterprise engaged in any business in the
telecommunications or cable communications market, within the Restricted
Territory, or (ii) engage in any other manner, within the Restricted Territory,
in any business in the telecommunications or cable communications market.
CONFIDENTIAL INFORMATION. "Confidential Information" means any
non-public information (whether or not in written form and whether or not
expressly designated as confidential) relating directly or indirectly to the
Assets, the Sellers, the Purchaser or any of their subsidiaries or relating
directly or indirectly to the business, operations, financial affairs,
performance, assets, technology, processes, products, contracts, customers,
licensees, sublicensees, suppliers, personnel, consultants or plans of the
Sellers, the Purchaser or any of their subsidiaries (including any such
information consisting of or otherwise relating to trade secrets, know-how,
technology, inventions, prototypes, designs, drawings, sketches, processes,
license or sublicense arrangements, formulae, proposals, research and
development activities, customer lists or preferences, pricing lists, referral
sources, marketing or sales techniques or plans, operations manuals, service
manuals, financial information, projections, lists of consultants, lists of
suppliers or lists of distributors); PROVIDED, HOWEVER, that "Confidential
Information" shall not be deemed to include information that was already
publicly known and in the public domain prior to the time of its initial
disclosure to the Sellers, the General Partners or the Purchaser.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" shall mean any written, oral, implied or other
agreement, contract, understanding, arrangement, instrument, note, guaranty,
indemnity, representation, warranty, deed, assignment, power of attorney,
certificate, purchase order, work order, insurance policy, benefit plan,
commitment, covenant, assurance or undertaking of any nature.
DAMAGES. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, Liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including any legal fee, expert fee, accounting fee or
advisory fee), charge, cost (including any cost of investigation) or expense of
any nature.
DISCLOSURE SCHEDULE. "Disclosure Schedule" shall mean the schedule
(dated as of the date of the Agreement) delivered to the Purchaser on behalf of
the General Partners and the Sellers, a copy of which is attached to the
Agreement and incorporated in the Agreement by reference.
EMPLOYEE BENEFIT PLAN. "Employee Benefit Plan" shall have the meaning
specified in Section 3(3) of ERISA.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, equity, trust, equitable
interest, claim, preference, right of possession, lease, tenancy, license,
encroachment, covenant, infringement, interference, Order, proxy, option, right
of first refusal, preemptive right, community property interest, legend, defect,
impediment, exception, reservation, limitation, impairment, imperfection of
title, condition or restriction of any nature (including any restriction on the
transfer of any asset, any restriction on the receipt of any income derived from
any asset, any restriction on the use of any asset and any restriction on the
possession, exercise or transfer of any other attribute of ownership of any
asset).
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, cooperative, foundation, society,
political party, union, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization or
entity.
ERISA. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974.
ERISA AFFILIATE. "ERISA Affiliate" shall mean any Person that is, was
or would be treated as a single employer with any of the Specified Entities
under Section 414 of the Code.
EXCLUDED ASSETS. "Excluded Assets" shall mean the assets identified on
EXHIBIT I (to the extent owned by the Sellers on the Closing Date).
FIRPTA. "FIRPTA" shall mean the Foreign Investment and Real Property
Tax Act of 1980.
GAAP. "GAAP" shall mean generally accepted accounting principles.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean
any: (a) permit, license, certificate, franchise, concession, approval, consent,
ratification, permission, clearance, confirmation, endorsement, waiver,
certification, designation, rating, registration, qualification or authorization
issued, granted, given or otherwise made available by or under the authority of
any Governmental Body or pursuant to any Legal Requirement; or (b) right under
any Contract with any Governmental Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation,
principality, state, commonwealth, province, territory, county, municipality,
district or other jurisdiction of any nature; (b) federal, state, local,
municipal, foreign or other government; (c) governmental or quasi-governmental
authority of any nature (including any governmental division, subdivision,
department, agency, bureau, branch, office, commission, council, board,
instrumentality, officer, official, representative, organization, unit, body or
Entity and any court or other tribunal); (d) multi-national organization or
body; or (e) individual, Entity or body exercising, or entitled to exercise, any
executive, legislative, judicial, administrative, regulatory, police, military
or taxing authority or power of any nature.
HAZARDOUS MATERIAL. "Hazardous Material" shall include: (a) any
petroleum, waste oil,
crude oil, asbestos, urea formaldehyde or polychlorinated biphenyl; (b) any
waste, gas or other substance or material that is explosive or radioactive; (c)
any "hazardous substance," "pollutant," "contaminant," "hazardous waste,"
"regulated substance," "hazardous chemical" or "toxic chemical" as designated,
listed or defined (whether expressly or by reference) in any statute, regulation
or other Legal Requirement (including CERCLA and any other so-called "superfund"
or "superlien" law and the respective regulations promulgated thereunder); (d)
any other substance or material (regardless of physical form) or form of energy
that is subject to any Legal Requirement which regulates or establishes
standards of conduct in connection with, or which otherwise relates to, the
protection of human health, plant life, animal life, natural resources, property
or the enjoyment of life or property from the presence in the environment of any
solid, liquid, gas, odor, noise or form of energy; and (e) any compound,
mixture, solution, product or other substance or material that contains any
substance or material referred to in clause "(a)", "(b)", "(c)" or "(d)" above.
INDEMNITEES. "Indemnitees" shall mean the following Persons: (a) the
Purchaser; (b) the Purchaser's current and future affiliates; (c) the respective
Representatives of the Persons referred to in clauses "(a)" and "(b)" above; and
(d) the respective successors and assigns of the Persons referred to in clauses
"(a)", "(b)" and "(c)" above.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, legislation, constitution,
principle of common law, resolution, ordinance, code, edict, decree,
proclamation, treaty, convention, rule, regulation, ruling, directive,
pronouncement, requirement, specification, determination, decision, opinion or
interpretation issued, enacted, adopted, passed, approved, promulgated, made,
implemented or otherwise put into effect by or under the authority of any
Governmental Body.
LIABILITY. "Liability" shall mean any debt, obligation, duty or
liability of any nature (including any unknown, undisclosed, unmatured,
unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious,
derivative, joint, several or secondary liability), regardless of whether such
debt, obligation, duty or liability would be required to be disclosed on a
balance sheet prepared in accordance with generally accepted accounting
principles and regardless of whether such debt, obligation, duty or liability is
immediately due and payable.
NONCOMPETITION PERIOD. "Noncompetition Period" shall mean the period
commencing on the Closing Date and ending on the fourth (4th) anniversary of the
Closing Date.
ORDER. "Order" shall mean any: (a) order, judgment, injunction, edict,
decree, ruling, pronouncement, determination, decision, opinion, verdict,
sentence, subpoena, writ or award issued, made, entered, rendered or otherwise
put into effect by or under the authority of any court, administrative agency or
other Governmental Body or any arbitrator or arbitration panel; or (b) Contract
with any Governmental Body entered into in connection with any Proceeding.
PERSON. "Person" shall mean any individual, Entity or Governmental
Body.
PROCEEDING. "Proceeding" shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any
informal proceeding), prosecution, contest, hearing, inquiry, inquest, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any Governmental Body or any arbitrator or
arbitration panel.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any patent, patent
application, trademark (whether registered or unregistered and whether or not
relating to a published work), trademark application, trade name, fictitious
business name, service xxxx (whether registered or unregistered), service xxxx
application, copyright (whether registered or unregistered), copyright
application, maskwork, maskwork application, trade secret, know-how, customer
list, franchise, system, computer software, invention, design, algorithm,
blueprint, engineering drawing, proprietary product, technology, proprietary
right or other intellectual property right or intangible asset.
RELATED PARTY. Each of the following shall be deemed to be a "Related
Party": (a) each individual who is, or who has at any time been, an officer,
director, partner or Affiliate of any of the Sellers; (b) each member of the
family of each of the individuals referred to in clause "(a)" above; and (c) any
Entity (other than the Sellers) in which any one of the individuals referred to
in clauses "(a)" and "(b)" above holds or held (or in which more than one of
such individuals collectively hold or held), beneficially or otherwise, a
controlling interest or a material voting, proprietary or equity interest.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
RESTRICTED TERRITORY. "Restricted Territory" means (a) each county or
similar political subdivision of each State of the United States of America
(including each of the counties in the State of California), (b) each State,
territory or possession of the United States of America and (c) any other
country in the world.
SELLERS CONTRACT. "Sellers Contract" shall mean any Contract: (a) to
which any of the Sellers is a party; (b) by which any of the Sellers or any of
their assets is or may become bound or under which the Sellers have, or may
become subject to, any obligation; or (c) under which any of the Sellers has or
may acquire any right or interest.
SELLERS PROPRIETARY ASSET. "Sellers Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to the Sellers or otherwise used by the
Sellers.
SELLERS TRIGGERING EVENT. "Sellers Triggering Event" shall be deemed to
have occurred if: (i) the Sellers shall have entered into any letter of intent
or similar document or agreement relating to any offer, proposal or inquiry
(other than an offer or proposal by the Purchaser) contemplating or otherwise
relating to any acquisition of the Sellers; or (ii) the General Partners shall
have failed to vote for the Transactions or approval of this Agreement.
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, estimated tax, gross receipts tax, value-added tax, surtax,
excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax,
property tax, business tax, occupation tax, inventory tax,
occupancy tax, withholding tax or payroll tax), levy, assessment, tariff,
impost, imposition, toll, duty (including any customs duty), deficiency or fee,
and any related charge or amount (including any fine, penalty or interest), that
is, has been or may in the future be (a) imposed, assessed or collected by or
under the authority of any Governmental Body, or (b) payable pursuant to any
tax-sharing agreement or similar Contract.
TAX RETURN. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information that
is, has been or may in the future be filed with or submitted to, or required to
be filed with or submitted to, any Governmental Body in connection with the
determination, assessment, collection or payment of any Tax or in connection
with the administration, implementation or enforcement of or compliance with any
Legal Requirement relating to any Tax.
TRANSACTIONAL AGREEMENTS. "Transactional Agreements" shall mean: (a)
the Agreement; (b) the Escrow Agreement; (c) the Assumption Agreement; (d) the
Non-Competition Agreements; (e) the Releases; (f) the Stock Assignments; (g) the
Registration Rights Agreement; and (h) the Closing Certificate.
TRANSACTIONS. "Transactions" shall mean (a) the execution and delivery
of the respective Transactional Agreements, and (b) all of the transactions
contemplated by the respective Transactional Agreements, including: (i) the sale
of the Assets by the Sellers to the Purchaser in accordance with the Agreement;
(ii) the assumption of the Assumed Liabilities by the Purchaser pursuant to the
Assumption Agreement; and (iii) the performance by the Sellers, the General
Partners and the Purchaser of their respective obligations under the
Transactional Agreements, and the exercise by the Sellers, the General Partners
and the Purchaser of their respective rights under the Transactional Agreements.
EXHIBIT B
FORM OF ESCROW AGREEMENT
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is entered into as of February 1, 2000 (the
"Closing Date"), by and among: TELINNOVATION, a California general partnership
(the "Partnership"), TELINNOVATION SERVICE CORPORATION, a California corporation
("TSC"), TELINNOVATION CORPORATION, a California corporation ("TC" and jointly
and severally with the Partnership and TSC, the "Sellers"); XXXXXXX XXXXX
("Xxxxx") and XXXXX XXXXXXX ("Xxxxxxx") (Xxxxx and Xxxxxxx are individually
referred to herein as "General Partner" and collectively as "General Partners");
DITECH COMMUNICATIONS CORPORATION, a Delaware corporation (the "Company"); and
U.S. TRUST COMPANY, NATIONAL ASSOCIATION (the "Escrow Agent").
RECITALS
1. The Sellers, the General Partners and the Company have entered into an
Asset Purchase Agreement dated December 8, 1999 (the "Purchase
Agreement"), pursuant to which the Sellers are selling substantially
all of their assets to the Company.
2. Pursuant to Section 1.3 of the Purchase Agreement, the General Partners
have agreed to certain performance obligations.
3. Pursuant to Section 4.13 of the Purchase Agreement, the Sellers and the
General Partners have agreed to certain reductions of the Purchase
Price (as defined in the Purchase Agreement).
4. Pursuant to Article 9 of the Purchase Agreement, the Sellers and the
General Partners have agreed to indemnify the Company for Damages.
5. The Purchase Agreement contemplates the establishment of an escrow
arrangement to secure such performance and indemnification obligations
of the Sellers and the General Partners under the Purchase Agreement.
AGREEMENT
The parties to this Escrow Agreement, intending to be legally bound,
agree as follows:
1. DEFINED TERMS
Capitalized terms used and not otherwise defined in this Escrow
Agreement shall have the meanings assigned to them in the Purchase Agreement.
2. ESCROW
2.1 SHARES TO BE PLACED IN ESCROW. On the Closing Date, the Company
shall deposit
360,000 shares of the Company's common stock (the "Escrow Shares") with the
Escrow Agent as partial security for certain obligations of the Sellers and the
General Partners pursuant to the Purchase Agreement. The Escrow Agent agrees to
accept delivery of the Escrow Shares and to hold such Escrow Shares in an escrow
account (the "Escrow" or "Escrow Account") in accordance with the provisions of
this Escrow Agreement. The Escrow Shares shall not be subject to any lien,
attachment, trustee process or any other judicial process of any creditor of any
party hereto.
(a) Obligations of the Sellers and the General Partners.
(b) The Sellers and the General Partners have agreed in Section
1.3 of the Purchase Agreement to certain performance obligations in connection
with the maintenance of the goodwill of the technology transferred to the
Purchaser pursuant to the Purchase Agreement. The Sellers and the General
Partners agree that the Escrow Shares shall be security for such performance
obligation, subject to the limitations and in the manner provided in this Escrow
Agreement and the Purchase Agreement, and are subject to release to the Sellers
and the General Partners upon the terms set forth herein.
(c) The Sellers and the General Partners have agreed in Section
4.13 of the Purchase Agreement to certain reductions of the Purchase Price
pursuant to the terms of the Purchase Agreement. The Sellers and the General
Partners agree that the Escrow Shares shall be security for such agreement,
subject to the limitations and in the manner provided in this Escrow Agreement
and the Purchase Agreement, and are subject to release to the Sellers and the
General Partners upon the terms set forth herein.
(d) The Sellers and the General Partners have agreed in Article 9
of the Purchase Agreement to indemnify and hold harmless the Indemnitees from
and against Damages. The Sellers and the General Partners agree that the Escrow
Shares shall be security for such indemnity obligation, subject to the
limitations and in the manner provided in this Escrow Agreement and the Purchase
Agreement, and are subject to release to the Sellers and the General Partners
upon the terms set forth herein.
2.2 RELEASE OF ESCROW SHARES.
(a) On January 1, 2001 ("First Release Date"), the Escrow Agent
shall release and distribute to the Sellers, 45,000 shares of the Escrow Shares,
less the sum owed to the Company or any Indemnitee for any Damages suffered or
incurred under Article 9 of the Purchase Agreement. For purposes of this Section
2.3(a), the Escrow Shares shall be valued pursuant to Section 5 herein.
(b) On the first year anniversary of the First Release Date, the
Escrow Agent shall release and distribute to the Sellers, 45,000 shares of the
Escrow Shares, less the sum owed to the Company or any Indemnitee for any
Damages suffered or incurred under Article 9 of the Purchase Agreement. For
purposes of this Section 2.3(b), the Escrow Shares shall be valued pursuant to
Section 5 herein.
(c) On each of the First Release Date, and the first and second
year anniversaries of the First Release Date, the Escrow Agent shall distribute
45,000 shares, 45,000 shares and 90,000 shares, respectively, of the Escrow
Shares, in the aggregate, to the Sellers; PROVIDED, HOWEVER, that the parties
hereto agree that the Company shall have the right to repurchase from the Escrow
Agent for one dollar ($1) in the aggregate: (i) if either Xxxxx and/or Xxxxxxx
terminates his employment relationship with the Company prior to the First
Release Date, any of the then undistributed shares, and (ii) if either Xxxxx
and/or Xxxxxxx terminates his employment relationship after the First Release
Date, any of the then undistributed pro rata shares of such terminated General
Partner (with Xxxxx'x share being 63.24% and Shvart's share being 36.76%). In
the event of the death of a General Partner, such General Partner shall be
deemed to have satisfied the conditions as set forth in this Section 2.3(c) as
of the second anniversary of the First Release Date. The death of such General
Partner will not be considered a voluntary termination.
(d) On the third year anniversary of the First Release Date, the
Escrow Agent shall distribute 90,000 shares of the Escrow Shares, in the
aggregate, to the Sellers (regardless of the occurrence of the death of any of
the General Partners); PROVIDED, HOWEVER, that in the event that each of the
milestones as set forth in Exhibit A attached hereto (the "Milestones"), is
successfully completed, then the number of Escrow Shares as set forth next to
such Milestone in Exhibit A, shall be released from the Escrow Account sooner,
upon completion of such Milestone.
2.3 VOTING OF SHARES. The record owners of the Escrow Shares shall be
entitled to exercise all voting rights with respect to such Escrow Shares.
2.4 DIVIDENDS, ETC. Any cash, securities or other property distributable
(whether by way of dividend, stock split or otherwise) in respect of or in
exchange for any Escrow Shares shall not be distributed to the record owner of
such Escrow Shares, but rather shall be held by the Escrow Agent in the Escrow.
At the time any Escrow Shares are required to be released from the Escrow to any
Person pursuant to this Escrow Agreement, any cash, securities or other property
previously distributed in respect of or in exchange for such Escrow Shares shall
be released from the Escrow to such Person.
2.5 TRANSFERABILITY. The interests of the Sellers and/or the General
Partners in the Escrow and in the Escrow Shares shall not be assignable or
transferable, other than by operation of law. No transfer of any of such
interests by operation of law shall be recognized or given effect until the
Escrow Agent shall have received written notice of such transfer.
2.6 FRACTIONAL SHARES. No fractional shares of Company stock shall be
retained in or released from the Escrow pursuant to this Escrow Agreement. In
connection with any release of Escrow Shares from the Escrow, any shareholder
who would otherwise be entitled to receive a fraction of a share of the
Company's stock (after aggregating all fractional shares of the Company's stock
issuable to such shareholder) shall be paid in cash the dollar amount (rounded
to the nearest whole cent), without interest, determined by multiplying such
fraction by the Designated Company Stock Price.
3. CLAIM PROCEDURES
3.1 CLAIM NOTICE.
(a) If the Company has incurred or suffered Damages for which it
is or may be entitled to indemnification under Article 9 of the Purchase
Agreement, the Company shall, not later than ten (10) days following the
Termination Date (as defined below), give written notice of such claim (a "Claim
Notice") to the Sellers and the Escrow Agent. Each Claim Notice shall state the
claimed Damages (the "Claim Amount") and the basis for such claim. The date four
(4) years after the Closing Date shall be referred to herein as the "Termination
Date."
(b) If either Xxxxx and/or Xxxxxxx voluntarily terminates his
employment relationship with the Company prior to the Termination Date, the
Company shall, not later than ten (10) days following the effective termination
date of Xxxxx'x and/or Xxxxxxx'x employment, as the case may be, give written
notice to the Sellers and the Escrow Agent, of the Company's intention to
repurchase the then undistributed Escrow Shares (the "Repurchase Shares")
pursuant to Section 2.3(c) or 2.3(d) (a "Repurchase Notice").
(c) If the death of a General Partner occurs, the representative
or agent of such General Partner (the "Representative") shall, not later than
thirty (30) days following the date of such death, give written notice to the
Company and the Escrow Agent, of such death, with a copy of a validly issued
death certificate, and the request of such Representative for the applicable
number of Escrowed Shares to be released pursuant to Section 2.3 above (the
"Notice of Death"). The Escrow Agent shall thereupon release to the Sellers and
the Company the appropriate number of Escrow Shares pursuant to Section 2.3
above, from the Escrow Account in accordance with such agreement or
instructions.
3.2 RESPONSE NOTICE.
(a) Within thirty (30) days after the delivery of a Claim Notice
to the Sellers, the Sellers shall deliver to the Company and the Escrow Agent, a
written notice (the "Indemnification Response Notice") containing: (i)
instructions to the effect that the Escrow Shares having a Fair Market Value
equal to the entire Claim Amount set forth in such Claim Notice are to be
released from the Escrow Account to the Company; (ii) instructions to the effect
that the Escrow Shares having a Fair Market Value equal to a specified portion
(but not the entire amount) of the Claim Amount set forth in such Claim Notice
are to be released from the Escrow to the Company, together with a statement
that the remaining portion of such Claim Amount is being disputed; or (iii) a
statement that the entire Claim Amount set forth in such Claim Notice is being
disputed. If no Indemnification Response Notice is received by the Company and
the Escrow Agent from the Sellers within thirty (30) days after the delivery of
a Claim Notice to the Sellers and the Escrow Agent, then the recipient of such
Claim Notice shall be deemed to have given instructions that the Escrow Shares
having a Fair Market Value equal to the entire Claim Amount set forth in such
Claim Notice are to be released to the Company from the Escrow Account.
(b) Within thirty (30) days after the delivery of a Repurchase
Notice to the Sellers, the Sellers shall deliver to the Company and the Escrow
Agent, a written notice (the "Response Notice") containing: (i) instructions to
the effect that the Repurchase Shares set forth in such
Repurchase Notice are to be repurchased by the Company and released from the
Escrow Account to the Company; or (ii) a statement that the Repurchase Shares
set forth in such Repurchase Notice are being disputed. If no Response Notice is
received by the Company from the Sellers within thirty (30) days after the
delivery of a Repurchase Notice to the Sellers, then the recipient of such
Repurchase Notice shall be deemed to have given instructions that all of the
Repurchase Shares set forth in such Repurchase Notice are to be repurchased by
and released to the Company from the Escrow Account.
3.3 CLAIM OF ESCROW SHARES BY THE COMPANY.
(a) Pursuant to Section 4.13 of the Purchase Agreement, in the
event the Sellers fail to pay to the Purchaser the Price Reductions (as defined
in the Purchase Agreement) within five (5) business days of the date such Price
Reduction is collected by the Sellers, or in the event the Sellers fail to pay
to the Purchaser the Deficiency Amount (as defined in the Purchase Agreement)
within five (5) business days of the date of the Deficiency Notice (as defined
in the Purchase Agreement), the Purchaser may give written notice of its claim
against the Escrow Account (a "Price Reduction Claim Notice") to the Sellers and
the Escrow Agent. Each Price Reduction Claim Notice shall state the claimed
Price Reduction amount or the Deficiency Amount, as applicable (the "Price
Reduction Claim Amount"), and the basis for such claim.
(b) Within five (5) days after the delivery of a Price Reduction
Claim Notice to the Sellers, the Sellers shall deliver to the Company and the
Escrow Agent, a written notice (the "Price Reduction Response Notice")
containing: (i) instructions to the effect that the Escrow Shares having a Fair
Market Value equal to the entire Price Reduction Claim Amount set forth in such
notice are to be released from the Escrow Account to the Company; (ii)
instructions to the effect that the Escrow Shares having a Fair Market Value
equal to a specified portion (but not the entire amount) of the Price Reduction
Claim Amount set forth in such notice are to be released from the Escrow to the
Company, together with a statement that the remaining portion of such Price
Reduction Claim Amount is being disputed; or (iii) a statement that the entire
Price Reduction Claim Amount set forth in such notice is being disputed. If no
Price Reduction Response Notice is received by the Company and the Escrow Agent
from the Sellers within five (5) days after the delivery of a Price Reduction
Claim Notice to the Sellers and the Escrow Agent, then the recipient of such
notice shall be deemed to have given instructions that the Escrow Shares having
a Fair Market Value equal to the entire Price Reduction Claim Amount set forth
in such notice are to be released to the Company from the Escrow Account.
3.4 RELEASE OF ESCROW SHARES TO THE COMPANY.
(a) If the Sellers give (or are deemed to have given pursuant to
Sections 3.2 and 3.3 herein) instructions that:
(b) the Escrow Shares having a Fair Market Value equal to the
entire Claim Amount or the Price Reduction Claim Amount as set forth in the
Claim Notice or the Price Reduction Claim Notice, as the case may be, or
(c) the Repurchase Shares as set forth in the Repurchase Notice,
(d) are to be released from the Escrow Account to the Company,
then the Escrow Agent shall transfer to the Company, from the Escrow Account,
such Escrow Shares having a Fair Market Value equal to such Claim Amount or
Price Reduction Claim Amount, or such Repurchase Shares, as the case may be.
(e) If an Indemnification Response Notice delivered by the
Sellers in response to a Claim Notice or a Price Reduction Claim Notice, as the
case may be, contains instructions to the effect that the Escrow Shares having a
Fair Market Value equal to a specified portion (but not the entire amount) of
the Claim Amount or a Price Reduction Claim Amount, as the case may be, set
forth in such notice are to be released from the Escrow to the Company, then (i)
the Escrow Agent shall transfer to the Company, from the Escrow Account, Escrow
Shares having a Fair Market Value equal to such specified portion of such Claim
Amount or a Price Reduction Claim Amount, as the case may be, and (ii) the
procedures set forth in Section 3.4(c) of this Escrow Agreement shall be
followed with respect to the remaining portion of such Claim Amount or a Price
Reduction Claim Amount, as the case may be.
(f) If an Indemnification Response Notice, a Price Reduction
Response Notice or a Response Notice, as the case may be, delivered by the
Sellers in response to a Claim Notice, a Price Reduction Response Notice or a
Repurchase Notice, respectively, contains a statement that all or a portion of
the Claim Amount or the Price Reduction Claim Amount, or all of the Repurchase
Shares, as the case may be, set forth in such notice is being disputed (such
amount or the disputed portion thereof being referred to as the "Disputed
Amount"), then the Escrow Agent shall continue to hold in Escrow the Disputed
Amount, notwithstanding the occurrence of the Termination Date, until (i)
delivery of a copy of a settlement agreement executed by the Company and the
Sellers setting forth instructions to the Escrow Agent as to release from the
Escrow Account, if any, that shall be made with respect to the Disputed Amount
or (ii) delivery of a copy of a court order setting forth instructions to the
Escrow Agent as to the release from the Escrow Account, if any, that shall be
made with respect to the Disputed Amount. The Escrow Agent shall thereupon
release funds from the Escrow Account in accordance with such agreement or
instructions.
4. RELEASE OF SHARES
4.1 SHARES TO BE RELEASED TO THE SELLERS.
(a) Fifteen (15) days following the Termination Date, the Escrow
Agent shall release and deliver to the Sellers from Escrow all Escrow Shares
then held in Escrow, except for any Escrow Shares that are to be retained in
Escrow in accordance with Section 3.4(c) of this Escrow Agreement.
(b) Fifteen (15) days following the date of receipt of a Notice
of Death, the Escrow Agent shall release and deliver to the applicable
Representative and the Company from Escrow the appropriate number of Escrow
Shares pursuant to Section 2.3 above then held in Escrow, except for any Escrow
Shares that are to be retained in Escrow in accordance with Section 3.4(c) of
this Escrow Agreement.
(c) Upon satisfaction of those conditions set forth in Section
3.4, the Escrow Agent shall immediately release and deliver to the Sellers the
Escrow Shares representing that portion of the Disputed Amount to which the
satisfaction of such conditions relates, or pursuant to the Sellers'
instructions.
(d) Shares to be Released to the Company.
(e) If the Escrow Agent is instructed, or deemed to be instructed
pursuant to Sections 3.2 and 3.3 herein, by the Sellers to release and deliver
the Escrow Shares to the Company for repurchase pursuant to Section 3.2 above,
then the Escrow Agent shall release such Escrow Shares to the Company within
fifteen (15) of such instruction.
(f) Upon satisfaction of those conditions set forth in Section
3.4, the Escrow Agent shall immediately release and deliver to the Company the
Escrow Shares representing that portion of the Disputed Amount to which the
satisfaction of such conditions relates, or pursuant to Sellers' instructions.
5. VALUATION OF SHARES HELD IN ESCROW
5.1 FAIR MARKET VALUE. For purposes of this Escrow Agreement, the "Fair
Market Value" of the Escrow Shares shall be deemed to be equal to the number of
Escrow Shares multiplied by the Designated Company Stock Price (adjusted as
appropriate to reflect any stock split, reverse stock split, stock dividend or
similar transaction effected by the Company after the Closing Date).
5.2 DESIGNATED COMPANY STOCK PRICE. For purposes of this Escrow Agreement,
the "Designated Company Stock Price" of the Escrow Shares shall be deemed to be
the price per share of the Company's common stock as of the close of business on
the day the Company delivers a Claim Notice to the Sellers.
6. FEES AND EXPENSES
6.1 EXPENSES. The Escrow Agent will be entitled to reimbursement for
reasonable expenses incurred in performance of its duties hereunder.
6.2 REIMBURSEMENT. The Company shall pay the fees and expenses of the
Escrow Agent for the services to be rendered by the Escrow Agent hereunder.
6.3 ESCROW AGENT'S DUTIES
(a) The Escrow Agent shall be obligated only for the performance
of such duties as are specifically set forth herein, and as set forth in any
additional written escrow instructions which the Escrow Agent may receive after
the date of this Agreement which are signed by an officer of the Company, an
officer of TSC and TC, respectively, and a General Partner of the Partnership,
and may rely and shall be protected in relying or refraining from acting on any
instrument reasonably believed to be genuine and to have been signed or
presented by the proper
party or parties. The Escrow Agent shall not be liable for any act done or
omitted hereunder as Escrow Agent while acting in good faith and in the exercise
of reasonable judgment, and any act done or omitted pursuant to the advice of
counsel shall be conclusive evidence of such good faith.
(b) The Escrow Agent is hereby expressly authorized to comply
with and obey orders, judgments or decrees of any court of law, notwithstanding
any notices, warnings or other communications from any party or any other Person
to the contrary. In case the Escrow Agent obeys or complies with any such order,
judgment or decree of any court, the Escrow Agent shall not be liable to any of
the parties hereto or to any other Person by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.
(c) In performing any duties under the Agreement, the Escrow
Agent shall not be liable to any party for damages, losses, or expenses, except
for gross negligence or willful misconduct on the part of the Escrow Agent. The
Escrow Agent shall not incur any such liability for (A) any act or failure to
act made or omitted in good faith, or (B) any action taken or omitted in
reliance upon any instrument, including any written statement or affidavit
provided for in this Agreement that the Escrow Agent shall in good faith believe
to be genuine, nor will the Escrow Agent be liable or responsible for forgeries,
fraud, impersonations, or determining the scope of any representative authority.
In addition, the Escrow Agent may consult with the legal counsel in connection
with Escrow Agent's duties under this Agreement and shall be fully protected in
any act taken, suffered, or permitted by him/her in good faith in accordance
with the advice of counsel. The Escrow Agent is not responsible for determining
or verifying the authority of any Person acting or purporting to act on behalf
of any party to this Agreement.
(d) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. In such event, the
Escrow Agent will not be liable for damage. Furthermore, the Escrow Agent may at
its option, file an action of interpleader requiring the parties to answer and
litigate any claims and rights among themselves. The Escrow Agent is authorized
to deposit with the clerk of the court all documents and the Escrow Shares or
cash held in escrow, except all cost, expenses, charges and reasonable attorney
fees incurred by the Escrow Agent due to the interpleader action and which the
parties jointly and severally agree to pay. Upon initiating such action, the
Escrow Agent shall be fully released and discharged of and from all obligations
and liability imposed by the terms of this Agreement.
(e) The parties and their respective successors and assigns agree
jointly and severally to indemnify and hold Escrow Agent harmless against any
and all losses, claims, damages, liabilities, and expenses, including reasonable
costs of investigation, counsel fees, and disbursements that may be imposed on
Escrow Agent or incurred by Escrow Agent in connection with the performance of
its duties under this Agreement (but excluding those expenses contemplated by
Section 7.7 in which case such expenses shall be the responsibility of the
Company), including but not limited to any litigation arising from this
Agreement or involving
its subject matter.
(f) The Escrow Agent may resign at any time upon giving at least
thirty (30) days written notice to the parties; PROVIDED, HOWEVER, that no such
resignation shall become effective until the appointment of a successor Escrow
Agent which shall be accomplished as follows: the parties shall use their best
efforts to mutually agree on a successor Escrow Agent within thirty (30) days
after receiving such notice. If the parties fail to agree upon a successor
Escrow Agent within such time, the Escrow Agent shall have the right to appoint
a successor Escrow Agent authorized to do business in the State of California.
The successor Escrow Agent shall execute and deliver an instrument accepting
such appointment and it shall, without further acts, be vested with all the
estates, properties, rights, powers, and duties of the predecessor Escrow Agent
as if originally named as Escrow Agent. The Escrow Agent shall be discharged
from any further duties and liability under this Agreement.
(g) The Escrow Agent shall be entitled to employ such legal
counsel and other experts (including, without limitation, the firm Xxxxxx
Godward LLP) as it may deem necessary to properly advise the Escrow Agent with
its obligations hereunder. The Escrow Agent may rely upon the advice of such
counsel, and it may pay such counsel reasonable compensation therefor.
Notwithstanding Section 7.5, the Company shall be responsible for all fees
generated by such legal counsel in connection with the Escrow Agent's
obligations hereunder.
7. GENERAL
7.1 OTHER AGREEMENTS. Nothing in this Escrow Agreement is intended to limit
any of the Company's rights, or any obligation of the Sellers or any General
Partner, under the Purchase Agreement.
7.2 NOTICES. Any notice or other communication required or permitted to be
delivered to any party under this Escrow Agreement shall be in writing and shall
be deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
if to the Company:
Ditech Communications Corporation
000 X. Xxxxxxxxxxx Xxxx
Xxxxxxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
if to TSC:
Telinnovation Service Corporation
000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx Xxxxx
Facsimile:
if to TC:
Telinnovation Corporation
000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx Xxxxx
Facsimile:
if to the Partnership:
Telinnovation Partnership
000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx Xxxxx
Facsimile:
with a copy to:
Berliner Xxxxx
00 Xxxxxxx Xxxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
if to the Escrow Agent:
U.S. Trust Company, National Association
Xxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxx
Facsimile: (000) 000-0000
7.3 COUNTERPARTS. This Escrow Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
7.4 HEADINGS. The underlined headings contained in this Escrow Agreement
are for convenience of reference only, shall not be deemed to be a part of this
Escrow Agreement and shall not be referred to in connection with the
construction or interpretation of this Escrow Agreement.
7.5 GOVERNING LAW; VENUE. This Escrow Agreement shall be construed in
accordance with, and governed in all respects by, the internal laws of the State
of California (without giving effect to principles of conflicts of laws). Any
state or federal court in the County of Santa Xxxxx in the State of California
shall have exclusive jurisdiction and venue over any dispute arising out of this
Escrow Agreement and the parties hereby consent to the jurisdiction and venue of
such courts.
7.6 WAIVER.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Escrow Agreement, and no delay on the part
of any Person in exercising any power, right, privilege or remedy under this
Escrow Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right, privilege or
remedy shall preclude any other or further exercise thereof or of any other
power, right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising
out of this Escrow Agreement, or any power, right, privilege or remedy under
this Escrow Agreement, unless the waiver of such claim, power, right, privilege
or remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such Person; and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given.
7.7 AMENDMENTS. This Escrow Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of the Company, the Partnership, TSC and TC, respectively.
7.8 SEVERABILITY. In the event that any provision of this Escrow Agreement,
or the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Escrow Agreement, and the application of such
provision to Persons or circumstances other than those as to which it is
determined to be invalid, unlawful, void or unenforceable, shall not be impaired
or otherwise affected and shall continue to be valid and enforceable to the
fullest extent permitted by law.
7.9 ENTIRE AGREEMENT. This Escrow Agreement and the Purchase Agreement and
the other agreements contemplated in the Purchase Agreement set forth the entire
understanding of the parties relating to the subject matter hereof and thereof
and supersede all prior agreements and understandings among or between any of
the parties relating to the subject matter hereof and thereof.
7.10 CONSTRUCTION.
(a) For purposes of this Escrow Agreement, whenever the context
requires: the
singular number shall include the plural, and vice versa; the masculine gender
shall include the feminine and neuter genders; the feminine gender shall include
the masculine and neuter genders; and the neuter gender shall include the
masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Escrow Agreement.
(c) As used in this Escrow Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this Escrow
Agreement to "Sections" are intended to refer to Sections of this Escrow
Agreement.
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement as
of the date first above written.
DITECH COMMUNICATION CORPORATION,
a Delaware corporation
By:
-------------------------------------------
Xxxxxxx X. Xxxxxxx, Chief Financial Officer
TELINNOVATION,
a California general partnership
By:
-------------------------------------------
Xxxxxxx Xxxxx, General Partner
By:
-------------------------------------------
Xxxxx Xxxxxxx, General Partner
TELINNOVATION SERVICE CORPORATION,
a California corporation
By:
-------------------------------------------
Xxxxxxx Xxxxx, Chief Executive Officer
TELINNOVATION CORPORATION,
a California corporation
By:
-------------------------------------------
Xxxxxxx Xxxxx, Chief Executive Officer
----------------------------------------------
XXXXXXX XXXXX, an individual
----------------------------------------------
XXXXX XXXXXXX, an individual
U.S. TRUST COMPANY, NATIONAL ASSOCIATION
By:
-------------------------------------------
Name:
Title:
EXHIBIT C
FORM OF ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (the "Assignment") is made,
executed and delivered as of February 1, 2000 by and among, TELINNOVATION, a
California general partnership (the "Partnership"), TELINNOVATION SERVICE
CORPORATION, a California corporation ("TSC"), TELINNOVATION CORPORATION, a
California corporation (the "Corporation" and jointly and severally with the
Partnership and TSC, the "Sellers"); XXXXXXX XXXXX ("Xxxxx") and XXXXX XXXXXXX
("Xxxxxxx") (Xxxxx and Schvarts are individually referred to herein as "General
Partner" and collectively as "General Partners"); and DITECH COMMUNICATIONS
CORPORATION, a Delaware corporation (the "Purchaser").
WITNESSETH
WHEREAS, the Purchaser, the Sellers and the General Partners have
executed and delivered an Asset Purchase Agreement dated as of December 8, 1999
(the "Agreement"), for, among other things, the assignment by the Sellers and
the General Partners to the Purchaser of all of the Assets (capitalized terms
used but not defined herein shall have the meaning set forth in the Agreement),
and for the assumption by the Purchaser of the Assumed Liabilities; and
WHEREAS, the parties desire to evidence the assignment to the Purchaser
of the Assets and the assumption by the Purchaser of the Assumed Liabilities.
NOW, THEREFORE, in consideration of the premises and for good and
valuable consideration paid, the receipt and adequacy of which is hereby
acknowledged by the parties hereto:
SECTION 1. The Sellers and the General Partners do hereby assign to the
Purchaser the Assets and all of the Sellers' and the General Partners' rights
thereunder; PROVIDED, HOWEVER, that anything in this instrument to the contrary
notwithstanding, nothing herein shall constitute an assignment, or an agreement
to assign, any Asset or any claim or right or any benefit arising thereunder or
resulting therefrom (a "Consent-Required Asset") if an attempted assignment of
such Consent-Required Asset, without consent of one or more third parties, would
constitute a breach or other contravention thereof or would in any way adversely
affect the rights of the Sellers, the General Partners or the Purchaser
thereunder; PROVIDED, FURTHER, that once all such consents are obtained, this
instrument shall automatically effect an immediate assignment of such
Consent-Required Asset without further action by either party hereto.
SECTION 2. The Purchaser hereby assumes the Assumed Liabilities.
SECTION 3. This Assignment may be executed in two or more counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Purchaser, the Sellers and the General Partners
have caused this Assignment and Assumption Agreement to be executed and
delivered on the day and year first above written.
TELINNOVATION,
a California general partnership
By:
-----------------------------
Xxxxxxx Xxxxx, General Partner
By:
-----------------------------
Xxxxx Xxxxxxx, General Partner
TELINNOVATION SERVICE CORPORATION,
a California corporation
By:
-----------------------------
Xxxxxxx Xxxxx, Chief Executive
Officer
TELINNOVATION CORPORATION,
a California corporation
By:
-----------------------------
Xxxxxxx Xxxxx, Chief Executive
Officer
----------------------------------
XXXXXXX XXXXX, an individual
----------------------------------
XXXXX XXXXXXX, an individual
DITECH COMMUNICATIONS CORPORATION,
a Delaware corporation
By:
-----------------------------
Xxxxxxx X. Xxxxxxx, Chief
Financial Officer
----------------------------------
XXXXXXX XXXXX, an individual
EXHIBIT D
CONTRACTS
The following contracts of the Sellers are to be transferred to the
Purchaser pursuant to the Purchase Agreement; provided that each contract which,
by its terms, requires the consent of any party other than the Sellers to assign
the rights and obligations thereof to Purchaser, shall be transferred to
Purchaser only at such time as such required consents to assignment are
obtained:
1. Master Licence Agreement between Xxxx Telephone Manufacturing
Company. N.V. on behalf of Alcatel, N.V and the Corporation
(September, 1990).
2. Unit Licence Agreement on Echo Cancellation between Xxxx Telephone
Manufacturing Company, N.V. and the Corporation (September, 1990).
3. Source Code Escrow Agreement among Xxxx Telephone Manufacturing
Company, N.V., Xxxxxxx Doevenspeck en Vennoten, C.V. (the escrow agent)
and the Corporation.
4. Unit License Agreement between Alcatel SEL AG and the Corporation
(April 27, 1993). Agreement between Northern Telecom Inc. and the
Corporation (April, 1991).
5. Amendment No. 1 to Agreement between Northern Telecom Inc. and the
Corporation (July 1994).
6. License of Technological Rights and Research and Development Agreement
between Latitude Communications, Inc. and the Corporation (November 16,
1993).
7. License Agreement between Telrad Communication & Electronic Industries,
Ltd.("Telrad") and the Corporation (August 4, 1995).
8. License Agreement between interWAVE Communications International Ltd.
and the Partnership (December 5, 1996).
9. Escrow Agreement for Source Code and Documentation between interWAVE
Communications, Inc. and the Partnership (December 5, 1996).
10. Agreement between DGI Technologies, Inc. and TSC (June 1, 1998).
11. Technology Agreement between Northern Telecom Inc. and TSC (October 1,
1998). Source Code Escrow Agreement among Data Securities
International, Inc., Northern Telecom Inc. and TSC (which is referred
to in Technology Agreement for future execution, but this has not been
executed to date).
12. Marketing, Licensing and Distribution of DSP Software Agreement between
Hothaus Technologies Inc and TSC (undated, Fal1, 1998).
13. License Agreement between Sonus Networks, Inc. and TSC (December 22,
1998).
14. Preferred Escrow Agreement among Data Securities International, Sonus
Networks, Inc. and TSC (December 22, 1998).
15. Licensing Agreement between Accelerated Networks Corporation and TSC
(December 1998).
16. Software Escrow Agreement among Accelerated Networks Corporation, DSI
Technology (escrow agent) and TSC (December 24, 1998). Addendum to this
Software Escrow Agreement among Accelerated Networks Corporation, DSI
Technology (escrow agent) and TSC (TSC signed Addendum February 10,
1999)
17. Licensing Agreement between Transmedia Communications, Inc. and
TSC (May 7, 1999). Transmedia Communications, Inc. assigned the
agreement to Cisco Systems, Inc.
18. OEM-IN Software License Agreement between Cisco Systems, Inc. and TSC
(January 1999) Pursuant to such agreement, the two parties committed to
entering into an Escrow Agreement, which is an exhibit to the former
agreement, which both parties signed, however, no escrow agent has
executed such Escrow Agreement and it is undated.
19. Licensing Agreement between Convergent Networks, Inc. and TSC
(September 8, 1999).
20. Licensing Agreement between Santera Systems Inc. and TSC (September 14,
1999).
21. Agreement between Ditech Corporation and the Partnership (November 11,
1994).
22. Agreement between Ditech Corporation and the Partnership (January 17,
1995).
23. Licensing Agreement between Ditech Corporation and TSC (July 21, 1998).
24. Invention Purchase Agreement between Ditech Corporation and the
Partnership (November 15, 1998).
25. Exclusive License Agreement between the General Partners and TSC
(April 30,1998).
EXHIBIT E
FORM OF STOCKHOLDER REPRESENTATION LETTER
DITECH COMMUNICATIONS CORPORATION
000 X. Xxxxxxxxxxx Xxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
Each of the undersigned hereby makes, jointly and severally, the
following certifications and representations with respect to the [aggregate five
hundred forty thousand (540,000) shares] (the "Shares") of the Common Stock of
DITECH COMMUNICATIONS CORPORATION, a Delaware corporation (the "Company"), which
are being acquired by each of the undersigned pursuant to that certain Asset
Purchase Agreement, dated December __, 1999, by and among the Company and each
of the undersigned.
Each of the undersigned represents and warrants that it is acquiring
the Shares solely for its account for investment and not with a view to or for
sale or distribution of the Shares or any part thereof. Each of the undersigned
also represents that the entire legal and beneficial interests of the Shares the
undersigned is acquiring is being acquired for, and will be held for, their
accounts only.
Each of the undersigned understands that the Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
on the basis that no distribution or public offering of the Shares is to be
effected. Each of the undersigned realizes that the basis for the exemption may
not be present if, notwithstanding the representations made herein, each of the
undersigned has in mind merely acquiring the Shares for a fixed or determinable
period in the future, or for a market rise, or for sale if the market does not
rise. The undersigned has no such intention.
Each of the undersigned recognizes that the Shares being acquired by
the undersigned must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available.
Each of the undersigned is aware that the Shares may not be sold
pursuant to Rule 144 adopted under the Securities Act ("Rule 144") unless
certain conditions are met and until the undersigned has met the holding
provisions of Rule 144. Among the conditions for use of the Rule is the
availability of current information to the public about the Company. Each of the
undersigned understands that the Company has not made such information available
and has no present plans to do so.
Each of the undersigned further agrees not to make any disposition of
all or any part of the Shares being acquired in any event unless and until:
1. The Company shall have received a letter secured by the undersigned from the
Securities and Exchange Commission stating that no action will be recommended to
the Commission with respect to the proposed disposition; or
2. There is then in effect a registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance
with said registration statement; or
3. (i) The undersigned shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, (ii) the undersigned
shall have furnished the Company with an opinion of counsel for the undersigned
to the effect that such disposition will not require registration of such Shares
under the Securities Act, and (iii) such opinion of counsel for the undersigned
shall have been concurred in by the Company's counsel and the Company shall have
advised the undersigned of such concurrence.
Each of the undersigned agrees to be bound by any and all restrictions and
obligations with respect to the Shares as may be set forth in any purchase
agreement, registration rights agreement or any other agreement or document
relating to the Shares.
Each of the undersigned understands and agrees that all certificates
evidencing the Shares to be issued to the undersigned may bear the following
legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
Very truly yours,
--------------------
EXHIBIT F
FORM OF NONCOMPETITION AGREEMENT
This NON-COMPETITION AGREEMENT (the "Agreement") is made this ___th day
of January, 2000, by and between DITECH COMMUNICATIONS CORPORATION, a Delaware
corporation (the "Company"), and _______________ (the "Seller").
RECITALS
The Seller is a substantial shareholder, an officer and a director of
each of Telinnovation Service Corporation, a California corporation ("TSC"), and
Telinnovation Corporation, a California corporation ("TC"). The Seller is a
general partner of Telinnovation, a California general partnership (the
"Partnership," together with TC and TSC, "Telinnovation"). The Company,
Telinnovation, the Seller and certain other parties have entered into an Asset
Purchase Agreement, dated as of December __, 1999 (the "Purchase Agreement"),
providing for the purchase by the Purchaser of all of the Assets, and the
assumption by the Purchaser of the Assumed Liabilities. In connection therewith,
the Seller has agreed not to compete with the Company in the manner and to the
extent herein set forth. The Seller has agreed to enter into this Agreement as
an inducement to the Purchaser to enter into the Purchase Agreement and
consummate the Transactions.
All capitalized but undefined terms used herein this Agreement shall
have the meanings set forth in the Purchase Agreement.
AGREEMENT
In consideration of the mutual covenants herein contemplated and
intending to be legally bound hereby, the Purchaser and the Seller agree as
follows:
1. RESTRICTION ON COMPETITION. Until four (4) years after the Closing
Date, the Seller shall not, directly or indirectly, without the prior written
consent of the Purchaser, (i) own, manage, operate, join, control, finance or
participate in the ownership, management, operation, control or financing of, or
be connected as an officer, director, employee, partner, principal, agent,
representative, consultant, licensor or otherwise with, any business or
enterprise engaged in any business whose products or activities compete in whole
or in part with the products or activities of the Company, within the Restricted
Territory (as defined below), or (ii) engage in any other manner, within the
Restricted Territory, in any business whose products or activities compete in
whole or in part with the products or activities of the Company. Notwithstanding
the above, the Seller shall not be deemed to be engaged, directly or indirectly,
in any business in contravention of subparagraphs (i) or (ii) above, if the
Seller participates in any such business solely as a passive investor in up to
1% of the equity securities of a company or partnership, the securities of which
are publicly traded. "Restricted Territory" means (a) each county or similar
political subdivision of each State of the United States of America (including
each of the counties in the State of California), (b) each State, territory or
possession of the United States of America and (c) any other country in the
world.
2. NON-INTERFERENCE BY THE SELLER. The Seller further agrees that until
four (4) years after the Closing Date, he will not, without the prior written
consent of the Purchaser, (i) interfere with the business of the Purchaser by
soliciting, attempting to solicit, inducing, or otherwise causing any employee
or consultant of the Purchaser to terminate his or her employment as such in
order to become an employee, consultant or independent contractor to or for any
business that competes with the business of the Purchaser or to or for any
company with which the Seller is associated in any way; or (ii) induce or
attempt to induce any customers, suppliers, distributors, resellers, or
independent contractor of the Purchaser to terminate their relationships with,
or to take any action that would be disadvantageous to the business of, the
Purchaser.
3. INDEPENDENCE OF OBLIGATIONS. The covenants of the Seller set
forth in this Agreement shall be construed as independent of any other agreement
or arrangement between the Seller, on the one hand, and the Purchaser, on the
other, and the existence of any claim or cause of action by the Seller against
the Purchaser shall not constitute a defense to the enforcement of such
covenants against the Seller.
4. EQUITABLE RELIEF. The Seller expressly acknowledges that damages
alone will not be an adequate remedy for any breach by the Seller of the
covenants set forth in Sections 1 and 2 hereof and that the other parties
hereto, in addition to any other remedies which they may have, whether at law,
in equity, by contract or otherwise, shall be entitled, as a matter of right, to
injunctive relief, including specific performance, in any court of competent
jurisdiction with respect to any actual or threatened breach by the Seller of
any of said covenants.
5. SEVERABILITY, ETC.
a. If any provision of this Agreement or any part of any such
provision is held under any circumstances to be invalid or unenforceable in any
jurisdiction, then (i) such provision or part thereof shall, with respect to
such circumstances and in such jurisdiction, be deemed amended to conform to
applicable laws so as to be valid and enforceable to the fullest possible
extent, (ii) the invalidity or unenforceability of such provision or part
thereof under such circumstances and in such jurisdiction shall not affect the
validity or enforceability of such provision or part thereof under any other
circumstances or in any other jurisdiction, and (iii) such invalidity of
enforceability of such provision or part thereof shall not affect the validity
or enforceability of the remainder of such provision or the validity or
enforceability of any other provision of this Agreement. Each provision of this
Agreement is separable from every other provision of this Agreement, and each
part of each provision of this Agreement is separable from every other part of
such provision.
b. The parties intend that the covenant contained in Section 1
above shall be construed as a series of separate covenants, one for each
geographical unit specified. Except for geographical coverage, each such
separate covenant shall be deemed identical in terms to the covenant contained
in Section 1 above. If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants deemed included in this Agreement, then
the unenforceable covenant shall be deemed eliminated from these provisions for
the purpose of those
proceedings to the extent necessary to permit the remaining separate covenants
to be enforced.
6. WAIVER OF BREACH. The failure or delay by the Purchaser in
enforcing any provision of this Agreement shall not operate as a waiver thereof,
and the waiver by the Purchaser or a breach of any provision of this Agreement
by the Seller shall not operate or be construed as a waiver of any subsequent
breach or violation thereof. All waivers shall be in writing and signed by the
party to be bound.
7. ASSIGNMENT. This Agreement shall be assignable by the Purchaser
only to any person, firm or corporation which may become a successor in interest
by purchase, merger or otherwise to the Purchaser or the business operated by
the Purchaser. This Agreement is not assignable by the Seller.
8. ENTIRE AGREEMENT; AMENDMENT. This Agreement represents the entire
agreement and understanding of the parties with respect to the subject matter
hereof and supersedes all prior agreements and understandings of the parties in
connection therewith. It may not be altered or amended except by an agreement in
writing signed by the parties to be bound.
9. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the Purchaser and its permitted successors and assigns and the
Seller and the Seller's heirs and legal representatives.
10. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of California (without
giving effect to principles of conflicts of laws).
IN WITNESS WHEREOF, the undersigned have executed this Non-Competition
Agreement as of the date first above written.
DITECH COMMUNICATIONS CORPORATION,
a Delaware corporation
By:
--------------------------------
Name:
Title:
-----------------------------------
[The Seller]
EXHIBIT G
FORM OF GENERAL RELEASE
THIS GENERAL RELEASE ("General Release") is being executed and delivered as
of February 1, 2000, by XXXXXXX XXXXX, an individual ("Xxxxx"), XXXXX XXXXXXX,
an individual ("Xxxxxxx"), and XXXXXXX XXXXX, an individual ("Hardy," together
with Xxxxx and Xxxxxxx, the "Releasors"), to and in favor of, and for the
benefit of, DITECH COMMUNICATIONS CORPORATION, a Delaware corporation (the
"Purchaser"), TELINNOVATION SERVICE Corporation, a California corporation
("TSC"), TELINNOVATION CORPORATION, a California corporation ("TC") and
TELINNOVATION, a California general partnership (the "Partnership," together
with TC and TSC, the "Sellers").
RECITALS
A. The Purchaser, the Sellers, the Partnership, Xxxxx and Xxxxxxx have
entered in an Asset Purchase Agreement, dated December 8, 1999 (the "Purchase
Agreement"), providing for the purchase by the Purchaser of all of the Assets
and the assumption by the Purchaser of the Assumed Liabilities.
B. The Purchaser and Hardy have entered in an Asset Purchase Agreement,
dated December 8, 1999 (the "Hardy Agreement"), providing for the purchase by
the Purchaser of certain of Hardy's assets as provided therein.
C. The Purchaser has required, as a condition to consummating the
Transactions contemplated by the Purchase Agreement and the transactions
contemplated by the Hardy Agreement, that the Releasors execute and deliver this
General Release.
D. All capitalized and undefined terms shall have the meanings set forth in
the Purchase Agreement.
AGREEMENT
In order to induce Purchaser to consummate the Transactions contemplated by
the Purchase Agreement and the transactions contemplated by the Hardy Agreement,
and for other valuable consideration (the receipt and sufficiency of which are
hereby acknowledged by the Releasors), the Releasors hereby covenant and agree
as follows:
1. RELEASE. Each Releasor, for himself and for each of such Releasor's
Associated Parties (as defined in Section 2), hereby generally, irrevocably,
unconditionally and completely releases and forever discharges each of the
Releasees (as defined in Section 2) from, and hereby irrevocably,
unconditionally and completely waives and relinquishes, each of the Released
Claims (as defined in Section 2).
2. DEFINITIONS.
(a) The term "Associated Parties," when used herein with respect
to a Releasor, shall mean and include: (i) such Releasor's predecessors,
successors, executors, administrators, heirs and estate; (ii) such Releasor's
past, present and future assigns, agents and representatives; (iii) each entity
that such Releasor has the power to bind (by such Releasor's acts or signature)
or over which such Releasor directly or indirectly exercises control; and (iv)
each entity of which such Releasor owns, directly or indirectly, at least 50% of
the outstanding equity, beneficial, proprietary, ownership or voting interests.
(b) The term "Releasees" shall mean and include: (i) Purchaser,
(ii) the Sellers, and (iii) the successors and past, present and future assigns,
directors, officers, partners, employees, agents, attorneys and representatives
of the Purchaser and respective Seller.
(c) The term "Claims" shall mean and include all past, present
and future disputes, claims, controversies, demands, rights, obligations,
liabilities, actions and causes of action of every kind and nature, including:
(i) any unknown, unsuspected or undisclosed claim; (ii) any claim or right that
may be asserted or exercised by a Releasor in such Releasor's capacity as a
stockholder, director, officer, partner or employee of the Sellers or in any
other capacity; and (iii) any claim, right or cause of action based upon any
breach of any express, implied, oral or written contract or agreement.
(d) The term "Released Claims" shall mean and include each and
every Claim that (i) any Releasor or any Associated Party of any Releasor may
have had in the past, may now have or may have in the future against any of the
Releasees, and (ii) has arisen or arises directly or indirectly out of, or
relates directly or indirectly to, any circumstance, agreement, activity,
action, omission, event or matter occurring or existing on or prior to the date
of this General Release (excluding only such Releasor's rights, if any, under
the Purchase Agreement).
3. CIVIL CODE SS.1542. Each Releasor (a) represents, warrants and
acknowledges that such Releasor has been fully advised by his attorney of the
contents of Section 1542 of the Civil Code of the State of California, and (b)
hereby expressly waives the benefits thereof and any rights such Releasor may
have thereunder. Section 1542 of the Civil Code of the State of California
provides as follows:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his settlement
with the debtor."
Each Releasor also hereby waives the benefits of, and any rights such Releasor
may have under, any statute or common law principle of similar effect in any
jurisdiction.
4. REPRESENTATIONS AND WARRANTIES. Each Releasor represents and
warrants that:
(a) such Releasor has not assigned, transferred, conveyed or
otherwise disposed of any Claim against any of the Releasees, or any direct or
indirect interest in any such Claim, in whole or in part;
(b) to the best of such Releasor's knowledge, no other person or
entity has any interest in any of the Released Claims;
(c) no Associated Party of such Releasor has or had any Claim
against any of the Releasees;
(d) no Associated Party of such Releasor will in the future have
any Claim against any Releasee that arises directly or indirectly from or
relates directly or indirectly to any circumstance, agreement, activity, action,
omission, event or matter occurring or existing on or before the date of this
General Release;
(e) this General Release has been duly and validly executed and
delivered by such Releasor;
(f) this General Release is a valid and binding obligation of
such Releasor and such Releasor's Associated Parties, and is enforceable against
such Releasor and each of such Releasor's Associated Parties in accordance with
its terms;
(g) there is no action, suit, proceeding, dispute, litigation,
claim, complaint or investigation by or before any court, tribunal, governmental
body, governmental agency or arbitrator pending or, to the best of the knowledge
of such Releasor, threatened against such Releasor or any of such Releasor's
Associated Parties that challenges or would challenge the execution and delivery
of this General Release or the taking of any of the actions required to be taken
by such Releasor under this General Release;
(h) neither the execution and delivery of this General Release
nor the performance hereof will (i) result in any violation or breach of any
agreement or other instrument to which such Releasor or any of such Releasor's
Associated Parties is a party or by which such Releasor or any of such
Releasor's Associated Parties is bound, or (ii) result in a violation or any
law, rule, regulation, treaty, ruling, directive, order, arbitration award,
judgment or decree to which such Releasor or any of such Releasor's Associated
Parties is subject; and
(i) no authorization, instruction, consent or approval of any
person or entity is required to be obtained by such Releasor or any of such
Releasor's Associated Parties in connection with the execution and delivery of
this General Release or the performance hereof.
5. INDEMNIFICATION. Without in any way limiting any of the rights or
remedies otherwise available to any Releasee, each Releasor shall indemnify and
hold harmless each Releasee against and from any loss, damage, injury, harm,
detriment, lost opportunity, liability, exposure, claim, demand, settlement,
judgment, award, fine, penalty, tax, fee, charge or expense (including
attorneys' fees) that is directly or indirectly suffered or incurred at any time
by such Releasee, or to which such Releasee otherwise becomes subject at any
time, and that arises directly or indirectly out of or by virtue of, or relates
directly or indirectly to, (a) any failure on the part of such Releasor to
observe, perform or abide by, or any other breach of, any restriction, covenant,
obligation, representation, warranty or other provision contained herein, or (b)
the assertion or purported assertion of any of the Released Claims by such
Releasor or any of such Releasor's
Associated Parties.
6. MISCELLANEOUS.
(a) This General Release sets forth the entire understanding of
the parties relating to the subject matter hereof and supersedes all prior
agreements and understandings among or between any of the Releasors and
Releasees relating to the subject matter hereof.
(b) If any provision of this General Release or any part of any
such provision is held under any circumstances to be invalid or unenforceable in
any jurisdiction, then (i) such provision or part thereof shall, with respect to
such circumstances and in such jurisdiction, be deemed amended to conform to
applicable laws so as to be valid and enforceable to the fullest possible
extent, (ii) the invalidity or unenforceability of such provision or part
thereof under such circumstances and in such jurisdiction shall not affect the
validity or enforceability of such provision or part thereof under any other
circumstances or in any other jurisdiction, and (iii) such invalidity or
enforceability of such provision or part thereof shall not affect the validity
or enforceability of the remainder of such provision or the validity or
enforceability of any other provision of this General Release. If any provision
of this General Release or any part of such provision is held to be
unenforceable against any Releasor, then the unenforceability of such provision
or part thereof against such Releasor shall not affect the enforceability
thereof against any other Releasor. Each provision of this General Release is
separable from every other provision of this General Release, and each part of
each provision of this General Release is separable from every other part of
such provision.
(c) This General Release shall be construed in accordance with,
and governed in all respects by, the laws of the State of California (without
giving effect to principles of conflicts of laws).
(d) Any legal action or other legal proceeding relating to this
General Release or the enforcement of any provision of this General Release may
be brought or otherwise commenced by any Releasee in any state or federal court
located in the State of California. Each Releasor:
(i) expressly and irrevocably consents and submits to the
jurisdiction of each state and federal court located in the State of California
in connection with any such legal proceeding;
(ii) agrees that each state and federal court located in the
State of California shall be deemed to be a convenient forum; and
(iii) agrees not to assert (by way of motion, as a defense or
otherwise), in any such legal proceeding commenced in any state or federal court
located in the State of California, any claim that such Releasor is not subject
personally to the jurisdiction of such court, that such legal proceeding has
been brought in an inconvenient forum, that the venue of such proceeding is
improper or that this General Release or the subject matter of this General
Release may not be enforced in or by such court.
Nothing contained in this General Release shall be deemed to limit or otherwise
affect the right of any Releasee (1) to commence any legal proceeding or to
otherwise proceed against any of the Releasors or any other person or entity in
any other forum or jurisdiction, or (2) to raise this Release as a defense in
any legal proceeding in any other forum or jurisdiction.
(e) This General Release may be executed in several counterparts,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
(f) Each Releasor shall execute and/or cause to be delivered to
each Releasee such instruments and other documents, and shall take such other
actions, as such Releasee may reasonably request for the purpose of carrying out
or evidencing any of the actions contemplated by this General Release.
(g) If any legal action or other legal proceeding relating to
this General Release or the enforcement of any provision hereof is brought by
any Releasor or Releasee, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements to the extent actually
incurred (in addition to any other relief to which the prevailing party may be
entitled).
(h) This General Release shall be effective with respect to, and
shall be binding upon and enforceable against, each Releasor who executes this
General Release, regardless of whether any of the other Releasors executes this
General Release.
(i) Whenever required by the context, the singular number shall
include the plural, and vice versa; the masculine gender shall include the
feminine and neuter genders; and the neuter gender shall include the masculine
and feminine genders.
(j) Any rule of construction to the effect that ambiguities are
to be resolved against the drafting party shall not be applied in the
construction or interpretation of this General Release.
(k) As used in this General Release, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, and shall be deemed to be followed by the words "without
limitation."
IN WITNESS WHEREOF, the Releasors have caused this General Release to be
executed as of the date first above written.
RELEASORS:
------------------------------
Xxxxxxx Xxxxx, an individual
------------------------------
Xxxxx Xxxxxxx, an individual
------------------------------
Xxxxxxx Xxxxx, an individual
EXHIBIT H
FORM OF OPINION OF BERLINER XXXXX
EXHIBIT I
EXCLUDED ASSETS
The following assets of the Sellers are Excluded Assets and will not be
among the Assets transferred to the Purchaser:
1. All Sellers' cash, cash equivalents, certificates of deposit,
money market accounts, deposits, checking and savings
accounts, and any financial institution accounts and financial
instruments as of and at the time of Closing.
2. All Sellers' shares of stock, bonds and securities holdings in
any brokerage account, and all other equity interests,
investments and securities held by the Sellers as of and at
the time of Closing.
3. All Sellers' accounts receivable and any other receivable or
right to payment for license related royalties and other
revenue generated from the Assets for any period prior to the
Closing from Nortel (two contracts), Cisco, Alcatel, ANI,
Transmedia, Sonus Networks, DGI, Latitude , Telrad and
Hothaus, provided such amounts are collected within the
nine-month period immediately following the Closing Date and
are not the result of a Ditech audit of such entities.
4. All motor vehicles of the Sellers as of and at the time of
Closing.
5. All Sellers' contracts that are identified in Part 2.11 of the
Disclosure Schedule other than those contracts set forth on
Exhibit D.
6. Any Asset or any claim or right or any benefit arising
thereunder or resulting therefrom (a "Consent-Required Asset")
if an attempted assignment of such Consent-Required Asset to
Purchaser, without consent of one or more third parties, would
constitute a breach or other contravention thereof or would in
any way adversely affect the rights of the Sellers, the
General Partners or the Purchaser thereunder; PROVIDED,
HOWEVER, that once such consents are obtained, Sellers shall,
pursuant to the Assignment Agreement between the parties,
automatically effect an immediate assignment of such
Consent-Required Asset without further action by either party
to the Purchase Agreement.
EXHIBIT J
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, ________________ hereby sells, assigns and transfers
unto DITECH COMMUNICATIONS CORPORATION, a Delaware corporation (the "Company"),
pursuant to the Asset Purchase Agreement, dated December __, 1999 by and between
the undersigned, the Company and the other parties named therein (the
"Agreement"), and the Escrow Agreement (as defined in the Agreement)
___________________ (______) shares of Common Stock of the Company standing in
the undersigned's name on the books of the Company represented by Certificate
No[(S)] _________ and does hereby irrevocably constitute and appoint the
Company's Secretary attorney to transfer said stock on the books of the Company
with full power of substitution in the premises. This Assignment may be used
only in accordance with and subject to the terms and conditions of the Agreement
and the Escrow Agreement, in connection with the repurchase of shares of Common
Stock issued to the undersigned pursuant to the Agreement and the Escrow
Agreement.
Dated:
(Signature)
(Print Name)
EXHIBIT K
FORM OF REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of February 1, 2000, by and
among DITECH COMMUNICATIONS CORPORATION, a Delaware corporation (the "Company"),
TELINNOVATION SERVICE CORPORATION, a California corporation ("TSC"),
TELINNOVATION CORPORATION, a California corporation ("TC"), TELINNOVATION, a
California general partnership (the "Partnership," together with TC and TSC,
"Telinnovation"), XXXXXXX XXXXX, an individual ("Xxxxx"), XXXXX XXXXXXX, an
individual ("Xxxxxxx") and XXXXXXX XXXXX ("Xxxxx," together with Xxxxx and
Xxxxxxx, the "Sellers").
RECITALS
A. The Company, Telinnovation, Xxxxx and Xxxxxxx have entered into an Asset
Purchase Agreement dated December 8, 1999 (the "Telinnovation Agreement"),
providing for the sale of substantially all of the assets of Telinnovation to
the Company pursuant to the terms set forth therein.
B. The Company and Hardy have entered into an Asset Purchase Agreement
dated December 8, 1999 (the "Hardy Agreement," together with the Telinnovation
Agreement, the "Purchase Agreements"), providing for the sale of certain of the
assets of Hardy to the Company pursuant to the terms set forth therein.
C. In order to induce the Sellers to enter into their respective Purchase
Agreements, the Company has agreed to provide the registration rights set forth
in this Agreement. The execution and delivery of this Agreement is a condition
to the closing under both Purchase Agreements.
The parties hereto hereby agree as follows:
1. DEMAND REGISTRATION.
(a) REQUEST FOR REGISTRATION. Commencing June 9, 2000, the holders of a
majority of the Registrable Securities may request, one time only, registration
under the Securities Act of all or any portion of their Registrable Securities
on Form S-2 or S-3 or any similar short-form registration ("Short-Form
Registrations"), if available; PROVIDED THAT the aggregate offering value of the
Registrable Securities requested to be registered in any Short-Form Registration
must equal at least $1,000,000. The registration requested pursuant to this
Section 1(a) is referred to herein as the "Demand Registration." The Demand
Registration shall specify the approximate number of Registrable Securities
requested to be registered and the anticipated per share price range for such
offering. Within ten (10) days after receipt of any such request, the Company
shall give written notice of such requested registration to all other holders of
Registrable Securities and, subject to Section 1(d) below, shall include in such
registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within fifteen (15) days after
the receipt of the Company's notice.
(b) DEMAND EXPENSES. All Registration Expenses of the holders of
Registrable
Securities incurred in connection with a Demand Registration shall be paid by
the Company.
(c) PRIORITY ON DEMAND REGISTRATION. The Company shall not include in any
Demand Registration that is a firmly underwritten offering any securities which
are not Registrable Securities without the prior written consent of the holders
of a majority of the Registrable Securities included in such registration. If a
Demand Registration is an underwritten offering and the managing underwriters
advise the Company in writing that in their opinion the number of Registrable
Securities and, if permitted hereunder, other securities requested to be
included in such offering exceeds the number of Registrable Securities and other
securities, if any, which can be sold in an orderly manner in such offering
within a price range acceptable to the holders of a majority of the Registrable
Securities initially requesting registration, the Company shall include in such
registration prior to the inclusion of any securities which are not Registrable
Securities the number of Registrable Securities requested to be included which
in the opinion of such underwriters can be sold in an orderly manner within the
price range of such offering, pro rata among the respective holders thereof on
the basis of the amount of Registrable Securities owned by each such holder.
2. RESTRICTIONS ON DEMAND REGISTRATION. The Company may postpone for up to
ninety (90) days the filing or the effectiveness of a registration statement for
a Demand Registration if the Company's board of directors determines in its
reasonable good faith judgment that such Demand Registration would reasonably be
expected to have a material adverse effect on any proposal or plan by the
Company or any of its Subsidiaries to engage in any acquisition of assets (other
than in the ordinary course of business) or any merger, consolidation, tender
offer, reorganization or similar transaction; PROVIDED THAT in such event, the
holders of Registrable Securities initially requesting such Demand Registration
shall be entitled to withdraw such request and, if such request is withdrawn,
such Demand. Registration shall not count as a permitted Demand Registration
hereunder and the Company shall pay all Registration Expenses in connection with
such registration.
3. HOLDBACK AGREEMENTS. In connection with any underwritten public offering
of the Company's Common Stock, each holder of Registrable Securities shall not,
unless the underwriters managing the registered public offering otherwise agree,
effect any public sale or distribution (including sales pursuant to Rule 144) of
equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities (except as part of such
underwritten registration), during the ninety (90) day period beginning on the
date of the underwritten public offering of the Company's Common Stock.
4. REGISTRATION PROCEDURES. Whenever the holders of Registrable Securities
have requested that any Registrable Securities be registered pursuant to this
Agreement, the Company shall use its best efforts to effect the registration and
the sale of such Registrable Securities in accordance with the intended method
of disposition thereof, and pursuant thereto the Company shall as expeditiously
as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective; PROVIDED
THAT before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company shall furnish
to the counsel selected by the holders of a majority of the Registrable
Securities covered by such registration statement copies of all such documents
proposed to be filed;
(b) notify each holder of Registrable Securities of the effectiveness of
each registration statement filed hereunder and prepare and file with the
Securities and Exchange Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of not less
than one hundred eighty (180) days and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such registration
statement;
(c) furnish to each seller of Registrable Securities such number of copies
of such registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each preliminary
prospectus) and such other documents as such seller may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
seller;
(d) use its best efforts to register or qualify such Registrable Securities
under such securities or blue sky laws of such jurisdictions as any seller
reasonably requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller; PROVIDED THAT the Company shall not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction;
(e) notify each seller of such Registrable Securities, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not misleading, and,
at the request of any such seller, the Company shall prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus shall not contain an untrue
statement of a material fact or omit to state any fact necessary to make the
statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each securities
exchange on which similar securities issued by the Company are then listed and,
if not so listed, to be listed on the NASD automated quotation system and, if
listed on the NASD automated quotation system, use its best efforts to secure
designation of all such Registrable Securities covered by such registration
statement as a Nasdaq "national market system security" within the meaning of
Rule 11 Aa2-1 promulgated pursuant to the Securities Exchange Act or, failing
that, to secure Nasdaq authorization for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register as such with respect to such Registrable Securities
with the NASD;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities;
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(j) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
available to its security holders, as, soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 1 l(a) of the Securities Act and Rule 158 thereunder;
(k) permit any holder of Registrable Securities which holder, in
its reasonable judgment, might be deemed to be an underwriter or a controlling
person of the Company, to participate in the preparation of such registration or
comparable statement and to require the insertion therein of material, furnished
to the Company in writing, which in the reasonable judgment of such holder and
its counsel should be included;
(l) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Common Stock included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order; and
(m) obtain a comfort letter, addressed to the holders of the
Registrable Securities covered by the registration statement, from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by comfort letters as the holders of a majority of
the Registrable Securities being sold reasonably request.
5. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including, without limitation, all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, fees and disbursements
of custodians, and fees and disbursements of counsel for the Company
and all independent certified public accountants, underwriters (excluding
discounts and commissions) and other Persons retained by the Company (all such
expenses being herein called "Registration Expenses"), shall be borne as
provided in this Agreement; in addition, the Company shall pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit or quarterly review, the expense of any liability insurance and
the expenses and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed or on the NASD automated quotation system.
(b) In connection with each Demand Registration the Company shall
reimburse the holders of Registrable Securities included in such registration
for the reasonable fees and disbursements (up to a maximum of $5,000) of one
counsel chosen by the holders of a majority of the Registrable Securities
included in such registration.
(c) To the extent that Registration Expenses are not paid by the
Company, each holder of securities included in any registration hereunder shall
pay those Registration Expenses allocable to the registration of such holder's
securities so included, and any Registration Expenses not so allocable shall be
borne by all sellers of securities included in such registration in proportion
to the aggregate selling price of the securities to be so registered.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted by
law, each holder of Registrable Securities, its officers and directors and each
Person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder expressly for use
therein or, in a registration not involving an underwritten offering, are caused
by such holder's failure to deliver a copy of the registration statement or
prospectus or any amendments or supplements thereto after the Company has
furnished such holder with a sufficient number of copies of the same. In
connection with an underwritten offering, the Company shall indemnify such
underwriters, their officers and directors and each Person who controls such
underwriters (within the meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of the holders of Registrable
Securities.
(b) In connection with any registration statement in which a
holder of Registrable Securities is participating, each such holder shall
furnish to the Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration statement
or prospectus and, to the extent permitted by law, shall indemnify the Company,
its directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or omission is
contained in any information or affidavit so furnished in writing by such
holder; PROVIDED THAT the obligation to indemnify shall be individual, not joint
and several, for each holder and shall be limited to the net amount of proceeds
received by such holder from the sale of Registrable Securities pursuant to such
registration statement.
(c) Any Person entitled to indemnification hereunder shall (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (provided that the failure to give prompt
notice shall not impair any Person's right to indemnification hereunder to the
extent that such failure has not prejudiced the indemnifying party) and (ii)
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist with respect to such
claim, permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party. If such defense is
assumed, the indemnifying party shall not be subject to any liability for any
settlement made by the indemnified party without its-consent (but such consent
shall not be unreasonably withheld). An indemnifying party who is not entitled
to, or elects not to, assume the defense of a claim shall not be obligated to
pay the fees and expenses of more than one counsel for all parties indemnified
by such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and shall survive the transfer of securities. The
Company also agrees to make such provisions, as are reasonably requested by any
indemnified party, for contribution to such party in the event the Company's
indemnification is unavailable for any reason.
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, custody agreements, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements;
PROVIDED THAT no holder of Registrable Securities included in any underwritten
registration shall be required to make any representations or warranties to the
Company or the underwriters (other than representations and warranties regarding
such holder and such holder's intended method of distribution) or to undertake
any indemnification obligations to the Company or the underwriters with respect
thereto, except as otherwise provided in Section 6 hereof.
8. DEFINITIONS.
(a) "REGISTRABLE SECURITIES" means (i) the aggregate total of six
hundred thousand (600,000) shares of the Company's Common Stock sold and issued
pursuant to the Purchase
Agreements, (ii) any Common Stock issued or issuable with respect to the
securities referred to in clause (i) above by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization, and (iii) any other shares of Common
Stock held by Persons holding securities described in clauses (i) or (ii) above.
As to any particular Registrable Securities, such securities shall cease to be
Registrable Securities of the second anniversary of the date of the Purchase
Agreements.
(b) Unless otherwise stated, other capitalized terms contained
herein have the meanings set forth in the Purchase Agreements.
9. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company shall not hereafter
enter into any agreement with respect to its securities which is inconsistent
with or violates the rights granted to the holders of Registrable Securities in
this Agreement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company
shall not take any action, or permit any change to occur, with respect to its
securities which would materially and adversely affect the ability of the
holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would materially and
adversely affect the marketability of such Registrable Securities in any such
registration (including, without limitation, effecting a stock split or a
combination of shares).
(c) REMEDIES. Any Person having rights under any provision of
this Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(d) AMENDMENTS AND WAIVERS. Except as otherwise provided herein,
the provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and holders of a majority of the Registrable
Securities.
(e) SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities.
(f) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of this Agreement.
(g) COUNTERPARTS. This Agreement may be executed simultaneously
in two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
(h) DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
(i) GOVERNING LAW. All issues and questions concerning the
construction, validity, interpretation and enforcement of this Agreement and the
exhibits and schedules hereto shall be governed by, and construed in accordance
with, the laws of the State of California, without giving effect to any choice
of law or conflict of law rules or provisions (whether of the State of
California or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of California.
(j) NOTICES. All notices and other communications required or
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (i) five
(5) days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by first class mall, postage prepaid, (ii) upon delivery,
if delivered by hand (iii) one (1) business day after the business day of
deposit with Federal Express or similar overnight courier, freight prepaid or
(iv) one (1) business day after the business day of facsimile transmission, if
delivered by facsimile transmission with copy by first class mail, postage
prepaid, and shall be addressed as follows, or at such other address as a party
may designate by ten (10) days' advance written notice to the other parties to
this Agreement pursuant to the provisions of this Section 8(j):
(x) if to Telinnovation:
000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000-0000
Facsimile:
------------------
if to Xxxxx:
000 Xxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Facsimile:
------------------
if to Xxxxxxx:
00000 Xxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile:
------------------
if to Hardy:
0000 Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Facsimile:
------------------
with a copy to:
Berliner Xxxxx
00 Xxxxxxx Xxxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxxxxxxxxx 00000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
(y) if to the Company, to:
Ditech Communications Corporation
000 X. Xxxxxxxxxxx Xxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxx
with a copy to:
Cooley Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
TELINNOVATION,
a California general partnership
By:
--------------------------------------
Xxxxxxx Xxxxx, General Partner
By:
--------------------------------------
Xxxxx Xxxxxxx, General Partner
TELINNOVATION SERVICE CORPORATION,
a California corporation
By:
--------------------------------------
Xxxxxxx Xxxxx, Chief Executive Officer
TELINNOVATION CORPORATION,
a California corporation
By:
--------------------------------------
Xxxxxxx Xxxxx, Chief Executive Officer
-----------------------------------------
XXXXXXX XXXXX, an individual
-----------------------------------------
XXXXX XXXXXXX, an individual
-----------------------------------------
DITECH COMMUNICATIONS CORPORATION,
a Delaware corporation
By:
--------------------------------------
Xxxxxxx X. Xxxxxxx, Chief Financial
Officer
-----------------------------------------
XXXXXXX XXXXX, an individual
