EXECUTION COPY
SILICON BANDWIDTH, INC.
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
May __, 1999
The Panda Project, Inc.
000 Xxxxxx Xxxxx Xxxxxxx
Xxxx Xxxxx, XX 00000
Re: Acquisition by Silicon Bandwidth, Inc. of Assets of
The Panda Project, Inc.
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Gentlemen:
This letter, upon your execution and delivery of a copy to
Silicon Bandwidth, Inc., a Delaware corporation ( Purchaser ), shall
constitute and confirm the binding agreement between The Panda
Project, Inc., a Florida corporation ("Seller"), and Purchaser
regarding the acquisition (the "Acquisition") by Purchaser from Seller
(and its subsidiary corporations and related divisions, if applicable)
of the Assets (as defined in Exhibit A), including, without
limitation, substantially all of the assets of Seller including, but
not limited to, trade names, intellectual property, patents, trade
secrets, accounts receivable, equipment and inventories used in, or
necessary for, the operation of the semiconductor packaging and
interconnect devices business of Seller (the "Business"), as further
described below.
Concurrently with the execution of this Agreement, and as a
condition and inducement to Purchaser's willingness to enter into this
Agreement, certain securityholders of Seller, which, in the aggregate,
own, or will own after the exercise or conversion of securities of
Seller owned by such securityholders, sufficient shares of capital
stock of Seller to assure all necessary Seller shareholder approvals
of the Acquisition, are entering into a voting agreement in the form
attached hereto as Exhibit B (the "Voting Agreement.")
Section 1. Purchase of Assets. Purchaser shall purchase
from Seller, and Seller shall sell, convey and assign to Purchaser,
free and clear of all claims, liens and interests except as is
provided for herein, all of Seller's right, title and interest in and
to the Assets; provided, that, Seller shall not assign to Purchaser
any Excluded Assets (as defined in Exhibit A).
Section 2. Assignment and Assumption of Contracts. The
term "Assets" includes any and all contracts and other rights (the
"Contracts") used in, or necessary for, the operation of the Business,
except for contracts which are Excluded Assets.
Section 3. Liabilities. On the Closing Date, Purchaser
shall assume (i) liabilities and obligations arising out of the
ownership, use and operation of the Business after the Closing Date;
and (ii) the other liabilities and obligations specified in Exhibit
C (the "Assumed Liabilities"). Purchaser shall not be liable for any
other liabilities or obligations of Seller or its respective
affiliates except as is otherwise specifically set forth herein.
Section 4. Payment of Purchase Price. On the Closing
Date, in consideration of the sale by Seller of the Business and
Assets to Purchaser, Purchaser will: (i) issue to Seller the shares
of common stock of Purchaser (the "Purchaser Common Stock") initially
representing 10% of the capital stock of Purchaser on a fully diluted
basis (counting the shares underlying the options pool referred to in
Section 9 hereof as outstanding as well as the 7,000,000 shares of
Series A Preferred Stock referred to in Section 7(iii) hereof); and
(ii) assume the liabilities specified in Section 3 hereof.
Section 5. Closing Date. The term "Closing Date means a
day set for the closing of the Acquisition and mutually agreeable to
Purchaser and Seller; provided, that in no event shall the Closing
Date be later than October 31, 1999. If the Closing Date shall not
have occurred by October 31, 1999, this agreement (or the Definitive
Agreement) shall terminate by written notice by either party, with no
continuing obligations of any party, except pursuant to Sections 17,
18 and 19 hereof.
Section 6. Representations and Warranties of Seller.
Seller hereby represents and warrants to Purchaser that:
(i) Organization and Qualification. Seller and each
directly and indirectly owned subsidiary of Seller has been duly
organized and is validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization, as the case may
be, and has the requisite corporate power and authority and all
necessary governmental approvals to own, lease and operate its
properties and to carry on its agreements, limitations on voting
rights, charges and encumbrances of any nature whatsoever.
(ii) Authority Relative to This Letter. Seller has all
necessary corporate power and authority to execute and deliver this
letter and to perform its obligations hereunder and to consummate the
Acquisition. The execution and delivery of this letter by Seller and
the consummation by Seller of the Acquisition have been duly and
validly authorized by all necessary corporate action, and, to Seller's
knowledge, no other corporate proceedings on the part of Seller are
necessary to authorize this letter or to consummate the Acquisition
except the approval of the Definitive Agreement and the Acquisition by
holders of a majority of the common stock of Seller and the holders of
66 2/3 % of the Series A Preferred Stock of Seller. The
securityholders of Seller who are entering into the Voting Agreement
own, or will own after the exercise or conversion of securities of
Seller owned by such securityholders, sufficient shares of capital
stock of Seller to assure all necessary Seller shareholder approvals
of the Acquisition. This letter has been duly executed and delivered
by Xxxxxx and, assuming the due authorization, execution and delivery
by Xxxxxxxxx, constitutes the legal, valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms.
(iii) No Conflict; Required Filings and Consents.
a. The execution and delivery of this letter by Seller
do not, and the performance by Seller of its
obligations hereunder and the consummation of the
Acquisition will not, (i) conflict with or violate
any provision of the articles of incorporation or
bylaws of Seller or any equivalent organizational
documents of any subsidiary of Seller, (ii) conflict
with or violate any law applicable to Seller or any
Seller subsidiaries or by which any property or asset
of Seller or any Seller subsidiaries is bound or
affected or (iii) result in any breach of or
constitute a default (or an event which, with the
giving of notice or lapse of time or both, could
reasonably be expected to become a default) under, or
give to others any right of termination, amendment,
acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any
property or asset of Seller or any Seller
subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation,
except, with respect to clauses (ii) and (iii), for
the Helix security interest and for any such
conflicts, violations, breaches, defaults or other
occurrences which are not reasonably expected,
individually or in the aggregate, to prevent or
materially delay the performance by Seller of its
obligations pursuant to this letter or the
consummation of the Acquisition.
b. The execution and delivery of this letter by Seller
do not, and the performance by Seller of its
obligations hereunder and the consummation of the
Acquisition will not, require any consent, approval,
authorization or permit of, or filing by Seller with
or notification by Seller to, any governmental
entity.
(iv) Properties. Seller has good and marketable title,
free and clear of all liens, to all their material properties and
assets, whether tangible or intangible, real, personal or mixed,
except liens arising in the ordinary course of business and except for
the Helix security interest. All buildings, and all fixtures,
equipment and other property and assets that are material to its
business on a consolidated basis, held under leases or sub-leases by
Seller or any subsidiary of Seller are held under valid instruments
enforceable in accordance with their respective terms, subject to
applicable laws of bankruptcy, insolvency or similar laws relating to
creditors' rights generally and to general principles of equity
(whether applied in a proceeding in law or equity). Substantially all
of Seller's and Seller's subsidiaries' equipment in regular use, which
is to be purchased by Purchaser, has been reasonably maintained and is
in serviceable condition, reasonable wear and tear excepted.
(v) Disclosure. No representation or warranty of
Seller in this letter contains any untrue statement of a material
fact, or omits to state a material fact necessary to make the
statements contained herein not misleading.
Section 7. Representations and Warranties of Purchaser.
Purchaser hereby represents and warrants to Seller that:
(i) Organization and Qualification. Purchaser has been
duly organized and is validly existing and in good standing under the
laws of the state of Delaware.
(ii) Authority Relative to This Letter. Purchaser has
all necessary corporate power and authority to execute and deliver
this letter and to perform its obligations hereunder and to consummate
the Acquisition. The execution and delivery of this letter by
Xxxxxxxxx and the consummation by Purchaser of the Acquisition have
been duly and validly authorized by all necessary corporate action,
and, to Purchaser's knowledge, no other corporate proceedings on the
part of Purchaser are necessary to authorize this letter or to
consummate the Acquisition. This letter has been duly executed and
delivered by Xxxxxxxxx and, assuming the due authorization, execution
and delivery by Seller, constitutes the legal, valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance
with its terms.
(iii) Capitalization. As of the Closing Date, the
authorized capital stock of Purchaser shall consist of 10,000,000
shares of preferred stock, 7,000,000 of which shall be issued and
outstanding, and 30,000,000 shares of common stock, 1,000,000 of which
shall be issued and outstanding to Seller pursuant to Section 4
hereof.
(iv) Financing Commitments. Purchaser has received
irrevocable commitments from investors to provide Purchaser equity
capital of not less than $6,000,000 in cash and commitments, subject
only to the closing of the Acquisition in accordance with the terms
and conditions of this Agreement.
(v) Purchaser's Business. Purchaser has not engaged in
any business of any kind or nature and will not engage in any
business, except as may be contemplated by this Agreement. Purchaser
has no indebtedness or liabilities of any kind or nature and will not
incur any indebtedness or liabilities from the date hereof through the
Closing Date, except as contemplated by this Agreement.
Section 8. Interim Period. From the date hereof to the
Closing Date, Purchaser and Seller will consult on all action
reasonably necessary or appropriate to preserve the value of the
Business and the Assets and to operate the Business in the ordinary
course; Seller will operate the Business in the ordinary course,
consistent with past practice and with a view to preserving its value
and goodwill and will not implement any material changes to the
operation of the Business without notifying Purchaser's prior written
approval, provided, that, ultimate control of the Business shall
remain exclusively with Seller until after the Closing Date. Subject
to the foregoing proviso, the Definitive Agreement will contain other
customary restrictions on the operation of the Business prior to the
Closing Date, and provided further, that Seller may take any action
with respect to Excluded Assets and excluded liabilities
notwithstanding the foregoing. Seller shall take no action nor allow
any action to be taken to cause any of the representations or
warranties of Seller under this Agreement to be untrue.
Section 9. Employee Matters. Following the Closing Date
Purchaser shall offer employment to all of the employees of the
Business other than selected individuals to be identified by Purchaser
at least 5 days prior to the Closing Date (collectively, the
"Employees"). Shares of Purchaser Common Stock equal to 20% of the
initial capital stock of Purchaser (computed on a fully diluted basis
including the issuance to Seller and the issuance of 7,000,000 shares
of Series A Preferred) will be reserved for issuance to Purchaser's
employees, officers and directors (specifically including the
Employees) upon the exercise of employee stock options with terms and
conditions, including vesting tied to continued employment by
Purchaser, customary to venture capital backed start-up companies.
Conditions to Acquisition. Unless waived in writing by
Purchaser, Purchaser's obligation to consummate the Acquisition shall
be subject to the satisfaction of the following conditions, among
others, to be contained in the Definitive Agreement:
(i) completion of, and satisfaction with the results
of, financial, business, technical and legal due diligence reviews of
Seller by the Purchaser;
(ii) Seller shall have solicited and received the
approval of the holders of common stock of Seller necessary to effect
the sale of substantially all of the assets of Seller;
(iii) if necessary to consummate the Acquisition,
Seller shall have solicited and received the approval of the holders
of 66-2/3% of the shares of Series A Preferred Stock of Seller;
(iv) Purchaser shall have received all permits,
authorizations, consents, agreements and approvals of all foreign or
domestic governmental agencies and other third parties which are
necessary or appropriate to permit Purchaser to use and operate the
Assets in a manner consistent with the manner in which they were used
and operated by Seller prior to the Closing Date (the "Approvals"),
which Approvals shall not contain any condition or restriction which
materially impairs Purchaser's ability to use, operate or enjoy the
Assets;
(v) there shall not be in effect any injunction, stay
or restraining order issued by a court of competent jurisdiction,
whether foreign or domestic, staying the effectiveness of any
Approval, and there shall not be any pending request for such an
injunction, stay or restraining order;
(vi) there shall not be threatened or pending any suit,
action, investigation, inquiry or other proceeding by or before any
court of competent jurisdiction or governmental agency which, in
Purchaser's reasonable judgment, could have a material adverse effect
on Purchaser's ability to acquire, use, operate or enjoy the Assets;
(vii) Seller shall have delivered to Purchaser
appropriate closing documents, including a bill of sale and other
title documents, satisfactory in form and substance to Purchaser;
(viii) Seller shall have delivered to Purchaser a
signed counterpart of a stockholders' agreement including the terms
set forth in Exhibit D hereto and otherwise satisfactory to Purchaser
(the "Stockholders' Agreement");
(ix) Purchaser shall be satisfied that applicable bulk
sale or similar requirements shall have been complied with by Seller
on a timely basis;
(x) No material adverse change in the Business or the
Assets shall have occurred since the date hereof;
(xi) Purchaser shall have received audited financial
statements of Seller for the fiscal year ended December 31, 1998;
(xii) the Contracts shall have been assigned as
contemplated by Section 2;
(xiii) All of the employees of Seller prior to the
Closing Date designated by the Purchaser as key employees on Exhibit
E ("Key Employees") shall have accepted the offer of employment by
Purchaser made pursuant to Section 9 above;
(xiv) Purchaser shall be satisfied in its sole
discretion that Seller is able to sell, convey and assign to
Purchaser, free and clear of all claims, liens and interests except as
is provided for herein, all of Seller's right, title and interest in
and to the Assets; and
(xv) Seller shall have complied in all material
respects with its covenants and agreements hereunder.
(a) Unless waived in writing by Xxxxxx, Xxxxxx's
obligation to consummate the transactions contemplated hereby shall be
subject to the satisfaction of the following conditions, among others
to be contained in the Definitive Agreement:
(i) the conditions set forth in subsections (a)(ii) and
(iii) shall have been satisfied;
(ii) Purchaser and its current stockholders shall each
have delivered to Seller a signed counterpart of the Stockholders'
Agreement;
(iii) Purchaser shall have been capitalized with equity
capital of not less than $6,000,000 in cash and commitments; and
(iv) Purchaser shall have complied in all material
respects with its covenants and agreements hereunder.
Section 11. Definitive Agreement. Seller and Xxxxxxxxx
agree to negotiate in good faith and use their respective best efforts
towards the execution and delivery of the Definitive Agreement as
promptly as is practicable after the date hereof. The Definitive
Agreement shall contain terms and provisions, including
representations, warranties, warranty termination periods,
indemnities, etc., as are consistent with the terms hereof and as are
customary for transactions of this type.
Section 12. Due Diligence. Seller will provide
Purchaser, together with its accountants, counsel and other authorized
representatives, full and complete access during normal business hours
to all properties, books, records, agreements and facilities of Seller
(insofar as the same are relevant to the Business or the Assets),
wherever located, and Seller will make its officers, employees,
attorneys, agents, independent accountants and actuaries available to
discuss with Purchaser and its accountants, counsel and other
authorized representatives such aspects of the business, financial
condition or prospects of the Business and the Assets as Purchaser may
deem necessary or desirable. To the extent that the transactions
contemplated hereby are not consummated, all written information
provided by Seller to Purchaser or its aforementioned representatives
will promptly be returned following Seller's written request to
Purchaser. All material non-public information provided by Seller
will be treated as confidential and will not be disclosed by Purchaser
or its representatives to any third party (other than its accountants,
counsel and authorized representatives and prospective debt and equity
investors for the sole purpose of evaluating the transactions
contemplated herein) without the prior written consent of Seller,
except as required by law or in connection with any civil,
administrative, criminal or other legal proceedings and
investigations.
Section 13. Sales, Transfer and Recording Taxes.
Purchaser and Seller shall equally bear sales, transfer or recording
taxes and recording fees imposed in connection with the Acquisition.
Section 14. Affiliates. To the extent that any of the
Assets are owned or controlled by Seller's subsidiary corporations or
other affiliates, Seller shall cause such persons to convey such
Assets to Purchaser pursuant to the Definitive Agreement.
Section 15. Public Announcements. Seller and Purchaser
will cooperate in making, and coordinate the making of, any public
announcements of the terms hereof, the Definitive Agreement and/or the
Acquisition. Seller and Purchaser have agreed that upon the execution
and acceptance of this letter, Seller shall file a Form 8-K with the
Securities and Exchange Commission and issue a press release
announcing the Acquisition, the form of each of which has been agreed
upon by Seller and Purchaser.
Section 16. Exclusivity. From the date of execution of
this agreement until August 1, 1999 or, if earlier, until such time as
Purchaser shall state in writing to Seller that the Acquisition will
not be consummated and that negotiations are terminated unless the
parties shall have entered into the Definitive Agreement (the
"Exclusivity Period"), none of Seller nor any of its respective
directors, officers, agents or representatives will (i) solicit,
encourage, initiate or participate in any negotiations or discussions
with respect to, any offer or proposal to acquire all or any portion
of the Business or the Assets whether by purchase of assets or
otherwise, (ii) disclose any information not customarily disclosed to
any person concerning the Business or the Assets or afford to any
person or entity access to the properties, books or records of the
Business or the Assets or (iii) cooperate with any person to make any
proposal to purchase all or any part of the assets of the Business or
the Assets (directly or indirectly) other than inventory or non-
essential or excess assets sold in the ordinary course of business.
The Exclusivity Period may be extended to September 30, 1999 at
Purchaser's option by written notice to Seller if, on or prior to
August 1, 1999, Purchaser offers to extend a loan of $500,000 to
Seller to help finance the continued operations of Seller pending the
closing of the Acquisition. The terms of any such loan shall provide
that the loan be secured by a first priority perfected security
interest in all assets of Seller, bear interest at the rate of 6% per
annum, be due and payable September 30, 1999, and be convertible, at
Purchaser's option, into Seller's Common Stock at then current market
prices.
Section 17. Expenses. Except as is otherwise provided
herein, each party hereto shall be responsible for its own expenses
incurred in connection with this agreement, the Definitive Agreement
and the consummation of the transactions contemplated hereby and
thereby. This provision shall survive the termination of this
agreement. In the event that (i) Seller shall determine after the
date hereof to terminate negotiations regarding the Acquisition
(whether or not permitted hereby) in order to seek or entertain a
proposal for the purchase of all or a portion of the Business or the
Assets or (ii) Seller sells, or agrees to sell, all or a portion of
the Business or the Assets within the twelve month period following
the termination hereof or the Definitive Agreement, Seller shall
promptly reimburse to Purchaser, upon receipt of invoices, Purchaser's
and its affiliates' out-of-pocket expenses incurred in connection with
the Acquisition including, without limitation, legal fees, accounting
fees, independent consultant fees and other miscellaneous out-of-
pocket expenses. There shall be no obligation of Seller under clause
(ii) of this Section 17 if Purchaser terminates negotiations with
Seller regarding the Acquisition in a manner not permitted by this
Agreement or if Seller determines that a condition set forth in
Section 10(b) above has not been satisfied and such failure of
condition is not attributable to the failure of Seller to use it best
efforts.
Section 18. Specific Performance; Injunctive Relief.
Purchaser and Seller acknowledge that Purchaser will be irreparably
harmed and that there will be no adequate remedy at law for a
violation of any of the covenants or agreements of Seller set forth
herein. Therefore, it is agreed that, in addition to any other
remedies that may be available to Purchaser upon any such violation,
Purchaser shall have the right to enforce such covenants and
agreements by specific performance, injunctive relief or by any other
means available to Purchaser at law or in equity and Seller hereby
waives any and all defenses which could exist in its favor in
connection with such enforcement and waives any requirement for the
security or posting of any bond in connection with such enforcement.
Section 19. Reservation of Rights. Payment of the
expenses specified in Section 17 shall not in any manner limit any
remedies against Seller that Purchaser may have hereunder or under the
Definitive Agreement, or against Purchaser that Seller may have
hereunder or the Definitive Agreement, for breach hereof.
Section 20. Governing Law, Amendments, Etc. This
agreement and the Definitive Agreement shall in all respects be
governed by and construed in accordance with the laws of the State of
New York, without reference to principles of conflicts or choice of
law. This agreement may only be amended by a written instrument
signed by authorized representatives of each of the parties hereto,
and may only be terminated by a written instrument signed by the party
purporting to terminate the agreement. Purchaser may assign all or a
portion of this agreement or the Definitive Agreement to any
subsidiary of Purchaser, or any corporation formed by the stockholders
of Purchaser. None of such assignments shall relieve Purchaser of any
obligations it may have hereunder or under the Definitive Agreement.
This agreement may be executed by the parties hereto in counterparts
and by telecopy, each of which shall be deemed to constitute an
original, but all of which together shall constitute one and the same
instrument.
Please indicate your acceptance of and agreement to the
above by signing as indicated below.
Very truly yours,
SILICON BANDWIDTH, INC.
By:
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Xxxx X. Xxxxxxx
Chairman
Accepted and Agreed to this
_______ day of May, 1999.
THE PANDA PROJECT, INC.
By:
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Name:
Title:
