Exhibit 2.2
Execution Copy
ASSET PURCHASE AGREEMENT
between
GLOBESPAN, INC.
and
PAIRGAIN TECHNOLOGIES, INC.
Dated as of January 21, 2000
TABLE OF CONTENTS
Page
I. SALE AND TRANSFER OF ASSETS...............................................2
SECTION 1.01 Sale of Assets............................................2
SECTION 1.02 Nonassignability of Assets................................5
SECTION 1.03 License Option............................................6
II. CLOSING, PURCHASE PRICE, LIABILITIES, ETC.................................6
SECTION 2.01 Closing...................................................6
SECTION 2.02 Payment to the Seller on Closing Date.....................6
SECTION 2.03 Liabilities...............................................6
SECTION 2.04 Deliveries at the Closing.................................8
III. REPRESENTATIONS AND WARRANTIES............................................8
SECTION 3.01 Representations and Warranties of the Seller..............8
SECTION 3.02 Representations and Warranties of the Buyer..............24
IV. COVENANTS................................................................29
SECTION 4.01 Covenants of the Seller..................................29
SECTION 4.02 Covenants of the Buyer...................................31
SECTION 4.03 Notification of Certain Matters..........................31
SECTION 4.04 Confidentiality..........................................31
SECTION 4.05 Allocation of Purchase Price.............................32
SECTION 4.06 Transfer Taxes...........................................32
SECTION 4.07 Insurance................................................32
SECTION 4.08 Non-Competition..........................................32
SECTION 4.09 Group Employees..........................................34
SECTION 4.10 Further Assurances.......................................35
SECTION 4.11 Inquiries and Negotiations...............................35
SECTION 4.12 Transfer of Assets.......................................36
SECTION 4.13 Transition Services......................................36
SECTION 4.14 License of Embedded Trademarks...........................37
V. CONDITIONS PRECEDENT......................................................37
SECTION 5.01 Conditions Precedent to Obligations of the Buyer.........37
SECTION 5.02 Conditions Precedent to Obligations of the Seller........39
VI. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION.............................41
SECTION 6.01 Survival of Representations..............................41
SECTION 6.02 Tax Indemnity............................................42
SECTION 6.03 Seller's General Indemnity...............................42
SECTION 6.04 Intellectual Property Indemnification....................42
i
SECTION 6.05 Indemnification Pursuant to Certain Agreements...........45
SECTION 6.06 Buyer's General Indemnity................................46
SECTION 6.07 Conditions of Indemnification............................46
SECTION 6.08 Limitations on Indemnity.................................47
SECTION 6.09 Remedies Cumulative......................................47
VII. TERMINATION AND ABANDONMENT.............................................48
SECTION 7.01 Termination of Agreement.................................48
SECTION 7.02 Effect of Termination....................................48
VIII. MISCELLANEOUS...........................................................48
SECTION 8.01 Definitions..............................................48
SECTION 8.02 Specific Performance.....................................53
SECTION 8.03 Service of Process.......................................53
SECTION 8.04 Bulk Transfer Laws.......................................53
SECTION 8.05 Expenses, Etc............................................54
SECTION 8.06 Execution in Counterparts................................54
SECTION 8.07 Notices..................................................54
SECTION 8.08 Waivers..................................................55
SECTION 8.09 Amendments, Supplements, Etc.............................55
SECTION 8.10 Entire Agreement.........................................55
SECTION 8.11 Dispute Resolution.......................................55
SECTION 8.12 Applicable Law...........................................57
SECTION 8.13 Binding Effect; Benefits.................................57
SECTION 8.14 Assignability............................................57
ii
INDEX TO EXHIBITS AND ANNEXES
Exhibit Description
A Form of Note
B Form of Xxxx of Sale and Assignment Agreement
C Form of Assumption Agreement
D Form of License Agreement
E Summary of Terms of the Sublease
F Form of Supply Agreement
G Form of Registration Rights Agreement
H The Lewyn Agreement
Annex Description
I Form of Opinion of Counsel for the Seller
II Form of Opinion of Counsel for the Buyer
iii
INDEX TO SCHEDULES
Schedule Description
1.01(a) Sale of Assets
1.01(e) Excluded Assets
3.01(a) Organization; Power; Capacity
3.01(c) Non-Contravention
3.01(g) Governmental Approvals
3.01(h) Title to Properties, Absence of Liens and Encumbrances
3.01(i) Contracts and Other Data
3.01(j) Customers
3.01(k) Intellectual Property
3.01(m) Litigation
3.01(n) Taxes
3.01(o) Labor Matters
3.01(p) Insurance
3.01(s) Employee Benefit Plans
3.01(t) Transactions with Affiliates
3.01(u) Environmental, Health and Safety Matters
3.01(w) Broker's or Finder's Fees
3.01(y) Year 2000 Compliance
3.01(aa) Absence of Undisclosed Liabilities
3.01(bb) Product Warranty
3.01(dd) Assets Necessary to Group Activity
3.01(gg) Development Agreements
3.02(a) Organization, Corporate Power, Etc.
3.02(d) Capitalization
3.02(i) Brokers
4.09 Group Employees
iv
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of January 21, 2000, among
GLOBESPAN, INC., a Delaware corporation (the "Buyer") and PAIRGAIN TECHNOLOGIES,
INC., a Delaware corporation (the "Seller"). Certain of the capitalized terms
used in this Agreement are defined in Section 8.01 hereof.
W I T N E S S E T H,
WHEREAS, the Seller is in the business of manufacturing transmission
and networking systems, including DSL transmission systems, for sale to local
telephone companies, competitive local exchange carriers (CLECS), business
enterprises, data networking services providers and other customers;
WHEREAS, the Seller, through its microelectronics engineering
development group (the "Group"), is engaged in the business of the design,
development, license and supply of intellectual property necessary for the
manufacture, have-manufacture and sale of integrated circuits and related
systems and software (the "Group Activity");
WHEREAS, the Seller, until now, has utilized the Group Activity with
the intent to develop components ahead of the general market availability and at
lower costs than available from commercial electronic components manufacturers
in order to provide a competitive advantage for the Seller's products;
WHEREAS, the Group Activity heretofore has been conducted as an
integrated part of the Seller and not on a stand-alone basis, and it is the
intention of the parties hereto to transfer to the Buyer the Group Activity by
the transfer to the Buyer all of the assets of the Seller used in or necessary
to the conduct by the Seller of the Group Activity, subject to certain specified
liabilities;
WHEREAS, the Seller desires to sell the Assets (as defined herein) to
the Buyer who can make better business use of the expertise and
intellectual property;
WHEREAS, the Seller desires to maintain the limited rights set forth
in the License Agreement (as defined herein) to conduct the activities described
therein;
WHEREAS, in connection with such purchase and sale, each of the Buyer
and the Seller desires to enter into certain mutually beneficial arrangements
relating to the operation of the Group Activity by the Buyer from and after the
Closing Date (as defined in Section 2.01 hereof); and
WHEREAS, the Seller desires to maintain licenses to utilize certain
intellectual property being sold to the Buyer with limited rights to modify such
property;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereby agree as follows:
I. SALE AND TRANSFER OF ASSETS
SECTION 1.01 Sale of Assets. (a) On the terms and subject to the
conditions hereinafter set forth, on the Closing Date (as hereinafter defined),
the Seller shall sell, convey, transfer, assign and deliver to the Buyer (or one
or more subsidiaries of the Buyer (each a "Designated Subsidiary") as may be
designated by the Buyer prior to the Closing Date), and the Buyer (or such
Designated Subsidiaries as are identified by Buyer prior to the Closing Date)
shall purchase from the Seller, for the aggregate consideration set forth in
Article II hereof, all the assets and properties (of every kind, nature and
description, real, personal or mixed, tangible or intangible and wherever
situated, whether or not carried on the books of the Seller) of the Seller that
are used in, or necessary to the Seller's conduct of the Group Activity (it
being the intention hereby to assign and transfer all the assets owned or
claimed by the Seller and used in, or necessary to, the Seller's conduct of
Group Activity or used by, or in connection with, the activities of the Group
Activity, whether or not such assets are listed on the accounts of the Seller),
free and clear of all mortgages, liens, pledges, security interests, charges,
claims, restrictions and encumbrances of any nature whatsoever ("Liens"), other
than Permitted Liens, and except those assets excluded pursuant to paragraph (b)
below (said assets and properties so to be sold, conveyed, transferred, assigned
and delivered being hereinafter collectively called the "Assets"), including,
without limitation:
(i) all tangible personal property, inventories, machinery,
equipment, supplies, tools, fixtures, leaseholds, computer equipment,
applications circuits, products in development, work in process, spare
parts, supplies, vehicles, furniture and office furnishings, wherever
situated, used in or necessary to the Seller's conduct of the Group
Activity, including without limitation all items listed on Schedule
1.01(a)(i) hereto;
(ii) all leases, subleases and rights thereunder used in or
necessary to the Seller's conduct of the Group Activity, including, without
limitation, all items listed on Schedule 1.01(a)(ii);
(iii) all claims, deposits, prepayments, refunds, causes of
action, rights of recovery, rights of setoff and rights of recoupment
relating to, used in or necessary to the Seller's conduct of the Group
Activity, including, without limitation, all items listed on Schedule
1.01(a)(iii) hereto;
(iv) all franchises, approvals, permits, licenses, orders,
registrations, certificates, variances and similar rights obtained from
governments and governmental agencies, to the extent they relate primarily
to or are used in or necessary to the Seller's
2
conduct of the Group Activity including, without limitation, all items
listed on Schedule 1.01(a)(iv) hereto;
(v) all intangible personal property of whatsoever kind or
character, whether evidenced in writing or not, used in or necessary to the
Seller's conduct of the Group Activity, including, but not limited to, all
customer lists, data bases, securities, claims, and causes of action
(whether fixed or contingent) including, without limitation, all items
listed on Schedule 1.01(a)(v) hereto;
(vi) all Group Intellectual Property, including, without
limitation, all items listed on Schedule 1.01(a)(vi) hereto;
(vii) any royalties paid to the Seller from and after September
29, 1999, pursuant to ADSL Agreement (including any such royalties as may
be paid to the Seller following the Closing Date, which royalties will be
promptly paid by the Seller to the Buyer upon receipt);
(viii) all technical documentation, materials and guidelines,
brochures, sales literature, promotional material and other selling
material primarily relating to or used in or necessary to the Seller's
conduct of the Group Activity including, without limitation, all items
listed on Schedule 1.01(a)(viii) hereto;
(ix) all papers, documents, instruments, books and records,
files, agreements, books of account and other records by which the Assets
might be identified or enforced, or otherwise pertaining to the Assets or
the Group Activity that are located at the offices or other locations used
in connection with the Assets or the Group Activity (including, without
limitation, customer invoices, customer lists, vendor and supplier lists,
drafts and other documents and materials relating to customer transactions)
including, without limitation, all items listed on Schedule 1.01(a)(ix)
hereto;
(x) the rights of the Seller under all contracts, agreements,
licenses, leases, sales orders, purchase orders and other commitments
(whether oral or written) primarily relating to, used in or necessary to
the Seller's conduct of the Group Activity including, without limitation,
all items listed on Schedule 1.01(a)(x) hereto;
(xi) all computer software programs, the source and object codes
for such software programs and all documentation and training manuals
related thereto, used in or necessary to the Seller's conduct of the Group
Activity including, without limitation, all items listed on Schedule
1.01(a)(xi) hereto; and
(xii) all other assets and rights of every kind and nature, real
or personal, tangible or intangible, that are owned or claimed by the
Seller, or any Affiliate of the Seller, and that are used by the Seller, or
any Affiliate of the Seller, in connection with, or necessary to the
3
Seller's conduct of the Group Activity (including, without limitation, all
goodwill), whether or not such assets are reflected in the balance sheets
and other financial statements of the Seller, or any Affiliate of the
Seller.
Without limiting the generality of the foregoing, the Assets shall, except as
set forth in paragraph (b) below, include all assets as may be acquired by the
Seller in respect of the Group Activity after the date of this Agreement that
would be included on a balance sheet prepared in accordance with generally
accepted accounting principles as of the Closing Date for the Group Activity,
but shall exclude any such assets that may be or have been disposed of after
said date in the ordinary course of business on a basis consistent with past
practice.
(b) In the event that any of the Group Intellectual Property, or
any license or other agreement relating to any of the Group Intellectual
Property is updated or otherwise modified in the name of or for the benefit of
the Seller, the Seller shall promptly transfer, assign and deliver to the Buyer
(or such Designated Subsidiaries as may be designated by the Buyer), and the
Buyer or such Designated Subsidiary shall acquire from the Seller, without
additional consideration, all such updates or other modifications.
(c) In the event that the Buyer shall establish at any time or
from time to time during the twelve-month period following the Closing Date that
any of the Schedules describing the Assets as provided in Section 1.01(a) hereof
failed to include assets or properties of the Seller used by the Seller in, or
necessary to the Seller's conduct of, the Group Activity (other than the
Excluded Assets) then the Seller shall promptly sell, convey, transfer, assign
and deliver to the Buyer (or such Designated Subsidiaries as may be designated
by the Buyer), and the Buyer or such Designated Subsidiary shall acquire from
the Seller, without additional consideration, all such assets and properties
(herein referred to as the "Additional Assets").
(d) In the event that the Buyer shall establish at any time or
from time to time during the twelve-month period following the Closing Date that
no arrangements have been made either in this Agreement or in any of the
Ancillary Agreements to provide the Buyer with nonexclusive use of any assets or
properties of the Seller not transferred hereunder and (i) used by the Seller in
the Group Activity or (ii) necessary to the Seller's conduct of the Group
Activity (other than the Excluded Assets), then the Seller shall use its
reasonable best efforts to enter into an agreement with the Buyer providing for
such nonexclusive use on a cost basis consistent with the Seller's existing cost
allocations for such assets or properties, and on such other terms and
conditions as may be mutually satisfactory to the Buyer and the Seller.
(e) Notwithstanding anything to the contrary contained herein,
the following assets and properties (the "Excluded Assets") of the Seller are
specifically excluded from the Assets and shall be retained by the Seller:
(i) the minute books, stock records and related corporate records
of the Seller;
4
(ii) any rights or benefits which arise under the terms and
provisions of the ADSL Agreement and which accrue to either the Group or
the Seller, including, but not limited to, the DMT ADSL Chip Set Technology
(such DMT ADSL Chip Set Technology to be assigned after March 6, 2000);
(iii) the cash surrender value of any life insurance policy for
the benefit of any Group Employee; and
(iv) the assets and properties identified on Schedule 1.01(e)(iv)
hereto.
SECTION 1.02 Nonassignability of Assets. To the extent that any
license, permit, agreement, lease, sales or purchase order, commitment or other
contract, property interest, qualification or asset described in this Agreement
as being sold, assigned, transferred or conveyed to the Buyer by the Seller
(collectively the "Commitments") or any claim, right or benefit arising
thereunder or resulting therefrom (collectively, together with the Commitments,
the "Interests"), is not capable of being sold, assigned, transferred or
conveyed without the approval, consent or waiver of the issuer thereof or the
other party thereto, or any third Person, including a government or governmental
or regulatory authority, or if such sale, assignment, transfer or conveyance or
attempted sale, assignment, transfer or conveyance would be invalid, or would
destroy, terminate or eliminate (or permit any other Person to destroy,
terminate or eliminate) the Interests related thereto, or would constitute a
breach of a Commitment or a violation of any law, rule or regulation then any
provision in this Agreement or any specific conveyance to the contrary
notwithstanding, this Agreement shall not constitute a sale, assignment,
transfer or conveyance thereof or an attempted sale, assignment, transfer or
conveyance thereof, but the Seller and the Buyer shall do such acts and things
as may be reasonably necessary to give the Buyer the full benefit in respect of
the Interests and the Seller the full benefit of the assumption of the Assumed
Liabilities with respect thereto, including using reasonable efforts in order
that any necessary third party shall execute such documents and do such acts and
things as may be reasonably required for such purpose (including any consent,
approval or amendment required to novate, reissue or assign the affected
Commitments); provided, however, that neither the Seller nor the Buyer shall be
obligated to pay any consideration therefor (except for filing fees and other
similar charges which shall be paid by the Seller) to, or commence litigation
against, the third party or Person from whom such consents, approvals or waivers
are requested. If the Buyer or the Seller is unable to obtain any such required
consent, approval or waiver, then until such required consent, approval or
waiver is obtained, and in the absence of any alternative arrangement
established by agreement between the Buyer and the Seller, the Seller shall
continue to be bound by such Commitments and the Buyer shall, as agent for the
Seller or as subcontractor, pay, perform and discharge fully all the obligations
of the Seller thereunder from and after the Closing Date and the Seller shall,
without further consideration, pay and remit to the Buyer (or its designee)
promptly all money, rights and other consideration received in respect of such
performance after payment of any taxes, costs or expenses due from the Seller
(or its Affiliates) with respect to such receipt. The Seller shall conduct
itself in the exercise of its rights under all such commitments only as
reasonably directed by the Buyer and at the Buyer's expense. If and when any
such approval, consent or waiver shall be obtained or such Commitment shall
5
otherwise become assignable or able to be novated or such restriction shall have
been satisfied or waived or no longer apply, the assignment of the Assets and
the assumption of the Assumed Liabilities related to such approval, consent or
waiver or restriction on assignment and/or assumption shall become effective
automatically as of the Closing Date, without further action on the part of the
Seller, the Buyer or any other Person, and without payment of further
consideration.
SECTION 1.03 LICENSE OPTION. The Seller hereby grants to the Buyer the
option (each, an "Option" and collectively, the "Options") to require the Seller
to assign to the Buyer all of its right, title and interest in, to and under the
Cross License Agreement (the "Cross License") dated as of October 23, 1997,
between Amati Communications Corporation and the Seller and the Level One
Agreements (such agreements being referred to herein as the "Optioned
Agreements"), each such Option being exercisable by the Buyer at any time on or
after the Closing Date subject only to the provisions of such Optioned
Agreement. The Seller will be deemed to have made all the representations and
warranties set forth in Section 3.01 hereof with respect to the applicable
Optioned Agreement (and the Intellectual Property licensed under such Optioned
Agreement) as of the date the applicable Option is exercised by the Buyer and is
assigned to the Buyer pursuant to the provisions of such Optioned Agreement.
II. CLOSING, PURCHASE PRICE, LIABILITIES, ETC.
SECTION 2.01 Closing. Subject to the provisions of Article IV hereof,
the closing (the "Closing") of the transactions contemplated by this Agreement
shall take place at the offices of Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol,
00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, on the business day following
the day on which the last of the conditions set forth in Sections 5.01 and 5.02
(other than the conditions which by their terms are to be satisfied at the
Closing) shall have been fulfilled or waived, or at such other time and/or place
or on such other date as the parties may mutually agree (such date and time of
closing being herein called the "Closing Date").
SECTION 2.02 Payment to the Seller on Closing Date. On the Closing
Date, in full consideration for the sale, conveyance, transfer, assignment and
delivery to the Buyer of the Assets, the Buyer shall:
(a) deliver to the Seller 1,081,197 shares (the "Initial Shares")
of common stock, par value $0.001, of the Buyer (the "Common Stock"),
subject to appropriate adjustment for any stock split (including the form
of a stock dividend) or reverse stock split on or prior to the Closing
Date;
(b) deliver to the Seller a convertible subordinated note (the
"Note") in the principal amount of $90 million, substantially in the form
attached hereto as Exhibit A; and
(c) assume the liabilities of the Seller as and to the extent
provided in Section 2.03.
SECTION 2.03 Liabilities.
(a) Liabilities to be Assumed. On the Closing Date, and subject
to the terms and conditions of this Agreement (including Section 2.03(b) below),
6
the Buyer will assume and agree to pay, perform and discharge when due, all
obligations accruing after the Closing Date under the agreements listed in
Schedule 3.01(i) unless such obligations are specified in Section 3.01(i) as not
being assumed by the Buyer (collectively the "Assumed Liabilities").
(b) Liabilities Not Assumed. The Buyer shall not assume, and
shall not be deemed to have assumed, any liabilities or obligations of the
Seller of any kind or nature whatsoever, except as expressly provided in the
Assumption Agreement (as defined hereafter) and in Section 2.03(a) above.
Without limiting the generality of the foregoing, it is hereby agreed that the
Buyer is not assuming any liability and shall not have any obligation for or
with respect to:
(i) any liabilities or obligations of the Seller or the Group
that arise under the terms of a contract, agreement, license, lease, sales
order, purchase order, or other commitment that shall not be assigned,
except as contemplated by Section 1.02 of this Agreement;
(ii) any liabilities or obligations of the Seller or the Group
that arise under the terms of the ADSL Agreement or the Excluded Agreements
set forth in item 4 of Schedule 1.01(e);
(iii) any liabilities or obligations of the Seller or the Group
under any Plan (as defined in Section 3.01(s)), including (x) any
obligation to adopt or to sponsor such Plan of the Seller except as the
Buyer may, in its sole discretion, elect to adopt or to sponsor and (y) any
deferred compensation benefits accrued as liabilities on the books of the
Seller;
(iv) any obligation of the Seller or the Group arising out of any
action, suit or proceeding based upon an event occurring or a claim arising
(A) prior to or as of the Closing Date or (B) after the Closing Date in the
case of claims in respect of products or services sold or provided by the
Seller or the Group or the conduct of the Group Activity prior to the
Closing Date and attributable to acts performed or omitted by the Seller or
the Group prior to the Closing Date; and
(v) any and all liabilities or obligations for Taxes incurred by
or imposed upon the Seller, or any predecessor company thereof, whether
relating to periods, before, including or after the Closing Date, and any
taxes arising from or with respect to the Assets or the operations of the
Group Activity that are incurred or relate to any period prior to (or up to
and including) the Closing Date, including, without limitation, any Taxes
incurred by or imposed upon the Seller or the Group and arising out of the
consummation of the transactions contemplated by this Agreement, as well as
sales and use Taxes arising out of the transactions contemplated by this
Agreement, whether such Taxes are imposed upon the Seller or the Buyer;
provided, however, that sales and use Taxes resulting from the purchase and
7
sale of the Assets hereunder shall be paid as provided in Section 4.06
below.
(the liabilities described in the preceding clauses (i) through (v) being herein
collectively called the "Excluded Liabilities").
SECTION 2.04 Deliveries at the Closing. At the Closing, (i) the Seller
will deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 5.01, including, without limitation, the Ancillary
Agreements; (ii) the Buyer will deliver to the Seller the various certificates,
instruments and documents referred to in Section 5.02, including, without
limitation, the Ancillary Agreements; (iii) the Seller will execute, acknowledge
(if appropriate), and deliver to the Buyer (A) a xxxx of sale in the form of the
Xxxx of Sale and Assignment Agreement annexed hereto as Exhibit B (the "Xxxx of
Sale"), (B) appropriate assignments (including real property and Group
Intellectual Property transfer documents) and (C) such other instruments of
sale, transfer, conveyance, and assignment as the Buyer and its counsel
reasonably may request; (iv) the Buyer will execute, acknowledge (if
appropriate), and deliver to the Seller (A) an assumption in the form of the
Assumption Agreement attached hereto as Exhibit C (the "Assumption Agreement")
and (B) such other instruments of assumption as the Seller and its counsel
reasonably may request; and (v) the Buyer will deliver to the Seller the
consideration specified in Section 2.02.
III. REPRESENTATIONS AND WARRANTIES
SECTION 3.01 Representations and Warranties of the Seller. The Seller
represents and warrants to the Buyer as follows:
(a) Organization, Power; Capacity. (i) The Seller is a corporation
duly organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation and is duly licensed or qualified to do
business as a foreign entity in each jurisdiction in which it is required
to be so qualified with respect to the operations of the Group and as set
forth in Schedule 3.01(a)(i), except where the failure to so qualify would
not be likely to result in a Material Adverse Effect on the Group. The
Seller has all requisite corporate power and authority to own, operate and
lease the Assets, to carry on the Group Activity as it is now being
conducted and to execute and deliver this Agreement and each Ancillary
Agreement to which it is party and to perform its obligations hereunder and
thereunder. Schedule 3.01(a)(i) hereto sets forth a complete list of the
jurisdictions in which the Seller is qualified to do business with respect
to the operations of the Group. The Seller has heretofore made available to
the Buyer true, complete and correct copies of its Certificate of
Incorporation and by-laws as currently in effect.
(ii) The Group does not own and is not party to any joint venture
or other enterprise and is not party to any contract to provide funds to or
8
make any investment (in the form of a loan, capital contribution or similar
payment) in any entity or enterprise that is not wholly owned by it.
(b) Authorization of Agreements. The execution and delivery by the
Seller of this Agreement and each Ancillary Agreement to which the Seller
is a party, and the consummation by the Seller of the transactions
contemplated hereby and thereby, have been duly authorized by all requisite
corporate action. This Agreement has been duly and validly executed by the
Seller and, subject to due execution by any other parties thereto, will
constitute the legal, valid and binding obligation of the Seller,
enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization and moratorium laws and other laws
of general application affecting the enforcement of creditors' rights
generally. Each Ancillary Agreement to which the Seller is party, when duly
executed and delivered in accordance with this Agreement, subject to due
execution by any other parties thereto, will constitute a legal, valid and
binding obligation of the Seller, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization and moratorium
laws and other laws of general application affecting the enforcement of
creditors' rights generally. No other corporate proceedings on the part of
the Seller are necessary to authorize this Agreement, the Ancillary
Agreements or the transactions contemplated hereby or thereby.
(c) Non-Contravention. The execution, delivery and performance of this
Agreement by the Seller and the consummation of the transactions
contemplated hereby will not (i) conflict with any provision of the
Certificate of Incorporation of the Seller (as in effect at the Closing) or
(ii), except as set forth on Schedule 3.01(c) result (with the giving of
notice or the lapse of time or both) in any violation of or default or loss
of a benefit under, or permit the acceleration of any obligation under, any
mortgage, indenture, lease, agreement or other instrument, permit,
concession, grant, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to the Seller, the Group, the
Group Activity or any of the Seller's properties, other than any such
violation, default, loss or acceleration that would not materially
adversely affect the ability of the Seller to consummate the transactions
contemplated hereby and which would not otherwise have a Material Adverse
Effect on the Seller, the Group or the Group Activity.
(d) Governmental Approvals. No consent, approval, order or
authorization of, or registration, declaration or filing with, any federal,
state, municipal or foreign governmental agency, public body, court,
tribunal or other authority (each a "Governmental Agency") having
jurisdiction over the Seller is required to be made or obtained by the
Seller in connection with the execution and delivery of this Agreement by
the Seller or the consummation by the Seller of the transactions
contemplated hereby, except for (i) compliance by the Seller with the
Xxxx-Xxxxx Act, (ii) filings pursuant to Securities Act and the Exchange
Act and the rules and regulations promulgated by the SEC thereunder and
(iii) such consents, approvals, orders or authorizations which if not
obtained, or registrations, declarations or filings which if not made,
9
would not materially adversely affect the ability of the Seller to
consummate the transactions contemplated hereby.
(e) [reserved]
(f) [reserved]
(g) Governmental Authorizations and Regulations. (i) Except as set
forth in Schedule 3.01(g)(i) hereto, the Seller has all governmental
licenses, franchises and permits ("Permits") required under applicable law
for the conduct of the Group Activity as currently conducted. Schedule
3.01(g)(i) hereto lists all material Permits held by the Seller required
under applicable law for the conduct of the Group Activity as currently
conducted.
(ii) The Group Activity is being conducted in compliance with all
Permits, except for such noncompliance as would not be likely to result in
a Material Adverse Effect on the Group. The Seller has not received any
notice of any alleged violation of any of the foregoing Permits.
(iii) Neither the Seller nor any of its properties, operations or
businesses relating to the Seller's conduct of the Group Activity is
subject to any court or administra tive order, judgment, injunction or
decree.
(iv) There is no restriction upon the ability or right of the
Seller to assign, convey and transfer any material Permit to the Buyer.
(h) Title to Properties, Absence of Liens and Encumbrances. Except as
set forth on Schedule 3.01(h), the Seller or the Group has good and
marketable title to or a valid leasehold interest in all of the Assets, in
each case free and clear of all Liens, other than (i) the liens described
on Schedule 3.01(h) hereto, (ii) liens for taxes not yet due, or (iii)
mechanic's, materialman's, landlord's and similar statutory liens arising
in the ordinary course of business and which, in the aggregate, would not
have a Material Adverse Effect on the Group or the Group Activity (the
Liens described in clauses (i), (ii) and (iii) above being referred to
herein as "Permitted Liens").
(i) Contracts and Other Data. Annexed hereto as Schedule 3.01(i), or
supplied separately, is a list setting forth the following with respect to
the Group Activity:
(i) a description of all leases of personal property used by the
Group in or otherwise necessary to the Seller's conduct of the Group
Activity as currently conducted, to which the Seller is a party,
either as lessee or lessor, including a description of the parties to
each such lease, the property to which each such lease relates, the
10
rental term and the monthly (or other) rents payable under each such
lease;
(ii) all Group Intellectual Property and all licenses granted by
or to the Seller and all other agreements to which the Seller or the
Group is party that relate, in whole or in part, to any Group
Intellectual Property or to other proprietary rights used in or
necessary to the Seller's conduct of the Group Activity as currently
conducted, whether owned by the Seller, the Group or otherwise;
(iii) all collective bargaining agreements, employment and
consulting agreements (whether written or oral), independent
contractor agreements (whether written or oral), executive
compensation plans (whether written or oral), bonus plans, deferred
compensation agreements, employee pension plans or retirement plans,
employee profit sharing plans, employee stock purchase and stock
option plans, group life insurance, hospitalization insurance or other
similar plans or arrangements (whether written or oral) maintained for
or providing benefits to employees of, or independent contractors or
other agents of the Seller who are engaged exclusively in the
day-to-day operations and support of the Group Activity;
(iv) the names and titles of, and current annual base salary or
hourly rates for, each of the Group Employees, together with a
statement of the full amount and nature of any other remuneration,
whether in cash or kind, paid to each such person during the past or
current fiscal year or payable to each such person in the future, and
the bonuses accrued for, and the vacation and severance benefits, to
which each such person is entitled; and
(v) all contracts (whether written or oral), including, without
limitation, guarantees, mortgages, indentures and loan agreements
which relate to the Group Activity, to which the Group (or the Seller
on behalf of the Group) is party, or to which the Group (or the Seller
on behalf of the Group) or any of the assets or properties used in or
necessary to the Seller's conduct of the Group Activity is subject and
which are not specifically referred to in clauses (i), (ii), (iii) or
(iv) above, including, but not limited to, contracts which (A) contain
warranties by the Seller or the Group in excess of those customary in
the business of the Group, (B) extend for more than 12 months after
the Closing Date, (C) contain any non-compete or exclusivity provision
which in any way could restrict the ability of the Buyer to conduct
the Group Activity freely, in any manner and in any geographic
location or to solicit for hire any Person, (D) obligate third parties
to maintain confidentiality of information relating to the Group or
the Group Activity obligating the Group to maintain confidentiality
relating to a third party, (E) contain any provision limiting the
Group's or the Seller's rights under such contract upon a change of
control, (F) contain any restriction upon the assignability of the
11
contract by the Group or the Seller or (G) have been, or are in the
process of being, negotiated by the Seller or the Group but are not
yet executed by all of the parties thereto.
True and complete copies of all documents and complete descriptions of
all material binding oral commitments (if any) referred to in Schedule
3.01(i) have been provided or made available to the Buyer and its counsel.
All material provisions of the contracts referred to in such Schedule are
valid and enforceable obligations of the Seller and of, to the best of the
Seller's knowledge, the other parties thereto. The Seller has not been
notified of any claim that any contract referred to in such Schedule is not
valid and enforceable in accordance with its terms for the periods stated
therein, or that there is under any such contract any existing default or
event of default or event which with notice or lapse of time or both would
constitute such a default. Schedule 3.01(i) also specifies which
obligations listed therein (except for obligations which arise only after
the Closing Date) are being assumed, and, if such obligations arise after
the Closing Date, which such obligations are not being assumed.
(j) Customers. Since January 1, 1999, neither the Group nor the Seller
on behalf of the Group, has sold goods or services to any third party
customer and neither Group nor the Seller on behalf of the Group maintains
any customer list.
(k) Intellectual Property.
(i) "Intellectual Property" of any Person shall mean any or all
of the following and all rights in, arising out of, or associated therewith
anywhere in the world held by such Person and not otherwise in the public
domain: (1) all United States, international and foreign patents and
applications therefor (including provisional applications) and all
reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (2) all inventions (whether patentable or
not), patterns, drawings, blueprints, specifications, products in
development, processes, applications, circuits, invention disclosures,
improvements, trade secrets, proprietary information, know how, mask works
(and all information contained in a mask but not yet fixed in a chip),
technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (3) all copyrights, copyright
registrations and applications therefor; (4) all industrial designs and any
registrations and applications therefor throughout the world; (5) all trade
names, logos, common law trademarks and service marks; trademark and
service xxxx registrations and applications therefor and all goodwill
associated therewith throughout the world; (6) all databases and data
collections and all rights therein throughout the world; (7) all software
including all source code, object code, firmware, development tools, files,
records and data, all media on which any of the foregoing is recorded; (8)
all permits, privileges or royalties; (9) any similar, corresponding or
equivalent rights to any of the foregoing and (10) all documentation
related to any of the foregoing.
12
(ii) Schedule 3.01(k)(ii)(a) lists all Intellectual Property used
in or necessary to the conduct of the Group Activity (the "Group
Intellectual Property"). Schedule 3.01(k)(ii)(b) lists all Group
Intellectual Property (A) owned by, or filed in the name of, the Group or
(B) owned by, or filed in the name of the Seller and relating to, used by
the Group in or necessary to the Seller's conduct of the Group Activity
(the "Group Protectable Intellectual Property").
(iii) Except as set forth on Schedule 3.01(k)(iii), the Seller
(1) owns or shall own as of the Closing Date, and has or will have as of
the Closing Date good title to each item of Group Protectable Intellectual
Property, free and clear of any Liens, (2) has exclusive and assignable
license to use each item of the Group Intellectual Property (other than
Group Protectable Intellectual Property set forth in (1) above), free and
clear of any Liens, (3) is the exclusive owner of or has the assignable
permission of the owner to use all trademarks and trade names used in
connection with the operation or conduct of the Group Activity, including
the sale of any products or the provision of any services by the Group and
(4) owns exclusively, and has good title to, all copyrighted works that are
Group products or other works of authorship that the Group otherwise
purports to own.
(iv) To the extent that any work, invention or material has been
developed or created by a third party for the Group (or for the Seller for
use in the Group Activity), the Group has a written agreement with such
third party with respect thereto and the Group (or the Seller) thereby has
obtained ownership of, and is the exclusive owner of, all Intellectual
Property in such work, material or invention by operation of law or by
valid assignment.
(v) The Group has not transferred ownership or, or granted any
exclusive license with respect to, any Group Intellectual Property, to any
third party, except for the exclusive license granted to Conexant under the
ADSL Agreement (which exclusive license expires on March 7, 2000).
(vi) Except as set forth on Schedule 3.01(k)(vi), the operation
of the Group Activity as it currently is conducted, including to the extent
applicable the Group's design, development, manufacture, license and sale
of the products (including products currently under development) or
services of the Group Activity, does not (1) infringe or misappropriate the
Intellectual Property of any other person, (2) violate the rights of any
person (including rights to privacy or publicity), or (3) constitute unfair
competition or trade practices under the laws of any jurisdiction, and
neither the Seller nor the Group has received written or oral notice from
any person claiming that such operation or any act, product or service of
the Group Activity infringes or misappropriates the Intellectual Property
of any third party, violates the rights of any person or constitutes unfair
competition or trade practices under the laws of any jurisdiction.
13
(vii) The Group (or the Seller, for use in the Group Activity)
owns or has the exclusive right to use all Intellectual Property used by
the Group in or necessary to the Seller's conduct of the Group Activity as
it is currently conducted, including, without limitation, in the design,
development, manufacture, license and sale of all products currently
manufactured (either directly or under contract) or sold by the Group or
under development by the Group, in the use and sale by Group customers
thereof, and in the performance of all services provided or contemplated to
be provided by the Group.
(viii) Each item of the Group Protectable Intellectual Property
is valid and subsisting, all necessary registration, maintenance and
renewal fees in connection with such Group Protectable Intellectual
Property have been paid and all necessary documents and certificates in
connection with such Group Protectable Intellectual Property have been
filed with the relevant patent, copyright, trademark or other authorities
in the Untied States or foreign jurisdictions, as the case may be, for the
purposes of maintaining such Group Protectable Intellectual Property,
except, in each case as would not be likely to result in a Material Adverse
Effect on the Group or the Buyer.
(ix) There are no contracts, licenses and agreements between the
Group or the Seller and any other person with respect to the Group
Intellectual Property under which there is any dispute known to the Group
or the Seller regarding the scope of such agreement, or performance under
such agreement including with respect to any payments to be made or
received by the Group thereunder.
(x) To the best of the Seller's knowledge, no Person is
infringing or misappropriating any of the Group Intellectual Property.
(xi) The Group and the Seller have taken all steps that are
reasonably required to protect the Group's rights in confidential
information and trade secrets of the Group or provided by any third party
to the Group. Without limiting the foregoing, the Seller and the Group
have, and enforce, a policy requiring each employee and contractor to
execute (A) proprietary information and confidentiality agreements in
connection with Group Intellectual Property and Group Protectable
Intellectual Property and (B) invention assignment agreements,
substantially in the Seller or the Group standard forms, and all current
employees and contractors of the Group have executed such agreements.
(xii) There are no proceedings or actions instituted by the Group
or the Seller or of which the Group or the Seller has received written
notice before any court, tribunal (including the United States Patent and
Trademark Office or equivalent authority anywhere in the world) related to
any Group Intellectual Property.
(xiii) No Intellectual Property or product or service of the
Group is subject to any proceeding or outstanding decree, order, judgment,
agreement or stipulation that restricts in any manner the use, transfer or
licensing thereof by the Group or may affect the validity, use or
enforceability of such Intellectual Property.
14
(xiv) No (1) product, service or publication of the Group, (2)
material published or distributed by the Group or (3) conduct or statement
of, or attributable to, the Group, constitutes obscene material or a
defamatory statement or material.
(xv) The Seller owns, or shall own as of the Closing Date, and
has, or will have as of the Closing Date, good title to all of the Patent
Rights (as defined in the Lewyn Agreement) free and clear of any Liens.
(l) Software. The Seller holds valid licenses to all copies of all
operating and applications computer software programs and databases used by
the Group in or necessary to the Seller's conduct of the Group Activity and
such programs and databases are adequate for the conduct of the Group
Activity as currently conducted.
(m) Litigation. Except as set forth in Schedule 3.01(m) hereto, there
are no Claims at law or in equity, pending or, to the knowledge of the
Seller, threatened, against the Seller or by or before any Governmental
Agency relating to the Group or the Group Activity. Except as set forth in
Schedule 3.01(m) hereto, there are no orders, rulings, charges, judgments
or decrees of any court or Governmental Agency with respect to which the
Seller has been named or is a party that apply, in whole or in part, to the
Group or the Group Activity or any of the Assets or which would limit the
ability of the Seller to consummate the transactions contemplated hereby.
(n) Taxes. (i) The Seller has, as of the date hereof, and will have as
of the Closing Date, timely filed in proper form all federal, state, local
and foreign tax returns, reports, estimates, information statements and
other statements in respect of Taxes, including without limitation Taxes
incurred in connection with the operations of the Group Activity ("Tax
Returns") that are required to be filed as of the date hereof, or which are
required to be filed on or before the Closing Date, as the case may be, and
all such Tax Returns are or will be accurate and complete in all material
respects. There are no liens for Taxes upon any Asset and no event has
occurred which with the passage of time or the giving of notice, or both,
could be reasonably likely to result in a lien for Taxes on any Asset. In
addition, except as set forth on Schedule 3.01(n)(i), all Taxes due or
payable by the Seller on or before the date hereof or the Closing Date, as
the case may be, with respect to which the Seller or the Assets may be
liable or otherwise in any way subject have been or will be timely paid,
except to the extent any such Taxes (as set forth as of the date hereof on
Schedule 3.01(n)(i)) are being contested in good faith by appropriate
proceedings by the Seller and for which adequate reserves for any disputed
amounts shall have been established. Except as set forth on Schedule
3.01(n)(i), as of the date hereof, there has been no Tax examination,
audit, proceeding or investigation of the Seller by any relevant taxing
authority, and the Seller has not received from any governmental or
regulatory authority any oral or written notice of any proposed adjustment,
deficiency or underpayment of any Taxes pertaining to the Assets or the
Group Activity, which notice has not been satisfied by payment or been
withdrawn. Except as set forth on Schedule 3.01(n)(i), there are no pending
or, to Seller's knowledge, threatened actions, audits, examination,
15
proceedings or investigations, by any relevant taxing authority with
respect to the Seller. The Seller does not have any outstanding request for
an extension of time within which to pay any Taxes, including without
limitation with respect to the Group Activity. The Seller has withheld and
paid in a timely manner to all relevant taxing authorities all payments for
withholding Taxes, unemployment insurance and other amounts required to be
withheld and paid. Each individual providing services to the Seller
(whether in his or her individual capacity or through any entity) in
connection with the Group Activity is properly classified by the Seller as
an employee or independent contractor, as the case may be, and Seller
respects such classification for all purposes, including without limitation
for purposes of withholding Taxes, unemployment insurance and entitlement
to participate in retirement plans.
(ii) Except as set forth in Schedule 3.01(n)(ii), the Seller has
not received a tax ruling (other than a determination with respect to a
Plan (as defined in Section 3.01(s)) or entered into a legally binding
agreement (such as a closing agreement) with a taxing authority.
(iii) None of the Assets is required to be treated as being owned
by any other person other than Seller pursuant to the "safe harbor" leasing
provisions of Section 168(f)(8) of the Code as in effect prior to the
repeal thereof.
(iv) For purposes of this Agreement, "Tax" (and with correlative
meaning, "Taxes") shall mean (a) any net income, gross income, gross
receipts, franchise, profits, gains, license, sales, use, ad valorem, value
added, property, payroll, withholding, excise, severance, transfer,
employment, social security, medicare, alternative or add-on minimum,
stamp, occupation, premium, environmental or windfall profits taxes,
customs duties or other taxes, governmental fees or other like assessments
or charges of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amount imposed by any governmental
authority responsible for the imposition of any such taxes (domestic or
foreign), (b) liability of the Seller for the payment of any amounts of the
type described in clause (a) as a result of Seller or any predecessor
thereof being a member of an affiliated, consolidated, combined or unitary
group, or being a party to any agreement or arrangement whereby liability
of the Seller for payments of such amounts was determined or taken into
account with reference to the liability of any other person for any period
(or portion thereof) ending on or prior to the Closing Date, and (c)
liability of the Seller with respect to the payment of any amounts
described in (a) as a result of any express or implied obligation to
indemnify any other person.
(o) Labor Matters. Except to the extent set forth in Schedule 3.01(o),
(i) the Group is in compliance with all applicable laws respecting
employment and employment practices, terms and conditions of employment,
occupational safety and health and wages and hours, except where the
failure to be in compliance would not, individually or in the aggregate,
have a Material Adverse Effect on the Group or Group Activity; (ii) there
is no unfair labor practice complaint or charge against the Group or the
Seller with respect to Group Employees which is pending or, to the
16
knowledge of the Seller, threatened before the National Labor Relations
Board; (iii) there is no labor strike, dispute, slowdown or stoppage
pending or, to the knowledge of the Seller, threatened against or affecting
the Group and there has been no such job action during the past three
years; (iv) no representation question exists respecting the Group
Employees and, to the knowledge of the Seller; there are no current
organizing activities among the Group Employees; and (v) there is no
pending or, to the knowledge of the Seller, threatened litigation between
the Group, on the one hand, and current or former officers or employees, on
the other hand, including without limitation, any claims for wrongful
termination, breach of any express or implied contract of employment or for
violation of equal employment opportunity laws which would, individually or
in the aggregate, have a Material Adverse Effect on the Group or Group
Activity.
(p) Insurance. Schedule 3.01(p) identifies each insurance policy
(including policies providing property, casualty, liability and workers'
compensation coverage and bond and surety arrangements) with respect to
which the Group is a party or otherwise the beneficiary of the coverage or
which covers Seller's operation of the Group Activity.
With respect to each such insurance policy: (A) neither the Seller nor
the Group is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with
notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration under the policy; and (B)
no party to the policy has repudiated any provision thereof. Schedule
3.01(p) describes any self-insurance arrangements affecting the Group.
(q) Condition of Assets. All tangible personal property, fixtures,
machinery and equipment comprising the Assets (A) are free from material
defects, have been maintained in accordance with normal industry practice,
are in good operating condition and repair (ordinary wear and tear
excepted) and are suitable for the purposes for which they are being used
and (B) conform with all applicable ordinances, codes, regulations and
requirements, including, without limitation, all applicable ordinances,
codes, regulations and requirements relating to the environment,
occupational safety and food safety, and no law presently in effect or
condition precludes or materially restricts continuation of the present use
of such properties.
(r) Accounts Receivable. Neither the Group nor the Seller on behalf of
the Group has any accounts or notes receivable.
(s) Employee Benefit Plans. (i) Schedule 3.01(s)(i) hereto sets forth
a complete and accurate list of each plan, program, arrangement, agreement
or commitment that is an employment, consulting or deferred compensation
agreement, or an executive compensation, incentive bonus or other bonus,
employee pension, profit-sharing, savings, retirement, stock option, stock
purchase, severance pay, life, health, disability or accident insurance
plan, or vacation or other employee benefit plan, program, arrangement,
17
agreement or commitment applicable to any Group Employee applicable to any
individual who is or was active in the Group Activity or in which any such
individual was a participant or otherwise had any interest whatsoever
("Plans"), including, without limitation, each employee benefit plan (as
defined under Section 3(3) of ERISA), maintained by the Seller or any of
its affiliates or any trade or business (whether or not incorporated)
which, together with such persons, would be treated as a single employer
under Title IV of ERISA or Section 414 of the Code (collectively, the
"ERISA Affiliates") or to which any ERISA Affiliate contributes or has any
obligation to contribute to, or has or may have any liability (including,
without limitation, a liability arising out of an indemnification,
guarantee, hold harmless or similar agreement). Each Plan is identified on
Schedule 3.01(s), to the extent applicable, as one or more of the
following: an "employee pension plan" (as defined in Section 3(2)(A) of
ERISA), an "employee welfare plan" (as defined in Section 3(l) of ERISA),
or as a plan intended to be qualified under Section 401 of the Code.
(ii) The Seller and each of its affiliates have complied, and
currently are in compliance, in all material respects with all laws and
regulations applicable to the Plans, including, without limitation, ERISA
and the Code.
(iii) Except as set forth on Schedule 3.01(s)(iii), no ERISA
Affiliate has maintained, adopted or established, contributed to or been
required to contribute to, or otherwise participated in or been required to
participate in, any employee benefit plan or other program or arrangement
subject to Title IV of ERISA (including, without limitation, a
"multi-employer plan" (as defined in Section 3(37) of ERISA) and a defined
benefit plan (as defined in Section 3(35) of ERISA)).
(iv) Except as set forth on Schedule 3.01(s)(iv) neither the
Seller nor any of its affiliates provides or may be required to provide,
and no Plan, other than a Plan that is an employee pension benefit plan
(within the meaning of Section 3(2)(A) of ERISA), provides or may be
required to provide benefits, including, without limitation, death, health
or medical benefits (whether or not insured), with respect to current or
former employees of the Group beyond their retirement or other termination
of service with the Group (other than (A) coverage mandated by applicable
law, (B) deferred compensation benefits accrued as liabilities on the books
of the Seller or the affiliates, or (C) benefits the full cost of which is
borne by the current or former employee (or his or her beneficiary)). No
ERISA Affiliate maintains any Plan under which any employee or former
employee of any of the ERISA Affiliates may receive medical benefits which
cannot be modified or terminated by the ERISA Affiliates at any time
without the consent of any person, and no employees or former employees of
the ERISA Affiliates will have any claim in respect of such benefits as of
the Closing Date.
(v) Except as set forth in Schedule 3.01(s)(v), the transactions
contemplated hereby will not result in (i) any portion of any amount paid
or payable by the Seller to a "disqualified individual" (within the meaning
18
of Section 280G(c) of the Code and the regulations promulgated thereunder),
whether paid or payable in cash, securities of the Seller or otherwise and
whether considered alone or in conjunction with any other amount paid or
payable to such a "disqualified individual," being an "excess parachute
payment" within the meaning of Section 280G(b)(1) of the Code and the
regulations promulgated thereunder, (ii) any employee of the Group being
entitled to severance pay, unemployment compensation, or any other payment,
(iii) an acceleration of the time of payment or vesting, or an increase in
the amount of compensation due to any such employee or former employee or
(iv) any prohibited transaction described in Section 406 of ERISA or
Section 4975 of the Code for which an exemption is not available.
(vi) No ERISA Affiliate has incurred any material liability with
respect to any Plan under ERISA (including, without limitation, Title I or
Title IV thereof, other than liability for premiums due to the Pension
Benefit Guaranty Corporation), the Code or other applicable law, which has
not been satisfied in full or been accrued on the consolidated balance
sheet of the Seller and the affiliates as of December 31, 1998 pending full
satisfaction, and no event has occurred, and there exists no condition or
set of circumstances, which could result in the imposition of any liability
under ERISA, the Code or other applicable law with respect to any Plan.
(vii) With respect to each Plan that is funded wholly or
partially through an insurance policy, all premiums required to have been
paid to date under the insurance policy have been paid, and, except as set
forth on Schedule 3.01(s)(vii), as of the Closing Date there will be no
liability of any of the ERISA Affiliates under any such insurance policy or
ancillary agreement with respect to such insurance policy in the nature of
a retroactive rate adjustment, loss sharing arrangement or other actual or
contingent liability arising wholly or partially out of events occurring
prior to the Closing Date.
(viii) None of the ERISA Affiliates has made any contribution to
any Plan that may be subject to any excise tax under Section 4972 of the
Code.
(t) Transactions with Affiliates. Except for the items set forth on
Schedule 3.01(t) hereto, (i) there are no agreements between the Seller and
any of its Affiliates, on the one hand, and the Group, on the other hand,
for the provision of goods or services to or by the Group; (ii) neither the
Seller nor any of its Affiliates have been involved in any other material
business arrangement or relationship with, or pertaining to, the Group
within the past twelve months; (iii) there are no facilities occupied in
whole or in part by the Group, and no other property, assets, franchises,
licenses or rights used by the Group, that are owned, leased by or to, or
occupied by any Affiliate of the Seller; and (iv) no Affiliate of the
Seller owns any asset, tangible or intangible, which is used in the Group
Activity.
(u) Environmental, Health and Safety Matters. (i) Except as set forth
on Schedule 3.01(u) hereto:
19
(A) No Hazardous Substances have been treated or stored, or have
been or have threatened to be, discharged, released or emitted into
the air, water, surface water, ground water, land surface or
subsurface strata or transported to or from any property occupied by
the Group, its predecessors or Affiliates or the operations of the
Group Activity except in accordance with all applicable Environmental,
Health and Safety Requirements and except for incidental releases of
Hazardous Substances in amounts or concentrations that would not be
expected to give rise to any claims or liabilities against the Group
(except where the failure to comply would not reasonably be likely to
have a Material Adverse Effect on the Group or the Group Activity)
under any Environmental, Health and Safety Requirements including, but
not limited to, any liability for response costs, corrective action
costs, personal injury, property damage, natural resources damages or
attorneys fees, pursuant to the Comprehensive Environmental Reasons,
Compensation and Liability Act of 1980, as amended ("CERCLA") or the
Solid Waste Disposal Act, as amended ("SWDA") or any other
Environmental Law.
(B) The Group, its predecessors, and Affiliates are in compliance
with all Environmental, Health and Safety Requirements and have all
permits required pursuant to any Environmental, Health and Safety
Requirements (except where the failure to comply would not reasonably
be likely to have a Material Adverse Effect on the Group or the Group
Activity). The Seller has not received any notification from a
governmental agency that there is any violation of any Environmental,
Health and Safety Requirements with respect to the Group Activity and
properties of the Group and has not received any notification from a
governmental agency pursuant to Section 104, 106 or 107 of the
Comprehensive Environmental Response Compensation and Liability Act,
as amended.
(C) To Seller's knowledge, none of the following exist at any
property or facility owned or operated by the Group or used in
connection with or by the Group Activity: (x) asbestos or
asbestos-containing material, (y) polychlorinated biphenyls, or (z)
landfills, surface impoundments, disposal areas or underground storage
tanks.
(ii) The Seller has provided the Buyer with copies of all
environmental assessment or audit reports and other similar studies or
analyses relating to any property occupied by the Group or the operations
of the Group Activity.
(iii) Neither this Agreement nor the consummation of the
transactions that are the subject of this Agreement will result in any
obligations for site investigation or cleanup, or notification to or
consent of Governmental Agencies or third parties, pursuant to any of the
so-called "transaction-triggered" or "responsible party transfer"
Environmental, Health and Safety Requirements.
20
(v) Compliance With Law. The Group has complied with all applicable
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of all Governmental
Agencies (except where the failure to comply would not reasonably be likely
to have a Material Adverse Effect on the Group or the Group Activity), and
no Claim has been filed or commenced against it alleging any failure so to
comply.
(w) Broker's or Finder's Fees. Except as set forth on Schedule
3.01(w), all negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by the Seller directly with
Buyer, without the intervention of any persons on behalf of the Seller in
such a manner to give rise to any claim by any person against Buyer.
(x) Other Information. None of the information furnished by the Seller
to the Buyer in this Agreement, the exhibits hereto, the schedules
identified herein, or in any certificate or other document to be executed
or delivered pursuant hereto by the Seller at or prior to the Closing Date
taken as a whole, is, or on the Closing Date will be, false or misleading
or contains, or on the Closing Date will contain, any misstatement of fact,
or omits, or on the Closing Date will omit, to state any material fact
required to be stated in order to make the statements therein not
misleading in light of the circumstances under which they were made.
(y) Year 2000 Compliance. (i) There is no failure to be Year 2000
Compliant (as herein defined) of any computer software or hardware owned,
used, licensed or sold by the Group, or the Seller in connection with the
Group Activity, including, without limitation, computer hardware systems,
software applications, firmware, microchips, equipment containing embedded
microchips and other embedded systems that are used the Group, or the
Seller in connection with the Group Activity, or the software, hardware,
firmware and other technology which constitutes part of the products and
services manufactured, marketed or sold the Group, or the Seller in
connection with the Group Activity, licensed by the Group or the Seller to
third parties in connection with the Group Activity or used by Seller or
the Group in the conduct of Group Activity (the "Computer Systems") where
such failure would result in any material liability or expense to the
Seller or the Buyer following the Closing;
(ii) For purposes of this Agreement, "Year 2000 Compliant" means
that (1) neither performance nor functionality of the Computer Systems is
affected by dates prior to, during and after the year 2000; (2) no value
for any then-current date will cause any interruption in operation; (3)
date-based functionality must behave consistently for dates prior to,
during and after year 2000; and (4) in all interfaces and data storage, the
century in any date must be specified either explicitly or by unambiguous
algorithms or inferencing rules.
21
(iii) Except as set forth on Schedule 3.01(y)(iii), neither the
Seller nor the Group has provided any written guarantee or warranty for any
product sold or licensed, or service provided by the Group to the effect
that such product or service (x) complies with or accounts for the fact of
the arrival of the year 2000, (y) will not be adversely affected with
respect to functionality, interoperability, performance or volume capacity
(including, without limitation, the processing and reporting of data) by
virtue of the arrival of the year 2000 or (z) is otherwise Year 2000
Compliant.
(z) Private Placement. The Seller (i) acknowledges and understands
that neither the Shares nor the Note have been registered under the
Securities Act of 1933, as amended (the "Act"), or any state securities
laws, and are being offered and sold in reliance upon federal and state
exemptions for transactions not involving any public offering, (ii) is an
accredited investor, within the meaning of Rule 501 of Regulation D under
the Act, (iii) has received certain information concerning the Buyer and
has had the opportunity to obtain additional information as desired in
order to evaluate the merits and risks inherent in holding the Shares and
the Note and (iv) understands that it may not offer or sell the Shares or
the Note except pursuant to an effective registration statement under the
Act or pursuant to a valid exemption from the requirements of Section 5 of
the Act and applicable state securities laws.
(aa) Absence of Undisclosed Liabilities. Except as set forth in
Schedule 3.01(aa), the Group has no liability or obligation of any kind,
whether accrued, absolute, fixed or contingent that would be required to be
reflected on a balance sheet (or the notes thereto) prepared in accordance
with generally accepted accounting principles for the Group which would,
individually or in the aggregate, have a Material Adverse Effect on the
Group or the Group Activity.
(bb) Product Warranty. All of the products manufactured, sold, leased,
and delivered by the Group have conformed in all material respects with all
applicable contractual commitments, any express and implied warranties and
all written specifications, and the Group has no material liability
(whether known or unknown, whether asserted or unasserted, whether absolute
or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due) for replacement or repair
thereof or other damages in connection therewith. Except as set forth on
Schedule 3.01(bb), all of the products manufactured, sold, leased, or
delivered by the Group are subject to standard terms and conditions of sale
or lease. Schedule 3.01(bb) includes copies of the standard terms and
conditions of sale or lease for the Group (containing applicable guaranty,
warranty, and indemnity provisions).
(cc) Product Liability. The Group does not have any material liability
(whether known or unknown, whether asserted or unasserted, whether absolute
or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due) arising out of any injury
to individuals or property as a result of the ownership, possession, or use
22
of any product heretofore manufactured, sold, leased, or delivered by the
Group.
(dd) Assets Necessary to Group Activity. (i) The Assets, together with
all rights to be conveyed under the Ancillary Agreements, constitute all
the property and assets, real, personal and mixed, tangible and intangible,
all the Intellectual Property and all leases, licenses and other
agreements, necessary to permit the Seller to conduct the Group Activity as
it currently conducts it. At the Closing, the Buyer will obtain all rights
to the Assets necessary to permit the Buyer to conduct the Group Activity
as it is currently conducted, in all material respects.
(ii) The Group Employees constitute all the employees who have
played a material role in the development of any of the Group Intellectual
Property and are currently employed by the Seller.
(iii) Except as set forth on Schedule 3.01(dd)(iii), every
contract or other agreement with any vendor, supplier or manufacturer of
any products or services supplied by the Group to a third party expressly
provides for a pass-through of such vendor's, supplier's or manufacturer's
warranties, indemnities and obligations from the Seller to the Buyer.
Except as set forth on Schedule 3.01(dd)(iii), the Seller has all such
pass-through rights as are necessary for it to fulfill all of its
obligations pursuant to Section VI hereof and for the Buyer to be defended,
and defend itself, against any Damages.
(iv) The description of the "Group Activity" as set forth in the
preamble of this Agreement is an accurate description, in all material
respects, of the activities conducted by the Group being conveyed hereby.
(ee) SEC Filings. The Seller has provided to the Buyer true and
complete copies of (i) the Annual Reports of the Seller on Form 10-K for
each of fiscal years ended December 31, 1996, 1997 and 1998, (ii) the
Quarterly Reports of the Seller on Form 10-Q for the months ended March 31,
1999, June 30, 1999 and September 30, 1999, (iii) its proxy or information
statements relating to meetings of, or actions taken without a meeting by,
the stockholders of the Seller subsequent to December 31, 1996, and (iv)
all other reports, statements and registration statements filed by the
Seller with the SEC subsequent to December 31, 1996 (collectively, the
"Seller Filings"). The Seller Filings (including, without limitation, any
financial statements or schedules included therein) (i) were prepared in
compliance with the requirements of the Securities Act or the Exchange Act,
as the case may be, and (ii) did not at the time of filing (or if amended,
supplemented or superseded by a filing prior to the date hereof, on the
date of that filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
23
(ff) Fairness Opinion. The Seller has received the opinion of
Broadview International LLC that, with regard to the consideration to be
paid to the Seller for the Assets being purchased (and the liabilities
being assumed) by the Buyer, the transactions contemplated in this
Agreement and the Ancillary Agreements are fair to the Seller from a
financial point of view as of the date of such opinion.
(gg) Development Agreements. Schedule 3.01(gg)(i) sets forth a list of
all development agreements to which the Seller is a party that relate to
the Group Activity (the "Development Agreements"). Except as set forth on
Schedule 3.01(gg)(ii), the Seller has satisfied, or will satisfy, all
material requirements, including but not limited to any minimum production
and development schedule, set forth in any Development Agreement and the
Seller is not in default (nor has any event occurred which, with the giving
of notice or passage of time would result in an event of default) under any
Development Agreement. Except as set forth on Schedule 3.01(gg)(iii), no
amounts ("Penalties") are owed by the Seller, and no such Penalties are
reasonably anticipated by the Seller to be owed, due to the failure of the
Group or the Seller to satisfy any requirements under any Development
Agreement, by the Seller to any third party with whom the Seller has
entered into a Development Agreement. Schedule 3.01(gg)(iii) also sets
forth a list of all Penalties which are owed, or are reasonably anticipated
by the Group or the Seller to be owed, by the Group or the Seller pursuant
to any Development Agreement.
SECTION 3.02 Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Seller as follows:
(a) Organization, Corporate Power, Etc. The Buyer is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is duly licensed or qualified to do
business as a foreign entity in each jurisdiction in which it is required
to be so qualified and as set forth in Schedule 3.02(a), except where the
failure to be so qualified would not be likely to result in a Material
Adverse Effect on the Buyer. The Buyer has all requisite corporate power
and authority to (i) own, operate and lease its properties, (ii) to execute
and deliver this Agreement and each Ancillary Agreement to which it is
party and to perform its obligations hereunder and thereunder, (iii) issue
and deliver the Initial Shares and (iv) issue and deliver the shares of
Common Stock issuable upon conversion of the Note (the "Conversion Shares",
and together with the Initial Shares, the "Shares"). Schedule 3.02(a)
hereto sets forth a complete list of the jurisdictions in which the Buyer
is qualified to do business.
(b) Authorization of Agreements. (i) The execution and delivery by the
Buyer of this Agreement and each Ancillary Agreement to which the Buyer is
a party, and the consummation by the Buyer of the transactions contemplated
hereby and thereby, have been duly authorized by all requisite corporate
action. This Agreement has been duly and validly executed by the Buyer and,
subject to due execution by any other parties thereto, will constitute the
legal, valid and binding obligation of the Buyer, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency,
24
reorganization and moratorium laws and other laws of general application
affecting the enforcement of creditors' rights generally. Each Ancillary
Agreement to which the Buyer is party, when duly executed and delivered in
accordance with this Agreement, subject to due execution by any other
parties thereto, will constitute a legal, valid and binding obligation of
the Buyer, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization and moratorium laws and other laws
of general application affecting the enforcement of creditors' rights
generally. No other corporate proceedings on the part of the Buyer are
necessary to authorize this Agreement, the Ancillary Agreements or the
transactions contemplated hereby or thereby.
(ii) The Initial Shares have been duly authorized by the Buyer
and, when issued in accordance with this Agreement, will be validly issued
and outstanding and fully paid.
(iii) The Conversion Shares have been duly reserved for issuance
upon conversion of the Note, and upon such conversion will be validly
issued and outstanding, fully paid and non-assessable shares of Common
Stock.
(c) Non-Contravention. The execution and delivery of this Agreement
and the Ancillary Agreements by the Buyer and the consummation of the
transactions contemplated hereby will not (i) conflict with any provision
of the Certificate of Incorporation of the Buyer (as in effect at the
Closing) (ii) result (with the giving of notice or the lapse of time or
both) in any violation of or default or loss of a benefit under, or permit
the acceleration of any obligation under, any mortgage, indenture, lease,
agreement or other instrument, permit, concession, grant, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Buyer or any of its properties, other than any
such violation, default, loss or acceleration that would not materially
adversely affect the ability of the Buyer to consummate the transactions
contemplated hereby and which would not otherwise have a Material Adverse
Effect on the Buyer.
(d) Capitalization. The authorized capital stock of the Buyer consists
of 100,000,000. As of December 31, 1999, 19,595,241 were issued and
outstanding, all of which were duly and validly issued, fully paid and
nonassessable. Except as set forth on Schedule 3.02(d), and except for
options to purchase an aggregate 2,474,525 shares of Common Stock granted
pursuant to the stock option plans of the Buyer, as of the date hereof
there are no subscription, warrant, option, convertible security, stock
appreciation or other right (contingent or other) to purchase or acquire,
or any securities convertible into or exchangeable for, any shares of any
class of capital stock of the Buyer or any subsidiary thereof is authorized
or outstanding and as of the date hereof there is not any commitment of the
Buyer or any such subsidiary to issue any shares, warrants, options or
other such rights or to distribute to holders of any class of its capital
stock any evidences of indebtedness or assets. As of the date hereof,
neither the Buyer nor any of its subsidiaries has any obligation
(contingent or other) to purchase, redeem or otherwise acquire any shares
25
of its capital stock or any interest therein or to pay any dividend or to
make any other distribution in respect thereof.
(e) Governmental Approvals. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Agency is required to be made or obtained by the Buyer in
connection with the execution and delivery of this Agreement by the Buyer
or the consummation by the Buyer of the transactions contemplated hereby,
except for (i) compliance by the Buyer with Xxxx-Xxxxx, (ii) filings
pursuant to Securities Act and the Exchange Act and the rules and
regulations promulgated by the SEC thereunder and (iii) such consents,
approvals, orders or authorizations which if not obtained, or
registrations, declarations or filings which if not made, would not
materially adversely affect the ability of the Buyer to consummate the
transactions contemplated hereby.
(f) SEC Filings. The Buyer has provided to the Seller true and
complete copies of (i) the Quarterly Reports of the Buyer on Form 10-Q for
the three months ended June 30, 1999 and September 30, 1999 (ii) its proxy
or information statements relating to meetings of, or actions taken without
a meeting by, the stockholders of the Buyer subsequent to June 23, 1999,
and (iii) all other reports, statements and registration statements filed
by the Buyer with the SEC subsequent to June 23, 1999 (collectively, the
"Buyer Filings"). The Buyer Filings (including, without limitation, any
financial statements or schedules included therein) (i) were prepared in
compliance with the requirements of the Securities Act or the Exchange Act,
as the case may be, and (ii) did not at the time of filing (or if amended,
supplemented or superseded by a filing prior to the date hereof, on the
date of that filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(g) Financial Statements. The consolidated financial statements of the
Buyer included in the Buyer Filings have been prepared in accordance with
generally accepted accounting principles consistently applied and
consistent with prior periods, subject, in the case of unaudited interim
consolidated financial statements, to year-end adjustments (which consist
of normal recurring accruals) and the absence of certain footnote
disclosures. The consolidated balance sheets of the Buyer included in the
Buyer Filings fairly present the financial position of the Buyer and its
subsidiaries as of their respective dates, and the related consolidated
statements of operations, stockholders' equity and cash flows included in
the Buyer Filings fairly present the results of operations of the Buyer and
its subsidiaries for the respective periods then ended, subject, in the
case of unaudited interim financial statements, to year-end adjustments
(which consist of normal recurring accruals) and the absence of certain
footnote disclosures. Except for liabilities or obligations that are
accrued or reserved against in the Buyer's financial statements (or
reflected in the notes thereto) included in the Buyer's Filings made prior
to the date hereof or that were incurred subsequent to September 30, 1999
in the ordinary course of business and consistent with past practice, none
of the Buyer and its subsidiaries has any liabilities or obligations
26
(whether absolute, accrued, contingent or otherwise) of a nature required
by generally accepted accounting principles to be reflected in a
consolidated balance sheet (or reflected in the notes thereto) or which
would have a Material Adverse Effect on the Buyer.
(h) Compliance with Laws. The Buyer has complied with all applicable
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of all Governmental
Agencies (except where the failure to comply would not have a Material
Adverse Effect on the Buyer), and no Claim has been filed or commenced
against it alleging any failure so to comply.
(i) Brokers. Except as set forth on Schedule 3.02(i), no person is
entitled to any brokerage or finder's fee or commission in connection with
the transactions contemplated by this Agreement as a result of any action
taken by or on behalf of the Buyer.
(j) Fairness Opinion. The Buyer has received the opinion of Xxxxxx
Xxxxxx Partners LLC that, with regard to the consideration to be paid to
the Seller for the Assets being purchased (and the liabilities being
assumed) by the Buyer, the transactions contemplated in this Agreement and
the Ancillary Agreements are fair to the Buyer from a financial point of
view as of the date of such opinion.
(k) Litigation. No action, suit or proceeding by or before any court
or Governmental Agency, involving the Buyer or its property is pending or,
to the best knowledge of the Buyer, threatened that (i) could reasonably be
expected to have a Material Adverse Effect on the performance by the Buyer
of its obligations under this Agreement or the consummation of any of the
transactions contemplated hereby or (ii) could reasonably be expected to
result in a Material Adverse Effect on the Buyer.
(l) Taxes. The Buyer has filed all necessary federal, state and
foreign income and franchise tax returns or has properly requested
extensions thereof and has paid all taxes required to be paid by it and, if
due and payable, any related or similar assessment, fine or penalty levied
against it. The Buyer has made adequate charges, accruals and reserves in
the applicable financial statements set forth in the Buyer Filings in
respect of all federal, state and foreign income and franchise taxes for
all periods as to which the tax liability of the Buyer has not been finally
determined. The Buyer is not aware of any tax deficiency that has been or
might be asserted or threatened against the Buyer that could result in a
Material Adverse Effect on the Buyer.
(m) Intellectual Property. The Buyer owns or possesses adequate rights
to use all Intellectual Property which is necessary to conduct its business
as described in the Buyer Filings; the expiration of any patents, patent
rights, trade secrets, trademarks, service marks, trade names or copyrights
will not result in a Material Adverse Effect on the Buyer that is not
otherwise disclosed in the Buyer Filings; the Buyer has not received
27
any notice of, and has no knowledge of, any infringement of or conflict
with asserted rights of the Buyer by others with respect to any of the
Buyer's Intellectual Property which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, might have a
Material Adverse Effect on the Buyer; and the Buyer has not received any
notice of, and has no knowledge of, any infringement of or conflict with
asserted rights of others with respect to any of the Buyer's Intellectual
Property which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, might have a Material Adverse
Effect on the Buyer. There is no claim being made against the Buyer
regarding the Buyer's Intellectual Property which, if the subject of an
unfavorable decision, ruling or finding, might have a Material Adverse
Effect on the Buyer. The Buyer does not in the conduct of its business as
now or proposed to be conducted as described in the Buyer Filings infringe
or conflict with any right or patent of any third party, or any discovery,
invention product or process which is the subject of a patent application
filed by any third party, known to the Buyer, which such infringement or
conflict is reasonably likely to result in a Material Adverse Effect on the
Buyer.
(n) Environmental Matters. (i) The Buyer is in compliance with all
rules, laws and regulations relating to the use, treatment, storage and
disposal of toxic substances and protection of health or the environment
which are applicable to its business, except where the failure to comply
would not result in a Material Adverse Effect, (ii) the Buyer has received
no notice from any Governmental Agency or third party of an asserted claim
under any Environmental, Health and Safety Requirement which claim is
required to be disclosed in the Buyer Filings, (iii) the Buyer will not be
required to make future material capital expenditures to comply with any
Environmental, Health and Safety Requirement and (iv) no property which is
owned, leased or occupied by the Buyer has been designated as Superfund
site pursuant to the Comprehensive Response, Compensation, and Liability
Act of 1980, as amended (42 U.S.C. Section 9601, et seq.), or otherwise
designated as a contaminated site under applicable state or local law.
(o) Offering of the Securities. Neither the Buyer nor any person
acting on its behalf has taken or will take any action (including, without
limitation, any offer, issuance or sale of any securities of the Buyer
under circumstances which might require the integration of such securities
with the Shares or the Note under the Securities Act of 1933, as amended
(the "Securities Act") or the rules and regulations of the Securities and
Exchange Commission thereunder) which might subject the offering, issuance
or sale of the Shares or the Note to the registration provisions of the
Securities Act.
28
IV. COVENANTS
SECTION 4.01 Covenants of the Seller.
(a) The Seller agrees that, at all times between the date hereof and
the Closing Date, unless the Buyer and the Seller shall otherwise agree in
writing, the Seller shall and shall cause the Group to:
(i) operate the Group Activity only in the ordinary course, in
accordance with past practices and, to the extent consistent with such
operations, the Seller will use best efforts to preserve (x) the existing
business organization of the Group Activity, (y) relationships with all
employees and (z) the Seller's present relationships with all lessors,
customers, suppliers and licensors of, and all other persons having
business dealings with, the Group Activity;
(ii) maintain all the Assets in good repair, order and condition
(reasonable wear and tear excepted);
(iii) not take any action or refrain from taking any action that
would affect (1) Seller's ownership of or right, exclusive or
non-exclusive, to use any Group Intellectual Property, (2) any registration
or application pending with respect to such Group Intellectual Property, or
(3) in any material respect, the value or utility of such Group
Intellectual Property to the Group Activity as currently conducted.
(iv) maintain the Group's records in the usual, regular and
ordinary manner, on a basis consistent with past practice, and use its best
efforts to comply with all laws applicable to it and to the conduct of the
Group Activity and perform all its material obligations without default;
(v) not change the character of the Group Activity in any manner;
(vi) not, with respect to the Group Activity (A) incur any
obligation or liability (fixed or contingent), or incur any indebtedness
for money borrowed which is to be repaid by the Group, except normal trade
or business obligations incurred in the ordinary course and consistent
with past practice and except in connection with this Agreement and the
transactions contemplated hereby; (B) mortgage, pledge or subject to any
lien, security interest or encumbrance any of the Assets (other than
mechanic's, materialman's and similar statutory liens arising in the
ordinary course and purchase money security interest arising in the
ordinary course between the date of delivery and payment); (C) transfer,
sell, lease or otherwise dispose of any of the Assets (except for Excluded
Assets) except for a fair consideration in the ordinary course and
consistent with past practice or, except in the ordinary course and
consistent with past practice, acquire any assets or properties; (D) cancel
or compromise any debt or claim individually or in the aggregate in excess
of $50,000, except in the ordinary course and consistent with past
29
practice; (E) waive or release any rights of material value or surrender,
cause to be revoked or otherwise terminate any material license, permit or
other approval, authorization or consent from any court, administrative
agency or other governmental authority relating to the conduct of the Group
Activity; (F) transfer or grant any rights under any concessions, leases,
licenses, agreements, patents, inventions, trademarks, trade names,
servicemarks, or copyrights or with respect to any Group Intellectual
Property or permit any license, permit or other form of authorization
relating to any such Intellectual Property to lapse having a value
individually or in the aggregate in excess of $50,000; (G) suffer any
casualty loss or damage which materially or adversely affects the ability
of the Seller to conduct the Group Activity; (H) make or grant any wage,
salary or benefit increase or bonus payment to any Group Employee
individually or in the aggregate in excess of $50,000, enter into or
materially amend the terms of any employment contract with, or make any
loan to, or grant any severance benefits to, or modify any severance
arrangements applicable to, or enter into or amend the terms of any
material transaction of any other nature with, any officer or employee
engaged in the operations of the Group Activity, other than in the ordinary
course of business and consistent with past practice; (I) enter into or
amend any contract agreement, lease or license involving the performance of
services or the provision of goods (in either case as a vendor or vendee)
which in accordance with its terms will not be completed for a period in
excess of one year after the date of such contract, binds the Group in any
way other than in the ordinary course and/or involves payments in excess of
$50,000; (J) enter into any other material transaction, contract or
commitment, except in the ordinary course and consistent with past
practice; or (K) except in the ordinary course and consistent with past
practice, amend or modify in any material respect adverse to the interests
of the Group Activity any contract listed on Schedule 3.01(i) hereto.
(vii) conduct the Group Activity in all material respects in
compliance with all applicable laws and regulations.
(b) Between the date hereof and the Closing Date, the Seller will
afford the representatives of the Buyer reasonable access during normal business
hours to the offices, facilities, books and records of the Seller related to the
Group Activity and the opportunity to discuss the affairs of the Group with
officers and employees of the Seller familiar therewith.
(c) (i) Between the date hereof and the Closing Date, the Seller
shall, with the Buyer's assistance and cooperation, but, except as set forth in
clause (c)(ii), at the expense of the Seller, promptly apply for or otherwise
seek and use the Seller's reasonable efforts to obtain all authorizations,
consents, waivers and approvals as may be required in connection with (1) the
assignment of the contracts, agreements, licenses, leases, sales orders,
purchase orders and other commitments of which the Seller is the beneficiary to
be assigned to the Buyer pursuant to Section 5.01(f) hereof and (2) the
Commitments and Interests described in Section 1.02 hereto.
(ii) All filing fees related to the efforts to obtain approval
under the Xxxx-Xxxxx Act shall be borne equally by Buyer and Seller.
30
(d) Between the date hereof and the Closing Date, the Seller will not
enter into any transaction or make any agreement or commitment, or permit any
event to occur, which would result in any of the representations or warranties
of the Seller contained in this Agreement not being true and correct at and as
of the time immediately after the occurrence of such transaction or event or
omit to take any action necessary to prevent any such representation or warranty
from being untrue or incorrect at any such time.
(e) Between the date hereof and the Closing Date, the Seller shall use
its best efforts to assist the Buyer in its efforts to enter into employment
agreements with all Group Employees and to ensure that all Group Employees
remain as employees of the Seller at least through the Closing Date, including
without limitation, honoring the terms of the employee retention programs
previously disclosed to the Buyer.
SECTION 4.02 Covenants of the Buyer.
(a) The Seller shall furnish Buyer such information as Buyer or its
counsel shall reasonably request with respect to the preparation of the Form S-1
and the public offering of the Shares (including, without limitation, all
financial statements and other information required by the Act and the rules and
regulations thereunder) and the Seller shall take any other action Buyer may
reasonably request in connection with the preparation and filing of the Form S-1
(including, without limitation, causing the Seller's independent public
accountants to prepare and deliver all consents, reports, opinions or other
information or instruments that may be required by the Act and the rules and
regulations thereunder or otherwise necessary).
(b) Between the date hereof and the Closing Date, the Buyer will not
enter into any transaction or make any agreement or commitment, or permit any
event to occur, which would result in any of the representations or warranties
of the Buyer contained in this Agreement not being true and correct at and as of
the time immediately after the occurrence of such transaction or event or omit
to take any action necessary to prevent any such representation or warranty from
being untrue or incorrect at any such time.
SECTION 4.03 Notification of Certain Matters. The Seller shall give
prompt notice to Buyer, and Buyer shall give prompt notice to the Seller of (i)
the occurrence, or failure to occur, of any event that such party believes would
be likely to cause any of its representations or warranties contained in this
Agreement to be untrue or inaccurate at any time from the date hereof to the
Closing Date and (ii) any material failure of the Seller or Buyer, as the case
may be, or any officer, director, employee, representative or agent thereof, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that failure to give such
notice shall not constitute a waiver of any defense that may be validly
asserted.
SECTION 4.04 Confidentiality. The contents of this Agreement shall be
kept confidential between the parties, except that each party may reveal and
discuss the contents with its respective professional advisors, including
31
attorneys and accountants. In addition, the parties may mutually agree in
writing as to the revealing of the subject transaction with current employees
and to the public. In so doing, the parties shall agree to the timing and
content of the release of such information. In furtherance of the foregoing, the
parties hereto agree to incorporate herein by reference that certain
confidentiality agreement, dated October 1, 1999 (the "Confidentiality
Agreement"), between the Buyer and the Seller and further agree that,
notwithstanding anything herein to the contrary, the terms and provisions of the
Confidentiality Agreement shall remain in full force and effect.
SECTION 4.05 Allocation of Purchase Price. The Purchase Price (and any
liabilities assumed by the Buyer from the Seller) shall be allocated among the
Assets in the manner determined by Buyer in its reasonable discretion as soon as
practicable after the Closing Date, subject to the approval of the Seller, which
approval will not be unreasonably withheld. The parties shall adhere to such
allocation for all Tax purposes and shall file all Tax Returns and other
documents with all taxing authorities on a basis consistent therewith. In
particular, Buyer and the Seller shall (i) file a Form 8594 Asset Acquisition
Statement of Allocation consistent with such allocation, (ii) provide a copy of
such form to the other, and (iii) file a copy of such form with its federal
income tax return for the period that includes the Closing Date.
SECTION 4.06 Transfer Taxes. All transfer, sales and use taxes imposed
upon or incurred by any of the parties hereto in connection with this Agreement
and the transactions contemplated hereby shall be borne equally by the Seller
and the Buyer. The Seller and the Buyer shall jointly prepare and file, at the
expense of Seller, all necessary Tax Returns and other documents with respect to
all such transfer, sales and use taxes. If required by applicable law, any other
party hereto shall join in the execution and filing of any such Tax Returns or
other documents. The Seller and the Buyer agree to cooperate in any endeavor to
effect a reduction in any such transfer, sales and use taxes.
SECTION 4.07 Insurance. Between the date of this Agreement and the
Closing Date, the Buyer shall use reasonable efforts to obtain policies of fire,
liability, workers' compensation and other forms of insurance in such amounts
and against such risks as the Buyer deems appropriate. The Seller shall
cooperate with the Buyer in obtaining such insurance and, in the event that the
Buyer is unable by the Closing Date to obtain such insurance, the Seller shall,
at the Buyer's written request, maintain their insurance policies in full force
and effect for the benefit of Buyer for a period after the Closing Date not to
exceed 60 days. The Buyer shall reimburse the Seller within 30 days in respect
of any premiums paid in keeping the Seller's insurance policies in full force
and effect after the Closing Date.
SECTION 4.08 Non-Competition. (a) (i) For a period of four years after
the Closing, neither the Seller nor any of its Affiliates that are business
entities shall, directly or indirectly, engage or invest in, own, manage,
operate, finance, control or participate in the ownership, management,
operation, financing or control of, or be associated in any manner connected
with, lend the Seller's credit to, or render services to, any business or
activity that is engaged, in whole or in part, in the design, development,
license and supply of intellectual property necessary for the manufacture,
32
have-manufacture and sale of integrated circuits and related systems and
software that is currently engaged in by the Group or the sale of integrated
circuits and related systems and software that utilizes such intellectual
property (the "Competing Activity") except that the Seller may engage in the
Permitted Activities and the Permitted Framer Activities to the extent and on
the terms set forth in the License Agreement. Neither the Seller nor any of its
Affiliates that are business entities will, without the prior written consent of
the Buyer, own an interest in, manage, operate, join, control or be connected
with, as an officer, employee, partner, stockholder, consultant or otherwise,
any Person that is engaged in the Competing Activity. For the purposes of this
Section 4.08, the term "Affiliate" shall not include companies of which members
of the board of directors on the date hereof are also members of the board of
directors of the Seller on the date hereof. (ii) Nothing herein shall prohibit
the Seller from being acquired (in whole or in part) by merger or otherwise, by
another business entity that is engaged in the Competing Activity; provided that
the acquiring company shall not utilize the DSL Technology for any purpose
whatsoever.
(b) As a separate and independent covenant, the Seller agrees with the
Buyer that, for a period of four years following the Closing, the Seller shall
not, without the Buyer's consent, which consent may be given or withheld by the
Buyer in its sole discretion, (i) employ, or otherwise engage as an employee,
consultant, advisor, independent contractor, or otherwise, any Group Employees
or solicit, cause or encourage, directly or indirectly, any Group Employees to
leave the employ of the Group or the Buyer or to violate the terms of their
contracts, or any employment arrangements, or cause or encourage any Person
(including the Seller itself) to enter into any employment, consulting, advisory
or other similar arrangement with any of the Group Employees and (ii) neither
the Seller, its Affiliates, nor any of their employees, contractors, agents or
other representatives, will induce, directly or indirectly, any Group Employee
to take any action which in any way, directly or indirectly, interferes with,
causes harm or damage to, or in any way disadvantages the Buyer, the Group
Activity or the Group.
(c) The Seller acknowledges that this Section 4.08 constitutes an
independent covenant and shall not be affected by performance or nonperformance
of any other provision of this Agreement by Buyer. The Seller has independently
consulted with its counsel and agrees after such consultation that the covenants
set forth in this Section 4.08 are reasonable and proper.
(d) The parties agree that a remedy at law for any breach of any
obligation contained in this Section 4.08 will be inadequate and that in
addition to any other rights and remedies to which Buyer shall be entitled
hereunder, at law or in equity, the Buyer shall be entitled to injunctive relief
and reimbursement for all reasonably attorneys' fees and other expenses incurred
in connection with the enforcement hereof.
(e) Notwithstanding the provisions of Section 8.14, the Buyer's rights
under this Section 4.08 may, without the Seller's consent, be assigned by the
Buyer to any third party in connection with any sale (by merger or otherwise) of
all or substantially all of the Assets to any such third party.
33
SECTION 4.09 Group Employees.
(a) Schedule 4.09(a) sets forth a list of all Group Employees. On the
Closing Date, the Seller shall terminate the employment of all of the Group
Employees and such Group Employees shall cease to accrue any benefits under any
employee benefit plans maintained by or for the benefit of the Seller or any of
its affiliates, and the Buyer shall be deemed to have offered to continue the
employment of each such individual whose employment was so terminated effective
from the Closing Date or, in the case of a Group Employee not actively at work
on the Closing Date on account of a disability, on the day such employee reports
for work after termination of such disability. For purposes of the immediately
preceding sentence, the term "continue the employment" shall mean employment on
terms (i) with respect to salary, competitive with those of individuals having
similar duties at comparable businesses and (ii) with respect to position,
"substantially the same duties in the same functional area" as in effect on the
Closing Date. Nothing in this Section 4.09 shall require the Buyer (1) to
provide or continue for the benefit of any employees any bonus or other
compensation plan or arrangement or any other employee benefit plan currently
maintained by the Seller or any affiliate thereof or (2) to maintain the
organizational structure of the Group Activity in effect on the date hereof.
Seller and Buyer acknowledge and agree that, to the maximum extent permitted or
allowed by applicable law, employment by the Buyer of any Group Employees as
described in this paragraph (a) shall be employment at will.
(b) The Seller hereby acknowledges and agrees that any severance,
termination or other obligation to any Group Employee arising from the
employment of such Group Employee by the Seller or any affiliate thereof or the
termination of the employment of such Group Employee as a result of the
transactions contemplated by this Agreement or otherwise shall be the sole
responsibility and liability of the Seller.
(c) The Buyer agrees that effective as of the Closing Date, all Group
Employees who shall commence employment with the Buyer ("Transferred Employees")
shall participate in the Buyer's employee benefit plans as the same may be in
effect from time to time, including a group health plan providing major medical
benefits, on substantially similar terms and conditions as the Buyer's similarly
situated employees.
(d) The Seller has heretofore delivered to the Buyer a schedule (the
"Vacation Schedule") showing, with respect to each Group Employee as of December
31, 1999, the number of days of vacation pay to which such Group Employee is
entitled as of such date. The Seller shall take responsibility for and cause to
be paid in the normal course of business the vacation pay of all Transferred
Employees as reflected on the Vacation Schedule.
(e) Except as specifically set forth in this Agreement (i) the Buyer
shall not be obligated to assume, continue or maintain any of the Seller's
Plans; (ii) no assets or liabilities of the Seller's Plans shall be transferred
to, or assumed by, the Buyer or the Buyer's benefit plans; and (iii) the Seller
shall be responsible solely for funding and/or paying any benefits under any of
34
the Seller's Plans, including any termination benefits and other employee
entitlements accrued under such plans by or attributable to employees of the
Group Activity prior to the Closing Date.
(f) Nothing in this Agreement, express or implied, shall confer upon
any employee of the Seller, or any representative of any such employee, any
rights or remedies, including any right to employment or continued employment
for any period, of any nature whatsoever.
(g) The Buyer will take all action necessary to grant to the Group
Employees at the Closing stock options, to be allocated among the Group
Employees as the Buyer determines in its sole discretion, to acquire Common
Stock. The Seller shall take all action necessary to cause all stock options
granted by the Seller to any Transferred Employee to vest at the Closing Date.
(h) The Seller agrees that if at any time after the Closing Date the
Buyer, in its reasonable determination, should require the assistance of
employees of the Seller (other than the Group Employees) who played a role in
the development of the Group Intellectual Property, the Seller shall make such
employees available to the Buyer, upon the Buyer's reasonable request, at such
rates and for such periods of time as the parties shall reasonably agree.
SECTION 4.10 Further Assurances. Subject to the terms and conditions
herein provided, the Seller and Buyer hereto agree to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement,
including, without limitation, using all reasonable efforts to obtain all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings (including, without limitation, any necessary filings
under Xxxx-Xxxxx); provided that the foregoing shall not require Buyer to agree
to make any divestiture of a significant asset in order to obtain any waiver,
consent or approval.
SECTION 4.11 Inquiries and Negotiations. From the date hereof until
the termination hereof, the Seller and its officers, directors, employees and
representatives and other agents will not, directly or indirectly, continue,
consider, solicit or encourage in any way (including by furnishing any
non-public information concerning the Seller, the Group Activity or the Assets)
or otherwise cooperate in any way with, or assist or participate in, or
encourage any effort or attempts by any person, corporation, entity or group
other than Buyer and its Affiliates, representatives and agents (each, a "Third
Party") in connection with any dispositions or divestiture of the Group or all
or any portion of the Assets, (whether by merger, sale of stock, sale or lease
of assets or otherwise and other than sales of inventory in the ordinary course
of business) (such transactions being hereinafter referred to as "Alternative
Transactions"). The Seller shall immediately notify Buyer if any proposal,
offer, inquiry or other contact is received by, any information is requested
from, or any discussions or negotiations are sought to be initiated or continued
with, the Seller in respect of an Alternative Transaction, and shall, in any
35
such notice to Buyer, indicate the identity of the Third Party and the terms and
conditions of any proposals or offers or the nature of any inquiries or
contacts.
SECTION 4.12 Transfer of Assets. Any Affiliate of the Seller that
holds, owns, controls or has any rights in any of the Assets or any assets
relating to, used in or useful to, the Group Activity shall, prior to the
Closing, transfer such assets to the Seller free and clear of any mortgage,
lien, pledge, claim, restriction, security interest, charge or encumbrance of
any nature whatsoever.
SECTION 4.13 Transition Services. (a) For a period of six (6) months
from the Closing Date, the Buyer shall make three (3) of its engineers available
at any time, at the Seller's request to design and develop the DMT ADSL hardware
and software onto the 12-port and 24-port Falcon-based G.lite/full rate DMT
channel cards, to support the on-the-job training of new DMT development support
engineers and to support the solution of problem reports that may arise from the
Seller's obligation to support Conexant's utilization of the Falcon components
pursuant to its obligations under the ADSL Agreement. The engineering support
services will be required principally of the engineers agreed upon between the
Buyer and the Seller. In the event any of such individuals should not accept the
Buyer's employment offer or subsequently terminate his employment with the
Buyer, the Buyer shall provide the services of such other employees then
employed by the Buyer with the requisite skills as are reasonably needed to
fulfill the Buyer's obligations under this Section 4.13(a), subject to the
reasonable approval of the Seller. Additionally, other engineers may be required
from time to time to support questions from Conexant, which cannot be predicted
at this time. In no event will the aggregate time commitment of the three named
engineers and the additional engineers exceed the equivalent of the full time
commitment of three engineers for such six-month period. So long as the Buyer is
satisfying the Seller's product development requirements as described in the
first sentence above, the Buyer will be entitled to use any or all of such
engineers in its own operations. The engineers shall be available to provide
such services to the Seller within two (2) days of the Seller's request, and in
consideration for such services, the Seller shall pay the Buyer Three Hundred
Dollars ($300) per hour for each engineer providing such services.
For a period of six (6) months, commencing six (6) months from the Closing
Date, the Buyer shall make two (2) of its engineers available at any time, at
the Seller's request, to support the completion of and bug-fixes related to the
Falcon Chip and for continuing support to enable the Seller to fulfill its
obligations under the ADSL Agreement. Such engineers shall be available to
provide such services to the Seller within two (2) days of the Seller's request,
and in consideration for such services, the Seller shall pay the Buyer One
Hundred Fifty Dollars ($150) per hour for each engineer providing such services.
The services described in this Section 4.13(a) are defined as the "Transition
Services".
(b) (i) Billing for transition services provided by the Buyer
pursuant to Section 4.13(a) will be made to the Seller, by the tenth
business day of the month following the month in which the Transaction
Service was provided.
(ii) Payment is due thirty (30) days from the Buyer's invoice
date. The Buyer may change credit or payment terms at any time when, in the
Buyer's reasonable opinion, the Seller's financial condition, previous
payment record, or the nature of the Seller's relationship with the Buyer
so warrants.
(iii) The Buyer may discontinue performance if the Seller fails
to pay any sum due that is not reasonably disputed, or fails to perform in
any material respects under this or any other Buyer agreement if, after
thirty (30) days written notice, the failure has not been cured.
(c) (i) Either party may terminate its obligations under this Section
4.13 for cause at any time unless the other party cures the breach within
thirty (30) days of written notice of such breach.
(ii) If either party becomes insolvent, is unable to pay its debt
when due, files for bankruptcy, is the subject of involuntary bankruptcy,
36
has a receiver appointed or has its assets assigned, the other party may
terminate its obligations under this Section 4.13 without notice and may
cancel any unfulfilled obligations.
(iii) Provisions herein which by their nature extend beyond the
termination or expiration of this Section 4.13 will remain in effect until
fulfilled.
(d) Each of the Seller and the Buyer agree that in the event of any
breach of Section 4.13(a) by the Buyer, the Seller would be irreparably
harmed and could not be made whole by monetary damages. It is accordingly
agreed that the Buyer waives the defense in any action alleging breach of
the provisions of this Section 4.13 seeking specific performance of the
Buyer's obligations under Section 4.13(a) that damages, or any other remedy
at law would be an adequate remedy. The parties further agree, in addition
to any other remedy to which it may be entitled at law or in equity, the
Seller shall be entitled to compel specific performance of Section 4.13(a)
in any action instituted by the Seller. The parties further agree that a
breach of Section 4.13(a) would require immediate redress. Accordingly, the
parties agree that in the event a legal proceeding is commenced by the
Seller which seeks specific performance of Section 4.13(a), such proceeding
shall be expedited to the fullest extent permitted by law.
SECTION 4.14 License of Embedded Trademarks. The Seller hereby
licenses the Buyer, for no additional consideration, the use of the Seller's
tradenames and trademarks in any mask work or mask set where such tradename or
trademark is embedded in the finished product, such license to terminate at such
time as the Buyer replaces the mask work or mask set.
V. CONDITIONS PRECEDENT
SECTION 5.01 Conditions Precedent to Obligations of the Buyer. The
obligation of the Buyer to consummate the transaction set forth in this
Agreement is subject to the fulfillment at or prior to the Closing Date of each
of the following conditions, any of which may be waived in whole or in part by
the Buyer to the extent permitted by applicable law:
(a) Accuracy of Representations and Warranties. The representations
and warranties contained in Section 3.01 of this Agreement or in any
certificate or document delivered to the Buyer pursuant hereto shall be
true and correct on and as of the Closing Date as though made at and as of
that date (without regard to any notification that may be made by the
Seller under Section 4.03), and the Seller shall have delivered to the
Buyer a certificate to that effect.
(b) Compliance with Covenants. The Seller shall have performed and
complied in all material respects with all terms, agreements, covenants and
conditions of this Agreement to be performed or complied with by it at or
prior to the Closing Date, and the Seller shall have delivered to the Buyer
a certificate of its president to that effect.
37
(c) All Proceedings To Be Satisfactory. All proceedings to be taken by
the Seller in connection with the transactions contemplated hereby and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Buyer and its counsel, Reboul, MacMurray, Xxxxxx, Xxxxxxx
& Kristol, and the Buyer and said counsel shall have received all such
counterpart originals or certified or other copies of such documents as
they may reasonably request.
(d) Legal Opinion. The Buyer shall have received the opinion of
Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx, counsel to the Seller, addressed to the
Buyer and dated the Closing Date, satisfactory in form and substance to the
Buyer and its counsel, to the effect set forth in Annex I hereto.
(e) Legal Actions or Proceedings. No preliminary or permanent
injunction or other order, decree or ruling issued by any court of
competent jurisdiction nor any statute, rule, regulation or order entered,
promulgated or enacted by any governmental, regulatory or administrative
agency or authority shall be in effect that would prevent the consummation
of the transactions contemplated hereby.
(f) Assignment of Contracts. The Seller shall have obtained all the
authorizations, consents, waivers and approvals required in connection with
the assignment of those contracts, agreements, licensee, leases, sales
orders, purchase orders and other commitments to be assigned to the Buyer
pursuant to this Agreement and set forth on Schedule 3.01(i) hereto,
including, but not limited to, those consents required in connection with
Section 1.02 hereof.
(g) Ancillary Agreements. Each Ancillary Agreement shall have been
executed and delivered by each party thereto other than the Buyer and said
Agreements shall be in full force and effect as of the Closing Date.
(h) Supporting Documents. On or prior to the Closing Date, the Buyer
and its counsel shall have received copies of the following supporting
documents:
(i) copies of the Certificates of Incorporation of the
Seller and all amendments thereto, certified as of a recent date by
the Secretary of State of the State of Delaware, and (2) certificates
of said Secretary dated as of a recent date as to the good standing of
the Seller and listing all documents of each on file with said
Secretary; and
(ii) certificates of the Secretary or an Assistant Secretary
of the Seller dated the Closing Date and certifying: (1) that attached
thereto is a true and complete copy of the By-laws of the Seller as in
effect on the date of such certification; (2) that attached thereto
is a true and complete copy of resolutions adopted by the Board of
Directors of the Seller authorizing the execution, delivery and
performance of this Agreement and each Ancillary Agreement to which
38
the Seller is a party and the transactions contemplated hereby and
thereby and that all such resolutions are still in full force and
effect and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement and each Ancillary
Agreement to which the Seller is a party; (3) that the Certificate of
Incorporation of the Seller has not been amended since the date of the
last amendment referred to in the certificate delivered pursuant to
clause (i)(2) above; and (4) as to the incumbency and specimen
signature of each officer of such Seller executing this Agreement and
any certificate or instrument furnished pursuant hereto, and a
certification by another officer of the Seller as to the incumbency
and signature of the officer signing the certificate referred to in
this paragraph (ii).
(i) Consents and Regulatory Approvals. The Buyer shall have (i)
obtained all material written consents, permits, licenses, authorizations
and approvals in forms acceptable to the Buyer of any and all persons,
including, without limitation, Governmental Agencies, authorities and third
parties, required to be obtained prior to the consummation of the
transactions contemplated hereby and required to be obtained in order that
Buyer may conduct the Group Activity immediately following the Closing
Date, and (ii) received evidence in form and substance satisfactory to
Buyer and its counsel reflecting that the Seller notified the Governmental
Agencies with whom the Seller transacts business as to the (x) transactions
contemplated hereby and (y) Seller's desire to enter into any required
novation agreements. Any waiting period (and any extension thereof) under
Xxxx-Xxxxx applicable to the purchase of the Group Activity contemplated
hereby shall have expired or been terminated.
(j) No Material Adverse Effect. Neither the Group nor the Group
Activity shall have suffered, after the date of this Agreement any change
which has had, or in the reasonable opinion of Buyer could reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on the Group Activity or the Group.
(k) Payment of Certain Excluded Liabilities. The Seller shall have
paid all Excluded Liabilities which are secured by liens or other
encumbrances on the Assets, and the Buyer shall have been furnished
evidence of such payment satisfactory to it.
SECTION 5.02 Conditions Precedent to Obligations of the Seller. The
obligation of the Seller to consummate the transactions set forth in this
Agreement is subject to the fulfillment at or prior to the Closing Date of each
of the following conditions, any of which may be waived in whole or in part by
the Seller to the extent permitted by applicable law:
(a) Accuracy of Representations and Warranties. The representations
and warranties of the Buyer contained in Section 3.02 or in any certificate
or document delivered to the Seller pursuant hereto shall be true and
correct on and as of the Closing Date as though made at and as of that date
(without regard to any notification that may be made by the Buyer under
Section 4.03), and the Buyer shall have delivered to the Seller a
certificate to such effect.
39
(b) Compliance with Covenants. The Buyer shall have performed and
complied in all material respects with all terms, agreements, covenants and
conditions of this Agreement to be performed or complied with by it at or
prior to the Closing Date, and the Buyer shall have delivered to the Seller
a certificate to that effect.
(c) Supporting Documents. On or prior to the Closing Date, the Seller
shall have received copies of the following supporting documents:
(i) (1) copies of the Certificate of Incorporation of the
Buyer and all amendments thereto, certified as of a recent date by the
Secretary of State of the State of Delaware, and (2) a certificate of
said Secretary dated as of a recent date as to the due incorporation
and good standing of the Buyer and listing all documents of the Buyer
on file with said Secretary; and
(ii) a certificate of the Secretary or an Assistant
Secretary of the Buyer dated the Closing Date and certifying: (1) that
attached thereto is a true and complete copy of the By-laws of the
Buyer as in effect on the date of such certification; (2) that
attached thereto is a true and complete copy of resolutions adopted by
the Board of Directors of the Buyer authorizing the execution,
delivery and performance of this Agreement, each Ancillary Agreement
to which the Buyer is a party and the transactions contemplated hereby
and thereby and that all such resolutions are still in full force and
effect and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement and such Ancillary
Agreements; (3) that the Certificate of Incorporation of the Buyer
have not been amended since the date of the last amendment referred to
in the certificate delivered pursuant to clause (i)(2) above; and (4)
as to the incumbency and specimen signature of each officer of the
Buyer executing this Agreement and any certificate or instrument
furnished pursuant hereto, and a certification by another officer of
the Buyer as to the incumbency and signature of the officer signing
the certificate referred to in paragraph (ii).
(d) Legal Actions or Proceedings. No preliminary or permanent
injunction or other order, decree or ruling issued by any court of
competent jurisdiction nor any statute, rule, regulation or order entered,
promulgated or enacted by any governmental, regulatory or administrative
agency or authority shall be in effect that would prevent the consummation
of the transactions contemplated hereby.
(e) Ancillary Agreements. Each Ancillary Agreement shall have been
executed and delivered by each party thereto other than the Seller and any
Key Employee, as the case may be, and said Agreements shall be in full
force and effect as of the Closing Date.
(f) All Proceedings To Be Satisfactory. All proceedings to be taken by
the Buyer in connection with transactions contemplated hereby and all
documents incident thereto shall be reasonably satisfactory in form and
40
substance to the Seller and their counsel, Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx,
and the Seller and said counsel shall have received all such counterpart
originals or certified or other copies of such documents as they may
reasonably request.
(g) Legal Opinion. The Seller shall have received the opinion of
Reboul MacMurray, Hewitt, Xxxxxxx & Kristol, counsel to the Buyer addressed
to the Seller and dated the Closing Date, satisfactory in form and
substance to the Seller and its counsel, to the effect set forth in Annex
II hereto.
VI. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
SECTION 6.01 Survival of Representations. All representations and
warranties made by any party hereto in this Agreement or pursuant hereto shall
survive the Closing hereunder and shall terminate at the close of business on
the third anniversary of the Closing Date, except for (i) the representations
and warranties of Seller contained in Sections 3.01(a), (b), (c) and (k), which
shall, subject to Section 6.04, survive indefinitely and (ii) the
representations and warranties of the Seller in Sections 3.01(n) and (u), which
shall survive for 90 days after the expiration of the applicable statute of
limitation (including any extensions or waivers thereof).
SECTION 6.02 Tax Indemnity. (a) Regardless of any disclosure made to
the Buyer, the Seller agrees to and shall indemnify the Buyer and its affiliates
and hold each of them harmless from and against
(i) a breach of any representations or warranties relating to
Taxes; and
(ii) without duplication of amounts payable under the preceding
clause (i), any and all Taxes incurred by, imposed upon or attributable to
any of them in respect of or attributable to the Assets (including as a
result of the imposition of any lien thereon) or the Group Activity or in
connection with the purchase of the Assets;
including reasonable legal, accounting and other professional fees and expenses
incurred by the Buyer or its affiliates in connection with Taxes subject to
indemnification under this Section 6.02, insofar as such Taxes pertain to
periods (or any portion of a period thereof) ending on or prior to the Closing
Date or the sale and transfer of the Assets, except for Taxes specifically
assumed by the Buyer pursuant to this Agreement.
(b) For purposes of paragraph (a) above, any interest, penalty or
additional charge included in Taxes shall be deemed to be a Tax for the period
in which the item on which the interest, penalty or additional charge is based,
an not a Tax for the periods during which the item accrues.
(c) The indemnity provided for in this Section 6.02 shall be
independent of any other indemnity provision hereof and, anything in this
41
Agreement to the contrary notwithstanding, shall survive until the expiration of
the applicable statutes of limitation (including extensions thereof) for the
Taxes referred to herein and any Taxes subject to indemnification under this
Section 6.02 shall not be subject to the provisions of Section 6.03.
SECTION 6.03 Seller's General Indemnity. Subject to the terms and
conditions of this Article VI, the Seller hereby agrees to indemnify, defend and
hold the Buyer and its Affiliates harmless from and against all demands, claims,
actions or causes of action, assessments, losses, damages, liabilities, costs
and expenses, including, without limitation, interest, penalties and reasonable
attorneys' fees and expenses (collectively, "Damages") as they are incurred,
asserted against, resulting to, imposed upon or incurred or suffered by the
Buyer and its Affiliates by reason of or resulting from:
(i) a breach by the Seller of any representation, warranty,
covenant or agreement contained in or made pursuant to Section 3.01 (except
for breaches of Section 3.01(k)(vi)(1) which shall be governed by Section
6.04) or Article IV of this Agreement;
(ii) any liabilities or obligations of, or claims against or
imposed on the Group or the Buyer (whether absolute, accrued, contingent or
otherwise and whether a contractual, or any other type of liability,
obligation or claim) which relate to acts or omissions by the Seller on or
prior to the Closing Date and which are not expressly assumed by the Buyer
pursuant to this Agreement;
(iii) any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) in respect of (A) any of the actions, suits or
proceedings or threatened actions, suits or proceedings described on
Schedule 3.01(m) hereof, or (B) any action, suit or proceeding commenced
after the Closing Date based upon an event occurring or a claim arising on
or prior to the Closing Date; and
(iv) any claim by any customer or licensee of the Seller relating
to the provision of goods or services or the licensing of any rights by the
Group prior to the Closing Date.
SECTION 6.04 Intellectual Property Indemnification.
(a) Anything herein to the contrary notwithstanding, the Seller's
obligations to the Buyer relating to any infringement or misappropriation
of any third party's Intellectual Property by the conduct of any Group
Activity shall be pursuant to the terms and provisions set forth in this
Section 6.04. The Seller hereby agrees to indemnify and hold the Buyer and
its Affiliates harmless from and against any Damages as they are incurred
asserted against, resulting to, imposed upon or incurred or suffered by the
Buyer or its affiliates by reason of or resulting from and to the extent of
the infringement or misappropriation of the Intellectual Property of any
other party by the conduct of any Group Activity as such Group Activity was
42
conducted on or before the Closing Date, including, without limitation, the
use of any trade name for a product or service offered by the Group; the
making, importing, selling, offering for sale, or using of any product of
the Group; the carrying out of any method or process involved in a Group
Activity; the reproduction of any mask work for a semiconductor chip
product or the importation or distribution of a semiconductor chip product
in which a mask work is embodied; or the running or reproduction of any
computer software in connection with a Group Activity (collectively, the
"Infringement").
(b) (i) Upon the receipt by the Buyer of the first actual notification
of any Infringement from any third party or from the Seller (an
"Infringement Notice"), the Buyer shall, (A) as promptly as practicable,
forward such Infringement Notice to the Seller (provided, however, that the
failure of the Buyer to forward such notice to the Seller shall not act as
a waiver of the obligations of the Seller set forth in this provision) and
(B) make a determination as to what action, if any, to take to address the
allegations set forth in the Infringement Notice, such determination to be
made by Buyer in its sole discretion and to be binding for purposes of this
Section 6.04 until such time as the party who alleges its Intellectual
Property is being infringed or misappropriated commences a lawsuit against
either the Seller or the Buyer in connection with such alleged Infringement
(the "Infringement Lawsuit"). If, following receipt of the Infringement
Notice, the Buyer determines that the alleged Infringement set forth in the
Infringement Notice is, through commercially reasonable efforts, capable of
being cured with the result that the subject Intellectual Property can be
used by the Buyer as it wishes in its sole discretion (such Infringement to
be referred to herein as a "Curable Claim of Infringement"), the Seller's
indemnification obligation shall be limited to all Damages asserted
against, resulting to, imposed upon or incurred or suffered by the Buyer or
its Affiliates by reason of or resulting from the alleged Infringement up
to and including the date of the Notification Event. If the Buyer elects,
in its sole discretion, to effect such cure, then the Buyer shall promptly
take commercially reasonable steps to cure the alleged Infringement.
(ii) Upon the commencement of an Infringement Lawsuit, if the Buyer
shall have determined that the Infringement alleged in the Infringement
Lawsuit is a Curable Infringement, the provisions of the last two sentences
of Section 6.04(b)(i) shall govern. If, within a commercially reasonable
period following the commencement of the Infringement Lawsuit the Buyer
shall determine that the Infringement alleged in the Infringement Lawsuit
is not a Curable Claim of Infringement, it shall provide written notice to
the Seller at which time, the provisions set forth in this paragraph (ii)
shall apply with the intent that all actions taken and communications made
pursuant to this paragraph (ii) shall be covered by the joint defense
privilege shared by the Buyer and the Seller, it being understood that upon
the commencement of an Infringement Lawsuit, the parties hereto will enter
into a mutually satisfactory joint defense agreement. The Seller shall
promptly notify the Buyer, in writing, as to whether it reasonably regards
the subject Infringement as a Curable Claim of Infringement. If the Seller
agrees with the Buyer that the alleged Infringement is not a Curable Claim
of Infringement, the Notification Event shall not serve to limit the
43
Damages from and against which the Seller shall indemnify and hold the
Buyer and its Affiliates harmless; provided that at any time thereafter the
Seller shall be entitled, at its sole option and expense (and without
limiting the Seller's obligation to indemnify the Buyer and its Affiliates
for any Damages incurred as a result of the subject Infringement), to
procure for the Buyer a license in and to the subject Intellectual Property
pursuant to which the Buyer is permitted, without liability for
infringement or misappropriation, to design, develop, make, have made, use,
import, export, sell, offer for sale, lease, license, transfer or otherwise
utilize and distribute the subject Intellectual Property in whatever manner
it deems necessary; and provided, further, that the Buyer hereby agrees
that it shall reasonably cooperate with the Seller in connection therewith
and shall, at the Seller's sole expense, take such actions as are
reasonably necessary to enable the Seller to procure such right. If the
Seller, acting reasonably and in good faith, regards the alleged
Infringement as a Curable Claim of Infringement, the parties shall endeavor
in good faith to reach an agreement as to whether such Infringement is a
Curable Claim of Infringement. If, after 60 days, the parties are unable to
reach an agreement as to whether such Infringement is a Curable Claim of
Infringement, the parties shall begin dispute resolution as set forth in
Section 8.11 hereof. In the event that the Infringement Lawsuit is finally
resolved in a manner unfavorable to the Buyer, then the Seller shall be
obligated to indemnify the Buyer and its Affiliates for Damages asserted
against, resulting to, imposed upon or incurred or suffered by the Buyer or
its Affiliates by reason of or resulting from the alleged Infringement (A)
up to and including the date on which the Buyer received the Infringement
Notice in the event that the parties, whether on their own or through the
procedures set forth in Section 8.11 hereof, determined that the alleged
Infringement was a Curable Claim of Infringement and (B) up to and
including the date on which such Infringement Lawsuit is finally resolved
in the event that the parties, whether on their own or through the
procedures set forth in Section 8.11 hereof, determined that the alleged
Infringement was not a Curable Claim of Infringement.
(c) The above notwithstanding, the Seller shall not be responsible for
Damages suffered or incurred by the Buyer or its Affiliates that were the
result of (i) changes in the way any Group Activity was conducted after the
Closing Date, such as the use of the Buyer's or any other party's
Intellectual Property in connection with the conduct of a Group Activity
after the Closing Date where the conduct of such Group Activity prior to
the Closing Date did not constitute an Infringement or (ii) the Buyer
intentionally substituting the Group Intellectual Property of the Group in
place of Intellectual Property of the Buyer (the "Buyer Intellectual
Property") in cases where the Buyer did not have a commercially reasonable
justification for doing so (it being understood, however, that the Buyer's
substitution of the Group Intellectual Property in place of the Buyer
Intellectual Property for the primary purpose of having the Seller bear the
risk in the event any Infringement claim is brought by a third party, shall
not be deemed a commercially reasonable justification for purposes hereof).
(d) In the event of a claim by a third party or the filing of an
Infringement Lawsuit relating to an alleged Infringement or to the conduct
of any Group Activity prior to a Notification Event, the parties agree to
cooperate in good faith in evaluating and determining the appropriate
44
method of defense of the claim, including, without limitation, the
determination of the appropriate party which is best positioned to be
responsible for the defense of the claim given the parties respective
interests and obligations. Regardless of which party is responsible for the
defense of any such claim, the settlement of any such claim must be
approved by both of the parties, which approval will not be unreasonably
withheld. In the event the parties are unable to determine the appropriate
method of defense of the claim within twenty (20) days of the receipt of
the notice of the claim, the procedure and method of the defense of the
claim shall be determined according to the provisions of Section 6.07
below.
(e) The Seller agrees that it shall use its best efforts to assist the
Buyer in the defense of any Infringement claim arising at any time,
including without limitation, those claims arising after the occurrence of
a Notification Event and shall, among other things which the Buyer shall
reasonably request, provide access, upon the request of the Buyer, to any
of the Seller's engineers or other personnel who, in the Buyer's opinion,
would be helpful to the Buyer in defending any claim to any Infringement of
the Intellectual Property of any third party.
(f) Unless and until the Buyer exercises its Option on the Cross
License pursuant to Section 1.03 hereof and the Cross License is
effectively assigned to the Buyer pursuant to the provisions of the Cross
License, the Seller shall not have any indemnification obligations under
this Section 6.04 with respect to any claims brought against the Buyer for
misappropriation or infringement of any of the Amati Patents (as defined in
the Cross License); PROVIDED, however, that the Seller shall be obligated
to indemnify the Buyer pursuant to this Section 6.04 in the event that the
Buyer exercises its Option on the Cross License and the assignment thereof
is ineffective due to a breach of any provision other than Section 4.4 of
the Cross License.
(g) Unless and until the Buyer exercises its Option on one or both of
the Level One Agreements pursuant to Section 1.03 hereof and such Optioned
Agreement is effectively assigned to the Buyer pursuant to the provisions
set forth in such Optioned Agreement, the Seller shall not have any
indemnification obligations under this Section 6.04 with respect to any
claims brought against the Buyer for misappropriation or infringement of
any of the Intellectual Property licensed under such Optioned Agreement;
PROVIDED, however, that the Seller shall be obligated to indemnify the
Buyer pursuant to this Section 6.04 in the event that the Buyer exercises
its Option on either of the Level One Agreements and the assignment thereof
is ineffective due to a breach of any provision in such Optioned Agreement
other than (i) Section 8.4 in the case where the Optioned Agreement is the
Joint Development and Supply Agreement, dated May 14, 1997, between the
Seller and Level One Communications, Inc. and (ii) Section 9.4 in the case
where the Optioned Agreement is the License Agreement, dated July 7, 1999,
between the Seller and Level One Communications, Inc.
SECTION 6.05 Indemnification Pursuant to Certain Agreements. Anything
herein to the contrary notwithstanding, the Seller hereby agrees to indemnify
and hold the Buyer and its Affiliates harmless from and against any Damages, as
they are incurred, asserted against, resulting to, imposed upon or incurred or
suffered by the Buyer or its Affiliates by reason of or resulting from:
(a) any unauthorized or impermissible disclosure to the Buyer or any
of its employees of any confidential or proprietary information in any
form, including residual information in the minds of one or more of the
Group Employees, which may have been disclosed to the Seller pursuant to
the Level One Agreements, the ADSL Agreement or the Cross License;
provided, however, that the Seller shall not be obligated to indemnify the
Buyer in cases where the Seller can establish that the Buyer deliberately,
intentionally and willfully, and with the actual knowledge and, during the
first two years following the Closing Date, at the direction of any of the
persons agreed to by the Buyer and the Seller or, thereafter, at the
direction of engineering management with direct development responsibility
and any members of management ranking senior to such engineering managers,
misappropriated or infringed (A) the Jointly Developed DMT ADSL Chip Set
Technology, the Future DMT ADSL Chip Set Technology, the Rockwell
Background Technology or Rockwell's DMT ADSL Chip Set Technology (each as
defined in the ADSL Agreement), (B) the Amati Patents (as defined in the
Cross License) or (C) the Pre-Existing LOC Technology, the Project
Developed Technology, the Chip Developed Technology in AFE and CAP (each as
defined in the Level One Agreements).
(b) any breach or alleged breach by the Seller of, default or alleged
default by the Seller in an obligation under, or failure or alleged failure
of the Seller to perform under, the Level One Agreements or the ADSL
Agreement; provided, however, that the Seller shall not be obligated to
indemnify the Buyer for any Damages arising from the Buyer's breach of the
covenants set forth in Section 4.13 hereof.
45
SECTION 6.06 Buyer's General Indemnity. Subject to the terms and
conditions of this Article VI, the Buyer hereby agrees to indemnify, defend and
hold the Seller and its Affiliates harmless from and against all Damages as they
are incurred, asserted against, resulting to, imposed upon or suffered by the
Seller and its Affiliates by reason of or resulting from:
(i) a breach by the Buyer of any representation, warranty,
covenant or agreement contained in or made pursuant to Section 3.02 or
Article IV of this Agreement; and
(ii) any liabilities or obligations of, or claims against or
imposed on, the Seller that are expressly assumed by the Buyer
pursuant to this Agreement.
SECTION 6.07 Conditions of Indemnification. The obligations and
liabilities of the party responsible for indemnifying hereunder (sometimes
referred to herein as "the indemnifying party"), and the party entitled to
indemnification hereunder (sometimes referred to herein as "the party to be
indemnified" or "the indemnified party"), under Sections 6.02, 6.03, 6.04 and
6.05, 6.06 hereof with respect to claims resulting from the assertion of
liability by third parties shall be subject to the following terms and
conditions:
(a) Within 20 days after receipt of notice of commencement of any
action or the assertion of any claim by a third party, the party to be
indemnified shall give the indemnifying party written notice thereof
together with a copy of such claim, process or other legal pleading
(provided that failure so to notify the indemnifying party of the assertion
of a claim within such period shall not affect its indemnity obligation
hereunder except as and to the extent that such failure shall adversely
affect the defense of such claim), and the indemnifying party shall have
the obligation to undertake the defense thereof by representatives of its
own choosing reasonably satisfactory to the indemnified party; provided,
that the indemnified party may retain separate co-counsel at its sole cost
and expense and participate in the defense of the third party claim;
(b) In the event that the indemnifying party, by the thirtieth day
after receipt of notice of any such claim (or, if earlier, by the tenth day
preceding the day on which an answer or other pleading must be served in
order to prevent judgment by default in favor of the person asserting such
claim), does not assume the defense of such claim, the party to be
indemnified will (upon further notice to the indemnifying party) have the
right to undertake the defense, compromise or settlement of such claim on
behalf of and for the account and risk of the indemnifying party, subject
to the right of the indemnifying party to assume the defense of such claim
at any time prior to settlement, compromise or final determination thereof;
(c) Other than as set forth in Section 6.07(b), except with the prior
written consent of the party to be indemnified, no indemnifying party, in
the defense of such claim or litigation, shall consent to entry of any
judgment or order, interim or otherwise, or enter into any settlement that
46
provides for injunctive or other nonmonetary relief affecting the party to
be indemnified or that does not include as an unconditional term thereof
the giving by each claimant or plaintiff to such party to be indemnified of
a release from all liability with respect to such claim or litigation. In
the event that the party to be indemnified shall in good faith determine
that the representation of both the indemnifying and indemnified parties
would be inappropriate due to a conflict of interest arising from the
availability to the indemnified party of one or more defenses or
counterclaims that are inconsistent with one or more of those that may be
available to the indemnifying party in respect of such claim or any
litigation relating thereto, the party to be indemnified shall have the
right (subject to applicable rules of professional conduct) at all times to
take over and assume control over the defense, settlement, negotiations or
litigation relating to such claim at the sole cost of the indemnifying
party; provided, however, that if the party to be indemnified does so take
over and assume control, the party to be indemnified may consent to the
entry of any judgment or enter into any settlement with respect to any
third party claim in any manner it may deem appropriate and, in the event
that the indemnifying party did not undertake the defense of such claim due
to a conflict of interest, such consent to entry of judgment or entry into
any settlement will be subject to the approval, not to be unreasonably
withheld, of the indemnifying party; and
(d) In connection with any such indemnification, the party to be
indemnified shall cooperate with all reasonable requests of the
indemnifying party.
SECTION 6.08 Limitations on Indemnity. No indemnifying party shall be
obligated to indemnify an indemnified party against Damages caused by a breach
of any representation, warranty or covenant of the Seller or the Buyer, as the
case may be, herein unless the aggregate amount of such Damages to the
indemnified party shall exceed $200,000, and the indemnifying party shall
thereafter be liable for the entire amount of any Damages incurred by the
indemnified party since the Closing Date in excess of $200,000 provided that the
total amount of Damages shall not exceed $200,000,000.
SECTION 6.09 Remedies Cumulative. Except as otherwise expressly
provided in this Article VI, the remedies provided herein shall be cumulative
and shall not preclude assertion by any party hereto of any equitable rights or
the seeking of any other equitable remedies against any other party hereto.
47
VII. TERMINATION AND ABANDONMENT
SECTION 7.01 Termination of Agreement. Certain of the parties may
terminate this Agreement as provided below:
(a) the Buyer and the Seller may terminate this Agreement by mutual
written consent of the Board of Directors of each party at any time prior
to the Closing;
(b) the Buyer may terminate this Agreement by giving written notice to
the Seller at any time prior to the Closing (A) in the event the Seller has
breached any material representation, warranty, or covenant contained in
this Agreement in any material respect, the Buyer has notified the Seller
of the breach, and the breach has continued without cure for a period of
fifteen days after the notice of breach or (B) if the Closing shall not
have occurred on or before March 31, 2000, by reason of the failure of any
condition precedent under Section 5.02 hereof (unless the failure results
primarily from the Buyer itself breaching any representation, warranty or
covenant contained in this Agreement); and
(c) the Seller may terminate this Agreement by giving written notice
to the Buyer at any time prior to the Closing (A) in the event the Buyer
has breached any material representation, warranty or covenant contained in
this Agreement in any material respect, the Seller has notified the Buyer
of the breach, and the breach has continued without cure for a period of
fifteen days after the notice of breach or (B) if the Closing shall not
have occurred on or before March 31, 2000, by reason of the failure of any
condition precedent under Section 5.01 hereof (unless the failure results
primarily from the Seller itself breaching any representation, warranty or
covenant contained in this Agreement).
SECTION 7.02 Effect of Termination. If any party terminates this
Agreement pursuant to Section 7.01 above, all rights and obligations of the
parties hereunder shall terminate without any liability on the part of any party
hereto except for willful breach.
VIII. MISCELLANEOUS
SECTION 8.01 Definitions. The following terms are used in this
Agreement with the meanings specified below, unless the context clearly
indicates otherwise:
"Act" has the meaning set forth in Section 3.01(z).
"ADSL Agreement" means the DMT ADSL Joint Development Agreement, dated
March 6, 1998, between the Seller and Conexant (as successor
interest to Rockwell Semiconductor Systems, Inc.), as amended.
"Additional Assets" has the meaning set forth in Section 1.01(a).
48
"Affiliate" with respect to any Person, means any Person controlling,
controlled by or under common control with such Person.
"Alternative Transaction" means any merger, consolidation, sale of all
or part of the Group or the Group Activity that is material to
the Group Activity, recapitalization, debt restructuring or
similar transaction involving the Group or Group Activity (other
than as contemplated between the parties hereto).
"Ancillary Agreements" means (i) the Xxxx of Sale, (ii) the License
Agreement, (iii) the Supply Agreement, (iv) the Sublease, (v) the
Note, (vi) the Assumption Agreement, (vii) the Registration
Rights Agreement and (viii) the Lewyn Agreement.
"Assets" has the meaning set forth in Section 1.01(a).
"Assumed Liabilities" has the meaning set forth in Section 2.03(a).
"Assumption Agreement" has the meaning set forth in Section 2.04.
"Xxxx of Sale" has the meaning set forth in Section 2.04.
"Buyer" has the meaning set forth in the preamble.
"Buyer Filings" has the meaning set forth in Section 3.02(f).
"CERCLA" means the Comprehensive Environmental Reasons, Compensation
and Liability Act of 1980, as amended.
"Claim" means any action, cause of action, suit (in contract, tort or
otherwise), proceeding, hearing, inquiry, investigation, charge,
complaint, claim, or demand by or before any Governmental Agency.
"Closing Date" and "Closing" have the respective meanings set forth in
Section 2.01.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitments" has the meaning set forth in Section 1.02.
"Common Stock" has the meaning set forth in Section 2.02(a).
"Competing Activity" has the meaning set forth in Section 4.08(a).
49
"Computer Systems" has the meaning set forth in Section 3.01(y).
"Conexant" means Conexant Systems, Inc.
"Confidential Information" means any information concerning the
businesses and affairs of the Group or the Buyer that is not
already generally available to the public.
"Confidentiality Agreement" has the meaning set forth in Section 4.04.
"Conversion Shares" has the meaning set forth in Section 3.02(a).
"Cross License" has the meaning set forth in Section 1.03.
"Curable Claim of Infringement" has the meaning set forth in Section
6.04(b).
"Damages" has the meaning set forth in Section 6.03.
"Designated Subsidiary" has the meaning set forth in Section 1.01(a).
"Development Agreements" has the meaning set forth in Section
3.01(gg).
"DMT ADSL Chip Set Technology" has the meaning set forth for such term
in the ADSL Agreement.
"DSL Technology" has the meaning set forth for such term in the
License Agreement.
"Environmental, Health and Safety Requirements" shall mean all
federal, state, local and foreign statues, regulations,
ordinances and similar provisions having the force or effect of
law, all judicial and administrative orders and determinations,
and all common law concerning public health and safety, worker
health and safety, and pollution or protection of the
environment, including without limitation all those relating to
the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution,
labeling, testing, processing, discharge, release, threatened
release, control or cleanup of any Hazardous Substance.
"ERISA" has the meaning set forth in Section 3.01(s).
"ERISA Affiliates" has the meaning set forth in Section 3.01(s).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
50
"Excluded Assets" has the meaning set forth in Section 1.01(e).
"Excluded Liabilities" has the meaning set forth in Section 2.03(b).
"Governmental Agency" has the meaning set forth in Section 3.01(d).
"Group" has the meaning set forth in the preamble.
"Group Activity" has the meaning set forth in the preamble.
"Group Employees" shall mean all those employees of the Group set
forth on Schedule 4.09(a) hereto. Each person listed on Schedule
4.09(a) shall be considered a "Group Employee".
"Group Intellectual Property" has the meaning set forth in Section
3.01(k)(ii).
"Xxxx-Xxxxx" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated
thereunder.
"Hazardous Substances" means any substance, whether liquid, solid or
gas, listed, identified or designated as hazardous or toxic under
any Environmental, Health and Safety Requirements, which,
applying criteria specified in any Environmental, Health and
Safety Requirements, is hazardous or toxic, or the use or
disposal of which is regulated under any Environmental, Health
and Safety Requirements.
"Infringement Lawsuit" has the meaning set forth in Section 6.04(b).
"Initial Shares" has the meaning set forth in Section 2.02(a).
"Intellectual Property" has the meaning set forth in Section
3.01(k)(i).
"Interests" has the meaning set forth in Section 1.02.
"Key Employee Employment Agreements" shall mean those employment
agreements, dated as of the Closing Date, between a Key Employee,
on the one hand, and the Buyer, on the other hand.
"Level One Agreements" means the Joint Development and Supply
Agreement dated 14 May 1997 and the Development and License
Agreement dated 7 July 1999, both between the Seller and Level
One Communications, Incorporated.
51
"Lewyn Agreement" means the agreement, dated January 20, 2000, between
Lewyn Consulting, Inc., and the Seller, attached hereto as
Exhibit H.
"License Agreement" means the license agreement, to be dated as of the
Closing Date, between the Buyer and Seller, substantially in the
form set forth in Exhibit D hereto (for the license of DSL
Technology from Buyer to the Seller).
"Liens" has the meaning set forth in Section 1.01(a).
"Material Adverse Effect" shall mean such state of fact, event, change
or effect that has had, or would reasonably be expected to have,
a material adverse effect on the assets, liabilities, business,
results of operations, properties, operations, prospects or
condition (financial or otherwise) of such Person; provided,
however, that no change (i) in the general economic condition in
any of the countries in which such party operates, (ii) that
generally affects the industry in which such party is operated,
(iii) in the price of the Common Stock on any stock exchange or
in any interdealer quotation system in which the Common Stock
trades or is quoted, or (iv) resulting from the announcement of
this Agreement shall be taken into account for purposes of
determining the occurrence or existence of a Material Adverse
Effect.
"Note" has the meaning set forth in Section 2.02(b).
"Option" or "Options" has the meaning set forth in Section 1.03.
"Optioned Agreements" has the meaning set forth in Section 1.03.
"Permitted Activities" has the meaning set forth in the License
Agreement.
"Permits" has the meaning set forth in Section 3.01(g).
"Permitted Liens" has the meaning set forth in Section 3.01(h).
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity.
"Plans" has the meaning set forth in Section 3.01(s).
"Registration Rights Agreement" means the registration rights
agreement, to be dated as of the Closing Date, between the Buyer
and the Seller, substantially in the form attached hereto as
Exhibit G.
52
"Seller" has the meaning set forth in the preamble.
"Seller Filings" has the meaning set forth in Section 3.01(ee).
"Shares" has the meaning set forth in Section 3.02(a).
"Sublease" means the Sublease Agreement to be dated as of the Closing
Date substantially pursuant to the terms set forth in Exhibit E
hereto.
"Supply Agreement" means the pricing agreement, to be dated as of the
Closing Date, between Buyer and Seller, substantially in the form
attached hereto as Exhibit F (for pricing of DSL).
"SWDA" means the Solid Waste Disposal Act, as amended.
"Tax" has the meaning set forth in Section 3.01(n)(iv).
"Tax Returns" has the meaning set forth in Section 3.01(n)(i).
"Third Party" has the meaning set forth in Section 4.11.
"Transferred Employees" has the meaning set forth in Section 4.09(c).
"Vacation Schedule" has the meaning set forth in Section 4.09(d).
"Year 2000 Compliant" has the meaning set forth in Section
3.01(y)(ii).
SECTION 8.02 Specific Performance. Each of the Seller and the Buyer
acknowledges that the acquisition of the Assets is a vital, necessary and unique
part of the Buyer's strategic plan, which includes the acquisition and
consolidation of other related businesses, and that any breach of this Agreement
by the Seller or the Buyer could not be adequately compensated by monetary
damages. Accordingly, if the Seller or the Buyer breaches its obligations under
this Agreement prior to the Closing, the Buyer shall be entitled, in addition to
any other remedies that it may have, to enforcement of this Agreement by a
decree of specific performance requiring the Seller to fulfill its obligations
under this Agreement.
SECTION 8.03 Service of Process. Each party to this Agreement hereby
irrevocably agrees that service of process in any legal action or proceeding
with respect to this Agreement or any Ancillary Agreement may be effected by
mailing a copy thereof by registered or certified mail, postage prepaid, to the
address of such party set forth in Section 8.07 hereof.
SECTION 8.04 Bulk Transfer Laws. The Buyer hereby waives compliance by
the Seller with any applicable bulk transfer laws, including, without
limitation, the bulk transfer provisions of the Uniform Commercial Code of any
state, or any similar statute, with respect to
53
the transactions contemplated hereby. The Seller hereby agrees to indemnify the
Buyer and hold it harmless from and against any loss or damage which it may
incur by reason of such non-compliance.
SECTION 8.05 Expenses, Etc. Except as otherwise expressly provided
herein, each party hereto shall pay its own fees and expenses (including, but
not limited to, legal, accounting and other professional fees) incurred in
connection with this Agreement, the Ancillary Agreements and the transactions
contemplated hereby and thereby.
SECTION 8.06 Execution in Counterparts. For the convenience of the
parties, this Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
SECTION 8.07 Notices. All notices which are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if (i) delivered personally, (ii) mailed by
registered or certified mail, return receipt requested and postage prepaid,
(iii) sent via a nationally recognized overnight courier service or (iv) sent
via facsimile confirmed in writing to the recipient, in each case as follows:
If to the Seller, to it at the address indicated below:
PairGain Technologies, Inc.
00000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx Xxxxxx
with a copy to:
Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Facsimile No. (000) 000-0000
Attention: Xxxx X. Xxxxx, Esq.
If to the Buyer, at:
GlobeSpan, Inc.
000 Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxxxx 00000
Attn: Xxxxxxx Xxxxx
President and CEO
54
with a copy to:
Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No. (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
or such other address or addresses as any party shall have designated by notice
in writing to the other parties.
SECTION 8.08 Waivers. Either the Seller, on the one hand, or the
Buyer, on the other hand, may, by written notice to the other, (i) extend the
time for the performance of any of the obligations or other actions of the other
under this Agreement, (ii) waive any inaccuracies in the representations or
warranties of the other contained in this Agreement or in any document delivered
pursuant to this Agreement, (iii) waive compliance with any of the conditions or
covenants of the other contained in this Agreement, or (iv) waive performance of
any of the obligations of the other under this Agreement. Except as provided in
the preceding sentence, no action taken pursuant to this Agreement, including
without limitation any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
SECTION 8.09 Amendments, Supplements, Etc. At any time this Agreement
may be amended or supplemented by such additional agreements, articles or
certificates, as may be determined by the mutual agreement of the parties hereto
to be necessary, desirable or expedient to further the purposes of this
Agreement, or to clarify the intention of the parties hereto, or to add to or
modify the covenants, terms or conditions hereof or to effect or facilitate any
governmental approval or acceptance of this Agreement or to effect or facilitate
the filing or recording of this Agreement or the consummation of any of the
transactions contemplated hereby. Any such instrument must be in writing and
signed by all parties hereto.
SECTION 8.10 Entire Agreement. This Agreement, its Exhibits, Schedules
and Annexes, the Ancillary Agreements and the other documents executed on the
Closing Date in connection herewith, constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral and written, between the parties hereto with
respect to the subject matter hereof.
SECTION 8.11 Dispute Resolution. All claims, disputes and other
matters in controversy (herein called "dispute") arising directly or indirectly
out of or related to this Agreement or any Ancillary Agreement, or the breach
thereof, whether contractual or noncontractual, and whether during the term or
after the termination of this Agreement, shall be resolved exclusively according
to the procedures set forth in this Section 8.11.
55
(a) Mediation. Neither party shall commence an arbitration proceeding
pursuant to the provisions of Section 8.11(b) below unless such party shall
first give a written notice (a "Dispute Notice") to the other party setting
forth the nature of the dispute. The parties shall attempt in good faith to
resolve the dispute by mediation under the Commercial Mediation Rules of the
American Arbitration Association ("AAA") in effect on the date of the Dispute
Notice. If the parties cannot agree on the selection of a mediator within twenty
(20) days after delivery of the Dispute Notice, the mediator will be selected by
the AAA. If the dispute has not been resolved by mediation as provided above
within sixty (60) days after delivery of the Dispute Notice, then the dispute
shall be determined by arbitration in accordance with the provisions of Section
8.11(b).
(b) Arbitration. (i) Any dispute that is not settled through mediation
as provided in Section 8.11(a) above shall be resolved by arbitration in Los
Angeles, California, governed by the Federal Arbitration Act, 9 U.S.C. ss. 1 et
seq., and administered by the American Arbitration Association under its
commercial Arbitration Rules in effect on the date of the Dispute Notice, as
modified by the provisions of this Section 8.11(b), by a single arbitrator.
Persons eligible to be selected as an arbitrator shall be limited to lawyers
with excellent academic and professional credentials who have had both training
and experience as an arbitrator. In the event the parties cannot agree on a
mutually acceptable single arbitrator, the AAA shall designate three persons
who, in its opinion, meet the criteria set forth herein. Each party shall be
entitled to strike one of such three designees on a peremptory basis, indicating
its order of preference with respect to the remaining designees, and the
selection of the arbitrator shall be made from among such designee(s) which have
not been so stricken by either party in accordance with their indicated order of
mutual preference to the extent possible. The arbitrator shall based the award
on applicable law and judicial precedent and, unless both parties agree
otherwise, shall include in such award the findings of fact and conclusions of
law upon which the award is based. Judgment on the awarded rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.
(ii) Upon application by either party to a court for an order
confirming, modifying or vacating the award, the court shall have the power to
review whether, as a matter of law based on the findings of fact determined by
the arbitrator, the award should be confirmed, modified or vacated in order to
correct any errors of law made by the arbitrator. In order to effectuate such
judicial review limited to issues of law, the parties agree (and shall stipulate
to the court) that the findings of fact made by the arbitrator shall be final
and binding on the parties and shall serve as the facts to be submitted to and
relied on by the court in determining the extent to which the award should be
confirmed, modified or vacated.
(iii) If either party fails to proceed with mediation or
arbitration as provided herein or unsuccessfully seeks to stay such mediation or
arbitration, or fails to comply with any arbitration award, or is unsuccessful
in vacating or modifying the award pursuant to a petition or application for
judicial review, the other party shall be entitled to be awarded costs,
including reasonable attorneys' fees, paid or incurred by such other party in
56
successfully compelling such arbitration or defending against the attempt to
stay, vacate or modify such arbitration award and/or successfully defending or
enforcing the award.
SECTION 8.12 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, exclusive of the
conflicts of law provisions thereof.
SECTION 8.13 Binding Effect; Benefits. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Notwithstanding anything contained in this
Agreement to the contrary, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
SECTION 8.14 Assignability. Except as set forth in Section 4.08(e),
neither this Agreement nor any of the parties' rights hereunder shall be
assignable by any party hereto without the prior written consent of the other
parties hereto.
57
IN WITNESS WHEREOF, this Asset Purchase Agreement has been duly
executed and delivered by the parties hereto as of the date first above written.
GLOBESPAN, INC.
By /s/Xxxxxxx Xxxxx
------------------------------
Name: Xxxxxxx Xxxxx
Title: President and Chief Executive Officer
PAIRGAIN TECHNOLOGIES, INC.
By /s/ Xxxxxx Xxxxx
------------------------------
Name: Xxxxxx Xxxxx
Title: Executive Vice President -
Business Development
58
