EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
NETWORKS ASSOCIATES, INC.,
NETWORK ASSOCIATES TECHNOLOGY, INC.,
NETWORK ASSOCIATES INTERNATIONAL BV,
NETWORK ASSOCIATES COMPANY LIMITED
AND
SECURE COMPUTING CORPORATION
EXECUTION DATE: FEBRUARY 12, 2002
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TABLE OF CONTENTS
PAGE
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ARTICLE I THE PURCHASE AND SALE OF ACQUIRED BUSINESS ASSETS...................1
1.1 Purchase and Sale...........................................1
1.2 Acquired Business Assets and Excluded Assets................1
1.3 Assumption of Certain Liabilities...........................4
1.4 Treatment of Specified Third-Party Software Licenses,
Specified End-User Licenses and Multiproduct End-User
Licenses....................................................6
1.5 Acquisition Consideration...................................7
1.6 Allocation of Acquisition Consideration.....................7
1.7 Transfer Taxes..............................................8
ARTICLE II THE CLOSING........................................................8
2.1 Closing Date................................................8
2.2 Transactions To Be Effected at the Closing..................8
2.3 Risk of Loss................................................8
2.4 Taking of Necessary Action; Further Action..................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS........................9
3.1 Organization, Standing and Power............................9
3.2 Authority, Conflicts, Consents..............................9
3.3 Operation of the Gauntlet Business;
Ownership/Sufficiency of Assets............................10
3.4 Changes....................................................11
3.5 Tax Matters................................................12
3.6 Restrictions on Business Activities........................12
3.7 Title to Properties; Absence of Liens and Encumbrances.....12
3.8 Intellectual Property......................................13
3.9 Agreements, Contracts and Commitments......................14
3.10 Governmental Authorization.................................15
3.11 Litigation.................................................15
3.12 Accounts Receivable; Accounts Payable......................15
3.13 Transitioning Employees....................................15
3.14 Insurance..................................................16
3.15 Compliance with Laws.......................................17
3.16 Sufficiency of Acquired Business Assets....................17
3.17 Transactions with Affiliates...............................17
3.18 Accuracy of Documents and Information......................17
3.19 Investment Representations.................................17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................18
4.1 Organization, Standing and Power...........................19
4.2 Authority..................................................19
4.3 SEC Filings; Financial Statements..........................19
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4.4 Absence of Certain Changes or Events.......................20
4.5 Litigation.................................................20
4.6 Issuance of Common Stock...................................20
ARTICLE V CONDUCT PRIOR TO CLOSING...........................................20
5.1 Conduct of Business of Sellers.............................21
ARTICLE VI ADDITIONAL AGREEMENTS.............................................21
6.1 Access to Information......................................21
6.2 Confidentiality............................................22
6.3 Expenses...................................................22
6.4 Public Disclosure..........................................22
6.5 Consents...................................................22
6.6 Legal Requirements.........................................22
6.7 Notification of Certain Matters............................23
6.8 Post-Closing Accounts Receivable...........................23
6.9 PGP 1000 e-ppliance Government Export License..............23
6.10 Post-Closing Assurances....................................23
6.11 Cooperation with Respect to Transitioning Employees;
Use of Premises............................................24
6.12 Non-Solicitation...........................................24
6.13 Transfer of Common Stock...................................24
6.14 Registration; Compliance with Securites Act................24
6.15 Registration Rights; Liquidated Damages....................26
6.16 Prohibition on Solicitation of Other Acquisition Offers....26
6.17 Non-competition Covenant...................................26
ARTICLE VII CONDITIONS TO THE ACQUISITION....................................27
7.1 Conditions to Obligations of Each Party to Effect
the Acquisition............................................27
7.2 Additional Conditions to Obligations of Sellers............27
7.3 Additional Conditions to the Obligations of Purchaser......28
ARTICLE VIII.................................................................29
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION..................29
8.1 Survival of Representations and Warranties.................29
8.2 Indemnification............................................30
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER.................................33
9.1 Termination................................................33
9.2 Effect of Termination......................................33
9.3 Amendment..................................................33
9.4 Extension; Waiver..........................................33
ARTICLE X GENERAL PROVISIONS.................................................34
10.1 Notices....................................................34
10.2 Interpretation; Definition.................................35
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10.3 Counterparts...............................................35
10.4 Entire Agreement; Assignment...............................35
10.5 Severability...............................................36
10.6 Governing Law; Arbitration.................................36
10.7 Rules of Construction......................................37
10.8 Successors.................................................37
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INDEX OF EXHIBITS
Exhibit Description
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Exhibit A Seller Disclosure Schedule
Exhibit 7.2(c) Form of the NAI License
Exhibit 7.2(d) Form of Firewall, VPN and GEMS License
Exhibit 7.2(e) Form of Patent License
Exhibit 7.3(e) Form of the TIS/CMS License
Exhibit 7.3(h)(i) Assignment of Patents
Exhibit 7.3(h)(ii) Assignment of Copyrights
Exhibit 7.3(h)(ii) Assignment of Trademarks
Schedules
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Schedule 1 Description of Gauntlet Business
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of February 12, 2002 (the "Agreement Date") by and among (i) Secure
Computing Corporation, a Delaware corporation ("Purchaser"), on the one hand;
and (ii) Networks Associates, Inc., a Delaware corporation ("NAI"); Network
Associates Technology, Inc., a Delaware corporation and a wholly owned
subsidiary of NAI ("NATI"); Network Associates International BV, a Netherlands
corporation and a wholly owned subsidiary of NAI ("NBV"); and Network Associates
Company Limited, a Japanese corporation and a wholly owned subsidiary of NAI
("NAC") (each a "Seller" and collectively the "Sellers"), on the other hand.
RECITALS
A. The Boards of Directors of NAI, NATI, NBV, NAC and Purchaser believe it is in
the best interests of each company and their respective stockholders that
Purchaser acquire (the "Acquisition") the Gauntlet software and appliance based
enterprise network firewall business comprised of the Gauntlet Firewall/VPN
software product lines, the Global Enterprise Management System, ("GEMS"),
product lines and the Firewall/VPN appliance-based hardware product lines as
more particularly described in Schedule 1 (the "Gauntlet Business") through the
purchase of certain of the assets of Sellers and, in furtherance thereof, have
approved the Acquisition.
X. Xxxxxxx and Purchaser desire to make certain representations and warranties
and other agreements in connection with the Acquisition.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and other agreements set forth herein,
and for other good and valuable consideration, the parties to this Agreement,
intending to be legally bound, hereby agree as follows:
ARTICLE 1
THE PURCHASE AND SALE OF ACQUIRED BUSINESS ASSETS
1.1 Purchase and Sale. Upon the terms and subject to the conditions of
this Agreement, each Seller hereby sells, assigns, transfers, conveys and
delivers, to Purchaser effective as of the Closing (as defined in Section 2.1)
and Purchaser hereby purchases, assumes and acquires, effective as of the
Closing, all of each Seller's right, title and interest in, to and under the
Acquired Business Assets (as defined in Section 1.2(a)).
1.2 Acquired Business Assets and Excluded Assets.
(a) The term "Acquired Business Assets" means all the business,
assets, goodwill and rights of Sellers of whatever kind and nature, real or
personal, tangible or intangible, other than the Excluded Assets (as defined in
Section 1.2(b)), owned, licensed or
GAUNTLET ASSET PURCHASE AGREEMENT
otherwise held or used by any Seller on the Closing Date and used or held for
use by the Sellers primarily in the Gauntlet Business, including but not limited
to:
(i) all accounts receivable on the Closing Date relating
directly to the operations of the Gauntlet Business;
(ii) end-user software licenses pursuant to which any Seller
licenses to its customers software relating primarily to the Gauntlet Business
("End-User Licenses"), and the rights of any Seller thereunder, but excluding
End-User Licenses which are also Multiproduct End-User Licenses or Specified
End-User Licenses (each defined below);
(iii) with respect to End-User Licenses requiring prior
customer consent to effect assignment thereof to the Purchaser on the Closing
Date, including those listed on Section 1.2(a)(iii) of the Seller Disclosure
Schedule (the "Specified End-User Licenses"), and the rights of any Seller
thereunder, the rights under Section 1.4;
(iv) with respect to End-User Licenses relating to the
Gauntlet Business products or services and other products and services
(including products and services relating to the Excluded Assets) of Sellers on
the Closing Date (the "Multiproduct End-User Licenses"), and the rights of any
Seller thereunder, the rights under Section 1.4;
(v) software license agreements pursuant to which a
third-party has licensed to a Seller software or other rights (including related
code, documentation and other data) relating primarily to the Gauntlet Business
that do not require prior counter-party consent to effect assignment thereof to
the Purchaser on the Closing Date ("Third-Party Software Licenses"), including
those licenses listed in Section 1.2(a)(v) of the Seller Disclosure Schedule,
and the rights of any Seller thereunder, and Third-Party Software Licenses
relating to software on the Hardware (as defined below) but excluding
Third-Party Software Licenses which are also Specified Third-Party Software
Licenses (defined below);
(vi) with respect to software license agreements pursuant to
which a third-party has licensed to a Seller software or other rights (including
related code, documentation and other data) relating primarily to the Gauntlet
Business requiring prior counter-party consent to effect assignment thereof to
the Purchaser on the Closing Date, including those listed on Section 1.2(a)(vi)
of the Seller Disclosure Schedule (the "Specified Third-Party Software
Licenses"), and the rights of any Seller thereunder, the rights under Section
1.4;
(vii) other than End User Licenses and Third-Party Software
Licenses, those contracts, indentures, agreements, original equipment
manufacturer agreements, commitments and all other legally binding arrangements,
whether oral or written, primarily related to the Gauntlet Business, including
those contracts listed in Section 1.2(a)(vii) of the Seller Disclosure Schedule,
and the rights of any Seller thereunder but, excluding those contracts listed as
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GAUNTLET ASSET PURCHASE AGREEMENT
Excluded Assets (such items, together with the End-User Licenses and Third-Party
Software Licenses, collectively shall be deemed for purposes of this Agreement
to be the "Contracts");
(viii) software (other than that covered under Third-Party
Software Licenses), patents (including all reissues, divisions, continuations,
and extensions thereof), patent applications, trademarks, trademark
registrations, service marks, trademark applications, domain names, trade names,
copyrights, licenses pursuant to which any Seller acquired any rights with
respect to the foregoing and other such intellectual property necessary to and
primarily used for the operations of the Gauntlet Business including those
listed in Section 1.2(a)(viii) of the Seller Disclosure Schedule (such items,
together with Third-Party Software Licenses, collectively the "Intellectual
Property");
(ix) all trade secrets, inventions, know-how, formulae,
processes, procedures, research records, records of inventions, test
information, market surveys and marketing know-how (collectively, "Technology")
necessary to and primarily used for the operations of the Gauntlet Business;
(x) all permits, licenses, franchises, approvals and
authorizations by governmental or regulatory authorities or bodies
(collectively, "Permits") relating solely and directly to the operations of the
Gauntlet Business including those listed in Section 1.2(a)(x) of the Seller
Disclosure Schedule;
(xi) all raw materials, work-in-process, finished goods,
supplies, parts, goods for sale and other inventories, whether or not in transit
(collectively, the "Inventory") on the Closing Date that are used, intended to
be used, or held for use primarily by or for the Gauntlet Business;
(xii) the machinery and equipment that are used, intended to
be used, or held for use primarily by or for the Gauntlet Business (the
"Hardware") including those listed in Section 1.2(a)(xii) of the Seller
Disclosure Schedule;
(xiii) subject to state or federal privacy laws, copies of
personnel records relating to the Transitioning Employees (as defined in Section
3.13(a), herein);
(xiv) electronic copies of the customer, distributor,
reseller and technical support databases that are used or held for use primarily
by or for the Gauntlet Business and retained by the Sellers in the ordinary
course of business; and
(xv) copies of all reasonably available customer lists,
customer files and other customer records in any format currently maintained by
Sellers.
(b) The Sellers will retain and not transfer the Excluded Assets.
The term "Excluded Assets," collectively, means:
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GAUNTLET ASSET PURCHASE AGREEMENT
(i) all rights of Sellers under this Agreement, and the
agreements, instruments and certificates delivered in connection with this
Agreement;
(ii) all records prepared in connection with the
Acquisition;
(iii) all cash on hand and cash equivalents of any Seller;
(iv) all rights relating to the Excluded Liabilities;
(v) all Seller Contracts with third party distributors such
as Xxxxxx Microsystems and all of Sellers' other existing domestic and
international distribution Contracts, and the rights of any Seller thereunder;
(vi) the End User Licenses, the Third Party Software
Licenses and the Contracts listed in Section 1.2(b)(vi) of the Seller Disclosure
Schedule, and the rights of any Seller thereunder;
(vii) all the assets of the "NAI Labs," which is Sellers'
advanced research and development group relating to advanced network and
information systems security technology, including any and all intellectual
property, technology, contracts, inventory, hardware, accounts receivable,
prepaid deposits, and any and all other rights relating thereto;
(viii) all of the assets of the "Cybercop Product Line,"
which is the Sellers' network risk and security assessment software (including
any related security data) products, including any and all intellectual
property, technology, contracts, inventory, hardware, accounts receivable,
prepaid deposits, and any and all other rights relating thereto;
(ix) all of the assets of the "PGP Encryption Software
Business," which is Sellers' wireless and desktop encryption software product
lines, including any and all intellectual property, technology, contracts,
inventory, hardware, accounts receivable, prepaid deposits, and any and all
other rights relating thereto;
(x) all interest of Sellers in real property, fixtures,
furniture and any leasehold interests in real property of each Seller; and
(xi) except for the rights granted under the TIS/CMS License
in substantially the form attached hereto as Exhibit 7.3(e), all intellectual
property rights relating to the software programs collectively know as the
TIS/CMS (TIS X.509 Certificate Management System).
1.3 Assumption of Certain Liabilities.
(a) Except as to the specific terms and conditions of this
Agreement, Purchaser does not assume any liability, accrued or contingent, known
or unknown or otherwise;
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GAUNTLET ASSET PURCHASE AGREEMENT
provided, however, that Purchaser hereby assumes, effective as of the Closing
Date, the following, which shall be the "Assumed Liabilities:"
(i) all obligations, liabilities and account payables that
(a) relate directly to the Gauntlet Business but only to the extent listed in
Section 1.3(a)(i) of the Seller Disclosure Schedule, and (b) relate directly to
Gauntlet Business incurred in the ordinary course of business by any Seller
after the date of this Agreement; provided, however Sellers will not create any
new obligations directly relating to the Gauntlet Business after the Closing
Date; and
(ii) all liabilities accruing on and after the Closing Date
under the Contracts included in the Acquired Business Assets, including for
these purposes any and all obligations as provided for under Section 1.4 below,
and all liabilities accruing on and after the Closing Date as a result of
Purchaser's ownership of the Acquired Business Assets, including, in each case,
all related customer service obligations.
(b) Notwithstanding the foregoing, the Assumed Liabilities shall
not include any Excluded Liabilities (as defined in Section 1.3(c)).
(c) The term "Excluded Liabilities," collectively, means:
(i) any obligation or liability of any Seller not stated to
be assumed pursuant to Section 1.3(a);
(ii) any obligation or liability of any Seller, or any
director, officer, employee or beneficial owner of ten percent or more of any
Seller, in respect of Taxes (as defined in Section 3.5) (including real or
personal property Taxes) for the period (or any portion of any period) ending on
or prior to the Closing Date ("Excluded Taxes");
(iii) any obligation or liability of any Seller relating to
or arising under or in connection with any Seller Employee Benefit Plan (as
defined in Section 3.13(a)) or any Seller Severance Arrangement (as defined in
Section 3.13(a)), except for the obligation to provide the Transitioning
Employees with employment benefits substantially equivalent to comparable
employees of Purchaser after the Closing Date;
(iv) any obligation, liability or account payable of any
Seller incurred after the Closing Date; and
(v) all liabilities accruing prior to the Closing Date under
the Contracts.
(d) Each Seller agrees to pay, perform and discharge, all liens,
charges, claims, security interests or other encumbrances incurred prior to the
Closing (collectively, the "Liens") except those, which Purchaser has expressly
agreed to assume pursuant to this Section 1.3.
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GAUNTLET ASSET PURCHASE AGREEMENT
1.4 Treatment of Specified Third-Party Software Licenses, Specified
End-User Licenses and Multiproduct End-User Licenses.
(a) Requirement to Close. The failure by any Seller to assign at
Closing any Specified Third-Party Software License or Specified End-User License
or relevant portion of any Multiproduct End-User License, shall not relieve any
of the parties hereto from its respective obligations to consummate the
transactions contemplated by this Agreement.
(b) Pre-Closing Specified Third-Party Software Licenses. Prior to
the Closing Date, Sellers shall take reasonable efforts to validly assign to
Purchaser, effective as of the Closing Date, all Specified Third-Party Software
Licenses listed on Schedule 1.4(b) of the Sellers Disclosure Schedule.
(c) Post Closing One Year Covenant. For a period of one year
after the Closing Date, if so requested by Purchaser, Sellers shall use
reasonable efforts (without the expenditure, in the aggregate, of considerable
personnel resources or any out-of-pocket payments to third parties to obtain
third-party consents) to validly assign to Purchaser, the Specified Third-Party
Software Licenses, Specified End-User Licenses and those portions of the
Multiproduct End-User Licenses relating primarily or exclusively to the Gauntlet
Business, that were not assigned to the Purchaser on the Closing Date.
(d) Post Closing Economic Benefits. Notwithstanding the foregoing
in Sections 1.4 (a), (b) or (c), after the Closing Date, if, and for so long as,
the Sellers have not assigned to the Purchaser, the Specified Third-Party
Software Licenses, the Specified End-User Licenses or the applicable portion of
the Multiproduct End-User Licenses then Sellers shall use reasonable efforts
(without the expenditure, in the aggregate, of considerable personnel resources
or any out-of-pocket payments to third parties to obtain third-party consents)
to (x) provide the Purchaser with the economic benefits of such Specified
Third-Party Software Licenses, Specified End-User Licenses and/or the applicable
portion of such Multiproduct End-User Licenses, (y) cooperate in any lawful
arrangement designed to provide such benefits to Purchaser, and (z) enforce, at
the request and expense of and for the benefit of Purchaser any rights of
Sellers arising from any such Specified Third-Party Software Licenses, Specified
End-User Licenses or the applicable portion of such Multiproduct End-User
Licenses, including the right to elect to terminate such contracts in accordance
with the terms thereof upon the written request of Purchaser.
(e) Purchaser Obligations. To the extent that Purchaser is
provided the benefits of any Specified Third-Party Software Licenses, Specified
End-User License or the applicable portion of any Multiproduct End-User License
referred to herein, (i) Purchaser shall perform at the discretion of Sellers and
for the benefit of any third person, the obligations of Sellers thereunder or in
connection therewith, and (ii) Purchaser agrees to pay, perform and discharge,
and defend and indemnify Sellers against and hold Sellers harmless from, all
obligations and liabilities of Sellers relating to such performance or failure
to perform and, in the event of a failure of such indemnity, Sellers shall cease
to be obligated under this Agreement with respect to such Specified Third-Party
Software Licenses, Specified End-User Licenses or Multiproduct End-User Licenses
which are the subject of such failure.
(f) Additional Purchaser Obligations. With respect to any
Specified Third-Party Software License, Specified End-User License and/or the
applicable portion of a Multiproduct End-User License that has not been assigned
to Purchaser, Purchaser and Seller shall enter into such
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GAUNTLET ASSET PURCHASE AGREEMENT
arrangements at Purchaser's expense as are reasonably necessary to permit such
Seller to perform such responsibilities on behalf of Purchaser.
1.6 Acquisition Consideration.
(a) The purchase price for the Acquired Business Assets (the
"Purchase Price") shall be such number of fully paid, validly issued and
nonassessable shares of common stock par value $0.01 of Purchaser ("Common
Stock") as is equal to the quotient of (x) $5,000,000 divided by (y) the average
of the Median Value (as defined below) of the Common Stock for each of the five
(5) consecutive trading days (as defined below) ending on and including the
trading day prior to the Agreement Date (the "Exchange Price"). The shares of
Common Stock to be issued by Purchaser to Sellers is herein referred to as (the
"Acquisition Consideration"). "Median Value" means, with respect to any trading
day, the average of the high and low sales prices for such trading day as
reported on the Nasdaq National Market. The term "trading day" means a day on
which there is trading on the Nasdaq National Market.
(b) No certificates representing fractional shares of Common
Stock shall be issued to Seller and Seller shall not be entitled to any voting
rights, rights to receive dividends or distributions or other rights as a
stockholder of Purchaser with respect to any fractional shares of Common Stock.
In lieu of any such fractional shares, Purchaser shall transfer to Seller, cash
(rounded to the nearest whole cent) without interest, in an amount equal to the
product obtained by multiplying such fraction by the Exchange Price.
1.6 Allocation of Acquisition Consideration. Sellers and Purchaser
recognize their mutual obligations pursuant to Section 1060 of the Internal
Revenue Code of 1986, as amended (the "Code") to timely file IRS Form 8594 (the
"Asset Acquisition Statement") with their respective federal income tax returns.
Accordingly, Sellers and Purchaser shall, no later than sixty (60) days after
the Closing Date, attempt in good faith to (i) enter into a Purchase Price
allocation agreement providing for the allocation of the Acquisition
Consideration among the Acquired Business Assets consistent with the provisions
of Section 1060 of the Code and the Treasury Regulations thereunder and (ii)
cooperate in the preparation of the Asset Acquisition Statement in accordance
with clause (i) for timely filing with their respective federal income tax
returns. If Sellers and Purchaser shall have agreed on a Acquisition
Consideration allocation and an Asset Acquisition Statement, then the Sellers
and Purchaser shall file the Asset Acquisition Statement in the form so agreed
and neither Sellers nor Purchaser shall take a Tax position, which is
inconsistent with such Acquisition Consideration allocation.
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GAUNTLET ASSET PURCHASE AGREEMENT
1.7 Transfer Taxes. All sales, use, value-added, gross receipts,
excise, registration, stamp duty, transfer or other similar taxes or
governmental fees ("Transfer Taxes") imposed or levied by reason of, in
connection with or attributable to this Agreement and the transactions
contemplated hereby shall be borne solely by Purchaser. To the extent Sellers
are responsible for the preparation and filing of any Transfer Tax return,
Sellers shall prepare and provide Purchaser such Transfer Tax return no later
than ten (10) business days prior to the due date of such return and Purchaser
shall remit to the Sellers within five business days thereof the amount of the
Transfer Taxes shown to be due on such return. The parties shall cooperate with
each other to the extent reasonably requested and legally permitted to minimize
any Transfer Taxes.
ARTICLE II
THE CLOSING
2.1 Closing Date. The closing of the sale and transfer of the Acquired
Business Assets (hereinafter called the "Closing") shall take place at the
offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C., located at 000 Xxxx Xxxx
Xxxx, Xxxx Xxxx, Xxxxxxxxxx at 10:00 a.m. local time on the business day
immediately following the satisfaction of the conditions set forth in Article
VII, or at such other time, date and place as shall be fixed by agreement of
Sellers and Purchaser (such date of the Closing being herein referred to as the
"Closing Date").
2.2 Transactions To Be Effected at the Closing. At the Closing:
(a) Each Seller shall deliver to Purchaser such appropriately
executed deeds, bills of sale, consents, assignments and other instruments of
transfer relating to the Acquired Business Assets identified by Purchaser to be
delivered by remote telecommunication or such other method as Purchaser may
reasonably request, including the assignments set forth in Section 7.3(f)
hereof;
(b) Purchaser shall deliver to Sellers promptly following the
Closing certificates evidencing the shares of Common Stock constituting the
Acquisition Consideration in accordance with Section 1.5(a) and such other
documents as Sellers may reasonably request to demonstrate satisfaction of the
conditions and compliance with the agreements set forth in this Agreement;
(c) Purchaser shall deliver to Sellers promptly following the
Closing cash in lieu of any fractional share of Common Stock, pursuant to
Section 1.5(b), by check; and
(d) The other documents, agreements and instruments to be
delivered on the Closing Date under Article VII shall be, as applicable, entered
into or delivered on the Closing Date.
2.3 Risk of Loss. Until the Closing, the risk of any loss of or damage
to the Acquired Business Assets from fire, casualty or any other occurrence
shall be borne by Sellers.
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GAUNTLET ASSET PURCHASE AGREEMENT
2.4 Taking of Necessary Action; Further Action. If, at any time after
the Closing Date, subject to Section 1.4 herein, any further action is necessary
or desirable to carry out the purposes of this Agreement and to vest Purchaser
with full right, title and possession to the Acquired Business Assets, the
Sellers agree to direct their respective officers to take all such lawful and
reasonably necessary and/or desirable action consistent with this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLERS
Sellers jointly and severally, represent and warrant to Purchaser as follows as
of the date hereof and as of the Closing:
3.1 Organization, Standing and Power. Each of the Sellers is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation. Each of the Sellers has the corporate
power to own its properties and to carry on its business as now being conducted.
Each of the Sellers is duly qualified to do business and is in good standing in
each jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect on the Gauntlet Business.
3.2 Authority, Conflicts, Consents.
(a) Each of the Sellers has all requisite power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of each Seller. This Agreement has been duly
executed and delivered by each Seller and constitutes the valid and binding
obligation of each Seller, enforceable in accordance with its terms subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
federal or state laws affecting the rights of creditors.
(b) The execution and delivery of this Agreement by each Seller
does not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit (any such
event, a "Conflict") under, (i) any provision of the Certificate of
Incorporation or Bylaws or equivalent charter documents of any Seller, (ii) any
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Acquired Business Assets or
(iii) the Contracts.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity") is required by or with respect to any Seller in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for such filings as may be required under applicable
securities laws. Other than Specified Third-Party Software Licenses, Specified
End-User Licenses
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GAUNTLET ASSET PURCHASE AGREEMENT
and Multiproduct End-User Licenses, Section 3.2(c) of the Seller Disclosure
Schedule sets forth all necessary consents, waivers and approvals of third
parties that are required to be obtained by any Seller in connection with the
execution and delivery of this Agreement by any Seller or the consummation by
the Sellers of the transactions contemplated hereby.
3.3 Operation of the Gauntlet Business; Ownership/Sufficiency of
Assets. Except as set forth in Section 3.3 of the Seller Disclosure Schedule
since December 31, 2001, (a) the Gauntlet Business has been operated exclusively
through Sellers in the ordinary course of business consistent with past
practice, (b) Sellers have owned and continue to own directly all of the
Acquired Business Assets, and (c) Sellers have made and continue to make all
payments and expenditures with respect to the Acquired Business Assets. The
Acquired Business Assets constitute the contracts, intellectual property,
technology and hardware used by Sellers to operate the Gauntlet Business and the
Acquired Business Assets are sufficient to operate and carry on the Gauntlet
Business as being conducted as of the date hereof and as of the Closing Date.
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GAUNTLET ASSET PURCHASE AGREEMENT
3.4 Changes. Since October 31, 2001 there has not been, occurred or
arisen any:
(a) transaction other than in the ordinary course of business
with respect to the Gauntlet Business or the Acquired Business Assets;
(b) capital expenditure or commitment with respect to the
Acquired Business Assets that has exceeded $100,000 individually or $500,000 in
the aggregate;
(c) destruction of, damage to or loss of any material assets,
business or customer (whether or not covered by insurance) related to the
Gauntlet Business;
(d) sale, lease, license or other disposition of any of the
Acquired Business Assets or properties of any Seller, except in the ordinary
course of business;
(e) amendment or termination or violation of any material
contract, agreement or license related primarily to the Gauntlet Business other
than termination pursuant to the terms thereof in the ordinary course of
business;
(f) waiver or release of any material right or claim, including
any material write-off or other material compromise of any account receivable or
material change in accounts payable related to the Gauntlet Business other than
in the ordinary course of business;
(g) except as set forth in Schedule 3.4(g) of the Seller
Disclosure Schedule, the commencement or notice of, or to the knowledge of
Sellers, threat of commencement of any lawsuit, arbitration or similar dispute
resolution process related primarily to the Gauntlet Business;
(h) claim of ownership by a third party of any Intellectual
Property owned by any of the Sellers that is used in the Gauntlet Business as
currently conducted or to the knowledge of Sellers, infringement by any Seller
in the conduct of the Gauntlet Business of any third party's Intellectual
Property rights;
(i) change in pricing or royalties set or charged by any Seller
in connection with the Gauntlet Business (except for changes in ordinary course
of business);
(j) a Material Adverse Effect on the Gauntlet Business or any
known development that is likely to result in a Material Adverse Effect on the
Gauntlet Business; or
(k) increase or decrease in the rates of direct compensation
payable or to become payable by Sellers to any employee, agent or consultant
engaged in the Gauntlet Business (the "Gauntlet Employees") (other than routine
increases made in the ordinary course of business or pursuant to a collective
bargaining agreement), or, with respect to such persons, any bonus, percentage
compensation, service award or other like benefit, granted, made or accrued to
or to the credit of any such persons, or any material welfare, pension,
retirement or similar payment or arrangement made or agreed to be made by
Sellers (other than such events occurring pursuant to any previously existing
benefit plan or collective bargaining agreement);
(l) loans made by Sellers to Gauntlet Employee;
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GAUNTLET ASSET PURCHASE AGREEMENT
(m) actions taken, or contemplated, by Sellers to seek protection
pursuant to any bankruptcy law, nor are Sellers aware that any creditor seeks to
initiate involuntary bankruptcy proceedings; or
(n) agreement by any Seller, or any of its officers, employees or
agents thereof to do any of the things described in the preceding clauses (a)
through (n) (other than by negotiations with Purchaser and its representatives
regarding the transactions contemplated by this Agreement).
3.5 Tax Matters.
(a) Definition of Taxes. For the purposes of this Agreement,
"Tax" or, collectively, "Taxes," means (i) any and all federal, state, local and
foreign taxes, and similar assessments and other governmental charges, duties,
impositions and liabilities, including taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts; (ii) any liability for the payment of any
amounts of the type described in clause (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group for any period; and (iii)
any liability for the payment of any amounts of the type described in clause (i)
or (ii) as a result of any express or implied obligation to reimburse or
indemnify any other person or as a result of any obligations under any
agreements or arrangements with any other person with respect to such amounts
and including any liability for taxes of a predecessor entity.
(b) To the extent failure to do so would have a Material Adverse
Effect on the Purchaser or Purchaser's ability to conduct the Gauntlet Business
or to use or encumber the Acquired Business Assets: (i) Sellers have timely
filed within the time period for filing or any extension granted with respect
thereto all federal, state, local and foreign returns, estimates, information
statements and reports ("Returns") which are required to be filed prior to the
Closing Date relating to or pertaining to any and all Excluded Taxes; and (ii)
Sellers, have paid (and will pay) all Excluded Taxes due and payable prior to
the Closing. With respect to the Gauntlet Business and the Acquired Business
Assets, (i) there are no pending (or to Sellers' knowledge, threatened) audits,
examinations, assessments, asserted deficiencies or written claims for Excluded
Taxes and (ii) there are (and immediately after the Closing there will be) no
Liens, other than Liens for Taxes not yet due and payable, on the Acquired
Business Assets attributable to Excluded Taxes.
3.6 Restrictions on Business Activities. There is no agreement
(relating to noncompetition or otherwise), commitment, judgment, injunction,
order or decree relating to the Gauntlet Business to which any Seller is party
and, to the best of the knowledge of Sellers, to which any other person is a
party, which has the effect of materially prohibiting or impairing the use of
any Acquired Business Assets as currently conducted.
3.7 Title to Properties; Absence of Liens and Encumbrances. Except as
set forth in Section 3.7 of the Seller Disclosure Schedule, Sellers have good
and valid title to, or, in the
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GAUNTLET ASSET PURCHASE AGREEMENT
case of leased assets, valid leasehold interests in, all of the Acquired
Business Assets free and clear of any Liens, except for Liens for Taxes not yet
due and payable.
3.8 Intellectual Property
(a) Sellers own, or are licensed or otherwise possess legally
enforceable and valid rights to use, all Intellectual Property (with respect to
patents, only to the knowledge of Sellers) that is used in the Gauntlet Business
as currently conducted by Sellers.
(b) Section 3.8(b) of the Seller Disclosure Schedule sets forth a
complete list of all registered patents, trademarks, copyrights, domain names
and service marks, and any applications therefor in respect of any of the
foregoing owned by any of the Sellers and included in the Intellectual Property
that is used in the Gauntlet Business as currently conducted by Sellers, and
specifies, where applicable, the jurisdictions in which the rights to such
Intellectual Property have been issued or registered or in which an application
for such issuance and registration has been filed, including the respective
registration or application numbers and the names of all registered owners. All
registered patents, trademarks, service marks, copyrights and domain names owned
by Sellers and set forth in Section 3.8(b) of the Seller Disclosure Schedule are
valid and subsisting.
(c) Except for nonexclusive end-user licenses and nondisclosure
agreements entered into in the ordinary course of business, to the knowledge of
Sellers, there are no licenses, sublicenses and other agreements related to the
Gauntlet Business to which any Seller is a party and pursuant to which any
Seller or any other person is authorized to use Intellectual Property used in
the Gauntlet Business as currently conducted by Sellers that is material to
Sellers. The execution and delivery of this Agreement by Sellers, and the
consummation of the transactions contemplated hereby, (i) will not cause any
Seller to be in violation or default under any license, sublicense or agreement
related to the Gauntlet Business, or (ii) require any Seller to repay any funds
already received by it from a third party, except which would not constitute a
Material Adverse Effect on the Gauntlet Business. Except for rights or licenses
granted by third-parties to Sellers, each Seller, as applicable, is the sole and
exclusive owner or licensee of, with all right, title and interest in and to
(free and clear of any Liens), the Intellectual Property (with respect to
patents, only to the knowledge of Sellers) that is used in the Gauntlet Business
as currently conducted by Sellers, and has sole and exclusive rights (and is not
contractually obligated to pay any compensation to any third party in respect
thereof) for the use thereof or the material covered thereby in connection with
the services or products in respect of which such Intellectual Property is being
used in connection with the Gauntlet Business.
(d) No claims contesting any Seller's ownership of or right to
use Intellectual Property that is used in the Gauntlet Business as currently
conducted by Sellers, or asserting any right of a third party to use any
Intellectual Property that is used in the Gauntlet Business as currently
conducted by Sellers, have been asserted or, to any Seller's knowledge,
threatened against any Seller, or to any Seller's knowledge, is there any
reasonable basis for any of the foregoing.
(e) To the knowledge of Sellers, (i) there is no unauthorized
use, infringement or misappropriation of any of the Intellectual Property owned
by Sellers that is used in the Gauntlet Business as currently conducted by
Sellers by any third party, including any employee or former employee of
Sellers, and (ii) no Intellectual Property owned by Sellers that is used in the
Gauntlet Business as currently conducted by Sellers is subject to any
outstanding decree, order, judgment, or stipulation restricting in any manner
the licensing thereof by Sellers. Each employee
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GAUNTLET ASSET PURCHASE AGREEMENT
and contractor materially involved in proprietary aspects of the Gauntlet
Business has executed nondisclosure of proprietary information and
confidentiality agreements in standard forms of the Sellers except where the
failure to do so would not have a Material Adverse Effect on the Gauntlet
Business, forms of which have been provided to Purchaser.
(f) No Patent has been or is now involved in any interference,
reissue, reexamination or opposition proceeding.
(g) Each employee and independent contractor contributing to the
creation of the Intellectual Property and/or Technology has executed an
assignment of intellectual property rights and confidentiality agreement
providing Sellers all right, title and interest in and to such contributions,
except where failure to do so would not have a Material Adverse Effect on the
Gauntlet Business.
3.9 Agreements, Contracts and Commitments
(a) No Seller has as it relates to the Gauntlet Business or the
Acquired Business Assets continuing obligations under, is a party to or is bound
by any Contract that:
(i) is an agreement of indemnification, warranty or guaranty
other than in the ordinary course of business;
(ii) relates to capital expenditures and involves future
payments in excess of $100,000; or
(iii) relates to the disposition or acquisition of material
assets or any interest in the Acquired Business Assets outside the ordinary
course of business.
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GAUNTLET ASSET PURCHASE AGREEMENT
(b) Subject to Section 1.4, as of the Closing Date, (x) each
Contract (other than any Contract constituting an Excluded Asset) will be a
valid and binding obligation of the parties thereto and in full force and
effect, and (assuming receipt of any required consent set forth in Section
3.2(c) of the Seller Disclosure Schedule) will continue in full force and effect
following the transactions contemplated by this Agreement, in each case without
any breach of any terms or conditions thereof or the forfeiture or impairment of
any rights thereunder, (y) each Seller will have performed all material
obligations required to be performed by it prior to the Closing Date under each
Contract (other than any Contract constituting an Excluded Asset) to which it is
a party and will not be (with or without the lapse of time or the giving of
notice, or both) in breach or default thereunder and (z) to the knowledge of
Sellers, each other party to each Contract (other than any Contract constituting
an Excluded Asset) will have performed all material obligations required to be
performed by such party under such assigned Contracts, and will not be (with or
without the lapse of time or the giving of notice, or both) in breach or default
thereunder.
(c) Except with respect to any Contract that constitutes an
Excluded Liability, no Seller is a party to or bound by any Contract that, if
performed in accordance with its terms, could reasonably be expected to have a
Material Adverse Effect on the Gauntlet Business or the Acquired Business
Assets.
3.10 Governmental Authorization. To the knowledge of Sellers, Section
1.2(a)(x) of the Seller Disclosure Schedule accurately lists each consent,
license, permit, grant or other authorization issued to Sellers by a
Governmental Entity and related primarily to the Gauntlet Business which is
required for the operation of its or their business or the holding of any such
interest (herein collectively called "Seller Authorizations"), which Seller
Authorizations are in full force and effect and constitute all material Seller
Authorizations required to permit Sellers to operate or conduct the Gauntlet
Business.
3.11 Litigation. Except as set forth in Section 3.11 of the Seller
Disclosure Schedule, there is no pending lawsuit, arbitration or similar dispute
resolution proceeding, foreign or domestic ("Litigation") against any Seller
related to the Gauntlet Business, or, to the knowledge of any Seller, threatened
against any Seller or any of its officers or directors (in their capacities as
such) related to the Gauntlet Business. To Sellers' knowledge, there is no basis
for such litigation.
3.12 Accounts Receivable; Accounts Payable.
(a) Section 3.12(a) of the Seller Disclosure Schedule sets forth
the amounts and aging schedule of Sellers' accounts receivable related to the
Gauntlet Business as of December 31, 2001 (the "Accounts Receivable"). All of
the Accounts Receivable arose in the ordinary course of Sellers' business.
(b) Section 3.12(b) of the Seller Disclosure Schedule sets forth
the amounts and aging schedule of Sellers' accounts payable related to the
Gauntlet Business as of December 31, 2001 (the "Accounts Payable"). All of the
Accounts Payable included arose in the ordinary course of Sellers' business.
3.13 Transitioning Employees.
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GAUNTLET ASSET PURCHASE AGREEMENT
(a) Section 3.13(a) of the Seller Disclosure Schedule contains
(i) a complete and accurate list of all the employees of the Sellers who are
devoting a majority of their time to the Gauntlet Business (the "Transitioning
Employees") showing for each Transitioning Employee, the name, location,
position held, hire date, salary or wages and aggregate annual compensation for
the Sellers' latest fiscal years, (ii) a list of the Employee Benefit Plans (as
defined in Section 3.13(d) below) and any other bonus, deferred compensation,
pension, profit sharing or retirement plans, or an other employee benefit plans
or arrangements of Sellers maintained or sponsored for the benefit of the
Transitioning Employees (the "Seller Employee Benefit Plans"), and (iii) a list
of any severance pay, post-employment liabilities or obligations or "golden
parachute" provisions (or similar provisions which provide for payment of
consideration upon the completion of the transactions contemplated herein)
applicable to the Transitioning Employees (the "Seller Severance Arrangements").
(b) With respect to all Transitioning Employees, each Seller
Employee Benefit Plan has been operated in material compliance with applicable
laws, including (without limitation) the Early Retirement Income Security Act of
1974, as amended ("ERISA").
(c) With respect to the Gauntlet Business, there is not presently
pending or existing, and to Seller's knowledge there is not threatened, (i) any
strike, slowdown, picketing, or work stoppage or (ii) any application for
certification of a collective bargaining agent.
(d) "Employee Benefit Plan" shall mean any plan, program, policy,
practice, contract, agreement or other arrangement that is defined in Section
3(1) of ERISA.
3.14 Insurance. Sellers have in full force and effect insurance
policies of the type and in an amount (subject to reasonable deductibles)
sufficient to cover the assets, business, equipment, properties and operations,
related to the Gauntlet Business.
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GAUNTLET ASSET PURCHASE AGREEMENT
3.15 Compliance with Laws. To the Sellers' knowledge, Sellers have
complied with and are not in material violation of, and have not received any
notices of violation with respect to, any material foreign, federal, state or
local statute, law or regulation with respect to the conduct of the Gauntlet
Business or the ownership or operation of the Acquired Business Assets.
3.16 Sufficiency of Acquired Business Assets. The Acquired Business
Assets constitute necessary property for the conduct of the Gauntlet Business.
3.17 Transactions with Affiliates. Schedule 3.17 of the Seller
Disclosure Schedule sets forth all Contracts, and any other agreements, being
assigned by Sellers to Purchaser which shall include any of the Sellers, or
their affiliates, as a party thereto following such assignment.
3.18 Accuracy of Documents and Information. The copies of all
instruments, agreements, other documents and written information and schedules
or exhibits to this Agreement delivered to Purchaser by Sellers are correct in
all material respects. To Sellers' knowledge, no representations or warranties
made by Sellers in this Agreement, nor certificate, schedule or exhibit
furnished directly to Purchaser by Sellers contains any untrue statement of a
material fact, or omits to state a material fact necessary to make the
statements or facts contained herein not misleading. There are no facts which
would constitute a Material Adverse Effect with respect to the Gauntlet Business
known to Sellers which has not been expressly set forth in the disclosure
materials, this Agreement or the exhibits and schedules hereto.
3.19 Investment Representations.
(a) Accredited Investor Status; Sophisticated Investor. Each
Seller is an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D under the Securities Act of 1933, as amended (the "1933 Act"). Each
Seller has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of investment in the Common
Stock to be issued pursuant to this Agreement.
(b) Information. Each of the Sellers and its advisors, if any,
have been furnished with all materials relating to the business, finances and
operations of Purchaser which have been requested and materials relating to the
issuance of the Common Stock to be issued pursuant to this Agreement. Each
Seller and its advisors, if any, have been afforded the opportunity to ask
questions of Purchaser. Each Seller understands that its investment in such
Common Stock involves a high degree of risk. Each Seller has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of such Common
Stock.
(c) No Governmental Review. Each Seller understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Common
Stock to be issued pursuant to this Agreement or the fairness or suitability of
the investment in such Common Stock nor have such authorities passed upon or
endorsed the merits of the issuance of such Common Stock.
(d) Legends. The certificates evidencing the Common Stock to be
issued to pursuant to this Agreement shall bear appropriate legends, as
determined by Purchaser.
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GAUNTLET ASSET PURCHASE AGREEMENT
(e) Residency. Each Seller is a resident of the jurisdiction set
forth in its address, as set forth on the signature pages hereto.
(f) Investment Representation. Each Seller is acquiring the
Common Stock to be issued pursuant to this Agreement for its own account and not
with a view to distribution in violation of any securities laws. Each Seller has
been advised and understands that such Common Stock has not been registered
under the 1933 Act or under the "blue sky" laws of any jurisdiction and may be
resold only if registered pursuant to the provisions of the 1933 Act or if an
exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law.
(g) Rule 144. Each Seller understands that the Common Stock to be
issued pursuant to this Agreement must be held indefinitely unless and until
such Common Stock is registered under the 1933 Act or an exemption from
registration is available. Each Seller has been advised or is aware of the
provisions of Rule 144 promulgated under the 1933 Act.
(h) Brokers. Other than Sellers' obligations to Bear Xxxxxx, no
Seller has taken any action which would give rise to any claim by any person for
brokerage commissions, finder's fees or similar payments by Purchaser or Sellers
relating to this Agreement or the transactions contemplated hereby.
(i) Reliance by Purchaser. Each Seller understands that the
Common Stock to be issued pursuant to this Agreement is being issued in reliance
on a transactional exemption from the registration requirements of applicable
securities laws and that Purchaser is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
each Seller set forth herein in order to determine the applicability of such
exemptions and the suitability of Seller to acquire the Common Stock.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Sellers as follows as of the date hereof
and as of the Closing:
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GAUNTLET ASSET PURCHASE AGREEMENT
4.1 Organization, Standing and Power. Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. Purchaser has the corporate power to own its properties and to
carry on its business as now being conducted. Purchaser is duly qualified to do
business and is in good standing in each jurisdiction in which the failure to be
so qualified would have a Material Adverse Effect on Purchaser.
4.2 Authority.
(a) Purchaser has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and delivered by Purchaser and constitutes the valid and binding obligation of
Purchaser, enforceable in accordance with its terms subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar federal or
state laws affecting the rights of creditors.
(b) The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation of, or default under (with or without notice or
lapse of time, or both), or give rise to a right of termination, cancellation or
acceleration of any provision of the organizational documents of, Purchaser.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Purchaser in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby,
except for such filings as may be required under applicable securities laws,
U.S. export control laws, and Exon Xxxxxx regulations.
4.3 SEC Filings; Financial Statements.
(a) The Purchaser has filed all forms, reports and other
documents required to be filed by the Purchaser with the SEC. All such required
forms, reports and other documents (including those that the Purchaser may file
after the date hereof until the Closing) are referred to herein as the
"Purchaser SEC Reports." The Purchaser SEC Reports (i) were or will be filed on
a timely basis, (ii) were or will be prepared in compliance in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act, as the case may be, and the rules and regulations of the SEC thereunder
applicable to such Purchaser SEC Reports, and (iii) did not or will not at the
time they were or are filed contain any untrue statement of a material fact or
omit to state a material fact required to be stated in such Purchaser SEC
Reports or necessary in order to make the statements in such Purchaser SEC
Reports, in the light of the circumstances under which they were made, not
misleading.
(b) Each of the consolidated financial statements (including, in
each case, any related notes and schedules) contained or to be contained in the
Purchaser SEC Reports (i) complied or will comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, (ii) were or will be prepared
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GAUNTLET ASSET PURCHASE AGREEMENT
in accordance with United States generally accepted accounting principles
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements or, in the case of unaudited
statements, as permitted by the SEC on Form 10-Q under the Exchange Act) and
(iii) fairly presented or will fairly present the consolidated financial
position of the Purchaser and its subsidiaries as of the dates and the
consolidated results of its operations and cash flows for the periods indicated,
consistent with the books and records of the Purchaser and its subsidiaries,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not expected to
be material in amount. The audited balance sheet of the Purchaser as of the most
recent audited date is referred to herein as the "Purchaser Balance Sheet."
4.4 Absence of Certain Changes or Events. Except as disclosed in the
Purchaser SEC Reports filed prior to the date of this Agreement, since the date
of the Purchaser Balance Sheet, there has not been any event, change or
development in the business, properties, financial condition or results of
operations of the Purchaser and its subsidiaries, taken as a whole, which has
had, or is reasonably likely to have, a Material Adverse Effect.
4.5 Litigation. Except as disclosed in the Purchaser SEC Reports filed
prior to the date of this Agreement, there is no action, suit, proceeding,
claim, arbitration or investigation pending or, to the knowledge of the
Purchaser, threatened against or affecting the Purchaser or any of its
subsidiaries which, individually or in the aggregate, has had, or is reasonably
likely to have, a Material Adverse Effect. There are no material judgments,
orders or decrees outstanding against the Purchaser.
4.6 Issuance of Common Stock. The Common Stock constituting the
Acquisition Consideration, when issued, sold and delivered in accordance with
the terms and for the consideration expressed in this Agreement, will be validly
issued, fully paid and nonassessable and will be free of any Liens or
encumbrances; provided, however, that such Common Stock shall be subject to
restrictions on transfer under applicable securities laws.
ARTICLE V
CONDUCT PRIOR TO CLOSING
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GAUNTLET ASSET PURCHASE AGREEMENT
5.1 Conduct of Business of Sellers. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Closing Date, Sellers agree, with respect to the operation of
the Gauntlet Business (except to the extent that Purchaser shall otherwise
consent in writing, which consent shall not be unreasonably withheld), to carry
on the Gauntlet Business in substantially the same manner as conducted
immediately prior to the date of this Agreement, and continue to pay its debts
and taxes when due, to pay or perform other obligations when due, and to use
reasonable efforts to preserve intact the Acquired Business Assets that are
being acquired pursuant to this Agreement and all material relationships with
third parties with respect to the Gauntlet Business. NAI shall promptly notify
Purchaser of any event or occurrence not in the ordinary course of business of
the Gauntlet Business. Except as expressly contemplated by this Agreement,
Sellers shall not, without the prior written consent of Purchaser:
(a) enter into any commitment or transaction primarily related to
the operation of the Gauntlet Business not in the ordinary course of business;
(b) transfer to any third person or entity any rights to the
Intellectual Property other than in the ordinary course of business;
(c) enter into or amend any agreements pursuant to which any
other party is granted marketing, distribution or similar rights of any type or
scope with respect to any products of any Seller primarily related to, or which
is reasonably likely to affect a material portion of, the operation of the
Gauntlet Business other than in the ordinary course of business;
(d) amend or otherwise modify in any material respect (or agree
to do so), except in the ordinary course of business, or violate the terms of
the Contracts;
(e) commence any litigation primarily related to the operation of
the Gauntlet Business other than in the ordinary course of business;
(f) sell, lease, license or otherwise dispose of any of the
Acquired Business Assets other than in the ordinary course of business; or
(g) grant any security interest or encumbrance or Lien in any of
the Acquired Business Assets.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Access to Information. Subject to Purchaser's obligations set forth
in Section 6.2, and subject to any contractual obligations that restrict
disclosure of third-party contracts, Sellers shall afford Purchaser and its
accountants, counsel and other representatives, reasonable access to Sellers'
properties, books, contracts, commitments and records, related to the Gauntlet
Business during normal business hours upon reasonable notice during the period
prior to the Closing Date or termination of this Agreement pursuant to its
terms. Each Seller agrees to provide to Purchaser and its accountants, counsel
and other representatives copies of all information reasonably
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GAUNTLET ASSET PURCHASE AGREEMENT
requested by Purchaser, including existing internal financial statements,
business plans and projections, related primarily to the Acquired Business
Assets upon request.
6.2 Confidentiality. Each of the parties hereto hereby agrees to keep
such information or knowledge obtained in any investigation pursuant to Section
6.1, or pursuant to the negotiation and execution of this Agreement or the
effectuation of the transactions contemplated hereby (collectively, the
"Confidential Information"), confidential; provided, however, that the foregoing
shall not apply to information or knowledge which (a) a party can demonstrate
was already lawfully in its possession prior to the disclosure thereof by the
other party, (b) is generally known to the public, (c) became known to the
public through no fault of such party, (d) is later lawfully acquired by such
party from other sources not under an obligation to maintain the confidentiality
of such information, (e) is required to be disclosed by order of court or
government agency with subpoena powers (provided that such party shall given the
other party prior notice of such order and a reasonable opportunity to object or
take other available action), (f) is disclosed in the course of any litigation
between any of the parties hereto, (g) is developed independently by either
party without reference to, or specific knowledge of, the other party's
Confidential Information or (h) a party is reasonably required to disclose in
order to effect the transactions contemplated by this Agreement. Notwithstanding
the foregoing, it is acknowledged that Purchaser and Sellers may publicly
disclose this Agreement and the material terms of this Agreement following the
date hereof in accordance with the provisions of Section 6.4 hereof.
6.3 Expenses. All fees and expenses incurred in connection with this
Agreement and the transactions contemplated hereby (including without limitation
any brokerage or finder's fees, expenses, and/or commissions or investment
banking fees and expenses or other such similar fees, and expenses, and any
legal, audit, and investor relations fees and expenses) shall be paid by the
party incurring such fees and expenses, whether or not the Acquisition is
consummated.
6.4 Public Disclosure. NAI and Purchaser shall consult with each other
and agree on forms of joint press releases relating to the Acquisition and this
Agreement to be issued in connection with the execution of this Agreement (if
any) and with the Closing of the Acquisition. Other than such joint press
releases, neither Purchaser nor Sellers shall issue any press release or
otherwise make any public statement with respect to the Acquisition and this
Agreement, except as may be required by law or any national securities exchange
in the discretion of the respective disclosing party.
6.5 Consents. Subject to the provisions of Section 1.4, each Seller
shall promptly apply for or otherwise seek, and use all reasonable efforts to
obtain, all consents and approvals required to be obtained by it for the
consummation of the Acquisition, and each Seller shall use reasonable efforts to
obtain all consents, waivers and approvals under any of the Seller's agreements,
contracts, licenses or leases in order to preserve the benefits thereunder for
Purchaser and otherwise in connection with the Acquisition.
6.6 Legal Requirements. Subject to the terms and conditions provided in
this Agreement (including specifically the provisions of Section 1.4), each of
the parties hereto shall use
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GAUNTLET ASSET PURCHASE AGREEMENT
its reasonable efforts to take promptly, or cause to be taken, all reasonable
actions, and to do promptly, or cause to be done, all things reasonably
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated hereby, to obtain
all necessary waivers, consents and approvals and to effect all necessary
registrations and filings and to remove any legal injunctions, in order to
consummate and make effective the transactions contemplated by this Agreement
for the purpose of securing to the parties hereto the benefits contemplated by
this Agreement. Moreover, if Purchaser waives the sale, assignment, transfer,
conveyance and/or delivery to it effective as of the Closing of any Acquired
Business Asset, for a period of one year after the Closing Date, if so requested
by Purchaser, Sellers shall use their reasonable efforts to validly effect the
sale, assignment, transfer, conveyance and/or delivery to Purchaser of such
Acquired Business Asset.
6.7 Notification of Certain Matters. NAI shall give prompt notice to
Purchaser, and Purchaser shall give prompt notice to NAI, of (i) the occurrence
or non-occurrence of any event, the occurrence or non-occurrence of which may
cause any representation or warranty in this Agreement to be untrue or
inaccurate at the Closing Date in any material respect, and (ii) any failure of
Sellers or Purchaser, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 6.7 shall not limit or otherwise affect any remedies available to the
party receiving such notice. Each of the parties to this Agreement shall use all
commercially reasonable efforts to effectuate the transactions contemplated
hereby and to fulfill or cause to be fulfilled the conditions to closing under
this Agreement. Each party hereto, at the reasonable request of another party
hereto, shall execute and deliver such other instruments and do and perform such
other acts and things as may be reasonably necessary or desirable for effecting
completely the consummation of this Agreement and the transactions contemplated
hereby.
6.8 Post-Closing Accounts Receivable. Sellers shall promptly pay to
Purchaser amounts received after the Closing Date in consideration of any
accounts receivable, which are included under this Agreement as Acquired
Business Assets. In addition, Sellers shall, within 30 days following the
Closing Date, provide Purchaser with amounts and aging schedule of (i) Sellers'
accounts receivable related to the Gauntlet Business as of the Closing Date and
(ii) Seller's accounts payable related to the Gauntlet Business as of the
Closing Date.
6.9 PGP 1000 e-ppliance Government Export License. For a period of six
months after the Closing Date, Sellers shall take reasonable action to transfer
to Purchaser, government export license #D286152 authorizing exports to civil
government end users for civil government end uses for the PGP 1000 e-ppliance
product. From the Closing Date until such time as Sellers transfer the Export
License to Purchaser, Purchaser shall be able to use the Export License as
arranged by Sellers pursuant to Section 7.3(k) hereof.
6.10 Post-Closing Assurances. Including Section 1.4 with respect to the
Specified Third-Party Software Licenses, the Specified End-User Licenses, and
the Multiproduct End-User Licenses, after the Closing, each party agrees to
execute and deliver such other instruments
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GAUNTLET ASSET PURCHASE AGREEMENT
and do and perform such other acts and things as may be reasonably necessary or
desirable for effecting completely the transactions contemplated hereby.
6.11 Cooperation with Respect to Transitioning Employees; Use of
Premises. Sellers shall assist Purchase in soliciting each of the Transitioning
Employees selected by Purchaser for employment with Purchaser. Such employment
shall be on terms comparable to those of similarly situated employees of the
Purchaser. Representatives of Purchaser and Sellers shall jointly inform the
Transitioning Employees of the Acquisition on or about the Closing Date. From
the date hereof until 30 days after the Closing Date, Sellers shall allow the
Transitioning Employees selected by Purchaser reasonable access and continued
use of the premises currently used by such Transition Employees in connection
with the Gauntlet Business.
6.12 Non-Solicitation. For a period of eighteen (18) months subsequent
to the execution of the Non-Disclosure Agreement between the parties dated ____,
2001, Purchaser shall not directly or indirectly solicit or hire any employee of
Sellers (other than the Transitioning Employees) or any of the subsidiaries of
the Sellers; provided however, that the foregoing shall not prevent Purchaser
from placing advertisements in newspapers consistent with Purchaser's past
practices or using recruiters, provided such recruiters have not been directed,
either directly or indirectly, to contact Sellers' employees; provided further
that for a period of eighteen (18) months after the date hereof, Sellers shall
not directly or indirectly solicit or hire any Transitioning Employees who
become employees of Purchaser in connection with the transactions contemplated
herein.
6.13 Transfer of Common Stock. Each Seller covenants not to effect any
transfer of the Common Stock to be issued pursuant to this Agreement if such
transfer would be in violation of applicable securities laws, would invalidate
the securities laws exemptions pursuant to which Common Stock is being issued
hereunder or would require registration and/or qualification under the 1933 Act
or other applicable securities laws.
6.14 Registration; Compliance with Securites Act. The Purchaser hereby
agrees that it shall:
(a) subject to receipt of necessary information from the Sellers,
prepare and file with the SEC as soon as practicable and in no event later than
sixty (60) days following the Closing, a registration statement on Form S-3 (the
"Registration Statement"), to enable the resale of the shares received as
Acquisition Consideration (collectively, the "Registrable Shares") by the
Sellers' from time to time on Nasdaq and use all reasonable efforts to cause
such Registration Statement to be declared effective as promptly as possible
after filing, but in no case later than 90 days after filing, and to remain
continuously effective until the earlier of the second anniversary of the
Closing, (i) such time as all Registrable Shares purchased by the Sellers
pursuant to this Agreement, have been sold thereunder or (ii) all Registrable
Shares that have not been sold by Sellers can be sold in a ninety (90) day
period pursuant to Rule 144 under the Securities Act (the "Registration
Period"). In the event that Form S-3 is unavailable for such registration, the
Company shall use such other form as is available for such a registration;
provided, however, that the Company will promptly file a new Registration
Statement on Form S-3 covering the resale of the Registrable Shares in the event
that such Form becomes available at any time while Registrable Shares are
outstanding and have not yet been sold to the public;
(b) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in
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GAUNTLET ASSET PURCHASE AGREEMENT
connection therewith as may be necessary to keep the Registration Statement
effective at all times until the end of the Registration Period; provided,
however, that the Purchaser shall not be obligated to keep the Registration
Statement effective if there occurs a suspension or stop order with respect to
the Registration Statement or an event occurs as a result of which the
prospectus (including any supplements thereto) included in the Registration
Statement then in effect includes an untrue statement of material fact or omits
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing (a
"Suspension"); provided, further that in no case shall Purchaser spend use of
the prospectus contained in the Registration Statement for more than two sixty
(60) day periods in any twelve month period. In the event of any Suspension, the
Purchaser will use its reasonable efforts to cause the use of the prospectus so
suspended to be resumed as soon as possible.
(c) furnish to each Seller with respect to the Registrable Shares
registered under the Registration Statement such reasonable number of copies of
the Registration Statement, prospectuses and preliminary prospectuses in
conformity with the requirements of the Securities Act and such other documents
as such Seller may reasonably request, in order to facilitate the public sale or
other disposition of all or any of the Registrable Shares by the Sellers;
(d) file documents required of the Company for normal blue sky
clearance in states specified in writing by any Seller; provided, however, that
the Company shall not be required to qualify to do business or consent to
service of process in any jurisdiction in which it is not now so qualified or
has not so consented;
(e) use its reasonable efforts to cause the Registrable Shares to
be listed on Nasdaq in connection with the filing of the Registration Statement;
(f) use its reasonable efforts to cause the Registration
Statement to be declared effective on or prior to ninety (90) days following the
Closing.
(g) the Purchaser shall permit a single firm of legal counsel
("Legal Counsel") designated by NAI to review the Registration Statement and all
amendments and supplements thereto a reasonable period of time prior to their
filing with the SEC;
(h) within three (3) Business Days after a Registration Statement
covering Registrable Shares is ordered effective by the SEC, the Purchaser shall
use reasonable efforts to deliver, or shall cause its legal counsel to deliver,
to the transfer agent for such Registrable Shares (with copies to the NAI)
confirmation that such Registration Statement has been declared effective by the
SEC; and
(i) bear all expenses in connection with the registration of the
Registrable Shares pursuant to the Registration Statement except for the fees
and expenses, if any, of Legal Counsel or other advisers to the Purchasers or
underwriting discounts, brokerage fees and commissions incurred by the
Purchasers, if any.
It shall be a condition precedent to the obligations of the Purchaser
to take any action pursuant to this Section that the Sellers shall furnish to
the Purchaser such information regarding itself, the Acquired Business Assets,
the Registrable Shares to be sold by the Sellers, and the intended method of
disposition of such securities as shall be required to effect the registration
of the Registrable Shares.
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GAUNTLET ASSET PURCHASE AGREEMENT
6.15 Registration Rights; Liquidated Damages. Subject to 6.15(b), if
the Registration Statement is not declared effective by the SEC during the
ninety (90) day period mentioned in Section 6.15(a) above, the Company shall pay
in cash to Sellers, as liquidated damages and not as a penalty, an amount equal
to one-half of a percent (0.5%) per month of the value of the Acquisition
Consideration on the Agreement Date, which amount will be increased to
three-fourth of a percent (0.75%) per month of the value of the Acquisition
Consideration on the Agreement Date in the event the Registration Statement is
not declared effective by the SEC within one hundred fifty (150) days of the
Closing Date.
6.16 Prohibition on Solicitation of Other Acquisition Offers. Sellers
shall not directly or indirectly through any of their officers, directors,
employees, financial advisors, legal counsels, representatives or agents (i)
solicit, initiate or encourage any inquiries or proposals that constitute or
could reasonably lead to, a proposal or offer for the sale, assignment, transfer
or conveyance of the Gauntlet Business or the Acquired Business Asset other than
the Acquisition contemplated by this Agreement (an "Acquisition Proposal"), or
(ii) engage in negotiations or discussions concerning, or providing non-public
information to any person or entity relating to, any Acquisition Proposal.
Sellers shall notify Purchaser immediately upon receipt of any Acquisition
Proposal or any request for non-public information in connection with an
Acquisition Proposal and keep Purchaser informed, on a current basis, of the
status of any such discussions and the terms being discussed.
6.17 Non-competition Covenant.
(a) Term. The term of this Section 6.17 shall commence and shall
be effective upon the Closing Date and shall terminate two (2) years following
the Closing Date (the "Noncompete Period"). Notwithstanding the foregoing, this
Section 6.17 shall not be effective unless and until the Closing and shall
terminate for all purposes upon the occurrence of a termination of this
Agreement pursuant to Article IX hereof.
(b) Acknowledgments. The Sellers acknowledge that the promises
and restrictive covenants it is providing in this Section 6.17 are reasonable
and necessary to protect the legitimate interests of the Purchaser in the
Acquisition. As a result of the foregoing, the parties expressly understand and
agree that the non-competition provisions contained in Section 6.17 are
reasonable, permissible and enforceable pursuant to the provisions of applicable
law.
(c) Noncompete. The Sellers agree that during the Noncompete
Period they shall not, directly or indirectly, sell or market any commercial
products in the application layer firewall market segment (the "Restricted
Business").
(d) Independence of Obligations; Severability. If any provision
of this Section 6.17 or any part of any such provision is held under any
circumstances to be invalid or unenforceable in any jurisdiction, then (a) such
provision or part thereof shall, with respect to such circumstances and in such
jurisdiction, be deemed amended to conform to applicable laws so as to be valid
and enforceable to the fullest possible extent, (b) the invalidity or
unenforceability of such provision or part thereof under such circumstances and
in such jurisdiction shall not affect the validity or enforceability of such
provision or part thereof under any other circumstances or in any other
jurisdiction, and (c) such invalidity of enforceability of such provision or
part thereof shall not affect the validity or enforceability of the remainder of
such provision or the validity or enforceability of any other provision of this
Section 6.17. Each provision of this Section 6.17 is
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GAUNTLET ASSET PURCHASE AGREEMENT
separable from every other provision of this Section 6.17 , and each part of
each provision of this Agreement is separable from every other part of such
provision.
(e) Reformation of Non-competition Covenant. In the event that
the provisions of this Section 6.17 are deemed to exceed the time, geographic or
scope limitations permitted by applicable law, then such provisions shall be
reformed to the maximum time, geographic or scope limitations, as the case may
be, permitted by applicable laws.
ARTICLE VII
CONDITIONS TO THE ACQUISITION
7.1 Conditions to Obligations of Each Party to Effect the Acquisition.
The respective obligations of each party to this Agreement to effect the
Acquisition shall be subject to the satisfaction at or prior to the Closing Date
of the following conditions:
(a) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Acquisition or restricting the conduct, use
or operations of the Acquired Business Assets by Sellers or Purchaser shall be
in effect, nor shall any proceeding brought by a Governmental Entity, seeking
any of the foregoing be pending; nor shall there be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Acquisition, which makes the consummation of the Acquisition
unlawful.
7.2 Additional Conditions to Obligations of Sellers. The obligations of
Sellers to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Closing Date of each of the following conditions, any of which may be waived, in
writing, exclusively by NAI:
(a) Representations, Warranties and Covenants. The
representations and warranties of Purchaser in this Agreement shall be true and
correct in all material respects on the date hereof and on and as of the Closing
Date as though such representations and warranties were made on and as of such
time and except, on the Closing Date, where the failure to be so true and
correct, individually or in the aggregate, have not had, and are not reasonably
likely to have, a Material Adverse Effect on the Purchaser, and Purchaser shall
have performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by it as of the Closing Date.
(b) Execution of the NAI License. Purchaser shall have executed a
license with NAI, in substantially the form attached hereto as Exhibit 7.2(c)
relating to the Purchaser's grant to NAI of a perpetual non-exclusive license
for the use of the Gauntlet Internet firewall tool kit and such license shall be
in full legal effect as of, and following the Closing Date.
(c) Execution of Firewall, VPN and GEMS License. Purchaser shall
have executed a license with NAI, in substantially the form attached hereto as
Exhibit 7.2(d) relating to the Purchaser's grant to NAI of a perpetual
non-exclusive license for the use of the Gauntlet
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GAUNTLET ASSET PURCHASE AGREEMENT
Firewall, VPN and GEMS software, and such license shall be in full legal effect
as of, and following the Closing Date.
(d) Execution of the Patent Licenses. Purchaser shall have
executed licenses with NAI, in substantially the form attached hereto as Exhibit
7.2(d) relating to the Purchaser's grant to NAI a perpetual non-exclusive
license for the use of all of the patents listed in Section 3.8 of the Seller
Disclosure Schedule, and such licenses shall be in full legal effect as of, and
following the Closing Date.
(e) Compliance Certificate of Purchaser. Sellers shall have been
provided with a certificate executed on behalf of Purchaser by its Chief
Executive Officer or Chief Financial Officer to the effect that, as of the
Closing Date:
(i) all representations and warranties made by Purchaser
under this Agreement are true and correct in all material respects; and
(ii) all covenants, obligations and conditions of this
Agreement to be performed by Purchaser on or before such date have been so
performed in all respects.
7.3 Additional Conditions to the Obligations of Purchaser. The
obligations of Purchaser to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing Date of each of the following conditions, any of which may
be waived, in writing, exclusively by Purchaser:
(a) Representations, Warranties and Covenants. The
representations and warranties of Sellers in this Agreement shall be true and
correct in all material respects on the date hereof and on and as of the Closing
Date as though such representations and warranties were made on and as of such
time and except, on the Closing Date, where the failure to be so true and
correct, individually or in the aggregate, have not had, and are not reasonably
likely to have, a Material Adverse Effect on the Gauntlet Business, and Sellers
shall have performed and complied in al material aspects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by it as of the Closing Date.
(b) Compliance Certificates of each Seller. Purchaser shall have
been provided with a certificate executed on behalf of each Seller, by NAI's
Chief Executive Officer or Chief Financial Officer, to the effect that, as of
the Closing Date:
(i) all representations and warranties made by Sellers in
this Agreement are true and correct in all material respects, and
(ii) all covenants, obligations and conditions of this
Agreement to be performed by Sellers (as the case may be) on or before such date
have been so performed in all respects.
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GAUNTLET ASSET PURCHASE AGREEMENT
(c) Material Adverse Effect. There shall not have occurred any
Material Adverse Effect on the Gauntlet Business or the Acquired Business
Assets.
(d) Third Party Consents. All consents, waivers, and approvals
listed pursuant to Section 7.3(d) of the Seller Disclosure Schedule shall have
been obtained to the reasonable satisfaction of Purchaser.
(e) Execution of the TIS/CMS License. NAI shall have executed a
license with Purchaser, in substantially the form attached hereto as Exhibit
7.3(e) relating to NAI's grant to Purchaser of a perpetual non-exclusive license
for the use of the TIS/CMS (TIS X.509 Certificate Management System) software.
(f) Execution of VirusScan Olympus OEM Agreement. Seller and
Purchaser shall have executed an OEM agreement, on terms reasonably acceptable
to Seller and Purchaser, for the inclusion of Seller's McAfee anti-virus engine
for use with the Gauntlet Firewall; provided, the OEM agreement will be
exclusive to Purchaser for the application layer firewall market segment;
provided, that such exclusivity does not violate any existing license or the
renewal of any existing license.
(g) Execution of PGP SDK Agreement. Seller and Purchaser shall
have executee a license, on terms reasonably acceptable to Seller and Purchaser,
permitting Purchaser to use the PGP software development kit in connection with
those portions of the Gauntlet Business where it is in use as of the date of
Closing.
(h) Execution of Assignments. Sellers shall have delivered or
caused to be delivered to Purchaser:
(i) An assignment of Patents in substantially the form
attached hereto as Exhibit 7.3(h)(i);
An assignment of Copyrights in substantially the form
attached hereto as Exhibit 7.3(h)(ii); and
1. An assignment of Trademarks in substantially the form attached
hereto as Exhibit 7.3(h)(iii).
(i) Export License. Sellers shall assign the Export License
to Purchaser, appoint Purchaser their distributor and/or make such other
arrangements as necessary to allow Purchaser use of the Export License from the
Closing Date until such time as Sellers transfer the Export License to Purchaser
in accordance with Section 6.9 hereof.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
8.1 Survival of Representations and Warranties. The representations and
warranties of Sellers and Purchaser contained in this Agreement or in any
certificate delivered
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GAUNTLET ASSET PURCHASE AGREEMENT
pursuant to this Agreement will survive the Closing and continue in full force
and effect until six (6) months after the anniversary of the Closing Date. In
addition, (other than claims by Seller under Section 1.4(e)) no claims will be
allowed to be made by NAI or Purchaser under the provisions of this Article
VIII, unless notice of such claim shall have been made on or prior to 5:00 p.m.
Pacific Time on the six (6) months anniversary of the Closing Date.
8.2 Indemnification.
(a) Indemnification by NAI. Subject to the qualifications and
limitations in this Article VIII, if the Closing is consummated, NAI shall
indemnify and defend and hold Purchaser, its subsidiaries, directors, officers,
and agents (collectively, the "Purchaser Indemnified Parties") harmless against
and with respect to, any and all Damages (as defined in subsection 8.2(c) below)
incurred by Purchaser Indemnified Parties as a result of any of the following:
(i) any inaccuracy or misrepresentation in, or breach of any
representation or warranty of, Sellers in this Agreement or the related
documents executed and delivered by Sellers in connection with this Agreement
(the "Operative Documents");
(ii) any breach or failure by the Sellers to perform any of
their covenants or agreements under this Agreement or any of the other Operative
Documents;
(iii) any liability of any Seller that is not an Assumed
Liability;
(iv) any liability of any Seller with respect to the
Contracts or any other agreements assumed by Purchaser from actions, omissions
or conditions occurring before the Closing Date; and
(v) other than any Assumed Liability, any liability or
obligation with respect to Sellers' use of the Acquired Business Assets or their
conduct of the Gauntlet Business on or before the Closing Date.
(b) Indemnification by Purchaser. Subject to the qualifications
and limitations in this Article VIII, if the Closing is consummated, Purchaser
shall indemnify and defend and hold NAI and the Sellers and their directors,
officers, and agents (collectively, the "Seller Indemnified Parties") harmless
against and with respect to, any and all Damages (as defined in subsection
8.2(c) below) incurred by any Seller Indemnified Party as a result of any of the
following:
(i) any inaccuracy or misrepresentation in, or breach of any
representation or warranty of Purchaser in this Agreement or the other Operative
Documents;
(ii) any breach or failure by Purchaser to perform any of
its covenants or agreements under this Agreement or any of the other Operative
Documents;
(iii) any Assumed Liabilities; and
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GAUNTLET ASSET PURCHASE AGREEMENT
(iv) any liability or obligation with respect to the
Purchaser 's use of the Acquired Business Assets or its conduct of the Gauntlet
Business after the Closing Date.
(c) Damages. For purposes of this Section 8.2, "Damages" means
all demands, claims, claims for reimbursement, actions or causes of action,
assessments, damages, costs, expenses, liabilities, deficiencies, judgments,
awards, fines, sanctions, penalties, charges and amounts paid in settlement,
whether civil, criminal or administrative in nature, including the reasonable
costs, fees and expenses of attorneys, experts, accountants, appraisers,
consultants, witnesses, investigators and agents and all such costs, fees and
expenses incurred in defending against any of the foregoing or in enforcing this
Agreement or the Operative Documents. Notwithstanding the foregoing definition,
the term "Damages" shall in no event include amounts recoverable as lost profits
or based on a multiple of earnings, incidental damages, indirect damages,
special damages, punitive damages or consequential damages.
(d) Procedure for Indemnification. The procedure for
indemnification shall be as follows:
(i) The party claiming indemnification ("Claimant") shall,
within thirty (30) days (or earlier, if necessary to timely answer a lawsuit)
after its discovery of any claim for which indemnification will be sought as
provided in this Agreement (the "Claim"), give notice to the party from whom
indemnification is sought ("Indemnitor") of its Claim, specifying in reasonable
detail the factual basis for the Claim and, to the extent known, the amount of
the Claim. Notwithstanding the preceding sentence, the failure by Claimant to
provide notice of any Claim within the period specified, or any delay in
providing such notice, shall not affect or impair the obligations of Indemnitor
hereunder, except and only to the extent that Indemnitor has been adversely
affected by such failure or delay.
(ii) With respect to Claims between the parties, following
receipt of notice from Claimant of a Claim, Indemnitor shall have sixty (60)
days to make any investigation that Indemnitor deems necessary or desirable of
the Claim. For purposes of this investigation, Claimant agrees to make available
to Indemnitor and its authorized representatives the information relied upon by
Claimant to substantiate the Claim. If Claimant and Indemnitor cannot agree as
to the validity and amount of the Claim within the sixty (60) day period (or any
mutually agreed upon extension thereof), Claimant shall arbitrate such dispute
as contemplated in Section 8.2(h) herein.
(iii) With respect to any Claim by a third party as to which
Claimant is entitled to indemnification hereunder, Indemnitor shall have the
right, exercisable by written notice to Claimant within 30 days after receipt of
written notice from Claimant of the commencement or assertion of any such Claim,
at its own expense to participate in or assume control of the defense of the
Claim, and Claimant shall cooperate fully with Indemnitor, with the right to
reimbursement for actual out-of-pocket expenses incurred by Claimant as a result
of any such request by the Indemnitor for Claimant's cooperation. If Indemnitor
does not elect to assume control or otherwise participate in the defense of any
third party Claim within thirty (30) days of its receipt of
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GAUNTLET ASSET PURCHASE AGREEMENT
notice of the Claim (or any extended period mutually agreed upon in writing by
the parties), Claimant shall have the right to undertake the defense, compromise
or settlement of the Claim for the account of Indemnitor subject to the right of
Indemnitor, at its expense, to assume the defense of the Claim at any time prior
to final settlement, compromise or determination thereof. In no event shall
Indemnitor be liable or otherwise have any obligation with respect to any
settlement, compromise or determination of any Claim agreed to by Claimant
without the prior written consent of Indemnitor (which consent will not be
withheld unreasonably).
(iv) The defending party shall have reasonable access to the
books, records and personnel which are pertinent to the defense and which are in
control of the other party. The parties agree to furnish such records,
information and testimony, and attend such conferences, discovery proceedings,
hearings, trials and appeals, as may be reasonably requested by the other party
in connection with defending any third party Claim.
(e) Limitations and Conditions Applicable to Purchaser . The
right of Purchaser to obtain indemnification from NAI pursuant to Section 8.2(a)
of this Agreement is subject to the following limitations:
(i) Purchaser shall not be entitled to indemnification from
NAI pursuant to Section 8.2(a) until the aggregate Damages for which NAI is
liable under Section 8.2(a) exceed $200,000, whereupon Purchaser shall be
entitled to indemnification by NAI for all Damages in excess of the first
$200,000; provided, however, that this limitation shall not apply with respect
to all Claims arising from or relating to those matters referred to in Section
8.2(a)(ii) or 8.2(a)(iii).
(ii) NAI shall not be obligated to indemnify Purchaser for
aggregate Damages under Section 8.2 in excess of the lesser of (i) $1,000,000
and (ii) to the extent Acquisition Consideration consists of unregistered
securities at the time any Claim is made, 20% of the aggregate shares received
by Sellers.
(iii) Purchaser shall not be entitled to recover Damages in
respect of any Claim or otherwise obtain reimbursement or restitution more than
once with respect to any Claim hereunder.
(f) Limitations and Conditions Applicable to NAI . The right of
NAI to obtain indemnification from Purchaser pursuant to Section 8.2(b) of this
Agreement is subject to the following limitations:
(i) NAI shall not be entitled to indemnification from
Purchaser pursuant to Section 8.2(b) until the aggregate Damages for which
Purchaser is liable under Section 8.2(b) exceed $200,000, whereupon NAI shall be
entitled to indemnification by Purchaser for all Damages in excess of the first
$200,000; provided, however, that this limitation shall not apply with respect
to all Claims arising from or relating to those matters referred to in Section
8.2(b)(ii), 8.2(b)(iii), and 8.2(b)(iv).
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GAUNTLET ASSET PURCHASE AGREEMENT
(ii) Purchaser shall not be obligated to indemnify NAI for
aggregate Damages under Section 8.2(b)(i) in excess of $1,000,000.
(iii) NAI shall not be entitled to recover Damages in
respect of any Claim or otherwise obtain reimbursement or restitution more than
once with respect to any Claim hereunder.
(g) Remedies Exclusive. The remedies provided in this Section 8.2
shall be exclusive as to any Claims by a party under this Agreement or any other
Operative Document or arising out of the transactions provided for herein and
therein and shall preclude assertion by any party of any other rights or the
seeking of any other remedies against another party; provided, however, that
nothing in this Section 8.2(g) shall limit rights or remedies expressly provided
for in this Agreement or any other Operative Document for fraud or deceit.
(h) Arbitration. Any controversy involving a Claim by an
indemnified party pursuant to this Article VIII shall be finally and exclusively
settled by binding arbitration in accordance with the Arbitration Rules (as
defined in Section 10.6).
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. Except as provided below, this Agreement may be
terminated and the Acquisition abandoned at any time prior to the Closing Date:
(a) by mutual consent of Seller and Purchaser; and
(b) by Purchaser or Seller if: (i) the Closing has not occurred
by February 22, 2002; (ii) there shall be a final nonappealable order of a
federal or state court in effect preventing consummation of the Acquisition; or
(iii) there shall be any statute, rule, regulation or order enacted, promulgated
or issued or deemed applicable to the Acquisition that would make consummation
of the Acquisition illegal.
9.2 Effect of Termination. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become void and
there shall be no liability or obligation on the part of Purchaser or Seller, or
their respective officers, directors, stockholders or equity owners, provided
that each party shall remain liable for any breaches of this Agreement prior to
its termination; and provided further that, the provisions of Article X and
Sections 6.2, 6.3 and 6.4 of this Agreement shall remain in full force and
effect and survive any termination of this Agreement.
9.3 Amendment. Subject to applicable law, this Agreement may be amended
by the parties hereto at any time by execution of an instrument in writing
signed by each party hereto.
9.4 Extension; Waiver. At any time prior to the Closing Date NAI and
Purchaser, as applicable may to the extent legally allowed, (i) extend the time
for the performance of
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GAUNTLET ASSET PURCHASE AGREEMENT
any of the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of NAI and Purchaser, as applicable, with
respect to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. Delay in exercising any
right under this Agreement shall not constitute a waiver of such right.
ARTICLE X
GENERAL PROVISIONS
10.1 Notices. All notices, requests, demands, waivers and other
communications required or permitted hereunder shall be in writing and shall in
any event be deemed to be given upon receipt or, if earlier, (a) five (5) days
after deposit with the U.S. Postal Service or other applicable postal service,
if mailed by first class registered or certified mail, return receipt requested,
postage prepaid, (b) upon delivery, if delivered by hand, by recognized
expedited delivery service, (c) one (1) business day after the business day of
deposit with Federal Express or similar overnight courier, freight prepaid or
(d) one (1) business day after the business day of facsimile transmission, if
delivered by facsimile transmission with copy by first class registered or
certified mail, return receipt requested, postage prepaid. Notices shall be
addressed to the address set forth below (or at such other address as a party
may designate by ten (10) days' advance written notice to the other party
pursuant to the provisions above):
(a) if to Seller, to:
Network Associates, Inc.
00000 Xxxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxx Xxxxxxx, Executive Vice President
and General Counsel
Facsimile No.: (000) 000-0000
with copies to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxx Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
and
Network Associates, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx Xxxxx, XX 00000
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GAUNTLET ASSET PURCHASE AGREEMENT
Attention: Xxxxxx X. Xxxxxxx, Executive Vice President for
Business Development and Strategic Research
Facsimile No.: (000) 000-0000
if to Purchaser, to:
Secure Computing Corporation
0000 Xxxx Xxxx Xxxx
Xx. Xxxx, XX 00000
Attention: Xxxx X. Xxxxx, Secretary and General Counsel
Facsimile No.: (000) 000-0000
with copies to:
Xxxxxx Xxxxxx White & XxXxxxxxx LLP
000 Xxxxxxxxxxx Xxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxx Xxxx
Facsimile No.: (000) 000-0000
10.2 Interpretation; Definition. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
(a) For purposes of this Agreement the term "Material Adverse
Effect" when used in connection with the Purchaser or the Gauntlet Business
means any change, event, violation, inaccuracy, circumstance or effect that is
materially adverse to the business, assets, liabilities, financial condition,
prospects or results of operations of the Purchaser and its subsidiaries taken
as a whole or the Gauntlet Business, as applicable; except for those changes,
events or effects that result from (x) the public announcement by NAI of its
intentions to dispose of the Gauntlet Business or the pendency of the
transactions contemplated hereby (including any reduction in sales of the
Gauntlet Business, or loss or termination by any Seller of Gauntlet Business
employees), (y) changes affecting the firewall/VPN industry generally (which
changes do not disproportionately affect the Gauntlet Business) or (z) changes
affecting the United States economy generally.
10.3 Counterparts. This Agreement may be executed in one or more
counterparts (including by means of facsimile), all of which shall be considered
one and the same agreement and shall become effective when one or more
counterparts have been signed by each of the parties and delivered to the other
party, it being understood that all parties need not sign the same counterpart.
10.4 Entire Agreement; Assignment. This Agreement, the schedules and
exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other
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GAUNTLET ASSET PURCHASE AGREEMENT
person any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise, without the prior written consent of NAI and
Purchaser, provided that Purchaser may assign its rights and delegate its
obligations hereunder to its affiliates.
10.5 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to
negotiate in good faith to modify this Agreement to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
10.6 Governing Law; Arbitration. This Agreement shall be governed by
and construed in accordance with the laws of the State of California, regardless
of the laws that might otherwise govern under applicable principles of conflicts
of laws thereof. Subject to the provisions of Article VIII, any claim or dispute
arising out of or related to this Agreement, the interpretation, making
performance, breach or termination thereof, shall be finally and exclusively
settled by binding arbitration as following: (i) arbitration shall be held in
Santa Clara, California, (ii) such arbitration shall be made in accordance with
the then current Commercial Arbitration Rules of the American Arbitration
Association, (iii) judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof, (iv) such arbitration shall be
conducted by an arbitrator chosen by mutual agreement of Purchaser, on the one
hand, and NAI on the other; failing such agreement, the arbitration shall be
conducted by three independent arbitrators, one of whom shall be chosen by the
Purchaser, one of whom shall be chosen by NAI, and such two arbitrators shall
mutually select a third arbitrator, with any decision of two such arbitrators
shall be binding on Purchaser and NAI, (v) the arbitrator(s) shall have the
authority to grant any equitable and legal remedies that would be available in
any judicial proceeding instituted under California substantive law to resolve a
dispute, (vi) judgment on the award rendered by the arbitrator(s) may be entered
in any court having jurisdiction thereof, (vii) each party shall pay its own
costs and expenses (including counsel fees) of any such arbitration except that
the arbitrator(s) can compel one party to pay all or a portion of the other
party's costs and expenses, and (viii) the parties agree that, any provision of
applicable law notwithstanding, they will not request, and the arbitrator(s)
shall have no authority to award damages based on amounts recoverable as lost
profits or based on a multiple of earnings, incidental damages, indirect
damages, special damages, punitive damages or consequential damages, against any
party and (ix) the parties hereto expressly waive all rights whatsoever to file
an appeal against or otherwise to challenge any award by the arbitrator(s)
hereunder, provided that the foregoing shall not limit the rights of either
party to bring a proceeding in any applicable jurisdiction to conform, enforce
or enter judgment upon such award (and the rights of the other party, if such
proceeding is brought, to contest such confirmation, enforcement or entry of
judgment) (for purposes of this Agreement, the arbitration rules described above
in sections (i) through (ix) above shall be the "Arbitration Rules").
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GAUNTLET ASSET PURCHASE AGREEMENT
10.7 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
10.8 Successors. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors, heirs and assigns.
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GAUNTLET ASSET PURCHASE AGREEMENT
IN WITNESS WHEREOF, Purchaser and each of the Sellers have caused this
Agreement to be signed by their duly authorized respective officers, all as of
the date first written above.
PURCHASER:
SECURE COMPUTING CORPORATION,
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Senior VP & CFO
Address: 0000 Xxxxxxx Xxxx
Xxx Xxxx, XX 00000
SELLERS:
NETWORKS ASSOCIATES, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Exec. VP
Address: 0000 Xxxxxxx Xxxxxx
Xxxxx Xxxxx, XX 00000
NETWORK ASSOCIATES TECHNOLOGY, INC.,
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: CFO & COO
Address: 0000 Xxxxxxx Xxxxxx
Xxxxx Xxxxx, XX 00000
NETWORK ASSOCIATES INTERNATIONAL BV,
a Netherlands corporation
By: /s/Xxxx Xxxxxx
-------------------------------------
Name: Xxxx Xxxxxx
Title: Director of Finance
Address:
NETWORK ASSOCIATES COMPANY LIMITED,
a Japanese Corporation
By: /s/ Xxxxxxx Xxxxxxxxx
-------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Director
Address:
SCHEDULE 1
The Gauntlet Firewall Business is Sellers' business relating to the following
products: Gauntlet SOURCE CODE (EXPORT VERSION) and any other versions thereof,
Gauntlet Firewall, Gauntlet Virtual Private Network, Gauntlet 1000 E-ppliance,
Gauntlet 300 e-ppliance, Gauntlet 310 e-ppliance, Gauntlet 320 e-ppliance, and
Gauntlet GEMS, and to the extent applicable, including all current and prior
versions thereof.
