EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
HOME DIRECTOR, INC.
(AS "BUYER"),
XXXXXXX XXXXX INTELLECTUAL CAPITAL COMPANY LLC
("STICC")
AND
INTERNATIONAL BUSINESS MACHINES CORPORATION,
(AS "SELLER")
DATED AS OF DECEMBER 7, 1999
TABLE OF CONTENTS
Article I. Purchase and Sale of Assets . . . . . . . . . . . 5
1.1 Transferred Assets. . . . . . . . . . . . . . . . . . . 5
1.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . 6
1.3 Consideration. . . . . . . . . . . . . . . . . . . . . . 6
1.4 Assumed Liabilities. . . . . . . . . . . . . . . . . . . 7
Article II. Closing. . . . . . . . . . . . . . . . . . . . . 7
2.1 Closing Date . . . . . . . . . . . . . . . . . . . . . . 7
Article III. Tax Matters.. . . . . . . . . . . . . . . . . . 8
3.1 Allocation of Purchase Price . . . . . . . . . . . . . . 8
3.2 Filing of Returns and Payment of Taxes . . . . . . . . . 8
3.3 Refunds and Credits. . . . . . . . . . . . . . . . . . . 8
3.4 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . 8
Article IV. Additional Covenants and Agreements. . . . . . . 9
4.1 Consents, Novations and Subcontracted Work . . . . . . . 9
4.2 Employees and Employee Benefits. . . . . . . . . . . . . 9
4.3 Shrink-Wrap Software, Windows 95 and Savoy Agreement . . 11
4.4 Further Action . . . . . . . . . . . . . . . . . . . . . 11
4.5 Undertaking. . . . . . . . . . . . . . . . . . . . . . . 12
4.6 Nonsolicitation. . . . . . . . . . . . . . . . . . . . . 12
4.7 Establishment of Letter of Credit Facility . . . . . . . 12
4.8 Access to Information; Cooperation After Closing . . . . 12
4.9 Insurance; Casualty Loss . . . . . . . . . . . . . . . . 12
4.10 Warranty Work . . . . . . . . . . . . . . . . . . . . . 13
Article V. Representations and Warranties of Buyer.. . . . . 13
5.1 Incorporation. . . . . . . . . . . . . . . . . . . . . . 13
5.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . 13
5.3 No Conflict. . . . . . . . . . . . . . . . . . . . . . . 13
5.4 Governmental Consents. . . . . . . . . . . . . . . . . . 14
5.5 No Broker. . . . . . . . . . . . . . . . . . . . . . . . 14
5.6 Insurance; Casualty Loss . . . . . . . . . . . . . . . . 14
Article VI. Representations and Warranties of Seller . . . . 14
6.1 Incorporation. . . . . . . . . . . . . . . . . . . . . . 14
6.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . 14
6.3 No Conflict. . . . . . . . . . . . . . . . . . . . . . . 15
6.4 Governmental Consents. . . . . . . . . . . . . . . . . . 15
6.5 No Broker. . . . . . . . . . . . . . . . . . . . . . . . 15
6.6 Title to Personal Property . . . . . . . . . . . . . . . 15
6.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . 15
6.8 No Rights in Others to Transferred Assets. . . . . . . . 16
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6.9 Licenses and Permits . . . . . . . . . . . . . . . . . . 16
6.10 Employees . . . . . . . . . . . . . . . . . . . . . . . 16
6.11 Assumed Contracts . . . . . . . . . . . . . . . . . . . 16
6.12 Compliance with Laws. . . . . . . . . . . . . . . . . . 16
6.13 Operation of Transferred Assets and Assumed Liabilities 17
6.14 Schedule Preparation. . . . . . . . . . . . . . . . . . 17
6.15 Year 2000 . . . . . . . . . . . . . . . . . . . . . . . 17
6.16 WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 17
Article VII. Indemnity.. . . . . . . . . . . . . . . . . . . 17
7.1 Buyer Indemnification. . . . . . . . . . . . . . . . . . 17
7.2 Seller Indemnification . . . . . . . . . . . . . . . . . 17
7.3 Procedures . . . . . . . . . . . . . . . . . . . . . . . 18
7.4 Indemnity Preclusion . . . . . . . . . . . . . . . . . . 18
7.5 Indemnity Is the Exclusive Remedy. . . . . . . . . . . . 19
7.6 Exclusion of Certain Damages . . . . . . . . . . . . . . 19
Article VIII. General Matters. . . . . . . . . . . . . . . . 19
8.1 Survival of Representations and Warranties . . . . . . . 19
8.2 Limitation of Liability. . . . . . . . . . . . . . . . . 19
8.3 Public Announcements . . . . . . . . . . . . . . . . . . 20
8.4 Due Diligence. . . . . . . . . . . . . . . . . . . . . . 20
8.5 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.6 Bulk Sales . . . . . . . . . . . . . . . . . . . . . . . 20
8.7 Modification and Waiver. . . . . . . . . . . . . . . . . 20
8.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . 20
8.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . 21
8.10 Assignment. . . . . . . . . . . . . . . . . . . . . . . 22
8.11 Counterparts. . . . . . . . . . . . . . . . . . . . . . 22
8.12 Entire Agreement. . . . . . . . . . . . . . . . . . . . 22
8.13 Construction. . . . . . . . . . . . . . . . . . . . . . 23
Schedules:
Schedule 1.1. Transferred Assets
Sub-schedule 1.1(a) Fixed Assets (production equipment)
Sub-schedule 1.1(b) Fixed Assets (office furniture and equipment)
Sub-schedule 1.1(c) Connection Center Inventory and Controller Inventory
Sub-schedule 1.1(d) Business Records Schedule 1.4. Assumed Liabilities
Schedule 3.1.(a) Allocation of Purchase Price
Schedule 4.2.(a)(1) Listing of Regular Employees
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Schedule 4.2.(a)(2) Listing of Supplemental Employees
Schedule 4.2.(b) Summary of Buyer's Planned Employment Terms and Benefit
Plans
Schedule 6.15 Year 2000
Exhibits:
Exhibit A Assumption Agreement
Exhibit B Xxxx of Sale
Exhibit C Schedule of Disclosure and Exceptions
Exhibit D Intellectual Property Agreement
Exhibit E Secondment Agreement
Exhibit F Stockholders' Agreement
Exhibit G Trademark Agreement
Exhibit H Transition Services Agreement
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of December 7, 1999 (this
"Agreement"), is entered into by and among Home Director, Inc., a Delaware
corporation ("Buyer"), Xxxxxxx Xxxxx Intellectual Capital Company LL.C, a
Delaware limited liability company ("STICC"), and International Business
Machines Corporation, a New York corporation ("Seller").
W I T N E S S E T H:
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WHEREAS, Seller wishes to sell certain assets related to its Home Director
business unit;
WHEREAS, STICC has formed Buyer and owns 9,500 shares of Buyer Common Stock.,
which shares constitute all of the presently issued and outstanding capital
stock of Buyer,
WHEREAS, Buyer wishes to purchase from Seller, and Seller wishes to sell. to
Buyer, the Transferred Assets for the Purchase Price and subject to the terms
and conditions hereinafter set forth;
WHEREAS, as partial consideration for the Contemplated Transactions, Buyer shall
issue to Seller five hundred (500) shares of Buyer Common Stock; and
WHEREAS, as a condition to Seller entering into this Agreement STICC has agreed
to be responsible for the future payment of $1,500,000.00 of the Purchase Price
(as more fully set forth herein) and to take the necessary steps to assure that
Buyer performs its Obligations to Seller pursuant to this Agreement, and but for
such agreement, Seller would not have entered into this Agreement.
NOW, THEREFORE, in consideration of the premises set forth above and the
respective covenants, agreements, representations and warranties hereinafter set
forth, and intending to be legally bound hereby, Buyer, STICC and Seller hereby
agree as follows:
DEFINITIONS.
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CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings specified below:
"AFFILIATE" shall mean, as to any Person, any other Person or entity which is
controlling, controlled by or under common control with such Person or entity.
"ALLOCATION STATEMENTS" shall have the meaning set forth in Section 3.1(a).
"APPLICABLE LAWS" shall mean, with respect to any Person, any domestic or
foreign, federal, state or local statute, law, ordinance, rule, administrative
interpretation, regulation,, order, writ, injunction, decree or other
requirement of any Governmental Authority (including any Environmental Law)
applicable to such Person 'or any of its respective properties, assets,
officers, directors, employees, consultants or agents (in connection with any
such officer's, director's, employee's, consultant's or agent's activities on
behalf of such Person).
"ASSUMED CONTRACTS" shall mean those contracts set forth on Schedule 1.4.
"ASSUMED LIABILITIES" shall have the meaning set forth in Section 1.4.
"ASSUMPTION AGREEMENT" shall mean the Assignment and Assumption Agreement a copy
of which is attached hereto as Exhibit A and by which Buyer shall assume the
Assumed Liabilities.
"BENEFIT ARRANGEMENTS" shall mean all life and health insurance, retirement,
savings, bonus, deferred compensation, incentive compensation, severance pay,
disability and fringe benefit plans, workers' compensation, holiday or vacation
pay, sick pay, stock option, profit sharing, seniority and other plans,
policies, practices, agreements or statements of terms and conditions providing
employee or executive compensation or benefits to Employees or any of their
dependents, maintained by Seller or any Affiliate, other than an Employee Plan.
"XXXX OF SALE" shall mean the Xxxx of Sale a copy of which is attached hereto as
Exhibit B to be entered into by the Parties on the Closing Date.
"BUSINESS DAY" shall mean a day other than a Saturday, Sunday or other day: (i)
on which commercial banks in New York, New York are authorized or required by
law to close; (ii) on which Seller's corporate headquarters in Armonk, New York
are closed; or (iii) on which Buyer's corporate headquarters in Morrisville,
North Carolina are closed.
"BUYER" shall have the meaning set forth in the preamble to this Agreement.
"BUYER COMMON STOCK" shall have the meaning set forth for the term "Common
Stock" in the Stockholders' Agreement.
"CLOSING" shall have the meaning set forth in Section 2.1.
"CLOSING DATE" shall mean December 7, 1999.
"CODE" shall have the meaning set forth in Section 3.1(a).
"CONFIDENTIALITY AGREEMENT" shall mean the Confidential Disclosure Agreement
(Agreement number 4999S50562) among Buyer and Seller dated as of the Closing
Date and Supplements there to which reference the Operative Agreements.
"CONNECTION CENTER INVENTORY" shall mean the items of inventory as set forth on
Sub-schedule 1.1(c).
"CONTEMPLATED TRANSACTIONS" shall mean the transactions contemplated by the
Operative Agreements.
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"CONTROLLER INVENTORY" shall mean the items of inventory as set forth on
Sub-schedule 1.1(c).
"DISCLOSURE SCHEDULES" shall mean the information disclosed pursuant to Article
VI and set forth in Exhibit C to this Agreement dated as of the Closing Date,
attached hereto and incorporated herein by reference.
"EMPLOYEE PLANS" shall mean each "employee benefit plan" as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended, which
is or has been entered into, maintained, administered or contributed to by
Seller or any of its Affiliates and which provides benefits to Employees or
their dependents.
"EMPLOYEES" shall have the meaning set forth in Section 4.2(a).
"ENVIRONMENTAL LAWS" shall mean any applicable federal, state or local law,
statute, ordinance, judgments, rulings, orders, regulations or similar laws
relating to any matters of pollution or of environmental regulation or control
or protection of the environment, including such environmental, laws as the
Resource Conservation and Recovery Act, the Comprehensive Environmental Response
Compensation and Liability Act, the Federal Emergency Planning and Community
Right-to-Know Act, the Hazardous Materials Transportation Act, the Clean Water
Act, and the Clean Air Act, and any state or local counterparts thereof, as any
of the same have been amended to the Date of Closing.
"ENVIRONMENTAL LIABILITIES" shall mean any liability that directly arises from
Seller's or any of its Affiliates violation of an Environment Law with respect
to the Transferred Assets on or prior to the. Closing Date.
"FIXED ASSETS" shall mean the production equipment and office furniture and
equipment which make up a portion of the Transferred Assets, a list of which as
of the Closing Date, together with the net book value of each item on the list
as of the Closing Date, is set forth on Sub-schedules 1.1(a) and 1.1(b).
"GOVERNMENTAL AUTHORITY" shall mean any Federal, state, local or foreign court,
governmental or administrative agency or commission or other governmental
agency, authority, instrumentality or regulatory body having appropriate
jurisdiction over the Transferred Assets, the Assumed Contracts or any Person
having any rights or obligations under any Operative Agreement.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section 7.3.
"INDEMNIFYING PARTY" shall have the meaning set forth in Section 7.3.
"INITIAL PAYMENT" shall have the meaning set forth in Section l.3(a)(i).
"INTELLECTUAL PROPERTY AGREEMENT" shall mean the Intellectual Property Agreement
a copy of which is attached hereto as Exhibit D.
"INVENTORY PAYMENTS" shall have the meaning set forth in section 1.3(a)(iv).
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"LETTER AGREEMENT" shall mean the letter agreement between STICC and Seller
dated October 5, 1999 and accepted by Seller on October 8, 1999.
"LETTER OF CREDIT" shall have the meaning set forth in Section 4.7.
"LIEN" shall mean with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance, lease, license, easement,
encroachment, burden, title defect, restriction, limitation or other adverse
claim of any kind, in respect of such property or asset.
"LIMITATION AMOUNT" shall have the meaning set forth in Section 8.2.
"LOSS" shall mean, with respect to any Person, any and all damage, fines imposed
by any Governmental Authority, Loss, liability and expense, including, without
limitation, reasonable expenses of investigation and reasonable attorney's fees
and expenses in connection with any claim, action, suit or proceeding.
"OBLIGATIONS" shall mean all covenants, agreements, warranties, duties,
representations, fees, reasonable expenses, liabilities (including any and all
Assumed Liabilities) and indebtedness of any kind and nature whatsoever, now or
hereafter arising, owing, due or payable from one Party to the other Party
pursuant to this Agreement.
"OPERATING EXPENSES" shall mean the ordinary course operating expenses,
liabilities and obligations of the IBM Home Director business unit.
"OPERATIVE AGREEMENTS" shall mean this Agreement, the Assumption Agreement, the
Xxxx of Sale, the Intellectual Property Agreement, the Stockholders' Agreement,
the Trademark Agreement, the Transition Services Agreement, the Secondment
Agreement and all attachments or exhibits attached hereto or thereto and
expressly referenced herein or therein.
"PARTIES" shall mean Buyer and Seller.
"PERMITTED LIENS" shall mean: (i) mechanics', carriers', workmen's, repairmen's
or other similar Liens arising or incurred in the ordinary course of business;
(ii) conditional sales contracts and equipment leases entered into in the
ordinary course of business; (iii) Liens for Taxes, assessments and other
governmental charges due and being contested in good faith by Seller, (iv) Liens
for Taxes either not due and payable or due but for which notice of assessment
has not been given, or which may thereafter be paid without penalty; (v)
security given in the ordinary course of business to any public utility,
Governmental Authority or to any statutory or public authority in connection
with the Transferred Assets; and (vi) other imperfections of title or
encumbrances, if any, which items (1) - (vi) taken together do not materially
impair the value of the Transferred Assets and Assumed Contracts, taken as a
whole.
"PERSON" shall mean any individual, firm, corporation, partnership, limited
liability company, trust, joint venture, Governmental Authority or other entity,
and shall include any successor (by merger or otherwise) of such entity.
"PRE-CLOSING TAX PERIOD" shall have the meaning set forth in Section 3.2.
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"PURCHASE PRICE" shall have the meaning set forth in Section 1.3.
"SECONDMENT AGREEMENT" shall mean the Secondment Agreement, a copy of which is
attached hereto as Exhibit E.
"SELLER" shall have the meaning set forth in the preamble to this Agreement.
"SETTLEMENT DATE" shall have the meaning set forth in Section 13(b).
"STICC" shall have the meaning set forth in the Preamble to this Agreement.
"STOCKHOLDERS' AGREEMENT" shall mean the Stockholders' Agreement among the
Parties and STICC, a copy of which is attached hereto as Exhibit F.
"SUBCONTRACTED WORK" shall have the meaning set forth in Section 4.1.
"TAXES" shall mean all taxes, imposts, duties, withholdings, charges, fees,
levies, or other assessments imposed by any governmental or taxing authority,
whether domestic or foreign (including but not limited to, income, excise,
property, sales, use, transfer, conveyance. payroll or other employment related
tax, license, ad valorem, value added, withholding, social security, national
insurance (or other similar contributions or payments), franchise, estimated
severance, stamp taxes, taxes based upon or measured by capital stock, net worth
or gross receipts and other taxes), together with all interest, fines, penalties
and additions attributable to or imposed with respect to such amounts and any
obligations under any agreement or arrangements with any Person with respect to
such amounts.
"TAX RETURNS" shall have the meaning set forth in Section 3.2.
"TRADEMARK AGREEMENT" shall mean the Trademark Agreement between the Parties a
copy of which is attached hereto as Exhibit G.
"TRANSFERRED ASSETS" shall mean such items of equipment, office furniture,
contracts, inventory, work in process and other assets as are listed on the
Sub-schedules to Schedule 1.1. to this Agreement.
"TRANSFERRED EMPLOYEES" shall have the meaning set forth in Section 4.2(a).
"TRANSITION SERVICES AGREEMENT" shall mean the Transition Services Agreement, a
copy of which is attached hereto as Exhibit H.
"WARN" shall mean the Worker Adjustment Retraining and Notification Act., as
amended.
ARTICLE I. PURCHASE AND SALE OF ASSETS
1.1 TRANSFERRED ASSETS. Upon the terms and subject to the conditions
hereof, as of the Closing Date, Seller hereby sells, transfers, conveys, assigns
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and delivers to Buyer, and Buyer hereby purchases and accepts from Seller, all
right, title and interest of Seller in and to all of the Transferred Assets.
1.2 EXCLUDED ASSETS. Notwithstanding anything to the contrary in this
Agreement, any assets not set forth on the Sub-schedules to Schedule 1.1. will
be retained by Seller and are excluded from the Transferred Assets. Except with
respect to Section 4.3 below and any intellectual property or interests in
Assumed Contracts, this Agreement does not relate to intellectual property or
interests in intellectual property, such items being the subject of certain
other Operative Agreements.
1.3 CONSIDERATION. In exchange for the sale and purchase contemplated by
the Operative Agreements, Buyer has provided or will provide the following to
Seller (collectively, the 'Purchase Price"):
(i) Upon signing of the Letter Agreement, STICC, on behalf of Buyer,
paid $500,000.00 to Seller (the "Initial Payment") receipt of which is hereby
acknowledged by Seller;
(ii) Buyer has obtained the Letter of Credit, which has been and may be
drawn upon by Seller to pay Operating Expenses, in accordance with Section 4.7;
(iii) On the Closing Date, Buyer will (x) pay to Seller an additional
$1,000,000.00 plus an amount equal to the net book value as of the Closing Date
of the Fixed Assets, which net book value is set forth on Sub-schedules 1.1(a)
and 1.1(b); (y) issue 500 shares of Buyer Common Stock to Seller, and (z) assume
the Assumed Liabilities;
(iv) Subject to Section 1.3(b), below, on the last Business Day of each
month following the Closing Date through the Settlement Date, Buyer will pay to
Seller (collectively, the "Inventory Payments") the net book value as of the
Closing Date (which net book value is set forth on Sub-schedule 1.1(c), of any
items of Connection Center Inventory and Controller Inventory that have been
used or sold by Buyer in the immediately preceding month; and
(v) On (or at Buyer's sole discretion, prior to) October 8, 2000, Buyer will
pay to Seller, $1,500,000.00, plus interest thereon from the Closing Date
through the payment date at a rate equal to the prime rate as reported in the
Wall Street Journal on the Closing Date.
(b) Sub-schedule 1.1(c) sets forth the inventory and work in process,
including the net book value thereof, included in the Transferred Assets and is
categorized as either Connection Center Inventory or Controller Inventory. On a
date which is eighteen (18) months from the Closing Date (the "Settlement
Date"), Buyer shall pay to Seller an amount equal to the net book value of all
Connection Center Inventory and Controller Inventory minus Inventory Payments
previously paid to Seller with respect to Connection Center Inventory and
Controller Inventory.
(c) The amounts referenced in this Section l.3.(c) shall be paid by
electronic funds transfer, in immediately available funds in U.S. dollars, to
the following account:
Account Name: International Business Machines Corporation
Bank: Chase Manhattan Bank
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Account Number IBM Concentration Account
Account #: 323-213499
Reference: Purchase of IBM Home Director Business Unit Assets
ABA Routing Number: 000000000
Bank Contact: Xx. Xxxxx Xxxxx Xxxxx
Xxxxx Manhattan Bank
0 Xxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
1.4 ASSUMED LIABILITIES. Pursuant to the Assumption Agreement,
Seller assigns and transfers to Buyer, and Buyer assumes and shall fully perform
and discharge, on a timely basis and in accordance with their respective terms
the liabilities and obligations of Seller under the Assumed Contracts listed on
Schedule 1.4. (collectively, the "Assumed Liabilities"). Without limiting the
generality of the foregoing Buyer is not assuming or undertaking any obligations
or liabilities of Seller to any assets or contracts which are not included in
the Assumed Liabilities. Other than Assumed Liabilities, Buyer shall not, by
virtue of the Contemplated Transactions or otherwise, assume or become liable
for any liability or obligation of Seller or its Home Director business unit of
any kind or nature whatsoever. Any rights, liabilities and obligations of Seller
to or from any of its Affiliates will not be transferred to Buyer, other than
identified as "Canadian Agreements" as set forth in Schedule 1.4.
(b) The Parties will each use reasonable efforts to obtain written
consents to the transfer and assignment of the Transferred Assets and Assumed
Liabilities to Buyer, and the novation of Seller, where the approval or other
consent of any other Person may be required for these actions. Buyer shall
cooperate with Seller (including, where necessary, entering into appropriate
instruments of assumption as shall be agreed upon) to have Seller released from
all liability to third parties with respect to the Assumed Liabilities, and the
Parties will each solicit such releases concurrently, in a manner acceptable to
both Parties, with the solicitation of consents from third parties to the
transfer, assignment and novation of the Transferred Assets and the Assumed
Liabilities; provided, however that neither Party shall be required to grant any
additional consideration to any third party in order to obtain any such consent,
novation, assumption or release.
ARTICLE II. CLOSING.
2.1 CLOSING DATE. The closing of the transaction provided for in this
Agreement (the "Closing") shall take place at the offices of Xxxxxxxxxxx &
Xxxxxxxx LLP, 1251 Avenue of the Americas, New York, New York on the Closing
Date. All transactions provided for herein to occur on and as of the Closing
Date shall be deemed to have occurred simultaneously and to be effective as soon
as the Parties have completed the Closing or as of the close of business on the
Closing Date, whichever first occurs. Risk of loss with respect to the
Transferred Assets shall pass to Buyer as of 11:59 p.m. on the Closing Date.
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ARTICLE III. TAX MATTERS.
3.1 ALLOCATION OF PURCHASE PRICE. Buyer and Seller hereby agree to
the allocation of the Purchase Price set forth in Schedule 3.1 .(a) (the
"Allocation Statements"), allocating, pursuant to Section 1060 of the Internal
Revenue Code of 1986, as amended, and the Treasury Regulations promulgated
thereunder (the "Code"), the total of the Purchase Price (and other payments
properly treated as additional Purchase Price for Tax purposes) to the different
Transferred Assets.
(b) Buyer and Seller shall each file all income, franchise and other
Tax Returns (as defined below), and execute such other documents as may be
required by any Governmental Authority, in a manner consistent with the
Allocation Statements. Buyer shall prepare the Form 8594 under Section 1060 of
the Code based on the Allocation Statements and deliver such form and all
documentation used in the preparation and support of such form to Seller within
30 days after the Closing Date. Buyer and Seller agree to file such form with
each relevant taxing authority and to refrain from taking any position
inconsistent with such form or the Allocation Statements.
3.2 FILING OF RETURNS AND PAYMENT OF TAXES. Seller shall prepare and
file, or cause to be prepared and filed, with the appropriate authorities all
Tax returns, reports and forms (herein "Tax Returns") and shall pay, or cause to
be paid, when due all Taxes relating to the Transferred Assets and Assumed
Contracts attributable to any taxable period which ends on or prior to the
Closing Date (herein "Pre-Closing Tax Period"). Buyer shall prepare and file, or
cause to be prepared and filed, with the appropriate authorities all Tax
Returns, and shall pay, or cause to be paid, when due all Taxes relating to the
Transferred Assets attributable to taxable periods which are not part of the
Pre-Closing Tax Period. If, in order to properly prepare its Tax Returns or
other documents required to be filed with Governmental Authorities, it is
necessary that a party be furnished with additional information, documents or
records relating to the Transferred Assets, both Seller and Buyer agree to use
reasonable efforts to furnish or make available such non-privileged information
at the recipient's request, cost and expense; provided, however, that no Party
shall be entitled to review or examine the Tax Returns of any other Party.
3.3 REFUNDS AND CREDITS. Any refunds and credits attributable to the
Pre-Closing Tax Period shall be for the account of Seller and any refunds and
credits attributable to any period which is not part of the Pre-Closing Tax
Period shall be for the account of Buyer.
3.4 TRANSFER TAXES. All transfer, documentary, sales, use, registration,
value-added and any other similar Taxes (including real estate conveyance, or
similar Taxes) and related fees incurred in connection with this Agreement and
the other Operative Agreements and the transactions contemplated hereby and
thereby shall be borne by Buyer, in addition to the consideration provided for
in Section 1.3. To the extent legally able to do so, Buyer and Seller shall
cooperate with each other to obtain exemptions from such taxes, provided that
neither Party shall be obligated to seek any exemption that would require any
governmental audit of its books and records.
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ARTICLE IV. ADDITIONAL COVENANTS AND AGREEMENTS.
4.1 CONSENTS, NOVATIONS AND SUBCONTRACTED WORK. Buyer and Seller shall
use reasonable efforts to obtain all requisite consents to assignments and
novations, as the case may be, of all of the Transferred Assets and the Assumed
Liabilities. For any Assumed Liabilities for which Seller has any secondary
liability to third parties, Buyer shall provide Seller reasonable access and
information in order for Seller to ascertain continuing compliance by Buyer with
all contract terms and conditions applicable thereto. If any such required
consents to assignment and novation have not been secured prior to Closing, the
Parties shall cooperate to establish an arrangement reasonably satisfactory to
both Buyer and Seller under which Buyer would obtain, to the extent practicable,
the claims, rights and benefits of Seller and would assume the corresponding
liabilities and obligations thereunder (but only to the extent Buyer receives
the benefit of the claims, rights and benefits thereunder) in accordance with
the intent of this Agreement (including by means of a subcontracting,
sublicensing or subleasing arrangement), or under which Seller would enforce for
the benefit of Buyer, and any and all claims, rights and benefits of Seller
against a third party thereto (the "Subcontracted Work") with Buyer assuming and
agreeing to pay Seller's obligations to the extent Buyer receives the benefit of
such claims, rights, and benefits; and until the requisite consents and
novations are obtained, such obligations would not be deemed to be included in
the Transferred Assets and Assumed Liabilities. Buyer shall diligently perform
and discharge the obligations of Seller in connection with the Subcontracted
Work. Buyer and Seller agree that such obligations will not be considered to be
Subcontracted Work after consents to assignment and novation are obtained, but
will instead be deemed to be Assumed Liabilities for all purposes of this
Agreement. In no event shall Seller or Buyer be obligated to pay any money or
grant any financial accommodations to any Governmental Authority or any other
Person in connection with obtaining any consent, waiver, confirmation, or
novation or approval with respect to the Transferred Assets and Assumed
Liabilities. Notwithstanding anything to the contrary in this Agreement, this
Agreement shall not constitute an agreement to assign any Transferred Asset or
Assumed Liability or any claim, right or benefit or liability or obligation
arising thereunder or resulting therefrom if an attempted assignment thereof,
without the consent of a third party thereto, would constitute a breach or other
contravention thereof, would be ineffective with respect to any party thereto or
would in any way adversely affect the rights of Buyer or Seller thereunder.
4.2 EMPLOYEES AND EMPLOYEE BENEFITS. Schedule 4.2.(a)(1) contains a list
of the regular employees employed by Seller or its Affiliates as of the date
hereof in connection with the Transferred Assets (including active employees and
employees who are on leave of absence, or those receiving benefits under
Seller's or its Affiliates' Sickness and Accident Income Plan), and Schedule
4.2.(a)(2) contains a list of the supplemental employees temporarily employed by
Seller or its Affiliates as of the date hereof in connection with the
Transferred Assets (collectively, the "Employees"). Buyer shall make employment
offers to the Employees effective as of January 1, 2000. The Employees who begin
their employment with Buyer (collectively referred to herein as the "Transferred
Employees") shall be employed by Buyer in accordance with, among others, the
terms and conditions set forth below.
(b) Effective January 1, 2000, Buyer agrees that it will employ the
Transferred Employees in the same positions and at the same salaries and shall
provide the Transferred Employees with benefits generally comparable to those
9
provided by similarly-sized companies, as more fully set forth in Schedule
4.2(b). Such benefits shall include a stock option plan and a 401(k) plan with
Buyer matching contributions to commence at such time as Buyer becomes
profitable. Buyer has summarized its planned employment terms and benefit plans
for the Transferred Employees in Schedule 4.2.(b). Buyer shall implement the
following severance pay practice for the Transferred Employees, which practice
shall only apply to the Transferred Employees and which obligation to maintain
such practice shall terminate on the first anniversary of the Closing Date: if a
Transferred Employee is involuntarily severed from full-time employment with
Buyer without cause during the one-year period following the Closing Date, such
Transferred Employee shall receive one (1) week of severance pay for each six
(6) months of service fully or partially completed with Buyer and Seller (in the
aggregate), with a minimum of eight (8) weeks and a maximum of twenty-six (26)
weeks. Each week of severance pay will be an amount equal to one week of such
Transferred Employee's total cash employment compensation from Buyer for full-
time employment. For one year from the Closing Date, Buyer agrees that it will
not change this severance pay practice as applied to the Transferred Employees.
Nothing contained in this Section 4.2. shall be construed to in any way limit or
prevent Buyer from terminating any Transferred Employee at any time for any
reason or give rise to an obligation by Buyer to pay severance pay to any
Transferred Employee involuntarily severed from full-time employment with Buyer
during such one-year period for cause or after such one-year period expires.
(c) As more fully set forth in the Secondment Agreement, for the period from
the Closing Date through and including December 31, 1999, Seller shall be
responsible for payment of all compensation and employee benefits to the
Employees, and Buyer shall promptly reimburse Seller for all such amounts paid
as compensation and for the costs of the benefits and services provided. As of
January 1, 2000, and thereafter, Buyer shall be responsible for all liabilities,
salaries, benefits and similar employer obligations of Buyer (including the
administration thereof) for all Transferred Employees. Upon separation from
Seller or its Affiliates, Transferred Employees shall be paid by Seller or its
Affiliates for vacation accrued, plus previously deferred vacation, less
vacation taken, plus accrued variable pay; provided, however that such accrued
variable pay shall be paid to such Transferred Employee at the same time as such
payments are made to Seller's or its Affiliates' employees and such vacation
payments shall be made no later than 30 days after expiration of the Secondment
Agreement.
(d) Buyer shall be responsible for liabilities with respect to the
termination of any Transferred Employees by Buyer after December 31, 1999,
including without limitation, health care continuation coverage with respect to
plans established or maintained by Buyer after the Closing, and damages or
settlements arising out of any claims of wrongful or illegal termination, and
for complying with the requirements of all Applicable Laws with respect to any
such termination.
(e) Seller will provide any notices, if applicable, relating to WARN, with
respect to events that occur in connection with the Contemplated Transactions.
(f) Seller will be responsible for all liabilities and obligations
pertaining to the employment or termination of employment of all Employees
(including Transferred Employees) accruing prior to January 1, 2000 (provided,
with respect to the time period between Closing and January 1, 2000, the
Employees are employed by Seller pursuant to the Secondment Agreement).
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4.3 SHRINK-WRAP SOFTWARE, WINDOWS 95 AND SAVOY AGREEMENT. Seller hereby
transfers, to the extent it has the legal right to do so and subject to the
applicable license agreements with the licensors, its royalty-free usage rights
to the shrink-wrap personal computer software (also known as conditions-of-use
software) being used in its ordinary course of business as of the Closing Date
on the personal computers that are Transferred Assets. If such software
copyrights are owned by Seller, Seller's license terms and conditions continue
to apply. In addition, Buyer is authorized to sell or otherwise distribute the
Controller Inventory together with the Microsoft Windows 95 Operating System
(WIN95), its associated Certificate of Authenticity (COA) and end user license
agreement (XXXX) to the extent preloaded or included with the Controller
Inventory. However, Buyer may not sell or otherwise distribute WIN95, the COA or
XXXX separately from the Controller Inventory. Further, WIN95, the COA and the
XXXX may not be modified other than for normal service or support or removed
(unless all such items are removed) prior to sale or distribution of units in
the Controller Inventory to the end user.
Further, until such xxxx Xxxxxx completes the assignment of License Agreement
number 4997RL2159-001/PCC970620 between Savoy Automation, Inc. and Seller,
effective August 26, 1997, as amended (the "Savoy Agreement") to Buyer, Seller
grants to Buyer, with respect to Object Code only of the Program and Derivative
Works thereof prepared by Seller (as such terms are defined in the Savoy
Agreement), a worldwide, irrevocable, nonexclusive, right and sublicense: (a) to
use, execute, preload, reproduce, copy, distribute, copies of (internally or
externally), prepare Derivative Works, display and perform all, or any portion
of the Program or said Derivative Works, and such rights and licenses shall
include all rights and licenses in and to pictorial, graphic or audio/visual
works, including icons, screens, music, sound and characters, created as a
result of execution of the Program whether such pictorial, graphic or
audio/visual works are created by use of the Program or with other programming
or through other means (b) under any trade secret patent application or patent
owned or licensable by Savoy to make, have made, use, have used, lease, or
otherwise license or sublicense each Program either alone or in combination with
equipment or software or both; (c) to use, in connection with the marketing of
the Program, the Program name(s), trade names and trademark(s) used by Savoy to
identify the Programs including any portions thereof; and (d) to sublicense all
or any portions of the Program to end users and others under similar provisions
used by Seller to sublicense Seller programming products, or at Buyer's sole
discretion, under provisions provided by Savoy to license or similarly transfer
Programs. In connection with such sublicense, Buyer shall comply with, and do
all things necessary for IBM to comply with, the Savoy Agreement. If Seller is
unable to complete an assignment of the Savoy Agreement to Buyer by December 31,
1999, Seller and Buyer agree to: (1) extend the Secondment Agreement, in
accordance with its terms, to maintain as seconded employees for the term of the
Savoy Agreement those Employees needed to create Derivative Works of the Program
reasonably requested by Buyer, or (ii) take such other actions as the Parties
mutually agree.
4.4 FURTHER ACTION. Each of Seller, Buyer and STICC agrees to ex and
deliver such other documents, certificates, agreements and other writings and to
take such other actions as may be necessary or desirable, in the reasonable
opinion of each Party's or STICC's counsel, in order to consummate or implement
expeditiously the Contemplated Transactions and the terms of the Operative
Agreements.
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4.5 UNDERTAKING. STICC hereby agrees to be responsible to Seller for the
prompt payment when due of Buyer's obligations under Section 1 .3(a)(v), and
STICC shall take the necessary steps to assure that Buyer performs its
Obligations to Seller under this Agreement.
4.6 NONSOLICITATION. Seller agrees that, for a period of one year from the
Closing Date, it will not, directly or indirectly, solicit for employment and
for a period of six months following the Closing Date, it will not hire (without
Buyer's prior written consent) any Transferred Employee (so long as such person
is employed by Buyer); provided, however that solicitation shall not include
general employment advertising or the use of any independent employment agency
or search firm not specifically directed to employees of Buyer and provided,
further that it shall not be a breach of this Section 4.6 if Seller
inadvertently hires any Transferred Employee.
Buyer agrees that, for a period of one (1) year from the Closing Date, it
will not, directly or indirectly, solicit for employment any employee of Seller
(or any of its Affiliates) employed in Raleigh, North Carolina or with whom
Buyer had contact in connection with this transaction (so long as such person is
employed by Seller); provided, however, that solicitation shall not include
general employment advertising or the use of any independent employment agency
or search firm not specifically directed to employees of Seller or any of its
Affiliates.
4.7 ESTABLISHMENT OF LETTER OF CREDIT FACILITY. Prior to the execution
and delivery of this Agreement, Buyer has established and caused to be delivered
to Seller an irrevocable letter of credit ("Letter of Credit") issued by United
States Trust Corporation and under which Seller is the beneficiary, in the
aggregate principal or stated amount of $2,000,000.00. Seller is entitled to
draw upon the Letter of Credit until January 31, 2000 as needed to pay any
Operating Expenses incurred from October 8, 1999 to the Closing Date.
Notwithstanding the foregoing, under no circumstances shall Seller be entitled
to draw on the Letter of Credit after receipt from Buyer of written notification
alleging that Seller is in breach of any obligations or representations under
the Agreement; provided, however, that Seller shall be entitled to draw on the
Letter of Credit after receipt of such notification to pay Operating Expenses
accrued through the date of such notification.
4.8 ACCESS TO INFORMATION; COOPERATION AFTER CLOSING. Except as may be
deemed appropriate to ensure compliance with respect to any Applicable Laws
(including, without limitation, any antitrust regulations) and subject to any
confidentiality obligations or applicable privileges (including, without
limitation, the attorney-client and work-product privileges), for a period of
two (2) years after the Closing Date, each Party shall use its good faith
reasonable efforts to provide the other Party and its representatives at the
other Party's expense. information reasonably requested by the other Party
relating to the Transferred Assets or Assumed Liabilities to the extent required
by the other Party to permit the other Party to determine any matter relating to
its rights and obligations under the Operative Agreements and its compliance
with applicable Tax and financial reporting requirements. Any requests pursuant
to this Section 4.8 shall be at the expense of the requesting Party.
4.9 INSURANCE; CASUALTY LOSS. Buyer agrees that, and for a period of two (2)
years after the Closing Date, it will maintain at its sole expense, with
financially sound and reputable insurance companies: (i) insurance on its
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properties; (ii) public liability insurance against claims for personal injury
or death as a result of the use of any products sold by it; and (iii) insurance
coverage against other business risks, in each case, in at least such amounts
and against at least such risks as are usually and prudently insured against in
the same general geographical area by companies of established repute engaged in
the same or a similar business, but in no event less than Five Million Dollars
($5,000,000.00). Buyer will furnish to Seller, upon its written request, the
insurance certificates with respect to such insurance. In addition, with respect
to matters for which indemnification is provided by Buyer under Article VII, all
such policies of insurance so maintained are to name Seller as an additional
insured as its interest may appear.
4.10 WARRANTY WORK. Buyer shall, at Seller's request, perform repair
services on products sold by Seller prior to the Closing Date (to the extent
Seller would be required to provide such repair services). To the extent that,
after the Closing Date, Buyer performs any such repair services on products sold
by Seller prior to the Closing Date, which services are the subject of any
warranty extended by Seller, Seller shall reimburse Buyer for such services
performed at Buyer's then-established standard rates for time and materials,
provided, however that in the event such cost to repair such products at Buyer's
standard rates exceeds Buyer's then- established standard price of such product,
Buyer shall replace such product and Seller shall reimburse Buyer for the
standard price of such replacement product.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer hereby represents and warrants to Seller as follows:
5.1 INCORPORATION. Buyer is a duly incorporated and validly existing
corporation in good standing under the laws of the State of Delaware, with all
requisite corporate power and authority to own its properties and conduct its
business.
5.2 AUTHORITY. Buyer has the requisite corporate power and authority to
execute and deliver each of the Operative Agreements and the Confidentiality
Agreement and to perform its obligations under each of the foregoing. Each of
the Operative Agreements and the Confidentiality Agreement has been duly and
validly authorized, executed and delivered, by Buyer and constitutes the valid
and binding agreement of Buyer in accordance with its respective terms except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting creditor's rights generally, including the effect of
statutory and other laws regarding fraudulent conveyance and preferential
transfers. No other corporate proceedings on the part of Buyer are necessary to
authorize the Operative Agreements, the Confidentiality Agreement and the
Contemplated Transactions.
5.3 NO CONFLICT. The execution and delivery by Buyer of each of the
Operative Agreements and the Confidentiality Agreement does not, and the
performance of its obligations thereunder, will not:
(a) conflict with, or result in a breach of, any of the provisions of
its Articles of Incorporation or By-laws;
13
(b) breach, violate or contravene any Applicable Law, or create any right of
termination or acceleration or encumbrance, that, in the aggregate, would have a
material adverse effect on its authority or ability to perform its obligations
under the Operative Agreements, the Confidentiality Agreement or the Assumed
Liabilities; and
(c) conflict in any respect with, or result in a breach of or default under,
any contract, license, franchise, permit or any other agreement or instrument to
which it is a party or by which it or any of its properties may be affected or
bound that, singly or in the aggregate, would have a material adverse effect on
its authority or ability to perform its obligations under the Operative
Agreements, the Confidentiality Agreement or the Assumed Liabilities.
5.4 GOVERNMENTAL CONSENTS. No material consent, approval or
authorization of, or designation, declaration or filing with, any Governmental
Authority on the part of Buyer is required in connection with the execution or
delivery by Buyer of the Operative Agreements, the Confidentiality Agreement or
the consummation by Buyer of the Contemplated Transactions.
5.5 NO BROKER. Buyer has engaged no corporation, firm or other Person who is
entitled to any fee or commission as a finder or a broker in connection with the
negotiation of the Operative Agreements, the Confidentiality Agreement or the
consummation of the Contemplated Transactions, and Buyer shall be responsible
for all liabilities and claims (including costs and expenses of defending
against same) arising in connection with any claim by a finder or broker that it
acted on behalf of Buyer in connection with the Contemplated Transactions.
5.6 INSURANCE; CASUALTY LOSS. Buyer is in compliance with its obligations
pursuant to Section 4.9.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth on the Disclosure Schedule delivered by Seller to
Buyer, Seller hereby represents and warrants to Buyer as follows:
6.1 INCORPORATION. Seller is a duly incorporated and validly existing
corporation in good standing under the laws of the State of New York, with all
requisite corporate power and authority to own its properties and conduct its
business, and is duly qualified in each jurisdiction in which its ownership of
property requires such qualification except where the failure to so qualify
would not have a material adverse effect upon the Transferred Assets or Assumed
Contracts.
6.2 AUTHORITY. Seller has the requisite Corporate power and authority to
execute and deliver the Operative Agreements and the Confidentiality Agreement
and to perform its obligations under each of the foregoing. Each of the
Operative Agreements and the Confidentiality Agreement has been duly and validly
authorized, executed and delivered by Seller and constitutes the valid and
binding agreement of Seller in accordance with its respective terms except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting creditor's rights generally, including the effect of
statutory and other laws regarding fraudulent conveyance and preferential
transfers. No other corporate proceedings on the part of Seller are necessary to
14
authorize the Operative Agreements, the Confidentiality Agreement and the
Contemplated Transactions.
6.3 NO CONFLICT. The execution and delivery by Seller of each of the
Operative Agreements and the Confidentiality Agreement does not, and the
performance by Seller of its obligations thereunder will not:
(a) conflict with, or result in a breach of, any of the provisions of
its Articles of Incorporation or By-laws;
(b) breach, violate or contravene any Applicable Law, or create any right of
termination or acceleration or encumbrance, that, in the aggregate, would have a
material adverse effect on its authority or ability to perform its obligations
under the Operative Agreements or the Confidentiality Agreement;
(c) conflict in any respect with, or result in a breach of or default under,
any contract, license, franchise, permit or any other agreement or instrument to
which it is a party or by which it or any of the Transferred Assets or Assumed
Contracts may be bound that, singly or in the aggregate, would have a material
adverse effect on the Transferred Assets or Assumed Contracts or its authority
or ability to perform its obligations under the Operative Agreements, the
Confidentiality Agreement or the Assumed Liabilities (except for Assumed
Contracts that require the consent or approval of a third party as a
prerequisite to transfer of such Assumed Contracts to Buyer); and
(d) result in the creation or imposition of any Lien, other than a Permitted
Lien, on any Transferred Assets or Assumed Contracts.
6.4 GOVERNMENTAL CONSENTS. No material consent, approval or
authorization of, or designation, declaration or filing with, any Governmental
Authority on the part of Seller is required in connection with the execution or
delivery by Seller of the Operative Agreements and the Confidentiality Agreement
or the consummation by Seller of the transactions contemplated by any of the
foregoing.
6.5 NO BROKER. Seller has engaged no corporation. firm or other Person who
is entitled to any fee or commission as a finder or a broker in connection with
the negotiation of the Operative Agreements, the Confidentiality Agreement or
the consummation of the Contemplated Transactions, and Seller shall be
responsible for all liabilities and claims (including costs and expenses of
defending against same) arising in connection with any claim by a finder or
broker that it acted on behalf of Seller in connection with the transactions
contemplated thereby.
6.6 TITLE TO PERSONAL PROPERTY. Seller has good and marketable title to all
Transferred Assets listed on Schedule 1.1. hereto, free and clear of any Liens
other than Permitted Liens. There are no Liens, other than Permitted Liens, on
the Assumed Contracts.
6.7 LITIGATION. There are no actions, suits, proceedings or investigations
pending or, to the knowledge of Seller's PSG general attorney, or Seller's
Raleigh site general attorneys or Intellectual Property Law attorneys primarily
responsible for providing legal advice to the Home Director business unit,
15
threatened in a writing to Seller against or directly affecting Seller's Home
Director business unit, at law or in equity, including an administrative
proceedings or condemnation actions with any Governmental Authority. There is no
existing default by Seller with respect to any judgment, order, writ, injunction
or decree of any Governmental Authority or arbitrator which materially adversely
affects the Transferred Assets or Assumed Contracts.
6.8 NO RIGHTS IN OTHERS TO TRANSFERRED ASSETS. Neither Seller nor any
Affiliate of Seller is party to any outstanding contracts or other arrangements
giving any Person any present or future right to require Seller to transfer to
any Person any ownership or possessory interest in, or to grant any Lien, other
than a Permitted Lien, on, any of the Transferred Assets or Assumed Contracts,
other than pursuant to this Agreement.
6.9 LICENSES AND PERMITS. Seller has licenses and permits and other
governmental authorizations and approvals required for Seller's use or operation
of the Transferred Assets or performance the Assumed Contracts, except where the
failure to have such licenses and permits would not have a material adverse
effect On Seller's ability to use or operate the Transferred Assets or perform
the Assumed Contracts. All licenses and permits held by Seller which are
material to the use or operation of the Transferred Assets or performance of
Assumed Contracts are valid and in full force and effect and there are not
pending or, to the knowledge of Seller, threatened in a writing to Seller, any
proceedings which could result in the termination or impairment of any such
license or permit which termination or impairment would materially interfere
with the use or operation of the Transferred Assets or performance of Assumed
Contracts as presently used, operated or performed, as applicable, by Seller.
Buyer must seek a regulatory or other permitted transfer of, or obtain through
separate application for itself, any applicable licenses and permits, including
environmental licenses and permits, which are required for Buyer's operation or
ownership of the Transferred Assets or performance of Assumed Contracts.
6.10 EMPLOYEES. Seller is not bound by any collective bargaining agreement
covering any Employee. No representation petition has been filed with the
National Labor Relations Board with respect to Employees. There is not any, and
during the past 12 months there has not been any. labor strike, work stoppage or
lockout with respect to the Employees.
6.11 ASSUMED CONTRACTS. Each Assumed Contract is a legal, valid and binding
obligation of Seller and, to the knowledge of Seller, of each other party
thereto, enforceable by Seller in accordance with its terms (except for such
failure to be valid and binding or enforceable that, individually or in the
aggregate, is not reasonably likely to have a material adverse effect on the
Transferred Assets or Assumed Contracts). Seller has performed or is performing
all material obligations required to be performed by it under the Assumed
Contracts and is not (with or without notice, lapse of time or both) in breach
or default in any material respect thereunder, and, to the knowledge of Seller,
no other party to any of such contracts is (with or without notice, lapse of
time or both) in breach or default in any material respect thereunder.
6.12 COMPLIANCE WITH LAWS. The operation of and use of the Transferred
Assets and performance of Assumed Contracts do not materially violate or
infringe any material Applicable Law.
16
6.13 OPERATION OF TRANSFERRED ASSETS AND ASSUMED LIABILITIES. Seller has, in
the United States only, operated its business relating to the Transferred Assets
and Assumed Liabilities only through Seller, and not through any Affiliate
except Lotus Development Corporation.
6.14 SCHEDULE PREPARATION. Seller is responsible for the preparation of the
content of the Schedules other than Schedules 1.1(d), 3.1(a) and 4.2(b);
provided, however this provision shall not be interpreted to mean that such
Schedules 1.1(a) - (c) or 1.4 are a complete listing of all Home Director
business unit assets, contracts and liabilities prior to Closing and the terms
of this Agreement only apply to the content of such Schedules.
6.15 YEAR 2000. The Controller Inventory and the Connection Center Inventory
are in compliance with the representations made by Seller regarding such items
on Seller's Web site, which representations are set forth on Schedule 6.15.
6.16 WARRANTIES. EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES MADE
BY SELLER IN THIS ARTICLE VI, SELLER MAKES NO REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, CONCERNING THE TRANSFERRED ASSETS AND ASSUMED LIABILITIES,
IT BEING SPECIFICALLY UNDERSTOOD BY BUYER THAT, EXCEPT FOR THE EXPRESS
WARRANTIES SET FORTH IN THIS ARTICLE VI THE TRANSFERRED ASSETS AND ASSUMED
LIABILITIES ARE BEING SOLD AND TRANSFERRED "AS IS" IN ALL RESPECTS. SELLER
SPECIFICALLY DISCLAIMS ANY WARRANTY OF MERCHANTABILITY OR SUITABILITY OR FITNESS
FOR ANY PARTICULAR PURPOSE OF BUYER'S, WHETHER OR NOT SELLER HAS BEEN MADE AWARE
OF ANY SUCH PURPOSE.
ARTICLE VII. INDEMNITY.
7.1 BUYER INDEMNIFICATION. Subject to the limitations set forth in
Sections 7.6. and 8.2. below, Buyer hereby agrees to indemnify and hold harmless
Seller, its officers, directors, employees, owners, agents and Affiliates, for,
against, from and in respect of any and all Losses which may be sustained or
suffered by any of them arising out of, resulting from or pertaining to: (i) any
breach of any representation, warranty, covenant or agreement of Buyer contained
in any Operative Agreement; (ii) any liabilities or obligations accruing or
required to be performed after the Closing Date in Connection with or relating
to the Assumed Liabilities or the Transferred Assets; (iii) any products
manufactured, shipped, sold or installed by Buyer (or any agent of, or third
party under contract with, Buyer) after the Closing Date, and any act or
omission by Buyer (or any agent of, or any third party under contract with,
Buyer) or any installer or integrator with respect to such products after the
Closing Date; and/or (iv) operation of a business by Buyer after the Closing
Date except as specified in the Operative Agreements or as otherwise agreed to
in separate written agreements between the Parties or in connection with
Seller's equity interest in Buyer.
7.2 SELLER INDEMNIFICATION. Subject to the limitations set forth in Sections
7.6 and 8.2 below, Seller hereby agrees to indemnify and hold harmless Buyer,
its officers, directors, employees, owners, agents and Affiliates, for, against,
from and in respect of any and all Losses which may be sustained or suffered by
17
any of them arising out of, resulting from or pertaining to: (i) any breach of
any representation, warranty, covenant or agreement of Seller contained in any
Operative Agreement; (ii) any liabilities or obligations accruing or required to
have been performed by Seller on or prior to the Closing Date in connection with
or relating to the Assumed Liabilities or Transferred Assets; (iii) any products
shipped, sold or installed by Seller (or any agent of, or third party under
contract with, Seller) on or prior to the Closing Date, and any act or omission
by Seller (or any agent of, or any third party under contract with, Seller) or
any installer or integrator with respect to such products on or prior to Closing
Date; and/or (iv) operation of the Home Director business unit by Seller on or
prior to the Closing Date except as specified in the Operative Agreements or as
otherwise agreed to in separate agreements between the Parties.
7.3 PROCEDURES. Buyer pursuant to Section 7.2. and Seller pursuant to
Section 7.1. (the "Indemnified Party") each agrees to give prompt notice to the
other Party (the "Indemnifying Party") of the assertion of any claim, or the
commencement of any suit, action or proceeding in respect of which indemnity may
be sought under this Article VII, including the amount and other details of such
claim. The Indemnifying Party may participate in the defense of, and, if it so
chooses, assume and control the defense of, any such suit, action or proceeding
at its own expense; provided, however, that the Indemnifying Party shall assume
and control the defense unless it notifies the Indemnified Party in writing of
its intent not to do so within 20 days after its receipt from the Indemnified
Party of notice of such claim or action. If the Indemnifying Party assumes such
defense, then the Indemnifying Party shall not be liable to the Indemnified
Party for any legal expenses subsequently incurred by the Indemnified Party in
connection with such defense. The Indemnified Party may, at its own expense,
monitor and participate in the defense but not control the defense unless the
Indemnifying Party notifies the Indemnified Party in writing of its intent not
to assume the control of the defense within 20 days after its receipt from the
Indemnified Party of notice of such claim or action. The Indemnified Party
undertakes to faithfully and fully cooperate with the Indemnifying Party in all
respects required for the best resolution or defense against any such claim,
suit, action or proceeding. For as long as the Indemnifying Party conducts the
defense of any such claim; suit, action or proceeding, the Indemnified Party
shall take no actions in relation to such claim, suit, action or proceeding,
without the prior consent of the Indemnifying Party. The Indemnifying Party
shall not be liable under Section 7.1. or Section 7.2. respectively, for any
settlement effected without its consent of any claim, suit, action or proceeding
in respect of which indemnity may be sought thereunder (which consent will not
be unreasonably withheld). The Indemnifying Party shall be authorized to consent
to a settlement of, or the entry of any judgment arising from, any claim of
which the Indemnifying Party has assumed the defense, without the prior consent
of the Indemnified Party, provided, however that a condition to any such
settlement shall be a complete release from any responsibility or liability of
the Indemnified Party and its Affiliates with respect to such claim which does
not impose any actual or potential liability upon the Indemnified Party.
7.4 INDEMNITY PRECLUSION. Buyer and Seller shall be precluded from seeking
indemnification from each other, and Buyer and Seller shall not be liable to
each other pursuant to the Operative Agreements, for any breach of
representations and warranties which either Xxxxxxx X. Xxxxxxxx, Xx. or Xxxxxxx
X. Xxxxx, respectively, had actual knowledge of prior to the Closing Date. In
addition, Buyer shall be precluded from seeking indemnification from Seller, and
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Seller shall not be liable to Buyer pursuant to the Operative Agreements, for
breaches of representations and warranties by Seller which Xxxx X. Xxxxxx and
Xxx Xxxxxxx had actual knowledge of prior to the Closing Date and knowingly
withheld from Xxxxxxx X. Xxxxxxxx, Xx. Further, Seller shall be precluded from
seeking indemnification from Buyer, and Buyer shall not be liable to Seller
pursuant to the Operative Agreements, for breaches of representations and
warranties by Buyer which Xxxx X. Xxxxxx and Xxx Xxxxxxx had actual knowledge of
prior to the Closing Date and knowingly withheld from Xxxxxxx X. Xxxxx.
7.5 INDEMNITY IS THE EXCLUSIVE REMEDY. Buyer and Seller each acknowledge and
agrees that its sole and exclusive remedy with respect to any and all claims for
any Loss relating to or arising out of a breach of a representation or warranty
by the Indemnifying Party of this Agreement, shall be pursuant to the
indemnification provisions set forth in this Article VII.
7.6 EXCLUSION OF CERTAIN DAMAGES. EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
IN AN OPERATIVE AGREEMENT, NEITHER SELLER NOR BUYER SHALL BE RESPONSIBLE FOR ANY
INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES WHATSOEVER,
INCLUDING LOSS OF PROFITS OR GOODWILL IN CONNECTION WITH ANY BREACH OF ANY
REPRESENTATION OR WARRANTY SET FORTH IN ANY OPERATIVE AGREEMENT.
ARTICLE VIII. GENERAL MATTERS.
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as may be
specifically provided in an Operative Agreement. all representations and
warranties made by the Parties in the Operative Agreements or in any schedule,
document, certificate or other instrument delivered by or on behalf of the
Parties pursuant to such agreements shall survive the Closing for a period of
twelve (12) months after the Closing Date; provided, however, that the
representations and warranties in respect of Taxes shall survive the Closing
Date until the applicable period of limitation on assessment or refund of any
relevant Tax has expired.
8.2 LIMITATION OF LIABILITY. Notwithstanding anything to the contrary set
forth in the Operative Agreements, unless this section is specifically excluded
from application to a specific Operative Agreement, neither Buyer nor Seller
shall be liable for any amounts with respect to the breach of a representation
and warranty unless and until such amounts shall exceed in the aggregate fifty
thousand ($50,000) dollars (the "Limitation Amount") (in which case such Party
shall only be liable with respect to the excess over the Limitation Amount).
There shall be no Buyer or Seller liability with respect to any such matter for
individual amounts of less than two thousand five hundred ($2,500) dollars and
such amounts shall not be taken into account in determining whether the
Limitation Amount has been exceeded, provided, however that individual claims
arising out of the same occurrence shall be aggregated for purposes of the
limitation set forth in this sentence. In no event shall Buyer's liability or
Seller's liability (other than with respect to Losses to the extent arising from
a breach of the representation and warranty in Section 6.6.) with respect to the
breach of representations and warranties in the Operative Agreements exceed one
million ($1,000,000) dollars in the aggregate. The limitations in this Section
do not apply to Losses by either Party resulting from fraud by the other Party.
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8.3 PUBLIC ANNOUNCEMENTS. The Confidentiality Agreement shall apply to, and
the Operative Agreements and the proposed transaction is subject to and
confidential under, the Confidentiality Agreement. For six (6) months after the
Closing Date, all public announcements relating to this Agreement or the
Contemplated Transactions shall be made only after consultation between the
Parties, except for disclosures by either Party that in the opinion of counsel
for such Party are required by Applicable Law. Any disclosures to customers in
connection with commercial relationships shall not reveal the Purchase Price
(other than the amount of equity participation) provided for by this Agreement.
Notwithstanding the foregoing, either Party shall have the right, in its sole
discretion, to make such disclosures as it may deem necessary or advisable to
any Governmental Authority. In the event of a breach or anticipatory breach of
this Section 8.3. by either Party, the other Party shall be entitled, in
addition to any and all other remedies available at law or in equity, to seek
preliminary and permanent injunctive relief and specific performance without
proving damages.
8.4 DUE DILIGENCE. Buyer and STICC have engaged in the entire due diligence
effort they deemed appropriate prior to executing this Agreement. The sale of
the Transferred Assets and acceptance of Assumed Liabilities is based solely
upon the results of that due diligence and there has been no reliance upon the
representations or statements of Seller, other than the representations and
warranties of Seller set forth in Article VI or in any other Operative
Agreement.
8.5 COSTS. Each Party and STICC shall be responsible for the costs and
expenses incurred by it in the negotiation, execution and delivery of the
Operative Agreements and, except as otherwise provided elsewhere in such
agreements, the consummation of the Contemplated Transactions.
8.6 BULK SALES. Buyer hereby waives compliance with any applicable bulk
sales or similar laws by Seller.
8.7 MODIFICATION AND WAIVER. No modification or waiver of any provision of
this Agreement and no consent by either Party to any departure therefrom shall
be effective unless in a writing referencing the particular section of this
Agreement to be modified or waived and signed by a duly authorized signatory of
each Party, and the same will only then be effective for the period and on the
conditions and for the specific instances and purposes specified in such
writing.
8.8 GOVERNING LAW. This Agreement has been delivered at and shall be deemed
to have been made at Armonk, New York, and shall be interpreted, and the rights
and liabilities of the parties hereto determined, in accordance with the laws of
the State of New York applicable to agreements executed, delivered and performed
within such State, without regard to the principles of conflicts of laws
thereof. As part of the consideration for value this day received, each of the
Parties and STICC hereby consent to the exclusive jurisdiction of any New York
State court located within the County of Westchester and any federal court of
the United States of America located in the Southern District of New York. EACH
OF THE PARTIES AND STICC HEREBY: (I) WAIVES TRIAL BY JURY; (II) WAIVES ANY
OBJECTION TO NEW YORK VENUE OF ANY ACTION INSTITUTED HEREUNDER; AND (III)
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CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY ANY AFOREMENTIONED COURT.
8.9 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given and shall be effective (a)
when delivered by messenger or courier, or (b) five days after deposit for
mailing by registered or certified mail, postage prepaid, return receipt
requested, when also transmitted by telecopy as follows:
(a) if to Seller, to:
International Business Machines Corporation
Xxx Xxxxxxx Xxxx
Xxxxxx, Xxx Xxxx 00000
Attention: Xxx X. Xxxxxx
Vice President, Corporate Development and Real Estate
Telecopy: (000) 000-0000
with a copy to:
International Business Machines Corporation
Xxx Xxxxxxx Xxxx
Xxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Associate General Counsel
Telecopy: (000) 000-0000
(b) if to Buyer, to:
Home Director, Inc.
000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Chief Executive Officer
with a copy to:
Xxxxxxx Xxxxx Intellectual Capital Company LLC
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Xx.
Telecopy: (000) 000-0000
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Xxxxxxxxxxx & Xxxxxxxx LLP
1251 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telecopy: (000)000-0000
Xxxxxxxxxxx & Xxxxxxxx LLP
Xxxxx X. Xxxxxx Building
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxx, Esq.
Telecopy: (000) 000-0000
(c) if to STICC, to:
Xxxxxxx Xxxxx Intellectual Capital Company LLC
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx. Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Xx.
Telecopy: (000) 000-0000
Xxxxxxxxxxx & Xxxxxxxx LLP
1251 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx. Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telecopy: (000) 000-0000
Xxxxxxxxxxx & Xxxxxxxx LLP
Xxxxx X. Xxxxxx Building
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxx, Esq.
Telecopy: (000) 000-0000
or to such other address as either of Buyer, Seller or STICC shall hereafter
designate to the other from time to time by similar written notice.
8.10 ASSIGNMENT. This Agreement shall be binding upon, and inure to the
benefit of, and be enforceable by, the successors and assigns of the Parties;
provided that, neither Party may assign its rights hereunder without the written
consent of the other Party, which consent shall not be unreasonably withheld.
8.11 COUNTERPARTS. This Agreement may be executed by the Parties and STICC
in one or more counterparts, each of which shall be an original and all of which
shall constitute one and the same instrument.
8.12 ENTIRE AGREEMENT. This Agreement, together with the Assumption
Agreement, the Xxxx of Sale, the Intellectual Property Agreement, the Trademark
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Agreement, the Secondment Agreement, the Stockholders' Agreement, the Transition
Services Agreement, and the Confidentiality Agreement, comprise the entire
agreement among Buyer, Seller and STICC with respect to the subject matter
hereof and thereof and supersede all prior agreements, understandings and
representations, oral or written, among Buyer, Seller and STICC relating hereto
and thereto. Except as expressly provided in any Operative Agreement, no
Operative Agreement or any provision thereof is intended to confer upon any
Person other than the Parties and STICC any rights or remedies hereunder.
8.13 CONSTRUCTION. As used in the Operative Agreements, any reference to the
masculine, feminine or neuter gender will include all genders, the plural will
include the singular, and the singular will include the plural. Use of the word
"including" shall mean "including, without limitation" whether or not such
words, or words of like import, are used. Any reference to an "Article" or
"Section" will be to an Article or Section hereof, unless otherwise noted, and
any reference to an "Exhibit" or "Schedule" will be an exhibit or schedule
attached hereto, unless otherwise noted. The Parties understand and agree that
this Agreement has been mutually negotiated, prepared and drafted, and that if
at any time the Parties desire or are required to interpret or construe any such
term or condition or any agreement or instrument subject hereto, no
consideration will be given to the issue of which party actually prepared,
drafted or requested any term or condition of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Buyer, Seller and STICC have caused this Agreement to be
executed by their duly authorized signatories as of the date and year first
above written.
INTERNATIONAL BUSINESS MACHINES CORPORATION HOME DIRECTOR, INC.
By:________________________________________ By:_______________________________
Name:______________________________________ Name:_____________________________
Title:_____________________________________ Title:____________________________
XXXXXXX XXXXX INTELLECTUAL
CAPITAL COMPANY LLC
By:_______________________________
Name:_____________________________
Title:____________________________
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