EXHIBIT 2.2
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ASSET PURCHASE AGREEMENT
between:
XXXXXXX XXXXX,
an individual;
and
DITECH COMMUNICATIONS CORPORATION,
a Delaware corporation
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Dated as of December 8, 1999
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is entered into as of December 8,
1999, by and between XXXXXXX XXXXX ("Hardy") and DITECH COMMUNICATIONS
CORPORATION, a Delaware corporation (the "Purchaser"). Certain capitalized
terms used in this Agreement are defined in EXHIBIT A.
RECITALS
X. Xxxxx has been providing certain independent contractor services
(the "Services") to Telinnovation, a California general partnership (the
"Partnership"), Telinnovation Service Corporation, a California corporation
("TSC"), Telinnovation Corporation, a California corporation (the "Corporation"
and jointly and severally with the Partnership and TSC, the "Sellers"), and in
connection with such services, has developed or acquired the Assets (as defined
below).
B. Concurrently with the execution of this Agreement, the Purchaser,
the Sellers, Xxxxxxx Xxxxx ("Xxxxx") and Xxxxx Xxxxxxx ("Xxxxxxx," together with
Xxxxx, the "General Partners") will enter into an Asset Purchase Agreement,
dated as of the date hereof (the "Purchase Agreement"), providing for the sale
of substantially all of the assets of the Sellers to the Purchaser pursuant to
the terms set forth therein.
X. Xxxxx wishes to provide for the sale of the Assets to the Purchaser
pursuant to the terms set forth in this Agreement.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
1. SALE OF ASSETS; RELATED TRANSACTIONS.
1.1 SALE OF ASSETS. Hardy shall sell, assign, transfer, convey and
deliver to the Purchaser, at the Closing, good and valid title to the Assets
(as defined below), free of any Encumbrances (except for those licenses set
forth in the Part 2.11 of the Disclosure Schedule to the Purchase Agreement),
on the terms and subject to the conditions set forth in this Agreement. For
purposes of this Agreement, "Assets" shall mean and include: (a) all of the
properties, rights, interests and other tangible and intangible assets of
Hardy relating to echo cancellation technology or other similar technology
(wherever located and whether or not acquired in connection with the
Services) (the "Technology") and; (b) contracts and contractual rights and
all of Hardy's rights thereunder, if any; and (c) any other assets that are
owned by Hardy or any other Related Party and that are needed for the conduct
of, or are useful in connection with, the business of the Sellers or the
exploitation of the Technology; PROVIDED, HOWEVER, that the Assets shall not
include any Excluded Assets. Without limiting the generality of the
foregoing, the Assets shall include:
(1) all equipment, materials, prototypes, tools, supplies,
vehicles,
furniture, fixtures, improvements and other tangible assets that are needed
for the conduct of, or are useful in connection with, the business of the
Sellers or the exploitation of the Technology (including without limitation
the tangible assets identified in Part 2.1 of the Disclosure Schedule);
(2) all Proprietary Assets and goodwill that are needed for the
conduct of, or are useful in connection with, the business of the Sellers or
the exploitation of the Technology (including without limitation all right,
title and interest in and to Hardy's invention with respect to the Method for
Packet Voice Quality Enhancement and the other Proprietary Assets identified
in Part 2.2 of the Disclosure Schedule);
(3) all of Hardy's rights under the Sellers Contracts, if any;
(4) all Governmental Authorizations held by Hardy, if any, that are
needed for the conduct of, or are useful in connection with, the business of
the Sellers or the exploitation of the Technology (including the Governmental
Authorizations identified in Part 2.4 of the Disclosure Schedule);
(5) all claims (including claims for past infringement of
Proprietary Assets) and causes of action of Hardy, if any, against the
Sellers or any other Persons (regardless of whether or not such claims and
causes of action have been asserted by Hardy), and all rights of indemnity,
warranty rights, rights of contribution, rights to refunds, rights of
reimbursement and other rights of recovery possessed by Hardy (regardless of
whether such rights are currently exercisable), if any, that are needed for
the conduct of, or are useful in connection with, the business of the Sellers
or the exploitation of the Technology; and
(6) all books, records, files and data of Hardy relating to any of
the Assets, if any.
1.2 PURCHASE PRICE. As consideration for the sale of the Assets to the
Purchaser, the Purchaser shall, at the Closing, issue to Hardy an aggregate
of sixty thousand (60,000) shares of the Purchaser's common stock (the
"Shares"), of which Purchaser shall deposit forty thousand (40,000) shares
(the "Escrow Shares") in an escrow account (the "Escrow Account") to be
established as of the Closing Date pursuant to an Escrow Agreement among the
Purchaser, Hardy and an escrow agent mutually selected by the parties hereto
(the "Escrow Agent"), in substantially the form of EXHIBIT B (the "Escrow
Agreement") to be disposed of in accordance with the provisions of Section
1.3 below; and
1.3 HARDY'S AGREEMENT TO DELIVER AND SUPPORT PRODUCIBLE PRODUCT DESIGNS.
Hardy hereby agrees to be hired by the Purchaser. The Purchaser desires to
hire and retain Hardy as an employee of the Purchaser to assist the Purchaser
in maintaining the goodwill associated with the technology being acquired
pursuant to the Transactions. As a result, in the event that Hardy
voluntarily terminates his employment relationship with the Purchaser prior
to the fourth (4th) anniversary of the Closing Date, the Purchaser shall have
the right to recover a portion of the Escrow Shares held in the Escrow
Account pursuant to the terms of the Escrow Agreement. The rights of the
parties to make a claim for any distribution from the Escrow Account, the
terms
and conditions by which the Escrow Account shall be held, invested and
distributed and the manner of resolving disputes pertaining to claims made on
the Escrow Account by a party shall be as set forth in the Escrow Agreement.
1.4 [RESERVED.]
1.5 SALES TAXES. Hardy shall bear and pay, and shall reimburse the
Purchaser and the Purchaser's affiliates for, any sales taxes, use taxes,
transfer taxes, documentary charges, recording fees or similar taxes,
charges, fees or expenses that may become payable in connection with the sale
of the Assets to the Purchaser or in connection with any of the other
Transactions.
1.6 [RESERVED.]
1.7 CLOSING.
(A) The Closing shall take place at the offices of Xxxxxx Godward
LLP, Five Xxxx Xxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000 at 10:00 a.m. on
January 6, 2000 or at such other time and place as the parties may mutually
agree.
(B) At the Closing:
(i) Hardy shall execute and deliver to the Purchaser such bills
of sale, endorsements, assignments and other documents as
may (in the reasonable judgment of the Purchaser or its
counsel) be necessary or appropriate to assign, convey,
transfer and deliver to the Purchaser good and valid title
to the Assets free of any Encumbrances;
(ii) the Purchaser shall issue and deliver to Hardy stock
certificates representing an aggregate twenty thousand
(20,000) shares of the Shares;
(iii) the parties hereto shall execute and deliver the Escrow
Agreement;
(iv) the Purchaser shall issue to Hardy stock certificates
representing the Escrow Shares and deposit such certificates
in the Escrow Account as contemplated by Section 1.2 above;
(v) Hardy shall execute and deliver to the Purchaser the
Noncompetition Agreement in the form of EXHIBIT F hereto
(the "Noncompetition Agreement");
(vi) Hardy shall execute and deliver to the Purchaser the General
Release in the form of EXHIBIT G hereto (the "Release");
(vii) Hardy shall execute and deliver to the Purchaser five (5)
Stock Assignments in the form of EXHIBIT J hereto (each, a
"Stock Assignment"); and
(viii) [Reserved.]
(ix) Hardy shall execute and deliver to the Purchaser a
certificate (the "Closing Certificate") setting forth his
representations and warranties that (A) each of the
representations and warranties made by him in this
Agreement was accurate in all respects as of the date of
this Agreement, (B) except as expressly set forth in the
Closing Certificate, each of the representations and
warranties made by him in this Agreement is accurate in all
respects as of the Closing Date as if made on the Closing
Date, (C) each of the covenants and obligations that he is
required to have complied with or performed pursuant to
this Agreement at or prior to the Closing has been duly
complied with and performed in all respects, and (D) except
as expressly set forth in the Closing Certificate, each of
the conditions set forth in Article 6 has been satisfied in
all respects;
(x) the Purchaser shall execute and deliver to Hardy the
Registration Rights Agreement, in the form of EXHIBIT K
hereto (the "Registration Rights Agreement").
(C) On the Closing Date or other date as mutually agreed upon by
the parties hereto, Hardy shall transfer to the Purchaser all intangible
Assets by electronic means.
2. REPRESENTATIONS AND WARRANTIES OF HARDY.
Hardy represents and warrants, to and for the benefit of the
Indemnitees, except, in each case, as set forth on the Disclosure Schedule
attached hereto, as follows:
1.3 EQUIPMENT, ETC. Part 2.1 of the Disclosure Schedule accurately
identifies all equipment, materials, prototypes, tools, supplies, vehicles,
furniture, fixtures, improvements and other tangible assets owned by the
Sellers, and accurately sets forth the date of acquisition, original cost and
book value of each of said assets. Part 2.1 of the Disclosure Schedule also
accurately identifies all tangible assets leased to the Sellers. Each asset
identified or required to be identified in Part 2.1 of the Disclosure
Schedule: (i) is structurally sound, free of defects and deficiencies and in
good condition and repair (ordinary wear and tear excepted); (ii) complies in
all respects with, and is being operated and otherwise used in full
compliance with, all applicable Legal Requirements; and (iii) is adequate and
appropriate for the uses to which it is being put. The assets identified in
Part 2.1 of the Disclosure Schedule are adequate for the conduct of the
business of the Sellers in the manner in which such business is currently
being conducted and in the manner in which such business is proposed to be
conducted.
1.2 PROPRIETARY ASSETS.
(a) Part 2.2(a)(1) of the Disclosure Schedule identifies and
provides a brief description of all Proprietary Assets owned by Hardy. Part
2.2(a)(2) of the Disclosure Schedule identifies and provides a brief
description of each Proprietary Asset that is owned by any other Person and
that is licensed to or used by Hardy (except for any Proprietary Asset that
is licensed to Hardy under any third party software license that (1) is
generally available to the public, and (2) imposes no future monetary
obligation on Hardy) and identifies the license agreement or other agreement
under which such Proprietary Asset is being licensed to or used by Hardy.
Hardy has good and valid title to all of the Proprietary Assets identified in
Part 2.2(a)(1) of the Disclosure Schedule, free of any Encumbrances, and have
a valid right to use and otherwise exploit, and to license others to use and
otherwise exploit, all Proprietary Assets identified in Part 2.2(a)(2) of the
Disclosure Schedule. Except as set forth in Part 2.2(a)(3) of the Disclosure
Schedule, Hardy is not obligated to make any payment to any Person for the
use or other exploitation of any Proprietary Asset. Except as set forth in
Part 2.2(a)(4) of the Disclosure Schedule, Hardy is free to use, modify,
copy, distribute, sell, license or otherwise exploit each of Hardy's
Proprietary Assets on an exclusive basis (other than Proprietary Assets
consisting of software licensed to Hardy under third party licenses generally
available to the public, with respect to which Hardy's rights are not
exclusive).
(b) Hardy has taken all reasonable measures and precautions
necessary to protect and maintain the confidentiality and secrecy of all
Hardy's Proprietary Assets. Hardy has not disclosed or delivered or permitted
to be disclosed or delivered to any Person, and no Person (other than Hardy)
has access to or has any rights with respect to, the source code, or any
portion or aspect of the source code, of any of Sellers' or Hardy's
Proprietary Assets, except as set forth in Part 2.2(b) of the Disclosure
Schedule.
(c) All patents, trademarks, service marks and copyrights that are
registered with any Governmental Body and held by Hardy are valid and
subsisting. None of Hardy's Proprietary Assets infringes or conflicts with
any Proprietary Asset owned or used by any other Person. Hardy is not
infringing, misappropriating or making any unlawful use of, and Hardy has not
at any time infringed, misappropriated or made any unlawful use of, or
received any notice or other communication of any actual, alleged, possible
or potential infringement, misappropriation or unlawful use of, any
Proprietary Asset owned or used by any other Person. To the best of the
Hardy's knowledge, no other Person is infringing, misappropriating or making
any unlawful use of, and no Proprietary Asset owned or used by any other
Person infringes or conflicts with, any of Hardy's Proprietary Assets.
(d) Hardy has not licensed any of Hardy's Proprietary Assets to any
Person on an exclusive basis. Hardy has not entered into any covenant not to
compete or Contract limiting their ability to exploit fully any of Hardy's
Proprietary Assets or to transact business in any market or geographical area
or with any Person.
(e) Except as set forth in Part 2.2(e) of the Disclosure Schedule,
Hardy has not entered into and is not bound by any Contract under which any
Person has the right to distribute or license any Proprietary Asset. Hardy
has not disclosed or delivered to any Person, or permitted the disclosure or
delivery to any Person, of the source code, or any portion or aspect of the
source code, or any proprietary information or algorithm contained in any
source code, of any Proprietary Asset. No event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of
time) will, or could reasonably be expected to, result in the disclosure or
delivery to any Person of the source code, or any portion or aspect of the
source code, or any proprietary information or algorithm contained in any
source code, of any Proprietary Asset.
(f) To Hardy's knowledge, all of the products manufactured by Hardy
and all of the Proprietary Assets developed and licensed by Hardy are able to
accurately process date data,
including but not limited to calculating, comparing and sequencing from, into
and between the twentieth century (through year 1999), the year 2000 and the
twenty-first century, including leap year calculations.
1.3 COMPLIANCE WITH LEGAL REQUIREMENTS. Except as set forth in Part 2.3
of the Disclosure Schedule: (a) Hardy is in full compliance with each Legal
Requirement that is applicable to him or to the ownership or use of any of
his assets; (b) Hardy has at all times been in full compliance with each
Legal Requirement that is or was applicable to him or to the ownership or use
of any of his assets; (c) no event has occurred, and no condition or
circumstance exists, that might (with or without notice or lapse of time)
constitute or result directly or indirectly in a violation by Hardy of, or a
failure on the part of Hardy to comply with, any Legal Requirement; and (d)
Hardy has not received, at any time, any notice or other communication (in
writing or otherwise) from any Governmental Body or any other Person
regarding (i) any actual, alleged, possible or potential violation of, or
failure to comply with, any Legal Requirement, or (ii) any actual, alleged,
possible or potential obligation on the part of Hardy to undertake, or to
bear all or any portion of the cost of, any cleanup or any remedial,
corrective or response action of any nature. Hardy has delivered to the
Purchaser an accurate and complete copy of each report, study, survey or
other document to which he has access that addresses or otherwise relates to
the compliance of Hardy with, or the applicability to Hardy of, any Legal
Requirement. To the best of Hardy's knowledge, no Governmental Body has
proposed or is considering any Legal Requirement that, if adopted or
otherwise put into effect, (i) may have an adverse effect on the assets or
liabilities of Hardy or on the ability of Hardy to comply with or perform any
covenant or obligation under any of the Transactional Agreements, or (ii) may
have the effect of preventing, delaying, making illegal or otherwise
interfering with any of the Transactions.
1.4 GOVERNMENTAL AUTHORIZATIONS. Part 2.4 of the Disclosure Schedule
identifies: each Governmental Authorization that is held by Hardy that
relates to or is useful in connection with the business of the Sellers. Hardy
has delivered to the Purchaser accurate and complete copies of all of the
Governmental Authorizations identified in Part 2.4 of the Disclosure
Schedule, including all renewals thereof and all amendments thereto. Each
Governmental Authorization identified or required to be identified in Part
2.4 of the Disclosure Schedule is valid and in full force and effect. Except
as set forth in Part 2.4 of the Disclosure Schedule: (i) Hardy is and has at
all times been in full compliance with all of the terms and requirements of
each Governmental Authorization identified or required to be identified in
Part 2.4 of the Disclosure Schedule; (ii) no event has occurred, and no
condition or circumstance exists, that might (with or without notice or lapse
of time) (A) constitute or result directly or indirectly in a violation of or
a failure to comply with any term or requirement of any Governmental
Authorization identified or required to be identified in Part 2.4 of the
Disclosure Schedule, or (B) result directly or indirectly in the revocation,
withdrawal, suspension, cancellation, termination or modification of any
Governmental Authorization identified or required to be identified in Part
2.4 of the Disclosure Schedule; (iii) Hardy has never received any notice or
other communication (in writing or otherwise) from any Governmental Body or
any other Person regarding (A) any actual, alleged, possible or potential
violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (B) any actual, proposed, possible or
potential revocation, withdrawal, suspension, cancellation, termination or
modification of any Governmental
Authorization; and (iv) all applications required to have been filed for the
renewal of the Governmental Authorizations required to be identified in Part
2.4 of the Disclosure Schedule have been duly filed on a timely basis with
the appropriate Governmental Bodies, and each other notice or filing required
to have been given or made with respect to such Governmental Authorizations
has been duly given or made on a timely basis with the appropriate
Governmental Body. The Governmental Authorizations identified in Part 2.4 of
the Disclosure Schedule constitute all of the Governmental Authorizations
necessary to permit Hardy to own and use his assets in the manner in which
they are currently owned and used and in the manner in which they are
proposed to be owned and used.
1.5 PERFORMANCE OF SERVICES. All services that have been performed on
behalf of or for the Sellers were performed properly and in full conformity
with the terms and requirements of all applicable warranties and other
Contracts and with all applicable Legal Requirements. The Purchaser will not
incur or otherwise become subject to any Liability arising directly or
indirectly from any services performed by Hardy. There is no claim pending or
being threatened against Hardy relating to any services performed by him,
and, to the best of his knowledge, there is no basis for the assertion of any
such claim.
1.6 PROCEEDINGS; ORDERS. Except as set forth in Part 2.6 of the
Disclosure Schedule, there is no pending Proceeding, and no Person has
threatened to commence any Proceeding: (i) that involves Hardy or that
otherwise relates to or might affect the business of the Sellers or any of
the Assets (whether or not Hardy is named as a party thereto); or (ii) that
challenges, or that may have the effect of preventing, delaying, making
illegal or otherwise interfering with, any of the Transactions. Except as set
forth in Part 2.6 of the Disclosure Schedule, no event has occurred, and no
claim, dispute or other condition or circumstance exists, that might directly
or indirectly give rise to or serve as a basis for the commencement of any
such Proceeding. Except as set forth in Part 2.6 of the Disclosure Schedule,
no Proceeding has ever been commenced by or against Hardy. Hardy has
delivered to the Purchaser accurate and complete copies of all pleadings,
correspondence and other written materials (to which Hardy has access) that
relate to the Proceedings identified in Part 2.6 of the Disclosure Schedule.
There is no Order to which Hardy, or any of his assets used by the Sellers,
is subject; and Hardy is not subject to any Order that relates to the
Sellers' business or to any of the assets of Hardy or the Sellers. There is
no proposed Order that, if issued or otherwise put into effect, (i) may have
an adverse effect on the assets and liabilities of Hardy or on Hardy's
ability to comply with or perform any covenant or obligation under any of the
Transactional Agreements, or (ii) may have the effect of preventing,
delaying, making illegal or otherwise interfering with any of the
Transactions.
1.7 AUTHORITY; BINDING NATURE OF AGREEMENTS.
(a) Hardy has the absolute and unrestricted right, power and
authority to enter into and to perform his obligations under each of the
Transactional Agreements to which he is or may become a party. This Agreement
constitutes the legal, valid and binding obligation of Hardy, enforceable
against him in accordance with its terms. Upon the execution of each of the
other Transactional Agreements at the Closing, each of such other
Transactional Agreements to which Hardy is a party will constitute the legal,
valid and binding obligation of Hardy and will be
enforceable against Hardy in accordance with its terms.
1.8 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.8 of the
Disclosure Schedule, neither the execution and delivery of any of the
Transactional Agreements, nor the consummation or performance of any of the
Transactions, will directly or indirectly (with or without notice or lapse of
time):
(a) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which Hardy, or any of the Assets, is subject;
(b) cause the Purchaser or any affiliate of the Purchaser to become
subject to, or to become liable for the payment of, any Tax;
(c) cause any of the Assets to be reassessed or revalued by any
taxing authority or other Governmental Body;
(d) contravene, conflict with or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is to be included in the Assets or is held by Hardy;
(e) contravene, conflict with or result in a violation or breach
of, or result in a default under, any provision of any Contract;
(f) give any Person the right to (i) declare a default or exercise
any remedy under any Contract, (ii) accelerate the maturity or performance of
any Contract, or (iii) cancel, terminate or modify any Contract; or
(g) result in the imposition or creation of any Encumbrance upon or
with respect to any of the Assets.
Except as set forth in Part 2.8 of the Disclosure Schedule, Hardy was, is or
will not be required to make any filing with or give any notice to, or to
obtain any Consent from, any Person in connection with the execution and
delivery of any of the Transactional Agreements or the consummation or
performance of any of the Transactions.
1.9 BROKERS. Hardy has not agreed or become obligated to pay, or has
taken any action that might result in any Person claiming to be entitled to
receive, any brokerage commission, finder's fee or similar commission or fee
in connection with any of the Transactions.
1.10 FULL DISCLOSURE. None of the Transactional Agreements contains or
will contain any untrue statement of fact; and none of the Transactional
Agreements omits or will omit to state any fact necessary to make any of the
representations, warranties or other statements or information contained
therein not misleading. All of the information set forth in the Disclosure
Schedule, and all other information regarding Hardy that has been furnished
to the Purchaser
or any of the Purchaser's Representatives by or on behalf of Hardy, is
accurate and complete in all respects.
1.11 OTHER REPRESENTATIONS.
(a) Hardy has not ever (i) made a general assignment for the
benefit of creditors, (ii) filed, or had filed against himself, any
bankruptcy petition or similar filing, (iii) suffered the attachment or other
judicial seizure of all or a substantial portion of his assets, (iv) admitted
in writing his inability to pay his or her debts as they become due, or (v)
taken or been the subject of any action that may have an adverse effect on
his ability to comply with or perform any of his covenants or obligations
under any of the Transactional Agreements.
(b) Hardy is not subject to any Order or is bound by any Contract
that may have an adverse effect on his ability to comply with or perform any
of his or her covenants or obligations under any of the Transactional
Agreements. There is no Proceeding pending, and no Person has threatened to
commence any Proceeding, that may have an adverse effect on the ability of
Hardy to comply with or perform any of his covenants or obligations under any
of the Transactional Agreements. No event has occurred, and no claim, dispute
or other condition or circumstance exists, that might directly or indirectly
give rise to or serve as a basis for the commencement of any such Proceeding.
(c) Hardy owns, and has good and valid title to, all of the Assets,
free and clear of all Encumbrances (except for those licenses set forth in
the Part 2.11 of the Disclosure Schedule to the Purchase Agreement).
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser represents and warrants, to and for the benefit of
Hardy, as follows:
3.1 CORPORATE EXISTENCE AND POWER. The Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware, and has all corporate power required to conduct its
business as now conducted, and is duly qualified to do business and is in
good standing in each jurisdiction in which the conduct of its business or
the ownership or leasing of its properties requires such qualification,
except where the failure to be so qualified would not have a material adverse
effect on Purchaser's business, financial condition or results of operations.
3.2 AUTHORITY; BINDING NATURE OF AGREEMENTS. The Purchaser has the
absolute and unrestricted right, power and authority to enter into and
perform its obligations under this Agreement, and the execution and delivery
of this Agreement by the Purchaser have been duly authorized by all necessary
action on the part of the Purchaser and its board of directors. The Purchaser
has the absolute and unrestricted right, power and authority to enter into
and perform its obligations under the Escrow Agreement and the Assumption
Agreement, and the execution, delivery and performance of the Escrow
Agreement and the Assumption Agreement by the Purchaser have been duly
authorized by all necessary action on the part of the Purchaser and its board
of directors. This Agreement constitutes the legal, valid and binding
obligation of the
Purchaser, enforceable against it in accordance with its terms. Upon the
execution and delivery of the Escrow Agreement and the Assumption Agreement
at the Closing, the Escrow Agreement and the Assumption Agreement will
constitute the legal, valid and binding obligations of the Purchaser,
enforceable against the Purchaser in accordance with their terms.
3.3 BROKERS. The Purchaser has not become obligated to pay, and has not
taken any action that might result in any Person claiming to be entitled to
receive, any brokerage commission, finder's fee or similar commission or fee
in connection with any of the Transactions.
3.4 NO CONFLICT; CONSENTS. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by Purchaser are
not prohibited by, and will not violate or conflict with, any provision of
the certificate of incorporation or bylaws of Purchaser, or of any Legal
Requirement or any provision of any Contract to which Purchaser is a party,
except where any of the foregoing would not have, individually or in the
aggregate, a material adverse effect on the business, financial condition or
results of operation, of Purchaser. No Consent of any Governmental Body is
necessary on the part of Purchaser for the consummation by Purchaser of the
transactions contemplated by this Agreement.
3.5 VALID ISSUANCE. The Shares to be issued in the Transactions will,
when issued in accordance with the provisions of this Agreement, be validly
issued, fully paid and nonassessable.
4. PRE-CLOSING COVENANTS OF HARDY
4.1 ACCESS AND INVESTIGATION. During the period from the date of this
Agreement through the Closing Date or earlier termination of this Agreement
pursuant to the provisions of Section 8.1 (the "Pre-Closing Period"), Hardy
shall, and shall cause his Representatives to: (a) provide Purchaser and
Purchaser's Representatives with reasonable access to Hardy's
Representatives, assets and to all existing books, records, tax returns, work
papers and other documents and information relating to the Assets; and (b)
provide Purchaser and Purchaser's Representatives with copies of such
existing books, records, tax returns, work papers and other documents and
information relating to the Assets, and with such additional financial and
other data and information regarding the Assets, as Purchaser may reasonably
request.
4.2 CONDUCT OF HARDY DURING PRE-CLOSING PERIOD. During the Pre-Closing
Period:
(a) Hardy shall provide the Sellers with independent contract
services in substantially the same manner as such services have been provided
prior to the date of this Agreement (except that Hardy may not grant any
licenses to any Proprietary Asset without Purchaser's prior written consent,
which may be withheld in Purchaser's sole discretion);
(b) Hardy shall use reasonable efforts to maintain his relations
and good will with all suppliers, customers, landlords, creditors, employees
and other Persons having business relationships with the Sellers;
(c) Hardy shall not (i) enter into, or permit any of the Assets to
become bound by,
any Contract or (ii) amend or prematurely terminate, or waive any material
right or remedy under, any Contract;
(d) Hardy shall not commence or settle any Legal Proceeding
relating to the Assets; and
(e) Hardy shall not agree or commit to take any of the actions
described in clauses "(c)" through "(d)" above.
4.3 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, Hardy shall promptly notify
Purchaser in writing of: (i) the discovery by Hardy of any event, condition,
fact or circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes in any material respect an
inaccuracy in or breach of any representation or warranty made by Hardy in
this Agreement; (ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute in any material respect an inaccuracy in or breach of any
representation or warranty made by Hardy in this Agreement if (A) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance or (B)
such event, condition, fact or circumstance had occurred, arisen or existed
on or prior to the date of this Agreement; (iii) any breach of any covenant
or obligation of Hardy; and (iv) any event, condition, fact or circumstance
that would make the satisfaction of any of the conditions set forth in
Article 6 impossible or unlikely on or prior to the Closing Date.
(b) If any event, condition, fact or circumstance that is required
to be disclosed pursuant to Section 4.3(a) requires any change in the
Disclosure Schedule, or if any such event, condition, fact or circumstance
would require such a change assuming the Disclosure Schedule were dated as of
the date of the occurrence, existence or discovery of such event, condition,
fact or circumstance, then Hardy shall promptly deliver to Purchaser an
update to the Disclosure Schedule specifying such change.
4.4 NO NEGOTIATION. During the Pre-Closing Period, Hardy shall not,
directly or indirectly:
(a) solicit or encourage the initiation of any inquiry, proposal or
offer from any Person (other than Purchaser) relating to a possible
Acquisition Transaction or a possible sale of the Assets;
(b) participate in any discussions or negotiations or enter into
any agreement with, or provide any non-public information to, any Person
(other than the Purchaser or the Purchaser's representatives) relating to or
in connection with a possible Acquisition Transaction or a possible sale of
the Assets; or
(c) consider, entertain or accept any proposal or offer from any
Person (other than Purchaser) relating to a possible Acquisition Transaction
or a possible sale of the Assets.
Hardy shall promptly notify Purchaser in writing of any material inquiry,
proposal or offer relating to a possible Acquisition Transaction or a
possible sale of the Assets that is received by Hardy or his Representatives
during the Pre-Closing Period.
4.5 FILINGS AND CONSENTS. As promptly as practicable after the execution
of this Agreement, Hardy (a) shall make all filings, if any, and give all
notices, if any, required to be made and given by such party in connection
with the Transactions and the other transactions contemplated by this
Agreement, and (b) shall use all reasonable efforts to obtain all Consents,
if any, required to be obtained (pursuant to any applicable Legal Requirement
or Contract, or otherwise) by such party in connection with the Transactions
and the other transactions contemplated by this Agreement. Hardy shall (upon
request) promptly deliver to Purchaser a copy of each such filing made, each
such notice given and each such Consent obtained by Hardy during the
Pre-Closing Period.
4.6 PUBLIC ANNOUNCEMENTS. During the Pre-Closing Period, Hardy shall
not, and shall not permit any of their Representatives to, issue any press
release or make any public statement regarding this Agreement, the Purchase
Agreement, the Transactions, or regarding any of the other transactions
contemplated by this Agreement, without Purchaser's prior written consent.
4.7 BEST EFFORTS. During the Pre-Closing Period, Hardy shall use best
efforts to cause the conditions set forth in Article 6 to be satisfied on a
timely basis.
4.8 EMPLOYEE AND RELATED MATTERS. Hardy shall execute and deliver to the
Purchaser the Noncompetition Agreement and the Release.
4.9 CONDITION TO EXECUTION OF THIS AGREEMENT. Concurrent with the
execution of this Agreement, the Company, the Sellers and the General
Partners shall enter into the Purchase Agreement.
5. PRE-CLOSING COVENANTS OF THE PURCHASER
5.1 BEST EFFORTS. During the Pre-Closing Period, the Purchaser shall use
best efforts to cause the conditions set forth in Article 7 to be satisfied
on a timely basis.
5.2 NASDAQ NATIONAL MARKET LISTING. Purchaser shall file an application
to list on the Nasdaq National Market the Shares as soon as practicable and
will pay all necessary filing fees in connection therewith.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser to effect the Transactions and
otherwise consummate the transactions contemplated by this Agreement are
subject to the satisfaction (or waiver by Purchaser), at or prior to the
Closing, of each of the following conditions:
6.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by Hardy in this Agreement and in each of the other
agreements and instruments delivered to Purchaser in connection with the
transactions contemplated by this Agreement shall have been accurate as of
the date of this Agreement (without giving effect to any update to the
Disclosure Schedule) and shall be accurate as of the Closing Date as if made
at the Closing (without giving effect to any update to the Disclosure
Schedule), except to the extent such representations and warranties expressly
relate to an earlier date (in which case such representations and warranties
shall be accurate on and as of such date (without giving effect to any update
to the Disclosure Schedule)).
6.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
Hardy is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed.
6.3 CONSENTS. All Consents (a) required to be obtained from any
Governmental Entity and (b) otherwise required to be obtained, in each case
in connection with the Transactions and the other transactions contemplated
by this Agreement shall have been obtained and shall be in full force and
effect, except in the case of clause (b) to the extent that the failure to
obtain any such Consents has not had, and is not reasonably likely to have, a
material adverse effect on Hardy.
6.4 EMPLOYEE MATTERS. Purchaser shall have received satisfactory
evidence that Hardy will be employed by the Purchaser after the Closing.
6.5 AGREEMENTS AND DOCUMENTS. Purchaser shall have received the
following agreements and documents, each of which shall be in full force and
effect:
(a) a Noncompetition Agreement, a Release and Stock Assignments
executed by each of the General Partners and Hardy;
(b) an Escrow Agreement executed by the Escrow Agent, the Purchaser
and Hardy;
(c) [Reserved];
(e) an escrow agreement as contemplated by the Purchase Agreement.
6.6 [RESERVED.]
6.7 LISTING. The shares of Purchaser Common Stock to be issued in the
Transactions and such other shares of Purchaser Common Stock required to be
reserved for issuance in connection with the Transactions shall have been
approved for listing (subject to notice of issuance) on the Nasdaq National
Market.
6.8 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the
Transactions shall have been issued by any court of competent jurisdiction
and remain in effect, and there shall not be any Legal Requirement enacted or
deemed applicable to the Transactions that makes consummation of the
Transactions illegal.
6.9 NO LEGAL PROCEEDINGS. No Governmental Body or other Person shall
have commenced or threatened to commence any Legal Proceeding challenging or
seeking the recovery of a material amount of damages in connection with the
Transactions.
6.10 RULE 506 EXEMPTION. The issuance of Purchaser Common Stock to Hardy
shall be exempt from registration under the Securities Act pursuant to Rule
506 under the Securities Act and Hardy shall have executed and delivered to
Purchaser the Stockholder Representation Letter in the form of EXHIBIT E
hereto.
6.11 CONCURRENT CLOSING. The Closing must occur concurrently with the
closing of those certain transactions contemplated by the Purchase Agreement.
6.12 ACCESS AND INVESTIGATION. Until the Closing, Hardy shall allow the
Purchaser and its agents reasonable free access during normal business hours
upon reasonable notice to its files, books, records, and offices, including,
without limitation, any and all information relating to taxes, commitments,
contracts, leases, licenses, personnel, and personal property and financial
condition and such other information and data, relating to the Assets,
requested by the Purchaser or its agents, as necessary to permit the
Purchaser to complete to the Purchaser's satisfaction of Hardy's due
diligence obligations.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF HARDY
The obligations of Hardy to effect the Transactions and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction (or waiver), at or prior to the Closing, of the following
conditions:
7.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by Purchaser in this Agreement and in each of the other
agreements and instruments delivered to Hardy in connection with the
transactions contemplated by this Agreement shall have been accurate as of
the date of this Agreement and shall be accurate as of the Closing Date as if
made at the Closing, except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations and
warranties shall be accurate on and as of such date).
7.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
Purchaser is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all material respects.
7.3 AGREEMENTS AND DOCUMENTS. Hardy shall have received the following
documents.
(a) a certificate executed by Purchaser containing the
representation and warranty of the Purchaser that the conditions set forth in
Sections 7.1, 7.2 and 7.4 have been duly satisfied; and
(b) the Registration Rights Agreement executed by the Purchaser.
7.4 LISTING. The shares of Purchaser Common Stock to be issued in the
Transactions and such other shares of Purchaser Common Stock required to be
reserved for issuance in connection
with the Transactions shall have been approved for listing (subject to notice
of issuance) on the Nasdaq National Market.
7.5 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the
Transactions shall have been issued by any court of competent jurisdiction
and remain in effect, and there shall not be any Legal Requirement enacted or
deemed applicable to the Transactions that makes consummation of the
Transactions illegal.
8. TERMINATION
8.1 TERMINATION EVENTS. Prior to Closing, this Agreement:
(a) shall automatically terminate upon the termination of the
Purchase Agreement pursuant to the terms therein;
(b) may be terminated by the Purchaser if any of Hardy's
representations and warranties contained in this Agreement shall be or shall
have become materially inaccurate, or if any of Hardy's covenants contained
in this Agreement shall have been breached in any material respect; provided,
however, that if any inaccuracy in Hardy's representations and warranties or
a breach of a covenant by Hardy, is curable by Hardy and Hardy is continuing
to exercise all reasonable efforts to cure such inaccuracy or breach during
the 30-day period commencing upon delivery by the Purchaser of a written
notice to Hardy, describing such inaccuracy or breach, then the Purchaser may
not terminate this Agreement under this Section 8.1(b) on account of such
inaccuracy or breach until the end of such cure period (if such inaccuracy or
breach then remains uncured);
(c) may be terminated by Hardy if any of the Purchaser's
representations and warranties contained in this Agreement shall be or shall
have become materially inaccurate, or if any of the Purchaser's covenants
contained in this Agreement shall have been breached in any material respect;
provided, however, that if any inaccuracy in the Purchaser's representations
and warranties or a breach of a covenant by the Purchaser is curable by the
Purchaser and the Purchaser is continuing to exercise all reasonable efforts
to cure such inaccuracy or breach during the 30-day period commencing upon
delivery by Hardy of a written notice to the Purchaser describing such
inaccuracy or breach, then Hardy may not terminate this Agreement under this
Section 8.1(b) on account of such inaccuracy or breach until the end of such
cure period (if such inaccuracy or breach then remains uncured);
(d) may be terminated by Purchaser if the Closing has not taken
place on or before January 31, 2000 (other than as a result of any failure on
the part of the Purchaser to comply with or perform any covenant or
obligation of Purchaser set forth in this Agreement or in any other agreement
or instrument delivered to Hardy or the Sellers);
(e) may be terminated by Hardy if the Closing has not taken place
on or before January 31, 2000 (other than as a result of the failure on the
part of the Sellers to comply with or perform any covenant or obligation of
the Sellers set forth in this Agreement or in any other
agreement or instrument delivered to Purchaser);
(f) may be terminated by either Purchaser or Hardy if a court of
competent jurisdiction or other Governmental Body shall have issued a final
and nonappealable order, decree or ruling, or shall have taken any other
action, having the effect of permanently restraining, enjoining or otherwise
prohibiting the Transaction; or
(g) may be terminated by the mutual written consent of Purchaser
and Hardy.
8.2 TERMINATION PROCEDURES. If Purchaser wishes to terminate this
Agreement pursuant to Section 8.1(b), (c) or (d), Purchaser shall deliver to
Hardy a written notice stating that Purchaser is terminating this Agreement
and setting forth a brief description of the basis on which Purchaser is
terminating this Agreement. If Hardy wishes to terminate this Agreement
pursuant to Section 8.1 (b), (d) or (e), Hardy shall deliver to Purchaser a
notice, in writing, stating that Hardy is terminating this Agreement and
setting forth a brief description of the basis on which they are terminating
this Agreement.
8.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Sections 8.1 and 8.2, all further obligations of the parties under this
Agreement shall terminate; PROVIDED, HOWEVER, that: (a) none of the parties
shall be relieved of any obligation or liability arising from any prior
willful breach by such party of any provision of this Agreement and (b) the
parties shall, in all events, remain bound by and continue to be subject to
the provisions set forth in Article 11 and Section 4.6.
9. INDEMNIFICATION, ETC.
9.1 SURVIVAL OF REPRESENTATIONS AND COVENANTS.
(a) The representations, warranties, covenants and obligations of
each party to this Agreement shall survive (without limitation): (i) the
Closing and the sale of the Assets to the Purchaser; (ii) any sale or other
disposition of any or all of the Assets by the Purchaser; and (iii) the death
or dissolution of any party to this Agreement.
(b) The representations, warranties, covenants and obligations of
Hardy, and the rights and remedies that may be exercised by the Indemnitees,
shall not be limited or otherwise affected by or as a result of any
information furnished to, or any investigation made by or any knowledge of,
any of the Indemnitees or any of their Representatives.
(c) For purposes of this Agreement, a "Claim Notice" relating to a
particular representation or warranty shall be deemed to have been given if
any Indemnitee, acting in good faith, delivers to Hardy a written notice
stating that such Indemnitee believes that there is or has been a possible
Breach of such representation or warranty and containing (i) a brief
description of the circumstances supporting such Indemnitee's belief that
there is or has been such a possible Breach, and (ii) a non-binding,
preliminary estimate of the aggregate dollar amount of the actual and
potential Damages that have arisen and may arise as a direct or indirect
result of such possible Breach.
(d) For purposes of this Agreement, each statement or other item of
information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a representation and warranty made
by Hardy in this Agreement.
9.2 INDEMNIFICATION BY HARDY. Hardy shall hold harmless and indemnify
each of the Indemnitees from and against, and shall compensate and reimburse
each of the Indemnitees for, any Damages that are directly or indirectly
suffered or incurred by any of the Indemnitees or to which any of the
Indemnitees may otherwise become subject at any time (regardless of whether
or not such Damages relate to any third-party claim) and that arise directly
or indirectly from or as a direct or indirect result of, or are directly or
indirectly connected with:
(i) any Breach of any of the representations or warranties made by Hardy in
this Agreement (without giving effect to any update to the Disclosure
Schedule) or in the Closing Certificate or any of the other
Transactional Agreements;
(ii) any Breach of any representation, warranty, statement, information or
provision contained in the Disclosure Schedule or in any other document
delivered or otherwise made available to the Purchaser or any of its
Representatives by or on behalf of Hardy or any of his Representative;
(iii) any Breach of any covenant or obligation of Hardy contained in any of
the Transactional Agreements;
(iv) any Liability of Hardy;
(v) any Liability to which the Purchaser or any of the other Indemnitees
may become subject and that arises directly or indirectly from or
relates directly or indirectly to any product produced or sold or any
services performed or any license entered into by or on behalf of Hardy
which relates to the Assets;
(vi) any Proceeding relating directly or indirectly to any Breach, alleged
Breach, Liability or matter of the type referred to in clause "(i),"
"(ii)," "(iii)," "(iv)," or "(v)" above (including any Proceeding
commenced by any Indemnitee for the purpose of enforcing any of its
rights under this Article 9).
9.3 SETOFF. In addition to any rights of setoff or other rights that the
Purchaser or any of the other Indemnitees may have pursuant to Section 1.3,
at common law or otherwise, the Purchaser shall have the right to withhold
and deduct any sum that may be owed to any Indemnitee under this Article 9
from any amount otherwise payable by any Indemnitee to Hardy. The withholding
and deduction of any such sum shall operate for all purposes as a complete
discharge (to the extent of such sum) of the obligation to pay the amount
from which such sum was withheld and deducted. Without limiting the
generality of the foregoing, the Purchaser shall have the right to offset any
sum that may be owed to the Purchaser under this Article 9 from the Shares
deposited in the Escrow Account at the then fair market value of such Shares
based on the price per share of such common stock as of the close of business
on the day the Purchaser gives notice to Hardy of its intent to offset
against the Shares.
9.4 NONEXCLUSIVITY OF INDEMNIFICATION REMEDIES. The indemnification
remedies and other remedies provided in this Article 9 shall not be deemed to
be exclusive. Accordingly, the exercise by any Person of any of its rights
under this Article 9 shall not be deemed to be an election of remedies and
shall not be deemed to prejudice, or to constitute or operate as a waiver of,
any other right or remedy that such Person may be entitled to exercise
(whether under this Agreement, under any other Contract, under any statute,
rule or other Legal Requirement, at common law, in equity or otherwise).
9.5 DEFENSE OF THIRD PARTY CLAIMS. In the event of the assertion or
commencement by any Person of any claim or Proceeding (whether against the
Purchaser, against any other Indemnitee or against any other Person) with
respect to which Hardy may become obligated to indemnify, hold harmless,
compensate or reimburse any Indemnitee pursuant to this Article 9, the
Purchaser shall have the right, at its election, to designate Hardy to assume
the defense of such claim or Proceeding at the sole expense of Hardy. If the
Purchaser so elects to designate Hardy to assume the defense of any such
claim or Proceeding:
(a) Hardy shall proceed to defend such claim or Proceeding in a
diligent manner with counsel satisfactory to the Purchaser;
(b) the Purchaser shall make available to Hardy any non-privileged
documents and materials in the possession of the Purchaser that may be
necessary to the defense of such claim or Proceeding;
(c) Hardy shall keep the Purchaser informed of all material
developments and events relating to such claim or Proceeding;
(d) the Purchaser shall have the right to participate in the
defense of such claim or Proceeding;
(e) Hardy shall not settle, adjust or compromise such claim or
Proceeding without the prior written consent of the Purchaser; and
(f) the Purchaser may at any time (notwithstanding the prior
designation of Hardy to assume the defense of such claim or Proceeding)
assume the defense of such claim or Proceeding.
If the Purchaser does not elect to designate Hardy to assume the defense of
any such claim or Proceeding (or if, after initially designating Hardy to
assume such defense, the Purchaser elects to assume such defense), the
Purchaser may proceed with the defense of such claim or Proceeding on its
own. If the Purchaser so proceeds with the defense of any such claim or
Proceeding on its own:
(i) all reasonable expenses relating to the defense of such claim
or Proceeding (whether or not incurred by the Purchaser) shall be borne
and paid exclusively by Hardy;
(ii) Hardy shall make available to the Purchaser any documents and
materials in the possession or control of either of Hardy that may be
necessary to the defense of such claim or Proceeding;
(iii) the Purchaser shall keep Hardy informed of all material
developments and events relating to such claim or Proceeding; and
(iv) the Purchaser shall have the right to settle, adjust or
compromise such claim or Proceeding with the consent of Hardy;
PROVIDED, HOWEVER, that Hardy shall not unreasonably withhold such
consent.
9.6 EXERCISE OF REMEDIES BY INDEMNITEES OTHER THAN PURCHASER. No
Indemnitee (other than the Purchaser or any successor thereto or assign
thereof) shall be permitted to assert any indemnification claim or exercise
any other remedy under this Agreement unless the Purchaser (or any successor
thereto or assign thereof) shall have consented to the assertion of such
indemnification claim or the exercise of such other remedy.
10. CERTAIN POST-CLOSING COVENANTS.
10.1 FURTHER ACTIONS. From and after the Closing Date, Hardy shall
cooperate with the Purchaser and the Purchaser's affiliates and
Representatives, and shall execute and deliver such documents and take such
other actions as the Purchaser may reasonably request, for the purpose of
evidencing the Transactions and putting the Purchaser in possession and
control of all of the Assets. Hardy hereby irrevocably nominates, constitutes
and appoints the Purchaser as his true and lawful attorney-in-fact (with full
power of substitution) effective as of the Closing Date, and hereby authorize
the Purchaser, in the name of and on behalf of Hardy, to execute, deliver,
acknowledge, certify, file and record any document, to institute and
prosecute any Proceeding and to take any other action (on or at any time
after the Closing Date) that the Purchaser may deem appropriate for the
purpose of (i) collecting, asserting, enforcing or perfecting any claim,
right or interest of any kind that is included in or relates to any of the
Assets, (ii) defending or compromising any claim or Proceeding relating to
any of the Assets, or (iii) otherwise carrying out or facilitating any of the
Transactions. The power of attorney referred to in the preceding sentence is
and shall be coupled with an interest and shall be irrevocable, and shall
survive the death, dissolution or insolvency of Hardy.
10.2 PUBLICITY. Hardy shall ensure that, on and at all times after the
Closing Date: (a) no press release or other publicity concerning any of the
Transactions is issued or otherwise disseminated by or on behalf of Hardy
without the Purchaser's prior written consent; (b) Hardy continues to keep
the terms of this Agreement and the other Transactional Agreements strictly
confidential; and (c) Hardy keeps strictly confidential, and does not use or
disclose to any other Person, any non-public document or other information
that relates directly or indirectly to the business of the Sellers, the
Purchaser or any affiliate of the Purchaser.
10.3 [RESERVED.]
10.4 [RESERVED.]
10.5 [RESERVED.]
10.6 CONFIDENTIALITY. Hardy agrees that he shall hold all Confidential
Information in strict confidence and shall not at any time (whether during or
after the Noncompetition Period): (a) reveal, report, publish, disclose or
transfer any Confidential Information to any Person (other than to the
Purchaser or the Sellers) (b) use any Confidential Information for any
purpose or (c) use any Confidential Information for the benefit of any Person
(other than the Purchaser).
10.7 CLIENT REFERRALS. Hardy agrees to refer any and all inquiries for
products, services or licenses from any and all existing or potential
customers, whether pursuant to agreements assumed by Purchaser or otherwise,
to Purchaser.
11. MISCELLANEOUS PROVISIONS.
11.1 FURTHER ASSURANCES. Each party hereto shall execute and/or cause to
be delivered to each other party hereto such instruments and other documents,
and shall take such other actions, as such other party may reasonably request
(prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the Transactions.
11.2 FEES AND EXPENSES.
(a) The Purchaser shall not bear and pay any fees, costs and
expenses (including all legal fees and expenses payable to Berliner Xxxxx)
that have been incurred or that are in the future incurred by, on behalf of
or for the benefit of Hardy in connection with: (i) the negotiation,
preparation and review of any letter of intent or similar document relating
to any of the Assets or the Transactions; (ii) the investigation and review
conducted by the Purchaser and its Representatives with respect to the
business of the Sellers (and the furnishing of information to the Purchaser
and its Representatives in connection with such investigation and review);
(iii) the negotiation, preparation and review of this Agreement (including
the Disclosure Schedule), the other Transactional Agreements and all bills of
sale, assignments, certificates, opinions and other instruments and documents
delivered or to be delivered in connection with the Transactions; (iv) the
preparation and submission of any filing or notice required to be made or
given in connection with any of the Transactions, and the obtaining of any
Consent required to be obtained in connection with any of the Transactions;
and (v) the consummation and performance of the Transactions.
(b) Subject to the provisions of Article 9 (including the
indemnification and other obligations of Hardy thereunder), the Purchaser
shall bear and pay all fees, costs and expenses (including all legal fees and
expenses payable to Xxxxxx Godward LLP) that have been incurred or that are
in the future incurred by or on behalf of the Purchaser in connection with:
(i) the negotiation, preparation and review of any letter of intent or
similar document relating to any of the Transactions; (ii) the investigation
and review conducted by the Purchaser and its Representatives with respect to
the business of the Sellers; (iii) the negotiation, preparation and review of
this Agreement, the other Transactional Agreements and all bills of sale,
assignments, certificates, opinions and other instruments and documents
delivered or to be delivered in connection with the Transactions; and (iv)
the consummation and performance of the
Transactions.
11.3 ATTORNEYS' FEES. If any legal action or other legal proceeding
relating to any of the Transactional Agreements or the enforcement of any
provision of any of the Transactional Agreements is brought against any party
to this Agreement, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
11.4 NOTICES. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall
be deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to
the address or facsimile telephone number set forth beneath the name of such
party below (or to such other address or facsimile telephone number as such
party shall have specified in a written notice given to the other parties
hereto):
if to Hardy:
Mr. Xxxxxxx Xxxxx
0000 Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Facsimile:
with a copy to:
Berliner Xxxxx
00 Xxxxxxx Xxxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
if to the Purchaser:
Ditech Communications Corporation
000 X. Xxxxxxxxxxx Xxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx Godward LLP
5 Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
11.5 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
11.6 HEADINGS. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
11.7 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which,
when taken together, shall constitute one agreement.
11.8 GOVERNING LAW; VENUE.
(a) This Agreement shall be construed in accordance with, and
governed in all respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of laws).
(b) Any legal action or other legal proceeding relating to this
Agreement or the enforcement of any provision of this Agreement may be
brought or otherwise commenced in any state or federal court located in the
County of Santa Clara, California. Each party to this Agreement:
(i) expressly and irrevocably consents and submits to the
jurisdiction of each state and federal court located in the County of Santa
Clara, California (and each appellate court located in the State of
California) in connection with any such legal proceeding;
(ii) agrees that each state and federal court located in the
County of Santa Clara, California shall be deemed to be a convenient forum;
and
(iii) agrees not to assert (by way of motion, as a defense or
otherwise), in any such legal proceeding commenced in any state or federal
court located in the County of Santa Clara, California, any claim that such
party is not subject personally to the jurisdiction of such court, that such
legal proceeding has been brought in an inconvenient forum, that the venue of
such proceeding is improper or that this Agreement or the subject matter of
this Agreement may not be enforced in or by such court.
(c) Hardy agrees that, if any Proceeding is commenced against any
Indemnitee by any Person in or before any court or other tribunal anywhere in
the world, then such Indemnitee may proceed against Hardy in or before such
court or other tribunal with respect to any indemnification claim or other
claim arising directly or indirectly from or relating directly or indirectly
to such Proceeding or any of the matters alleged therein or any of the
circumstances giving rise thereto.
(d) Nothing in this Section 11.8 shall be deemed to limit or
otherwise affect the right of any Indemnitee to commence any legal proceeding
against Hardy in any forum or jurisdiction.
11.9 SUCCESSORS AND ASSIGNS; PARTIES IN INTEREST.
(a) This Agreement shall be binding upon: Hardy's personal
representatives,
executors, administrators, estate, heirs, successors and assigns (if any);
and the Purchaser and its successors and assigns (if any). This Agreement
shall inure to the benefit of: Hardy; the Purchaser; the other Indemnitees
(subject to Section 9.6); and the respective successors and assigns (if any)
of the foregoing.
(b) The Purchaser may freely assign any or all of its rights under
this Agreement (including its indemnification rights under Article 9), in
whole or in part, to any other Person without obtaining the consent or
approval of any other Person. Hardy shall not be permitted to assign any of
his or their rights or delegate any of his or their obligations under this
Agreement without the Purchaser's prior written consent.
(c) Except for the provisions of Article 9 hereof, none of the
provisions of this Agreement is intended to provide any rights or remedies to
any Person other than the parties to this Agreement and their respective
successors and assigns (if any).
11.10 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and remedies
of the parties hereto shall be cumulative (and not alternative). Hardy agrees
that: (a) in the event of any Breach or threatened Breach by Hardy of any
covenant, obligation or other provision set forth in this Agreement, the
Purchaser shall be entitled (in addition to any other remedy that may be
available to it) to (i) a decree or order of specific performance or mandamus
to enforce the observance and performance of such covenant, obligation or
other provision, and (ii) an injunction restraining such Breach or threatened
Breach; and (b) neither the Purchaser nor any other Indemnitee shall be
required to provide any bond or other security in connection with any such
decree, order or injunction or in connection with any related action or
Proceeding.
11.11 WAIVER.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of
any Person in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right, privilege
or remedy shall preclude any other or further exercise thereof or of any
other power, right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy
is expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have
any effect except in the specific instance in which it is given.
11.12 AMENDMENTS. This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of the Purchaser and Hardy.
11.13 SEVERABILITY. In the event that any provision of this Agreement,
or the application of any such provision to any Person or set of
circumstances, shall be determined to be invalid, unlawful,
void or unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances other than those as
to which it is determined to be invalid, unlawful, void or unenforceable,
shall not be impaired or otherwise affected and shall continue to be valid
and enforceable to the fullest extent permitted by law.
11.14 ENTIRE AGREEMENT. The Transactional Agreements set forth the
entire understanding of the parties relating to the subject matter thereof
and supersede all prior agreements and understandings among or between any of
the parties relating to the subject matter thereof.
11.15 KNOWLEDGE. For purposes of this Agreement, a Person shall be
deemed to have "knowledge" of a particular fact or other matter if:
(a) Such Person is actually aware of such fact or other matter;
(b) A prudent Person could be expected to discuss or otherwise
become aware of such fact or other matter in the course of conducting a
diligent and comprehensive investigation concerning the truth or existence of
such fact or other matter; or
(c) any Representative of such Person has knowledge of such fact or
other matter.
11.16 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender
shall include the masculine and neuter genders; and the neuter gender shall
include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement
to "Articles," "Sections" and "Exhibits" are intended to refer to Sections of
this Agreement and Exhibits to this Agreement.
[SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be executed and delivered as of the date first written above.
/s/ Xxxxxxx Xxxxx
--------------------------------------
Xxxxxxx Xxxxx, an individual
DITECH COMMUNICATIONS CORPORATION,
a Delaware corporation
By: /s/ Xxxxxxx Xxxxxxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxxxxxx
Title: President
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction involving: (a) the sale or other disposition of all or any
portion of the business or assets of Hardy; or (b) any other transaction
contemplating the performance of any services (whether as an employee,
consultant, advisor, designer, developer of technology, or otherwise) by
Xxxxx, Xxxxxxx and/or Hardy.
AFFILIATE. "Affiliate" means, with respect to any specified Person,
any other Person that, directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with
such specified Person.
AGREEMENT. "Agreement" shall mean the Asset Purchase Agreement to
which this Exhibit A is attached (including the Disclosure Schedule), as it
may be amended from time to time.
BEST EFFORTS. "Best Efforts" shall mean the efforts that a prudent
Person desiring to achieve a particular result would use to ensure that such
result is achieved as expeditiously as possible.
BREACH. There shall be deemed to be a "Breach" of a representation,
warranty, covenant, obligation or other provision if there is or has been (a)
any inaccuracy in or breach (including any inadvertent or innocent breach)
of, or any failure (including any inadvertent failure) to comply with or
perform, such representation, warranty, covenant, obligation or other
provision, or (b) any claim (by any Person) or other circumstance that is
inconsistent with such representation, warranty, covenant, obligation or
other provision; and the term "Breach" shall be deemed to refer to any such
inaccuracy, breach, failure, claim or circumstance.
CLOSING. "Closing" shall mean the closing of the sale of the Assets
to the Purchasers.
CLOSING DATE. "Closing Date" shall mean the date on which the
Closing actually occurs in accordance with the terms of this Agreement.
CODE. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
COMPETITION. A Person shall be deemed to be in "Competition" if such
Person, without the prior written consent of the Purchaser, (i) own, manage,
operate, join, control, finance or participate in the ownership, management,
operation, control or financing of, or be connected as an officer, director,
employee, partner, principal, agent, representative, consultant, licensor or
otherwise with, any business or enterprise engaged in any business in the
telecommunications or cable communications market, within the Restricted
Territory, or (ii) engage in any other manner, within the Restricted
Territory, in any business in the telecommunications or cable
communications market.
CONFIDENTIAL INFORMATION. "Confidential Information" means any
non-public information (whether or not in written form and whether or not
expressly designated as confidential) relating directly or indirectly to the
Assets, Hardy, the Sellers, the Purchaser or any of their subsidiaries or
relating directly or indirectly to the business, operations, financial
affairs, performance, assets, technology, processes, products, contracts,
customers, licensees, sublicensees, suppliers, personnel, consultants or
plans of Hardy, the Sellers, the Purchaser or any of their subsidiaries
(including any such information consisting of or otherwise relating to trade
secrets, know-how, technology, inventions, prototypes, designs, drawings,
sketches, processes, license or sublicense arrangements, formulae, proposals,
research and development activities, customer lists or preferences, pricing
lists, referral sources, marketing or sales techniques or plans, operations
manuals, service manuals, financial information, projections, lists of
consultants, lists of suppliers or lists of distributors); PROVIDED, HOWEVER,
that "Confidential Information" shall not be deemed to include information
that was already publicly known and in the public domain prior to the time of
its initial disclosure to Hardy, the Sellers, the General Partners or the
Purchaser.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental
Authorization).
CONTRACT. "Contract" shall mean any written, oral, implied or other
agreement, contract, understanding, arrangement, instrument, note, guaranty,
indemnity, representation, warranty, deed, assignment, power of attorney,
certificate, purchase order, work order, insurance policy, benefit plan,
commitment, covenant, assurance or undertaking of any nature.
DAMAGES. "Damages" shall include any loss, damage, injury, decline
in value, lost opportunity, Liability, claim, demand, settlement, judgment,
award, fine, penalty, Tax, fee (including any legal fee, expert fee,
accounting fee or advisory fee), charge, cost (including any cost of
investigation) or expense of any nature.
DISCLOSURE SCHEDULE. "Disclosure Schedule" shall mean the schedule
(dated as of the date of the Agreement) delivered to the Purchaser on behalf
of Hardy, a copy of which is attached to the Agreement and incorporated in
the Agreement by reference.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge,
hypothecation, charge, mortgage, security interest, encumbrance, equity,
trust, equitable interest, claim, preference, right of possession, lease,
tenancy, license, encroachment, covenant, infringement, interference, Order,
proxy, option, right of first refusal, preemptive right, community property
interest, legend, defect, impediment, exception, reservation, limitation,
impairment, imperfection of title, condition or restriction of any nature
(including any restriction on the transfer of any asset, any restriction on
the receipt of any income derived from any asset, any restriction on the use
of any asset and any restriction on the possession, exercise or transfer of
any other attribute of ownership of any asset).
ENTITY. "Entity" shall mean any corporation (including any
non-profit corporation),
general partnership, limited partnership, limited liability partnership,
joint venture, estate, trust, cooperative, foundation, society, political
party, union, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization or entity.
EXCLUDED ASSETS. "Excluded Assets" shall mean the assets identified
on EXHIBIT I (to the extent owned by Hardy on the Closing Date).
GAAP. "GAAP" shall mean generally accepted accounting principles.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean
any: (a) permit, license, certificate, franchise, concession, approval,
consent, ratification, permission, clearance, confirmation, endorsement,
waiver, certification, designation, rating, registration, qualification or
authorization issued, granted, given or otherwise made available by or under
the authority of any Governmental Body or pursuant to any Legal Requirement;
or (b) right under any Contract with any Governmental Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation,
principality, state, commonwealth, province, territory, county, municipality,
district or other jurisdiction of any nature; (b) federal, state, local,
municipal, foreign or other government; (c) governmental or
quasi-governmental authority of any nature (including any governmental
division, subdivision, department, agency, bureau, branch, office,
commission, council, board, instrumentality, officer, official,
representative, organization, unit, body or Entity and any court or other
tribunal); (d) multi-national organization or body; or (e) individual, Entity
or body exercising, or entitled to exercise, any executive, legislative,
judicial, administrative, regulatory, police, military or taxing authority or
power of any nature.
INDEMNITEES. "Indemnitees" shall mean the following Persons: (a) the
Purchaser; (b) the Purchaser's current and future affiliates; (c) the
respective Representatives of the Persons referred to in clauses "(a)" and
"(b)" above; and (d) the respective successors and assigns of the Persons
referred to in clauses "(a)", "(b)" and "(c)" above.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal,
state, local, municipal, foreign or other law, statute, legislation,
constitution, principle of common law, resolution, ordinance, code, edict,
decree, proclamation, treaty, convention, rule, regulation, ruling,
directive, pronouncement, requirement, specification, determination,
decision, opinion or interpretation issued, enacted, adopted, passed,
approved, promulgated, made, implemented or otherwise put into effect by or
under the authority of any Governmental Body.
LIABILITY. "Liability" shall mean any debt, obligation, duty or
liability of any nature (including any unknown, undisclosed, unmatured,
unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious,
derivative, joint, several or secondary liability), regardless of whether
such debt, obligation, duty or liability would be required to be disclosed on
a balance sheet prepared in accordance with generally accepted accounting
principles and regardless of whether such debt, obligation, duty or liability
is immediately due and payable.
NONCOMPETITION PERIOD. "Noncompetition Period" shall mean the period
commencing
on the Closing Date and ending on the fourth (4th) anniversary of the Closing
Date.
ORDER. "Order" shall mean any: (a) order, judgment, injunction,
edict, decree, ruling, pronouncement, determination, decision, opinion,
verdict, sentence, subpoena, writ or award issued, made, entered, rendered or
otherwise put into effect by or under the authority of any court,
administrative agency or other Governmental Body or any arbitrator or
arbitration panel; or (b) Contract with any Governmental Body entered into in
connection with any Proceeding.
PERSON. "Person" shall mean any individual, Entity or Governmental
Body.
PROCEEDING. "Proceeding" shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any informal proceeding),
prosecution, contest, hearing, inquiry, inquest, audit, examination or
investigation commenced, brought, conducted or heard by or before, or
otherwise involving, any Governmental Body or any arbitrator or arbitration
panel.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any patent, patent
application, trademark (whether registered or unregistered and whether or not
relating to a published work), trademark application, trade name, fictitious
business name, service xxxx (whether registered or unregistered), service
xxxx application, copyright (whether registered or unregistered), copyright
application, maskwork, maskwork application, trade secret, know-how, customer
list, franchise, system, computer software, invention, design, algorithm,
blueprint, engineering drawing, proprietary product, technology, proprietary
right or other intellectual property right or intangible asset.
RELATED PARTY. Each of the following shall be deemed to be a
"Related Party": (a) each individual who is, or who has at any time been, an
officer, director, partner or Affiliate of Hardy; (b) each member of the
family of each of the individuals referred to in clause "(a)" above; and (c)
any Entity (other than the Sellers) in which any one of the individuals
referred to in clauses "(a)" and "(b)" above holds or held (or in which more
than one of such individuals collectively hold or held), beneficially or
otherwise, a controlling interest or a material voting, proprietary or equity
interest.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
RESTRICTED TERRITORY. "Restricted Territory" means (a) each county
or similar political subdivision of each State of the United States of
America (including each of the counties in the State of California), (b) each
State, territory or possession of the United States of America and (c) any
other country in the world.
SELLERS CONTRACT. "Sellers Contract" shall mean any Contract: (a) to
which any of the Sellers is a party; (b) by which any of the Sellers or any
of their assets is or may become bound or under which the Seller have, or may
become subject to, any obligation; or (c) under which any of the Sellers has
or may acquire any right or interest.
SELLERS PROPRIETARY ASSET. "Sellers Proprietary Asset" shall mean
any Proprietary Asset owned by or licensed to the Sellers or otherwise used
by the Sellers.
TAX. "Tax" shall mean any tax (including any income tax, franchise
tax, capital gains tax, estimated tax, gross receipts tax, value-added tax,
surtax, excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use
tax, property tax, business tax, occupation tax, inventory tax, occupancy
tax, withholding tax or payroll tax), levy, assessment, tariff, impost,
imposition, toll, duty (including any customs duty), deficiency or fee, and
any related charge or amount (including any fine, penalty or interest), that
is, has been or may in the future be (a) imposed, assessed or collected by or
under the authority of any Governmental Body, or (b) payable pursuant to any
tax-sharing agreement or similar Contract.
TAX RETURN. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule,
notice, notification, form, election, certificate or other document or
information that is, has been or may in the future be filed with or submitted
to, or required to be filed with or submitted to, any Governmental Body in
connection with the determination, assessment, collection or payment of any
Tax or in connection with the administration, implementation or enforcement
of or compliance with any Legal Requirement relating to any Tax.
TRANSACTIONAL AGREEMENTS. "Transactional Agreements" shall mean: (a)
the Agreement; (b) the Escrow Agreement; (c) the Assumption Agreement; (d)
the Closing Certificate; (e) the Stock Assignments; and (f) the Registration
Rights Agreement.
TRANSACTIONS. "Transactions" shall mean (a) the execution and
delivery of the respective Transactional Agreements, and (b) all of the
transactions contemplated by the respective Transactional Agreements,
including: (i) the sale of the Assets by Hardy to the Purchaser in accordance
with the Agreement; and (ii) the performance by Hardy, the Sellers, the
General Partners and the Purchaser of their respective obligations under the
Transactional Agreements, and the exercise by Hardy, the Sellers, the General
Partners and the Purchaser of their respective rights under the Transactional
Agreements.
EXHIBIT B
FORM OF ESCROW AGREEMENT
THIS ESCROW AGREEMENT is entered into as of February 1, 2000 (the
"Closing Date"), by and between XXXXXXX XXXXX ("Xxxxx"), DITECH COMMUNICATIONS
CORPORATION, a Delaware corporation (the "Company"), and U.S. TRUST COMPANY,
NATIONAL ASSOCIATION (the "Escrow Agent").
RECITALS
(a) The Company and Hardy have entered into an Asset Purchase
Agreement dated December 8, 1999 (the "Purchase Agreement"), pursuant to
which Hardy is selling certain of his assets to the Company pursuant to the
terms set forth therein.
(b) Pursuant to Section 1.3 of the Purchase Agreement, Hardy has
agreed to certain performance obligations.
(c) The Purchase Agreement contemplates the establishment of an
escrow arrangement to secure the performance obligations of Hardy under the
Purchase Agreement.
AGREEMENT
The parties to this Escrow Agreement, intending to be legally bound,
agree as follows:
1. DEFINED TERMS
Capitalized terms used and not otherwise defined in this Escrow
Agreement shall have the meanings assigned to them in the Purchase Agreement.
2. ESCROW
2.1 SHARES TO BE PLACED IN ESCROW. On the Closing Date, the Company
shall deposit 40,000 shares of the Company's common stock (the "Escrow
Shares") with the Escrow Agent as partial security for the performance
obligations of Hardy pursuant to the Purchase Agreement. The Escrow Agent
agrees to accept delivery of the Escrow Shares and to hold such Escrow Shares
in an escrow account (the "Escrow" or "Escrow Account") in accordance with
the provisions of this Escrow Agreement. The Escrow Shares shall not be
subject to any lien, attachment, trustee process or any other judicial
process of any creditor of any party hereto.
2.2 OBLIGATIONS OF HARDY. Hardy has agreed in Section 1.3 of the
Purchase Agreement to certain performance obligations in connection with the
maintenance of the goodwill of the technology transferred to the Purchaser
pursuant to the Purchase Agreement. Hardy agrees that
the Escrow Shares shall be security for such performance obligation, subject
to the limitations and in the manner provided in this Escrow Agreement and
the Purchase Agreement, and are subject to release to Hardy upon the terms
set forth herein.
2.3 RELEASE OF ESCROW SHARES.
(a) On each of January 1, 2001 (the "First Release Date"), and the
first and second year anniversaries of the First Release Date (each, a
"Release Date"), the Escrow Agent shall distribute 10,000 shares, 10,000
shares and 10,000 shares, respectively, of the Escrow Shares, to Hardy;
PROVIDED, HOWEVER, that if prior to any Release Date Hardy voluntarily
terminates his employment relationship with the Company, the parties hereto
agree that the Company shall have the right to repurchase any of the then
undistributed shares from the Escrow Agent for one dollar ($1) in the
aggregate. In the event of the death of Hardy, Hardy shall be deemed to have
satisfied the applicable conditions as set forth this Section 2.3(a), as of
the second anniversary of the First Release Date; provided, however, that
such death shall not be considered a voluntary termination.
(b) On the third year anniversary of the First Release Date, the
Escrow Agent shall distribute 10,000 shares of the Escrow Shares, to Hardy
(regardless of the occurrence of the death of Hardy); PROVIDED, HOWEVER, that
in the event that each of the milestones as set forth in Exhibit A attached
hereto (the "Milestones"), is successfully completed, then the number of
Escrow Shares as set forth next to such Milestone in Exhibit A, shall be
released from the Escrow Account sooner, upon completion of such milestone.
2.4 VOTING OF SHARES. The record owners of the Escrow Shares shall be
entitled to exercise all voting rights with respect to such Escrow Shares.
2.5 DIVIDENDS, ETC. Any cash, securities or other property distributable
(whether by way of dividend, stock split or otherwise) in respect of or in
exchange for any Escrow Shares shall not be distributed to the record owner
of such Escrow Shares, but rather shall be held by the Escrow Agent in the
Escrow. At the time any Escrow Shares are required to be released from the
Escrow to any Person pursuant to this Escrow Agreement, any cash, securities
or other property previously distributed in respect of or in exchange for
such Escrow Shares shall be released from the Escrow to such Person.
2.6 TRANSFERABILITY. The interests of Hardy in the Escrow and in the
Escrow Shares shall not be assignable or transferable, other than by
operation of law. No transfer of any of such interests by operation of law
shall be recognized or given effect until the Escrow Agent shall have
received written notice of such transfer.
3. CLAIM PROCEDURES
3.1 CLAIM NOTICE.
(a) If Hardy voluntarily terminates his employment relationship
with the Company
prior to the Termination Date (as defined below), the Company shall, not
later than ten (10) days following the effective termination date of Hardy's
employment, give written notice to Hardy and the Escrow Agent, of the
Company's intention to repurchase the then undistributed Escrow Shares (the
"Repurchase Shares") pursuant to Section 2.3(a) or 2.3(b) (a "Repurchase
Notice"). The date four (4) years after the Closing Date shall be referred to
herein as the "Termination Date."
(b) If the death of Hardy occurs, the representative or agent of
Hardy (the "Representative") shall, not later than thirty (30) days following
the date of such death, give written notice to the Company and the Escrow
Agent, of such death, with a copy of a validly issued death certificate, and
the request of such Representative for the applicable number of Escrowed
Shares to be released pursuant to Section 2.3 above (the "Notice of Death").
The Escrow Agent shall thereupon release to such Representative and the
Company the appropriate number of Escrow Shares pursuant to Section 2.3
above, from the Escrow Account in accordance with such agreement or
instructions.
2.2 RESPONSE NOTICE. Within thirty (30) days after the delivery of a
Repurchase Notice to Hardy, Hardy shall deliver to the Company and the Escrow
Agent, a written notice (the "Response Notice") containing: (i) instructions
to the effect that the Repurchase Shares set forth in such Repurchase Notice
are to be repurchased by the Company and released from the Escrow Account to
the Company; or (ii) a statement that the Repurchase Shares set forth in such
Repurchase Notice are being disputed. If no Response Notice is received by
the Company from Hardy within thirty (30) days after the delivery of a
Repurchase Notice to Hardy, then the recipient of such Repurchase Notice
shall be deemed to have given instructions that all of the Repurchase Shares
set forth in such Repurchase Notice are to be repurchased by and released to
the Company from the Escrow Account.
2.3 RELEASE OF DISPUTED ESCROW SHARES. If a Response Notice delivered by
Hardy in response to a Repurchase Notice, contains a statement that all of
the Repurchase Shares set forth in such notice is being disputed (such amount
or the disputed portion thereof being referred to as the "Disputed Amount"),
then the Escrow Agent shall continue to hold in Escrow the Disputed Amount,
notwithstanding the occurrence of the Termination Date, until (i) delivery of
a copy of a settlement agreement executed by the Company and Hardy setting
forth instructions to the Escrow Agent as to release from the Escrow Account,
if any, that shall be made with respect to the Disputed Amount or (ii)
delivery of a copy of a court order setting forth instructions to the Escrow
Agent as to the release from the Escrow Account, if any, that shall be made
with respect to the Disputed Amount. The Escrow Agent shall thereupon release
the Escrow Shares from the Escrow Account in accordance with such agreement
or instructions.
4. RELEASE OF SHARES
4.1 SHARES TO BE RELEASED TO HARDY.
(A) Fifteen (15) days following the Termination Date, the Escrow Agent shall
release and deliver to Hardy, from Escrow all Escrow Shares then held in Escrow,
except for any Escrow Shares that are to be retained in Escrow in accordance
with Section 3.3 of this Escrow
Agreement.
(b) Fifteen (15) days following the date of receipt of the Notice
of Death, the Escrow Agent shall release and deliver to Hardy's
Representative and the Company from Escrow the appropriate number of Escrow
Shares pursuant to Section 2.3 above then held in Escrow, except for any
Escrow Shares that are to be retained in Escrow in accordance with Section
3.3 of this Escrow Agreement.
(c) Upon satisfaction of those conditions set forth in Section 3.3,
the Escrow Agent shall immediately release and deliver to Hardy the Disputed
Amount.
4.2 SHARES TO BE RELEASED TO THE COMPANY. If the Escrow Agent is
instructed, or deemed to be instructed pursuant to Section 3.2 herein, by
Hardy to release and deliver the Escrow Shares to the Company for repurchase
pursuant to Section 3.2 above, then the Escrow Agent shall release such
Escrow Shares to the Company within fifteen (15) of such instruction.
5. [RESERVED.]
6. FEES AND EXPENSES
6.1 EXPENSES. The Escrow Agent will be entitled to reimbursement for
reasonable expenses incurred in performance of its duties hereunder.
6.2 REIMBURSEMENT. The Company shall pay the fees and expenses of the
Escrow Agent for the services to be rendered by the Escrow Agent hereunder.
7. ESCROW AGENT'S DUTIES
7.1 The Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth herein, and as set forth in any
additional written escrow instructions which the Escrow Agent may receive
after the date of this Agreement which are signed by an officer of the
Company and Hardy, and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed to be genuine
and to have been signed or presented by the proper party or parties. The
Escrow Agent shall not be liable for any act done or omitted hereunder as
Escrow Agent while acting in good faith and in the exercise of reasonable
judgment, and any act done or omitted pursuant to the advice of counsel shall
be conclusive evidence of such good faith.
7.2 The Escrow Agent is hereby expressly authorized to comply with and
obey orders, judgments or decrees of any court of law, notwithstanding any
notices, warnings or other communications from any party or any other Person
to the contrary. In case the Escrow Agent obeys or complies with any such
order, judgment or decree of any court, the Escrow Agent shall not be liable
to any of the parties hereto or to any other Person by reason of such
compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified,
annulled, set aside, vacated or found to have been entered without
jurisdiction.
7.3 In performing any duties under the Agreement, the Escrow Agent shall
not be liable to any party for damages, losses, or expenses, except for gross
negligence or willful misconduct on the part of the Escrow Agent. The Escrow
Agent shall not incur any such liability for (A) any act or failure to act
made or omitted in good faith, or (B) any action taken or omitted in reliance
upon any instrument, including any written statement or affidavit provided
for in this Agreement that the Escrow Agent shall in good faith believe to be
genuine, nor will the Escrow Agent be liable or responsible for forgeries,
fraud, impersonations, or determining the scope of any representative
authority. In addition, the Escrow Agent may consult with the legal counsel
in connection with Escrow Agent's duties under this Agreement and shall be
fully protected in any act taken, suffered, or permitted by him/her in good
faith in accordance with the advice of counsel. The Escrow Agent is not
responsible for determining or verifying the authority of any Person acting
or purporting to act on behalf of any party to this Agreement.
7.4 If any controversy arises between the parties to this Agreement, or
with any other party, concerning the subject matter of this Agreement, its
terms or conditions, the Escrow Agent will not be required to determine the
controversy or to take any action regarding it. In such event, the Escrow
Agent will not be liable for damage. Furthermore, the Escrow Agent may at its
option, file an action of interpleader requiring the parties to answer and
litigate any claims and rights among themselves. The Escrow Agent is
authorized to deposit with the clerk of the court all documents and the
Escrow Shares or cash held in escrow, except all cost, expenses, charges and
reasonable attorney fees incurred by the Escrow Agent due to the interpleader
action and which the parties jointly and severally agree to pay. Upon
initiating such action, the Escrow Agent shall be fully released and
discharged of and from all obligations and liability imposed by the terms of
this Agreement.
7.5 The parties and their respective successors and assigns agree
jointly and severally to indemnify and hold Escrow Agent harmless against any
and all losses, claims, damages, liabilities, and expenses, including
reasonable costs of investigation, counsel fees, and disbursements that may
be imposed on Escrow Agent or incurred by Escrow Agent in connection with the
performance of its duties under this Agreement (but excluding those expenses
contemplated by Section 7.7 in which case such expenses shall be the
responsibility of the Company), including but not limited to any litigation
arising from this Agreement or involving its subject matter.
7.6 The Escrow Agent may resign at any time upon giving at least thirty
(30) days written notice to the parties; PROVIDED, HOWEVER, that no such
resignation shall become effective until the appointment of a successor
Escrow Agent which shall be accomplished as follows: the parties shall use
their best efforts to mutually agree on a successor Escrow Agent within
thirty (30) days after receiving such notice. If the parties fail to agree
upon a successor Escrow Agent within such time, the Escrow Agent shall have
the right to appoint a successor Escrow Agent authorized to do business in
the State of California. The successor Escrow Agent shall execute and deliver
an instrument accepting such appointment and it shall, without further acts,
be vested with all the estates, properties, rights, powers, and duties of the
predecessor Escrow Agent as if originally
named as Escrow Agent. The Escrow Agent shall be discharged from any further
duties and liability under this Agreement.
7.7 The Escrow Agent shall be entitled to employ such legal counsel and
other experts (including, without limitation, the firm Xxxxxx Godward LLP) as
it may deem necessary to properly advise the Escrow Agent with its
obligations hereunder. The Escrow Agent may rely upon the advice of such
counsel, and it may pay such counsel reasonable compensation therefor.
Notwithstanding Section 7.5, the Company shall be responsible for all fees
generated by such legal counsel in connection with the Escrow Agent's
obligations hereunder.
8. GENERAL
8.1 OTHER AGREEMENTS. Nothing in this Escrow Agreement is intended to
limit any of the Company's rights, or any obligation of Hardy, under the
Purchase Agreement.
8.2 NOTICES. Any notice or other communication required or permitted to
be delivered to any party under this Escrow Agreement shall be in writing and
shall be deemed properly delivered, given and received when delivered (by
hand, by registered mail, by courier or express delivery service or by
facsimile) to the address or facsimile telephone number set forth beneath the
name of such party below (or to such other address or facsimile telephone
number as such party shall have specified in a written notice given to the
other parties hereto):
if to the Company:
Ditech Communications Corporation
000 X. Xxxxxxxxxxx Xxxx
Xxxxxxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
if to Hardy:
Xxxxxxx Xxxxx
0000 Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Facsimile:
with a copy to:
Berliner Xxxxx
00 Xxxxxxx Xxxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
if to the Escrow Agent:
U.S. Trust Company, National Association
Xxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxx
Facsimile: (000) 000-0000
8.3 COUNTERPARTS. This Escrow Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
8.4 HEADINGS. The underlined headings contained in this Escrow Agreement
are for convenience of reference only, shall not be deemed to be a part of
this Escrow Agreement and shall not be referred to in connection with the
construction or interpretation of this Escrow Agreement.
8.5 GOVERNING LAW; VENUE. This Escrow Agreement shall be construed in
accordance with, and governed in all respects by, the internal laws of the
State of California (without giving effect to principles of conflicts of
laws). Any state or federal court in the County of Santa Xxxxx in the State
of California shall have exclusive jurisdiction and venue over any dispute
arising out of this Escrow Agreement and the parties hereby consent to the
jurisdiction and venue of such courts.
8.6 WAIVER.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Escrow Agreement, and no delay on the
part of any Person in exercising any power, right, privilege or remedy under
this Escrow Agreement, shall operate as a waiver of such power, right,
privilege or remedy; and no single or partial exercise of any such power,
right, privilege or remedy shall preclude any other or further exercise
thereof or of any other power, right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out
of this Escrow Agreement, or any power, right, privilege or remedy under this
Escrow Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such Person; and any such waiver shall not be
applicable or have any effect except in the specific instance in which it is
given.
8.7 AMENDMENTS. This Escrow Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered on behalf of the Company and Hardy.
8.8 SEVERABILITY. In the event that any provision of this Escrow
Agreement, or the
application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Escrow Agreement, and the application of such
provision to Persons or circumstances other than those as to which it is
determined to be invalid, unlawful, void or unenforceable, shall not be
impaired or otherwise affected and shall continue to be valid and enforceable
to the fullest extent permitted by law.
8.9 ENTIRE AGREEMENT. This Escrow Agreement and the Purchase Agreement
and the other agreements contemplated in the Purchase Agreement set forth the
entire understanding of the parties relating to the subject matter hereof and
thereof and supersede all prior agreements and understandings among or
between any of the parties relating to the subject matter hereof and thereof.
8.10 CONSTRUCTION.
(a) For purposes of this Escrow Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Escrow Agreement.
(c) As used in this Escrow Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this Escrow
Agreement to "Sections" are intended to refer to Sections of this Escrow
Agreement.
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement as
of the date first above written.
DITECH COMMUNICATION CORPORATION,
a Delaware corporation
By:
-----------------------------------------
Xxxxxxx X. Xxxxxxx, Chief Financial
Officer
--------------------------------------------
XXXXXXX XXXXX, an individual
U.S. TRUST COMPANY, NATIONAL ASSOCIATION
By:
-----------------------------------------
Name:
Title:
EXHIBIT C
[RESERVED.]
EXHIBIT D
[RESERVED.]
EXHIBIT E
FORM OF STOCKHOLDER REPRESENTATION LETTER
DITECH COMMUNICATIONS CORPORATION
000 X. Xxxxxxxxxxx Xxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
Each of the undersigned hereby makes, jointly and severally, the
following certifications and representations with respect to the [aggregate five
hundred forty thousand (540,000) shares] (the "Shares") of the Common Stock of
DITECH COMMUNICATIONS CORPORATION, a Delaware corporation (the "Company"), which
are being acquired by each of the undersigned pursuant to that certain Asset
Purchase Agreement, dated December __, 1999, by and among the Company and each
of the undersigned.
Each of the undersigned represents and warrants that it is acquiring
the Shares solely for its account for investment and not with a view to or for
sale or distribution of the Shares or any part thereof. Each of the undersigned
also represents that the entire legal and beneficial interests of the Shares the
undersigned is acquiring is being acquired for, and will be held for, their
accounts only.
Each of the undersigned understands that the Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
on the basis that no distribution or public offering of the Shares is to be
effected. Each of the undersigned realizes that the basis for the exemption may
not be present if, notwithstanding the representations made herein, each of the
undersigned has in mind merely acquiring the Shares for a fixed or determinable
period in the future, or for a market rise, or for sale if the market does not
rise.
The undersigned has no such intention.
Each of the undersigned recognizes that the Shares being acquired by
the undersigned must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available.
Each of the undersigned is aware that the Shares may not be sold
pursuant to Rule 144 adopted under the Securities Act ("Rule 144") unless
certain conditions are met and until the undersigned has met the holding
provisions of Rule 144. Among the conditions for use of the Rule is the
availability of current information to the public about the Company. Each of the
undersigned understands that the Company has not made such information available
and has no present plans to do so.
Each of the undersigned further agrees not to make any disposition of
all or any part of the Shares being acquired in any event unless and until:
1. The Company shall have received a letter secured by the undersigned from the
Securities and
Exchange Commission stating that no action will be recommended to the
Commission with respect to the proposed disposition; or
2. There is then in effect a registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance
with said registration statement; or
3. (i) The undersigned shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, (ii) the undersigned
shall have furnished the Company with an opinion of counsel for the undersigned
to the effect that such disposition will not require registration of such Shares
under the Securities Act, and (iii) such opinion of counsel for the undersigned
shall have been concurred in by the Company's counsel and the Company shall have
advised the undersigned of such concurrence.
4. Each of the undersigned agrees to be bound by any and all restrictions and
obligations with respect to the Shares as may be set forth in any purchase
agreement, registration rights agreement or any other agreement or document
relating to the Shares.
Each of the undersigned understands and agrees that all certificates
evidencing the Shares to be issued to the undersigned may bear the following
legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
Very truly yours,
--------------------
EXHIBIT F
FORM OF NONCOMPETITION AGREEMENT
This NON-COMPETITION AGREEMENT (the "Agreement") is made as of February
1, 2000, by and between DITECH COMMUNICATIONS CORPORATION, a Delaware
corporation (the "Company"), and XXXXXXX XXXXX (the "Seller").
RECITALS
The Seller is, and has been, providing certain independent contractor
services to each of Telinnovation Service Corporation, a California corporation
("TSC"), Telinnovation Corporation, a California corporation ("TC"),
Telinnovation, a California general partnership (the "Partnership," together
with TC and TSC, "Telinnovation") relating to the Assets (as defined in the
Telinnovation Agreement (as defined below)). The Company, Telinnovation and
certain other parties have entered into an Asset Purchase Agreement, dated as of
December 8, 1999 (the "Telinnovation Agreement"), providing for the purchase by
the Purchaser of all of the Assets, and the assumption by the Purchaser of the
Assumed Liabilities. The Company and the Seller have entered into an Asset
Purchase Agreement, dated as of December 8, 1999 (the "Purchase Agreement"),
providing for the purchase by the Purchaser of certain of the assets of the
Seller. In connection therewith, the Seller has agreed not to compete with the
Company in the manner and to the extent herein set forth. The Seller has agreed
to enter into this Agreement as an inducement to the Purchaser to enter into the
Purchase Agreement and consummate the Transactions.
All capitalized but undefined terms used herein this Agreement shall
have the meanings set forth in the Purchase Agreement.
AGREEMENT
In consideration of the mutual covenants herein contemplated and
intending to be legally bound hereby, the Purchaser and the Seller agree as
follows:
1. RESTRICTION ON COMPETITION. Until four (4) years after the Closing
Date, the Seller shall not, directly or indirectly, without the prior written
consent of the Purchaser, (i) own, manage, operate, join, control, finance or
participate in the ownership, management, operation, control or financing of,
or be connected as an officer, director, employee, partner, principal, agent,
representative, consultant, licensor or otherwise with, any business or
enterprise engaged in any business whose products or activities compete in
whole or in part with the products or activities of the Company, within the
Restricted Territory (as defined below), or (ii) engage in any other manner,
within the Restricted Territory, in any business whose products or activities
compete in whole or in part with the products or activities of the Company.
Notwithstanding the above, the Seller shall not be deemed to be engaged,
directly or indirectly, in any business in contravention of subparagraphs (i)
or (ii) above, if the Seller participates in any such business solely as a
passive investor in up to 1% of the equity securities of a company or
partnership, the securities of which are publicly traded. "Restricted
Territory" means (a) each county or similar political
subdivision of each State of the United States of America (including each of
the counties in the State of California), (b) each State, territory or
possession of the United States of America and (c) any other country in the
world.
2. NON-INTERFERENCE BY THE SELLER. The Seller further agrees that until
four (4) years after the Closing Date, he will not, without the prior written
consent of the Purchaser, (i) interfere with the business of the Purchaser by
soliciting, attempting to solicit, inducing, or otherwise causing any
employee or consultant of the Purchaser to terminate his or her employment as
such in order to become an employee, consultant or independent contractor to
or for any business that competes with the business of the Purchaser or to or
for any company with which the Seller is associated in any way; or (ii)
induce or attempt to induce any customers, suppliers, distributors,
resellers, or independent contractor of the Purchaser to terminate their
relationships with, or to take any action that would be disadvantageous to
the business of, the Purchaser.
3. INDEPENDENCE OF OBLIGATIONS. The covenants of the Seller set forth in
this Agreement shall be construed as independent of any other agreement or
arrangement between the Seller, on the one hand, and the Purchaser, on the
other, and the existence of any claim or cause of action by the Seller
against the Purchaser shall not constitute a defense to the enforcement of
such covenants against the Seller.
4. EQUITABLE RELIEF. The Seller expressly acknowledges that damages
alone will not be an adequate remedy for any breach by the Seller of the
covenants set forth in Sections 1 and 2 hereof and that the other parties
hereto, in addition to any other remedies which they may have, whether at
law, in equity, by contract or otherwise, shall be entitled, as a matter of
right, to injunctive relief, including specific performance, in any court of
competent jurisdiction with respect to any actual or threatened breach by the
Seller of any of said covenants.
5. SEVERABILITY, ETC.
(a) If any provision of this Agreement or any part of any such
provision is held under any circumstances to be invalid or unenforceable in
any jurisdiction, then (i) such provision or part thereof shall, with respect
to such circumstances and in such jurisdiction, be deemed amended to conform
to applicable laws so as to be valid and enforceable to the fullest possible
extent, (ii) the invalidity or unenforceability of such provision or part
thereof under such circumstances and in such jurisdiction shall not affect
the validity or enforceability of such provision or part thereof under any
other circumstances or in any other jurisdiction, and (iii) such invalidity
of enforceability of such provision or part thereof shall not affect the
validity or enforceability of the remainder of such provision or the validity
or enforceability of any other provision of this Agreement. Each provision of
this Agreement is separable from every other provision of this Agreement, and
each part of each provision of this Agreement is separable from every other
part of such provision.
(b) The parties intend that the covenant contained in Section 1 above
shall be construed as a series of separate covenants, one for each
geographical unit specified. Except for geographical coverage, each such
separate covenant shall be deemed identical in terms to the covenant
contained in Section 1 above. If, in any judicial proceeding, a court shall
refuse to
enforce any of the separate covenants deemed included in this Agreement, then
the unenforceable covenant shall be deemed eliminated from these provisions
for the purpose of those proceedings to the extent necessary to permit the
remaining separate covenants to be enforced.
6. WAIVER OF BREACH. The failure or delay by the Purchaser in enforcing
any provision of this Agreement shall not operate as a waiver thereof, and
the waiver by the Purchaser or a breach of any provision of this Agreement by
the Seller shall not operate or be construed as a waiver of any subsequent
breach or violation thereof. All waivers shall be in writing and signed by
the party to be bound.
7. ASSIGNMENT. This Agreement shall be assignable by the Purchaser only
to any person, firm or corporation which may become a successor in interest
by purchase, merger or otherwise to the Purchaser or the business operated by
the Purchaser. This Agreement is not assignable by the Seller.
8. ENTIRE AGREEMENT; AMENDMENT. This Agreement represents the entire
agreement and understanding of the parties with respect to the subject matter
hereof and supersedes all prior agreements and understandings of the parties
in connection therewith. It may not be altered or amended except by an
agreement in writing signed by the parties to be bound.
9. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the Purchaser and its permitted successors and assigns and the
Seller and the Seller's heirs and legal representatives.
10. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California (without
giving effect to principles of conflicts of laws).
11. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Non-Competition
Agreement as of the date first above written.
DITECH COMMUNICATIONS CORPORATION,
a Delaware corporation
By:
--------------------------------------
Xxxxxxx X. Xxxxxxx, Chief Financial
Officer
--------------------------------------
Xxxxxxx Xxxxx
EXHIBIT G
FORM OF GENERAL RELEASE
THIS GENERAL RELEASE ("General Release") is being executed and
delivered as of February 1, 2000, by XXXXXXX XXXXX, an individual ("Xxxxx"),
XXXXX XXXXXXX, an individual ("Xxxxxxx"), and XXXXXXX XXXXX, an individual
("Hardy," together with Xxxxx and Xxxxxxx, the "Releasors"), to and in favor of,
and for the benefit of, DITECH COMMUNICATIONS CORPORATION, a Delaware
corporation (the "Purchaser"), TELINNOVATION SERVICE Corporation, a California
corporation ("TSC"), TELINNOVATION CORPORATION, a California corporation ("TC")
and TELINNOVATION, a California general partnership (the "Partnership," together
with TC and TSC, the "Sellers").
RECITALS
A. The Purchaser, the Sellers, the Partnership, Xxxxx and Xxxxxxx have
entered in an Asset Purchase Agreement, dated December 8, 1999 (the "Purchase
Agreement"), providing for the purchase by the Purchaser of all of the Assets
and the assumption by the Purchaser of the Assumed Liabilities.
B. The Purchaser and Hardy have entered in an Asset Purchase Agreement,
dated December 8, 1999 (the "Hardy Agreement"), providing for the purchase by
the Purchaser of certain of Hardy's assets as provided therein.
C. The Purchaser has required, as a condition to consummating the
Transactions contemplated by the Purchase Agreement and the transactions
contemplated by the Hardy Agreement, that the Releasors execute and deliver this
General Release.
D. All capitalized and undefined terms shall have the meanings set
forth in the Purchase Agreement.
AGREEMENT
In order to induce Purchaser to consummate the Transactions
contemplated by the Purchase Agreement and the transactions contemplated by the
Hardy Agreement, and for other valuable consideration (the receipt and
sufficiency of which are hereby acknowledged by the Releasors), the Releasors
hereby covenant and agree as follows:
1. RELEASE. Each Releasor, for himself and for each of such Releasor's
Associated Parties (as defined in Section 2), hereby generally, irrevocably,
unconditionally and completely releases and forever discharges each of the
Releasees (as defined in Section 2) from, and hereby irrevocably,
unconditionally and completely waives and relinquishes, each of the Released
Claims (as defined in Section 2).
2. DEFINITIONS.
(a) The term "Associated Parties," when used herein with respect to
a Releasor, shall mean and include: (i) such Releasor's predecessors,
successors, executors, administrators, heirs and estate; (ii) such Releasor's
past, present and future assigns, agents and representatives; (iii) each
entity that such Releasor has the power to bind (by such Releasor's acts or
signature) or over which such Releasor directly or indirectly exercises
control; and (iv) each entity of which such Releasor owns, directly or
indirectly, at least 50% of the outstanding equity, beneficial, proprietary,
ownership or voting interests.
(b) The term "Releasees" shall mean and include: (i) Purchaser, (ii)
the Sellers, and (iii) the successors and past, present and future assigns,
directors, officers, partners, employees, agents, attorneys and
representatives of the Purchaser and respective Seller.
(c) The term "Claims" shall mean and include all past, present and
future disputes, claims, controversies, demands, rights, obligations,
liabilities, actions and causes of action of every kind and nature,
including: (i) any unknown, unsuspected or undisclosed claim; (ii) any claim
or right that may be asserted or exercised by a Releasor in such Releasor's
capacity as a stockholder, director, officer, partner or employee of the
Sellers or in any other capacity; and (iii) any claim, right or cause of
action based upon any breach of any express, implied, oral or written
contract or agreement.
(d) The term "Released Claims" shall mean and include each and every
Claim that (i) any Releasor or any Associated Party of any Releasor may have
had in the past, may now have or may have in the future against any of the
Releasees, and (ii) has arisen or arises directly or indirectly out of, or
relates directly or indirectly to, any circumstance, agreement, activity,
action, omission, event or matter occurring or existing on or prior to the
date of this General Release (excluding only such Releasor's rights, if any,
under the Purchase Agreement).
3. CIVIL CODE SS.1542. Each Releasor (a) represents, warrants and
acknowledges that such Releasor has been fully advised by his attorney of the
contents of Section 1542 of the Civil Code of the State of California, and
(b) hereby expressly waives the benefits thereof and any rights such Releasor
may have thereunder. Section 1542 of the Civil Code of the State of
California provides as follows:
"A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor."
Each Releasor also hereby waives the benefits of, and any rights such Releasor
may have under, any statute or common law principle of similar effect in any
jurisdiction.
4. REPRESENTATIONS AND WARRANTIES. Each Releasor represents and warrants
that:
(a) such Releasor has not assigned, transferred, conveyed or
otherwise disposed of any Claim against any of the Releasees, or any direct
or indirect interest in any such Claim, in whole or in part;
(b) to the best of such Releasor's knowledge, no other person or
entity has any interest in any of the Released Claims;
(c) no Associated Party of such Releasor has or had any Claim
against any of the Releasees;
(d) no Associated Party of such Releasor will in the future have
any Claim against any Releasee that arises directly or indirectly from or
relates directly or indirectly to any circumstance, agreement, activity,
action, omission, event or matter occurring or existing on or before the date
of this General Release;
(e) this General Release has been duly and validly executed and
delivered by such Releasor;
(f) this General Release is a valid and binding obligation of such
Releasor and such Releasor's Associated Parties, and is enforceable against
such Releasor and each of such Releasor's Associated Parties in accordance
with its terms;
(g) there is no action, suit, proceeding, dispute, litigation,
claim, complaint or investigation by or before any court, tribunal,
governmental body, governmental agency or arbitrator pending or, to the best
of the knowledge of such Releasor, threatened against such Releasor or any of
such Releasor's Associated Parties that challenges or would challenge the
execution and delivery of this General Release or the taking of any of the
actions required to be taken by such Releasor under this General Release;
(h) neither the execution and delivery of this General Release nor
the performance hereof will (i) result in any violation or breach of any
agreement or other instrument to which such Releasor or any of such
Releasor's Associated Parties is a party or by which such Releasor or any of
such Releasor's Associated Parties is bound, or (ii) result in a violation or
any law, rule, regulation, treaty, ruling, directive, order, arbitration
award, judgment or decree to which such Releasor or any of such Releasor's
Associated Parties is subject; and
(i) no authorization, instruction, consent or approval of any
person or entity is required to be obtained by such Releasor or any of such
Releasor's Associated Parties in connection with the execution and delivery
of this General Release or the performance hereof.
5. INDEMNIFICATION. Without in any way limiting any of the rights or
remedies otherwise available to any Releasee, each Releasor shall indemnify
and hold harmless each Releasee against and from any loss, damage, injury,
harm, detriment, lost opportunity, liability, exposure, claim, demand,
settlement, judgment, award, fine, penalty, tax, fee, charge or expense
(including attorneys' fees) that is directly or indirectly suffered or
incurred at any time by such Releasee, or to which such Releasee otherwise
becomes subject at any time, and that arises directly or indirectly out of or
by virtue of, or relates directly or indirectly to, (a) any failure on the
part of such Releasor to observe, perform or abide by, or any other breach
of, any restriction, covenant, obligation, representation, warranty or other
provision contained herein, or (b) the assertion or purported assertion of
any of the Released Claims by such Releasor or any of such Releasor's
Associated Parties.
6. MISCELLANEOUS.
(a) This General Release sets forth the entire understanding of the
parties relating to the subject matter hereof and supersedes all prior
agreements and understandings among or between any of the Releasors and
Releasees relating to the subject matter hereof.
(b) If any provision of this General Release or any part of any such
provision is held under any circumstances to be invalid or unenforceable in
any jurisdiction, then (i) such provision or part thereof shall, with respect
to such circumstances and in such jurisdiction, be deemed amended to conform
to applicable laws so as to be valid and enforceable to the fullest possible
extent, (ii) the invalidity or unenforceability of such provision or part
thereof under such circumstances and in such jurisdiction shall not affect
the validity or enforceability of such provision or part thereof under any
other circumstances or in any other jurisdiction, and (iii) such invalidity
or enforceability of such provision or part thereof shall not affect the
validity or enforceability of the remainder of such provision or the validity
or enforceability of any other provision of this General Release. If any
provision of this General Release or any part of such provision is held to be
unenforceable against any Releasor, then the unenforceability of such
provision or part thereof against such Releasor shall not affect the
enforceability thereof against any other Releasor. Each provision of this
General Release is separable from every other provision of this General
Release, and each part of each provision of this General Release is separable
from every other part of such provision.
(c) This General Release shall be construed in accordance with, and
governed in all respects by, the laws of the State of California (without
giving effect to principles of conflicts of laws).
(d) Any legal action or other legal proceeding relating to this
General Release or the enforcement of any provision of this General Release
may be brought or otherwise commenced by any Releasee in any state or federal
court located in the State of California. Each Releasor:
(i) expressly and irrevocably consents and submits to the
jurisdiction of each state and federal court located in the State of
California in connection with any such legal proceeding;
(ii) agrees that each state and federal court located in the
State of California shall be deemed to be a convenient forum; and
(iii) agrees not to assert (by way of motion, as a defense or
otherwise), in any such legal proceeding commenced in any state or federal
court located in the State of California, any claim that such Releasor is not
subject personally to the jurisdiction of such court, that such legal
proceeding has been brought in an inconvenient forum, that the venue of such
proceeding is improper or that this General Release or the subject matter of
this General Release may not be enforced in or by such court.
Nothing contained in this General Release shall be deemed to limit or otherwise
affect the right of any Releasee (1) to commence any legal proceeding or to
otherwise proceed against any of the Releasors or any other person or entity in
any other forum or jurisdiction, or (2) to raise this Release as a defense in
any legal proceeding in any other forum or jurisdiction.
(e) This General Release may be executed in several counterparts,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
(f) Each Releasor shall execute and/or cause to be delivered to each
Releasee such instruments and other documents, and shall take such other
actions, as such Releasee may reasonably request for the purpose of carrying
out or evidencing any of the actions contemplated by this General Release.
(g) If any legal action or other legal proceeding relating to this
General Release or the enforcement of any provision hereof is brought by any
Releasor or Releasee, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements to the extent actually
incurred (in addition to any other relief to which the prevailing party may
be entitled).
(h) This General Release shall be effective with respect to, and
shall be binding upon and enforceable against, each Releasor who executes
this General Release, regardless of whether any of the other Releasors
executes this General Release.
(i) Whenever required by the context, the singular number shall
include the plural, and vice versa; the masculine gender shall include the
feminine and neuter genders; and the neuter gender shall include the
masculine and feminine genders.
(j) Any rule of construction to the effect that ambiguities are to
be resolved against the drafting party shall not be applied in the
construction or interpretation of this General Release.
(k) As used in this General Release, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, and shall be deemed to be followed by the words "without
limitation."
IN WITNESS WHEREOF, the Releasors have caused this General Release to
be executed as of the date first above written.
RELEASORS:
--------------------------------------------
XXXXXXX XXXXX, an individual
--------------------------------------------
XXXXX XXXXXXX, an individual
--------------------------------------------
XXXXXXX XXXXX, an individual
EXHIBIT H
[RESERVED.]
EXHIBIT I
HARDY EXCLUDED ASSETS
The following assets of the Seller are Excluded Assets and will not be
among the Assets transferred to the Purchaser:
1. All Seller's cash, cash equivalents, certificates of deposit,
money market accounts, deposits, investment, checking and
savings accounts, and any financial institution accounts and
financial instruments as of and at the time of Closing.
2. All Seller's shares of stock, bonds and securities holdings in
any brokerage account, and all other equity interests,
investments and securities held by the Seller as of and at the
time of Closing.
3. All Seller's computer equipment and related peripherals
located at Seller's residence, consisting of two (2) Pentium
desktop computers, a Toshiba Laptop computer, related
equipment and software, none of which contains any proprietary
information relating to the Assets, as such term is defined in
the Agreement and the Purchase Agreement.
4. All Seller's real and personal property, including motor
vehicles of the Seller, as of and at the time of Closing.
EXHIBIT J
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, ________________ hereby sells, assigns and
transfers unto DITECH COMMUNICATIONS CORPORATION, a Delaware corporation (the
"Company"), pursuant to the Asset Purchase Agreement, dated December __, 1999 by
and between the undersigned and the Company (the "Agreement"), and the Escrow
Agreement (as defined in the Agreement) ___________________ (______) shares of
Common Stock of the Company standing in the undersigned's name on the books of
the Company represented by Certificate No[(S)] _________ and does hereby
irrevocably constitute and appoint the Company's Secretary attorney to transfer
said stock on the books of the Company with full power of substitution in the
premises. This Assignment may be used only in accordance with and subject to the
terms and conditions of the Agreement and the Escrow Agreement, in connection
with the repurchase of shares of Common Stock issued to the undersigned pursuant
to the Agreement and the Escrow Agreement.
Dated:
(Signature)
(Print Name)
EXHIBIT K
FORM OF REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of February 1, 2000, by
and among DITECH COMMUNICATIONS CORPORATION, a Delaware corporation (the
"Company"), TELINNOVATION SERVICE CORPORATION, a California corporation ("TSC"),
TELINNOVATION CORPORATION, a California corporation ("TC"), TELINNOVATION, a
California general partnership (the "Partnership," together with TC and TSC,
"Telinnovation"), XXXXXXX XXXXX, an individual ("Xxxxx"), XXXXX XXXXXXX, an
individual ("Xxxxxxx") and XXXXXXX XXXXX ("Xxxxx," together with Xxxxx and
Xxxxxxx, the "Sellers").
RECITALS
A. The Company, Telinnovation, Xxxxx and Xxxxxxx have entered into an
Asset Purchase Agreement dated December 8, 1999 (the "Telinnovation
Agreement"), providing for the sale of substantially all of the assets of
Telinnovation to the Company pursuant to the terms set forth therein.
B. The Company and Hardy have entered into an Asset Purchase Agreement
dated December 8, 1999 (the "Hardy Agreement," together with the
Telinnovation Agreement, the "Purchase Agreements"), providing for the sale
of certain of the assets of Hardy to the Company pursuant to the terms set
forth therein.
C. In order to induce the Sellers to enter into their respective
Purchase Agreements, the Company has agreed to provide the registration
rights set forth in this Agreement. The execution and delivery of this
Agreement is a condition to the closing under both Purchase Agreements.
The parties hereto hereby agree as follows:
1. DEMAND REGISTRATION.
(a) Request for Registration. Commencing June 9, 2000, the holders
of a majority of the Registrable Securities may request, one time only,
registration under the Securities Act of all or any portion of their
Registrable Securities on Form S-2 or S-3 or any similar short-form
registration ("Short-Form Registrations"), if available; PROVIDED THAT the
aggregate offering value of the Registrable Securities requested to be
registered in any Short-Form Registration must equal at least $1,000,000. The
registration requested pursuant to this Section 1(a) is referred to herein as
the "Demand Registration." The Demand Registration shall specify the
approximate number of Registrable Securities requested to be registered and
the anticipated per share price range for such offering. Within ten (10) days
after receipt of any such request, the Company shall give written notice of
such requested registration to all other holders of Registrable Securities
and, subject to Section 1(d) below, shall include in such registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within fifteen (15) days after the receipt of
the Company's notice.
(b) DEMAND EXPENSES. All Registration Expenses of the holders of
Registrable Securities incurred in connection with a Demand Registration
shall be paid by the Company.
(c) Priority on Demand Registration. The Company shall not include
in any Demand Registration that is a firmly underwritten offering any
securities which are not Registrable Securities without the prior written
consent of the holders of a majority of the Registrable Securities included
in such registration. If a Demand Registration is an underwritten offering
and the managing underwriters advise the Company in writing that in their
opinion the number of Registrable Securities and, if permitted hereunder,
other securities requested to be included in such offering exceeds the number
of Registrable Securities and other securities, if any, which can be sold in
an orderly manner in such offering within a price range acceptable to the
holders of a majority of the Registrable Securities initially requesting
registration, the Company shall include in such registration prior to the
inclusion of any securities which are not Registrable Securities the number
of Registrable Securities requested to be included which in the opinion of
such underwriters can be sold in an orderly manner within the price range of
such offering, pro rata among the respective holders thereof on the basis of
the amount of Registrable Securities owned by each such holder.
2. RESTRICTIONS ON DEMAND REGISTRATION. The Company may postpone for up
to ninety (90) days the filing or the effectiveness of a registration
statement for a Demand Registration if the Company's board of directors
determines in its reasonable good faith judgment that such Demand
Registration would reasonably be expected to have a material adverse effect
on any proposal or plan by the Company or any of its Subsidiaries to engage
in any acquisition of assets (other than in the ordinary course of business)
or any merger, consolidation, tender offer, reorganization or similar
transaction; PROVIDED THAT in such event, the holders of Registrable
Securities initially requesting such Demand Registration shall be entitled to
withdraw such request and, if such request is withdrawn, such Demand.
Registration shall not count as a permitted Demand Registration hereunder and
the Company shall pay all Registration Expenses in connection with such
registration.
3. HOLDBACK AGREEMENTS. In connection with any underwritten public
offering of the Company's Common Stock, each holder of Registrable Securities
shall not, unless the underwriters managing the registered public offering
otherwise agree, effect any public sale or distribution (including sales
pursuant to Rule 144) of equity securities of the Company, or any securities
convertible into or exchangeable or exercisable for such securities (except
as part of such underwritten registration), during the ninety (90) day period
beginning on the date of the underwritten public offering of the Company's
Common Stock.
4. REGISTRATION PROCEDURES. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered
pursuant to this Agreement, the Company shall use its best efforts to effect
the registration and the sale of such Registrable Securities in accordance
with the intended method of disposition thereof, and pursuant thereto the
Company shall as expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use
its best efforts to cause such registration statement to become effective;
PROVIDED THAT before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company shall
furnish to the counsel selected by the holders of a majority of the
Registrable Securities covered by such registration statement copies of all
such documents proposed to be filed;
(b) notify each holder of Registrable Securities of the
effectiveness of each registration statement filed hereunder and prepare and
file with the Securities and Exchange Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for a period of not less than one hundred eighty (180) days and
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement during
such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate
the disposition in such jurisdictions of the Registrable Securities owned by
such seller; PROVIDED THAT the Company shall not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this subparagraph, (ii) subject itself to
taxation in any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction;
(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such seller,
the Company shall prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not contain an untrue statement of a
material fact or omit to state any fact necessary to make the statements
therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are
then listed and, if not so listed, to be listed on the NASD automated
quotation system and, if listed on the NASD automated quotation system, use
its best efforts to secure designation of all such Registrable Securities
covered by such registration statement as a Nasdaq "national market system
security" within the meaning of Rule 11 Aa2-1 promulgated pursuant to the
Securities Exchange Act or, failing that, to secure Nasdaq authorization for
such Registrable Securities and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register as such with
respect to such Registrable Securities with the NASD;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders
of a majority of the Registrable Securities being sold or the underwriters,
if any, reasonably request in order to expedite or facilitate the disposition
of such Registrable Securities;
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained
by any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(j) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
available to its security holders, as, soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning
with the first day of the Company's first full calendar quarter after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 1 l(a) of the Securities Act and Rule 158
thereunder;
(k) permit any holder of Registrable Securities which holder, in its
reasonable judgment, might be deemed to be an underwriter or a controlling
person of the Company, to participate in the preparation of such registration
or comparable statement and to require the insertion therein of material,
furnished to the Company in writing, which in the reasonable judgment of such
holder and its counsel should be included;
(l) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification
of any Common Stock included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order; and
(m) obtain a comfort letter, addressed to the holders of the
Registrable Securities covered by the registration statement, from the
Company's independent public accountants in customary form and covering such
matters of the type customarily covered by comfort letters as the holders of
a majority of the Registrable Securities being sold reasonably request.
5. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including, without limitation, all
registration and filing fees, fees and expenses of compliance with securities
or blue sky laws, printing expenses, messenger and delivery expenses, fees
and disbursements of custodians, and fees and disbursements of counsel for
the Company
and all independent certified public accountants, underwriters (excluding
discounts and commissions) and other Persons retained by the Company (all
such expenses being herein called "Registration Expenses"), shall be borne as
provided in this Agreement; in addition, the Company shall pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit or quarterly review, the expense of any liability insurance
and the expenses and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by the Company are
then listed or on the NASD automated quotation system.
(b) In connection with each Demand Registration the Company shall
reimburse the holders of Registrable Securities included in such registration
for the reasonable fees and disbursements (up to a maximum of $5,000) of one
counsel chosen by the holders of a majority of the Registrable Securities
included in such registration.
(c) To the extent that Registration Expenses are not paid by the
Company, each holder of securities included in any registration hereunder
shall pay those Registration Expenses allocable to the registration of such
holder's securities so included, and any Registration Expenses not so
allocable shall be borne by all sellers of securities included in such
registration in proportion to the aggregate selling price of the securities
to be so registered.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted by law,
each holder of Registrable Securities, its officers and directors and each
Person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are caused by
or contained in any information furnished in writing to the Company by such
holder expressly for use therein or, in a registration not involving an
underwritten offering, are caused by such holder's failure to deliver a copy
of the registration statement or prospectus or any amendments or supplements
thereto after the Company has furnished such holder with a sufficient number
of copies of the same. In connection with an underwritten offering, the
Company shall indemnify such underwriters, their officers and directors and
each Person who controls such underwriters (within the meaning of the
Securities Act) to the same extent as provided above with respect to the
indemnification of the holders of Registrable Securities.
(b) In connection with any registration statement in which a holder
of Registrable Securities is participating, each such holder shall furnish to
the Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, shall indemnify
the Company, its directors and officers and each Person who controls the
Company (within the meaning of the Securities Act) against any losses,
claims, damages, liabilities and expenses resulting from any untrue or
alleged untrue statement of material fact contained in the registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or omission is
contained in any information or affidavit so furnished in writing by such
holder; PROVIDED THAT the obligation to indemnify shall be individual, not
joint and several, for each holder and shall be limited to the net amount of
proceeds received by such holder from the sale of Registrable Securities
pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give prompt
notice shall not impair any Person's right to indemnification hereunder to
the extent that such failure has not prejudiced the indemnifying party) and
(ii) unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist with
respect to such claim, permit such indemnifying party to assume the defense
of such claim with counsel reasonably satisfactory to the indemnified party.
If such defense is assumed, the indemnifying party shall not be subject to
any liability for any settlement made by the indemnified party without
its-consent (but such consent shall not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the
defense of a claim shall not be obligated to pay the fees and expenses of
more than one counsel for all parties indemnified by such indemnifying party
with respect to such claim, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to such claim.
(d) The indemnification provided for under this Agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party and shall survive the transfer of
securities. The Company also agrees to make such provisions, as are
reasonably requested by any indemnified party, for contribution to such party
in the event the Company's indemnification is unavailable for any reason.
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in
any underwriting arrangements approved by the Person or Persons entitled
hereunder to approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, custody agreements, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements; PROVIDED THAT no holder of Registrable Securities
included in any underwritten registration shall be required to make any
representations or warranties to the Company or the underwriters (other than
representations and warranties regarding such holder and such holder's
intended method of distribution) or to undertake any indemnification
obligations to the Company or the underwriters with respect thereto, except
as otherwise provided in Section 6 hereof.
8. DEFINITIONS.
(a) "REGISTRABLE SECURITIES" means (i) the aggregate total of six
hundred thousand (600,000) shares of the Company's Common Stock sold and
issued pursuant to the Purchase
Agreements, (ii) any Common Stock issued or issuable with respect to the
securities referred to in clause (i) above by way of a stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization, and (iii) any other shares of
Common Stock held by Persons holding securities described in clauses (i) or
(ii) above. As to any particular Registrable Securities, such securities
shall cease to be Registrable Securities of the second anniversary of the
date of the Purchase Agreements.
(b) Unless otherwise stated, other capitalized terms contained
herein have the meanings set forth in the Purchase Agreements.
9. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company shall not hereafter
enter into any agreement with respect to its securities which is inconsistent
with or violates the rights granted to the holders of Registrable Securities
in this Agreement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company shall
not take any action, or permit any change to occur, with respect to its
securities which would materially and adversely affect the ability of the
holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would materially
and adversely affect the marketability of such Registrable Securities in any
such registration (including, without limitation, effecting a stock split or
a combination of shares).
(c) REMEDIES. Any Person having rights under any provision of this
Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach
of the provisions of this Agreement and that any party may in its sole
discretion apply to any court of law or equity of competent jurisdiction
(without posting any bond or other security) for specific performance and for
other injunctive relief in order to enforce or prevent violation of the
provisions of this Agreement.
(d) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and holders of a majority of the Registrable
Securities.
(e) SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto shall bind and inure
to the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express
assignment has been made, the provisions of this Agreement which are for the
benefit of purchasers or holders of Registrable Securities are also for the
benefit of, and enforceable by, any subsequent holder of Registrable
Securities.
(f) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of this Agreement.
(g) COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall
constitute one and the same Agreement.
(h) DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
(i) GOVERNING LAW. All issues and questions concerning the
construction, validity, interpretation and enforcement of this Agreement and
the exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of California, without giving effect
to any choice of law or conflict of law rules or provisions (whether of the
State of California or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of
California.
(j) NOTICES. All notices and other communications required or
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (i)
five (5) days after deposit with the U.S. Postal Service or other applicable
postal service, if delivered by first class mall, postage prepaid, (ii) upon
delivery, if delivered by hand (iii) one (1) business day after the business
day of deposit with Federal Express or similar overnight courier, freight
prepaid or (iv) one (1) business day after the business day of facsimile
transmission, if delivered by facsimile transmission with copy by first class
mail, postage prepaid, and shall be addressed as follows, or at such other
address as a party may designate by ten (10) days' advance written notice to
the other parties to this Agreement pursuant to the provisions of this
Section 8(j):
(x) if to Telinnovation:
000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000-0000
Facsimile:__________________
if to Xxxxx:
000 Xxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Facsimile:__________________
if to Xxxxxxx:
00000 Xxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile:__________________
if to Hardy:
0000 Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Facsimile:__________________
with a copy to:
Berliner Xxxxx
00 Xxxxxxx Xxxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxxxxxxxxx 00000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
(y) if to the Company, to:
Ditech Communications Corporation
000 X. Xxxxxxxxxxx Xxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxx
with a copy to:
Xxxxxx Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
TELINNOVATION,
a California general partnership
By:
------------------------------------------
Xxxxxxx Xxxxx, General Partner
By:
------------------------------------------
Xxxxx Xxxxxxx, General Partner
TELINNOVATION SERVICE CORPORATION,
a California corporation
By:
------------------------------------------
Xxxxxxx Xxxxx, Chief Executive Officer
TELINNOVATION CORPORATION,
a California corporation
By:
-----------------------------------------
Xxxxxxx Xxxxx, Chief Executive Officer
-----------------------------------------
XXXXXXX XXXXX, an individual
-----------------------------------------
XXXXX XXXXXXX, an individual
DITECH COMMUNICATIONS CORPORATION,
a Delaware corporation
By:
-----------------------------------------
Xxxxxxx X. Xxxxxxx, Chief Financial
Officer
-----------------------------------------
XXXXXXX XXXXX, an individual
