EXHIBIT 10.48
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as of December 31,
1998, between NETWORK COMPUTING DEVICES, INC., a Delaware corporation ("Buyer")
and TEKTRONIX, INC., an Oregon corporation ("Seller"). Seller desires to sell
and Buyer desires to buy the assets of Seller's Network Displays Business
division ("NWD" or the "Business").
NOW, THEREFORE, Buyer and Seller hereby agree as follows:
ARTICLE 1
TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES
1.1. AGREEMENT TO SELL. Upon the terms and subject to all of the
conditions contained herein, Seller hereby agrees to sell, assign, transfer and
deliver to Buyer on the Closing Date (as defined in Article 3), and Buyer hereby
agrees to purchase from Seller on the Closing Date, the "Assets" (as defined in
Section 1.2).
1.2. DESCRIPTION OF ASSETS. For purposes of this Agreement, the
term "Assets" shall mean all equipment, inventories, pre-paid licenses, fixed
assets, contractual rights, intellectual property rights (as described below),
and other assets of every kind and description, wherever located, real, personal
or mixed, tangible or intangible, owned or held by Seller and used in or
necessary to the conduct or operation of the Business, as identified below:
1.2.1 all personal property, office computers, machinery,
office equipment and other equipment, furniture, fixtures, fixed assets and
other tangible property used in connection with the Business set forth on
SCHEDULE 1.2.1, less items disposed of in the ordinary course of business
between November 30, 1998 and the Closing Date and plus any replacements or
additions acquired in the ordinary course between November 30, 1998 and the
Closing Date;
1.2.2 all inventories (including spare parts) acquired,
manufactured or produced in the ordinary course of the Business as listed on
SCHEDULE 1.2.2 (the "Inventory"), less items disposed of in the ordinary
course of business between November 30, 1998 and the Closing Date and plus
any replacements or additions acquired in the ordinary course between
November 30, 1998 and the Closing Date;
1.2.3 those licenses, contracts and agreements listed on
SCHEDULE 1.2.3 hereto (collectively, the "Contracts"), plus any purchase
orders related exclusively to the Business and entered into between December
17, 1998 and the Closing Date in the ordinary course of business;
1.2.4 the prepaid royalties associated with certain contracts
set forth on SCHEDULE 1.2.4;
1.2.5 all product designs, patents, patent applications,
software, trademarks, trademark applications, service marks, service xxxx
applications, trade and other marks and names (either registered, common law
or registration applied for), copyrights, copyright applications, mask works,
inventions, trade secrets, proprietary information, know-how,
processes, manufacturing or marketing procedures, recipes, formulae,
drawings, schematics and patterns, and all documentation and other media
relating to the foregoing (collectively, "Intellectual Property") owned by
Seller or with respect to which Seller has a license, interest or other right
to use (all such Intellectual Property, collectively, the "Seller
Intellectual Property") and which is used by Seller solely in connection with
the Business. The Seller Intellectual Property includes, without limitation,
the Intellectual Property listed on SCHEDULE 1.2.5, but excludes the
Intellectual Property listed as "Excluded Intellectual Property" on such
Schedule. Without limitation of the foregoing, the Assets shall be deemed to
further include any drawings, documentation, schematics, manuals or other
materials, whether in written or magnetic form that describe, disclose or
otherwise set forth any of the Seller Intellectual Property; and
1.2.6 all goodwill associated with the Business and the name
"Network Displays."
1.3. EXCLUDED ASSETS. All accounts receivable of the Business
outstanding prior to the Closing Date and Seller's current Spotlight product and
all Intellectual Property associated with the Spotlight product and not with
any other products designed, developed, manufactured or marketed by NWD and any
other rights or assets of Seller not included in the definition of Assets are
excluded from the definition of Assets for purposes of Section 1.2 and will not
be purchased by Buyer (the "Excluded Assets").
1.4. ASSUMPTION OF LIABILITIES AND OBLIGATIONS. In connection with
the purchase and sale of the Assets pursuant to this Agreement, Buyer shall
assume only the following liabilities and obligations of Seller (the "Assumed
Liabilities"):
1.4.1 all liabilities and obligations of Seller incurred in
connection with the Business which relate to the purchase and other
commitments listed on SCHEDULE 1.4.1;
1.4.2 obligations of Seller under the service and support
agreements (the "Support Agreements") listed on SCHEDULE 1.4.2;
1.4.3 obligations of Seller arising under warranties with
respect to products sold prior to the Closing Date listed in SCHEDULE 1.4.3;
and
1.4.4 all liabilities and obligations of Seller under the
Contracts.
Except for the Assumed Liabilities, no other liabilities or obligations of
any nature, whether known or unknown, foreseen or unforeseen, fixed or
contingent, liquidated or unliquidated, accrued or unaccrued, shall be assigned
to or assumed by Buyer in connection with the purchase and sale of the Assets
hereunder, and such liabilities and obligations shall remain the responsibility
of Seller. All such liabilities and obligations of Seller are hereinafter
referred to as the "Excluded Liabilities." The Excluded Liabilities shall
include, without limitation, all accounts payable arising or outstanding prior
to the Closing Date, all indebtedness secured by any of the Assets, any and all
liabilities based upon or arising from product liability or warranty claims
(other than those listed in Schedule 1.4.3) relating to products sold prior to
the Closing Date and any liabilities based upon or arising from a breach of any
of the commitments listed on Schedule 1.4.1, the Support Agreements, or the
Contracts prior to the Closing.
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ARTICLE 2
PURCHASE PRICE
2.1. PURCHASE PRICE. As full consideration for the sale,
assignment, transfer and delivery of the Assets by Seller to Buyer and upon the
terms and subject to all of the conditions contained herein (and the performance
by each of the parties hereto of their respective obligations hereunder), the
purchase price shall consist of the following (the "Purchase Price"):
2.1.1 Cash in the amount of $3.5 million, subject to
adjustment as provided in Section 2.4 (the "Closing Purchase Price") in
connection with (1) employees who are not offered employment and (2) changes
in the net book value of the Assets described in Section 1.2.1 and 1.2.2
between November 30 (the date of Schedules 1.2.1 and 1.2.2) and the Closing
Date in the ordinary course of business; and
2.1.2 A warrant (the "Warrant") evidencing Seller's right to
acquire, within five (5) years after the Closing Date, one million
(1,000,000) shares of common stock of the Buyer at an exercise price equal to
$8.00 per share pursuant to the terms and conditions set forth in the
Warrant, a copy of which is attached hereto as Exhibit A.
2.2. PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid as
set forth below:
2.2.1 PAYMENT AT CLOSING. On the Closing Date, Buyer shall
pay Seller the Closing Purchase Price in cash by check or wire transfer in
immediately available funds to the account designated by Seller and provided
to Buyer.
2.2.2 DELIVERY OF WARRANT. On the Closing Date, Buyer shall
execute and deliver the Warrant to Seller.
2.3. PURCHASE PRICE ALLOCATION. Prior to, or promptly following the
Closing, the parties shall mutually agree on a purchase price allocation. The
parties agree that any government filings made by them will be in a manner
consistent with such agreed upon allocation.
2.4. PURCHASE PRICE ADJUSTMENTS. The Closing Purchase Price shall
be subject to adjustment as follows:
2.4.1 In the event more than fifteen (15) employees of the
Business as of the Closing Date (as identified by Seller in a written
instrument delivered to Buyer at least ten (10) business days prior to the
Closing Date) are not offered employment by Buyer in accordance with Section
7.3, the Closing Purchase Price shall be increased by an amount calculated by
multiplying (a) the difference between (x) the aggregate number of such
employees not offered employment by Buyer and (y) fifteen (15), by (b) the
average amount payable to all such employees not offered employment by Buyer
pursuant to Seller's severance pay plan upon their termination of employment
with Seller (such severance amounts for all employees of the Business shall
be set forth in a written instrument delivered to Buyer at least ten (10)
business days prior to the Closing Date). In the event that Seller does not,
within ninety (90) days after the Closing Date, terminate the employment of
any of the employees of the Business not offered
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employment by Buyer, then (i) the amount calculated pursuant to the preceding
sentence shall be recalculated as if all such employees not terminated by
Seller within the foregoing period had been offered employment by Buyer, and
(ii) Seller will promptly pay to Buyer an amount equal to the difference
between the initial calculation pursuant to this Section 2.4.1 and such
recalculation. Promptly following the end of the ninety (90) day period
following the Closing Date, Seller will notify Buyer in writing if it has not
terminated, within such period, the employment of any of the employees of the
Business not offered employment by Buyer, setting forth the identity of each
such employee.
2.4.2 The Closing Purchase Price shall be reduced or
increased, as applicable, on a dollar for dollar basis to reflect (i) the net
book value of any property listed on Schedule 1.2.1 which is acquired or
disposed of by Seller prior to the Closing Date, and (ii) the net book value
of any Inventory which is disposed of or acquired by seller prior to the
Closing Date (the "Adjustment Amount"). As soon as practicable following the
Closing Date, Seller will prepare a revised Schedule 1.2.1 and 1.2.2
reflecting the assets described in Sections 1.2.1 and 1.2.2 as of the Closing
Date and Seller's net book value for such assets. Buyer and Seller shall use
their best efforts to determine the Adjustment Amount, if any, as soon as
practicable following the Closing Date, and in any event no later than
January 31, 1999. If Buyer and Seller are unable to agree on the amount, if
any, of the foregoing reduction or increase, the matters in dispute shall be
resolved by arbitration as provided in Section 12.7 hereof. Resolution of
such disputes by agreement of Buyer and Seller or by arbitration shall be
final, conclusive and binding on the parties. Promptly following the final
determination of the Adjustment Amount, if any, Seller shall pay Buyer, or
Buyer shall pay to Seller, such amount, as applicable.
2.5. NONCOMPETE. In connection with the purchase of the Assets,
Seller and Buyer shall enter into a Non-Competition Agreement in the form of
EXHIBIT C attached hereto.
2.6. TAXES AND CLOSING COSTS. All sales and transfer taxes imposed
by any governmental entity or agency on the transfer of the Assets and the
Assumed Liabilities hereunder shall be shared equally by Buyer and Seller.
Seller shall be responsible for any of Seller's business, occupation,
withholding, income or other taxes whatsoever, or any taxes of any kind
concerning the Assets or the Assumed Liabilities that are related to any period
prior to the Closing Date. Except as provided above, each party shall bear
their own costs in connection with the transactions contemplated hereby.
2.7. PRORATIONS. Rents, taxes, and other operating expenses
associated with the Assets shall be prorated between Buyer and Seller as of the
Closing Date. Seller shall be responsible for any of Seller's rents, taxes,
and other operating expenses of any kind concerning the Business or the Assets
that are related to any period before the Closing Date.
ARTICLE 3
CLOSING
3.1. CLOSING. The transactions contemplated by this Agreement shall
be consummated (the "Closing") at such time and place as may be mutually agreed
to by the parties hereto (the "Closing Date") upon the satisfaction of all
conditions to the closing of the transactions contemplated hereby as set forth
in Article 8, excluding such conditions whose
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satisfaction is waived in whole or in part by the party entitled to the
benefit of such condition. In no event shall the Closing occur later than
December 31, 1998.
3.2. DOCUMENTS DELIVERED BY SELLER AT CLOSING. Seller shall cause
good and marketable title to all of the Assets to be transferred to Buyer at the
Closing, free and clear of all liens, encumbrances, charges, security interests,
claims, restrictions or rights in others (collectively, "Liens"). Without
limiting the foregoing and except as otherwise set forth herein, Seller shall
take or cause to be taken any and all actions necessary or otherwise reasonably
required by Buyer to ensure that at the Closing Buyer acquires possession of and
good and marketable title to all of the Assets, free and clear of all Liens. At
the Closing, Seller shall deliver to Buyer the following documents
(collectively, the "Seller Closing Documents"), executed by Seller, where
applicable, and in form satisfactory to Buyer:
(a) a Xxxx of Sale in substantially the form of EXHIBIT D
attached hereto;
(b) certified resolutions of the Board of Directors of Seller
approving the sale of the Assets to Buyer in accordance with the terms of this
Agreement;
(c) UCC-2 Termination Statements terminating Financing
Statements executed by each creditor who has filed UCC-1's covering any of the
Assets to be filed with the applicable governmental agency and releases of liens
or other evidence acceptable to Buyer terminating all liens or encumbrances on
the Assets;
(d) Space Sharing Agreement in substantially the form of
Exhibit I attached hereto with regard to the sales and support offices listed on
Schedule 6.11;
(e) the Assignment and Assumption Agreement in substantially
the form of EXHIBIT E attached hereto;
(f) the Non-Competition Agreement described in Section 2.5
hereof;
(g) the Registration Rights Agreements in substantially the
form of EXHIBIT F attached hereto;
(h) the Supply Agreement in substantially the form of
EXHIBIT G attached hereto;
(i) the License Agreement in substantially the form of
EXHIBIT H attached hereto (the "License Agreement");
(j) evidence that all federal, state and local tax liens and
creditor claims related to the Assets and the Business, if any, have been paid
in full;
(k) the Services Agreement in substantially the form of
EXHIBIT B attached hereto;
(l) a certificate executed by an authorized officer of
Seller to the effect that the conditions set forth in Section 8.1(b) have been
satisfied;
(m) all third-party consents (including, without limitation,
from parties to the Contracts and governmental authorities necessary for the
consummation of the transactions contemplated hereby);
(n) any updates to the Seller Disclosure Schedule (as defined
in Article 4), as contemplated by Section 6.9 below; and
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(o) any other documents reasonably required by Buyer to
transfer the Assets and the Assumed Liabilities in accordance with the terms
of this Agreement.
3.3. DOCUMENTS DELIVERED BY BUYER AT CLOSING. At the Closing, Buyer
shall deliver to Seller the following executed documents or consideration
("Buyer Closing Documents"):
(a) the Closing Purchase Price;
(b) the Warrant;
(c) the Services Agreement in substantially the form of
EXHIBIT B attached hereto;
(d) the Assignment and Assumption Agreement in substantially
the form of EXHIBIT E attached hereto;
(e) the Registration Rights Agreement in substantially the
form of EXHIBIT F attached hereto;
(f) the Supply Agreement in substantially the form of
EXHIBIT G attached hereto;
(g) the License Agreement in substantially the form of
EXHIBIT H attached hereto;
(h) resolutions of the Board of Directors of Buyer
authorizing the consummation of the transactions contemplated hereby, certified
by the Secretary of Buyer;
(i) the Space Sharing Agreement in substantially the form of
Exhibit I;
(j) a certificate executed by an officer of Buyer to the
effect that the conditions set forth in Section 8.2(b) have been satisfied; and
(k) any other documents reasonably required to transfer the
Assets and the Assumed Liabilities in accordance with the terms of this
Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer that the following facts and
circumstances are true and correct as of the date of this Agreement, except as
set forth on the schedule of exceptions attached hereto as Schedule 4 (the
"Seller Disclosure Schedule"):
4.1. AUTHORITY AND CONSENTS. Seller has full power and authority
(corporate and otherwise) to enter into this Agreement and the other documents
to be executed by Seller pursuant to the terms hereof and to carry out the
transactions contemplated by this Agreement and such other documents. The
execution and performance of this Agreement and the other documents to be
executed by Seller pursuant to the terms hereof will not result in a violation
of Seller's Certificate of Incorporation or Bylaws. This Agreement and the
other documents to be executed by Seller pursuant to the terms hereof and their
execution and delivery to Buyer have been duly authorized by the Board of
Directors of Seller and no further corporate action shall be necessary on the
part of Seller or its shareholders to make this Agreement and the other
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documents to be executed by Seller pursuant to the terms hereof and the
transactions contemplated by the Agreement and such other documents valid and
binding upon Seller. This Agreement and the other documents to be executed by
Seller pursuant to the terms hereof do and will constitute legal, valid and
binding obligations of Seller, enforceable against Seller in accordance with
their respective terms, subject as to enforcement only: (a) to bankruptcy,
insolvency, reorganization, arrangement, moratorium and other similar laws of
general applicability relating to or affecting creditors' rights generally; (b)
to general principles of equity; and (c) to the extent indemnification
provisions in the Registration Rights Agreement may be limited by federal or
state securities laws.
4.2. DUE ORGANIZATION. Seller (a) is a corporation duly organized
and validly existing as a corporation under the laws of the State of Oregon; and
(b) has all requisite corporate power and authority to own or lease and to
operate its properties and carry on the Business, as now being conducted.
4.3. TITLE TO ASSETS. Seller (or a subsidiary of Seller) has good
and marketable title to all of the Assets and all the Assets are free and clear
of all Liens.
4.4. PROPERTIES AND ASSETS. The Business has, at all times, been
owned and operated by Seller. The tangible Assets are in good working order and
in a state of reasonable maintenance and repair, ordinary wear and tear
excepted. Except for general economic conditions or trends affecting the
industry in which the Business operates, to Seller's knowledge, there are no
pending developments affecting or threatening Seller or the Business which
materially interfere with a continuation of the operation of the Business.
4.5. INVENTORY. All of the Inventory is in good and merchantable
condition and salable or useable in the ordinary course of business.
SCHEDULE 1.2.2 sets forth a true, correct and complete list of the Inventory,
including all locations where the Inventory is stored or maintained and the
agreed dollar value of Inventory at each such location.
4.6. CONTRACTS. SCHEDULE 1.2.3 constitutes a true, correct and
complete list of all Contracts. Each Contract is valid and enforceable in
accordance with its respective terms, Seller is not in default in the
performance of any of its obligations thereunder, no event of default has
occurred which (whether with or without notice, lapse of time, or both, or the
happening or the occurrence of any other event) would constitute such a default
thereunder and, to Seller's knowledge, all other parties thereto are not in
default thereunder and have no counterclaims, offsets and defenses with respect
thereto. There are no claims against Seller to return products of the Business
by reason of alleged overshipments, defective products or otherwise, or of
products in the hands of customers or distributors under an understanding that
such products would be returnable. SCHEDULE 1.2.4 constitutes a true, correct
and complete list of all prepaid royalties associated with certain contracts.
4.7. EXISTING EMPLOYMENT CONTRACTS. Except for those obligations
which Seller has agreed to undertake and be fully responsible for pursuant to
Article 6 herein, there are no employment contracts, collective bargaining
agreements, or pension, bonus, profit-sharing, stock option, or other agreements
or arrangements providing for employee remuneration or benefits to which Seller
is a party by which it is bound to the Employees.
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4.8. COMPLIANCE WITH LAWS. Seller has complied with, and is not in
violation of, applicable federal, state, or local statutes, laws, and
regulations affecting the properties related to, or the operations of, the
Business.
4.9. LITIGATION. There is no suit, action, arbitration, mediation
or legal, administrative, or other proceeding, or governmental investigation
pending or, to the best knowledge of Seller, threatened, against or affecting
the Business or any of the Assets. Seller is not subject to any order, writ,
injunction, judgment, law, regulation or decree of any federal, state, local, or
foreign court, department, agency, instrumentality or other governmental body
relating to the Business or any of the Assets which could reasonably be expected
to have a material adverse effect on the condition, financial or otherwise, of
any of the Assets or the Business or which could reasonably be expected to
prevent the transactions contemplated by this Agreement. Except as set forth on
Schedule 4 and in relation to the Business or Assets, to Seller's knowledge
there are no assertions against Seller or the Business of any claim or
liability, material to the Business or Assets, of any nature other than those
incurred in the ordinary course of business of the Business or contemplated by
this Agreement or the other documents contemplated hereby.
4.10. AGREEMENT WILL NOT CAUSE BREACH OR VIOLATION. Neither the
execution nor delivery of this Agreement or the other documents contemplated
hereby by the Seller nor compliance by Seller with the terms and provisions
of this Agreement or the other documents contemplated hereby will (a)
conflict with or result in a breach of any of the terms, conditions or
provisions of any judgment, order, injunction, decree, regulation or ruling
of any court or governmental authority to which Seller is subject or of any
Contract or any agreement, contract, or commitment to which Seller is a party
or by which it is bound and no approvals or consents of any persons are
necessary in connection herewith, or (b) give any Person the right to
terminate or modify any Contract, or accelerate any obligation or
indebtedness of Seller with regard to the Business thereunder.
4.11. BROKERS AND FINDERS. Except for certain arrangements with
Xxxxxx Brothers for which Seller is solely responsible, Seller represents and
warrants that it has not retained a finder, investment banker or broker in
connection with the transactions contemplated by this Agreement.
4.12. NO UNDISCLOSED LIABILITIES. Seller represents that, except
with respect to intellectual property matters, which are addressed in Section
4.15, the Business has no liabilities or obligations of any nature except (i)
liabilities that are expressly being assumed by Buyer hereunder, and (ii)
liabilities and obligations that are being retained by Seller and that Seller
will pay and/or satisfy, as applicable, as they become due.
4.13. CONSENTS AND APPROVALS OF GOVERNMENT AUTHORITIES. No
consent, approval or authorization of, or declaration, filing, notice or
registration with, any governmental agency, regulatory authority or other
governmental person or governmental entity is required in connection with the
execution, delivery and performance of this Agreement or any of the other
documents contemplated hereby by Seller or the consummation of the
transactions contemplated herein and therein.
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4.14. SUBSEQUENT EVENTS. Since November 30, 1998, there have been
no material changes in the condition, financial or otherwise, of any of the
Assets or any of the liabilities, prospects or operations of the Business,
other than changes in the ordinary course of business which in the aggregate
have not been materially adverse to the business, finances or operations of
Seller. Except as set forth on Schedule 4, neither Seller nor the Business
has, in connection with the Business or the Assets, since November 30, 1998:
4.14.1 Incurred any material uninsured obligation or liability
(absolute, accrued, contingent or otherwise), other than in the ordinary
course of business.
4.14.2 Discharged or satisfied any material lien or
encumbrance, or paid or satisfied any material obligation, claim or liability
other than liabilities incurred in the ordinary course of business and
consistent with past practice, or trade payables incurred in the ordinary
course of business and consistent with past practice.
4.14.3 Mortgaged, pledged or subjected any of the Assets to
any Lien.
4.14.4 Sold or transferred any of the Assets other than in the
ordinary course of business.
4.14.5 Except for this Agreement and the other documents
contemplated hereby, entered into any material transaction other than in the
ordinary course of business.
4.14.6 Experienced damage, destruction or loss materially and
adversely affecting the Assets or Business or experienced any other material
adverse change in its financial condition, assets, liabilities or business
affecting the Assets or Business.
4.14.7 Altered the nature of the Business as carried on or
made any material change in the products and services it supplies.
4.14.8 Licensed or disposed of or permitted to lapse any
rights to the use of any Seller Intellectual Property other than the grant of
licenses in the ordinary course of business.
4.14.9 Made any change in the accounting policies or practices
of Seller relating to the Business.
4.14.10 Entered into any other transaction, other than in the
ordinary course of business.
4.14.11 Agreed, whether in writing or otherwise, to do any of the
foregoing.
4.15. INTELLECTUAL PROPERTY.
4.15.1 The intellectual property transferred or licensed to
Buyer pursuant to this Agreement or the License Agreement is owned by Seller
or is used by Seller pursuant to a valid license that will at the Closing be
validly assigned to Buyer, is not subject to any dispute and Seller has the
right to transfer or license such intellectual property to Buyer as
contemplated by this Agreement or the License Agreement.
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4.15.2 To Seller's knowledge, after reasonable due diligence
and inquiry, the conduct of the Business does not infringe any patent, patent
right, copyright, trademark or trade name, registered or unregistered, or any
other intellectual property right of any third party and no claim is pending
or has been made or threatened to such effect.
4.15.3 To Seller's knowledge, after reasonable due diligence
and inquiry, there is no prior art that is more relevant than that considered
in the prosecution of those patents being transferred or licensed to Buyer
pursuant to this Agreement or the License Agreement.
4.15.4 To Seller's knowledge, after reasonable due diligence
and inquiry, the intellectual property being transferred or licensed to Buyer
pursuant to this Agreement or the License Agreement does not infringe any
patent, patent right, copyright, trademark or trade name, registered or
unregistered, or any other intellectual property right of any third party and
no claim is pending or has been made or threatened to such effect.
4.15.5 To Seller's knowledge, after reasonable due diligence
and inquiry, the patents being transferred or licensed by Seller to Buyer
hereunder or under the License Agreement are valid, subsisting and
enforceable, have not been declared invalid or unenforceable, in whole or in
part (and no proceedings in this regard are currently pending or threatened),
and all maintenance and similar fees in respect thereof have been timely paid
in full.
4.15.6 To the best knowledge of Seller, after reasonable due
diligence and inquiry, no employee of Seller has disclosed without
authorization or otherwise misused or is infringing or misappropriating any
of the Intellectual Property used in connection with the Business.
4.15.7 Seller owns and has good and marketable title to, or a
license to use, each item of Seller Intellectual Property listed on SCHEDULE
1.2.5 OR THE INTELLECTUAL PROPERTY LICENSED UNDER THE LICENSE AGREEMENT, free
and clear of any Liens. Seller owns, or has the binding and enforceable
right to use or operate under, all Seller Intellectual Property not listed on
SCHEDULE 1.2.5 or the intellectual property licensed under the License
Agreement free and clear of any Liens (other than solely as provided in any
licenses relating to such Seller Intellectual Property). No Seller
Intellectual Property or product and/or technology of Seller or any
intellectual property licensed under the License Agreement is subject to any
outstanding decree, order, judgment, stipulation, license or agreement
restricting in any material manner the use or licensing thereof by Seller.
4.15.8 Seller has not received notice from any person or entity
that the operation of the Business, including its design, development,
manufacture and sale of its products and/or technology (including with respect
to products and/or technology currently under development) and provision of
services, infringes the Intellectual Property of any Person or entity.
4.15.9 Except as provided in Schedule 4.15.9, the Seller
Intellectual Property (together with the intellectual property rights licensed
by Seller to Buyer pursuant to the License Agreement) includes all Intellectual
Property that is material to the continued operation
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of the Business, taken as a whole, and which is necessary to operate the
Business to substantially the same extent and in substantially the same
manner as currently conducted.
4.16. PERSONNEL. Schedule 4 lists the names, current salary
rates, bonuses paid during the last fiscal year, and accrued vacation and
sick leave for all the Employees (as defined in Section 7.3). Seller is not
in default with respect to any of the obligations so listed. Seller has
delivered to Buyer true, complete and correct copies of all such written
obligations and complete summaries of all such oral obligations. There is
no pending or, to Seller's knowledge, threatened labor dispute, strike or
work stoppage affecting the Business. Schedule 4 also lists the amount
payable to employees of Seller under other fringe benefit plans.
4.17. FULL DISCLOSURE. No representation, warranty, covenant or
agreement by the Seller in this Agreement or in any exhibit, schedule,
written statement, certificate or other document delivered or to be delivered
to Buyer pursuant hereto or in connection with the consummation of the
transactions contemplated hereby contains any untrue statement of a material
fact.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller that the following facts and
circumstances are true and correct:
5.1. AUTHORITY AND CONSENT. Buyer has full power and authority
(corporate and otherwise) to enter into this Agreement and the other documents
to be executed by Buyer pursuant to the terms hereof and to carry out the
transactions contemplated by this Agreement and such other documents. This
Agreement and the other documents to be executed by Buyer pursuant to the terms
hereof and their execution and delivery to Seller have been duly authorized by
the Board of Directors of Buyer, and no further corporate action shall be
necessary on the part of Buyer or its shareholders to make this Agreement and
the other documents to be executed by Buyer pursuant to the terms hereof and the
transactions contemplated by the Agreement and such other documents valid and
binding upon Buyer. This Agreement and the other documents to be executed by
Buyer pursuant to the terms hereof do and will constitute legal, valid and
binding obligations of Buyer enforceable against Buyer in accordance with their
respective terms, subject as to enforcement only: (a) to bankruptcy,
insolvency, reorganization, arrangement, moratorium and other similar laws of
general applicability relating to or affecting creditors' rights generally; (b)
to general principles of equity; and (c) to the extent indemnification
provisions in the Registration Rights Agreement may be limited by federal or
state securities laws.
5.2. LITIGATION. There is no suit, action, arbitration, or legal,
administrative, or other proceeding, or governmental investigation pending or,
to the knowledge of Buyer, threatened against Buyer, which challenges this
Agreement or the other documents contemplated hereby or affects the transactions
contemplated hereunder or thereunder.
5.3. AGREEMENT WILL NOT CAUSE BREACH OR VIOLATION. Neither the
execution nor delivery of this Agreement by the Buyer, nor compliance by the
Buyer with the terms and
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provisions of this Agreement will (a) conflict with or result in a breach of
any of the terms, conditions or provisions of Buyer's Certificate of
Incorporation or Bylaws, or (b) violate, or be in conflict with, or
constitute a default under or cause the acceleration of the maturity of any
debt or obligation pursuant to, any agreement or commitment to which Buyer is
a party or by which Buyer is bound, or violate any statute or law or any
judgment, decree, order, regulation, or rule of any court or governmental
authority.
5.4. BROKERS AND FINDERS. Buyer represents and warrants it has not
retained a finder, investment banker or broker in connection with the
transactions contemplated by this Agreement.
5.5. VALID ISSUANCE. The Warrant is a valid and binding obligation
of Buyer enforceable against it in accordance with its terms subject, as to
enforcement only, to: (a) bankruptcy, insolvency, reorganization, arrangement,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights generally; and (b) general principles of equity.
The common stock to be issued by Buyer pursuant to the terms and conditions of
the Warrant have been reserved for issuance and will be duly authorized, validly
issued, fully-paid and nonassessable.
5.6. BUYER SEC DOCUMENTS. Buyer's Annual Report on Form 10-K for
the year ended December 31, 1997, and its Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998, complied as to form in all material respects
with the requirements therefor under the Securities Exchange Act of 1934, as
amended, and do not contain any untrue statements of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
ARTICLE 6
SELLER'S COVENANTS
6.1. ACCESS TO PROPERTIES AND RECORDS. Throughout the period
between the date of this Agreement and the Closing Date, Seller shall give to
Buyer and Buyer's authorized representatives reasonable access, during business
hours, to (a) all facilities and offices which support the operations of the
Business, (b) any and all of the Assets, (c) all of the properties, books,
records, contracts, and related financial and operating data concerning the
Business or the Assets maintained and accumulated by its counsel, accountants
and other representatives and to furnish such persons with all information,
including copies of books, contracts, records and related financial and
operating data which such persons may reasonably request. Without limiting the
foregoing, Buyer shall be permitted to interview during regular business hours
all employees of Seller involved in the Business.
6.2. CONDUCT OF THE BUSINESS PRIOR TO CLOSING DATE. Between the
date of this Agreement and the Closing, and except as otherwise required by this
Agreement:
6.2.1 The Business shall be operated in the ordinary course
consistent with past practices and in a normal businesslike fashion (including,
without limitation, its normal accounts
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receivable practice), and Seller shall take such actions as are in its
business judgment reasonably necessary to facilitate a smooth transition of
the operation of the Business from Seller to Buyer at the Closing. Seller
shall use its best efforts to preserve and maintain the Business and Seller's
goodwill, including relationships with employees, suppliers and customers.
Seller shall maintain quantities of inventories in a manner consistent with
prior practice and in a normal businesslike fashion. In addition, Seller
shall maintain records and books of account for the Business consistent with
past practices and in a normal businesslike fashion, and shall continue to
carry all of the insurance for the Business consistent with past practice.
6.2.2 Seller shall not take (or permit to be taken) any action with
regard to the Business or the Assets which would cause any material change in
any of the items and matters covered by the representations and warranties set
forth in Article 4, including, without limitation:
(a) incurring or becoming subject to, or agreeing to incur or
become subject to, any obligation or liability (absolute or contingent), except
current liabilities incurred, and obligations under contracts entered into, in
the ordinary course of business consistent with past practices;
(b) mortgaging, pledging or assuming any Lien, or agreeing to
do so, in respect to any of the Assets;
(c) waiving or compromising any material rights or any
material debt owed to Seller with respect to the Business;
(d) entering into any transactions, other than in the
ordinary course of business consistent with past practices;
(e) increasing the rate of compensation payable or to become
payable to any employees of the Business, except in the ordinary course of
business;
(f) terminating or amending any Contract, unless terminated
or amended in the ordinary course of business consistent with past practices;
(g) introducing any new method of accounting with respect to
the Business or any of the Assets or liabilities of Seller in regard to the
Business (assumed or not assumed) (including, without limitation, any change in
depreciation or amortization policies or rates);
(h) making any capital expenditures or entering into
commitments for capital expenditures exceeding, in the aggregate, One Hundred
Thousand Dollars ($100,000); or
(i) alter its practice for creating or accounting for
Inventory.
6.3. ADVICE OF DEVELOPMENTS. Seller shall have continuing
obligations after the date of this Agreement through the Closing Date to advise
Buyer of all significant matters concerning the Business and the Assets.
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6.4. ACQUISITION, MERGER OR SIMILAR NEGOTIATIONS WITH OTHER PARTIES.
From the date hereof until the earlier of the termination of this Agreement or
consummation of transactions contemplated hereby, none of Seller or any of its
officers, directors, employees, representatives, agents or affiliates shall
directly or indirectly encourage, solicit, initiate or conduct discussions or
negotiations with, provide any information to, or enter into any agreement with,
any corporation, partnership, limited liability company, person or other entity
or group concerning any merger, combination, consolidation, sale of assets
(other than the sale of products in the ordinary course of business) or other
similar transaction involving all or any portion of the Business or the Assets.
Seller shall immediately notify Buyer of any contact by any third-party with
respect to any of the matters described in this Section 6.4.
6.5. SATISFACTION OF CONDITIONS. Seller shall take or cause to be
taken all commercially reasonable actions within its power necessary to satisfy
all conditions to Buyer's obligations to close and consummate the transactions
contemplated by this Agreement.
6.6. CONSENTS. On or prior to the Closing Date, Seller shall (a)
notify all persons required to be notified pursuant to applicable law or any of
the Contracts of the transactions contemplated hereunder, in the form and manner
required thereunder, and (b) use commercially reasonable efforts to obtain the
consent of all persons whose consent is required pursuant to applicable law or
any of the Contracts in connection with the consummation of the transactions
contemplated hereby, in the form and manner required thereunder.
6.7. ERISA. Except as otherwise provided in Sections 2.4.1 or 7.3,
Seller agrees to be responsible for and to undertake the termination of the
participation of the employees in all of Seller's employee benefit plans or
arrangements that are subject to the ERISA, and to assume all liabilities
associated with such plans and their termination, if any.
6.8. BUSINESS NAME. Upon the Closing, Seller shall cease using and
doing business under the name "Network Displays," and any other names used
exclusively in connection with the Business.
6.9. NOTIFICATION OF CERTAIN MATTERS. Without limiting Section 6.3,
Seller shall give prompt notice to Buyer of the occurrence or non-occurrence of
any event which causes or is likely to cause any representation or warranty made
by Seller herein to be untrue or inaccurate or any covenant, condition or
agreement contained herein not to be complied with or satisfied (provided,
however, that any such disclosure shall not in any way be deemed to (a) amend,
modify or in any way affect the representations, warranties and covenants made
by such party in or pursuant to this Agreement, or (b) alter or waive any rights
of Buyer with respect to the breach thereof). Prior to the Closing Date, Seller
shall update the Seller Disclosure Schedule as necessary to make the Seller
Disclosure Schedule accurate and complete as of the Closing Date and promptly
notify Buyer of any such modifications.
6.10. CONTINUING OPERATION OF BUSINESS. Seller agrees to manufacture
network display products solely for the benefit of Buyer in accordance with the
Supply Agreement in the form attached hereto as Exhibit G.
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6.11. SPACE SHARING AGREEMENT. Seller agrees to enter into the
Space Sharing Agreement with Buyer in substantially the form of EXHIBIT I
attached hereto for any or all of the locations listed on Schedule 6.11 .
6.12. LICENSE AGREEMENT. Seller agrees to grant to Buyer a
non-exclusive, perpetual, irrevocable, royalty-free license to the
Intellectual Property listed on Schedule 6.12 pursuant to a License Agreement
substantially in the form of EXHIBIT H attached hereto (the "License
Agreement").
6.13 NON-COMPETITION AGREEMENT. Buyer and Seller shall enter
into a non-competition agreement substantially in the form of EXHIBIT C
attached hereto.
6.14 RESPONSIBILITY FOR CERTAIN EMPLOYEES. The parties
acknowledge that the employees of Seller listed on Schedule 6.14 will not
become employees of Buyer following the Closing, and that Seller is
responsible for either continuing the employment of such individuals or
assuming the cost of severance under Seller's severance pay policies. Seller
will indemnify Buyer for all costs and expenses (including reasonable
attorneys' fees) incurred by Buyer as a result of any legal claim by any of
the individuals listed on Schedule 6.14 that any such individual is entitled
to employment by, or compensation or severance (or the equivalent) from)
Buyer as a result of the transfer of the Assets to Buyer; provided that Buyer
shall notify Seller as soon as Buyer becomes aware of any such claims or
potential claims and gives Seller exclusive control of the conduct of such
claims and provides Seller with all assistance reasonably necessary to defend
or settle such claims, and provided that Buyer shall not take any action
reasonably likely to interfere with such defense or settlement or increase
the cost thereof. Seller shall not indemnify Buyer for costs associated with
any such individual at the point that Buyer either agrees to employ such
individual or is required to do so by a governmental entity of competent
jurisdiction and Buyer does not immediately terminate such individual. The
indemnity in this Section 6.14 is not subject to the limitations set forth in
Section 9.6.
ARTICLE 7
BUYER'S COVENANTS
7.1. LICENSE OF SELLER INTELLECTUAL PROPERTY. Buyer agrees to
grant a license to Seller to use the Seller Intellectual Property pursuant to
the terms and conditions set forth in a License Agreement in substantially
the form of Exhibit H; provided, however, that Seller shall not use any of
such Seller Intellectual Property for any business or operations prohibited
by the Non-Competition Agreement.
7.2. EXISTING CUSTOMERS. Buyer will use commercially reasonable
efforts to continue to meet the needs of existing customers of the Business
as of the Closing Date with regard to product development, quality and
support in accordance with good industry practices; provided, however, that
in no event shall Buyer be liable to Seller or any other person or entity for
any breach of this covenant.
7.3. EMPLOYEES. Subject to Section 2.4, Buyer shall offer
employment to employees of Seller associated with the Business (excluding
those employees involved in the manufacturing of products for the Business)
on terms reasonably comparable to those currently provided by Seller (the
"Employees"). At least ten (10) business days prior to the Closing Date,
Seller will provide to Buyer in writing a list of all of Seller's employees
associated with the Business, which list shall include a description in
reasonable detail of the current terms of their employment with Seller,
including, without limitation, their severance pay entitlements under
Seller's severance pay plan. If Buyer employs Employees, and terminates any
such Employee without cause within twelve months of the Closing, then Buyer
will provide severance benefits to each such terminated Employee at least
equal to the amount that would have been provided under the terms of Seller's
Severance Pay Plan.
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7.4. STOCK OPTIONS. It is Buyer's intent to allocate a pool of
approximately five hundred thousand (500,000) shares of Buyer's common stock
for stock options to be granted to key employees of the Business to retain and
motivate them in accordance with Buyer's normal practices. To the extent
Buyer's current stock option pool is insufficient for such purposes, Buyer
shall, at its sole option, either (a) propose in its next annual proxy to
increase the amount of shares available under its then existing stock option
plan; or (b) implement a non-statutory stock option plan.
7.5. SATISFACTION OF CONDITIONS. Buyer shall take or cause to be
taken all commercially reasonable actions within its power necessary to
satisfy all conditions to Seller's obligations to close and consummate the
transactions contemplated by this Agreement.
7.6. CONSENTS. Prior to the Closing, Buyer shall cooperate with
Seller in Seller's efforts to obtain the consents of all persons whose
consent is required pursuant to applicable law or any of the Contracts in
connection with the consummation of the transactions contemplated hereby,
provided that Buyer shall not be required to incur any costs or undertake any
obligations in connection therewith, except as expressly contemplated hereby.
7.7 RETURNED PRODUCTS. Buyer acknowledges that certain of
Seller's customers have the right, pursuant to certain of the Contracts, to
return products of the Business. To the extent saleable products are
returned to Seller by such customers of the Business, Buyer agrees to use
commercially reasonable efforts to market and sell such returned products.
Buyer will pay to Seller an amount equal to 70 percent of the purchase price
paid by a new customer for the product returned to Seller when it is sold to
a new customer.
7.8 COOPERATION IN COLLECTION OF RECEIVABLES. Buyer
acknowledges that following the Closing Seller will continue to collect
accounts receivable related to the Business and outstanding on or before the
Closing Date. Buyer will use commercially reasonable efforts to cooperate
with Seller in Seller's effort to collect overdue accounts receivable
following the Closing.
7.9 AUTOMOBILES. Following the Closing the parties intend for
certain employees of the Business who become employees of Buyer to use the
automobiles leased by Seller from a third party and listed on Schedule 7.9
(the "Leased Automobiles"). The parties acknowledge that the leases for the
Leased Automobiles cannot be transferred to Buyer. Buyer, with the
cooperation of Seller, will use commercially reasonable efforts to establish,
as of the Closing Date, new leases pursuant to which it will assume all
rights and responsibilities associated with the Leased Automobiles. If Buyer
is unable to establish such new leases as of the Closing, Seller, to the
extent permissible under its contractual obligations, will permit Buyer to
use the Leased Automobiles until, at the latest, February 28, 1999; provided
that Buyer reimburses Seller for all costs of any kind incurred by Seller in
connection with the Leased Automobiles following the Closing.
7.10 SELLER AS CUSTOMER. Following the Closing, the parties
intend that Seller will remain a customer of the Business. For a period of
one year, Buyer will provide products and product support to Seller at
Buyer's cost for the selected option. Following the first anniversary of the
Closing Date, Buyer will provide products and product support to Seller on
terms that are no less favorable than terms provided by Buyer to any other
customer purchasing similar products or support.
ARTICLE 8
CONDITIONS TO CLOSING
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8.1. CONDITIONS TO BUYER'S OBLIGATIONS AT THE CLOSING. Buyer's
obligations to consummate the transactions contemplated by this Agreement
shall be subject to the full satisfaction of the following conditions, each
of which conditions may be waived in writing by Buyer:
(a) INSTRUMENTS. Seller shall have delivered all of the
Seller Closing Documents at the Closing.
(b) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
COVENANTS. The representations and warranties of Seller contained in this
Agreement shall be true in all material respects at the Closing as though made
at such time. Seller shall have performed all obligations and complied with all
covenants and conditions required by this Agreement to be performed or complied
with by it on or prior to the Closing Date.
(c) EMPLOYMENT AND NON-COMPETITION AGREEMENTS.
(i) As more fully set forth in a side letter to this
Agreement, Buyer and the requisite number of employees of the Business set forth
therein to whom Buyer has made an offer of employment shall have entered into an
employment agreement substantially in the form of EXHIBIT J attached hereto (the
"Offer Letters").
(ii) Buyer and Seller shall have entered into the
Non-Competition Agreement, in substantially the form of EXHIBIT C attached
hereto.
(d) Buyer and Seller shall have entered into the Space
Sharing Agreement, in substantially the form of EXHIBIT I attached hereto.
(e) NO MATERIAL CHANGES. There shall not have been any
material adverse change in the Assets or the Business from the date hereof to
the Closing Date, nor shall there exist any condition which could reasonably be
expected to result in such a material adverse change.
(f) CONSENTS. All consents or approvals required for the
consummation of the transactions contemplated hereby, including any required
consents of the parties to any Contract, shall have been obtained.
(g) BOARD APPROVAL. This Agreement and the transactions
contemplated hereby shall have been duly approved and adopted by the Board of
Directors of Seller.
(h) SELLER SCHEDULE. The updates to the Seller Disclosure
Schedule, as delivered to Buyer at the Closing pursuant to Section 3.2 herein,
shall be satisfactory to Buyer.
8.2. CONDITIONS TO SELLER'S OBLIGATIONS AT THE CLOSING. Seller's
obligations to consummate the transactions contemplated by this Agreement shall
be subject to the full satisfaction of the following conditions, each of which
conditions may be waived in writing of Seller:
(a) INSTRUMENTS. Buyers shall have delivered all of the
Buyer Closing Documents at the Closing.
(b) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
COVENANTS. The representations and warranties of Buyer contained in this
Agreement shall be true in all material respects at the Closing as though made
at such time. Buyer shall have performed all obligations and complied with all
covenants and conditions required by this Agreement to be performed or complied
with by it at or prior to the Closing Date.
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(c) CONSENTS. All material consents or approvals required
for the consummation of the transactions contemplated hereby shall have been
obtained.
ARTICLE 9
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
9.1. SURVIVAL. The representations and warranties of Seller
contained in this Agreement or in any document, certificate or schedule or
instrument contemplated hereby or delivered pursuant hereto, shall survive the
Closing Date for a period of one (1) year after the Closing Date. The
representations and warranties of Buyer contained in this Agreement or in any
document, certificate or instrument contemplated hereby or delivered pursuant
hereto, shall survive the Closing Date for a period of one (1) year after the
Closing Date.
9.2. SELLER'S INDEMNITY. Seller shall indemnify, defend, protect
and hold harmless Buyer (and Buyer's officers, directors, shareholders,
employees and agents) from and against any and all losses, costs, expenses,
liabilities, obligations, claims, demands, causes of action, suits, settlements
and judgments of every nature, including the costs and expenses associated
therewith and reasonable attorneys', consultants' and witness fees incurred in
connection therewith ("Buyer's Damages"), which arise out of: (a) the breach of
any representation or warranty made by Seller under this Agreement or any of the
Seller Closing Documents; (b) the non-performance, partial or total, of any
covenant made by Seller pursuant to this Agreement or any of the Seller Closing
Documents; (c) any Excluded Liability; or (d) the conduct of the Business prior
to the Closing Date (other than the Assumed Liabilities).
9.3. BUYER'S INDEMNITY. Buyer shall indemnify, defend, protect and
hold harmless Seller (and Seller's officers, directors, shareholders, employees
and agents) from and against any and all losses, costs, expenses, liabilities,
obligations, claims, demands, causes of action, suits, settlements and judgments
of every nature, including the costs and expenses associated therewith and
reasonable attorneys', consultants' and witness fees incurred in connection
therewith ("Seller's Damages"; and when used together with or in the alternative
to Buyer's Damages, "Damages"), which arise out of: (a) the breach by Buyer of
any representation or warranty made by Buyer pursuant to this Agreement or any
of the Buyer Closing Documents; or (b) the non-performance, partial or total, of
any covenant made by Buyer pursuant to this Agreement or any of the Buyer
Closing Documents; or (c) the conduct of the Business after the Closing Date
(other than the Excluded Liabilities and other than as to matters that
constitute a breach of any of Seller's representations, warranties and covenants
hereunder).
9.4. INDEMNITY PROCEDURES.
9.4.1 In the event that at any time or from time to time
after the Closing Date a person or entity entitled to indemnification
pursuant to Section 9.2 or 9.3 (any such person or entity, an "Indemnitee")
shall sustain a loss of any nature whatsoever against which such Indemnitee
is to be indemnified under this Agreement, such Indemnitee shall notify the
party required to provide such indemnification (such party, the "Indemnitor")
in writing of any such loss so sustained, and Indemnitor shall within thirty
(30) days after transmittal of such notice pay
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to such Indemnitee the amount of such loss so sustained, subject to their
right to contest any third-party claim which has not yet resulted in a loss,
as hereinafter provided in Section 9.4.2.
9.4.2 Promptly after receipt by an Indemnitee of written
notice of a claim or the commencement of any proceeding against it, such
Indemnitee shall, if a claim in respect thereof is to be made against an
Indemnitor under Section 9.2 or 9.3, give written notice to the Indemnitor of
the commencement thereof, but the failure so to notify the Indemnitor shall
not relieve it of any liability that it may have to any Indemnitee, except to
the extent the Indemnitor demonstrates that the defense of such action is or
has been prejudiced thereby, and then only to the extent of such prejudice.
In case any such proceeding shall be brought against an Indemnitee and it
shall give notice to the Indemnitor of the commencement thereof, the
Indemnitor shall be entitled to participate therein and, to the extent that
it shall wish (unless the Indemnitor is also a party to such proceeding and
the Indemnitee determines in good faith that joint representation would be
inappropriate) to assume the defense thereof with counsel which is reasonably
satisfactory to such Indemnitee and, after notice from the Indemnitor to such
Indemnitee of its election so to assume the defense thereof, the Indemnitor
shall not be liable to such Indemnitee under such Section for any fees of
such counsel or any other expenses with respect to the defense of such
proceeding, in each case, subsequently incurred by such Indemnitee in
connection with the defense thereof. If an Indemnitor assumes the defense of
such proceeding, (a) no compromise or settlement thereof may be effected by
the Indemnitor without the Indemnitee's reasonable prior written consent
unless (i) there is no finding or admission of any violation of law or any
violation of the rights of any person or entity and no effect on any other
claims that may be made against the Indemnitee, and (ii) the sole relief
provided is monetary damages that are paid in full by the Indemnitor; and (b)
the Indemnitor shall have no liability with respect to any compromise or
settlement thereof effected without its prior written consent (which shall
not be unreasonably withheld). If notice is given to an Indemnitor of the
commencement of any proceeding and it does not, within fifteen (15) business
days after the Indemnitee's notice is given, give notice to the Indemnitee of
its election to assume the defense thereof, the Indemnitor shall be bound by
any determination made in such action or any compromise or settlement thereof
effected by the Indemnitee. Notwithstanding the foregoing, if an Indemnitee
determines in good faith that there is a reasonable probability that a
proceeding may adversely affect it or its affiliates, other than as a result
of monetary damages, such Indemnitee may, by notice to the Indemnitor, assume
the exclusive right to defend, compromise or settle such proceeding, but the
Indemnitor shall not be bound by any determination of a proceeding so
defended or any compromise or settlement thereof effected without its prior
written consent (which shall not be unreasonably withheld).
9.4.3 If any Indemnitor contests or challenges any claim or
action asserted against an Indemnitee referred to in this Article, it shall
do so at its own cost and expense, holding Indemnitee harmless from all
costs, fees, expenses, debts, liabilities and charges in connection with such
contest; shall diligently defend against any such claim; and shall hold
Indemnitee's business and assets free and harmless from any attachment,
execution, judgment, lien or other legal process.
9.5. OTHER REMEDIES. Except with respect to claims described in
Section 6.14, the rights of indemnification set forth in this Article 9 shall
be the exclusive remedy for monetary Damages under this Agreement.
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9.6 LIMITATION OF INDEMNIFICATION.
9.6.1 No indemnification shall be owed by Buyer pursuant to
this Agreement until Seller's reasonable estimate of Seller's Damages,
calculated without any set-off of Buyer's Damages, exceeds $50,000 in the
aggregate, at which point such indemnification shall be owed as follows: (1)
no indemnification shall be owed with respect to the first $50,000 in
Seller's Damages, (2) to the extent Seller's Damages are between $50,000 and
$300,000, Buyer and Seller shall evenly divide the cost of such Damages, such
that Buyer pays $0.50 for each dollar of Seller's Damages between $50,000 and
$300,000 and (3) to the extent Seller's Damages exceed $300,000, Buyer shall
pay all amounts up to the limits set forth in Section 9.6.3.
9.6.2 No indemnification shall be owed by Seller pursuant to
this Agreement until Buyer's reasonable estimate of Buyer's Damages,
calculated without any set-off of Seller's Damages, exceeds $50,000 in the
aggregate, at which point such indemnification shall be owed as follows: (1)
no indemnification shall be owed with respect to the first $50,000 in Buyer's
Damages, (2) to the extent Buyer's Damages are between $50,000 and $300,000,
Buyer and Seller shall evenly divide the cost of such Damages, such that
Seller pays $0.50 for each dollar of Buyer's Damages between $50,000 and
$300,000 and (3) to the extent Buyer's Damages exceed $300,000, Seller shall
pay all amounts up to the limits set forth in Section 9.6.3.
9.6.3 Absent fraud, the maximum indemnification liability
that may be incurred by Buyer or Seller under this Agreement for breach of
their representations and warranties hereunder shall be $800,000. The
foregoing limitation shall not apply in respect of (a) the breach of any
covenant in Article 6 and 7, (b) Buyer's failure to perform the Assumed
Liabilities, and (c) Seller's failure to perform or satisfy the Excluded
Liabilities.
9.6.4 At Seller's sole option, which shall be exercised no
later than five days before Seller is required to satisfy its indemnification
obligation, Seller may satisfy its indemnification obligations with cash or
by agreeing to surrender a portion of the shares underlying the Warrant, or
by a combination of cash and the surrender of a portion of the shares
underlying the Warrant. If Seller chooses to satisfy its indemnification
obligations through the surrender of shares of Buyer's common stock
underlying the Warrant, for the purposes of satisfying obligations under this
Article 9 each surrendered share shall be valued by subtracting the "Exercise
Price" (as defined in the Warrant) from the "Fair Market Value" of each such
share (as defined in the Warrant).
ARTICLE 10
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
10.1. NONDISCLOSURE. Prior to the Closing, no information
concerning Seller, the Assets or the Business that has been furnished to or
obtained by Buyer under this Agreement or in connection with the transactions
contemplated hereby shall be disclosed to any person other than in confidence
to those employees, legal counsel, financial advisers and independent public
accountants of Buyer whom Buyer reasonably determines have a need to know
that information in connection with the transactions contemplated by this
Agreement. If the transactions contemplated hereby are not consummated,
Buyer shall continue to hold all such information in confidence, and all such
information that is in writing or embodied on a diskette, tape or other
tangible medium shall be returned promptly to Seller. The Seller recognizes
and acknowledges that it has had in the past, currently has, and in the
future may possibly have, access to certain Confidential Information (as
defined below) related to the Business that is valuable, special and unique
and which is part of the Assets sold pursuant to this Agreement. The Seller
agrees that, unless this Agreement is terminated, it will not disclose such
Confidential Information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, except to authorized
representatives of the Buyer, unless (i) such information becomes available
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to or known by the public generally through no fault of Seller or its
employees or agents, (ii) disclosure is required by law or the order of any
governmental authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (ii), Seller shall, if possible, give
prior written notice thereof to Buyer and provide Buyer with the opportunity
to contest such disclosure. Nothing herein shall be construed as prohibiting
Buyer from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
10.2. CONFIDENTIAL INFORMATION. "Confidential information" shall
mean all trade secrets and other confidential and/or proprietary information
of the Seller relating exclusively to the Business or the Assets, including
information derived from reports, investigations, research, work in progress,
codes, marketing and sales programs, financial projections, cost summaries,
pricing formulae, contract analyses, financial information, projections,
confidential filings with any state or federal agency, and all other
confidential concepts, methods of doing business, ideas, materials or
information prepared or performed for, by or on behalf of such person by its
employees, officers, directors, agents, representatives, or consultants.
10.3. NONDISCLOSURE COVENANTS: REMEDY FOR BREACH. The parties
agree that, in the event of breach or threatened breach of the covenants in
this Article 10, the damage or imminent damage to the value and the goodwill
of Buyer or Seller, as the case may be, will be irreparable and extremely
difficult to estimate, making any remedy at law or in damages inadequate.
Accordingly, the parties agree that a non-breaching party shall be entitled
to injunctive relief in the event of any breach or threatened breach of any
of such covenants by the other party, in addition to any other relief
(including damages) available to the non-breaching party under this
Agreement or under law.
ARTICLE 11
TERMINATION
11.1. TERMINATION BY BUYER AND/OR SELLER. This Agreement may be
terminated without further liability by either party at any time before the
Closing Date:
(a) by mutual consent of Buyer and Seller; or
(b) by either Buyer or Seller if the Closing has not
occurred by January 31, 1999, provided that the terminating party has not
prevented the Closing from occurring through breach of any of its
representations, warranties or covenants.
11.2. TERMINATION BY BUYER. Buyer, if not then in default
hereunder, may terminate this Agreement at any time before the Closing Date
upon notice to Seller of the occurrence of (a) a material breach of any of
Seller's representations or warranties hereunder, or (b) a default in the
observance or performance of any of Seller's covenants or agreements herein
and such breach is not remedied within ten (10) days after the giving of
written notice by Buyer to Seller.
11.3. TERMINATION BY SELLER. Seller, if not then in default
hereunder, may terminate this Agreement at any time before the Closing Date
upon notice to Buyer of the occurrence of (a) a material breach of any of
Buyer's representations or warranties hereunder, or (b) a default in
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the observance or performance of any of Buyer's covenants or agreements
herein and such breach is not remedied within ten (10) days after the giving
of written notice by Seller to Buyer.
11.4. PROCEDURE: EFFECT OF TERMINATION. If either Buyer or
Seller elects to terminate this Agreement pursuant to this Article 11, the
terminating party shall promptly give written notice thereof to the other
party. In the event of termination pursuant to this Article 11, the parties
shall be released from all liabilities and obligations under this Agreement,
other than for damages to the extent arising from a breach of this Agreement
and the confidentiality obligations imposed by Article 10.
ARTICLE 12
MISCELLANEOUS
12.1. CONTRACTS NOT ASSIGNED AT CLOSING. If the parties choose to
consummate the transactions contemplated by this Agreement prior to receiving
the necessary third party consents to assign certain of the Contracts or
Intellectual Property licenses to Buyer, then (1) with respect to Contracts with
customers of the Business, following the Closing and until such time as consents
to assign such Contracts are received or such Contracts are terminated, Buyer
will make available to Seller the products or services necessary to fulfill
Seller's obligations under such Contracts in exchange for Seller providing to
Buyer the financial benefits under such Contracts, and (2) with respect to third
party licenses included within Seller's Intellectual Property, Seller will use
commercially reasonable efforts, with the cooperation of Buyer, to obtain
consents to assign such licenses by January 30, 1998 and will cooperate with
Buyer in any reasonable arrangement designed to provide Buyer with the
opportunity to use the intellectual property provided under such licenses;
provided, however, that with respect to clause (2) of this sentence, Seller
shall not be required to incur licensing costs or pay any fees to any vendor in
connection with the assignment of any such license or the establishment of any
new license or other arrangement necessary to provide such Intellectual Property
to Buyer. The parties acknowledge that Seller's efforts to continue to meet
contractual obligations under the customer Contracts described in this Section
shall not be a violation of the Non-Competition Agreement.
12.2 ENTIRE AGREEMENT. This Agreement and the documents and
agreements contemplated herein constitute the entire agreement between and
among the parties with regard to the subject matter of this Agreement. This
Agreement supersedes all previous agreements between or among the parties
relating to the transactions contemplated by this Agreement, including that
certain letter of intent dated November 12, 1998. There are now no
agreements, representations, or warranties between or among the parties other
than those set forth in the Agreement or the documents and agreements
contemplated herein.
12.3. AMENDMENT, WAIVERS AND CONSENTS. This Agreement shall not
be changed or modified, in whole or in part, except by supplemental agreement
signed by the parties. Any party may waive compliance by any other party
with any of the covenants or conditions of this Agreement, but no waiver
shall be binding unless executed in writing by the party granting the waiver.
No waiver of any provision of this Agreement shall be deemed, or shall
constitute, a waiver of any other provision, whether or not similar, nor
shall any waiver constitute a continuing waiver. Any consent under this
Agreement shall be in writing and shall be effective only to the extent
specifically set forth in such writing.
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12.4. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure
to the benefit of the parties hereto and their respective successors and
assigns, provided that Seller shall not assign its obligations hereunder.
12.5. GOVERNING LAW. The rights and obligations of the parties
shall be governed by, and this Agreement shall be construed and enforced in
accordance with, the laws of the State of California, excluding its conflict
of laws rules to the extent such rules would apply the law of another
jurisdiction.
12.6. ATTORNEYS' FEES. If any party brings any suit, action,
counterclaim, or arbitration proceeding to enforce the provisions of this
Agreement (including without limitation enforcement of any award or judgment
obtained with respect to this Agreement), the prevailing party shall be
entitled to recover a reasonable allowance for attorneys' fees and
litigation expenses in addition to court costs.
12.7. DISPUTE RESOLUTION. Any dispute, controversy or claim
between the parties relating to, or arising out of or in connection with,
this Agreement (or any subsequent agreements or amendments thereto),
including as to its existence, enforceability, validity, interpretation,
performance, breach or damages, including claims in tort, whether arising
before or after the termination of this Agreement, shall be settled only by
binding arbitration pursuant to the Commercial Arbitration Rules, as then
amended and in effect, of the American Arbitration Association (the "Rules"),
subject to the following:
12.7.1 There shall be one arbitrator, who shall be selected
under the normal procedures prescribed in the Rules.
12.7.2 Subject to legal privileges, each party shall be
entitled to discovery in accordance with the Federal Rules of Civil Procedure.
12.7.3 At the arbitration hearing, each party may make written
and oral presentations to the arbitrator, present testimony and written
evidence and examine witnesses.
12.7.4 The arbitrator's decision shall be in writing, shall be
binding and final and may be entered and enforced in any court of competent
jurisdiction.
12.7.5 No party shall be eligible to receive, and the
arbitrator shall not have the authority to award, exemplary or punitive
damages.
12.7.6 Each party to the arbitration shall pay one-half of the
fees and expenses of the arbitrator and the American Arbitration Association.
12.7.7 The arbitrator shall not have the power to amend this
Agreement.
12.8. PAYMENT OF FEES AND EXPENSES. Except as otherwise set forth
in this Agreement, each of Seller and Buyer shall each bear their own costs
and expenses, including without limitation, attorneys' fees, incurred in
connection with the negotiation and execution of this Agreement.
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12.9. RULES OF CONSTRUCTION. The parties acknowledge that each
party has read and negotiated the language used in this Agreement. The
parties agree that, because all parties participated in negotiating and
drafting this Agreement, no rule of construction shall apply to this
Agreement which construes ambiguous language in favor of or against any party
by reason of that party's role in drafting this Agreement.
12.10. ADDITIONAL DOCUMENTS. Each of the parties agree, without
further consideration, to execute and deliver such other documents and take
such further action as may be reasonably required to effectuate the
provisions of this Agreement.
12.11. SEVERABILITY. If any provision of this Agreement, as
applied to either party or to any circumstance, is declared by a court of
competent jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provision.
12.12. EXHIBITS. All Exhibits and Schedules attached hereto shall
be deemed to be a part of this Agreement and are fully incorporated in this
Agreement by this reference.
12.13. NOTICES. All notices or other communications required or
permitted hereunder shall be made in writing and shall be deemed to have been
duly given and effective immediately if delivered by hand or, effective three
(3) business days after mailed, postage prepaid, by first class or certified
or registered mail, return receipt requested, and addressed as follows:
To Buyer at: Network Computing Devices, Inc.
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
Attn: Chief Financial Officer
With a copy to: Xxxxxxxx & Xxxxxxxx LLP
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxx, Esq.
To Seller at: Tektronix, Inc.
XX Xxx 0000
00-000 Xxxxxxxxxxx Xxxxxxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
Attn: Secretary
With a copy to: Stoel Rives LLP
000 XX Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
A notice of change of address shall be effective only when done in accordance
with this Section 12.13.
12.14. RIGHTS OF PARTIES. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it and
their respective successors and assigns, nor is anything in this Agreement
intended to relieve or discharge the obligation or liability of any third
person to any party to this Agreement, nor shall any provision give any third
person any right of subrogation or action over or against any party to this
Agreement.
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12.15. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
12.16. KNOWLEDGE. As used in this Agreement, references to the
best knowledge or knowledge of Seller shall include the best knowledge or
knowledge, respectively, of Seller's officers and directors and employees of
the Business after reasonable due diligence and inquiry.
IN WITNESS WHEREOF, the parties hereto have duly executed this Asset
Purchase Agreement as of the date first written above.
SELLER BUYER
TEKTRONIX, INC. NETWORK COMPUTING DEVICES, INC.
By /s/ Xxxxx X. Xxxxxx By /s/ Xxxxxxx X. Xxxxx
------------------------- --------------------------
Title Title Executive Vice President,
---------------------- Operations & Finance,
Chief Financial Officer
-------------------------
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LIST OF SCHEDULES AND EXHIBITS
Exhibit A Form of Warrant
Exhibit B Form of Services Agreement
Exhibit C Form of Non-Competition Agreement
Exhibit D Form of Xxxx of Sale
Exhibit E Form of Assignment and Assumption Agreement
Exhibit F Registration Rights Agreement
Exhibit G Form of Supply Agreement
Exhibit H Form of License Agreement
Exhibit I Form of Space Sharing Agreement
Exhibit J Form of Offer Letter
Schedule 1.2.1 Equipment
Schedule 1.2.2 Inventory
Schedule 1.2.3 Contracts
Schedule 1.2.4 Pre-Paid Royalties
Schedule 1.2.5 Seller Intellectual Property
Schedule 1.4.1 Purchase and other Commitments
Schedule 1.4.2 Support Agreements
Schedule 1.4.3 Warranty Obligations
Schedule 4 Seller Disclosure Schedule
Schedule 6.11 Location of Sales and Support Offices
Schedule 6.12 Licensed Intellectual Property
Schedule 7.9 Leased Automobiles
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