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EXHIBIT 2.1
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Execution Copy
ASSET PURCHASE AGREEMENT
between
GLOBESPAN, INC.
and
PAIRGAIN TECHNOLOGIES, INC.
Dated as of January 21, 2000
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Table of Contents
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Page
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I. SALE AND TRANSFER OF ASSETS...............................................2
SECTION 1.01. Sale of Assets...........................................2
SECTION 1.02. Nonassignability of Assets...............................4
SECTION 1.03. License Option...........................................5
II. CLOSING, PURCHASE PRICE, LIABILITIES, ETC.................................5
SECTION 2.01. Closing..................................................5
SECTION 2.02. Payment to the Seller on Closing Date....................5
SECTION 2.03. Liabilities..............................................6
SECTION 2.04. Deliveries at the Closing................................7
III. REPRESENTATIONS AND WARRANTIES............................................7
SECTION 3.01. Representations and Warranties of the Seller.............7
SECTION 3.02. Representations and Warranties of the Buyer.............20
IV. COVENANTS................................................................23
SECTION 4.01. Covenants of the Seller.................................23
SECTION 4.02. Covenants of the Buyer..................................25
SECTION 4.03. Notification of Certain Matters.........................26
SECTION 4.04. Confidentiality.........................................26
SECTION 4.05. Allocation of Purchase Price............................26
SECTION 4.06. Transfer Taxes. ........................................27
SECTION 4.07. Insurance...............................................27
SECTION 4.08. Non-Competition.........................................27
SECTION 4.09. Group Employees.........................................28
SECTION 4.10. Further Assurances......................................29
SECTION 4.11. Inquiries and Negotiations..............................29
SECTION 4.12. Transfer of Assets......................................29
SECTION 4.13. License of Embedded Trademarks..........................30
V. CONDITIONS PRECEDENT.....................................................30
SECTION 5.01. Conditions Precedent to Obligations of the Buyer........30
SECTION 5.02. Conditions Precedent to Obligations of the Seller.......32
VI. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION.............................33
SECTION 6.01. Survival of Representations.............................33
SECTION 6.02. Tax Indemnity...........................................34
SECTION 6.03. Seller's General Indemnity..............................34
SECTION 6.04. Intellectual Property Indemnification...................35
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Table of Contents
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(continued)
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SECTION 6.05. Indemnification Pursuant to Certain Agreements..........37
SECTION 6.06. Buyer's General Indemnity...............................37
SECTION 6.07. Conditions of Indemnification...........................37
SECTION 6.08. Limitations on Indemnity................................38
SECTION 6.09. Remedies Cumulative.....................................38
VII. TERMINATION AND ABANDONMENT..............................................39
SECTION 7.01. Termination of Agreement................................39
SECTION 7.02. Effect of Termination...................................39
VIII. MISCELLANEOUS............................................................39
SECTION 8.01. Definitions.............................................39
SECTION 8.02. Specific Performance....................................43
SECTION 8.03. Service of Process......................................43
SECTION 8.04. Bulk Transfer Laws......................................43
SECTION 8.05. Expenses, Etc...........................................44
SECTION 8.06. Execution in Counterparts...............................44
SECTION 8.07. Notices.................................................44
SECTION 8.08. Waivers.................................................45
SECTION 8.09. Amendments, Supplements, Etc............................45
SECTION 8.10. Entire Agreement........................................45
SECTION 8.11. Dispute Resolution......................................45
SECTION 8.12. Applicable Law..........................................46
SECTION 8.13. Binding Effect; Benefits................................46
SECTION 8.14. Assignability...........................................46
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INDEX TO EXHIBITS AND ANNEXES
Exhibit Description
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A Form of Note
B Form of Xxxx of Sale and Assignment Agreement
C Form of Assumption Agreement
D Form of License Agreement
E Summary of Terms of the Sublease
F Form of Supply Agreement
G Form of Registration Rights Agreement
H The Lewyn Agreement
Annex Description
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I Form of Opinion of Counsel for the Seller
II Form of Opinion of Counsel for the Buyer
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INDEX TO SCHEDULES
Schedule Description
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1.01(a) Sale of Assets
1.01(e) Excluded Assets
3.01(a) Organization; Power; Capacity
3.01(c) Non-Contravention
3.01(g) Governmental Approvals
3.01(h) Title to Properties, Absence of Liens and
Encumbrances
3.01(i) Contracts and Other Data
3.01(j) Customers
3.01(k) Intellectual Property
3.01(m) Litigation
3.01(n) Taxes
3.01(o) Labor Matters
3.01(p) Insurance
3.01(s) Employee Benefit Plans
3.01(t) Transactions with Affiliates
3.01(u) Environmental, Health and Safety Matters
3.01(w) Broker's or Finder's Fees
3.01(y) Year 2000 Compliance
3.01(aa) Absence of Undisclosed Liabilities
3.01(bb) Product Warranty
3.01(dd) Assets Necessary to Group Activity
3.01(gg) Development Agreements
3.02(a) Organization, Corporate Power, Etc.
3.02(d) Capitalization
3.02(i) Brokers
4.09 Group Employees
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of January 21, 2000, among
GLOBESPAN, INC., a Delaware corporation (the "Buyer") and PAIRGAIN TECHNOLOGIES,
INC., a Delaware corporation (the "Seller"). Certain of the capitalized terms
used in this Agreement are defined in Section 8.01 hereof.
W I T N E S S E T H,
- - - - - - - - - -
WHEREAS, the Seller is in the business of manufacturing transmission
and networking systems, including DSL transmission systems, for sale to local
telephone companies, competitive local exchange carriers (CLECS), business
enterprises, data networking services providers and other customers;
WHEREAS, the Seller, through its microelectronics engineering
development group (the "Group"), is engaged in the business of the design,
development, license and supply of intellectual property necessary for the
manufacture, have-manufacture and sale of integrated circuits and related
systems and software (the "Group Activity");
WHEREAS, the Seller, until now, has utilized the Group Activity with
the intent to develop components ahead of the general market availability and at
lower costs than available from commercial electronic components manufacturers
in order to provide a competitive advantage for the Seller's products;
WHEREAS, the Group Activity heretofore has been conducted as an
integrated part of the Seller and not on a stand-alone basis, and it is the
intention of the parties hereto to transfer to the Buyer the Group Activity by
the transfer to the Buyer all of the assets of the Seller used in or necessary
to the conduct by the Seller of the Group Activity, subject to certain specified
liabilities;
WHEREAS, the Seller desires to sell the Assets (as defined herein) to
the Buyer who can make better business use of the expertise and intellectual
property;
WHEREAS, the Seller desires to maintain the limited rights set forth in
the License Agreement (as defined herein) to conduct the activities described
therein;
WHEREAS, in connection with such purchase and sale, each of the Buyer
and the Seller desires to enter into certain mutually beneficial arrangements
relating to the operation of the Group Activity by the Buyer from and after the
Closing Date (as defined in Section 2.01 hereof); and
WHEREAS, the Seller desires to maintain licenses to utilize certain
intellectual property being sold to the Buyer with limited rights to modify such
property;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereby agree as follows:
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I. SALE AND TRANSFER OF ASSETS
SECTION 1.01. Sale of Assets.
(a) On the terms and subject to the conditions hereinafter set forth,
on the Closing Date (as hereinafter defined), the Seller shall sell, convey,
transfer, assign and deliver to the Buyer (or one or more subsidiaries of the
Buyer (each a "Designated Subsidiary") as may be designated by the Buyer prior
to the Closing Date), and the Buyer (or such Designated Subsidiaries as are
identified by Buyer prior to the Closing Date) shall purchase from the Seller,
for the aggregate consideration set forth in Article II hereof, all the assets
and properties (of every kind, nature and description, real, personal or mixed,
tangible or intangible and wherever situated, whether or not carried on the
books of the Seller) of the Seller that are used in, or necessary to the
Seller's conduct of the Group Activity (it being the intention hereby to assign
and transfer all the assets owned or claimed by the Seller and used in, or
necessary to, the Seller's conduct of Group Activity or used by, or in
connection with, the activities of the Group Activity, whether or not such
assets are listed on the accounts of the Seller), free and clear of all
mortgages, liens, pledges, security interests, charges, claims, restrictions and
encumbrances of any nature whatsoever ("Liens"), other than Permitted Liens, and
except those assets excluded pursuant to paragraph (b) below (said assets and
properties so to be sold, conveyed, transferred, assigned and delivered being
hereinafter collectively called the "Assets"), including, without limitation:
(i) all tangible personal property, inventories, machinery,
equipment, supplies, tools, fixtures, leaseholds, computer equipment,
applications circuits, products in development, work in process, spare parts,
supplies, vehicles, furniture and office furnishings, wherever situated, used in
or necessary to the Seller's conduct of the Group Activity, including without
limitation all items listed on Schedule 1.01(a)(i) hereto;
(ii) all leases, subleases and rights thereunder used in or
necessary to the Seller's conduct of the Group Activity, including, without
limitation, all items listed on Schedule 1.01(a)(ii);
(iii) all claims, deposits, prepayments, refunds, causes of
action, rights of recovery, rights of setoff and rights of recoupment relating
to, used in or necessary to the Seller's conduct of the Group Activity,
including, without limitation, all items listed on Schedule 1.01(a)(iii) hereto;
(iv) all franchises, approvals, permits, licenses, orders,
registrations, certificates, variances and similar rights obtained from
governments and governmental agencies, to the extent they relate primarily to or
are used in or necessary to the Seller's conduct of the Group Activity
including, without limitation, all items listed on Schedule 1.01(a)(iv) hereto;
(v) all intangible personal property of whatsoever kind or
character, whether evidenced in writing or not, used in or necessary to the
Seller's conduct of the Group Activity, including, but not limited to, all
customer lists, data bases, securities, claims, and causes of action (whether
fixed or contingent) including, without limitation, all items listed on Schedule
1.01(a)(v) hereto;
(vi) all Group Intellectual Property, including, without
limitation, all items listed on Schedule 1.01(a)(vi) hereto;
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(vii) any royalties paid to the Seller from and after
September 29, 1999, pursuant to the ADSL Agreement (including any such royalties
as may be paid to the Seller following the Closing Date, which royalties will
be promptly paid by the Seller to the Buyer upon receipt);
(viii) all technical documentation, materials and guidelines,
brochures, sales literature, promotional materials and other selling material
primarily relating to or used in or necessary to the Seller's conduct of the
Group Activity including, without limitation, all items listed on Schedule
1.01(a)(viii) hereto;
(ix) all papers, documents, instruments, books and records,
files, agreements, books of account and other records by which the Assets might
be identified or enforced, or otherwise pertaining to the Assets or the Group
Activity that are located at the offices or other locations used in connection
with the Assets or the Group Activity (including, without limitation, customer
invoices, customer lists, vendor and supplier lists, drafts and other documents
and materials relating to customer transactions) including, without limitation,
all items listed on Schedule 1.01(a)(ix) hereto;
(x) the rights of the Seller under all contracts, agreements,
licenses, leases, sales orders, purchase orders and other commitments (whether
oral or written) primarily relating to, used in or necessary to the Seller's
conduct of the Group Activity including, without limitation, all items listed on
Schedule 1.01(a)(x) hereto;
(xi) all computer software programs, the source and object codes
for such software programs and all documentation and training manuals related
thereto, used in or necessary to the Seller's conduct of the Group Activity
including, without limitation, all items listed on Schedule 1.01(a)(xi) hereto;
and
(xii) all other assets and rights of every kind and nature, real
or personal, tangible or intangible, that are owned or claimed by the Seller, or
any Affiliate of the Seller, and that are used by the Seller, or any Affiliate
of the Seller, in connection with, or necessary to the Seller's conduct of the
Group Activity (including, without limitation, all goodwill), whether or not
such assets are reflected in the balance sheets and other financial statements
of the Seller, or any Affiliate of the Seller.
Without limiting the generality of the foregoing, the Assets shall, except as
set forth in paragraph (b) below, include all assets as may be acquired by the
Seller in respect of the Group Activity after the date of this Agreement that
would be included on a balance sheet prepared in accordance with generally
accepted accounting principles as of the Closing Date for the Group Activity,
but shall exclude any such assets that may be or have been disposed of after
said date in the ordinary course of business on a basis consistent with past
practice.
(b) In the event that any of the Group Intellectual Property, or any
license or other agreement relating to any of the Group Intellectual Property is
updated or otherwise modified in the name of or for the benefit of the Seller,
the Seller shall promptly transfer, assign and deliver to the Buyer (or such
Designated Subsidiaries as may be designated by the Buyer), and the Buyer or
such Designated Subsidiary shall acquire from the Seller, without additional
consideration, all such updates or other modifications.
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(c) In the event that the Buyer shall establish at any time or from
time to time during the twelve-month period following the Closing Date that any
of the Schedules describing the Assets as provided in Section 1.01(a) hereof
failed to include assets or properties of the Seller used by the Seller in, or
necessary to the Seller's conduct of, the Group Activity (other than the
Excluded Assets) then the Seller shall promptly sell, convey, transfer, assign
and deliver to the Buyer (or such Designated Subsidiaries as may be designated
by the Buyer), and the Buyer or such Designated Subsidiary shall acquire from
the Seller, without additional consideration, all such assets and properties
(herein referred to as the "Additional Assets").
(d) In the event that the Buyer shall establish at any time or from
time to time during the twelve-month period following the Closing Date that no
arrangements have been made either in this Agreement or in any of the Ancillary
Agreements to provide the Buyer with nonexclusive use of any assets or
properties of the Seller not transferred hereunder and (i) used by the Seller in
the Group Activity or (ii) necessary to the Seller's conduct of the Group
Activity (other than the Excluded Assets), then the Seller shall use its
reasonable best efforts to enter into an agreement with the Buyer providing for
such nonexclusive use on a cost basis consistent with the Seller's existing cost
allocations for such assets or properties, and on such other terms and
conditions as may be mutually satisfactory to the Buyer and the Seller.
(e) Notwithstanding anything to the contrary contained herein, the
following assets and properties (the "Excluded Assets") of the Seller are
specifically excluded from the Assets and shall be retained by the Seller:
(i) the minute books, stock records and related corporate records
of the Seller;
(ii) any rights or benefits which arise under the terms and
provisions of the ADSL Agreement and which accrue to either the Group or the
Seller, including, but not limited to, the DMT ADSL Chip Set Technology (such
DMT ADSL Chip Set Technology to be assigned after March 6, 2000);
(iii) the cash surrender value of any life insurance policy for
the benefit of any Group Employee; and
(iv) the assets and properties identified on Schedule 1.01(e)(iv)
hereto.
SECTION 1.02. Nonassignability of Assets. To the extent that any license,
permit, agreement, lease, sales or purchase order, commitment or other contract,
property interest, qualification or asset described in this Agreement as being
sold, assigned, transferred or conveyed to the Buyer by the Seller (collectively
the "Commitments") or any claim, right or benefit arising thereunder or
resulting therefrom (collectively, together with the Commitments, the
"Interests"), is not capable of being sold, assigned, transferred or conveyed
without the approval, consent or waiver of the issuer thereof or the other party
thereto, or any third Person, including a government or governmental or
regulatory authority, or if such sale, assignment, transfer or conveyance or
attempted sale, assignment, transfer or conveyance would be invalid, or would
destroy, terminate or eliminate (or permit any other Person to destroy,
terminate or eliminate) the Interests related thereto, or would constitute a
breach of a Commitment or a violation of any law, rule or regulation then any
provision in this Agreement or any specific conveyance to the contrary
notwithstanding, this Agreement shall not constitute a sale, assignment,
transfer or conveyance thereof or an attempted sale, assignment, transfer or
conveyance thereof, but the Seller and the Buyer shall do such acts and
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things as may be reasonably necessary to give the Buyer the full benefit in
respect of the Interests and the Seller the full benefit of the assumption of
the Assumed Liabilities with respect thereto, including using reasonable efforts
in order that any necessary third party shall execute such documents and do such
acts and things as may be reasonably required for such purpose (including any
consent, approval or amendment required to novate, reissue or assign the
affected Commitments); provided, however, that neither the Seller nor the Buyer
shall be obligated to pay any consideration therefor (except for filing fees and
other similar charges which shall be paid by the Seller) to, or commence
litigation against, the third party or Person from whom such consents, approvals
or waivers are requested. If the Buyer or the Seller is unable to obtain any
such required consent, approval or waiver, then until such required consent,
approval or waiver is obtained, and in the absence of any alternative
arrangement established by agreement between the Buyer and the Seller, the
Seller shall continue to be bound by such Commitments and the Buyer shall, as
agent for the Seller or as subcontractor, pay, perform and discharge fully all
the obligations of the Seller thereunder from and after the Closing Date and the
Seller shall, without further consideration, pay and remit to the Buyer (or its
designee) promptly all money, rights and other consideration received in respect
of such performance after payment of any taxes, costs or expenses due from the
Seller (or its Affiliates) with respect to such receipt. The Seller shall
conduct itself in the exercise of its rights under all such commitments only as
reasonably directed by the Buyer and at the Buyer's expense. If and when any
such approval, consent or waiver shall be obtained or such Commitment shall
otherwise become assignable or able to be novated or such restriction shall have
been satisfied or waived or no longer apply, the assignment of the Assets and
the assumption of the Assumed Liabilities related to such approval, consent or
waiver or restriction on assignment and/or assumption shall become effective
automatically as of the Closing Date, without further action on the part of the
Seller, the Buyer or any other Person, and without payment of further
consideration.
SECTION 1.03. License Option. The Seller hereby grants to the Buyer the
option (each, an "Option" and collectively, the "Options") to require the
Seller to assign to the Buyer all of its right, title and interest in, to and
under the Cross License Agreement (the "Cross License") dated as of October 23,
1997, between Amati Communications Corporation and the Seller and the Level One
Agreements (such agreements being referred to herein as the "Optioned
Agreements"), each such Option being exercisable by the Buyer at any time on or
after the Closing Date subject only to the provisions of such Optioned
Agreement. The Seller will be deemed to have made all the representations and
warranties set forth in Section 3.01 hereof with respect to the applicable
Optioned Agreement (and the Intellectual Property licensed under such Optioned
Agreement) as of the date the applicable Option is exercised by the Buyer and is
assigned to the Buyer pursuant to the provisions of such Optioned Agreement.
II. CLOSING, PURCHASE PRICE, LIABILITIES, ETC.
SECTION 2.01. Closing. Subject to the provisions of Article IV hereof, the
closing (the "Closing") of the transactions contemplated by this Agreement shall
take place at the offices of Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol, 00
Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, on the business day following the
day on which the last of the conditions set forth in Sections 5.01 and 5.02
(other than the conditions which by their terms are to be satisfied at the
Closing) shall have been fulfilled or waived, or at such other time and/or place
or on such other date as the parties may mutually agree (such date and time of
closing being herein called the "Closing Date").
SECTION 2.02. Payment to the Seller on Closing Date. On the Closing Date,
in full consideration for the sale, conveyance, transfer, assignment and
delivery to the Buyer of the Assets, the Buyer shall:
(a) deliver to the Seller 1,081,197 shares (the "Initial Shares") of
common stock, par value $0.001, of the Buyer (the "Common Stock"), subject to
appropriate adjustment for any stock split (including the form of a stock
dividend) or reverse stock split on or prior to the Closing Date;
(b) deliver to the Seller a convertible subordinated note (the "Note")
in the principal amount of $90 million, substantially in the form attached
hereto as Exhibit A; and
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(c) assume the liabilities of the Seller as and to the extent provided
in Section 2.03.
SECTION 2.03. Liabilities.
(a) Liabilities to be Assumed. On the Closing Date, and subject to the
terms and conditions of this Agreement (including Section 2.03(b) below), the
Buyer will assume and agree to pay, perform and discharge when due, all
obligations accruing after the Closing Date under the agreements listed in
Schedule 3.01(i) unless such obligations are specified in Section 3.01(i) as not
being assumed by the Buyer (collectively the "Assumed Liabilities").
(b) Liabilities Not Assumed. The Buyer shall not assume, and shall not
be deemed to have assumed, any liabilities or obligations of the Seller of any
kind or nature whatsoever, except as expressly provided in the Assumption
Agreement (as defined hereafter) and in Section 2.03(a) above. Without limiting
the generality of the foregoing, it is hereby agreed that the Buyer is not
assuming any liability and shall not have any obligation for or with respect to:
(i) any liabilities or obligations of the Seller or the Group
that arise under the terms of a contract, agreement, license, lease, sales
order, purchase order, or other commitment that shall not be assigned, except as
contemplated by Section 1.02 of this Agreement;
(ii) any liabilities or obligations of the Seller or the Group
that arise under the terms of the ADSL Agreement or the Excluded Agreements set
forth in item 4 of Schedule 1.01(e);
(iii) any liabilities or obligations of the Seller or the Group
under any Plan (as defined in Section 3.01(s)), including (x) any obligation to
adopt or to sponsor such Plan of the Seller except as the Buyer may, in its sole
discretion, elect to adopt or to sponsor and (y) any deferred compensation
benefits accrued as liabilities on the books of the Seller;
(iv) any obligation of the Seller or the Group arising out of any
action, suit or proceeding based upon an event occurring or a claim arising (A)
prior to or as of the Closing Date or (B) after the Closing Date in the case of
claims in respect of products or services sold or provided by the Seller or the
Group or the conduct of the Group Activity prior to the Closing Date and
attributable to acts performed or omitted by the Seller or the Group prior to
the Closing Date; and
(v) any and all liabilities or obligations for Taxes incurred by
or imposed upon the Seller, or any predecessor company thereof, whether relating
to periods, before, including or after the Closing Date, and any taxes arising
from or with respect to the Assets or the operations of the Group Activity that
are incurred or relate to any period prior to (or up to and including) the
Closing Date, including, without limitation, any Taxes incurred by or imposed
upon the Seller or the Group and arising out of the consummation of the
transactions contemplated by this Agreement, as well as sales and use Taxes
arising out of the transactions contemplated by this Agreement, whether such
Taxes are imposed upon the Seller or the Buyer; provided, however, that sales
and use Taxes resulting from the purchase and sale of the Assets hereunder shall
be paid as provided in Section 4.06 below.
(the liabilities described in the preceding clauses (i) through (v) being herein
collectively called the "Excluded Liabilities").
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SECTION 2.04. Deliveries at the Closing. At the Closing, (i) the Seller
will deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 5.01, including, without limitation, the Ancillary
Agreements; (ii) the Buyer will deliver to the Seller the various certificates,
instruments and documents referred to in Section 5.02, including, without
limitation, the Ancillary Agreements; (iii) the Seller will execute, acknowledge
(if appropriate), and deliver to the Buyer (A) a xxxx of sale in the form of the
Xxxx of Sale and Assignment Agreement annexed hereto as Exhibit B (the "Xxxx of
Sale"), (B) appropriate assignments (including real property and Group
Intellectual Property transfer documents) and (C) such other instruments of
sale, transfer, conveyance, and assignment as the Buyer and its counsel
reasonably may request; (iv) the Buyer will execute, acknowledge (if
appropriate), and deliver to the Seller (A) an assumption in the form of the
Assumption Agreement attached hereto as Exhibit C (the "Assumption Agreement")
and (B) such other instruments of assumption as the Seller and its counsel
reasonably may request; and (v) the Buyer will deliver to the Seller the
consideration specified in Section 2.02.
III. REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of the Seller. The Seller
represents and warrants to the Buyer as follows:
(a) Organization, Power; Capacity. (i) The Seller is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is duly licensed or qualified to do business
as a foreign entity in each jurisdiction in which it is required to be so
qualified with respect to the operations of the Group and as set forth in
Schedule 3.01(a)(i), except where the failure to so qualify would not be likely
to result in a Material Adverse Effect on the Group. The Seller has all
requisite corporate power and authority to own, operate and lease the Assets, to
carry on the Group Activity as it is now being conducted and to execute and
deliver this Agreement and each Ancillary Agreement to which it is party and to
perform its obligations hereunder and thereunder. Schedule 3.01(a)(i) hereto
sets forth a complete list of the jurisdictions in which the Seller is qualified
to do business with respect to the operations of the Group. The Seller has
heretofore made available to the Buyer true, complete and correct copies of its
Certificate of Incorporation and by-laws as currently in effect.
(ii) The Group does not own and is not party to any joint venture
or other enterprise and is not party to any contract to provide funds to or make
any investment (in the form of a loan, capital contribution or similar payment)
in any entity or enterprise that is not wholly owned by it.
(b) Authorization of Agreements. The execution and delivery by the
Seller of this Agreement and each Ancillary Agreement to which the Seller is a
party, and the consummation by the Seller of the transactions contemplated
hereby and thereby, have been duly authorized by all requisite corporate action.
This Agreement has been duly and validly executed by the Seller and, subject to
due execution by any other parties thereto, will constitute the legal, valid and
binding obligation of the Seller, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization and moratorium laws
and other laws of general application affecting the enforcement of creditors'
rights generally. Each Ancillary Agreement to which the Seller is party, when
duly executed and delivered in accordance with this Agreement, subject to due
execution by any other parties thereto, will constitute a legal, valid and
binding obligation of the Seller, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization and moratorium laws
and other laws of general application affecting the enforcement
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of creditors' rights generally. No other corporate proceedings on the part of
the Seller are necessary to authorize this Agreement, the Ancillary Agreements
or the transactions contemplated hereby or thereby.
(c) Non-Contravention. The execution, delivery and performance of this
Agreement by the Seller and the consummation of the transactions contemplated
hereby will not (i) conflict with any provision of the Certificate of
Incorporation of the Seller (as in effect at the Closing) or (ii), except as set
forth on Schedule 3.01(c) result (with the giving of notice or the lapse of time
or both) in any violation of or default or loss of a benefit under, or permit
the acceleration of any obligation under, any mortgage, indenture, lease,
agreement or other instrument, permit, concession, grant, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Seller, the Group, the Group Activity or any of the Seller's properties,
other than any such violation, default, loss or acceleration that would not
materially adversely affect the ability of the Seller to consummate the
transactions contemplated hereby and which would not otherwise have a Material
Adverse Effect on the Seller, the Group or the Group Activity.
(d) Governmental Approvals. No consent, approval, order or
authorization of, or registration, declaration or filing with, any federal,
state, municipal or foreign governmental agency, public body, court, tribunal or
other authority (each a "Governmental Agency") having jurisdiction over the
Seller is required to be made or obtained by the Seller in connection with the
execution and delivery of this Agreement by the Seller or the consummation by
the Seller of the transactions contemplated hereby, except for (i) compliance by
the Seller with the Xxxx-Xxxxx Act, (ii) filings pursuant to Securities Act and
the Exchange Act and the rules and regulations promulgated by the SEC thereunder
and (iii) such consents, approvals, orders or authorizations which if not
obtained, or registrations, declarations or filings which if not made, would not
materially adversely affect the ability of the Seller to consummate the
transactions contemplated hereby.
(e) [reserved]
(f) [reserved]
(g) Governmental Authorizations and Regulations. (i) Except as set
forth in Schedule 3.01(g)(i) hereto, the Seller has all governmental licenses,
franchises and permits ("Permits") required under applicable law for the conduct
of the Group Activity as currently conducted. Schedule 3.01(g)(i) hereto lists
all material Permits held by the Seller required under applicable law for the
conduct of the Group Activity as currently conducted.
(ii) The Group Activity is being conducted in compliance with all
Permits, except for such noncompliance as would not be likely to result in a
Material Adverse Effect on the Group. The Seller has not received any notice of
any alleged violation of any of the foregoing Permits.
(iii) Neither the Seller nor any of its properties, operations or
businesses relating to the Seller's conduct of the Group Activity is subject to
any court or administrative order, judgment, injunction or decree.
(iv) There is no restriction upon the ability or right of the
Seller to assign, convey and transfer any material Permit to the Buyer.
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(h) Title to Properties, Absence of Liens and Encumbrances. Except as
set forth on Schedule 3.01(h), the Seller or the Group has good and marketable
title to or a valid leasehold interest in all of the Assets, in each case free
and clear of all Liens, other than (i) the liens described on Schedule 3.01(h)
hereto, (ii) liens for taxes not yet due, or (iii) mechanic's, materialman's,
landlord's and similar statutory liens arising in the ordinary course of
business and which, in the aggregate, would not have a Material Adverse Effect
on the Group or the Group Activity (the Liens described in clauses (i), (ii) and
(iii) above being referred to herein as "Permitted Liens").
(i) Contracts and Other Data. Annexed hereto as Schedule 3.01(i), or
supplied separately, is a list setting forth the following with respect to the
Group Activity:
(i) a description of all leases of personal property used by the
Group in or otherwise necessary to the Seller's conduct of the Group Activity as
currently conducted, to which the Seller is a party, either as lessee or lessor,
including a description of the parties to each such lease, the property to which
each such lease relates, the rental term and the monthly (or other) rents
payable under each such lease;
(ii) all Group Intellectual Property and all licenses granted by
or to the Seller and all other agreements to which the Seller or the Group is
party that relate, in whole or in part, to any Group Intellectual Property or to
other proprietary rights used in or necessary to the Seller's conduct of the
Group Activity as currently conducted, whether owned by the Seller, the Group or
otherwise;
(iii) all collective bargaining agreements, employment and
consulting agreements (whether written or oral), independent contractor
agreements (whether written or oral), executive compensation plans (whether
written or oral), bonus plans, deferred compensation agreements, employee
pension plans or retirement plans, employee profit sharing plans, employee stock
purchase and stock option plans, group life insurance, hospitalization insurance
or other similar plans or arrangements (whether written or oral) maintained for
or providing benefits to employees of, or independent contractors or other
agents of the Seller who are engaged exclusively in the day-to-day operations
and support of the Group Activity;
(iv) the names and titles of, and current annual base salary or
hourly rates for, each of the Group Employees, together with a statement of the
full amount and nature of any other remuneration, whether in cash or kind, paid
to each such person during the past or current fiscal year or payable to each
such person in the future, and the bonuses accrued for, and the vacation and
severance benefits, to which each such person is entitled; and
(v) all contracts (whether written or oral), including, without
limitation, guarantees, mortgages, indentures and loan agreements which relate
to the Group Activity, to which the Group (or the Seller on behalf of the Group)
is party, or to which the Group (or the Seller on behalf of the Group) or any of
the assets or properties used in or necessary to the Seller's conduct of the
Group Activity is subject and which are not specifically referred to in clauses
(i), (ii), (iii) or (iv) above, including, but not limited to, contracts which
(A) contain warranties by the Seller or the Group in excess of those customary
in the business of the Group, (B) extend for more than 12 months after the
Closing Date, (C) contain any non-compete or exclusivity provision which in any
way could restrict the ability of the Buyer to conduct the Group Activity
freely, in any manner and in any geographic location or to solicit for hire any
Person, (D) obligate third parties to maintain confidentiality of information
relating to the Group or the Group Activity obligating the Group to
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maintain confidentiality relating to a third party, (E) contain any provision
limiting the Group's or the Seller's rights under such contract upon a change of
control, (F) contain any restriction upon the assignability of the contract by
the Group or the Seller or (G) have been, or are in the process of being,
negotiated by the Seller or the Group but are not yet executed by all of the
parties thereto.
True and complete copies of all documents and complete descriptions of
all material binding oral commitments (if any) referred to in Schedule 3.01(i)
have been provided or made available to the Buyer and its counsel. All material
provisions of the contracts referred to in such Schedule are valid and
enforceable obligations of the Seller and of, to the best of the Seller's
knowledge, the other parties thereto. The Seller has not been notified of any
claim that any contract referred to in such Schedule is not valid and
enforceable in accordance with its terms for the periods stated therein, or that
there is under any such contract any existing default or event of default or
event which with notice or lapse of time or both would constitute such a
default. Schedule 3.01(i) also specifies which obligations listed therein
(except for obligations which arise only after the Closing Date) are being
assumed, and, if such obligations arise after the Closing Date, which such
obligations are not being assumed.
(j) Customers. Since January 1, 1999, neither the Group nor the Seller
on behalf of the Group, has sold goods or services to any third party customer
and neither Group nor the Seller on behalf of the Group maintains any customer
list.
(k) Intellectual Property.
(i) "Intellectual Property" of any Person shall mean any or all
of the following and all rights in, arising out of, or associated therewith
anywhere in the world held by such Person and not otherwise in the public
domain: (1) all United States, international and foreign patents and
applications therefor (including provisional applications) and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (2) all inventions (whether patentable or not),
patterns, drawings, blueprints, specifications, products in development,
processes, applications, circuits, invention disclosures, improvements, trade
secrets, proprietary information, know how, mask works (and all information
contained in a mask but not yet fixed in a chip), technology, technical data and
customer lists, and all documentation relating to any of the foregoing; (3) all
copyrights, copyright registrations and applications therefor; (4) all
industrial designs and any registrations and applications therefor throughout
the world; (5) all trade names, logos, common law trademarks and service marks;
trademark and service xxxx registrations and applications therefor and all
goodwill associated therewith throughout the world; (6) all databases and data
collections and all rights therein throughout the world; (7) all software
including all source code, object code, firmware, development tools, files,
records and data, all media on which any of the foregoing is recorded; (8) all
permits, privileges or royalties; (9) any similar, corresponding or equivalent
rights to any of the foregoing and (10) all documentation related to any of the
foregoing.
(ii) Schedule 3.01(k)(ii)(a) lists all Intellectual Property used
in or necessary to the conduct of the Group Activity (the "Group Intellectual
Property"). Schedule 3.01(k)(ii)(b) lists all Group Intellectual Property (A)
owned by, or filed in the name of, the Group or (B) owned by, or filed in the
name of the Seller and relating to, used by the Group in or necessary to the
Seller's conduct of the Group Activity (the "Group Protectable Intellectual
Property").
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(iii) Except as set forth on Schedule 3.01(k)(iii), the Seller
(1) owns or shall own as of the Closing Date, and has or will have as of the
Closing Date good title to each item of Group Protectable Intellectual Property,
free and clear of any Liens, (2) has exclusive and assignable license to use
each item of the Group Intellectual Property (other than Group Protectable
Intellectual Property set forth in (1) above), free and clear of any Liens, (3)
is the exclusive owner of or has the assignable permission of the owner to use
all trademarks and trade names used in connection with the operation or conduct
of the Group Activity, including the sale of any products or the provision of
any services by the Group and (4) owns exclusively, and has good title to, all
copyrighted works that are Group products or other works of authorship that the
Group otherwise purports to own.
(iv) To the extent that any work, invention or material has been
developed or created by a third party for the Group (or for the Seller for use
in the Group Activity), the Group has a written agreement with such third party
with respect thereto and the Group (or the Seller) thereby has obtained
ownership of, and is the exclusive owner of, all Intellectual Property in such
work, material or invention by operation of law or by valid assignment.
(v) The Group has not transferred ownership of, or granted any
exclusive license with respect to, any Group Intellectual Property, to any third
party, except for the exclusive license granted to Conexant under the ADSL
Agreement (which exclusive license expires on March 7, 2000).
(vi) Except as set forth on Schedule 3.01(k)(vi), the operation
of the Group Activity as it currently is conducted, including to the extent
applicable the Group's design, development, manufacture, license and sale of the
products (including products currently under development) or services of the
Group Activity, does not (1) infringe or misappropriate the Intellectual
Property of any other person, (2) violate the rights of any person (including
rights to privacy or publicity), or (3) constitute unfair competition or trade
practices under the laws of any jurisdiction, and neither the Seller nor the
Group has received written or oral notice from any person claiming that such
operation or any act, product or service of the Group Activity infringes or
misappropriates the Intellectual Property of any third party, violates the
rights of any person or constitutes unfair competition or trade practices under
the laws of any jurisdiction.
(vii) The Group (or the Seller, for use in the Group Activity)
owns or has the exclusive right to use all Intellectual Property used by the
Group in or necessary to the Seller's conduct of the Group Activity as it is
currently conducted, including, without limitation, in the design, development,
manufacture, license and sale of all products currently manufactured (either
directly or under contract) or sold by the Group or under development by the
Group, in the use and sale by Group customers thereof, and in the performance of
all services provided or contemplated to be provided by the Group.
(viii) Each item of the Group Protectable Intellectual Property
is valid and subsisting, all necessary registration, maintenance and renewal
fees in connection with such Group Protectable Intellectual Property have been
paid and all necessary documents and certificates in connection with such Group
Protectable Intellectual Property have been filed with the relevant patent,
copyright, trademark or other authorities in the Untied States or foreign
jurisdictions, as the case may be, for the purposes of maintaining such Group
Protectable Intellectual Property, except, in each case as would not be likely
to result in a Material Adverse Effect on the Group or the Buyer.
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(ix) There are no contracts, licenses and agreements between the
Group or the Seller and any other person with respect to the Group Intellectual
Property under which there is any dispute known to the Group or the Seller
regarding the scope of such agreement, or performance under such agreement
including with respect to any payments to be made or received by the Group
thereunder.
(x) To the best of the Seller's knowledge, no Person is
infringing or misappropriating any of the Group Intellectual Property.
(xi) The Group and the Seller have taken all steps that are
reasonably required to protect the Group's rights in confidential information
and trade secrets of the Group or provided by any third party to the Group.
Without limiting the foregoing, the Seller and the Group have, and enforce, a
policy requiring each employee and contractor to execute (A) proprietary
information and confidentiality agreements in connection with Group Intellectual
Property and Group Protectable Intellectual Property and (B) invention
assignment agreements, substantially in the Seller or the Group standard forms,
and all current employees and contractors of the Group have executed such
agreements.
(xii) There are no proceedings or actions instituted by the Group
or the Seller or of which the Group or the Seller has received written notice
before any court, tribunal (including the United States Patent and Trademark
Office or equivalent authority anywhere in the world) related to any Group
Intellectual Property.
(xiii) No Intellectual Property or product or service of the
Group is subject to any proceeding or outstanding decree, order, judgment,
agreement or stipulation that restricts in any manner the use, transfer or
licensing thereof by the Group or may affect the validity, use or enforceability
of such Intellectual Property.
(xiv) No (1) product, service or publication of the Group, (2)
material published or distributed by the Group or (3) conduct or statement of,
or attributable to, the Group, constitutes obscene material or a defamatory
statement or material.
(xv) The Seller owns, or shall own as of the Closing Date, and
has, or will have as of the Closing Date, good title to all of the Patent Rights
(as defined in the Lewyn Agreement) free and clear of any Liens.
(l) Software. The Seller holds valid licenses to all copies of all
operating and applications computer software programs and databases used by the
Group in or necessary to the Seller's conduct of the Group Activity and such
programs and databases are adequate for the conduct of the Group Activity as
currently conducted.
(m) Litigation. Except as set forth in Schedule 3.01(m) hereto, there
are no Claims at law or in equity, pending or, to the knowledge of the Seller,
threatened, against the Seller or by or before any Governmental Agency relating
to the Group or the Group Activity. Except as set forth in Schedule 3.01(m)
hereto, there are no orders, rulings, charges, judgments or decrees of any court
or Governmental Agency with respect to which the Seller has been named or is a
party that apply, in whole or in part, to the Group or the Group Activity or any
of the Assets or which would limit the ability of the Seller to consummate the
transactions contemplated hereby.
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(n) Taxes. (i) The Seller has, as of the date hereof, and will have as
of the Closing Date, timely filed in proper form all federal, state, local and
foreign tax returns, reports, estimates, information statements and other
statements in respect of Taxes, including without limitation Taxes incurred in
connection with the operations of the Group Activity ("Tax Returns") that are
required to be filed as of the date hereof, or which are required to be filed on
or before the Closing Date, as the case may be, and all such Tax Returns are or
will be accurate and complete in all material respects. There are no liens for
Taxes upon any Asset and no event has occurred which with the passage of time or
the giving of notice, or both, could be reasonably likely to result in a lien
for Taxes on any Asset. In addition, except as set forth on Schedule 3.01(n)(i),
all Taxes due or payable by the Seller on or before the date hereof or the
Closing Date, as the case may be, with respect to which the Seller or the Assets
may be liable or otherwise in any way subject have been or will be timely paid,
except to the extent any such Taxes (as set forth as of the date hereof on
Schedule 3.01(n)(i)) are being contested in good faith by appropriate
proceedings by the Seller and for which adequate reserves for any disputed
amounts shall have been established. Except as set forth on Schedule 3.01(n)(i),
as of the date hereof, there has been no Tax examination, audit, proceeding or
investigation of the Seller by any relevant taxing authority, and the Seller has
not received from any governmental or regulatory authority any oral or written
notice of any proposed adjustment, deficiency or underpayment of any Taxes
pertaining to the Assets or the Group Activity, which notice has not been
satisfied by payment or been withdrawn. Except as set forth on Schedule
3.01(n)(i), there are no pending or, to Seller's knowledge, threatened actions,
audits, examination, proceedings or investigations, by any relevant taxing
authority with respect to the Seller. The Seller does not have any outstanding
request for an extension of time within which to pay any Taxes, including
without limitation with respect to the Group Activity. The Seller has withheld
and paid in a timely manner to all relevant taxing authorities all payments for
withholding Taxes, unemployment insurance and other amounts required to be
withheld and paid. Each individual providing services to the Seller (whether in
his or her individual capacity or through any entity) in connection with the
Group Activity is properly classified by the Seller as an employee or
independent contractor, as the case may be, and Seller respects such
classification for all purposes, including without limitation for purposes of
withholding Taxes, unemployment insurance and entitlement to participate in
retirement plans.
(ii) Except as set forth in Schedule 3.01(n)(ii), the Seller has
not received a tax ruling (other than a determination with respect to a Plan (as
defined in Section 3.01(s)) or entered into a legally binding agreement (such as
a closing agreement) with a taxing authority.
(iii) None of the Assets is required to be treated as being owned
by any other person other than Seller pursuant to the "safe harbor" leasing
provisions of Section 168(f)(8) of the Code as in effect prior to the repeal
thereof.
(iv) For purposes of this Agreement, "Tax" (and with correlative
meaning, "Taxes") shall mean (a) any net income, gross income, gross receipts,
franchise, profits, gains, license, sales, use, ad valorem, value added,
property, payroll, withholding, excise, severance, transfer, employment, social
security, medicare, alternative or add-on minimum, stamp, occupation, premium,
environmental or windfall profits taxes, customs duties or other taxes,
governmental fees or other like assessments or charges of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any governmental authority responsible for the imposition of any such
taxes (domestic or foreign), (b) liability of the Seller for the payment of any
amounts of the type described in clause (a) as a result of Seller or any
predecessor thereof being a member of an affiliated, consolidated, combined or
unitary group, or being a party to any agreement or arrangement whereby
liability of the Seller for payments of such amounts was
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determined or taken into account with reference to the liability of any other
person for any period (or portion thereof) ending on or prior to the Closing
Date, and (c) liability of the Seller with respect to the payment of any amounts
described in (a) as a result of any express or implied obligation to indemnify
any other person.
(o) Labor Matters. Except to the extent set forth in Schedule 3.01(o),
(i) the Group is in compliance with all applicable laws respecting employment
and employment practices, terms and conditions of employment, occupational
safety and health and wages and hours, except where the failure to be in
compliance would not, individually or in the aggregate, have a Material Adverse
Effect on the Group or Group Activity; (ii) there is no unfair labor practice
complaint or charge against the Group or the Seller with respect to Group
Employees which is pending or, to the knowledge of the Seller, threatened before
the National Labor Relations Board; (iii) there is no labor strike, dispute,
slowdown or stoppage pending or, to the knowledge of the Seller, threatened
against or affecting the Group and there has been no such job action during the
past three years; (iv) no representation question exists respecting the Group
Employees and, to the knowledge of the Seller; there are no current organizing
activities among the Group Employees; and (v) there is no pending or, to the
knowledge of the Seller, threatened litigation between the Group, on the one
hand, and current or former officers or employees, on the other hand, including
without limitation, any claims for wrongful termination, breach of any express
or implied contract of employment or for violation of equal employment
opportunity laws which would, individually or in the aggregate, have a Material
Adverse Effect on the Group or Group Activity.
(p) Insurance. Schedule 3.01(p) identifies each insurance policy
(including policies providing property, casualty, liability and workers'
compensation coverage and bond and surety arrangements) with respect to which
the Group is a party or otherwise the beneficiary of the coverage or which
covers Seller's operation of the Group Activity.
With respect to each such insurance policy: (A) neither the Seller nor
the Group is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration under the policy; and (B) no party to
the policy has repudiated any provision thereof. Schedule 3.01(p) describes any
self-insurance arrangements affecting the Group.
(q) Condition of Assets. All tangible personal property, fixtures,
machinery and equipment comprising the Assets (A) are free from material
defects, have been maintained in accordance with normal industry practice, are
in good operating condition and repair (ordinary wear and tear excepted) and are
suitable for the purposes for which they are being used and (B) conform with all
applicable ordinances, codes, regulations and requirements, including, without
limitation, all applicable ordinances, codes, regulations and requirements
relating to the environment, occupational safety and food safety, and no law
presently in effect or condition precludes or materially restricts continuation
of the present use of such properties.
(r) Accounts Receivable. Neither the Group nor the Seller on behalf of
the Group has any accounts or notes receivable.
(s) Employee Benefit Plans. (i) Schedule 3.01(s)(i) hereto sets forth a
complete and accurate list of each plan, program, arrangement, agreement or
commitment that is an employment, consulting or deferred compensation agreement,
or an executive compensation, incentive bonus or
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other bonus, employee pension, profit-sharing, savings, retirement, stock
option, stock purchase, severance pay, life, health, disability or accident
insurance plan, or vacation or other employee benefit plan, program,
arrangement, agreement or commitment applicable to any Group Employee applicable
to any individual who is or was active in the Group Activity or in which any
such individual was a participant or otherwise had any interest whatsoever
("Plans"), including, without limitation, each employee benefit plan (as defined
under Section 3(3) of ERISA), maintained by the Seller or any of its affiliates
or any trade or business (whether or not incorporated) which, together with such
persons, would be treated as a single employer under Title IV of ERISA or
Section 414 of the Code (collectively, the "ERISA Affiliates") or to which any
ERISA Affiliate contributes or has any obligation to contribute to, or has or
may have any liability (including, without limitation, a liability arising out
of an indemnification, guarantee, hold harmless or similar agreement). Each Plan
is identified on Schedule 3.01(s), to the extent applicable, as one or more of
the following: an "employee pension plan" (as defined in Section 3(2)(A) of
ERISA), an "employee welfare plan" (as defined in Section 3(l) of ERISA), or as
a plan intended to be qualified under Section 401 of the Code.
(ii) The Seller and each of its affiliates have complied, and
currently are in compliance, in all material respects with all laws and
regulations applicable to the Plans, including, without limitation, ERISA and
the Code.
(iii) Except as set forth on Schedule 3.01(s)(iii), no ERISA
Affiliate has maintained, adopted or established, contributed to or been
required to contribute to, or otherwise participated in or been required to
participate in, any employee benefit plan or other program or arrangement
subject to Title IV of ERISA (including, without limitation, a "multi-employer
plan" (as defined in Section 3(37) of ERISA) and a defined benefit plan (as
defined in Section 3(35) of ERISA)).
(iv) Except as set forth on Schedule 3.01(s)(iv) neither the
Seller nor any of its affiliates provides or may be required to provide, and no
Plan, other than a Plan that is an employee pension benefit plan (within the
meaning of Section 3(2)(A) of ERISA), provides or may be required to provide
benefits, including, without limitation, death, health or medical benefits
(whether or not insured), with respect to current or former employees of the
Group beyond their retirement or other termination of service with the Group
(other than (A) coverage mandated by applicable law, (B) deferred compensation
benefits accrued as liabilities on the books of the Seller or the affiliates, or
(C) benefits the full cost of which is borne by the current or former employee
(or his or her beneficiary)). No ERISA Affiliate maintains any Plan under which
any employee or former employee of any of the ERISA Affiliates may receive
medical benefits which cannot be modified or terminated by the ERISA Affiliates
at any time without the consent of any person, and no employees or former
employees of the ERISA Affiliates will have any claim in respect of such
benefits as of the Closing Date.
(v) Except as set forth in Schedule 3.01(s)(v), the transactions
contemplated hereby will not result in (i) any portion of any amount paid or
payable by the Seller to a "disqualified individual" (within the meaning of
Section 280G(c) of the Code and the regulations promulgated thereunder), whether
paid or payable in cash, securities of the Seller or otherwise and whether
considered alone or in conjunction with any other amount paid or payable to such
a "disqualified individual," being an "excess parachute payment" within the
meaning of Section 280G(b)(1) of the Code and the regulations promulgated
thereunder, (ii) any employee of the Group being entitled to severance pay,
unemployment compensation, or any other payment, (iii) an
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acceleration of the time of payment or vesting, or an increase in the amount of
compensation due to any such employee or former employee or (iv) any prohibited
transaction described in Section 406 of ERISA or Section 4975 of the Code for
which an exemption is not available.
(vi) No ERISA Affiliate has incurred any material liability with
respect to any Plan under ERISA (including, without limitation, Title I or Title
IV thereof, other than liability for premiums due to the Pension Benefit
Guaranty Corporation), the Code or other applicable law, which has not been
satisfied in full or been accrued on the consolidated balance sheet of the
Seller and the affiliates as of December 31, 1998 pending full satisfaction, and
no event has occurred, and there exists no condition or set of circumstances,
which could result in the imposition of any liability under ERISA, the Code or
other applicable law with respect to any Plan.
(vii) With respect to each Plan that is funded wholly or
partially through an insurance policy, all premiums required to have been paid
to date under the insurance policy have been paid, and, except as set forth on
Schedule 3.01(s)(vii), as of the Closing Date there will be no liability of any
of the ERISA Affiliates under any such insurance policy or ancillary agreement
with respect to such insurance policy in the nature of a retroactive rate
adjustment, loss sharing arrangement or other actual or contingent liability
arising wholly or partially out of events occurring prior to the Closing Date.
(viii) None of the ERISA Affiliates has made any contribution to
any Plan that may be subject to any excise tax under Section 4972 of the Code.
(t) Transactions with Affiliates. Except for the items set forth on
Schedule 3.01(t) hereto, (i) there are no agreements between the Seller and any
of its Affiliates, on the one hand, and the Group, on the other hand, for the
provision of goods or services to or by the Group; (ii) neither the Seller nor
any of its Affiliates have been involved in any other material business
arrangement or relationship with, or pertaining to, the Group within the past
twelve months; (iii) there are no facilities occupied in whole or in part by the
Group, and no other property, assets, franchises, licenses or rights used by the
Group, that are owned, leased by or to, or occupied by any Affiliate of the
Seller; and (iv) no Affiliate of the Seller owns any asset, tangible or
intangible, which is used in the Group Activity.
(u) Environmental, Health and Safety Matters. (i) Except as set forth
on Schedule 3.01(u) hereto:
(A) No Hazardous Substances have been treated or stored, or
have been or have threatened to be, discharged, released or emitted into the
air, water, surface water, ground water, land surface or subsurface strata or
transported to or from any property occupied by the Group, its predecessors or
Affiliates or the operations of the Group Activity except in accordance with all
applicable Environmental, Health and Safety Requirements and except for
incidental releases of Hazardous Substances in amounts or concentrations that
would not be expected to give rise to any claims or liabilities against the
Group (except where the failure to comply would not reasonably be likely to have
a Material Adverse Effect on the Group or the Group Activity) under any
Environmental, Health and Safety Requirements including, but not limited to, any
liability for response costs, corrective action costs, personal injury, property
damage, natural resources damages or attorneys fees, pursuant to the
Comprehensive Environmental Reasons, Compensation and Liability Act of 1980, as
amended ("CERCLA") or the Solid Waste Disposal Act, as amended ("SWDA") or any
other Environmental Law.
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(B) The Group, its predecessors, and Affiliates are in
compliance with all Environmental, Health and Safety Requirements and have all
permits required pursuant to any Environmental, Health and Safety Requirements
(except where the failure to comply would not reasonably be likely to have a
Material Adverse Effect on the Group or the Group Activity). The Seller has not
received any notification from a governmental agency that there is any violation
of any Environmental, Health and Safety Requirements with respect to the Group
Activity and properties of the Group and has not received any notification from
a governmental agency pursuant to Section 104, 106 or 107 of the Comprehensive
Environmental Response Compensation and Liability Act, as amended.
(C) To Seller's knowledge, none of the following exist at
any property or facility owned or operated by the Group or used in connection
with or by the Group Activity: (x) asbestos or asbestos-containing material, (y)
polychlorinated biphenyls, or (z) landfills, surface impoundments, disposal
areas or underground storage tanks.
(ii) The Seller has provided the Buyer with copies of all
environmental assessment or audit reports and other similar studies or analyses
relating to any property occupied by the Group or the operations of the Group
Activity.
(iii) Neither this Agreement nor the consummation of the
transactions that are the subject of this Agreement will result in any
obligations for site investigation or cleanup, or notification to or consent of
Governmental Agencies or third parties, pursuant to any of the so-called
"transaction-triggered" or "responsible party transfer" Environmental, Health
and Safety Requirements.
(v) Compliance With Law. The Group has complied with all applicable
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of all Governmental Agencies
(except where the failure to comply would not reasonably be likely to have a
Material Adverse Effect on the Group or the Group Activity), and no Claim has
been filed or commenced against it alleging any failure so to comply.
(w) Broker's or Finder's Fees. Except as set forth on Schedule 3.01(w),
all negotiations relative to this Agreement and the transactions contemplated
hereby have been carried out by the Seller directly with Buyer, without the
intervention of any persons on behalf of the Seller in such a manner to give
rise to any claim by any person against Buyer.
(x) Other Information. None of the information furnished by the Seller
to the Buyer in this Agreement, the exhibits hereto, the schedules identified
herein, or in any certificate or other document to be executed or delivered
pursuant hereto by the Seller at or prior to the Closing Date taken as a whole,
is, or on the Closing Date will be, false or misleading or contains, or on the
Closing Date will contain, any misstatement of fact, or omits, or on the Closing
Date will omit, to state any material fact required to be stated in order to
make the statements therein not misleading in light of the circumstances under
which they were made.
(y) Year 2000 Compliance. (i) There is no failure to be Year 2000
Compliant (as herein defined) of any computer software or hardware owned, used,
licensed or sold by the Group, or the Seller in connection with the Group
Activity, including, without limitation, computer hardware systems, software
applications, firmware, microchips, equipment containing embedded microchips and
other embedded systems that are used the Group, or the Seller in connection with
the Group
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Activity, or the software, hardware, firmware and other technology which
constitutes part of the products and services manufactured, marketed or sold the
Group, or the Seller in connection with the Group Activity, licensed by the
Group or the Seller to third parties in connection with the Group Activity or
used by Seller or the Group in the conduct of Group Activity (the "Computer
Systems") where such failure would result in any material liability or expense
to the Seller or the Buyer following the Closing;
(ii) For purposes of this Agreement, "Year 2000 Compliant" means
that (1) neither performance nor functionality of the Computer Systems is
affected by dates prior to, during and after the year 2000; (2) no value for any
then-current date will cause any interruption in operation; (3) date-based
functionality must behave consistently for dates prior to, during and after year
2000; and (4) in all interfaces and data storage, the century in any date must
be specified either explicitly or by unambiguous algorithms or inferencing
rules.
(iii) Except as set forth on Schedule 3.01(y)(iii), neither the
Seller nor the Group has provided any written guarantee or warranty for any
product sold or licensed, or service provided by the Group to the effect that
such product or service (x) complies with or accounts for the fact of the
arrival of the year 2000, (y) will not be adversely affected with respect to
functionality, interoperability, performance or volume capacity (including,
without limitation, the processing and reporting of data) by virtue of the
arrival of the year 2000 or (z) is otherwise Year 2000 Compliant.
(z) Private Placement. The Seller (i) acknowledges and understands that
neither the Shares nor the Note have been registered under the Securities Act of
1933, as amended (the "Act"), or any state securities laws, and are being
offered and sold in reliance upon federal and state exemptions for transactions
not involving any public offering, (ii) is an accredited investor, within the
meaning of Rule 501 of Regulation D under the Act, (iii) has received certain
information concerning the Buyer and has had the opportunity to obtain
additional information as desired in order to evaluate the merits and risks
inherent in holding the Shares and the Note and (iv) understands that it may not
offer or sell the Shares or the Note except pursuant to an effective
registration statement under the Act or pursuant to a valid exemption from the
requirements of Section 5 of the Act and applicable state securities laws.
(aa) Absence of Undisclosed Liabilities. Except as set forth in
Schedule 3.01(aa), the Group has no liability or obligation of any kind, whether
accrued, absolute, fixed or contingent that would be required to be reflected on
a balance sheet (or the notes thereto) prepared in accordance with generally
accepted accounting principles for the Group which would, individually or in the
aggregate, have a Material Adverse Effect on the Group or the Group Activity.
(bb) Product Warranty. All of the products manufactured, sold, leased,
and delivered by the Group have conformed in all material respects with all
applicable contractual commitments, any express and implied warranties and all
written specifications, and the Group has no material liability (whether known
or unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due) for replacement or repair thereof or other damages in
connection therewith. Except as set forth on Schedule 3.01(bb), all of the
products manufactured, sold, leased, or delivered by the Group are subject to
standard terms and conditions of sale or lease. Schedule 3.01(bb) includes
copies of the standard terms and conditions of sale or lease for the Group
(containing applicable guaranty, warranty, and indemnity provisions).
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(cc) Product Liability. The Group does not have any material liability
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due) arising out of any injury to individuals or
property as a result of the ownership, possession, or use of any product
heretofore manufactured, sold, leased, or delivered by the Group.
(dd) Assets Necessary to Group Activity. (i) The Assets, together with
all rights to be conveyed under the Ancillary Agreements, constitute all the
property and assets, real, personal and mixed, tangible and intangible, all the
Intellectual Property and all leases, licenses and other agreements, necessary
to permit the Seller to conduct the Group Activity as it currently conducts it.
At the Closing, the Buyer will obtain all rights to the Assets necessary to
permit the Buyer to conduct the Group Activity as it is currently conducted, in
all material respects.
(ii) The Group Employees constitute all the employees who have
played a material role in the development of any of the Group Intellectual
Property and are currently employed by the Seller.
(iii) Except as set forth on Schedule 3.01(dd)(iii), every
contract or other agreement with any vendor, supplier or manufacturer of any
products or services supplied by the Group to a third party expressly provides
for a pass-through of such vendor's, supplier's or manufacturer's warranties,
indemnities and obligations from the Seller to the Buyer. Except as set forth on
Schedule 3.01(dd)(iii), the Seller has all such pass-through rights as are
necessary for it to fulfill all of its obligations pursuant to Section VI hereof
and for the Buyer to be defended, and defend itself, against any Damages.
(iv) The description of the "Group Activity" as set forth in the
preamble of this Agreement is an accurate description, in all material respects,
of the activities conducted by the Group being conveyed hereby.
(ee) SEC Filings. The Seller has provided to the Buyer true and
complete copies of (i) the Annual Reports of the Seller on Form 10-K for each of
fiscal years ended December 31, 1996, 1997 and 1998, (ii) the Quarterly Reports
of the Seller on Form 10-Q for the months ended March 31, 1999, June 30, 1999
and September 30, 1999, (iii) its proxy or information statements relating to
meetings of, or actions taken without a meeting by, the stockholders of the
Seller subsequent to December 31, 1996, and (iv) all other reports, statements
and registration statements filed by the Seller with the SEC subsequent to
December 31, 1996 (collectively, the "Seller Filings"). The Seller Filings
(including, without limitation, any financial statements or schedules included
therein) (i) were prepared in compliance with the requirements of the Securities
Act or the Exchange Act, as the case may be, and (ii) did not at the time of
filing (or if amended, supplemented or superseded by a filing prior to the date
hereof, on the date of that filing) contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(ff) Fairness Opinion. The Seller has received the opinion of Broadview
International LLC that, with regard to the consideration to be paid to the
Seller for the Assets being purchased (and the liabilities being assumed) by the
Buyer, the transactions contemplated in this Agreement and the Ancillary
Agreements are fair to the Seller from a financial point of view as of the date
of such opinion.
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(gg) Development Agreements. Schedule 3.01(gg)(i) sets forth a list of
all development agreements to which the Seller is a party that relate to the
Group Activity (the "Development Agreements"). Except as set forth on Schedule
3.01(gg)(ii), the Seller has satisfied, or will satisfy, all material
requirements, including but not limited to any minimum production and
development schedule, set forth in any Development Agreement and the Seller is
not in default (nor has any event occurred which, with the giving of notice or
passage of time would result in an event of default) under any Development
Agreement. Except as set forth on Schedule 3.01(gg)(iii), no amounts
("Penalties") are owed by the Seller, and no such Penalties are reasonably
anticipated by the Seller to be owed, due to the failure of the Group or the
Seller to satisfy any requirements under any Development Agreement, by the
Seller to any third party with whom the Seller has entered into a Development
Agreement. Schedule 3.01(gg)(iii) also sets forth a list of all Penalties which
are owed, or are reasonably anticipated by the Group or the Seller to be owed,
by the Group or the Seller pursuant to any Development Agreement.
SECTION 3.02. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Seller as follows:
(a) Organization, Corporate Power, Etc. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is duly licensed or qualified to do business
as a foreign entity in each jurisdiction in which it is required to be so
qualified and as set forth in Schedule 3.02(a), except where the failure to be
so qualified would not be likely to result in a Material Adverse Effect on the
Buyer. The Buyer has all requisite corporate power and authority to (i) own,
operate and lease its properties, (ii) to execute and deliver this Agreement and
each Ancillary Agreement to which it is party and to perform its obligations
hereunder and thereunder, (iii) issue and deliver the Initial Shares and (iv)
issue and deliver the shares of Common Stock issuable upon conversion of the
Note (the "Conversion Shares", and together with the Initial Shares, the
"Shares"). Schedule 3.02(a) hereto sets forth a complete list of the
jurisdictions in which the Buyer is qualified to do business.
(b) Authorization of Agreements. (i) The execution and delivery by the
Buyer of this Agreement and each Ancillary Agreement to which the Buyer is a
party, and the consummation by the Buyer of the transactions contemplated hereby
and thereby, have been duly authorized by all requisite corporate action. This
Agreement has been duly and validly executed by the Buyer and, subject to due
execution by any other parties thereto, will constitute the legal, valid and
binding obligation of the Buyer, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization and moratorium laws
and other laws of general application affecting the enforcement of creditors'
rights generally. Each Ancillary Agreement to which the Buyer is party, when
duly executed and delivered in accordance with this Agreement, subject to due
execution by any other parties thereto, will constitute a legal, valid and
binding obligation of the Buyer, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization and moratorium laws
and other laws of general application affecting the enforcement of creditors'
rights generally. No other corporate proceedings on the part of the Buyer are
necessary to authorize this Agreement, the Ancillary Agreements or the
transactions contemplated hereby or thereby.
(ii) The Initial Shares have been duly authorized by the Buyer
and, when issued in accordance with this Agreement, will be validly issued and
outstanding and fully paid.
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(iii) The Conversion Shares have been duly reserved for issuance
upon conversion of the Note, and upon such conversion will be validly issued and
outstanding, fully paid and non-assessable shares of Common Stock.
(c) Non-Contravention. The execution and delivery of this Agreement and
the Ancillary Agreements by the Buyer and the consummation of the transactions
contemplated hereby will not (i) conflict with any provision of the Certificate
of Incorporation of the Buyer (as in effect at the Closing) (ii) result (with
the giving of notice or the lapse of time or both) in any violation of or
default or loss of a benefit under, or permit the acceleration of any obligation
under, any mortgage, indenture, lease, agreement or other instrument, permit,
concession, grant, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Buyer or any of its properties,
other than any such violation, default, loss or acceleration that would not
materially adversely affect the ability of the Buyer to consummate the
transactions contemplated hereby and which would not otherwise have a Material
Adverse Effect on the Buyer.
(d) Capitalization. The authorized capital stock of the Buyer consists
of 100,000,000. As of December 31, 1999, 19,595,241 were issued and outstanding,
all of which were duly and validly issued, fully paid and nonassessable. Except
as set forth on Schedule 3.02(d), and except for options to purchase an
aggregate 2,474,525 shares of Common Stock granted pursuant to the stock option
plans of the Buyer, as of the date hereof there are no subscription, warrant,
option, convertible security, stock appreciation or other right (contingent or
other) to purchase or acquire, or any securities convertible into or
exchangeable for, any shares of any class of capital stock of the Buyer or any
subsidiary thereof is authorized or outstanding and as of the date hereof there
is not any commitment of the Buyer or any such subsidiary to issue any shares,
warrants, options or other such rights or to distribute to holders of any class
of its capital stock any evidences of indebtedness or assets. As of the date
hereof, neither the Buyer nor any of its subsidiaries has any obligation
(contingent or other) to purchase, redeem or otherwise acquire any shares of its
capital stock or any interest therein or to pay any dividend or to make any
other distribution in respect thereof.
(e) Governmental Approvals. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Agency is required to be made or obtained by the Buyer in connection with the
execution and delivery of this Agreement by the Buyer or the consummation by the
Buyer of the transactions contemplated hereby, except for (i) compliance by the
Buyer with Xxxx-Xxxxx, (ii) filings pursuant to Securities Act and the Exchange
Act and the rules and regulations promulgated by the SEC thereunder and (iii)
such consents, approvals, orders or authorizations which if not obtained, or
registrations, declarations or filings which if not made, would not materially
adversely affect the ability of the Buyer to consummate the transactions
contemplated hereby.
(f) SEC Filings. The Buyer has provided to the Seller true and complete
copies of (i) the Quarterly Reports of the Buyer on Form 10-Q for the three
months ended June 30, 1999 and September 30, 1999 (ii) its proxy or information
statements relating to meetings of, or actions taken without a meeting by, the
stockholders of the Buyer subsequent to June 23, 1999, and (iii) all other
reports, statements and registration statements filed by the Buyer with the SEC
subsequent to June 23, 1999 (collectively, the "Buyer Filings"). The Buyer
Filings (including, without limitation, any financial statements or schedules
included therein) (i) were prepared in compliance with the requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) did not at the
time of filing (or if amended, supplemented or superseded by a filing prior to
the date hereof, on the date of that filing) contain any untrue statement of a
material fact or omit to state a material fact
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required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(g) Financial Statements. The consolidated financial statements of the
Buyer included in the Buyer Filings have been prepared in accordance with
generally accepted accounting principles consistently applied and consistent
with prior periods, subject, in the case of unaudited interim consolidated
financial statements, to year-end adjustments (which consist of normal recurring
accruals) and the absence of certain footnote disclosures. The consolidated
balance sheets of the Buyer included in the Buyer Filings fairly present the
financial position of the Buyer and its subsidiaries as of their respective
dates, and the related consolidated statements of operations, stockholders'
equity and cash flows included in the Buyer Filings fairly present the results
of operations of the Buyer and its subsidiaries for the respective periods then
ended, subject, in the case of unaudited interim financial statements, to
year-end adjustments (which consist of normal recurring accruals) and the
absence of certain footnote disclosures. Except for liabilities or obligations
that are accrued or reserved against in the Buyer's financial statements (or
reflected in the notes thereto) included in the Buyer's Filings made prior to
the date hereof or that were incurred subsequent to September 30, 1999 in the
ordinary course of business and consistent with past practice, none of the Buyer
and its subsidiaries has any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of a nature required by generally accepted
accounting principles to be reflected in a consolidated balance sheet (or
reflected in the notes thereto) or which would have a Material Adverse Effect on
the Buyer.
(h) Compliance with Laws. The Buyer has complied with all applicable
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of all Governmental Agencies
(except where the failure to comply would not have a Material Adverse Effect on
the Buyer), and no Claim has been filed or commenced against it alleging any
failure so to comply.
(i) Brokers. Except as set forth on Schedule 3.02(i), no person is
entitled to any brokerage or finder's fee or commission in connection with the
transactions contemplated by this Agreement as a result of any action taken by
or on behalf of the Buyer.
(j) Fairness Opinion. The Buyer has received the opinion of Xxxxxx
Xxxxxx Partners LLC that, with regard to the consideration to be paid to the
Seller for the Assets being purchased (and the liabilities being assumed) by the
Buyer, the transactions contemplated in this Agreement and the Ancillary
Agreements are fair to the Buyer from a financial point of view as of the date
of such opinion.
(k) Litigation. No action, suit or proceeding by or before any court or
Governmental Agency, involving the Buyer or its property is pending or, to the
best knowledge of the Buyer, threatened that (i) could reasonably be expected to
have a Material Adverse Effect on the performance by the Buyer of its
obligations under this Agreement or the consummation of any of the transactions
contemplated hereby or (ii) could reasonably be expected to result in a Material
Adverse Effect on the Buyer.
(l) Taxes. The Buyer has filed all necessary federal, state and foreign
income and franchise tax returns or has properly requested extensions thereof
and has paid all taxes required to be paid by it and, if due and payable, any
related or similar assessment, fine or penalty levied against it. The Buyer has
made adequate charges, accruals and reserves in the applicable financial
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statements set forth in the Buyer Filings in respect of all federal, state and
foreign income and franchise taxes for all periods as to which the tax liability
of the Buyer has not been finally determined. The Buyer is not aware of any tax
deficiency that has been or might be asserted or threatened against the Buyer
that could result in a Material Adverse Effect on the Buyer.
(m) Intellectual Property. The Buyer owns or possesses adequate rights
to use all Intellectual Property which is necessary to conduct its business as
described in the Buyer Filings; the expiration of any patents, patent rights,
trade secrets, trademarks, service marks, trade names or copyrights will not
result in a Material Adverse Effect on the Buyer that is not otherwise disclosed
in the Buyer Filings; the Buyer has not received any notice of, and has no
knowledge of, any infringement of or conflict with asserted rights of the Buyer
by others with respect to any of the Buyer's Intellectual Property which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, might have a Material Adverse Effect on the Buyer; and the Buyer has
not received any notice of, and has no knowledge of, any infringement of or
conflict with asserted rights of others with respect to any of the Buyer's
Intellectual Property which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, might have a Material Adverse Effect on
the Buyer. There is no claim being made against the Buyer regarding the Buyer's
Intellectual Property which, if the subject of an unfavorable decision, ruling
or finding, might have a Material Adverse Effect on the Buyer. The Buyer does
not in the conduct of its business as now or proposed to be conducted as
described in the Buyer Filings infringe or conflict with any right or patent of
any third party, or any discovery, invention product or process which is the
subject of a patent application filed by any third party, known to the Buyer,
which such infringement or conflict is reasonably likely to result in a Material
Adverse Effect on the Buyer.
(n) Environmental Matters. (i) The Buyer is in compliance with all
rules, laws and regulations relating to the use, treatment, storage and disposal
of toxic substances and protection of health or the environment which are
applicable to its business, except where the failure to comply would not result
in a Material Adverse Effect, (ii) the Buyer has received no notice from any
Governmental Agency or third party of an asserted claim under any Environmental,
Health and Safety Requirement which claim is required to be disclosed in the
Buyer Filings, (iii) the Buyer will not be required to make future material
capital expenditures to comply with any Environmental, Health and Safety
Requirement and (iv) no property which is owned, leased or occupied by the Buyer
has been designated as Superfund site pursuant to the Comprehensive Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601, et
seq.), or otherwise designated as a contaminated site under applicable state or
local law.
(o) Offering of the Securities. Neither the Buyer nor any person acting
on its behalf has taken or will take any action (including, without limitation,
any offer, issuance or sale of any securities of the Buyer under circumstances
which might require the integration of such securities with the Shares or the
Note under the Securities Act of 1933, as amended (the "Securities Act") or the
rules and regulations of the Securities and Exchange Commission thereunder)
which might subject the offering, issuance or sale of the Shares or the Note to
the registration provisions of the Securities Act.
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IV. COVENANTS
SECTION 4.01. Covenants of the Seller.
(a) The Seller agrees that, at all times between the date hereof and
the Closing Date, unless the Buyer and the Seller shall otherwise agree in
writing, the Seller shall and shall cause the Group to:
(i) operate the Group Activity only in the ordinary course, in
accordance with past practices and, to the extent consistent with such
operations, the Seller will use best efforts to preserve (x) the existing
business organization of the Group Activity, (y) relationships with all
employees and (z) the Seller's present relationships with all lessors,
customers, suppliers and licensors of, and all other persons having business
dealings with, the Group Activity;
(ii) maintain all the Assets in good repair, order and condition
(reasonable wear and tear excepted);
(iii) not take any action or refrain from taking any action that
would affect (1) Seller's ownership of or right, exclusive or non-exclusive, to
use any Group Intellectual Property, (2) any registration or application pending
with respect to such Group Intellectual Property, or (3) in any material
respect, the value or utility of such Group Intellectual Property to the Group
Activity as currently conducted.
(iv) maintain the Group's records in the usual, regular and
ordinary manner, on a basis consistent with past practice, and use its best
efforts to comply with all laws applicable to it and to the conduct of the Group
Activity and perform all its material obligations without default;
(v) not change the character of the Group Activity in any manner;
(vi) not, with respect to the Group Activity (A) incur any
obligation or liability (fixed or contingent), or incur any indebtedness for
money borrowed which is to be repaid by the Group, except normal trade or
business obligations incurred in the ordinary course and consistent with past
practice and except in connection with this Agreement and the transactions
contemplated hereby; (B) mortgage, pledge or subject to any lien, security
interest or encumbrance any of the Assets (other than mechanic's, materialman's
and similar statutory liens arising in the ordinary course and purchase money
security interest arising in the ordinary course between the date of delivery
and payment); (C) transfer, sell, lease or otherwise dispose of any of the
Assets (except for Excluded Assets) except for a fair consideration in the
ordinary course and consistent with past practice or, except in the ordinary
course and consistent with past practice, acquire any assets or properties; (D)
cancel or compromise any debt or claim individually or in the aggregate in
excess of $50,000, except in the ordinary course and consistent with past
practice; (E) waive or release any rights of material value or surrender, cause
to be revoked or otherwise terminate any material license, permit or other
approval, authorization or consent from any court, administrative agency or
other governmental authority relating to the conduct of the Group Activity; (F)
transfer or grant any rights under any concessions, leases, licenses,
agreements, patents, inventions, trademarks, trade names, servicemarks, or
copyrights or with respect to any Group Intellectual Property or permit any
license, permit or other form of authorization relating to any such Intellectual
Property to lapse having a value individually or in the aggregate in excess of
$50,000; (G) suffer any casualty loss or damage which materially or adversely
affects the ability of the Seller to conduct the Group Activity; (H) make or
grant any wage, salary or benefit increase or bonus payment to any Group
Employee individually or in the aggregate in excess of $50,000, enter into or
materially amend the terms of any employment contract with, or make any loan to,
or grant any severance benefits to, or modify any
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severance arrangements applicable to, or enter into or amend the terms of any
material transaction of any other nature with, any officer or employee engaged
in the operations of the Group Activity, other than in the ordinary course of
business and consistent with past practice; (I) enter into or amend any contract
agreement, lease or license involving the performance of services or the
provision of goods (in either case as a vendor or vendee) which in accordance
with its terms will not be completed for a period in excess of one year after
the date of such contract, binds the Group in any way other than in the ordinary
course and/or involves payments in excess of $50,000; (J) enter into any other
material transaction, contract or commitment, except in the ordinary course and
consistent with past practice; or (K) except in the ordinary course and
consistent with past practice, amend or modify in any material respect adverse
to the interests of the Group Activity any contract listed on Schedule 3.01(i)
hereto.
(vii) conduct the Group Activity in all material respects in
compliance with all applicable laws and regulations.
(b) Between the date hereof and the Closing Date, the Seller will
afford the representatives of the Buyer reasonable access during normal business
hours to the offices, facilities, books and records of the Seller related to the
Group Activity and the opportunity to discuss the affairs of the Group with
officers and employees of the Seller familiar therewith.
(c) (i) Between the date hereof and the Closing Date, the Seller shall,
with the Buyer's assistance and cooperation, but, except as set forth in clause
(c)(ii), at the expense of the Seller, promptly apply for or otherwise seek and
use the Seller's reasonable efforts to obtain all authorizations, consents,
waivers and approvals as may be required in connection with (1) the assignment
of the contracts, agreements, licenses, leases, sales orders, purchase orders
and other commitments of which the Seller is the beneficiary to be assigned to
the Buyer pursuant to Section 5.01(f) hereof and (2) the Commitments and
Interests described in Section 1.02 hereto.
(ii) All filing fees related to the efforts to obtain approval
under the Xxxx-Xxxxx Act shall be borne equally by Buyer and Seller.
(d) Between the date hereof and the Closing Date, the Seller will not
enter into any transaction or make any agreement or commitment, or permit any
event to occur, which would result in any of the representations or warranties
of the Seller contained in this Agreement not being true and correct at and as
of the time immediately after the occurrence of such transaction or event or
omit to take any action necessary to prevent any such representation or warranty
from being untrue or incorrect at any such time.
(e) Between the date hereof and the Closing Date, the Seller shall use
its best efforts to assist the Buyer in its efforts to enter into employment
agreements with all Group Employees and to ensure that all Group Employees
remain as employees of the Seller at least through the Closing Date, including
without limitation, honoring the terms of the employee retention programs
previously disclosed to the Buyer.
SECTION 4.02. Covenants of the Buyer.
(a) The Seller shall furnish Buyer such information as Buyer or its
counsel shall reasonably request with respect to the preparation of the Form S-1
and the public offering of the Shares (including, without limitation, all
financial statements and other information required by the
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Act and the rules and regulations thereunder) and the Seller shall take any
other action Buyer may reasonably request in connection with the preparation and
filing of the Form S-1 (including, without limitation, causing the Seller's
independent public accountants to prepare and deliver all consents, reports,
opinions or other information or instruments that may be required by the Act and
the rules and regulations thereunder or otherwise necessary).
(b) Between the date hereof and the Closing Date, the Buyer will not
enter into any transaction or make any agreement or commitment, or permit any
event to occur, which would result in any of the representations or warranties
of the Buyer contained in this Agreement not being true and correct at and as of
the time immediately after the occurrence of such transaction or event or omit
to take any action necessary to prevent any such representation or warranty from
being untrue or incorrect at any such time.
SECTION 4.03. Notification of Certain Matters. The Seller shall give
prompt notice to Buyer, and Buyer shall give prompt notice to the Seller of (i)
the occurrence, or failure to occur, of any event that such party believes would
be likely to cause any of its representations or warranties contained in this
Agreement to be untrue or inaccurate at any time from the date hereof to the
Closing Date and (ii) any material failure of the Seller or Buyer, as the case
may be, or any officer, director, employee, representative or agent thereof, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that failure to give such
notice shall not constitute a waiver of any defense that may be validly
asserted.
SECTION 4.04. Confidentiality. The contents of this Agreement shall be
kept confidential between the parties, except that each party may reveal and
discuss the contents with its respective professional advisors, including
attorneys and accountants. In addition, the parties may mutually agree in
writing as to the revealing of the subject transaction with current employees
and to the public. In so doing, the parties shall agree to the timing and
content of the release of such information. In furtherance of the foregoing, the
parties hereto agree to incorporate herein by reference that certain
confidentiality agreement, dated October 1, 1999 (the "Confidentiality
Agreement"), between the Buyer and the Seller and further agree that,
notwithstanding anything herein to the contrary, the terms and provisions of the
Confidentiality Agreement shall remain in full force and effect.
SECTION 4.05. Allocation of Purchase Price. The Purchase Price (and any
liabilities assumed by the Buyer from the Seller) shall be allocated among the
Assets in the manner determined by Buyer in its reasonable discretion as soon as
practicable after the Closing Date, subject to the approval of the Seller, which
approval will not be unreasonably withheld. The parties shall adhere to such
allocation for all Tax purposes and shall file all Tax Returns and other
documents with all taxing authorities on a basis consistent therewith. In
particular, Buyer and the Seller shall (i) file a Form 8594 Asset Acquisition
Statement of Allocation consistent with such allocation, (ii) provide a copy of
such form to the other, and (iii) file a copy of such form with its federal
income tax return for the period that includes the Closing Date.
SECTION 4.06. Transfer Taxes. All transfer, sales and use taxes imposed
upon or incurred by any of the parties hereto in connection with this Agreement
and the transactions contemplated hereby shall be borne equally by the Seller
and the Buyer. The Seller and the Buyer shall jointly prepare and file, at the
expense of Seller, all necessary Tax Returns and other documents with respect to
all such transfer, sales and use taxes. If required by applicable law, any other
party hereto shall join in the execution and filing of any such Tax Returns or
other documents. The Seller
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and the Buyer agree to cooperate in any endeavor to effect a reduction in any
such transfer, sales and use taxes.
SECTION 4.07. Insurance. Between the date of this Agreement and the
Closing Date, the Buyer shall use reasonable efforts to obtain policies of fire,
liability, workers' compensation and other forms of insurance in such amounts
and against such risks as the Buyer deems appropriate. The Seller shall
cooperate with the Buyer in obtaining such insurance and, in the event that the
Buyer is unable by the Closing Date to obtain such insurance, the Seller shall,
at the Buyer's written request, maintain their insurance policies in full force
and effect for the benefit of Buyer for a period after the Closing Date not to
exceed 60 days. The Buyer shall reimburse the Seller within 30 days in respect
of any premiums paid in keeping the Seller's insurance policies in full force
and effect after the Closing Date.
SECTION 4.08. Non-Competition. (a) (i) For a period of four years after
the Closing, neither the Seller nor any of its Affiliates that are business
entities shall, directly or indirectly, engage or invest in, own, manage,
operate, finance, control or participate in the ownership, management,
operation, financing or control of, or be associated in any manner connected
with, lend the Seller's credit to, or render services to, any business or
activity that is engaged, in whole or in part, in the design, development,
license and supply of intellectual property necessary for the manufacture,
have-manufacture and sale of integrated circuits and related systems and
software that is currently engaged in by the Group or the sale of integrated
circuits and related systems and software that utilizes such intellectual
property (the "Competing Activity") except that the Seller may engage in the
Permitted Activities and Permitted Framer Activities to the extent and on the
terms set forth in the License Agreement. Neither the Seller nor any of
its Affiliates that are business entities will, without the prior written
consent of the Buyer, own an interest in, manage, operate, join, control or be
connected with, as an officer, employee, partner, stockholder, consultant or
otherwise, any Person that is engaged in the Competing Activity. For the
purposes of this Section 4.08, the term "Affiliate" shall not include companies
of which members of the board of directors on the date hereof are also members
of the board of directors of the Seller on the date hereof. (ii) Nothing herein
shall prohibit the Seller from being acquired (in whole or in part) by merger or
otherwise, by another business entity that is engaged in the Competing Activity;
provided that the acquiring company shall not utilize the DSL Technology for any
purpose whatsoever.
(b) As a separate and independent covenant, the Seller agrees with the
Buyer that, for a period of four years following the Closing, the Seller shall
not, without the Buyer's consent, which consent may be given or withheld by the
Buyer in its sole discretion, (i) employ, or otherwise engage as an employee,
consultant, advisor, independent contractor, or otherwise, any Group Employees
or solicit, cause or encourage, directly or indirectly, any Group Employees to
leave the employ of the Group or the Buyer or to violate the terms of their
contracts, or any employment arrangements, or cause or encourage any Person
(including the Seller itself) to enter into any employment, consulting, advisory
or other similar arrangement with any of the Group Employees and (ii) neither
the Seller, its Affiliates, nor any of their employees, contractors, agents or
other representatives, will induce, directly or indirectly, any Group Employee
to take any action which in any way, directly or indirectly, interferes with,
causes harm or damage to, or in any way disadvantages the Buyer, the Group
Activity or the Group.
(c) The Seller acknowledges that this Section 4.08 constitutes an
independent covenant and shall not be affected by performance or nonperformance
of any other provision of this
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Agreement by Buyer. The Seller has independently consulted with its counsel and
agrees after such consultation that the covenants set forth in this Section 4.08
are reasonable and proper.
(d) The parties agree that a remedy at law for any breach of any
obligation contained in this Section 4.08 will be inadequate and that in
addition to any other rights and remedies to which Buyer shall be entitled
hereunder, at law or in equity, the Buyer shall be entitled to injunctive relief
and reimbursement for all reasonably attorneys' fees and other expenses incurred
in connection with the enforcement hereof.
(e) Notwithstanding the provisions of Section 8.14, the Buyer's rights
under this Section 4.08 may, without the Seller's consent, be assigned by the
Buyer to any third party in connection with any sale (by merger or otherwise) of
all or substantially all of the Assets to any such third party.
SECTION 4.09. Group Employees.
(a) Schedule 4.09(a) sets forth a list of all Group Employees. On the
Closing Date, the Seller shall terminate the employment of all of the Group
Employees and such Group Employees shall cease to accrue any benefits under any
employee benefit plans maintained by or for the benefit of the Seller or any of
its affiliates, and the Buyer shall be deemed to have offered to continue the
employment of each such individual whose employment was so terminated effective
from the Closing Date or, in the case of a Group Employee not actively at work
on the Closing Date on account of a disability, on the day such employee reports
for work after termination of such disability. For purposes of the immediately
preceding sentence, the term "continue the employment" shall mean employment on
terms (i) with respect to salary, competitive with those of individuals having
similar duties at comparable businesses and (ii) with respect to position,
"substantially the same duties in the same functional area" as in effect on the
Closing Date. Nothing in this Section 4.09 shall require the Buyer (1) to
provide or continue for the benefit of any employees any bonus or other
compensation plan or arrangement or any other employee benefit plan currently
maintained by the Seller or any affiliate thereof or (2) to maintain the
organizational structure of the Group Activity in effect on the date hereof.
Seller and Buyer acknowledge and agree that, to the maximum extent permitted or
allowed by applicable law, employment by the Buyer of any Group Employees as
described in this paragraph (a) shall be employment at will.
(b) The Seller hereby acknowledges and agrees that any severance,
termination or other obligation to any Group Employee arising from the
employment of such Group Employee by the Seller or any affiliate thereof or the
termination of the employment of such Group Employee as a result of the
transactions contemplated by this Agreement or otherwise shall be the sole
responsibility and liability of the Seller.
(c) The Buyer agrees that effective as of the Closing Date, all Group
Employees who shall commence employment with the Buyer ("Transferred Employees")
shall participate in the Buyer's employee benefit plans as the same may be in
effect from time to time, including a group health plan providing major medical
benefits, on substantially similar terms and conditions as the Buyer's similarly
situated employees.
(d) The Seller has heretofore delivered to the Buyer a schedule (the
"Vacation Schedule") showing, with respect to each Group Employee as of December
31, 1999, the number of days of vacation pay to which such Group Employee is
entitled as of such date. The Seller shall take
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responsibility for and cause to be paid in the normal course of business the
vacation pay of all Transferred Employees as reflected on the Vacation Schedule.
(e) Except as specifically set forth in this Agreement (i) the Buyer
shall not be obligated to assume, continue or maintain any of the Seller's
Plans; (ii) no assets or liabilities of the Seller's Plans shall be transferred
to, or assumed by, the Buyer or the Buyer's benefit plans; and (iii) the Seller
shall be responsible solely for funding and/or paying any benefits under any of
the Seller's Plans, including any termination benefits and other employee
entitlements accrued under such plans by or attributable to employees of the
Group Activity prior to the Closing Date.
(f) Nothing in this Agreement, express or implied, shall confer upon
any employee of the Seller, or any representative of any such employee, any
rights or remedies, including any right to employment or continued employment
for any period, of any nature whatsoever.
(g) The Buyer will take all action necessary to grant to the Group
Employees at the Closing stock options, to be allocated among the Group
Employees as the Buyer determines in its sole discretion, to acquire Common
Stock. The Seller shall take all action necessary to cause all stock options
granted by the Seller to any Transferred Employee to vest at the Closing Date.
(h) The Seller agrees that if at any time after the Closing Date the
Buyer, in its reasonable determination, should require the assistance of
employees of the Seller (other than the Group Employees) who played a role in
the development of the Group Intellectual Property, the Seller shall make such
employees available to the Buyer, upon the Buyer's reasonable request, at such
rates and for such periods of time as the parties shall reasonably agree.
SECTION 4.10. Further Assurances. Subject to the terms and conditions
herein provided, the Seller and Buyer hereto agree to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement,
including, without limitation, using all reasonable efforts to obtain all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings (including, without limitation, any necessary filings
under Xxxx-Xxxxx); provided that the foregoing shall not require Buyer to agree
to make any divestiture of a significant asset in order to obtain any waiver,
consent or approval.
SECTION 4.11. Inquiries and Negotiations. From the date hereof until
the termination hereof, the Seller and its officers, directors, employees and
representatives and other agents will not, directly or indirectly, continue,
consider, solicit or encourage in any way (including by furnishing any
non-public information concerning the Seller, the Group Activity or the Assets)
or otherwise cooperate in any way with, or assist or participate in, or
encourage any effort or attempts by any person, corporation, entity or group
other than Buyer and its Affiliates, representatives and agents (each, a "Third
Party") in connection with any dispositions or divestiture of the Group or all
or any portion of the Assets, (whether by merger, sale of stock, sale or lease
of assets or otherwise and other than sales of inventory in the ordinary course
of business) (such transactions being hereinafter referred to as "Alternative
Transactions"). The Seller shall immediately notify Buyer if any proposal,
offer, inquiry or other contact is received by, any information is requested
from, or any discussions or negotiations are sought to be initiated or continued
with, the Seller in respect of an Alternative Transaction, and shall, in any
such notice to Buyer, indicate the identity of the Third Party and the terms and
conditions of any proposals or offers or the nature of any inquiries or
contacts.
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SECTION 4.12. Transfer of Assets. Any Affiliate of the Seller that
holds, owns, controls or has any rights in any of the Assets or any assets
relating to, used in or useful to, the Group Activity shall, prior to the
Closing, transfer such assets to the Seller free and clear of any mortgage,
lien, pledge, claim, restriction, security interest, charge or encumbrance of
any nature whatsoever.
SECTION 4.13. Transition Services. (a) For a period of six (6) months from
the Closing Date, the Buyer shall make three (3) of its engineers available at
any time, at the Seller's request to design and develop the DMT ADSL hardware
and software onto the 12-port and 24-port Falcon-based G.lite/full rate DMT
channel cards, to support the on-the-job training of new DMT development
support engineers and to support the solution of problem reports that may arise
from the Seller's obligation to support Conexant's utilization of the Falcon
components pursuant to its obligations under the ADSL Agreement. The
engineering support services will be required principally of the engineers
agreed upon between the Buyer and the Seller. In the event any of such
individuals should not accept the Buyer's employment offer or subsequently
terminate his employment with the Buyer, the Buyer shall provide the services
of such other employees then employed by the Buyer with the requisite skills
as are reasonably needed to fulfill the Buyer's obligations under this Section
4.13(a), subject to the reasonable approval of the Seller. Additionally, other
engineers may be required from time to time to support questions from Conexant,
which cannot be predicted at this time. In no event will the aggregate time
commitment of the three named engineers and the additional engineers exceed the
equivalent of the full time commitment of three engineers for such six-month
period. So long as the Buyer is satisfying the Seller's product development
requirements as described in the first sentence above, the Buyer will be
entitled to use any or all of such engineers in its own operations. The
engineers shall be available to provide such services to the Seller within two
(2) days of the Seller's request, and in consideration for such services, the
Seller shall pay the Buyer Three Hundred Dollars ($300) per hour for each
engineer providing such services.
For a period of six (6) months, commencing six (6) months from the Closing
Date, the Buyer shall make two (2) of its engineers available at any time, at
the Seller's request, to support the completion of and bug-fixes related to the
Falcon Chip and for continuing support to enable the Seller to fulfill its
obligations under the ADSL Agreement. Such engineers shall be available to
provide such services to the Seller within two (2) days of the Seller's
request, and in consideration for such services, the Seller shall pay the Buyer
One Hundred Fifth Dollars ($150) per hour for each engineer providing such
services. The services described in this Section 4.13(a) are defined as the
"Transition Services".
(b)(i) Billing for transition services provided by the Buyer pursuant
to Section 4.13(a) will be made to the Seller, by the tenth business day of the
month following the month in which the Transaction Service was provided.
(ii) Payment is due thirty (30) days from the Buyer's invoice
date. The Buyer may change credit or payment terms at any time when, in the
Buyer's reasonable opinion, the Seller's financial condition, previous payment
record, or the nature of the Seller's relationship with the Buyer so warrants.
(iii) The Buyer may discontinue performance if the Seller fails to
pay any sum due that is not reasonably disputed, or fails to perform in any
material respects under this or any other Buyer agreement if, after thirty (30)
days written notice, the failure has not been cured.
(c)(i) Either party may terminate its obligations under this Section
4.13 for cause at any time unless the other party cures the breach within thirty
(30) days of written notice of such breach.
(ii) If either party becomes insolvent, is unable to pay its debt
when due, files for bankruptcy, is the subject of involuntary bankruptcy, has a
receiver appointed or has its assets assigned, the other party may terminate its
obligations under this Section 4.13 without notice and may cancel any
unfulfilled obligations.
(iii) Provisions herein which by their nature extend beyond the
termination or expiration of this Section 4.13 will remain in effect until
fulfilled.
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(d) Each of the Seller and the Buyer agree that in the event of any
breach of Section 4.13(a) by the Buyer, the Seller would be irreparably harmed
and could not be made whole by monetary damages. It is accordingly agreed that
the Buyer waives the defense in any action alleging breach of the provisions of
this Section 4.13 seeking specific performance of the Buyer's obligations under
Section 4.13(a) that damages, or any other remedy at law would be an adequate
remedy. The parties further agree, in addition to any other remedy to which it
may be entitled at law or in equity, the Seller shall be entitled to compel
specific performance of Section 4.13(a) in any action instituted by the Seller.
The parties further agree that a breach of Section 4.13(a) would require
immediate redress. Accordingly, the parties agree that in the event a legal
proceeding is commenced by the Seller which seeks specific performance of
Section 4.13(a), such proceeding shall be expedited to the fullest extent
permitted by law.
SECTION 4.14. License of Embedded Trademarks. The Seller hereby
licenses the Buyer, for no additional consideration, the use of the Seller's
tradenames and trademarks in any mask work or mask set where such tradename or
trademark is embedded in the finished product, such license to terminate at such
time as the Buyer replaces the mask work or mask set.
V. CONDITIONS PRECEDENT
SECTION 5.01. Conditions Precedent to Obligations of the Buyer. The
obligation of the Buyer to consummate the transaction set forth in this
Agreement is subject to the fulfillment at or prior to the Closing Date of each
of the following conditions, any of which may be waived in whole or in part by
the Buyer to the extent permitted by applicable law:
(a) Accuracy of Representations and Warranties. The representations and
warranties contained in Section 3.01 of this Agreement or in any certificate or
document delivered to the Buyer pursuant hereto shall be true and correct on and
as of the Closing Date as though made at and as of that date (without regard to
any notification that may be made by the Seller under Section 4.03), and the
Seller shall have delivered to the Buyer a certificate to that effect.
(b) Compliance with Covenants. The Seller shall have performed and
complied in all material respects with all terms, agreements, covenants and
conditions of this Agreement to be performed or complied with by it at or prior
to the Closing Date, and the Seller shall have delivered to the Buyer a
certificate of its president to that effect.
(c) All Proceedings To Be Satisfactory. All proceedings to be taken by
the Seller in connection with the transactions contemplated hereby and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Buyer and its counsel, Reboul, MacMurray, Xxxxxx, Xxxxxxx &
Kristol, and the Buyer and said counsel shall have received all such counterpart
originals or certified or other copies of such documents as they may reasonably
request.
(d) Legal Opinion. The Buyer shall have received the opinion of
Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx, counsel to the Seller, addressed to the Buyer
and dated the Closing Date, satisfactory in form and substance to the Buyer and
its counsel, to the effect set forth in Annex I hereto.
(e) Legal Actions or Proceedings. No preliminary or permanent
injunction or other order, decree or ruling issued by any court of competent
jurisdiction nor any statute, rule, regulation or order entered, promulgated or
enacted by any governmental, regulatory or administrative agency or authority
shall be in effect that would prevent the consummation of the transactions
contemplated hereby.
(f) Assignment of Contracts. The Seller shall have obtained all the
authorizations, consents, waivers and approvals required in connection with the
assignment of those contracts, agreements, licensee, leases, sales orders,
purchase orders and other commitments to be assigned to the Buyer pursuant to
this Agreement and set forth on Schedule 3.01(i) hereto, including, but not
limited to, those consents required in connection with Section 1.02 hereof.
(g) Ancillary Agreements. Each Ancillary Agreement shall have been
executed and delivered by each party thereto other than the Buyer and said
Agreements shall be in full force and effect as of the Closing Date.
(h) Supporting Documents. On or prior to the Closing Date, the Buyer
and its counsel shall have received copies of the following supporting
documents:
(i) copies of the Certificates of Incorporation of the Seller and
all amendments thereto, certified as of a recent date by the Secretary of State
of the State of Delaware, and (2) certificates of said Secretary dated as of a
recent date as to the good standing of the Seller and listing all documents of
each on file with said Secretary; and
(ii) certificates of the Secretary or an Assistant Secretary of
the Seller dated the Closing Date and certifying: (1) that attached thereto is a
true and complete copy of the By-laws of the Seller as in effect on the date of
such certification; (2) that attached thereto is a true and complete copy of
resolutions adopted by the Board of Directors of the Seller authorizing the
execution, delivery and performance of this Agreement and each Ancillary
Agreement to which the Seller is a party and the transactions contemplated
hereby and thereby and that all such resolutions
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are still in full force and effect and are all the resolutions adopted in
connection with the transactions contemplated by this Agreement and each
Ancillary Agreement to which the Seller is a party; (3) that the Certificate of
Incorporation of the Seller has not been amended since the date of the last
amendment referred to in the certificate delivered pursuant to clause (i)(2)
above; and (4) as to the incumbency and specimen signature of each officer of
such Seller executing this Agreement and any certificate or instrument furnished
pursuant hereto, and a certification by another officer of the Seller as to the
incumbency and signature of the officer signing the certificate referred to in
this paragraph (ii).
(i) Consents and Regulatory Approvals. The Buyer shall have (i)
obtained all material written consents, permits, licenses, authorizations and
approvals in forms acceptable to the Buyer of any and all persons, including,
without limitation, Governmental Agencies, authorities and third parties,
required to be obtained prior to the consummation of the transactions
contemplated hereby and required to be obtained in order that Buyer may conduct
the Group Activity immediately following the Closing Date, and (ii) received
evidence in form and substance satisfactory to Buyer and its counsel reflecting
that the Seller notified the Governmental Agencies with whom the Seller
transacts business as to the (x) transactions contemplated hereby and (y)
Seller's desire to enter into any required novation agreements. Any waiting
period (and any extension thereof) under Xxxx-Xxxxx applicable to the purchase
of the Group Activity contemplated hereby shall have expired or been terminated.
(j) No Material Adverse Effect. Neither the Group nor the Group
Activity shall have suffered, after the date of this Agreement any change which
has had, or in the reasonable opinion of Buyer could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the Group
Activity or the Group.
(k) Payment of Certain Excluded Liabilities. The Seller shall have paid
all Excluded Liabilities which are secured by liens or other encumbrances on the
Assets, and the Buyer shall have been furnished evidence of such payment
satisfactory to it.
SECTION 5.02. Conditions Precedent to Obligations of the Seller. The
obligation of the Seller to consummate the transactions set forth in this
Agreement is subject to the fulfillment at or prior to the Closing Date of each
of the following conditions, any of which may be waived in whole or in part by
the Seller to the extent permitted by applicable law:
(a) Accuracy of Representations and Warranties. The representations and
warranties of the Buyer contained in Section 3.02 or in any certificate or
document delivered to the Seller pursuant hereto shall be true and correct on
and as of the Closing Date as though made at and as of that date (without regard
to any notification that may be made by the Buyer under Section 4.03), and the
Buyer shall have delivered to the Seller a certificate to such effect.
(b) Compliance with Covenants. The Buyer shall have performed and
complied in all material respects with all terms, agreements, covenants and
conditions of this Agreement to be performed or complied with by it at or prior
to the Closing Date, and the Buyer shall have delivered to the Seller a
certificate to that effect.
(c) Supporting Documents. On or prior to the Closing Date, the Seller
shall have received copies of the following supporting documents:
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(i) (1) copies of the Certificate of Incorporation of the Buyer
and all amendments thereto, certified as of a recent date by the Secretary of
State of the State of Delaware, and (2) a certificate of said Secretary dated as
of a recent date as to the due incorporation and good standing of the Buyer and
listing all documents of the Buyer on file with said Secretary; and
(ii) a certificate of the Secretary or an Assistant Secretary of
the Buyer dated the Closing Date and certifying: (1) that attached thereto is a
true and complete copy of the By-laws of the Buyer as in effect on the date of
such certification; (2) that attached thereto is a true and complete copy of
resolutions adopted by the Board of Directors of the Buyer authorizing the
execution, delivery and performance of this Agreement, each Ancillary Agreement
to which the Buyer is a party and the transactions contemplated hereby and
thereby and that all such resolutions are still in full force and effect and are
all the resolutions adopted in connection with the transactions contemplated by
this Agreement and such Ancillary Agreements; (3) that the Certificate of
Incorporation of the Buyer have not been amended since the date of the last
amendment referred to in the certificate delivered pursuant to clause (i)(2)
above; and (4) as to the incumbency and specimen signature of each officer of
the Buyer executing this Agreement and any certificate or instrument furnished
pursuant hereto, and a certification by another officer of the Buyer as to the
incumbency and signature of the officer signing the certificate referred to in
paragraph (ii).
(d) Legal Actions or Proceedings. No preliminary or permanent
injunction or other order, decree or ruling issued by any court of competent
jurisdiction nor any statute, rule, regulation or order entered, promulgated or
enacted by any governmental, regulatory or administrative agency or authority
shall be in effect that would prevent the consummation of the transactions
contemplated hereby.
(e) Ancillary Agreements. Each Ancillary Agreement shall have been
executed and delivered by each party thereto other than the Seller and any Key
Employee, as the case may be, and said Agreements shall be in full force and
effect as of the Closing Date.
(f) All Proceedings To Be Satisfactory. All proceedings to be taken by
the Buyer in connection with transactions contemplated hereby and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Seller and their counsel, Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx, and the Seller and
said counsel shall have received all such counterpart originals or certified or
other copies of such documents as they may reasonably request.
(g) Legal Opinion. The Seller shall have received the opinion of Reboul
MacMurray, Hewitt, Xxxxxxx & Kristol, counsel to the Buyer addressed to the
Seller and dated the Closing Date, satisfactory in form and substance to the
Seller and its counsel, to the effect set forth in Annex II hereto.
VI. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
SECTION 6.01. Survival of Representations. All representations and
warranties made by any party hereto in this Agreement or pursuant hereto shall
survive the Closing hereunder and shall terminate at the close of business on
the third anniversary of the Closing Date, except for (i) the representations
and warranties of Seller contained in Sections 3.01(a), (b), (c) and (k), which
shall, subject to Section 6.04, survive indefinitely and (ii) the
representations and warranties of the Seller in Sections 3.01(n) and (u), which
shall survive for 90 days after the expiration of the applicable statute of
limitation (including any extensions or waivers thereof).
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SECTION 6.02. Tax Indemnity. (a) Regardless of any disclosure made to
the Buyer, the Seller agrees to and shall indemnify the Buyer and its affiliates
and hold each of them harmless from and against
(i) a breach of any representations or warranties relating to
Taxes; and
(ii) without duplication of amounts payable under the preceding
clause (i), any and all Taxes incurred by, imposed upon or attributable to any
of them in respect of or attributable to the Assets (including as a result of
the imposition of any lien thereon) or the Group Activity or in connection with
the purchase of the Assets;
including reasonable legal, accounting and other professional fees and expenses
incurred by the Buyer or its affiliates in connection with Taxes subject to
indemnification under this Section 6.02, insofar as such Taxes pertain to
periods (or any portion of a period thereof) ending on or prior to the Closing
Date or the sale and transfer of the Assets, except for Taxes specifically
assumed by the Buyer pursuant to this Agreement.
(b) For purposes of paragraph (a) above, any interest, penalty or
additional charge included in Taxes shall be deemed to be a Tax for the period
in which the item on which the interest, penalty or additional charge is based,
an not a Tax for the periods during which the item accrues.
(c) The indemnity provided for in this Section 6.02 shall be
independent of any other indemnity provision hereof and, anything in this
Agreement to the contrary notwithstanding, shall survive until the expiration of
the applicable statutes of limitation (including extensions thereof) for the
Taxes referred to herein and any Taxes subject to indemnification under this
Section 6.02 shall not be subject to the provisions of Section 6.03.
SECTION 6.03. Seller's General Indemnity. Subject to the terms and
conditions of this Article VI, the Seller hereby agrees to indemnify, defend and
hold the Buyer and its Affiliates harmless from and against all demands, claims,
actions or causes of action, assessments, losses, damages, liabilities, costs
and expenses, including, without limitation, interest, penalties and reasonable
attorneys' fees and expenses (collectively, "Damages") as they are incurred,
asserted against, resulting to, imposed upon or incurred or suffered by the
Buyer and its Affiliates by reason of or resulting from:
(i) a breach by the Seller of any representation, warranty,
covenant or agreement contained in or made pursuant to Section 3.01 (except for
breaches of Section 3.01(k)(vi)(1) which shall be governed by Section 6.04) or
Article IV of this Agreement;
(ii) any liabilities or obligations of, or claims against or
imposed on the Group or the Buyer (whether absolute, accrued, contingent or
otherwise and whether a contractual, or any other type of liability, obligation
or claim) which relate to acts or omissions by the Seller on or prior to the
Closing Date and which are not expressly assumed by the Buyer pursuant to this
Agreement;
(iii) any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) in respect of (A) any of the actions, suits or
proceedings or threatened actions, suits or proceedings described on Schedule
3.01(m) hereof, or (B) any action, suit or proceeding commenced
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after the Closing Date based upon an event occurring or a claim arising on or
prior to the Closing Date; and
(iv) any claim by any customer or licensee of the Seller relating
to the provision of goods or services or the licensing of any rights by the
Group prior to the Closing Date.
SECTION 6.04. Intellectual Property Indemnification.
(a) Anything herein to the contrary notwithstanding, the Seller's
obligations to the Buyer relating to any infringement or misappropriation of any
third party's Intellectual Property by the conduct of any Group Activity shall
be pursuant to the terms and provisions set forth in this Section 6.04. The
Seller hereby agrees to indemnify and hold the Buyer and its Affiliates harmless
from and against any Damages as they are incurred asserted against, resulting
to, imposed upon or incurred or suffered by the Buyer or its affiliates by
reason of or resulting from and to the extent of the infringement or
misappropriation of the Intellectual Property of any other party by the conduct
of any Group Activity as such Group Activity was conducted on or before the
Closing Date, including, without limitation, the use of any trade name for a
product or service offered by the Group; the making, importing, selling,
offering for sale, or using of any product of the Group; the carrying out of any
method or process involved in a Group Activity; the reproduction of any mask
work for a semiconductor chip product or the importation or distribution of a
semiconductor chip product in which a mask work is embodied; or the running or
reproduction of any computer software in connection with a Group Activity
(collectively, the "Infringement").
(b) (i) Upon the receipt by the Buyer of the first actual notification
of any Infringement from any third party or from the Seller (an "Infringement
Notice"), the Buyer shall, (A) as promptly as practicable, forward such
Infringement Notice to the Seller (provided, however, that the failure of the
Buyer to forward such notice to the Seller shall not act as a waiver of the
obligations of the Seller set forth in this provision) and (B) make a
determination as to what action, if any, to take to address the allegations set
forth in the Infringement Notice, such determination to be made by Buyer in its
sole discretion and to be binding for purposes of this Section 6.04 until such
time as the party who alleges its Intellectual Property is being infringed or
misappropriated commences a lawsuit against either the Seller or the Buyer in
connection with such alleged Infringement (the "Infringement Lawsuit"). If,
following receipt of the Infringement Notice, the Buyer determines that the
alleged Infringement set forth in the Infringement Notice is, through
commercially reasonable efforts, capable of being cured with the result that the
subject Intellectual Property can be used by the Buyer as it wishes in its sole
discretion (such Infringement to be referred to herein as a "Curable Claim of
Infringement"), the Seller's indemnification obligation shall be limited to all
Damages asserted against, resulting to, imposed upon or incurred or suffered by
the Buyer or its Affiliates by reason of or resulting from the alleged
Infringement up to and including the date of the Notification Event. If the
Buyer elects, in its sole discretion, to effect such cure, then the Buyer shall
promptly take commercially reasonable steps to cure the alleged Infringement.
(ii) Upon the commencement of an Infringement Lawsuit, if the
Buyer shall have determined that the Infringement alleged in the Infringement
Lawsuit is a Curable Infringement, the provisions of the last two sentences of
Section 6.04(b)(i) shall govern. If, within a commercially reasonable period
following the commencement of the Infringement Lawsuit the Buyer shall determine
that the Infringement alleged in the Infringement Lawsuit is not a Curable Claim
of Infringement, it shall provide written notice to the Seller at which time,
the provisions set forth in this paragraph (ii) shall apply with the intent that
all actions taken and communications made pursuant to
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this paragraph (ii) shall be covered by the joint defense privilege shared by
the Buyer and the Seller, it being understood that upon the commencement of an
Infringement Lawsuit, the parties hereto will enter into a mutually satisfactory
joint defense agreement. The Seller shall promptly notify the Buyer, in writing,
as to whether it reasonably regards the subject Infringement as a Curable Claim
of Infringement. If the Seller agrees with the Buyer that the alleged
Infringement is not a Curable Claim of Infringement, the Notification Event
shall not serve to limit the Damages from and against which the Seller shall
indemnify and hold the Buyer and its Affiliates harmless; provided that at any
time thereafter the Seller shall be entitled, at its sole option and expense
(and without limiting the Seller's obligation to indemnify the Buyer and its
Affiliates for any Damages incurred as a result of the subject Infringement), to
procure for the Buyer a license in and to the subject Intellectual Property
pursuant to which the Buyer is permitted, without liability for infringement or
misappropriation, to design, develop, make, have made, use, import, export,
sell, offer for sale, lease, license, transfer or otherwise utilize and
distribute the subject Intellectual Property in whatever manner it deems
necessary; and provided, further, that the Buyer hereby agrees that it shall
reasonably cooperate with the Seller in connection therewith and shall, at the
Seller's sole expense, take such actions as are reasonably necessary to enable
the Seller to procure such right. If the Seller, acting reasonably and in good
faith, regards the alleged Infringement as a Curable Claim of Infringement, the
parties shall endeavor in good faith to reach an agreement as to whether such
Infringement is a Curable Claim of Infringement. If, after 60 days, the parties
are unable to reach an agreement as to whether such Infringement is a Curable
Claim of Infringement, the parties shall begin dispute resolution as set forth
in Section 8.11 hereof. In the event that the Infringement Lawsuit is finally
resolved in a manner unfavorable to the Buyer, then the Seller shall be
obligated to indemnify the Buyer and its Affiliates for Damages asserted
against, resulting to, imposed upon or incurred or suffered by the Buyer or its
Affiliates by reason of or resulting from the alleged Infringement (A) up to and
including the date on which the Buyer received the Infringement Notice in the
event that the parties, whether on their own or through the procedures set forth
in Section 8.11 hereof, determined that the alleged Infringement was a Curable
Claim of Infringement and (B) up to and including the date on which such
Infringement Lawsuit is finally resolved in the event that the parties, whether
on their own or through the procedures set forth in Section 8.11 hereof,
determined that the alleged Infringement was not a Curable Claim of
Infringement.
(c) The above notwithstanding, the Seller shall not be responsible for
Damages suffered or incurred by the Buyer or its Affiliates that were the result
of (i) changes in the way any Group Activity was conducted after the Closing
Date, such as the use of the Buyer's or any other party's Intellectual Property
in connection with the conduct of a Group Activity after the Closing Date where
the conduct of such Group Activity prior to the Closing Date did not constitute
an Infringement or (ii) the Buyer intentionally substituting the Group
Intellectual Property of the Group in place of Intellectual Property of the
Buyer (the "Buyer Intellectual Property") in cases where the Buyer did not have
a commercially reasonable justification for doing so (it being understood,
however, that the Buyer's substitution of the Group Intellectual Property in
place of the Buyer Intellectual Property for the primary purpose of having the
Seller bear the risk in the event any Infringement claim is brought by a third
party, shall not be deemed a commercially reasonable justification for purposes
hereof).
(d) In the event of a claim by a third party or the filing of an
Infringement Lawsuit relating to an alleged Infringement or to the conduct of
any Group Activity prior to a Notification Event, the parties agree to cooperate
in good faith in evaluating and determining the appropriate method of defense of
the claim, including, without limitation, the determination of the appropriate
party which is best positioned to be responsible for the defense of the claim
given the parties
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respective interests and obligations. Regardless of which party is responsible
for the defense of any such claim, the settlement of any such claim must be
approved by both of the parties, which approval will not be unreasonably
withheld. In the event the parties are unable to determine the appropriate
method of defense of the claim within twenty (20) days of the receipt of the
notice of the claim, the procedure and method of the defense of the claim shall
be determined according to the provisions of Section 6.07 below.
(e) The Seller agrees that it shall use its best efforts to assist the
Buyer in the defense of any Infringement claim arising at any time, including
without limitation, those claims arising after the occurrence of a Notification
Event and shall, among other things which the Buyer shall reasonably request,
provide access, upon the request of the Buyer, to any of the Seller's engineers
or other personnel who, in the Buyer's opinion, would be helpful to the Buyer in
defending any claim to any Infringement of the Intellectual Property of any
third party.
(f) Unless and until the Buyer exercises its Option on the Cross
License pursuant to Section 1.03 hereof and the Cross License is effectively
assigned to the Buyer pursuant to the provisions of the Cross License, the
Seller shall not have any indemnification obligations under this Section 6.04
with respect to any claims brought against the Buyer for misappropriation or
infringement of any of the Amati Patents (as defined in the Cross License);
provided, however, that the Seller shall be obligated to indemnify the Buyer
pursuant to this Section 6.04 in the event that the Buyer exercises its Option
on the Cross License and the assignment thereof is ineffective due to a breach
of any provision other than Section 4.4 of the Cross License.
(g) Unless and until the Buyer exercises its Option on one or both of
the Level One Agreements pursuant to Section 1.03 hereof and such Optioned
Agreement is effectively assigned to the Buyer pursuant to the provisions set
forth in such Optioned Agreement, the Seller shall not have any indemnification
obligations under this Section 6.04 with respect to any claims brought against
the Buyer for misappropriation or infringement of any of the Intellectual
Property licensed under such Optioned Agreement; provided, however, that the
Seller shall be obligated to indemnify the Buyer pursuant to this Section 6.04
in the event that the Buyer exercises its Option on either of the Level One
Agreements and the assignment thereof is ineffective due to a breach of any
provision in such Optioned Agreement other than (i) Section 8.4 in the case
where the Optioned Agreement is the Joint Development and Supply Agreement,
dated May 14, 1997, between the Seller and Level One Communications, Inc. and
(ii) Section 9.4 in the case where the Optioned Agreement is the License
Agreement, dated July 7, 1999, between the Seller and Level One Communications,
Inc.
SECTION 6.05. Indemnification Pursuant to Certain Agreements. Anything
herein to the contrary notwithstanding, the Seller hereby agrees to indemnify
and hold the Buyer and its Affiliates harmless from and against any Damages, as
they are incurred, asserted against, resulting to, imposed upon or incurred or
suffered by the Buyer or its Affiliates by reason of or resulting from:
(a) any unauthorized or impermissible disclosure to the Buyer or any
of its employees of any confidential or proprietary information in any form,
including residual information in the minds of one or more of the Group
Employees, which may have been disclosed to the Seller pursuant to the Level
One Agreements, the ADSL Agreement or the Cross License; provided, however, that
the Seller shall not be obligated to indemnify the Buyer in cases where the
Seller can establish that the Buyer deliberately, intentionally and willfully,
and with the actual knowledge and, during the first two years following the
Closing Date, at the direction of any of the persons agreed to by the Buyer and
the Seller or, thereafter, at the direction of engineering management with
direct development responsibility and any members of management ranking senior
to such engineering managers, misappropriated or infringed (A) the Jointly
Developed DMT ADSL Chip Set Technology, the Future DMT ADSL Chip Set
Technology, the Rockwell Background Technology or Rockwell's DMT ADSL Chip Set
Technology (each as defined in the ADSL Agreement), (B) the Amati Patents (as
defined in the Cross License) or (C) the Pre-Existing LOC Technology, the
Project Developed Technology, the Chip Developed Technology in AFE and CAP
(each as defined in the Level One Agreements).
(b) any breach or alleged breach by the Seller of, default or alleged
default by the Seller in an obligation under, or failure or alleged failure of
the Seller to perform under, the Level One Agreements or the ADSL Agreement;
provided, however, that the Seller shall not be obligated to indemnify the
Buyer for any Damages arising from the Buyer's breach of the covenants set
forth in Section 4.13 hereof.
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SECTION 6.06. Buyer's General Indemnity. Subject to the terms and
conditions of this Article VI, the Buyer hereby agrees to indemnify, defend and
hold the Seller and its Affiliates harmless from and against all Damages as they
are incurred, asserted against, resulting to, imposed upon or suffered by the
Seller and its Affiliates by reason of or resulting from:
(i) a breach by the Buyer of any representation, warranty,
covenant or agreement contained in or made pursuant to Section 3.02 or Article
IV of this Agreement; and
(ii) any liabilities or obligations of, or claims against or
imposed on, the Seller that are expressly assumed by the Buyer pursuant to this
Agreement.
SECTION 6.07. Conditions of Indemnification. The obligations and
liabilities of the party responsible for indemnifying hereunder (sometimes
referred to herein as "the indemnifying party"), and the party entitled to
indemnification hereunder (sometimes referred to herein as "the party to be
indemnified" or "the indemnified party"), under Sections 6.02, 6.03, 6.04 and
6.05 and 6.06 hereof with respect to claims resulting from the assertion of
liability by third parties shall be subject to the following terms and
conditions:
(a) Within 20 days after receipt of notice of commencement of any
action or the assertion of any claim by a third party, the party to be
indemnified shall give the indemnifying party written notice thereof together
with a copy of such claim, process or other legal pleading (provided that
failure so to notify the indemnifying party of the assertion of a claim within
such period shall not affect its indemnity obligation hereunder except as and to
the extent that such failure shall adversely affect the defense of such claim),
and the indemnifying party shall have the obligation to undertake the defense
thereof by representatives of its own choosing reasonably satisfactory to the
indemnified party; provided, that the indemnified party may retain separate
co-counsel at its sole cost and expense and participate in the defense of the
third party claim;
(b) In the event that the indemnifying party, by the thirtieth day
after receipt of notice of any such claim (or, if earlier, by the tenth day
preceding the day on which an answer or other pleading must be served in order
to prevent judgment by default in favor of the person asserting such claim),
does not assume the defense of such claim, the party to be indemnified will
(upon further notice to the indemnifying party) have the right to undertake the
defense, compromise or settlement of such claim on behalf of and for the account
and risk of the indemnifying party, subject to the right of the indemnifying
party to assume the defense of such claim at any time prior to settlement,
compromise or final determination thereof;
(c) Other than as set forth in Section 6.07(b), except with the prior
written consent of the party to be indemnified, no indemnifying party, in the
defense of such claim or litigation, shall consent to entry of any judgment or
order, interim or otherwise, or enter into any settlement that provides for
injunctive or other nonmonetary relief affecting the party to be indemnified or
that does not include as an unconditional term thereof the giving by each
claimant or plaintiff to such party to be indemnified of a release from all
liability with respect to such claim or litigation. In the event that the party
to be indemnified shall in good faith determine that the representation of both
the indemnifying and indemnified parties would be inappropriate due to a
conflict of interest arising from the availability to the indemnified party of
one or more defenses or counterclaims that are inconsistent with one or more of
those that may be available to the indemnifying party in respect of such claim
or any litigation relating thereto, the party to be indemnified shall have the
right (subject to applicable rules of professional conduct) at all times to take
over and assume control over the defense, settlement, negotiations or litigation
relating to such claim at the sole cost of the indemnifying party; provided,
however, that if the party to be indemnified does so take over and assume
control, the party to be indemnified may consent to the entry of any judgment or
enter into any settlement with respect to any third party claim in any manner it
may deem appropriate and, in the event that the indemnifying party did not
undertake the defense of such claim due to a conflict of interest, such consent
to entry of judgment or entry into any settlement will be subject to the
approval, not to be unreasonably withheld, of the indemnifying party; and
(d) In connection with any such indemnification, the party to be
indemnified shall cooperate with all reasonable requests of the indemnifying
party.
SECTION 6.08. Limitations on Indemnity. No indemnifying party shall be
obligated to indemnify an indemnified party against Damages caused by a breach
of any representation, warranty or covenant of the Seller or the Buyer, as the
case may be, herein unless the aggregate amount of such Damages to the
indemnified party shall exceed $200,000, and the indemnifying party shall
thereafter be liable for the entire amount of any Damages incurred by the
indemnified party since the Closing Date in excess of $200,000 provided that the
total amount of Damages shall not exceed $200,000,000.
SECTION 6.09. Remedies Cumulative. Except as otherwise expressly
provided in this Article VI, the remedies provided herein shall be cumulative
and shall not preclude assertion by any party hereto of any equitable rights or
the seeking of any other equitable remedies against any other party hereto.
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VII. TERMINATION AND ABANDONMENT
SECTION 7.01. Termination of Agreement. Certain of the parties may
terminate this Agreement as provided below:
(a) the Buyer and the Seller may terminate this Agreement by mutual
written consent of the Board of Directors of each party at any time prior to the
Closing;
(b) the Buyer may terminate this Agreement by giving written notice to
the Seller at any time prior to the Closing (A) in the event the Seller has
breached any material representation, warranty, or covenant contained in this
Agreement in any material respect, the Buyer has notified the Seller of the
breach, and the breach has continued without cure for a period of fifteen days
after the notice of breach or (B) if the Closing shall not have occurred on or
before March 31, 2000, by reason of the failure of any condition precedent under
Section 5.02 hereof (unless the failure results primarily from the Buyer itself
breaching any representation, warranty or covenant contained in this Agreement);
and
(c) the Seller may terminate this Agreement by giving written notice to
the Buyer at any time prior to the Closing (A) in the event the Buyer has
breached any material representation, warranty or covenant contained in this
Agreement in any material respect, the Seller has notified the Buyer of the
breach, and the breach has continued without cure for a period of fifteen days
after the notice of breach or (B) if the Closing shall not have occurred on or
before March 31, 2000, by reason of the failure of any condition precedent under
Section 5.01 hereof (unless the failure results primarily from the Seller itself
breaching any representation, warranty or covenant contained in this Agreement).
SECTION 7.02. Effect of Termination. If any party terminates this
Agreement pursuant to Section 7.01 above, all rights and obligations of the
parties hereunder shall terminate without any liability on the part of any party
hereto except for willful breach.
VIII. MISCELLANEOUS
SECTION 8.01. Definitions. The following terms are used in this
Agreement with the meanings specified below, unless the context clearly
indicates otherwise:
"Act" has the meaning set forth in Section 3.01(z).
"ADSL Agreement" means the DMT ADSL Joint Development Agreement, dated
March 6, 1998, between the Seller and Conexant (as successor interest to
Rockwell Semiconductor Systems, Inc.), as amended.
"Additional Assets" has the meaning set forth in Section 1.01(a).
"Affiliate" with respect to any Person, means any Person controlling,
controlled by or under common control with such Person.
"Alternative Transaction" means any merger, consolidation, sale of all or
part of the Group or the Group Activity that is material to the Group Activity,
recapitalization, debt restructuring or similar transaction involving the Group
or Group Activity (other than as contemplated between the parties hereto).
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"Ancillary Agreements" means (i) the Xxxx of Sale, (ii) the License
Agreement, (iii) the Supply Agreement, (iv) the Sublease, (v) the Note, (vi) the
Assumption Agreement, (vii) the Registration Rights Agreement and (viii) the
Lewyn Agreement.
"Assets" has the meaning set forth in Section 1.01(a).
"Assumed Liabilities" has the meaning set forth in Section 2.03(a).
"Assumption Agreement" has the meaning set forth in Section 2.04.
"Xxxx of Sale" has the meaning set forth in Section 2.04.
"Buyer" has the meaning set forth in the preamble.
"Buyer Filings" has the meaning set forth in Section 3.02(f).
"CERCLA" means the Comprehensive Environmental Reasons, Compensation and
Liability Act of 1980, as amended.
"Claim" means any action, cause of action, suit (in contract, tort or
otherwise), proceeding, hearing, inquiry, investigation, charge, complaint,
claim, or demand by or before any Governmental Agency.
"Closing Date" and "Closing" have the respective meanings set forth in
Section 2.01.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitments" has the meaning set forth in Section 1.02.
"Common Stock" has the meaning set forth in Section 2.02(a).
"Competing Activity" has the meaning set forth in Section 4.08(a).
"Computer Systems" has the meaning set forth in Section 3.01(z).
"Conexant" means Conexant Systems, Inc.
"Confidential Information" means any information concerning the businesses
and affairs of the Group or the Buyer that is not already generally available to
the public.
"Confidentiality Agreement" has the meaning set forth in Section 4.04.
"Conversion Shares" has the meaning set forth in Section 3.02(a).
"Cross License" has the meaning set forth in Section 1.03.
"Curable Claim of Infringement" has the meaning set forth in Section
6.04(b).
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"Damages" has the meaning set forth in Section 6.03.
"Designated Subsidiary" has the meaning set forth in Section 1.01(a).
"Development Agreements" has the meaning set forth in Section 3.01(gg).
"DMT ADSL Chip Set Technology" has the meaning set forth for such term in
the ADSL Agreement.
"DSL Technology" has the meaning set forth for such term in the License
Agreement.
"Environmental, Health and Safety Requirements" shall mean all federal,
state, local and foreign statues, regulations, ordinances and similar provisions
having the force or effect of law, all judicial and administrative orders and
determinations, and all common law concerning public health and safety, worker
health and safety, and pollution or protection of the environment, including
without limitation all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control or cleanup of any Hazardous Substance.
"ERISA" has the meaning set forth in Section 3.01(s).
"ERISA Affiliates" has the meaning set forth in Section 3.01(s).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" has the meaning set forth in Section 1.01(e).
"Excluded Liabilities" has the meaning set forth in Section 2.03(b).
"Governmental Agency" has the meaning set forth in Section 3.01(d).
"Group" has the meaning set forth in the preamble.
"Group Activity" has the meaning set forth in the preamble.
"Group Employees" shall mean all those employees of the Group set forth on
Schedule 4.09(a) hereto. Each person listed on Schedule 4.09(a) shall be
considered a "Group Employee".
"Group Intellectual Property" has the meaning set forth in Section
3.01(k)(ii).
"Xxxx-Xxxxx" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Hazardous Substances" means any substance, whether liquid, solid or gas,
listed, identified or designated as hazardous or toxic under any Environmental,
Health and Safety Requirements, which, applying criteria specified in any
Environmental, Health and Safety Requirements, is hazardous or toxic, or the use
or disposal of which is regulated under any Environmental, Health and Safety
Requirements.
"Infringement Lawsuit" has the meaning set forth in Section 6.04(b).
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"Initial Shares" has the meaning set forth in Section 2.02(a).
"Intellectual Property" has the meaning set forth in Section 3.01(k)(i).
"Interests" has the meaning set forth in Section 1.02.
"Key Employee Employment Agreements" shall mean those employment
agreements, dated as of the Closing Date, between a Key Employee, on the one
hand, and the Buyer, on the other hand.
"Level One Agreements" means the Joint Development and Supply Agreement
dated 14 May 1997 and the Development and License Agreement dated 7 July 1999,
both between the Seller and Level One Communications, Incorporated.
"Lewyn Agreement" means the agreement, dated January 20, 2000, between
Lewyn Consulting, Inc., and the Seller, attached hereto as Exhibit H.
"License Agreement" means the license agreement, to be dated as of the
Closing Date, between the Buyer and Seller, substantially in the form set forth
in Exhibit D hereto (for the license of DSL Technology from Buyer to the
Seller).
"Liens" has the meaning set forth in Section 1.01(a).
"Material Adverse Effect" shall mean such state of fact, event, change or
effect that has had, or would reasonably be expected to have, a material adverse
effect on the assets, liabilities, business, results of operations, properties,
operations, prospects or condition (financial or otherwise) of such Person;
provided, however, that no change (i) in the general economic condition in any
of the countries in which such party operates, (ii) that generally affects the
industry in which such party is operated, (iii) in the price of the Common Stock
on any stock exchange or in any interdealer quotation system in which the Common
Stock trades or is quoted, or (iv) resulting from the announcement of this
Agreement shall be taken into account for purposes of determining the occurrence
or existence of a Material Adverse Effect.
"Note" has the meaning set forth in Section 2.02(b).
"Option" or "Options" has the meaning set forth in Section 1.03.
"Optioned Agreements" has the meaning set forth in Section 1.03.
"Permitted Activities" has the meaning set forth in the License Agreement.
"Permits" has the meaning set forth in Section 3.01(g).
"Permitted Liens" has the meaning set forth in Section 3.01(h).
"Person" means any individual, partnership, firm, corporation, association,
trust, unincorporated organization or other entity.
"Plans" has the meaning set forth in Section 3.01(s).
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"Registration Rights Agreement" means the registration rights agreement, to
be dated as of the Closing Date, between the Buyer and the Seller, substantially
in the form attached hereto as Exhibit G.
"Seller" has the meaning set forth in the preamble.
"Seller Filings" has the meaning set forth in Section 3.01(ee).
"Shares" has the meaning set forth in Section 3.02(a).
"Sublease" means the Sublease Agreement to be dated as of the Closing Date
substantially pursuant to the terms set forth in Exhibit E hereto.
"Supply Agreement" means the pricing agreement, to be dated as of the
Closing Date, between Buyer and Seller, substantially in the form attached
hereto as Exhibit F (for pricing of DSL).
"SWDA" means the Solid Waste Disposal Act, as amended.
"Tax" has the meaning set forth in Section 3.01(n)(iv).
"Tax Returns" has the meaning set forth in Section 3.01(n)(i).
"Third Party" has the meaning set forth in Section 4.11.
"Transferred Employees" has the meaning set forth in Section 4.09(c).
"Vacation Schedule" has the meaning set forth in Section 4.09(d).
"Year 2000 Compliant" has the meaning set forth in Section 3.01(y)(ii).
SECTION 8.02. Specific Performance. Each of the Seller and the Buyer
acknowledges that the acquisition of the Assets is a vital, necessary and unique
part of the Buyer's strategic plan, which includes the acquisition and
consolidation of other related businesses, and that any breach of this Agreement
by the Seller or the Buyer could not be adequately compensated by monetary
damages. Accordingly, if the Seller or the Buyer breaches its obligations under
this Agreement prior to the Closing, the Buyer shall be entitled, in addition to
any other remedies that it may have, to enforcement of this Agreement by a
decree of specific performance requiring the Seller to fulfill its obligations
under this Agreement.
SECTION 8.03. Service of Process. Each party to this Agreement hereby
irrevocably agrees that service of process in any legal action or proceeding
with respect to this Agreement or any Ancillary Agreement may be effected by
mailing a copy thereof by registered or certified mail, postage prepaid, to the
address of such party set forth in Section 8.07 hereof.
SECTION 8.04. Bulk Transfer Laws. The Buyer hereby waives compliance by the
Seller with any applicable bulk transfer laws, including, without limitation,
the bulk transfer provisions of the Uniform Commercial Code of any state, or any
similar statute, with respect to the transactions contemplated hereby. The
Seller hereby agrees to indemnify the Buyer and hold it harmless from and
against any loss or damage which it may incur by reason of such non-compliance.
43
49
SECTION 8.05. Expenses, Etc. Except as otherwise expressly provided herein,
each party hereto shall pay its own fees and expenses (including, but not
limited to, legal, accounting and other professional fees) incurred in
connection with this Agreement, the Ancillary Agreements and the transactions
contemplated hereby and thereby.
SECTION 8.06. Execution in Counterparts. For the convenience of the
parties, this Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
SECTION 8.07. Notices. All notices which are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if (i) delivered personally, (ii) mailed by
registered or certified mail, return receipt requested and postage prepaid,
(iii) sent via a nationally recognized overnight courier service or (iv) sent
via facsimile confirmed in writing to the recipient, in each case as follows:
If to the Seller, to it at the address indicated below:
PairGain Technologies, Inc.
00000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx Xxxxxx
with a copy to:
Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Facsimile No. (000) 000-0000
Attention: Xxxx X. Xxxxx, Esq.
If to the Buyer, at:
GlobeSpan, Inc.
000 Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxxxx 00000
Attn: Xxxxxxx Xxxxx
President and CEO
with a copy to:
Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No. (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
44
50
or such other address or addresses as any party shall have designated by notice
in writing to the other parties.
SECTION 8.08. Waivers. Either the Seller, on the one hand, or the Buyer, on
the other hand, may, by written notice to the other, (i) extend the time for the
performance of any of the obligations or other actions of the other under this
Agreement, (ii) waive any inaccuracies in the representations or warranties of
the other contained in this Agreement or in any document delivered pursuant to
this Agreement, (iii) waive compliance with any of the conditions or covenants
of the other contained in this Agreement, or (iv) waive performance of any of
the obligations of the other under this Agreement. Except as provided in the
preceding sentence, no action taken pursuant to this Agreement, including
without limitation any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
SECTION 8.09. Amendments, Supplements, Etc. At any time this Agreement may
be amended or supplemented by such additional agreements, articles or
certificates, as may be determined by the mutual agreement of the parties hereto
to be necessary, desirable or expedient to further the purposes of this
Agreement, or to clarify the intention of the parties hereto, or to add to or
modify the covenants, terms or conditions hereof or to effect or facilitate any
governmental approval or acceptance of this Agreement or to effect or facilitate
the filing or recording of this Agreement or the consummation of any of the
transactions contemplated hereby. Any such instrument must be in writing and
signed by all parties hereto.
SECTION 8.10. Entire Agreement. This Agreement, its Exhibits, Schedules and
Annexes, the Ancillary Agreements and the other documents executed on the
Closing Date in connection herewith, constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral and written, between the parties hereto with
respect to the subject matter hereof.
SECTION 8.11. Dispute Resolution. All claims, disputes and other matters in
controversy (herein called "dispute") arising directly or indirectly out of or
related to this Agreement or any Ancillary Agreement, or the breach thereof,
whether contractual or noncontractual, and whether during the term or after the
termination of this Agreement, shall be resolved exclusively according to the
procedures set forth in this Section 8.11.
(a) Mediation. Neither party shall commence an arbitration proceeding
pursuant to the provisions of Section 8.11(b) below unless such party shall
first give a written notice (a "Dispute Notice") to the other party setting
forth the nature of the dispute. The parties shall attempt in good faith to
resolve the dispute by mediation under the Commercial Mediation Rules of the
American Arbitration Association ("AAA") in effect on the date of the Dispute
Notice. If the parties cannot agree on the selection of a mediator within twenty
(20) days after delivery of the Dispute Notice, the mediator will be selected by
the AAA. If the dispute has not been resolved by mediation as provided above
within sixty (60) days after delivery of the Dispute Notice, then the dispute
shall be determined by arbitration in accordance with the provisions of Section
8.11(b).
45
51
(b) Arbitration. (i) Any dispute that is not settled through mediation
as provided in Section 8.11(a) above shall be resolved by arbitration in Los
Angeles, California, governed by the Federal Arbitration Act, 9 U.S.C. Section 1
et seq., and administered by the American Arbitration Association under its
commercial Arbitration Rules in effect on the date of the Dispute Notice, as
modified by the provisions of this Section 8.11(b), by a single arbitrator.
Persons eligible to be selected as an arbitrator shall be limited to lawyers
with excellent academic and professional credentials who have had both training
and experience as an arbitrator. In the event the parties cannot agree on a
mutually acceptable single arbitrator, the AAA shall designate three persons
who, in its opinion, meet the criteria set forth herein. Each party shall be
entitled to strike one of such three designees on a peremptory basis, indicating
its order of preference with respect to the remaining designees, and the
selection of the arbitrator shall be made from among such designee(s) which have
not been so stricken by either party in accordance with their indicated order of
mutual preference to the extent possible. The arbitrator shall based the award
on applicable law and judicial precedent and, unless both parties agree
otherwise, shall include in such award the findings of fact and conclusions of
law upon which the award is based. Judgment on the awarded rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.
(ii) Upon application by either party to a court for an order
confirming, modifying or vacating the award, the court shall have the power to
review whether, as a matter of law based on the findings of fact determined by
the arbitrator, the award should be confirmed, modified or vacated in order to
correct any errors of law made by the arbitrator. In order to effectuate such
judicial review limited to issues of law, the parties agree (and shall stipulate
to the court) that the findings of fact made by the arbitrator shall be final
and binding on the parties and shall serve as the facts to be submitted to and
relied on by the court in determining the extent to which the award should be
confirmed, modified or vacated.
(iii) If either party fails to proceed with mediation or
arbitration as provided herein or unsuccessfully seeks to stay such mediation or
arbitration, or fails to comply with any arbitration award, or is unsuccessful
in vacating or modifying the award pursuant to a petition or application for
judicial review, the other party shall be entitled to be awarded costs,
including reasonable attorneys' fees, paid or incurred by such other party in
successfully compelling such arbitration or defending against the attempt to
stay, vacate or modify such arbitration award and/or successfully defending or
enforcing the award.
SECTION 8.12. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, exclusive of the
conflicts of law provisions thereof.
SECTION 8.13. Binding Effect; Benefits. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Notwithstanding anything contained in this
Agreement to the contrary, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
SECTION 8.14. Assignability. Except as set forth in Section 4.08(e),
neither this Agreement nor any of the parties' rights hereunder shall be
assignable by any party hereto without the prior written consent of the other
parties hereto.
46
52
IN WITNESS WHEREOF, this Asset Purchase Agreement has been duly
executed and delivered by the parties hereto as of the date first above written.
GLOBESPAN, INC.
By: /s/ Xxxxxxx Xxxxx
----------------------------------
Name: Xxxxxxx Xxxxx
Title: President and Chief Executive
Officer
PAIRGAIN TECHNOLOGIES, INC.
By: /s/ Xxxxxx Xxxxx
----------------------------------
Name: Xxxxxx Xxxxx
Title: Executive Vice President -
Business Development
47
53
EXHIBIT A
NEITHER THE SECURITY EVIDENCED BY THIS NOTE NOR THE SECURITIES ISSUABLE UPON
CONVERSION HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE, AND SUCH SECURITIES MAY NOT BE SOLD, PLEDGED
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF REGISTRATION THEREUNDER OR AN
EXEMPTION THEREFROM, UNLESS AN OPINION OF COUNSEL IS FURNISHED REASONABLY
SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY STATING THAT AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF APPLICABLE SECURITIES LAWS IS AVAILABLE.
GLOBESPAN, INC.
SUBORDINATED CONVERTIBLE PROMISSORY NOTE
$90,000,000 February 24, 0000
Xxx Xxxx, Xxx Xxxxxx
FOR VALUE RECEIVED, GlobeSpan, Inc., a Delaware corporation
("Company"), promises to pay to PairGain Technologies, Inc. ("Holder"), or its
assigns, the principal sum of Ninety Million Dollars ($90,000,000.00), or such
lesser amount as shall equal the outstanding principal amount hereof, together
with interest from the date of this subordinated convertible promissory note
(this "Note") on the unpaid principal balance calculated in accordance with
Section 2 hereof. All unpaid principal, together with any then unpaid and
accrued interest and other amounts payable hereunder, shall be due and payable
on the earlier of (i) the seventh anniversary of the date of this Note, or (ii)
when, upon or after the occurrence of an Event of Default (as defined below),
such amounts are declared due and payable by Holder or made automatically due
and payable in accordance with the terms hereof. This Note is issued pursuant to
the Asset Purchase Agreement (as defined below).
The following is a statement of the rights of Holder and the conditions
to which this Note is subject, and to which Holder, by the acceptance of this
Note, agrees:
1. Definitions. As used in this Note, the following capitalized
terms have the following meanings:
(a) "Asset Purchase Agreement" shall mean the Asset Purchase
Agreement dated January 21, 2000, between the Company and the Holder.
(b) "Business Day" shall mean any day other than a Saturday,
Sunday or a legal holiday under the laws of the State of New York.
(c) "Common Stock" shall mean the shares of common stock,
par value $0.001, of Company.
(d) "Event of Default" has the meaning given in Section 4
hereof.
54
(e) "Holder" shall mean the Person specified in the
introductory paragraph of this Note or any Person who shall at the time be the
holder of this Note.
(f) "Liquidity Event" shall mean (i) any consolidation or
merger of Company with or into any Person, or any other corporate
reorganizations in which Company shall not be the continuing or surviving entity
of such consolidation, merger or reorganization or any transaction or series of
related transactions by Company in which in excess of 50% of Company's voting
power is transferred; (ii) a sale of Company assets in one or a series of
related transactions where the aggregate gross proceeds to the Company are in
excess of $30,000,000; or (iii) a sale of debt or equity securities of the
Company, where the aggregate gross proceeds to the Company are in excess of
$30,000,000.
(g) "Obligations" shall mean and include all loans,
advances, debts, liabilities and obligations, howsoever arising, owed by Company
to Holder of every kind and description (whether or not evidenced by any note or
instrument and whether or not for the payment of money), now existing or
hereafter arising under or pursuant to the terms hereof, including, all
interest, fees, charges, expenses, attorneys' fees and costs and accountants'
fees and costs chargeable to and payable by Company hereunder and thereunder, in
each case, whether direct or indirect, absolute or contingent, due or to become
due, and whether or not arising after the commencement of a proceeding under
Title 11 of the United States Code (11 U. S. C. Section 101 et seq.), as amended
from time to time (including post-petition interest) and whether or not allowed
or allowable as a claim in any such proceeding.
(h) "Person" shall mean and include an individual, a
partnership, a corporation (including a business trust), a joint stock company,
a limited liability company, an unincorporated association, a joint venture or
other entity or a governmental authority.
(i) "Registration Rights Agreement" shall mean that certain
Registration Rights Agreement of even date herewith, between the Company and the
Holder.
(j) "Senior Indebtedness" shall mean, unless expressly
subordinated to or made on a parity with the amounts due under this Note, the
principal of (and premium, if any), unpaid interest on and amounts reimbursable,
fees, expenses, costs of enforcement and other amounts due in connection with,
(i) indebtedness of Company, to banks, commercial finance lenders, insurance
companies, leasing or equipment financing institutions or other lending
institutions regularly engaged in the business of lending money (excluding
venture capital, investment banking or similar institutions which sometimes
engage in lending activities but which are primarily engaged in investments in
equity securities), which is for money borrowed, or purchase or leasing of
equipment in the case of lease or other equipment financing, whether or not
secured, and (ii) any such indebtedness or any debentures, notes or other
evidence of indebtedness issued in exchange for such Senior Indebtedness, or any
indebtedness arising from the satisfaction of such Senior Indebtedness by a
guarantor.
(k) "Subsidiary" shall mean (a) any corporation of which
more than 50% of the issued and outstanding equity securities having ordinary
voting power to elect a
55
majority of the Board of Directors of such corporation is at the time directly
or indirectly owned or controlled by Company, (b) any partnership, joint
venture, or other association of which more than 50% of the equity interest
having the power to vote, direct or control the management of such partnership,
joint venture or other association is at the time directly or indirectly owned
and controlled by Company, (c) any other entity included in the financial
statements of Company on a consolidated basis.
2. Interest. The interest rate to be applied to the unpaid
principal balance of this Note shall be five percent (5%) per annum (calculated
on the basis of a 360-day year consisting of twelve 30-day months). Interest
shall accrue and shall not be payable until the final maturity of the Note or
its earlier prepayment or conversion. If this Note or a portion hereof is called
for prepayment or conversion as provided herein, this Note or such portion shall
cease to bear interest on and after the date fixed for such prepayment or
conversion.
3. Prepayment. At any time (i) on or prior to August 24, 2000,
upon fifteen days prior written notice to Holder, or (ii) after August 24, 2000,
concurrently with the consummation of a Liquidity Event, provided that Company
has given Holder not less than ten Business Days prior written notice of the
consummation of such Liquidity Event, Company may (subject to the limitations
set forth below in this Section 3), at its option, prepay, without penalty or
premium, this Note in whole or in part, from time to time, unless Holder elects
to convert this Note in accordance with section 7 of this Note; provided that
any such prepayment will be applied first to interest accrued on this Note to
the date of prepayment and second, if the amount of prepayment exceeds the
amount of all such expenses and accrued interest to the date of prepayment, to
the payment of principal of this Note. Any notice of prepayment given by the
Company under this Section 3 in connection with a Liquidity Event, shall include
the aggregate gross proceeds that the Company will receive in connection with
such Liquidity Event (the "Liquidity Proceeds") together with the amount under
this Note that the Company intends to prepay concurrently with the consummation
of such Liquidity Event (the "Prepayment Amount"); provided, that, in no event
shall the Prepayment Amount exceed the Liquidity Proceeds; provided, further,
that in the event such Liquidity Event is a sale of equity securities of the
Company pursuant to a registered offering under the Securities Act of 1933, as
amended, in which the Holder would be entitled to participate pursuant to the
terms of the Registration Rights Agreement, then in no event shall the
Prepayment Amount exceed the aggregate net proceeds that the Holder would have
received had the Holder elected to participate in such offering. In addition,
notice of prepayment or other notices shall be given by registered or certified
mail to the person in whose name this Note is registered at its address
designated on the register maintained by the Company on the date of making such
notice of prepayment or other notice.
4. Events of Default. The occurrence of any of the following
shall constitute an "Event of Default" under this Note:
(a) Failure to Pay. Company shall fail to pay (i) when due
any principal payment on the due date hereunder or (ii) any interest or other
payment required under the terms of this Note on the date due and such payment
shall not have been made within five (5) Business Days of Company's receipt of
Holder's written notice to Company of such failure to pay; or
56
(b) Voluntary Bankruptcy or Insolvency Proceedings. Company
or any of its Subsidiaries shall (i) apply for or consent to the appointment of
a receiver, trustee, liquidator or custodian of itself or of all or a
substantial part of its property, (ii) be unable, or admit in writing its
inability, to pay its debts generally as they mature, (iii) make a general
assignment for the benefit of its or any of its creditors, (iv) be dissolved or
liquidated, (v) become insolvent (as such term may be defined or interpreted
under any applicable statute), (vi) commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or consent to any such relief or to the appointment of or
taking possession of its property by any official in an involuntary case or
other proceeding commenced against it, or (vii) take any action for the purpose
of effecting any of the foregoing; or
(c) Involuntary Bankruptcy or Insolvency Proceedings.
Proceedings for the appointment of a receiver, trustee, liquidator or custodian
of Company or any of its Subsidiaries or of all or a substantial part of the
property thereof, or an involuntary case or other proceedings seeking
liquidation, reorganization or other relief with respect to Company or any of
its Subsidiaries or the debts thereof under any bankruptcy, insolvency or other
similar law now or hereafter in effect shall be commenced and an order for
relief entered or such proceeding shall not be dismissed or discharged within
thirty (30) days of commencement.
5. Rights of Holder upon Default. Upon the occurrence or
existence of any Event of Default (other than an Event of Default referred to in
Sections 4(b) and 4(c)) and at any time thereafter during the continuance of
such Event of Default, Holder may, by written notice to Company, declare all
outstanding Obligations payable by Company hereunder to be immediately due and
payable without presentment, demand, protest or any other notice of any kind,
all of which are hereby expressly waived, anything contained herein to the
contrary notwithstanding. Upon the occurrence or existence of any Event of
Default described in Sections 4(b) and 4(c), immediately and without notice, all
outstanding Obligations payable by Company hereunder shall automatically become
immediately due and payable, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived, anything contained
herein to the contrary notwithstanding. At any time after any declaration of
acceleration as to this Note has been made as provided in this Section 5, the
Holder may, by notice to the Company, rescind such declaration and its
consequences, if (i) the Company has paid all overdue installments of interest
on this Note and all principal that has become due otherwise than by such
declaration of acceleration and (ii) all other defaults and Events of Default
(other than nonpayments of principal and interest that have become due solely by
reason of acceleration) shall have been remedied or cured or shall have been
waived pursuant to this paragraph; provided, however, that no such recission
shall extend to or affect any subsequent default or Event of Default or impair
any right consequent thereon. In addition to the foregoing remedies, upon the
occurrence or existence of any Event of Default, Holder may exercise any other
right power or remedy permitted to it by law, either by suit in equity or by
action at law, or both.
57
6. Subordination.
(a) Subordination. The indebtedness evidenced by this Note
is hereby expressly subordinated, to the extent and in the manner hereinafter
set forth, in right of payment to the prior payment in full of all of Company's
Senior Indebtedness.
(b) Further Assurances. By acceptance of this Note, Holder
agrees to execute and deliver customary forms of subordination agreements
requested from time to time by holders of Senior Indebtedness, and as a
condition to Holder's rights hereunder, Company may require that Holder execute
such forms of subordination agreements; provided that such forms shall not
impose on Holder terms less favorable than those provided herein.
(c) Other Indebtedness. No indebtedness which does not
constitute Senior Indebtedness shall be senior in any respect to the
indebtedness represented by this Note.
(d) No Impairment. Subject to the rights, if any, of the
holders of Senior Indebtedness, under subordination agreements entered into
between Holder and holders of Senior Indebtedness, to receive cash, securities
or other properties otherwise payable or deliverable to Holder, nothing
contained in this Section 6 shall impair, as between Company and Holder, the
obligation of Company, subject to the terms and conditions hereof, to pay to
Holder the principal hereof and interest hereon as and when the same become due
and payable, or shall prevent Holder, upon default hereunder, from exercising
all rights, powers and remedies otherwise provided herein or by applicable law.
7. Conversion.
(a) Voluntary Conversion. On or after August 24, 2000,
Holder has the right, at Holder's option, at any time prior to payment in full
of this Note, to convert this Note, in whole or in part, at the office of the
Company or any transfer agent into the number of shares of Common Stock of the
Company which is equal to the quotient obtained by dividing (A) the outstanding
principal unpaid amount of this Note (or a portion thereof) which the Holder
elects to convert, by (B) the Note Conversion Price, immediately in effect prior
to the time of such conversion. The "Note Conversion Price" shall be $92.49 (as
adjusted from time to time as provided below).
(b) Mechanics of Conversion. This Note is convertible by
surrendering the original Note, duly endorsed, at the office of the Company or
of any transfer agent for the shares of Common Stock and giving written notice
to Company at such office that Holder elects to convert the same. Thereupon, the
Company shall, as soon as practicable thereafter, issue and deliver at such
office to Holder a certificate or certificates for the number of shares of
Common Stock to which Holder is entitled together with a check in an amount
equal to the amount of accrued but unpaid interest on the principal amount of
the Note which is being converted, and, if the Holder elects to convert less
than the entire unpaid amount of this Note, then the Company shall, at the same
time it issues and delivers the Common Stock certificate or certificates, issue
and deliver at such office to Holder a new promissory note, in substantially the
form hereof, representing the remaining amounts owing hereunder. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the certificate or certificates representing the
shares to be converted, and the person
58
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder of such shares of Common
Stock on such date.
(c) Adjustment for Stock Splits and Combinations. If the
Company at any time or from time to time after the date of this Note (the
"Effective Date") effects a division of the outstanding shares of Common Stock,
then the Note Conversion Price shall be proportionately decreased and,
conversely, if this Company at any time, or from time to time, after the
Effective Date combines the outstanding shares of Common Stock, then the Note
Conversion Price shall be proportionately increased. Any adjustment under this
Section 7(c) shall be effective on the close of business on the date such
division or combination becomes effective.
(d) Adjustment for Certain Dividends and Distributions. If
the Company at any time or from time to time after the Effective Date pays or
fixes a record date for the determination of holders of shares of Common Stock
entitled to receive a dividend or other distribution in the form of shares of
Common Stock, or rights or options for the purchase of, or securities
convertible into, Common Stock, then in each such event the Note Conversion
Price shall be decreased, as of the time of such payment or, in the event a
record date is fixed, as of the close of business of such record date, by
multiplying the Note Conversion Price by a fraction (i) the numerator of which
shall be the total number of shares of Common Stock outstanding immediately
prior to the time of such payment or the close of business on such record date,
as the case may be, and (ii) the denominator of which shall be the sum of (A)
the total number of shares of Common Stock outstanding immediately prior to the
time of such payment or the close of business on such record date, as the case
may be, plus (B) the number of shares of Common Stock issuable in payment of
such dividend or distribution or upon exercise of such option or right of
conversion; provided, however, that if a record date is fixed and such dividend
is not fully paid or such other distribution is not fully made on the date fixed
therefor, then the Note Conversion Price shall not be decreased as of the close
of business on such record date as hereinabove provided as to the portion not
fully paid or distributed and thereafter the Note Conversion Price shall be
decreased pursuant to this Section 7(d) as of the date or dates of actual
payment of such dividend or distribution.
(e) Adjustments for Other Dividends and Distributions. If
the Company at any time or from time to time after the Effective Date pays, or
fixes a record date for the determination of holders of shares of Common Stock
entitled to receive, a dividend or other distribution in the form of securities
of the Company other than shares of Common Stock or rights or options for the
purchase of, or securities convertible into, Common Stock, then in each such
event provision shall be made so that the Holder shall receive upon conversion
of this Note, in addition to the number of shares of Common Stock receivable
thereupon, the amount of securities of the Company which it would have received
had this Note been converted into shares of Common Stock on the date one day
before such event (adjusted to account for any additional accrued but unpaid
interest and other fees due under this Note) and had Holder thereafter, from the
date of such event to and including the actual date of conversion of this Note,
retained such securities, subject to all other adjustments called for during
such period under this Section 7 with respect to the rights of the Holder.
59
(f) Adjustment for Reclassification, Exchange and
Substitution. If at any time or from time to time after the Effective Date the
number of shares of Common Stock issuable upon conversion of this Note, is
changed into the same or a different number of shares of any other class or
classes of stock or other securities, whether by recapitalization,
reclassification or otherwise (other than a recapitalization, division or
combination of shares or a stock dividend, or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this Section 7), then
in any such event the Holder shall have the right thereafter to convert this
Note into the same kind and amount of stock and other securities receivable upon
such recapitalization, reclassification or other change, as the maximum number
of shares of Common Stock into which this Note, could have been converted
immediately prior to such recapitalization (adjusted to account for any
additional accrued but unpaid interest and other fees due under this Note),
reclassification or change, all subject to further adjustment as provided
herein.
(g) Reorganizations, Mergers, Consolidations or Sales of
Assets. If at any time or from time to time after the Effective Date there is a
capital reorganization of the Common Stock (other than a recapitalization,
division, combination, reclassification or exchange of shares provided for
elsewhere in this Section 7) or a merger or consolidation of this Company into
or with another corporation or the sale of all or substantially all of its
assets to another corporation in such a way (including, without limitation, by
way of consolidation or merger) that holders of Common Stock shall be entitled
to receive stock, securities or assets with respect to or in exchange for Common
Stock, then, unless this Note is converted prior thereto or prepaid upon
consummation thereof as provided in Section 3 above, as a part of such capital
reorganization, merger or ,consolidation, or sale, provision shall be made so
that the Holder shall thereafter receive upon conversion hereof the number of
shares of stock or other securities or property of this Company, or of the
successor corporation resulting from such capital reorganization, merger, or
consolidation or sale, to which a holder of the number of shares of Common Stock
into which this Note would have been entitled on such capital reorganization,
merger, consolidation or sale (adjusted to account for any additional accrued
but unpaid interest due under this Note). In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 7
with respect to the rights of the Holder after such capital reorganization,
merger, consolidation, or sale. The provisions of this Section 7 (including
adjustment of the Note Conversion Price and the number of shares into which this
Note may be converted) shall be applicable after that event and be as nearly
equivalent to such Note Conversion Prices and number of shares as may be
practicable.
(h) Fractional Shares; Effect of Conversion. The Company
may, but shall not be obligated to, issue any fractional shares upon conversion
of this Note. In the event that Company elects not to issue fractional shares,
Company shall round the number of shares to the nearest whole share of each type
of Common Stock, provided that if such rounding would result in Holder receiving
less than 99.9% of the amount of such Common Stock to which it is entitled,
pursuant to this Section 7, such fraction shall be rounded up to the next whole
share of Common Stock.
(i) Reservation of Stock Issuable Upon Conversion. The
Company shall at all times reserve and keep available out of its authorized but
unissued shares of Common
60
Stock or treasury stock, solely for the purpose of effecting the conversion of
this Note, such number of shares of Common Stock as shall from time to time be
sufficient to effect the conversion of this Note.
8. Successors and Assigns. Subject to the restrictions on
transfer described in Section 9 below, the rights and obligations of Company and
Holder of this Note shall be binding upon and benefit the successors, assigns,
heirs, administrators and transferees of the parties.
9. Assignment by Company. Neither this Note nor any of the
rights, interests or obligations hereunder may be assigned, by operation of law
or otherwise, in whole or in part, by Company without the prior written consent
of Holder.
10. Waiver. Company hereby waives presentment, demand, or
protest and any notice of any kind in connection with the delivery, acceptance,
performance, default, acceleration, or collection of this Note.
11. Notices. Any notice, request or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or mailed by recognized overnight
courier or personal delivery at the respective addresses of the parties as set
forth in the Asset Purchase Agreement or on the register maintained by Company.
Any party hereto may by notice so given change its address for future notice
hereunder. Notice shall conclusively be deemed to have been given when received.
12. Payment. Payments made hereunder shall be made in lawful
tender of the United States.
13. Expenses. If action is instituted to collect any amounts
owing under this Note, Company promises to pay all costs and expenses,
including, without limitation, reasonable attorneys' fees and costs, incurred in
connection with such action.
14. Governing Law. This Note and all actions arising out of
or in connection with this Note shall be governed by and construed in accordance
with the laws of the State of New York, without regard to the conflicts of law
provisions of the State of New York, or of any other state.
IN WITNESS WHEREOF, Company has caused this Note to be
issued as of the date first written above.
GLOBESPAN, INC.,
a Delaware corporation
By: /s/ Xxxxxxx Xxxxx
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Xxxxxxx Xxxxx, President and Chief
Executive Officer
