UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 23, 2004
PERFORMANCE TECHNOLOGIES, INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-27460 16-1158413
(Commission File Number) (I.R.S. Employer Identification No.)
205 Indigo Creek Drive, Rochester, New York 14626
(Address of principal executive offices) (Zip Code)
(585) 256-0200 (Company's telephone number, including area code)
(Not Applicable)
(Former name or former address, if changed since last report)
Note: This Amendment is being filed to amend and correct the Registrant's
Current Reports on Form 8-K, dated January 14, 2004 and January 23, 2004.
Item 2. Acquisition or Disposition of Assets.
On January 23, 2004, the Registrant acquired substantially all of the
assets of, and assumed certain liabilities of, Mapletree Networks, Inc., a
corporation organized under the laws of the State of Delaware with its principal
place of business in Norwood, Massachusetts. The transaction was completed
pursuant to the Asset Purchase Agreement by and among Mapletree Networks, Inc.,
the Registrant, and PTI Massachusetts Corporation, dated as of January 12, 2004,
a copy of which is attached hereto as Exhibit 2.
The Asset Purchase Agreement provides that the purchase price payable in
connection with the transaction is $8.25 million. The purchase price was
determined by arm's length negotiations between the parties. The payment of
approximately 30% of the purchase price is subject to the future satisfaction of
certain performance conditions. All of the purchase price has been paid, or will
be paid, out of funds that the Registrant has on hand.
The acquired assets consist of intellectual property rights (including
trade secrets, know-how, inventions, patents, copyrights, designs, technical
processes in works of authorship, source code, object code, design documentation
and procedures for product generation and testing of all computer software and
firmware), products and inventory, certain contract rights, furniture, fixtures,
customers lists and certain other assets, all as set forth in greater detail in
the Asset Purchase Agreement.
Mapletree Networks, Inc. used the acquired assets in connection with its
business of providing voice, data and fax access technology for original
equipment manufacturers. Through its wholly-owned subsidiary, PTI Massachusetts
Corporation, the Registrant intends to continue using the acquired assets in
connection with the provision of voice, data and fax access technology solutions
to original equipment manufacturers and other businesses.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
None required.
(b) Unaudited Pro Forma Combined Financial Statement.
None required.
(c) Exhibits.
(2) Asset Purchase Agreement by and among Mapletree
Networks, Inc., the Registrant, and PTI Massachusetts
Corporation, dated as of January 12, 2004. (Copies of
omitted exhibits and schedules to the Asset Purchase
Agreement will be provided to the Securities and
Exchange Commission upon written request.)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
PERFORMANCE TECHNOLOGIES, INCORPORATED
January 30, 2004 By: /s/ Donald L. Turrell
-------------------------------------------
Donald L. Turrell
President and Chief Executive Officer
January 30, 2004 By: /s/ Dorrance W. Lamb
-------------------------------------------
Dorrance W. Lamb
Chief Financial Officer and
Vice President, Finance
Index to Exhibits
(2) Asset Purchase Agreement by and among Mapletree Networks, Inc.,
Performance Technologies, Incorporated, and PTI Massachusetts Corporation, dated
as of January 12, 2004.
ASSET PURCHASE AGREEMENT
by and among
Mapletree Networks, Inc.,
Performance Technologies, Incorporated
and
PTI Massachusetts Corporation
Dated as of January 12, 2004
TABLE OF CONTENTS
page
Article I. Definitions.......................................................1
Section 1.1 Certain Definitions...........................................1
Section 1.2 Interpretation................................................8
Section 1.3 Accounting Conventions........................................9
Article II. PURCHASE AND SALE................................................9
Section 2.1 Purchase and Sale of Assets...................................9
Section 2.2 Excluded Assets...............................................11
Section 2.3 Inability to Assign Assumed Contracts.........................12
Section 2.4 Excluded Liabilities..........................................13
Section 2.5 Assumption of Certain Liabilities.............................13
Section 2.6 Purchase Price................................................14
Section 2.7 Closing.......................................................20
Article III. REPRESENTATIONS AND WARRANTIES OF SELLER........................20
Section 3.1 Organization and Power; Stock Ownership.......................20
Section 3.2 Authorization.................................................20
Section 3.3 Approvals.....................................................20
Section 3.4 Non-Contravention.............................................20
Section 3.5 Binding Effect................................................21
Section 3.6 Seller Subsidiaries...........................................21
Section 3.7 Financial Statements..........................................21
Section 3.8 Title.........................................................21
Section 3.9 Transferred Assets............................................22
Section 3.10 Compliance With Laws.........................................22
Section 3.11 Litigation and Claims........................................22
Section 3.12 Intellectual Property........................................23
Section 3.13 Adequacy of Technical Documentation..........................26
Section 3.14 Intellectual Property Rights Granted to Seller...............26
Section 3.15 Third-Party Interests in Intellectual Property...............26
Section 3.16 Major Vendors and Customers..................................27
Section 3.17 Assumed Contracts............................................27
Section 3.18 Warranties...................................................28
Section 3.19 Taxes........................................................28
Section 3.20 Employment Matters...........................................29
Section 3.21 Employee Benefits............................................30
Section 3.22 Environmental Matters........................................31
Section 3.23 Insurance....................................................32
Section 3.24 Subsequent Changes...........................................32
Section 3.25 Related-Party Transactions...................................33
Section 3.26 Accounts Receivable..........................................33
Section 3.27 Inventory....................................................33
Section 3.28 Finders' Fees................................................33
Section 3.29 Disclosure...................................................34
Article IV. REPRESENTATIONS AND WARRANTIES OF BUYER..........................34
Section 4.1 Organization and Power........................................34
Section 4.2 Authorization.................................................34
Section 4.3 Approvals.....................................................34
Section 4.4 Non-Contravention.............................................35
Section 4.5 Binding Effect................................................35
Section 4.6 Finders' Fees.................................................35
Section 4.7 Compliance With Laws..........................................35
Section 4.8 Financial Ability.............................................35
Article V. CERTAIN COVENANTS.................................................36
Section 5.1 Access........................................................36
Section 5.2 Conduct of Business...........................................36
Section 5.3 Reasonable Efforts; Further Assurances........................37
Section 5.4 Corporate Name Change.........................................38
Section 5.5 Exclusivity...................................................38
Section 5.6 Confidentiality...............................................39
Section 5.7 Public Disclosure.............................................40
Section 5.8 Bulk Sales....................................................40
Section 5.9 Taxes.........................................................40
Section 5.10 Determination and Allocation of Consideration................41
Section 5.11 Non-Competition..............................................42
Section 5.12 Covenants Not to Sue or Assert Rights........................42
Section 5.13 Satisfaction of Bank Debt....................................43
Section 5.14 Certain Contracts............................................43
Section 5.15 Risk of Loss.................................................43
Section 5.16 Real Estate Matters..........................................43
Section 5.17 Statement of Transaction Expenses............................43
Section 5.18 2003 Audit...................................................43
Section 5.19 Final Balance Sheet..........................................44
Section 5.20 Warranty Claims..............................................44
Section 5.21 Business Plan................................................44
Section 5.22 VTech Inventory Confirmation.................................45
Section 5.23 Sharing Data.................................................45
Article VI. COVENANTS AS TO CERTAIN EMPLOYMENT MATTERS.......................46
Section 6.1 Employees.....................................................46
Section 6.2 Enforcement of Rights.........................................48
Section 6.3 Non-Solicitation..............................................48
Article VII. CONDITIONS TO CLOSING...........................................48
Section 7.1 Conditions to the Obligations of Buyer,
Acquisition Sub and Seller....................................48
Section 7.2 Further Conditions to the Obligation of Buyer
and Acquisition Sub...........................................49
Section 7.3 Further Conditions to the Obligation of Seller................51
Article VIII. INDEMNIFICATION................................................52
Section 8.1 Indemnification by Seller.....................................52
Section 8.2 Indemnification by Buyer......................................53
Section 8.3 Disposition of Indemnification Escrow.........................53
Section 8.4 Indemnification Procedures....................................53
Section 8.5 Indemnification Limitations...................................55
Article IX. TERMINATION......................................................56
Section 9.1 Termination...................................................56
Section 9.2 Effect of Termination.........................................57
Article X. IN GENERAL........................................................57
Section 10.1 Notices......................................................57
Section 10.2 Amendment; Waiver............................................58
Section 10.3 No Assignment or Benefit to Third Parties....................58
Section 10.4 Survival.....................................................59
Section 10.5 Expenses.....................................................59
Section 10.6 Schedules, Exhibits, Etc.....................................59
Section 10.7 Governing Law................................................60
Section 10.8 Alternate Dispute Resolution.................................60
Section 10.9 Submission to Jurisdiction...................................60
Section 10.10 Remedies Cumulative.........................................61
Section 10.11 Inferences..................................................61
Section 10.12 Severability................................................61
Section 10.13 Entire Agreement............................................61
Section 10.14 Headings....................................................61
Section 10.15 Counterparts................................................61
Section 10.16 Facsimiles..................................................62
TABLE OF EXHIBITS AND SCHEDULES..............................................64
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of January 12, 2004 by and among Mapletree
Networks, Inc., a Delaware corporation ("Seller"), Performance Technologies,
Incorporated, a Delaware corporation ("Buyer"), and PTI Massachusetts
Corporation, a Delaware corporation ("Acquisition Sub").
WHEREAS, Seller is engaged in the business of providing voice, data and fax
access technology for OEMs (collectively, the "Business"); and
WHEREAS, the parties desire that Seller sell, transfer, assign and license
to Acquisition Sub, and that Acquisition Sub purchase, license and assume from
Seller certain specified assets and liabilities related to the Business, all as
more specifically provided herein;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and undertakings contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
Article I.Definitions
Section 1.1 Certain Definitions.
The following terms will, when used in this Agreement, have the following
respective meanings:
"2003 Audit" means the audited consolidated balance sheet, statement of
operations and statement of cash flows of Seller as of and for the fiscal year
ended December 31, 2003, including the notes and schedules thereto, certified by
Ernst & Young LLP (or such other independent auditor mutually agreed to by Buyer
and Seller).
"Affiliate" means, with respect to a Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, such Person
at any time during the period for which the determination of affiliation is
being made. For purposes of this definition, the term "control" means, with
respect to any Person, the possession, directly or indirectly, of the power to
direct or cause the direction of management policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"Agreement" means this Asset Purchase Agreement, as the same may be amended
or supplemented from time to time in accordance with the terms hereof, together
with the exhibits and schedules thereto.
"Ancillary Agreements" means, collectively, the Escrow Agreement attached
to this Agreement as Exhibit A, the Business Plan attached to this Agreement as
Exhibit B, the Indemnification Substitution Agreement attached to this Agreement
as Exhibit C, and the Stockholder Escrow Agreement attached to this Agreement as
Exhibit D, each as more fully described herein.
"Antitrust Laws" means and includes the Sherman Act, as amended, the
Clayton Act, as amended, the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, the Federal Trade Commission Act, as amended, national
competition Laws and all other U.S. or non-U.S. Laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade.
"Applicable Employees" is defined in Section 6.1(a)(i) of this Agreement.
"Approvals" means, collectively, the consents, approvals, waivers,
authorizations, novations, notices and filings required in connection with the
consummation of the Transaction (or of any portion of the Transaction), which
are listed on Schedule 1.1.
"Assumed Contracts" is defined in Section 2.1(c) of this Agreement.
"Assumed Liabilities" is defined in Section 2.5 of this Agreement.
"Assumed License Agreements" is defined in Section 2.1(c)(i) of this
Agreement.
"Benefits Plans" is defined in Section 3.21(a) of this Agreement.
"Books and Records" means books, ledgers, files (including personnel
files), reports, operating records, accounting records, price lists,
correspondence and other forms of information, in any form or medium, relating
in any manner to the business, operations or financial or statistical history of
a Person.
"Business Plan" means that certain plan of operation for the Business
during the period commencing on the Closing Date and continuing until December
31, 2004 (unless earlier terminated) attached to this Agreement as Exhibit B.
"Buyer Benefit Plans" is defined in Section 6.1(d) of this Agreement.
"Buyer Indemnified Parties" is defined in Section 8.1 of this Agreement.
"Buyer Losses" is defined in Section 8.1 of this Agreement.
"Change of Control" means: (a) with respect to Acquisition Sub, (i) a sale
of substantially all of the assets of Acquisition Sub to a Person who is neither
Buyer nor a wholly owned subsidiary of Buyer, or (ii) a consolidation or merger
of Acquisition Sub or a sale or other transfer of beneficial ownership (as
defined in the Securities Act) of the equity securities of Acquisition Sub, in
one or a series of related transactions, resulting in neither Buyer nor a wholly
owned subsidiary of Buyer beneficially owning the Acquisition Sub; and (b) with
respect to Buyer, (i) a sale of substantially all of the assets of Buyer to a
Person who is not controlled by Buyer, (ii) a consolidation or merger of Buyer
in which the shareholders of Buyer immediately prior to the consummation of such
transaction do not hold at least a majority of the voting power of the surviving
entity, or (iii) any Person is or becomes the beneficial owner (as defined Rule
13d-3 under the Securities Exchange Act of 1934, as amended), directly or
indirectly, of securities of Buyer (excluding from the securities beneficially
owned by such Person any securities acquired directly from Buyer or its
Affiliates) representing fifty percent (50%) or more of the combined voting
power of Buyer's then outstanding securities.
"Chosen Court" is defined in Section 10.9 of this Agreement.
"Claim" means any pending contest, claim, charge, demand, assessment,
action, cause of action, complaint, litigation, proceeding, hearing or notice
involving any Person.
"Claim Notice" is defined in Section 8.4(b) of this Agreement.
"Closing" means the closing and consummation of the Transaction.
"Closing Consideration" is defined in Section 2.6(a) of this Agreement.
"Closing Date" is defined in Section 2.7 of this Agreement.
"Closing Documents" means: (a) with respect to Seller, all agreements,
documents and instruments, including the Ancillary Agreements, required to be
delivered by Seller at Closing, as set forth in Section 7.2; and (b) with
respect to Buyer and Acquisition Sub, all agreements, documents and instruments,
including the Ancillary Agreements, required to be delivered by Buyer and
Acquisition Sub at Closing, as set forth in Section 7.3.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended, section 4980B of the Code and Title I, Part 6 of ERISA, and any
similar state group health plan continuation law, together with all regulations
and proposed regulations promulgated thereunder.
"Code" means the Internal Revenue Code of 1986, as amended, and all
Treasury Regulations promulgated thereunder.
"Confidential Information" means all information of any kind concerning the
Disclosing Party (as defined in Section 5.6) or any of its Affiliates obtained
directly or indirectly from the Disclosing Party or any of its Affiliates,
employees, representatives or agents in connection with the transactions
contemplated by this Agreement, except information (a) ascertainable or obtained
from public or published sources, (b) received from a third party who is under
no obligation to keep such information confidential, (c) which is or becomes
known to the public (other than through a breach of this Agreement), or (d)
which was in the Receiving Party's (as defined in Section 5.6) possession prior
to disclosure thereof to the Receiving Party and which was not subject to any
obligation to keep such information confidential. Any information relating to
the Transferred Assets and any other confidential or proprietary business
information transferred to Buyer hereunder shall, upon Closing, be deemed the
sole and exclusive Confidential Information of Buyer.
"Disclosing Party" is defined in Section 5.6(a) of this Agreement.
"Disputed Earn Out Notice" is defined in Section 2.6(d) of this Agreement.
"Earn Out Consideration" is defined in Section 2.6(a) of this Agreement.
"Earn Out Conditions" is defined in Section 2.6(d) of this Agreement.
"Earn Out Date" is defined in Section 2.6(d) of this Agreement.
"Effective Time" is defined in Section 2.7 of this Agreement.
"Employment Laws" is defined in Section 3.20 of this Agreement.
"Encumbrances" means liens, charges, encumbrances, security interests,
options or any other restrictions or third party rights.
"Environmental Law" means, collectively, all federal, state and local
statutes, common law, authorizations, regulations, ordinances, codes, published
guidelines and policies, directives, judgments, injunctions, decrees and orders
(including all amendments thereto) pertaining to environmental matters including
but not limited to: (A) the protection, investigation or restoration of the
environment, health, safety or natural resources, (B) the handling, use,
presence, disposal, release or threatened release of any Hazardous Substance, or
(C) air, indoor air, noise, employee exposure, water vapor, surface water,
groundwater, soil, natural resources, chemical use, health, safety and
sanitation, or threat of injury to persons or property relating to any Hazardous
Substance. Without limiting the generality of the foregoing, "Environmental
Laws" include the Comprehensive Environmental Response, Compensation and
Liability Act, the Medical Waste Tracking Act, the Resource Conservation and
Recovery Act, the Clean Air Act, the Federal Water Pollution Control Act, the
Safe Water Drinking Act, the Toxic Substance Control Act and the Occupational
Safety and Health Act.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" is defined in Section 3.21(f)of this Agreement.
"Escrow Agent" means JPMorgan Chase Bank.
"Escrow Agreement" means that certain escrow agreement by and among, Buyer,
Acquisition Sub, Seller and JPMorgan Chase Bank attached to this Agreement as
Exhibit A.
"Excluded Assets" is defined in Section 2.2 of this Agreement.
"Excluded Liabilities" is defined in Section 2.4 of this Agreement.
"Final Balance Sheet" means the audited consolidated balance sheet of
Seller as of the Closing Date, certified Ernst & Young LLP (or such other
independent auditor mutually agreed to by Buyer and Seller), which will be
prepared within thirty (30) days of Closing.
"Final Net Asset Value" is defined in Section 2.6(e) of this Agreement.
"Final Net Asset Value Holdback" is defined in Section 2.6(e)(i)(A) of this
Agreement.
"Financial Statements" means: (a) the audited consolidated balance sheet,
statement of operations and statement of cash flows of Seller as of and for the
fiscal years ended December 31, 2000, 2001 and 2002, including the notes and
schedules thereto, certified by Arthur Andersen LLP, with respect to 2000, and
Ernst & Young LLP, with respect to 2001 and 2002; and (b) the Provisional
Balance Sheet, all of which shall comprise Schedule 3.7(a).
"GAAP" means generally accepted accounting principles, methods and
practices, consistently applied, set forth in the opinions and pronouncements of
the Accounting Principles Board and the American Institute of Certified Public
Accountants, and statements and pronouncements of the Financial Accounting
Standards Board, the Securities and Exchange Commission or of such other Person
as may be approved by a significant segment of the U.S. accounting profession,
in each case as of the date or period at issue, and as applied in the U.S. to
U.S. companies.
"Governmental Authorizations" means all licenses, permits, certificates and
other authorizations and approvals of any Governmental Entity required under any
Law to carry on the Business as currently conducted or anticipated in the
Ordinary Course.
"Governmental Entity" means any U.S. or non-U.S. local, state, federal or
other government, including each of their respective branches, departments,
agencies, courts, instrumentalities or other subdivisions.
"Hazardous Substance" means and includes: (a) any hazardous materials,
hazardous wastes, hazardous substances and toxic substances as those or similar
items are defined under any Environmental Law; (b) any asbestos or any material
that contains any hydrated mineral silicate, including chrysolite, amosite,
crocidolite, tremolite, anthophylite and/or actinolite, whether friable or
non-friable; (c) any polychlorinated biphenyls or polychlorinated
biphenyl-containing materials or fluids; (d) radon; (e) any other hazardous,
explosive, flammable, infectious, carcinogenic, mutagenic, radioactive, toxic or
noxious substance, material, pollutant, contaminant or solid, liquid or gaseous
waste; (f) any petroleum, petroleum hydrocarbons, petroleum products, crude oil
or any fractions thereof, natural gas or synthetic gas; and (h) any substance
that, whether by its nature or its use, is or becomes subject to regulation
under any Environmental Laws or with respect to which any Environmental Laws or
Governmental Entity requires or will require environmental investigation,
monitoring or remediation.
"Hired Employees" is defined in Section 6.1(a) of this Agreement.
"Indemnification Substitution Agreement" is defined in Section 7.2(c) of
this Agreement.
"Indemnified Parties" means, as appropriate in the context, either the
Buyer Indemnified Parties or the Seller Indemnified Parties, which terms are
defined in Article VIII.
"Indemnifying Party" means a party obligated to provide indemnification
pursuant to Article VIII.
"Indemnity Escrow" is defined in Section 2.6(c)(i) of this Agreement.
"Intellectual Property" means patents, inventions, trade secrets, concepts,
know-how, inventions, discoveries, disclosures, copyrights (whether registered
or unregistered), works of authorship, trademarks (whether registered or
unregistered), service marks (whether registered or unregistered), mask works,
trade names, trade dress, product names, slogans, logos and Internet domain
names, including registrations and applications for any of the foregoing,
software, firmware, object code, source code, specifications, processes,
drawings, designs, technology, methods, techniques, formulae, work papers, and
proprietary information and documents incorporating any similar rights,
including technical reports and laboratory data (in all media).
"Inventory" is defined in Section 2.1(d) of this Agreement.
"Law" means any applicable law (including common law), statute, ordinance,
rule, regulation, code, order, judgment, injunction, decree or judicial or
administrative doctrine that is promulgated or issued by any Governmental
Entity.
"Liability" means any direct or indirect indebtedness, liability, damage,
deficiency, obligation or responsibility, fixed or unfixed, choate or inchoate,
liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent
or otherwise.
"Losses" means liabilities, losses, interest, penalties and reasonable
costs and expenses associated therewith (including reasonable attorneys' fees,
litigation costs, fines, penalties and expenses of investigation), whether
asserted by a party to this Agreement or by a third party, but in no event
includes incidental or consequential damages.
"Material Adverse Effect" means a material adverse effect on the
Transferred Assets or on Seller's ability to perform its obligations under this
Agreement, other than (a) effects that (1) result from changes in general
economic conditions, (2) are the result of factors generally affecting Seller's
industry or are the result of any changes in any regulation or statute that has
or would reasonably be expected to have an industry-wide effect, or (3) result
from the consummation of the transactions hereby or any of the actions required
to be taken by Seller hereunder, or (b) any change in GAAP or changes in laws or
regulations or the interpretation thereof.
"Net Assets" means total assets (excluding cash and cash equivalents) minus
total liabilities, as determined in accordance with GAAP.
"Net Asset Value Holdback" is defined in Section 2.6(c)(ii) of this
Agreement.
"Net Operating Profit" means income from operations, as set forth in
greater detail in the Business Plan.
"No-Shop Period" is defined in Section 5.5(a) of this Agreement.
"Notice Period" is defined in Section 8.4(c) of this Agreement.
"Ordinary Course" means the ordinary course of business of the Business,
consistent with past practices.
"Patents" is defined in Section 2.1(a)(ii) of this Agreement.
"Permitted Encumbrances" means Encumbrances that secure or constitute an
Assumed Liability that is recorded on the Books and Records of Seller as of the
Closing Date, as well as (a) mechanic's, materialmen's, carrier's, workman's,
repairmen's and similar liens, (b) liens arising under worker's compensation,
unemployment insurance, social security, retirement and similar legislation, (c)
liens on goods in transit incurred pursuant to documentary letters of credit,
and (d) purchase money liens, in each case arising in the Ordinary Course.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization.
"Potential Material Event" is defined in Section 2.6(d) of this Agreement.
"Prior Service" is defined in Section 6.1(d) of this Agreement.
"Products" is defined in Section 2.1(b) of this Agreement.
"Provisional Balance Sheet" means the unaudited consolidated balance sheet
of Seller as of November 30, 2003 or as of such other later date before the
Closing Date mutually agreed to by Buyer and Seller.
"Provisional Net Asset Value" is defined in Section 2.6(b)(iii) of this
Agreement.
"Purchase Price" is defined in Section 2.6(a) of this Agreement.
"Purchase Transaction" is defined in Section 5.5(b) of this Agreement.
"Receiving Party" is defined in Section 5.6(a) of this Agreement.
"Registration Rights Agreement" is defined in Section 2.6(d) of this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Indemnified Parties" is defined in Section 8.2 of this Agreement.
"Seller Losses" is defined in Section 8.2 of this Agreement.
"Seller Subsidiary" means: Mapletree Networks Limited, a company organized
under the United Kingdom Companies Act of 1985.
"Senior Managers" is defined in Section 10.8 of this Agreement.
"Software" is defined in Section 2.1(a)(i) of this Agreement.
"Stockholder Escrow Agreement" is defined in Section 7.2(c) of this
Agreement.
"Subsidiary" means any Person, 50 percent or more of the outstanding equity
interests of which are owned, directly or indirectly, by another Person.
"Tax" or "Taxes" means any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes as well
as public imposts, fees and social security charges (including but not limited
to health, unemployment and pension insurance), together with all interest,
penalties and additions imposed with respect to such amounts.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Technical Documentation" is defined in Section 2.1(e) of this Agreement.
"Trademarks" is defined in Section 2.1(a)(iii) of this Agreement.
"Transferred Assets" is defined in Section 2.1 of this Agreement.
"Transferred Intellectual Property" is defined in Section 2.1(a) of this
Agreement.
"Transaction" means, collectively, the purchase and sale of the Transferred
Assets, the assumption of the Assumed Liabilities and the execution and delivery
of the Closing Documents and the other transactions, all as herein provided.
"U.S." means the United States of America.
"VTech" means VTech Networks Co., Ltd., a company located in Dongguan,
Guangdong, China, and its Affiliates.
Section 1.2 Iterpretation.
In this Agreement, unless the express context otherwise requires: (a) the
words "herein," "hereof" and "hereunder" and words of similar import refer to
this Agreement as a whole and not to any particular provision of this Agreement;
(b) references to "Article" or "Section" are to the respective Articles and
Sections of this Agreement, and references to "Exhibit" or "Schedule" are to the
respective Exhibits and Schedules annexed hereto; (c) references to a "party"
mean a party to this Agreement and include references to such party's permitted
successors and permitted assigns; (d) references to a "third party" mean a
Person not a party to this Agreement; (e) the terms "dollars" and "$" means U.S.
dollars; (f) terms defined in the singular have a comparable meaning when used
in the plural, and vice versa; (g) references to a party's "knowledge" or any
similar phrase means with respect to any Person, the actual knowledge of such
Person. In the case of Seller, knowledge shall include only the actual
collective knowledge of Sean Aruda, Ali Bigdeliazari, Brian Millette (only with
respect to Sections 3.7, 3.10(b), 3.11, 3.12, 3.14, 3.15, 3.17, 3.18, 3.19,
3.20, 3.21 and 3.24), Liz Gerald (only with respect to Sections 3.7, 3.10(b),
3.11, 3.18, 3.22 and 3.24), Martin Bond (only with respect to Sections 3.7,
3.11, 3.17, 3.18 and 3.24) and Joanne Regali (only with respect to Sections 3.7,
3.10(b), 3.11, 3.19, 3.20, 3.21 and 3.24); h) the masculine pronoun includes
the feminine and the neuter, and vice versa, as appropriate in the context; and
(i) wherever the word "include," "includes" or "including" is used in this
Agreement, it will be deemed to be followed by the words "without limitation."
Section 1.3 Accounting Conventions.
Except as expressly provided otherwise herein, all references in this
Agreement to financial terms will be deemed to refer to such terms as they are
defined under GAAP, consistently applied.
Article II. PURCHASE AND SALE
Section 2.1 Purchase and Sale of Assets.
On the terms and subject to the conditions set forth herein, at Closing,
Seller will sell, convey, transfer, assign and deliver to Acquisition Sub, and
Acquisition Sub will purchase from Seller, all of Seller's and Seller
Subsidiary's right, title and interest in and to the following listed assets
(except for those assets that are defined in Section 2.2 as Excluded Assets), in
each such case as the same exist on the Closing Date (collectively, the
"Transferred Assets"):
(a) all Intellectual Property, including the following (collectively, the
"Transferred Intellectual Property"):
(i) Trade secrets, know-how, inventions, patents, copyrights,
designs, technical processes in works of authorship, source code,
object code, design documentation and procedures for product
generation and testing of all computer software and firmware,
including that listed on Schedule 2.1(a)(i) and including the software
rules and algorithms, flowcharts, and Technical Documentation
(collectively, the "Software"), all products owned by Seller or Seller
Subsidiary including those listed on Schedule 2.1(b) and including all
proposed or unimplemented developments or improvements thereof (the
"Products"), all product development projects, including those listed
on Schedule 2.1(b), and all Internet, intranet and World Wide Web
content, sites, domain names and pages, and all HTML and other code
related thereto, including those listed on Schedule 2.1(a)(i).
(ii) all patents and patent applications, including those listed
on Schedule 2.1(a)(ii), together with any division, continuation,
continuation-in-part, continuing prosecution application, continued
examination application, reinstatement, reexamination, revival,
reissue, extension or substitution of any thereof, and corresponding
foreign applications, patents and rights thereto, including, in all
cases, the right to sue for past infringement thereof and to collect
any past or future royalties or other payments in connection therewith
(collectively, the "Patents");
(iii) all trademarks, service marks, trade names, trade dress,
product names, slogans and logos, including those listed on Schedule
2.1(a)(iii), and corresponding foreign applications, marks and rights
thereto, including, in all cases, the right to sue for past
infringement thereof and to collect any past or future royalties or
other payments in connection therewith (collectively, the
"Trademarks"); and
(b) The Products, the Software, all product development projects,
including those listed on Schedule 2.1(b), and all Internet, intranet and World
Wide Web content, sites, domain names and pages, and all HTML and other code
related thereto, including those listed on Schedule 2.1(a)(i);
(c) only the following contracts and instruments, and no others
(collectively, the "Assumed Contracts"):
(i) those contracts, agreements, licenses (whether granted to or by a
third party) and other commitments and arrangements, oral or written,
with any Person respecting the ownership, license, acquisition,
design, development, distribution, marketing, use, maintenance,
support or enhancement of Transferred Intellectual Property, related
technical or user documentation or databases (including royalty,
work-for-hire, consulting, employment, dealership and franchise
agreements), which are listed on Schedule 2.1(c)(i) (the "Assumed
License Agreements"); and
(ii) those other agreements, contracts, subcontracts, leases and
subleases of personal property, arrangements, commitments, licenses
and sublicenses, with customers, suppliers, resellers, distributors,
current, former or prospective employees, employee groups, or other
third parties, which are listed on Schedule 2.1(c)(ii);
(d) all inventories of (i) Products (including parts, components, supplies
and the like for Products); (ii) computer program code (in all media) and
materials; (iii) program documentation, including user materials; and (iv) all
other unused or reusable materials, stores and supplies, including those of
the nature or type reflected on the Provisional Balance Sheet or on Schedule
2.1(d) (the "Inventory");
(e) all technical and descriptive materials owned by Seller or Seller
Subsidiary in all media (other than Inventory) relating to the acquisition,
design, development, use or maintenance of Transferred Intellectual Property
or the Products, including any compilers, tools, libraries, debuggers and higher
level or proprietary language (the "Technical Documentation");
(f) all of the furniture, fixtures, equipment, computer equipment and
hardware, vehicles, machinery, apparatus, media, tools, appliances, implements,
supplies and other tangible personal property of Seller wherever located, along
with all rights under related product warranties, including any leasehold
improvements owned by Seller for Seller's leased premises located in Norwood,
Massachusetts for any portion of such premises that Buyer occupies after the
Closing;
(g) all customer lists and documentation (in all media) relating to the
customers of the Business;
(h) as the same relate to the other Transferred Assets enumerated herein,
all Books and Records, and all proprietary and non-proprietary business
information, including marketing and sales materials and publications, product
literature, reports, plans, records, pricing, cost and other manuals,
advertising materials, catalogues, sales, service and maintenance records,
and training materials (provided, however, that Seller may maintain copies of
all Books and Records);
(i) to the extent their transfer is permitted by Law, all Governmental
Authorizations which are required for the conduct of the Business, and all
applications therefore;
(j) all Claims that Seller may have against any Person relating to or
arising out of any Transferred Asset or any Hired Employee, including rights to
recover damages, settlements, rights to refunds, Claims for compensation or
benefits, insurance Claims, Claims of infringement or past infringement of
any Intellectual Property rights and royalty or similar rights related to
any Transferred Intellectual Property;
(k) the assets, if any, that are listed on Schedule 2.1(k);
(l) all accounts receivable of Seller; and
(m) all goodwill of the Business associated with the foregoing enumerated
Transferred Assets.
Section 2.2 Excluded Assets.
Notwithstanding anything herein to the contrary, from and after Closing,
Seller will retain all of its existing right, title and interest in and to, and
there will be excluded from the sale, conveyance, assignment or transfer to
Acquisition Sub hereunder, and the Transferred Assets will not include, all
assets of Seller and Seller Subsidiary that are not Transferred Assets,
including, without limitation, the following, in each case as the same exists on
the Closing Date (collectively, the "Excluded Assets"):
(a) all other agreements, instruments, contracts, subcontracts, leases,
subleases, arrangements, commitments, licenses, sublicenses and independent
contractor agreements, written or oral, that are not Assumed Contracts;
(b) all employee compensation, retirement, pension, severance, deferred
compensation, health, welfare or benefit plans and programs, and all funds and
accounts held thereunder;
(c) all real property, including land, buildings, structures and
improvements thereon, appurtenances thereto and interests therein (including
leasehold or possessory interests), and all fixtures constituting part of such
real property, except as provided in Section 2.1(f);
(d) all refunds, overpayments and prepayments of Taxes and duties paid by
Seller,
(e) all Tax Returns of Seller and all other Books and Records related
thereto;
(f) all corporate minute books and stock records of Seller and all other
Books and Records related thereto;
(g) the capital stock of any Subsidiary;
(h) cash and cash equivalents; and
(i) the assets, if any, that are set forth on Schedule 2.2(i).
Section 2.3 Inability to Assign Assumed Contracts.
(a) Notwithstanding anything to the contrary contained in this Agreement or
in any Closing Document, to the extent that the assignment or attempted
assignment to Acquisition Sub of any Assumed Contract, or any Claim, right or
benefit arising thereunder or resulting therefrom, is prohibited by any Law, or
would require any consent, approval, waiver, authorization or novation by a
Governmental Entity or a Person and such consent, approval, waiver,
authorization or novation has not been obtained prior to Closing and in a form
reasonably acceptable to Acquisition Sub, or with respect to which any attempted
assignment would be ineffective or would materially adversely affect the rights
of Seller or Acquisition Sub thereunder, then this Agreement will not constitute
an assignment or attempted assignment thereof, and the same will not be assigned
at Closing.
(b) Both prior and subsequent to Closing, the parties will use commercially
reasonable efforts, and cooperate with each other, to obtain promptly all
consents, approvals, waivers, authorizations or novations, including all
Approvals, for the Assumed Contracts on terms reasonably acceptable to Buyer and
Acquisition Sub. Seller will bear and pay the cost of all filing, recordation
and similar fees and Taxes incurred after the date hereof but prior to the
Closing and payable to Governmental Entities in connection with assignment of
the Assumed Contracts, and any additional fees or charges (howsoever
denominated) incurred prior to the Closing required by any Persons in connection
with the assignment of any Assumed Contract or obtaining any consent, approval,
waiver, authorization or novation, including any Approval. Acquisition Sub shall
be liable for any such additional fees or charges incurred after the Closing,
provided that the decision to incur such fees or charges was made by Sean Aruda
or Ali Bigdeliazari. Notwithstanding anything to the contrary contained in this
Agreement or in any Closing Document, Seller shall not be deemed to have
breached any covenant if it fails to procure any consent to assignment of any
Assumed Contract other than those Assumed Contracts described in Section 7.2(k).
(c) Seller will pay to Acquisition Sub, when received, all income, proceeds
and other monies received by Seller from third parties to the extent related to
Acquisition Sub's intended rights under any Assumed Contract, as contemplated by
this Section 2.3(c). Once any such consent, approval, waiver, authorization or
novation is obtained or made in a form acceptable to Acquisition Sub in its sole
discretion, Seller will assign such Assumed Contract to Acquisition Sub at no
additional cost. Any expenses incurred by Seller, and any reasonable expenses
incurred by Acquisition Sub, in connection with the arrangements contemplated by
this Section 2.3(c) will be borne by Seller.
(d) The provisions of this Section 2.3 shall not affect the right of Buyer
and Acquisition Sub to elect not to consummate the Transaction contemplated by
this Agreement if the conditions to its obligations hereunder contained in
Article VII hereof have not been otherwise fulfilled.
Section 2.4 Excluded Liabilities.
It is expressly understood and agreed that neither Buyer nor Acquisition
Sub (nor any of their Affiliates) will assume, nor will any of them be liable
for, any Liability of Seller, any Seller Subsidiary, any Affiliate of Seller or
the Business, of any kind or nature, at any time existing or asserted, howsoever
arising, whether or not accrued, whether fixed, contingent or otherwise, whether
known or unknown, liquidated or unliquidated, due or to become due, and whether
or not recorded on the Books and Records of any Person, unless such Liability is
expressly within the definition of Assumed Liabilities under Section 2.5. All
Liabilities that are not expressly within the definition of Assumed Liabilities
under Section 2.5 are referred to collectively as the "Excluded Liabilities."
Section 2.5 Assumption of Certain Liabilities.
It is expressly understood and agreed that, on the terms and subject to the
conditions set forth herein, Acquisition Sub, severally, will assume and agree
to satisfy and discharge or perform when due only the following Liabilities of
Seller, at any time existing or asserted, howsoever arising, whether or not
accrued, whether fixed, contingent or otherwise, whether known or unknown,
liquidated or unliquidated, due or to become due, and whether or not recorded on
the Books and Records of any Person (but no others Liabilities) (collectively,
the "Assumed Liabilities"):
(a) all Liabilities and obligations for future performance arising under
the Assumed Contracts to the extent that the rights and benefits of Seller
thereunder are after the Closing Date, subject to Section 2.3(c) hereof,
effectively transferred or assigned to Acquisition Sub, or novated for the
benefit of Acquisition Sub;
(b) all Liabilities that arise out of or relate to the Transferred Assets
(other than the Assumed Contracts and Governmental Authorizations) to the extent
such Liabilities are attributable to occurrences and circumstances arising
following Closing;
(c) all Liabilities identified on the Final Balance Sheet (including
any pre-Closing warranty liability for Products), but only up to the amount of
Liabilities set forth on the Final Balance Sheet (and, with respect to warranty
liability for Products, only up to the amount of the warranty reserve set forth
therein).
Section 2.6 Purchase Price.
(a) On the terms and subject to the conditions set forth in this Agreement,
the purchase price for the Transferred Assets is eight million two hundred fifty
thousand dollars ($8,250,000) (the "Purchase Price"). The Purchase Price shall
consist of (i) six million six hundred twenty-five thousand dollars ($6,625,000)
to be paid at Closing (the "Closing Consideration") and (ii) one million six
hundred twenty-five thousand dollars ($1,625,000), in each case as adjusted in
accordance with the terms of this Agreement, to be paid, if at all, no later
than March 31, 2005 (the "Earn Out Consideration").
(b) The Closing Consideration shall be subject to the following
adjustments, which, as applied, shall yield the amount of the Closing
Consideration to be paid to Seller at Closing:
(i) the amount of the Closing Consideration shall be reduced by
the aggregate amounts of the outstanding current debt and
long-term debt of Seller owed to Comerica Bank and Comdisco, as
reflected in each lender's payoff letter (in form and substance
mutually satisfactory to Buyer and Seller) and those holders of
the Company's notes listed on Schedule 3.24, provided that Buyer
shall repay all such amounts owed to Comerica Bank, Comdisco and
the parties listed on Schedule 3.24 at the Closing;
(ii) the amount of the Closing Consideration shall be reduced by
the aggregate amount of the accounts payable of Seller more than
forty (40) days past due as of the Closing Date, as well as the
aggregate amount of any accounts payable of Seller incurred
outside the Ordinary Course, including accounts payable due to
expenses (including legal and accounting fees and expenses)
associated with the Transaction (including the negotiation and
execution of this Agreement), all as set forth on Schedule
2.6(b)(ii); and
(iii) subject to later adjustment in accordance with Section 2.6
(e) of this Agreement, the amount of the Closing Consideration
shall be increased by the amount, if any, by which the value of
the Net Assets of Seller, as reflected on the Provisional Balance
Sheet (the "Provisional Net Asset Value"), is more than nine
hundred sixty-nine thousand five hundred dollars ($969,500),
provided, however, that no such increase shall be made to the
amount of the Closing Consideration if the amount by which the
Provisional Net Asset Value exceeds nine hundred sixty-nine
thousand five hundred dollars ($969,500) is less than fifty
thousand dollars ($50,000).
(c) On the terms and subject to the conditions set forth in this Agreement,
at Closing, Buyer shall pay the Closing Consideration, as adjusted, as follows:
(i) by depositing with the Escrow Agent the amount of one
million five hundred thousand dollars ($1,500,000) (the
"Indemnity Escrow") for disposition as provided in the Escrow
Agreement and in accordance with Section 8.3 of this
Agreement;
(ii) by increasing the Indemnity Escrow by the amount, if any,
by which the value of the Provisional Net Asset Value is less
than nine hundred sixty-nine thousand five hundred dollars
($969,500) (the "Net Asset Value Holdback") for disposition as
provided for by Section 2.6(e) of this Agreement, provided,
however, that no such retention shall be made if the Net Asset
Value Holdback is less than fifty thousand dollars ($50,000); and
(iii) by wire transfers of immediately available funds in the
aggregate amount of the balance of the Closing Consideration, as
adjusted, to the accounts designated in writing by Seller at
least two (2) business days prior to Closing.
(d) On or before March 31, 2005, Buyer shall pay to Seller the Earn Out
Consideration if, and only if, all of the conditions below (the "Earn Out
Conditions") are satisfied on or before March 31, 2005:
(i) during the period beginning on the Closing Date, and ending
on December 31, 2004, the Business, on a stand alone basis as
operated by Acquisition Sub in accordance with the Business Plan,
shall have total gross revenue exceeding ten million dollars
($10,000,000);
(ii) during the period beginning on the Closing Date and ending
on December 31, 2004, the gross margin, determined in accordance
with GAAP, of the Business, on a stand alone basis as operated by
Acquisition Sub in accordance with the Business Plan, shall be at
least sixty-two percent (62%); and
(iii) the Business, on a stand alone basis as operated by
Acquisition Sub in accordance with the Business Plan, shall
achieve a Net Operating Profit in each of the following periods:
(A) Closing Date to March 31, 2004; (B) April 1, 2004 to June 30
2004; (C) July 1, 2004 to September 30, 2004; and (D) October 1,
2004 toDecember 31, 2004.
Within two (2) business days of the date on which Buyer determines whether
the Earn Out Conditions are satisfied, which shall in no event be later than
March 31, 2005, but which, for the avoidance of doubt and by way of example,
could be as early as April 1, 2004 if the condition contained in Section
2.6(d)(iii)(A) fails, Buyer shall provide Seller with a notice of such
determination in accordance with Section 10.1 of this Agreement, which notice
shall provide reasonable detail for any determination that any of Earn Out
Conditions have not been met. If Buyer determines that one or more of the Earn
Out Conditions have not been satisfied, Seller shall have the right to audit
such Books and Records of Acquisition Sub and the Business, as maintained by
Acquisition Sub during the relevant period or periods, to verify the accuracy of
Buyer's determination. Such audit rights shall be subject to reasonable time,
place and manner restrictions imposed by Buyer.
If Seller delivers a written notice (the "Disputed Earn Out Notice") to
Buyer, stating that Seller objects to Buyer's determination that the Earn Out
Conditions have not been satisfied and explaining in reasonable detail the basis
for such objection, Seller and Buyer will attempt to resolve and finally
determine and agree upon whether the Earn Out Conditions have been satisfied. If
Buyer and Seller are unable to agree upon whether the Earn Out Conditions have
been satisfied within 30 days after deliver of the Disputed Earn Out Notice,
they will select an independent, nationally recognized accounting firm to make a
determination as to whether the Earn Out Conditions have been satisfied, which
accounting firm must be reasonably acceptable to Seller and Buyer. The
determination of the accounting firm so selected will be made within 60 days
after such selection and will be final and binding on the parties. The fees,
costs and expenses of the accounting firm so selected will be borne by the party
the position of which did not prevail in such determination.
Buyer shall pay the Earn Out Consideration to Seller upon the breach by
Buyer or Acquisition Sub of the covenant set forth in Section 5.21 hereof. If
Seller believes that Buyer or Acquisition Sub is in breach of the covenant set
forth in Section 5.21 hereof, then Seller shall deliver a written notice (the
"Business Plan Breach Notice") to Buyer, setting forth Seller's belief that such
breach has occurred and stating in reasonable detail Seller's basis for alleging
that such a breach has occurred or is occurring. Buyer or Acquisition Sub shall
have ten (10) business days from Buyer's receipt of a Business Plan Breach
Notice to attempt to cure the alleged breach described in the Business Plan
Breach Notice, and in no event shall the Earn Out Consideration be paid to
Seller on account of the alleged breach described in the Business Plan Breach
Notice until Buyer or Acquisition Sub has had ten (10) business days from
Buyer's receipt of the Business Plan Breach Notice to attempt to cure such
alleged breach.
Buyer shall pay a portion of the Earn Out Consideration, as determined
below, to Seller immediately upon the occurrence of a Change of Control. The
portion of the Earn Out Consideration to be paid, if at all, pursuant to the
preceding sentence shall be determined as follows: (a) if the Change of Control
occurs on or before March 31, 2004, no Earn Out Consideration shall be paid by
virtue of the Change of Control; (b) if the Change of Control occurs after March
31, 2004 but on or before June 30, 2004, that portion of the Earn Out
Consideration equal to ratio of the total gross revenue of the Business
(calculated as required in Section 2.6(d)(i)) from the period from Closing to
March 31, 2004 to $10,000,000 shall be paid by virtue of the Change of Control,
provided that each of the Earn Out Conditions is satisfied at such time, where
the measuring periods in Section 2.6(d)(i) and Section 2.6(d)(ii) are reduced to
the period from Closing to March 31, 2004 and the total gross revenue target in
Section 2.6(d)(i) is reduced to two million one hundred thousand dollars
($2,100,000) and the condition in Section 2.6(d)(iii) is measured only for the
period described in clause (A) thereof; (c) if the Change of Control occurs
after June 30, 2004 but on or before September 30, 2004, that portion of the
Earn Out Consideration equal to the ratio of the total gross revenue of the
Business (calculated as required in Section 2.6(d)(i)) from the period from
Closing to June 30, 2004 to $10,000,000 shall be paid by virtue of the Change of
Control, provided that each of the Earn Out Conditions is satisfied at such
time, where the measuring periods in Section 2.6(d)(i) and Section 2.6(d)(ii)
are reduced to the period from Closing to June 30, 2004 and the total gross
revenue target in Section 2.6(d)(i) is reduced to four million four hundred
thousand dollars ($4,400,000) and the condition in Section 2.6(d)(iii) is
measured only for the periods described clauses (A) and (B) thereof; or (d) if
the Change of Control occurs after September 30, 2004 but on or before December
31, 2004, that portion of the Earn Out Consideration equal to the ratio of the
total gross revenue of the Business (calculated as required in Section
2.6(d)(i)) from the period from Closing to September 30, 2004 to $10,000,000
shall be paid by virtue of the Change of Control, provided that each of the Earn
Out Conditions is satisfied at such time, where the measuring periods in Section
2.6(d)(i) and Section 2.6(d)(ii) are reduced to the period from Closing to
September 30, 2004 and the total gross revenue target in Section 2.6(d)(i) is
reduced to seven million dollars ($7,000,000) and the condition in Section
2.6(d)(iii) is measured only for the periods described in clauses (A), (B) and
(C) thereof. In addition, the payment to Seller of none or a portion of the Earn
Out Consideration, as described in the preceding sentence, shall not impair
Seller's ability to obtain the balance of the Earn Out Consideration upon the
fulfillment by Seller of the Earn Out Conditions in accordance with, and as set
forth in, Section 2.6(d) hereof, and Buyer shall cause the acquiring or
surviving entity in the Change of Control to assume Buyer's rights and
obligations hereto.
If Buyer is required to pay any portion of the Earn Out Consideration,
Buyer shall pay such Earn Out Consideration in cash promptly (and in any event
within two business days of the satisfaction of the Earn Out Conditions) by wire
transfer of immediately available funds to an account designated in writing by
Seller.
If any portion of the Earn Out Consideration is not paid in full when due,
then the unpaid amount of such Earn Out Consideration shall bear interest at a
rate of eleven and one half percent (11.5%) per annum until paid in full.
Interest shall be payable monthly in arrears as of the last day of each month.
Notwithstanding any term herein to the contrary, the interest rate on the Earn
Out Consideration shall not exceed the maximum rate permitted by law.
The amount of the Earn Out Consideration shall be increased by the net
amount, if any, by which the amount of the Closing Consideration was decreased
pursuant to Sections 2.6(c)(ii) and 2.6(e) of this Agreement.
The amount of the Earn Out Consideration shall be decreased by the net
amount, if any, by which the amount of the Closing Consideration was increased
pursuant to Sections 2.6(b)(iii) and 2.6(e) of this Agreement.
If the Earn Out Conditions are not satisfied on or before March 31, 2005,
then Seller shall no longer have any right to receive the Earn Out
Consideration, and Buyer shall be forever relieved of any obligation to pay the
Earn Out Consideration to Seller. Notwithstanding the foregoing, at any time
after Closing, Buyer may, in its sole discretion, pay the Earn Out Consideration
to Seller, irrespective of whether the Earn Out Conditions are satisfied.
(e) Within thirty (30) days of the Closing, the final value of the Net
Assets of the Business shall be determined by reference to the Final Balance
Sheet (the "Final Net Asset Value"). For the purpose of calculating the Final
Net Asset Value, the aggregate outstanding current debt and long-term debt of
Seller owed to Comerica Bank, Comdisco and the parties listed on Schedule 3.24,
as reflected in each lender's payoff letter (in form and substance mutually
satisfactory to Buyer and Seller), shall be deemed by the parties to be included
in and to be a part of the Final Balance Sheet. Once the Final Net Asset Value
has been determined, the following adjustments shall be made, as applicable:
(i) If the Final Net Asset Value is less than nine hundred
sixty-nine thousand five hundred dollars ($969,500) and:
(A) the Indemnity Escrow was increased pursuant to
Section 2.6(c)(ii) by an amount equal to the Net Asset
Value Holdback, and the amount by which the Final Net
Asset Value is less than nine hundred sixty-nine thousand
five hundred dollars ($969,500) (the "Final Net Asset
Value Holdback") is greater than the Net Asset Value
Holdback, then Buyer shall be entitled to claim and
receive from the Indemnity Escrow an amount equal to the
Final Net Asset Value Holdback; or
(B) the Indemnity Escrow was increased pursuant to
Section 2.6(c)(ii) by an amount equal to the Net Asset
Value Holdback, and the Final Net Asset Value Holdback is
less than the Net Asset Value Holdback, then (1) Buyer
shall be entitled to claim and receive from the Indemnity
Escrow an amount equal to the Final Net Asset Value
Holdback and (2) Seller shall be entitled to claim and
receive from the Indemnity Escrow an amount equal to the
difference between the Net Asset Value Holdback and the
Final Net Asset Value Holdback; or
(C) the amount of the Closing Consideration was not
increased pursuant to Section 2.6 (b) (iii) of this
Agreement, then Buyer shall be entitled to claim and
receive from the Indemnity Escrow the amount equal to the
Final Net Asset Value Holdback; or
(D) the amount of the Closing Consideration was increased
pursuant to Section 2.6(b) (iii) of this Agreement, then
Buyer shall be entitled to claim and receive from the
Indemnity Escrow an amount equal to the sum of (1) the
Final Net Asset Value Holdback and (2) the amount by
which the Closing Consideration was increased pursuant to
Section 2.6(b)(iii) of this Agreement.
(ii) If the Final Net Asset Value is exactly nine hundred sixty-
nine thousand five hundred dollars ($969,500), and:
(A) the Indemnity Escrow was increased pursuant to
Section 2.6(c)(ii) by an amount equal to the Net Asset
Value Holdback, then Seller shall be entitled to claim
and receive from the Indemnity Escrow an amount equal to
the Net Asset Value Holdback; or
(B) the amount of the Closing Consideration was increased
pursuant to Section 2.6(b)(iii) of this Agreement, then
Buyer shall be entitled to claim and receive from the
Indemnity Escrow the amount by which the Closing
Consideration was increased pursuant to Section 2.6(b)
(iii) of this Agreement.
(iii) If the Final Net Asset Value is greater than nine hundred
sixty-nine thousand five hundred dollars ($969,500), and:
(A) the Indemnity Escrow was increased pursuant to
Section 2.6 (c) (ii) by an amount equal to the Net Asset
Value Holdback, then Seller shall be entitled to claim
and receive from the Indemnity Escrow an amount equal to
(1) the amount of the Net Asset Value Holdback and (2)
Buyer shall pay to Seller the amount by which the Final
Net Asset Value is greater than nine hundred sixty-nine
thousand five hundred dollars ($969,500); or
(B) Buyer did not increase the Indemnity Escrow pursuant
to Section 2.6(c)(ii) of this Agreement by an amount
equal to the Net Asset Value Holdback and the amount
of the Closing Consideration was not increased pursuant
to Section 2.6(b)(iii) of this Agreement, then Buyer
shall pay to Seller the amount by which the Final Net
Asset Value is greater than nine hundred sixty-nine
thousand five hundred dollars ($969,500); or
(C) the amount of the Closing Consideration was increased
pursuant to Section 2.6(b)(iii) of this Agreement, then
such amount shall be increased, by Buyer paying an
appropriate amount to Seller, or decreased, by Buyer
claiming and receiving an appropriate amount from the
Indemnity Escrow, as necessary, so that such amount
equals the amount of the Final Net Asset Value.
(iv) Notwithstanding anything in this Agreement to the contrary,
no adjustment shall be made pursuant to Section 2.6(e) of
this Agreement if the amount of such adjustment is less than
fifty thousand dollars ($50,000).
An example of the various adjustments contemplated by Sections 2.6(b), (c)
and (e) of this Agreement is attached hereto as Illustration A ("Illustration
A"). Illustration A is attached for illustrative purposes only, and it is not
intended by the parties to be of any binding effect whatsoever.
Section 2.7 Closing.
Closing will take place at the offices of Buyer's counsel, Harter, Secrest
& Emery LLP, 1600 Bausch & Lomb Place, Rochester, New York, at 9:00 a.m., local
time, on January 16, 2004, or on such other date, or at such other time or
place, as the parties may mutually agree. The date on which Closing occurs is
called the "Closing Date" and Closing will be effective (the "Effective Time")
as of 11:59 p.m., Rochester, New York time, on the Closing Date. The required
deliveries at Closing are set forth in Article VII.
Article III. REPRESENTATIONS AND WARRANTIES OF SELLER
As of the date hereof, Seller represents and warrants to Buyer as follows:
Section 3.1 Organization and Power; Stock Ownership.
Seller is a corporation duly organized, validly existing and in good standing
under the Laws of the State of Delaware. Seller has all requisite corporate
power and authority to enter into this Agreement and the Closing Documents, to
perform its obligations hereunder and thereunder, to own, lease, operate and
transfer the Transferred Assets, and to carry on the Business as now being
conducted. Seller is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where its ownership or operation of the
Transferred Assets or its conduct of the Business requires such qualification,
which jurisdictions are listed on Schedule 3.1, except where the failure to be
so qualified would not have a Material Adverse Effect.
Section 3.2 Authorization.
Seller has full corporate power and authority to execute and deliver this
Agreement and each Closing Document and to perform its obligations hereunder and
thereunder. The execution, delivery and performance by Seller of this Agreement
and each Closing Document have been duly and validly authorized by the Board of
Directors and by the stockholders of Seller, and no additional corporate
authorization or consent is required in connection therewith.
Section 3.3 Approvals.
Except for the Approvals, no consent, approval, waiver, authorization or
novation is required to be obtained by Seller and no notice or filing is
required to be given by Seller to, or made by Seller with, any Governmental
Entity or other Person in connection with the execution, delivery and
performance by Seller of this Agreement and each Closing Document and the
consummation of the Transaction, except for such the failure of which to obtain
would not reasonably be expected to have a Material Adverse Effect.
Section 3.4 Non-Contravention.
The execution, delivery and performance by Seller of this Agreement and
each Closing Document, and the consummation of the Transaction, do not and will
not: (a) violate any provision of the certificate of incorporation, bylaws or
other organizational documents of Seller; (b) assuming the receipt or making of
all Approvals, conflict with, or result in the breach of, or constitute a
default under, or result in the termination, cancellation or acceleration
(whether after the filing of notice or the lapse of time or both) of any right
or obligation of Seller under, or a loss of any benefit to which Seller is
entitled under, any Assumed Contract or any contract to which Seller is a party,
or result in the creation of any Encumbrance (other than a Permitted
Encumbrance) upon any of the Transferred Assets; or (c) assuming the receipt or
making of all Approvals, violate or result in a breach of or constitute a
default under any Law, judgment, injunction, order, decree or other restriction
of any Governmental Entity to which Seller is subject, except, with respect to
clauses (b) and (c), any event that would not have a Material Adverse Effect.
Section 3.5 Binding Effect.
This Agreement and each Closing Document, when executed and delivered by
Buyer and Seller, will constitute valid and legally binding obligations of
Seller, enforceable against it in accordance with their respective terms,
subject to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors' rights and to
general equity principles.
Section 3.6 Seller Subsidiaries.
Except for the Seller Subsidiary, Seller has no Subsidiaries. Seller owns
all of the issued and outstanding shares of the capital stock or other equity
interests of the Seller Subsidiary free and clear of all Encumbrances.
Section 3.7 Financial Statements.
(a) Annexed hereto as Schedule 3.7(a) are each of the Financial Statements.
The Financial Statements fairly present the financial position and the results
of the operations of the Business in all material respects for the respective
periods therein stated, and reflect adequate reserves for all known Liabilities,
as of the respective dates therein stated, and have been prepared in accordance
with GAAP consistently applied, except as noted in the footnotes thereto, if
any.
(b) Accounts payable reflected on the Provisional Balance Sheet have arisen
from bona fide transactions and are usual and normal in amount both individually
and in the aggregate. Except as set forth on Schedule 3.7(b), all material
Liabilities reflected on the Provisional Balance Sheet were incurred in the
Ordinary Course, arose from bona fide transactions, and are usual and normal in
amount both individually and in the aggregate. Except as set forth on Schedule
3.7(b), all Liabilities of the Business reflected on the Provisional Balance
Sheet can be prepaid without penalty at any time.
Section 3.8 Title.
With respect to all of the Transferred Assets, Seller has and will have at
Closing: (i) good title to all tangible property included in the Transferred
Assets, free and clear of all Encumbrances, except for Permitted Encumbrances
that are not material individually or in the aggregate; and (ii) all right,
title and interest in and to all intangible property included in the Transferred
Assets (other than Transferred Intellectual Property, which is addressed in
Section 3.12), free and clear of all Encumbrances except for Permitted
Encumbrances, and, in the case of the Assumed Contracts, subject to the rights
of third parties thereunder.
Section 3.9 Transferred Assets.
(a) The Transferred Assets, when taken together with the Excluded Assets,
constitute all properties, assets and leasehold estates, real, personal and
mixed, tangible and intangible, used or useful in the operation of the Business
on the date hereof and immediately prior to Closing.
(b) Except as set forth in Schedule 3.9(b), those Transferred Assets that
are tangible are in all material respects in a good state of repair and
condition, ordinary wear and tear excepted.
(c) All of the Inventory consisting of finished Products, and all parts,
components, supplies and the like for Products, is good and marketable in all
material respects, and, except as set forth in Schedule 3.9(c), all of the
Software and Products included in the Inventory are the respective current
versions thereof.
(d) All prepaid assets and security deposits, as set forth on Schedule
3.9(d), arose out of bona fide transactions in the Ordinary Course and will be
valid assets on the Closing Date.
Section 3.10 Compliance With Laws.
(a) The Business has been and is being conducted in compliance with all
Laws, except for any non-compliance that would not, individually or in the
aggregate have a Material Adverse Effect. Seller has all Governmental
Authorizations necessary for the conduct of the Business as currently conducted,
except for those Governmental Authorizations the absence of which would not,
individually or in the aggregate, have a Material Adverse Effect.
(b) To Seller's knowledge, each of the premises of the Business, as
currently used, occupied and operated by Seller, conforms to and complies in all
material respects with all covenants, conditions, restrictions, reservations,
land use, zoning, health, fire, water and building codes and other similar Laws,
and no such Laws prohibit or limit or condition the use or operation of such
premises. To Seller's knowledge, there is no pending, contemplated, threatened
or anticipated change in the zoning classification of any of such premises.
During Seller's use, occupancy and operation of premises of the Business, the
Seller has operated and maintained such premises in accordance with applicable
Laws in all material respects.
Section 3.11 Litigation and Claims.
Except as set forth on Schedule 3.11: (a) to Seller's knowledge, there is
no civil, criminal or administrative Claim or investigation pending or
threatened against Seller or Seller Subsidiary with respect to or relating to
the Business, any of the Transferred Assets or Assumed Liabilities; and (b)
neither the Business, nor any of the Transferred Assets nor any Assumed
Liability is subject to any order, writ, judgment, award, injunction or decree
of any Governmental Entity or of any arbitrator.
Section 3.12 Intellectual Property.
(a) Except as set forth on Schedule 3.12(a), Seller owns or has the right
to use pursuant to written license, sublicense, agreement or permission all of
the Transferred Intellectual Property. Except as set forth on Schedule 3.12(a),
each item of Transferred Intellectual Property and Seller's rights under the
Assumed License Agreement will be owned or available for use by right by Buyer
immediately upon Closing, without the payment of any additional amounts to any
third party. Upon Closing, to Seller's knowledge, all available patent rights as
to any of the Transferred Intellectual Property or any of the Products may be
pursued exclusively by Buyer.
(b) Buyer will receive at Closing, free and clear of all Encumbrances
(except for Permitted Encumbrances), all of Seller's rights in Transferred
Intellectual Property and other proprietary information, processes and formulae
related to the ownership, maintenance and use of the Transferred Assets and the
conduct of the Business as operated by Seller.
(c) Except as set forth in Schedule 3.12(c), to Seller's knowledge, Seller
has not infringed upon, misappropriated or otherwise violated (whether through
the use of the Transferred Intellectual Property or otherwise) any Intellectual
Property rights of any third party, and Seller has not received any
communication that a Claim has been asserted by any Person as to the use of the
Transferred Intellectual Property or alleging any such infringement,
misappropriation or violation by Seller (including any Claim that Seller must
license or refrain from using any Intellectual Property rights of any third
party), and Seller does not know of any reasonably valid basis for any such
Claim. Except as set forth in Schedule 3.12(c), to Seller's knowledge, no third
party has infringed upon, misappropriated or otherwise violated any rights of
Seller with respect to the Transferred Intellectual Property. Seller has made
available to Buyer all infringement studies, including opinions of counsel,
prepared by or on behalf of Seller relating to the Transferred Assets.
(d) Schedule 2.1(a)(i) identifies all Software of Seller that constitutes a
Transferred Asset. Seller has made available to Buyer correct and complete
copies of all such items of Transferred Intellectual Property, as amended to
date, and has made available to Buyer correct and complete copies of all other
written documentation evidencing ownership and prosecution (if applicable) of
each such item. Except as set forth in Schedule 3.12(d), with respect to each
such item of Transferred Intellectual Property owned by Seller:
(i) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge against Seller, and Seller
does not know of any reasonably valid basis for the issuance of any
such injunction, judgment, order, decree, ruling, or charge;
(ii) no Claim or investigation is pending against Seller, which
challenges the legality, validity, enforceability, use or ownership of
the item, and Seller does not know of any reasonably valid basis for
any such Claim or investigation; and
(iii) Seller has not agreed to indemnify any Person for or against
any interference, infringement, misappropriation or other violation
with respect to the item.
(e) Schedule 2.1(a)(ii) and Schedule 2.1(a)(iii) identify each Patent and
Trademark of Seller that constitutes a Transferred Asset. Seller has made
available to Buyer correct and complete copies of all items related to such
Transferred Intellectual Property, as amended to date, and has made available to
Buyer correct and complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item, including all
applications, registrations and prosecution materials. Except as set forth in
Schedule 3.12(e), with respect to each such item of Transferred Intellectual
Property owned by Seller:
(i) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge against Seller, and Seller
does not know of any reasonably valid basis for the issuance of any
such injunction, judgment, order, decree, ruling, or charge;
(ii) no Claim or investigation is pending against Seller, which
challenges the legality, validity, enforceability, use or ownership of
the item, and Seller does not know of any reasonably valid basis for
any such Claim or investigation;
(iii) Seller has not agreed to indemnify any Person for or against
any interference, infringement, misappropriation or other violation
with respect to the item; and
(iv) Seller has not taken, nor does it know of, any actions,
including a sale or offer for sale, the disclosure of which could lead
to the invalidity of any item disclosed on Schedule 2.1(a)(ii).
(f) Schedule 2.1(b) identifies each Product and Seller has made available
to Buyer correct and complete copies of all items related to the same, as
amended to date, and has made available to Buyer correct and complete copies of
all other written documentation evidencing ownership and prosecution (if
applicable) of each such item, including all applications, registrations and
prosecution materials. Except as set forth in Schedule 3.12(f), with respect to
each Product:
(i) the Product is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge against Seller, and Seller
does not know of any reasonably valid basis for the issuance of any
such injunction, judgment, order, decree, ruling, or charge against
Seller;
(ii) no Claim or investigation is pending against Seller, which
challenges the legality, validity, enforceability, use or ownership of
the Product, and Seller does not know of any reasonably valid basis
for any such Claim or investigation;
(iii) Seller has not agreed to indemnify any Person for or against
any interference, infringement, misappropriation or other violation
with respect to the Product; and
(g) with respect to each Assumed License Agreement:
(i) the Assumed License Agreement is legal, valid, binding,
enforceable and in full force and effect with respect to Seller and
any other party thereto;
(ii) to Seller's knowledge, the Assumed License Agreement will
continue to be legal, valid, binding, enforceable and in full force
and effect with respect to Buyer and any other party thereto following
the consummation of the Transaction;
(iii) neither Seller nor any other party to the Assumed License
Agreement is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default or
permit termination, modification or acceleration thereunder;
(iv) neither Seller nor any other party to the Assumed License
Agreement has repudiated any material provision thereof or threatened
any breach thereof;
(v) to Seller's knowledge, (i) with respect to each Assumed
License Agreement that is a sublicense of Intellectual Property owned
by a third party, the representations and warranties set forth in
Sections 3.12(g)(i) through 3.12(g)(iv) are true and correct with
respect to the underlying license; and (ii) to Seller's knowledge no
Claim or investigation is pending that challenges the legality,
validity or enforceability of the Intellectual Property owned by a
third party underlying the Assumed License Agreement, and Seller does
not know of any reasonably valid basis for any such Claim or
investigation.
(h) Schedule 3.12(h) sets forth the form and placement of the proprietary
legends and copyright notices displayed in or on the Software. In no instance
has the eligibility of the Software for protection under applicable copyright
law been forfeited to the public domain by omission of any required notice or
any other action.
(i) Seller has promulgated and used its commercially reasonable efforts to
enforce the trade secret protection program set forth in Schedule 3.12(i). To
Seller's knowledge, there has been no material violation of such program by any
Person. The Transferred Intellectual Property (including any source code and
system documentation relating to the Software): (i) has at all times been
maintained in confidence; and (ii) has been disclosed by Seller only to
employees, consultants and third parties having a "need to know" the contents
thereof in connection with the performance of their duties to Seller or in the
conduct of the Business.
(j) All personnel, including employees, agents, consultants and
contractors, who have contributed to or participated in the conception,
reduction to practice or development of the Technical Documentation, Transferred
Intellectual Property and Products on behalf of Seller either: (i) have been
party to a "work-for-hire" arrangement or agreement with Seller, in accordance
with applicable federal and state law, that has accorded Seller full, effective,
exclusive and original ownership of, and all right, title and interest in and
to, all tangible and intangible property thereby arising; or (ii) have executed
appropriate instruments of assignment in favor of Seller as assignee that have
conveyed to Seller full, effective and exclusive ownership of all right, title
and interest in and to all tangible and intangible property arising thereby.
Section 3.13 Adequacy of Technical Documentation.
The Technical Documentation includes the source code, system documentation,
statements of principles of operation and schematics for all of the Transferred
Intellectual Property, as well as any pertinent commentary or explanation,
including any commentary contained in any source code, that may be necessary to
render the Technical Documentation understandable to an individual skilled in
the art of computer programming with related industry knowledge and, with
respect to any Software, usable by an individual skilled in the art of computer
programming with related industry knowledge.
Section 3.14 Intellectual Property Rights Granted to Seller.
(a) Schedule 3.14(a) lists each license, sublicense, agreement and
permission by which Seller uses or has right, prospective rights to such rights
or interests in any Intellectual Property owned by a third party. Seller has
made available to Buyer correct and complete copies of all such licenses,
sublicenses and agreements (as amended to date). Seller has not obtained any
such rights in any Intellectual Property under any oral license, sublicense,
agreement or permission.
(b) Except as set forth on Schedule 3.14(b), to Seller's knowledge, the
Transferred Intellectual Property and the Technical Documentation contain no
other programming, materials or Intellectual Property in which any third party
may claim superior, joint or common ownership, including any right or license.
The Transferred Intellectual Property and the Technical Documentation do not
contain derivative works, reproductions or copies of any programming or
materials not owned in their entirety by Seller and included in the Transferred
Assets.
Section 3.15 Third-Party Interests in Intellectual Property.
Schedule 3.15 identifies each license, sublicense, agreement and permission
by which a third-party has been granted by Seller rights or interests in any
Intellectual Property or Technical Documentation. Seller has made available to
Buyer correct and complete copies of all such agreements (as amended to date).
Seller has not granted any such rights in any Intellectual Property under any
oral license, sublicense, agreement or permission. The licenses and sublicenses
set forth on Schedule 3.15 constitute only end-user agreements, each in a
standard form previously disclosed to Buyer and each of which grants the
end-user thereunder solely the non-exclusive right and license to use an
identified Intellectual Property and related user documentation, for internal
purposes only. There are no contracts, agreements, licenses and other
commitments and arrangements in effect with respect to the marketing,
distribution, licensing, or promotion of the Inventory, the Technical
Documentation, the Transferred Intellectual Property or the Products by any
independent sales person, distributor, sublicensor or other re-marketer or sales
organization.
Section 3.16 Major Vendors and Customers.
Schedule 3.16 lists each third-party licensor, developer, re-marketer,
distributor and supplier of property or services to, and each licensee, end-user
or customer of, the Business to whom Seller paid or billed in the aggregate
$10,000 (in cash, stock, services, debt or other consideration) or more during
2003 prior to the date hereof, together with, in each case, the amount paid or
billed during such period. Seller has no reasonable basis for believing that the
consummation of the Transaction will result in the loss of any significant
customer or vendor of the Business.
Section 3.17 Assumed Contracts.
(a) Seller has made available to Buyer true and complete copies of each
Assumed Contract that is in written form, and true and complete written
summaries of each Assumed Contract that is oral. Each of the Assumed Contracts
constitutes the valid and legally binding obligation of Seller, and is
enforceable against Seller in accordance with its terms (subject to applicable
bankruptcy, insolvency and other similar laws and except that the remedies of
specific performance and injunctive relief may be subject to equitable defenses
and the discretion of the court before which any proceeding therefor may be
brought). Each of the Assumed Contracts constitutes the entire agreement of the
respective parties thereto relating to the subject matter thereof. All
obligations required to be performed by Seller under the terms of the Assumed
Contracts by the date hereof have been performed. All obligations required to be
performed under the terms of the Assumed Contracts by the Closing Date shall
have been performed in all material respects. Neither Seller nor, to Seller's
knowledge, any other party is in material breach or violation of, or material
default under, any Assumed Contract, and no event has occurred or failed to
occur which, with the giving of notice, the lapse of time or both, would
constitute a material default under any of the Assumed Contracts by Seller or,
to Seller's knowledge, any other party under such Assumed Contracts.
(b) Except for the Approvals, none of the Assumed Contracts requires
consent or waiver for its assignment to and assumption by Acquisition Sub.
(c) Except for this Agreement, the Assumed Contracts, the Plans (as defined
in Section 3.21), and any agreements identified in Schedule 2.2(i), there are
no: (i) contracts or commitments affecting the use or value of the Business or
any of the Transferred Assets; (ii) agreements, licenses or commitments with
respect to Transferred Intellectual Property or affecting the Business or
requiring future performance by Seller; (iii) collective bargaining agreements
or other contracts or commitments to or with any labor unions or other employee
representatives, groups of employees, works councils or the like; (iv)
employment contracts or other contracts, agreements or commitments to or with
individual current, former or prospective employees, consultants or agents; or
(v) joint ventures or other contracts or commitments providing for payments
based in any manner on the revenues or profits of Seller, the Business or any
Transferred Asset.
Section 3.18 Warranties.
As of the date of the Provisional Balance Sheet, the Seller had no
Liability for replacement of such Products or other damages in connection
therewith, except to the extent of any warranty reserve set forth on the
Provisional Balance Sheet, which warranty reserve is adequate to cover the
amount of all reasonably anticipated warranty-related claims for Products sold
on or before the Closing Date. Except as set forth on Schedule 3.18, as of the
Closing Date, to Seller's knowledge, Seller will have no material Liability for
replacement of such Products or other damages in connection therewith. No
Product sold by Seller is subject to any contractual guaranty, warranty or other
indemnity beyond the applicable standard terms and conditions of sale or
license. Seller has heretofore made available to Buyer copies of the standard
terms and conditions of sale or license used by Seller, which contain all
applicable guaranty, warranty and indemnity provisions.
Section 3.19 Taxes.
Except as set forth on Schedule 3.19:
(a) Seller and Seller Subsidiary have filed all Tax Returns that they were
required to file. All such Tax Returns were correct and complete in all material
respects. All material Taxes owed by Seller or Seller Subsidiary (whether or not
shown on any Tax Return) have been paid. Neither Seller nor Seller Subsidiary is
the beneficiary of any extension of time within which to file any Tax Return.
(b) There are (and immediately following the Effective Time there will be)
no liens, pledges, charges, claims, restrictions on transfer, mortgages,
security interests or other encumbrances of any sort (collectively, "Liens") on
the assets of Seller or Seller Subsidiary relating to or attributable to Taxes
other than Liens for Taxes not yet due and payable.
(c) Seller and Seller Subsidiary have withheld and paid in connection with
amounts owing to any employee, independent contractor, creditor, stockholder, or
other third party, and all Forms W-2 and 1099 required with respect thereto have
been properly completed and timely filed.
(d) There is no material dispute or claim concerning any Tax liability of
Seller or Seller Subsidiary either (A) claimed or raised by any authority in
writing or (B) as to which any of the directors or officers of Seller or Seller
Subsidiary has actual knowledge based upon personal contact with any agent of
such authority, which if adversely determined, would result in any Lien on the
assets of Seller or Seller Subsidiary.
(e) Section (e) of Schedule 3.19 lists all federal, state, local and
foreign Tax Returns filed with respect to Seller or Seller Subsidiary for
periods ended on of after December 31, 1997, which have been audited or are
currently the subject of an audit. Neither Seller nor any of its Subsidiaries
has waived any statute of limitations with respect to a Tax assessment or
deficiency.
Section 3.20 Employment Matters.
(a) Except as set forth on Schedule 3.20(a): (i) neither Seller nor any
Seller Subsidiary or Affiliate has entered into any collective bargaining
agreement or other similar agreement with any employee, union, labor
organization or other employee representative or group of employees and, to
Seller's knowledge, no such organization or Person has made or is making any
attempt to organize or represent employees of Seller or any Seller Subsidiary or
Affiliate; (ii) there is no unfair labor practice charge, pending trial of
unfair labor practice charges, unremedied unfair labor practice finding or
adverse decision of the National Labor Relations Board or any other Governmental
Entity, or any hearing officer or administrative law judge thereof, against
Seller or any Seller Subsidiary or Affiliate (or any agent, representative or
employee of Seller or any Seller Subsidiary or Affiliate) and, to Seller's
knowledge, there is no basis for any such unfair labor practice charge; (iii)
there is no pending grievance or arbitration and no unsatisfied or unremedied
grievance or arbitration award against Seller or any Seller Subsidiary or
Affiliate (or against any of their respective employees) and, to Seller's
knowledge, there is no basis for any such grievance or arbitration; (iv) during
the three-year period preceding the date hereof, there has not been and there is
not presently pending or existing or, threatened in writing, any labor dispute,
strike, walkout, slow down, other work stoppage, labor arbitration or proceeding
in respect of the grievance of any employee, any application or complaint filed
by an employee or union with the National Labor Relations Board or any
comparable Governmental Entity and, to Seller's knowledge, there is no basis for
any such grievance, application or complaint; (v) there is not pending or, to
Seller's knowledge, threatened with respect to Seller or any Seller Subsidiary
or Affiliate (or their respective employees) any labor dispute, strike, walkout,
lockout, slow down or other work stoppage; (vi) during the three-year period
preceding the date hereof, there has been no labor dispute, strike, walkout,
lockout, slow down or other work stoppage of employees of Seller or any Seller
Subsidiary or Affiliate; (vii) there are no Claims currently pending or, to
Seller's knowledge, threatened, against Seller or any Seller Subsidiary or
Affiliate (or any of their respective officers, employees or agents) alleging
the violation of any Laws relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar Taxes, occupational safety and health
and plant closing (collectively, "Employment Laws"), or any other Claim
whatsoever, whether based in tort, contract or Law, arising out of or relating
in any way to a Person's employment (actual or alleged), application for
employment or termination of employment with Seller or any Seller Subsidiary or
Affiliate and, to Seller's knowledge, there is no basis for any such Claim;
(viii) neither Seller nor any Seller Subsidiary or Affiliate has been found
liable for the payment of Taxes, fines, backpay, compensatory damages,
liquidated damages, penalties or other amounts, however designated, for failure
to comply with any Employment Laws, and, to Seller's knowledge, there is no
basis for any such Liability; and (ix) Seller and each Seller Subsidiary and
Affiliate has paid all amounts of compensation due to its respective employees
and former employees and has properly withheld and reported Taxes on the same,
except to the extent that the failure to do so would not reasonably be expected
to have a Material Adverse Effect.
(b) Without limiting the generality of Section 3.10, to Seller's knowledge,
Seller and each Seller Subsidiary or Affiliate is in full compliance with all
applicable Employment Laws and contracts relating to employment, including those
relating to wages, hours, working conditions, hiring, promotion, occupational
health and safety (including those dealing with employee handling or use of or
exposure to Hazardous Substances and the training of employees with respect to
such Hazardous Substances), and the payment and withholding of Taxes and other
similar obligations, and neither Seller nor any Seller Subsidiary or Affiliate
has received any notice of any violation of any such Employment Law or contract.
Seller and each Seller Subsidiary or Affiliate is in full compliance with all
applicable affirmative action and equal employment opportunity obligations
arising under any Employment Law or any contract or subcontract with any
Governmental Entity or other Person. Seller and each Seller Subsidiary or
Affiliate has withheld from the wages and salaries of its employees as is
required by the Employment Laws and is not liable for any arrears of wages or
any Tax or penalty in connection therewith.
(c) No current or former employee of Seller or any Seller Subsidiary or
Affiliate has any claim against Seller or any Seller Subsidiary or Affiliate (or
any of their respective officers, employees or agents) under any Employment Law
or contract on account of or for: (i) wages or salary for any period other than
the current payroll period; (ii) overtime pay for any period other than the
current payroll period; (iii) vacation, holiday or other time off or pay in lieu
thereof (other than time off or pay in lieu thereof earned); or (iv) any
violation of any Employment Law or contract relating to the payment of wages,
fringe benefits, wage supplements or hours of work; and all liability for
vacation, holiday and other time off or pay in lieu thereof has been recorded in
the Financial Statements.
(d) Except as set forth on Schedule 3.20(d) attached hereto, neither
Seller, any Seller Subsidiary or Affiliate, nor Buyer is, nor immediately after
the Closing will be, liable for severance pay or any other payment of monies to
any employee of Seller or any Seller Subsidiary or Affiliate as a result of the
execution of this Agreement or the parties' performance of its terms, or for any
other reason in any way related to the consummation of the Transaction.
Section 3.21 Employee Benefits.
(a) Schedule 3.21(a) lists all formal or informal, written or unwritten,
employee benefit plans and collective bargaining, employment or severance
agreements or other similar arrangements which Seller, or any ERISA Affiliate,
has ever sponsored, maintained, or to which contributions are made, or for which
obligations have been incurred, for the benefit of employees of Seller or an
ERISA Affiliate, including, without limitation, (1) any "employee benefit plan"
(within the meaning of Section 3(3) of ERISA) (the "Benefit Plans"), (2) any
profit-sharing, incentive compensation (whether cash or equity), commission,
deferred compensation, bonus, stock option, stock purchase, pension, retainer,
consulting, retirement, severance, welfare or incentive plan, agreement or
arrangement, (3) any plan, agreement or arrangement providing for "fringe
benefits" or perquisites to employees, officers, directors or agents, including
but not limited to benefits relating to automobiles, clubs, vacation, child
care, parenting, sabbatical, sick leave, medical, dental, hospitalization, life
insurance and other types of insurance, and (4) any employment agreement. The
plans, agreements and arrangements described in this Section 3.21 are referred
to herein as "Plans". Copies of all written Plans and written descriptions of
all unwritten Plans have been provided or made available to Buyer.
(b) None of the Plans is (i) a plan subject to Title IV of ERISA or Section
412 of the Code, (ii) a "multiemployer plan" (within the meaning of Section
3(37) of ERISA), (iii) a "multiple employer plan" (within the meaning of Section
3(40) of ERISA or Section 413(c) of the Code), (iv) a "voluntary employees'
beneficiary association" (within the meaning of Section 501(c)(9) of the Code),
or (v) a "multiple employer welfare arrangement" (within the meaning of Section
3(40)(A) of ERISA).
(c) Neither the Seller nor any ERISA Affiliate has ever contributed to, or
had an obligation to contribute to, any plan subject to Title IV of ERISA or
Section 412 of the Code, any "multiemployer plan" (within the meaning of Section
3(37) of ERISA), any "multiple employer plan" (within the meaning of Section
3(40) of ERISA or Section 413(c) of the Code), any "voluntary employees'
beneficiary association" (within the meaning of Section 501(c)(9) of the Code),
or any "multiple employer welfare arrangement" (within the meaning of Section
3(40)(A) of ERISA).
(d) Each Plan has been administered materially in accordance with: (i) the
terms of all applicable governing documents; (ii) the applicable provisions of
ERISA, the Code and all other Laws; and (iii) the terms of all applicable
employment, collective bargaining and other agreements. Except as set forth in
Schedule 3.11, there are no actions, suits, proceedings, disputes, Claims or
investigations pending or, to the knowledge of Seller, threatened against or
involving any Plan, and, to the knowledge of Seller, there are no investigations
by any Governmental Entity or other Claims (except routine claims for benefits
payable in the normal operation of the plan) pending or, to the knowledge of
Seller, threatened against or involving any Plan or asserting any rights to
benefits under any Plan.
(e) With respect to the Plans, there is no Liability whatsoever that the
Buyer shall assume, or could reasonably be expected to assume, as part of the
Transaction or otherwise.
(f) "ERISA Affiliate" means any Person that is a member of "controlled
group of corporations" with, or is under "common control" with, or is a member
of the same "affiliated service group" with Seller, as defined in Section 414 of
the Code.
Section 3.22 Environmental Matters.
(a) Seller has complied with all Environmental Laws except for violations
that have not had and would not be reasonably expected to have a Material
Adverse Effect, and no Claim or investigation has been filed or commenced
against Seller or the Business alleging such failure, nor does Seller know of
any valid basis for such a Claim.
(b) Except as set forth in Schedule 3.22, the Business does not have any
Liability (and the Business has not handled, used, stored, recycled or disposed
of any Hazardous Substance, arranged for the disposal of any Hazardous
Substance, exposed any employee or other Person to any Hazardous Substance or
hazardous condition, or owned or operated any property or facility in any
manner, in each case that could reasonably be expected to form the basis for any
present or future Claim or investigation giving rise to any such Liability) for
damage or remediation to any site, location or body of water (surface or
subsurface), or for any illness of or personal injury to any employee or other
Person, under any Environmental Law, except to the extent any of the foregoing
have not had and would not be reasonably expected to have a Material Adverse
Effect.
Section 3.23 Insurance
Annexed hereto as Schedule 3.23 is a list of all insurance policies
covering the ownership and operations of the Transferred Assets, reflecting the
policies' terms, identity of insurers, amounts and coverage. Such insurance
provides coverage for such risks, and in such amounts, as are reasonable and
customary for assets of the same nature and size as the Transferred Assets. All
of such policies, or similar replacement policies, are now and will be until
Closing in full force and effect with no premium arrearages.
Section 3.24 Subsequent Changes.
Since September 30, 2003, there has not occurred any event, condition or
change in the operations, condition (financial or otherwise) or assets of the
Business that has had, or would be reasonably expected at a later date to have,
a Material Adverse Effect. Without limiting the generality of the foregoing,
since September 30, 2003, except as set forth on Schedule 3.24, neither Seller
nor any Seller Subsidiary has:
(a) sold, leased, transferred, pledged, encumbered or assigned any of the
assets of the Business outside the Ordinary Course;
(b) entered into any agreement, contract, lease or license (or series of
related agreements, contracts, leases, and licenses) other than Ordinary Course
sales and purchase orders;
(c) accelerated, terminated, modified or canceled any Assumed Contract
except in the Ordinary Course; and to Seller's knowledge, no other party has
done so as a result of any default by Seller;
(d) made any capital expenditure (or series of related capital
expenditures) other than in the Ordinary Course involving more than $25,000;
(e) made any capital investment in, any loan to, or any acquisition of the
securities or assets of, any other Person;
(f) issued any note, bond or other debt security or created, incurred,
assumed or guaranteed any indebtedness for borrowed money or capitalized lease
obligation;
(g) canceled, compromised, waived or released any material right or Claim
(or series of related material rights and Claims) outside the Ordinary Course;
(h) granted any license or sublicense of any rights under or with respect
to any Transferred Intellectual Property outside the Ordinary Course;
(i) experienced any material damage, destruction or loss to the assets of
the Business not covered by insurance;
(j) granted any increase in the base compensation of any employee or made
any other material change in employment terms for any employee, except for
normal compensation increases made in the Ordinary Course; or
(k) entered into any commitment to do any of the foregoing.
Section 3.25 Related-Party Transactions.
Except as disclosed in Schedule 3.25, neither Seller nor any Seller
Subsidiary is a party to any contract, agreement, license, lease or arrangement
with, or any other commitment to, directly or indirectly: (a) any stockholder,
director, officer, Affiliate or salaried employee of Seller or any Seller
Subsidiary; or (b) any Person in which any such stockholder, director, officer
or salaried employee has a material equity or participating interest.
Section 3.26 Accounts Receivable.
Set forth on Schedule 3.26 is a true, correct and complete listing of
Seller's accounts receivable. All of the accounts receivable (including the
accounts, obligations, contracts and instruments that underlie such accounts
receivable) set forth on Schedule 3.26 and in the Financial Statements, net of
any reserve for doubtful accounts shown thereon, arose out of bona fide
transactions in the Ordinary Course and will be valid, enforceable claims on the
Closing Date. Seller owns all of the accounts receivable free of any Claims or
Encumbrances. Seller has not rescinded, cancelled, settled, modified or
otherwise compromised any accounts receivable on Schedule 3.26, or any
indebtedness due thereunder, or any guarantee or repurchase obligation related
thereto, except in the Ordinary Course.
Section 3.27 Inventory.
Schedule 2.1(d) is a true, correct and complete listing of the Inventory.
All of the Inventory has been costed and valued, and presented in all material
respects in the Financial Statements, in accordance with GAAP.
Section 3.28 Finders' Fees.
Except for Covington Associates LLC, whose fees and expenses will be paid
by Seller and/or Seller's Affiliates in accordance with Seller's and/or Seller's
Affiliates agreement with such firm (a true, correct and complete copy of which
has been delivered to Buyer prior to the date hereof), there is no investment
banker, broker, finder or other intermediary who has been retained by or is
authorized to act on behalf of Seller, any Seller Subsidiary or Seller Affiliate
who might be entitled to any fee or commission from Buyer or any Affiliate of
Buyer in connection with the Transaction.
Section 3.29 Disclosure.
The provisions of this Agreement and the Schedules with respect to Seller,
and the provisions of all other documents and information furnished by Seller
pursuant hereto, do not include any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made herein
and therein not misleading.
Article IV. REPRESENTATIONS AND WARRANTIES OF BUYER
As of the date hereof, Buyer represents and warrants to Seller as follows:
Section 4.1 Organization and Power.
Each of Buyer and Acquisition Sub is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware. Each of
Buyer and Acquisition Sub has all requisite corporate power and authority to
enter into this Agreement and the Closing Documents, to perform its obligations
hereunder and thereunder, to own, lease and operate its assets, and to carry on
its businesses as now being conducted. Each of Buyer and Acquisition Sub is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where its operation or conduct of its business requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on its ability to perform its obligations under this
Agreement.
Section 4.2 Authorization.
Each of Buyer and Acquisition Sub has full corporate power and authority to
execute and deliver this Agreement and each Closing Document, and to perform
their obligations hereunder and thereunder. The execution, delivery and
performance by Buyer and Acquisition Sub of this Agreement and each Closing
Document have been duly and validly authorized by all necessary corporate action
on the part of Buyer and Acquisition Sub, and no additional corporate
authorization or consent is required in connection therewith.
Section 4.3 Approvals.
No consent, approval, waiver, authorization or novation is required to be
obtained by Buyer or Acquisition Sub from, and no notice or filing is required
to be given by Buyer or Acquisition Sub to or made by Buyer or Acquisition Sub
with, any Governmental Entity or other Person in connection with the execution,
delivery and performance by each of Buyer and Acquisition Sub of this Agreement,
Closing Document and the consummation of the Transaction.
Section 4.4 Non-Contravention.
The execution, delivery and performance by Buyer and Acquisition Sub of
this Agreement and each Closing Document, and the consummation of the
Transaction, do not and will not: (a) violate any provision of the articles of
incorporation, bylaws or other organizational documents of Buyer or Acquisition
Sub; (b) conflict with, or result in the breach of, or constitute a default
under, or result in the termination, cancellation or acceleration (whether after
the filing of notice or the lapse of time or both) of any right or obligation of
Buyer or Acquisition Sub under, any agreement, contract, lease, sublease,
arrangement, commitment or license to which Buyer or Acquisition Sub is a party
or by which any of their assets are bound; or (c) violate or result in a breach
of or constitute a default under any Law, judgment, injunction, order, decree or
other restriction of any Governmental Entity to which Buyer or Acquisition Sub
is subject.
Section 4.5 Binding Effect.
This Agreement and each Closing Document, when executed and delivered by
Buyer, Acquisition Sub and Seller, will constitute valid and legally binding
obligations of Buyer and Acquisition Sub, enforceable against each of Buyer and
Acquisition Sub in accordance with their respective terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar Laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
Section 4.6 Finders' Fees.
Except for Harris Williams & Co., whose fees and expenses will be paid by
Buyer, there is no investment banker, broker, finder or other intermediary that
has been retained by or is authorized to act on behalf of Buyer or any Affiliate
of Buyer who might be entitled to any fee or commission from Seller or any
Affiliate of Seller in connection with the Transaction.
Section 4.7 Compliance With Laws.
To Buyer's knowledge, its business has been and is being conducted in
compliance with all Laws, except for any non-compliance that would not,
individually or in the aggregate have a material adverse effect on its condition
(financial or otherwise), results of operations or its ability to perform its
obligations under this Agreement. Buyer has all Governmental Authorizations
necessary for the conduct of its business as currently conducted, except for
those Governmental Authorizations the absence of which would not, individually
or in the aggregate have a material adverse effect on its condition (financial
or otherwise), results of operations or its ability to perform its obligations
under this Agreement.
Section 4.8 Financial Ability.
Buyer and Acquisition Sub together have the financial capacity to
consummate the Transactions, and Buyer and Acquisition Sub understand that under
the terms of this Agreement Buyer's and Acquisition Sub's obligations hereunder
are not in any way contingent or otherwise subject to the availability of any
financing.
Article V. CERTAIN COVENANTS
Section 5.1 Access.
Prior to Closing, Seller will permit Buyer and its representatives to have
access, during regular business hours and upon reasonable advance notice, to the
Books and Records of Seller relating to the assets, Liabilities and operations
of the Business, to Seller's employees and to the locations at which the
Business is conducted or at which such Books and Records are located, subject to
reasonable security regulations of Seller , any Laws and such additional
limitations as Seller may reasonably require to prevent disruption of its
business. Seller will furnish, or cause to be furnished, to Buyer any financial
and operating data and other information that is available with respect to the
Business as Buyer from time to time reasonably requests, and will instruct its
employees, counsel, independent accountants and financial advisors to cooperate
with Buyer in its investigation of the Business.
Section 5.2 Conduct of Business.
(a) During the period from the date hereof to Closing, except as otherwise
contemplated by this Agreement or as Buyer otherwise consents in writing,
Seller will conduct the Business in the Ordinary Course and without
limiting the generality of the foregoing will not:
(i) incur or guaranty any indebtedness other than trade payables
incurred in the Ordinary Course or pursuant to its existing credit
facility;
(ii) incur, create or assume any Encumbrance (other than a
Permitted Encumbrance) on any Transferred Assets, other than in the
Ordinary Course;
(iii) acquire or dispose of any Transferred Assets, other than in the
Ordinary Course;
(iv) make any change of accounting or accounting practice, procedure
or policy, other than any change required by GAAP;
(v) enter into any material agreement, contract, lease or license (or
series of related agreements, contracts, leases, and licenses) other
than those described in Schedule 5.2;
(vi) accelerate, terminate, modify or cancel any Assumed Contract;
(vii) make any capital expenditure (or series of related capital
expenditures) involving more than $10,000;
(viii) fail to maintain the Transferred Assets that are tangible and
all parts thereof in as good working order and condition in all
material respects, ordinary wear and tear excepted;
(ix) fail to keep in full force and effect its current insurance
policies or other comparable insurance affecting the Business or the
Transferred Assets;
(x) cause or permit any Seller Subsidiary to: (A) amend any of its
governing documents or instruments; (B) issue, grant or sell any
shares of its capital stock or other equity interest, or any options,
warrants or other rights to purchase any such shares or interests or
securities convertible into or exchangeable therefor; (C) make any
distributions to its stockholders; or (D) acquire any assets or enter
into any agreements, contracts, leases or licenses other than in the
Ordinary Course;
(xi) make any capital investment in, any loan to, or any acquisition
of the securities or assets of, any other Person;
(xii) issue any note, bond or other debt security or create, incur,
assume or guarantee any indebtedness for borrowed money other than
pursuant to its existing credit facility or capitalized lease
obligation;
(xiii) cancel, compromise, waive or release any material right or
Claim (or series of related rights and Claims) outside the Ordinary
Course;
(xiv) dispose of, license or permit to lapse any rights in any
Transferred Intellectual Property;
(xv) grant any increase in the base compensation of any of its
employees or make any other material change in benefit plans or
employment terms for any of its employees; or
(xvi) enter into any commitment to do any of the foregoing.
(b) During the period from the date hereof to Closing, Seller will use
commercially reasonable efforts to preserve the Business and the
Transferred Assets intact and to preserve for Buyer its relationship with
licensors, developers, consultants, re-marketers, suppliers, distributors,
customers, employees and others having regular business relations with it.
If, during the period from the date hereof to Closing, Seller desires to
terminate the employment of any employee, it shall give Buyer three (3)
business days' prior written notice before making such termination.
Section 5.3 Reasonable Efforts; Further Assurances.
(a) During the period from the date hereof to Closing, Seller and Buyer and
Acquisition Sub will each cooperate and use commercially reasonable efforts
to fulfill the conditions precedent to its own and the other parties'
obligations hereunder.
(b) Seller and Buyer and Acquisition Sub will cooperate and use their
respective commercially reasonable efforts to comply with all Laws in
furtherance of the Transaction, including the execution of additional
agreements, instruments and documents that may be required by local Law.
Subject to the provisions hereof, from time to time before and after the
Closing Date, each party will promptly execute, acknowledge and deliver any
other assurances or documents reasonably requested by the other party and
necessary for the other party to satisfy its obligations hereunder or to
obtain the benefits contemplated hereby.
Section 5.4 Corporate Name Change.
In furtherance of the purchase and sale of the Transferred Assets
hereunder, Seller will cause Seller's corporate name to be changed, effective
as of the Closing Date, to a name completely dissimilar to "Mapletree Networks,
Inc." and thereafter will not adopt, use, cause to be used or approve or
sanction the use of such names, the name "Mapletree Networks, Inc.," or any
other name so similar as to cause confusion or create a likelihood of confusion
with the name Mapletree Networks, Inc. or any derivation thereof, or any other
trade name or assumed name comprising the Transferred Assets.
Section 5.5 Exclusivity.
(a) From the date of this Agreement until January 16, 2004 (the "No Shop
Period"), or such earlier date as this Agreement is terminated under
Section 9.1 hereof, except if the board of directors of Seller concludes in
good faith, based on consultation with independent outside counsel, that
taking such action is necessary in order for the board of directors of
Seller to act in a manner consistent with its fiduciary duty to the
stockholders of Seller under applicable Laws:
(i) Buyer will have the exclusive right to negotiate with Seller with
respect to a Purchase Transaction; and
(ii) Seller will and will cause each Affiliate and representative of
Seller to: (A) terminate all current discussions and negotiations
regarding a Purchase Transaction with any party other than Buyer or
Buyer's Affiliates; and (B) not seek or initiate proposals or offers
from, enter into, continue or engage in discussions or negotiations
with, or furnish information to any party other than Buyer or Buyer's
Affiliates relating to a Purchase Transaction.
(b) For purposes of this Section 5.5, "Purchase Transaction" means (i) any
direct or indirect acquisition, whether by purchase, merger, consolidation,
stock sale (primary or secondary) or any other structure which would result
in the sale of any part of Seller's capital stock, assets or business, in
either one or a series of transactions; or (ii) any arrangement whereby
effective operating control of Seller's assets, consolidated business or a
substantial portion thereof is granted to another party or any change in
the current composition of Seller's Board of Directors is effected.
(c) During the No-Shop Period, Seller will promptly notify Buyer of the
existence of any proposal or communication it receives from any person
concerning not only a Purchase Transaction but also any transaction similar to
that described in subsection (a) above for any part of Seller's capital stock,
assets or business.
(d) Buyer and Seller agree that the certain Memorandum of Agreement between
Buyer and Seller dated November 7, 2003 is hereby terminated and
superseded, in its entirety, by the terms of this Agreement.
Section 5.6 Confidentiality.
(a) Seller and Buyer (each, the "Receiving Party") hereby covenant and
agree, each on behalf of itself and on behalf of its Affiliates, that from
and after the Closing Date, Receiving Party and its Affiliates will not
(unless legally compelled to do so) disclose, give, sell, use or otherwise
divulge any Confidential Information of the other party (the "Disclosing
Party") or permit their respective employees, officers, directors or
advisors to do the same. If Receiving Party or its Affiliates, or any of
their respective employees, officers, directors or advisors become legally
compelled to disclose any Confidential Information, Receiving Party shall
provide Disclosing Party with prompt written notice of such requirement so
that Disclosing Party may seek a protective order or other remedy or waive
compliance with this Section 5.6. In the event that such protective order
or other remedy is not obtained, or Disclosing Party waives compliance with
this Section 5.6, Receiving Party or its Affiliates, as applicable, shall
furnish only that portion of Confidential Information which is legally
required to be provided and exercise its commercially reasonable efforts to
obtain assurances that appropriate confidential treatment will be accorded
Confidential Information. The confidentiality and restrictive use
obligations under this Section 5.6 shall not apply to information which is
independently developed by Receiving Party or its Affiliates after Closing
without the use or benefit of any information that would otherwise be
Confidential Information as shown by records maintained in the ordinary
course of the developing party's business, or to any information that, at
the time of disclosure, is or subsequently becomes available publicly;
provided, however, that such information was not disclosed in breach of
this Agreement by Receiving Party, Receiving Party's Affiliates or their
respective employees, officers, directors or advisors.
(b) Receiving Party, on behalf of itself and on behalf of its Affiliates
and their respective employees, officers, directors or advisors
acknowledges that a breach of its obligations under this Section 5.6 may
result in irreparable injury to Disclosing Party. In the event of the
breach by Receiving Party or any of its Affiliates or their respective
employees, officers, directors or advisors of any of the terms and
conditions of this Section 5.5 to be performed, Disclosing Party shall be
entitled, if it so elects, to institute and prosecute proceedings in any
court of competent jurisdiction, either at law or in equity, to obtain
damages for any breach of this Section 5.5, or to enforce the specific
performance thereof by such party or to enjoin such party from violating
the provisions of this Section 5.5 by seeking a temporary restraining order
or similar relief .
(c) Buyer and Seller agree that upon Closing that the certain
Non-Disclosure Agreement between Buyer and Seller dated May 1, 2003, will
automatically terminate and be superseded, in its entirety, by the terms of
this Agreement.
(d) Notwithstanding the foregoing, nothing in this Agreement or in any of
the Closing Documents shall prohibit the disclosure of the tax treatment or
tax structure of the transactions contemplated by this Agreement and the
Closing Documents.
Section 5.7 Public Disclosure.
Notwithstanding anything herein to the contrary, neither party may issue
or cause to be issued a press release or similar public announcement or
communication, whether prior or subsequent to Closing, concerning the
Transaction or the execution, performance or terms of this Agreement, unless
specifically approved in advance by the other party, except that Buyer shall
make such disclosures as it is required to make pursuant to applicable Law.
Section 5.8 Bulk Sales.
If the provisions of article 6 of the Uniform Commercial Code have not been
repealed in each jurisdiction where any of the Transferred Assets are located,
Seller and Buyer hereby waive compliance with the provisions of article 6 of the
Uniform Commercial Code in each such jurisdiction that has not repealed such
article and where any of the Transferred Assets are located in connection with
the Transaction. Seller will be responsible for all Liabilities arising out of
the parties' waiver of such compliance.
Section 5.9 Taxes.
(a) Responsibility for the preparation and filing of Tax Returns and the
payment of Taxes incurred as a result of the sale and transfer of the
Transferred Assets and the Assumed Liabilities hereunder will be as
follows:
(i) Buyer and Seller will each prepare and file such Tax Returns as
may be, respectively, required of them in connection with all
excise, sales, use, value added, transfer, stamp, documentary, filing,
recordation or other similar Taxes incurred as a result of the sale
and transfer of the Transferred Assets and the Assumed Liabilities
hereunder in accordance with the form of the Transaction or as may
otherwise be required by a Governmental Entity; provided, however,
that the cost of all such Taxes will be borne by Seller;
(ii) Seller will be responsible for the preparation and filing of any
required income Tax Returns and the payment of all of Seller's
income Taxes incurred as a result of the sale and transfer of the
Transferred Assets and the Assumed Liabilities hereunder;
(iii) Seller will be responsible for the preparation and filing of all
Tax Returns and the payment of all other Taxes of any nature incurred
in the Business or relating to the Transferred Assets, the Assumed
Liabilities and the Applicable Employees for the period up to and
including the Closing Date; and
(iv) For the period after the Closing Date, Buyer will be responsible
for the preparation and filing of all Tax Returns and the payment of
all other Taxes of any nature incurred or relating to the Transferred
Assets or the Assumed Liabilities.
(b) Buyer and Seller will provide each other with such cooperation and
information as either of them reasonably may request of the other in
connection with filing any Tax Return, amended return or Claim for refund,
determining a Liability for Taxes or a right to refund of Taxes or
preparation for litigation or investigation of Claims or in connection with
any audit. Each of Buyer and Seller will retain all Tax Returns, schedules
and work papers and all material records or other documents relating to Tax
matters of the Business for the taxable year of Seller ending after the
Closing Date and for all previous years, until the expiration of the
statute of limitations of the taxable years to which such Tax Returns and
other documents relate (and, to the extent notified by the other party in
writing, any extensions thereof). Any information obtained under this
Section 5.9(b) will be kept confidential as contemplated by Section 5.6,
except as may be otherwise necessary in connection with the filing of Tax
Returns or Claims for refund or in conducting an audit or other proceeding
related to the payment of Taxes.
(c) If in order to prepare properly documents required to be filed with
Governmental Entities or its financial statements, it is necessary that
either Buyer or Seller be furnished with additional information relating to
the Transferred Assets or the Assumed Liabilities and such information is
in the possession of the other party, such other party will use its
reasonable efforts to furnish such information in a timely manner to the
party reasonably requiring such information, at the cost and expense of the
party requiring such information.
(d) With respect to all Hired Employees, Seller will cause to be issued IRS
Form W-2s for that portion of calendar year 2003 ending on the Closing Date
during which time the Hired Employees were employees of Seller. Buyer shall
have no obligation to issue any IRS Form W-2s to any Hired Employee for any
period on or before the Closing Date.
(e) Seller and Buyer will file or provide to each other such Tax Returns,
forms and other documents as may be required or necessary to minimize or
obtain an exemption from any excise, sales, use, value added, transfer,
stamp, documentary, filing, recordation or other similar Taxes that arise
with respect to the Transferred Assets, or the Assumed Liabilities. Without
limiting the generality of the foregoing, on or before the Closing Date
Buyer will provide Seller with any required sales Tax exemption
certificates of Buyer required in connection with the Transaction.
(f) Notwithstanding any other provision of this Section 5.9, no party will
have access to the other party's federal, state or foreign income Tax
Returns or Books and Records relating thereto.
Section 5.10 Determination and Allocation of Consideration.
Seller agrees to accept Buyer's allocation of the Purchase Price, provided
such allocation is in accordance with Section 1060 of the Code and is
otherwise in compliance with the Code. Buyer will prepare, and Buyer and
Seller will file, an IRS Form 8594 in a timely fashion in accordance with the
rules under section 1060 of the Code and in accordance Buyer's allocation of the
Purchase Price. The determination and allocation of the Purchase Price made
pursuant to this Section 5.10 will be binding on Seller and Buyer for all
Tax reporting purposes. Neither Seller nor Buyer shall file any tax return or
other document or otherwise take any position that is inconsistent with the
allocation determined pursuant to this Section 5.10.
Section 5.11 Non-Competition.
(a) For a period of two (2) years following the Closing Date neither Seller
nor any Seller Subsidiary, will engage directly or indirectly, whether as
owner, principal, stockholder, employee, consultant or in any other
capacity, in the business of acquiring, developing, marketing, selling,
distributing, licensing or maintaining systems and application computer
programs competitive with, or substitutable for, any of the Transferred
Intellectual Property or any of the Products (including derivative works or
products created by Buyer), anywhere in the world, except as a customer or
authorized distributor of Buyer or otherwise with Buyer's consent (which
may be withheld in Buyer's sole discretion). Seller, for itself and as sole
stockholder of the Seller Subsidiary, acknowledges and agrees that the
current market for the Transferred Intellectual Property and the Products
extends throughout the entire world and that it is therefore reasonable to
prohibit them from competing with Buyer anywhere in the world.
(b) An investment by Seller or any Seller Subsidiary, directly or
indirectly, in less than 5 percent of the publicly traded equity securities
of any Person the stock of which is publicly traded will not be deemed a
violation of this Section 5.11.
(c) If any Governmental Entity of competent jurisdiction determines that
the restrictive covenant contained in this Section 5.11, or any part
thereof, is invalid or unenforceable for any reason, the remainder of the
restrictive covenant will not thereby be affected and will be given full
force and effect, without regard to the invalid portion or portions. If any
such Governmental Entity determines that the restrictive covenant contained
in this Section 5.11, or any part thereof, is unenforceable because of the
duration or scope of such covenant, such Governmental Entity will have the
power to reduce such duration or scope and, in its reduced form, such
covenant will then be enforceable and will be given full force and effect.
(d) Seller, for itself and as sole stockholder of the Seller Subsidiary,
acknowledges and agrees that the provisions of this Section 5.11, as they
apply to Seller and Seller Subsidiary, are reasonable and supported by
adequate consideration, that Buyer would not have entered into this
Agreement without having received the benefit of the provisions of this
Section 5.11, and that any breach of the provisions of this Section
5.11 would result in substantial and irreparable harm to Buyer and its
Affiliates and, therefore, that Buyer will be entitled to an injunction to
prohibit any such breach or anticipated breach, without the necessity of
posting a bond, cash or otherwise, in addition to all of their other legal
and equitable remedies, including the remedies provided by Article VII.
(e) Seller will cause the Seller Subsidiary to comply in all respects with
this Section 5.11.
Section 5.12 Covenants Not to Sue or Assert Rights.
Seller hereby covenants not to sue Buyer, its Affiliates or their
successors, assignees or licensees, from and after the Closing Date, for
infringement of any Transferred Intellectual Property. Seller shall not assert
rights, from and after the Closing Date, in any Transferred Intellectual
Property against Buyer, its Affiliates or their successors, assignees or
licensees.
Section 5.13 Satisfaction of Bank Debt.
Immediately prior to Closing, Buyer shall pay to Comerica Bank and Comdisco
the aggregate amounts of outstanding current debt and long-term debt of Seller
owed to such lenders, as reflected in each lender's payoff letter (in form and
substance mutually satisfactory to Buyer and Seller.
Section 5.14 Certain Contracts.
If Seller fails to disclose any written or oral license, sublicense,
agreement, contract, permission or other understanding to Buyer that is a
Transferred Asset in any Schedule hereto that called for the disclosure thereof,
and Buyer later learns of the same, Buyer may, in its sole discretion, require
Seller to use commercially reasonable efforts to assign the same.
Section 5.15 Risk of Loss.
Seller will bear all risk of loss, destruction or damage to any of the
Transferred Assets occurring prior to the Effective Time of the Closing, whether
due to fire, accident or other casualty, willful act, condemnation, riot, act of
God or otherwise, and Buyer will have no responsibility with respect thereto.
Buyer will bear all risk of loss, destruction or damage to any of the
Transferred Assets occurring on or after the Effective Time of the Closing,
whether due to fire, accident or other casualty, willful act, condemnation,
riot, act of God or otherwise, and Seller will have no responsibility with
respect thereto.
Section 5.16 Real Estate Matters.
Buyer and Seller will use commercially reasonable efforts to reach a
mutually beneficial agreement with the landlord of Seller's Norwood,
Massachusetts's office space that will allow Buyer or the Affiliates of Buyer to
use a certain portion of that space after the Closing and will allow Seller to
vacate all or a portion thereof with no obligation or Liability with respect to
such vacated space attributable to facts and circumstances arising after the
Effective Time.
Section 5.17 Statement of Transaction Expenses.
Immediately prior to Closing, Seller shall provide Buyer with a reasonably
detailed listing of the aggregate expenses not paid in the ordinary course by
Seller in connection with this Agreement and the consummation of all of the
transactions contemplated hereby, including fees and expenses paid to Seller's
attorneys, accountants and advisors.
Section 5.18 2003 Audit.
If the 2003 Audit is required in order to satisfy Buyer's reporting
obligations under the securities laws, as determined by Buyer in its sole
discretion, Seller (or those of Seller's successors and assigns who come to hold
Seller's Books and Records in the event that Seller is dissolved) shall use
commercially reasonable efforts to cooperate with Ernst & Young LLP (or other
independent auditor mutually agreed upon by Buyer and Seller), as well as with
Buyer and its representatives, to complete and deliver the 2003 Audit by
February 15, 2004.
Section 5.19 Final Balance Sheet.
(a) Seller shall use commercially reasonable efforts to cooperate with
Ernst & Young LLP (or other independent auditor mutually agreed upon by
Buyer and Seller), as well as with Buyer and its representatives, to
complete and deliver the Final Balance Sheet, along with a detailed listing
of all Liabilities set forth thereon (including, but not limited to,
accounts payable, accrued expenses and deferred revenue), within thirty
(30) days of Closing.
(b) Seller hereby agrees that (i) any accounts receivable (including the
accounts, obligations, contracts and instruments that underlie such
accounts receivable) set forth on the Final Balance Sheet, net of any
reserve for doubtful accounts shown thereon, will have arisen out of bona
fide transactions in the Ordinary Course and (ii) all of the Inventory will
be costed and valued, and presented in all material respects in the Final
Balance Sheet, in accordance with GAAP.
Section 5.20 Warranty Claims.
Buyer and Acquisition Sub shall use commercially reasonable efforts to
resolve favorably all warranty-related Claims for Products sold on or before the
Closing Date that are asserted against Buyer. However, the foregoing is not
intended by the parties to expand, in any fashion, Buyer's or Acquisition Sub's
liability for warranty-related Claims beyond such liability as is to be assumed
pursuant to Section 2.5 of this Agreement.
Section 5.21 Business Plan.
(a) Following the Closing, Buyer and Acquisition Sub shall use commercially
reasonable efforts to operate the Business during the period commencing on
the Closing Date and continuing until December 31, 2004 in accordance with
the Business Plan. Notwithstanding the foregoing, and subject to Section
2.6(d) of this Agreement, Buyer and Acquisition Sub shall have the right to
terminate the Business Plan and operate the Business as they see fit
following the failure of any of the Earn Out Conditions, which, for the
avoidance of doubt, means that Buyer could have the right to terminate the
Business Plan after March 31, 2004, June 30, 2004 and September 30, 2004 by
virtue of a failure of the Earn Out Condition contained in Section
2.6(d)(iii) of this Agreement.
(b) In furtherance of the obligation of Buyer and Acquisition Sub to use
their best efforts to operate the Business during the period commencing on
the Closing Date and continuing until December 31, 2004 in accordance with
the Business Plan, as set forth above in Section 5.21(a), as long as the
possibility remains that all of the Earn Out Conditions can be satisfied,
Buyer and Acquisition Sub shall:
(i) maintain the Business in Acquisition Sub, as a separate wholly
owned subsidiary of Buyer;
(ii) keep separate accounting books and records for the Business; and
(iii) permit the day to day business operations of the Business to be
controlled by Sean Aruda and Ali Bigdeliazari in accordance with the
terms of their respective employment agreements of even date herewith.
(c) Notwithstanding anything in this Agreement to the contrary, and with
particular reference to Section 2.6(d) of this Agreement, the parties agree
that:
(i) The termination without cause of or the resignation for good
reason by either Sean Aruda or Ali Bigdeliazari, in accordance with
the terms of their respective employment agreements of even date
herewith, shall constitute a breach of Buyer's and Acquisition Sub's
covenant in this Section 5.21 to operate the Business during the
period commencing on the Closing Date and continuing until December
31, 2004 in accordance with the Business Plan; and
(ii) The termination for cause of or the resignation without good
reason by either Sean Aruda or Ali Bigdeliazari, in accordance with
the terms of their respective employment agreements of even date
herewith, shall not constitute a breach of Buyer's and Acquisition
Sub's covenant in this Section 5.21 to operate the Business during the
period commencing on the Closing Date and continuing until December
31, 2004 in accordance with the Business Plan;
Section 5.22 VTech Inventory Confirmation.
Prior to Closing, Seller, at its sole expense, shall cause VTech to
provide, as of a date that is not more than five (5) days prior to the Closing
Date, the following information:
(a) all Inventory that has been purchased by Seller and delivered to VTech
and is held by VTech at its facilities in China, as determined by a
physical inventory count;
(b) all Inventory (and, to the extent applicable, all parts, components,
supplies and the like for Products) that has been purchased by VTech on
behalf of Seller and is held by VTech at its facilities in China but for
which VTech has not billed Seller, as determined by a physical inventory
count; and
(c) all other commitments made by VTech on behalf of Seller in connection
with the purchase of parts, components, supplies and the like for Products.
Two (2) days prior to Closing, Seller shall deliver to Buyer a certificate,
in form and substance reasonably acceptable to Buyer, setting forth the
aforementioned information.
Section 5.23 Sharing Data.
Subject to reasonable time, place and manner restrictions imposed by Buyer,
Seller shall have the right for a period of seven years following the date
hereof to have reasonable access to such books, records and accounts, including
financial and tax information, correspondence, production records, employment
records and other records that are transferred to Buyer pursuant to this
Agreement for the purpose of concluding its involvement in the Business and for
complying with its obligations under applicable securities, tax, environmental,
employment and other Laws. Buyer shall not destroy any such books, records and
accounts, including financial and tax information, correspondence, production
records, employment records and other records without first providing Seller
with the opportunity to obtain or copy books, records and accounts, including
financial and tax information, correspondence, production records, employment
records and other records.
Article VI. COVENANTS AS TO CERTAIN EMPLOYMENT MATTERS
Section 6.1 Employees.
(a) As used herein, the following terms will have the following respective
meanings:
(i) "Applicable Employees" means all employees of the Business on the
date hereof, as set forth on Schedule 6.1 (a) (i). Seller will cause
Schedule 6.1(a)(i) to include the title, current base salary or
compensation and target compensation of each Person listed thereon.
(ii) "Hired Employees" means all Applicable Employees, whom Buyer
determines, in its sole discretion, to offer employment with Buyer,
Acquisition Sub or another Affiliate of Buyer and who accept such
employment. As soon as practicable after the date hereof but in any
event before Closing, a list of the Hired Employees shall be added to
this Agreement as Schedule 6.1(a)(ii).
(b) As soon as practicable after the date hereof, Seller will provide Buyer
with access to all Applicable Employees for the purpose of making offers of
employment, as well as conducting discussions preparatory thereto. On the
Closing Date, Seller will terminate the employment of each Hired Employee
and take all such other actions necessary to allow such Hired Employees to
work for Buyer, Acquisition Sub or Buyer's Affiliates. Seller will also not
take any action to prevent Buyer, Acquisition Sub or Buyer's Affiliates
from offering employment or an independent contractor arrangement to any
former employee of Seller.
(c) Following the Closing, Buyer or Acquisition Sub will employ the Hired
Employees on substantially the same terms and conditions as such employees
are employed by Seller immediately prior to the Closing (except for such
employees that have entered into employment agreements with Buyer or
Acquisition Sub to be effective as of the Closing); provided, that nothing
herein shall be construed as a limitation of Buyer's or Acquisition Sub's
right to make decisions as to the retention or termination of any of its
employees after the Closing, including the Hired Employees, or Buyer's
right to modify, amend or terminate, in its sole discretion and judgment,
any such terms and conditions for its employees, including the Hired
Employees. Notwithstanding the foregoing, neither Buyer nor Acquisition Sub
shall, at any time prior to ninety-one (91) days after the Closing Date,
effect a "plant closing" or "mass layoff", as those terms are defined in
the Worker Adjustment and Retraining Notification Act of 1988, as amended
(the "WARN Act"), or take any other act affecting in whole or in part any
site of employment of Buyer which could result in any liability to Seller
under the WARN Act or any other applicable foreign, federal, state or other
law.
(d) The Plans will not be transferred to Buyer or Acquisition Sub pursuant
to this Agreement. Instead, from and after the Closing through December 31,
2004, Buyer or Acquisition Sub shall provide to the Hired Employees who
continue to be employed by Buyer or Acquisition Sub employee benefit plans,
agreements, programs, policies and arrangements (the "Buyer Benefit Plans")
that are substantially comparable in all material respects to the Plans in
effect immediately prior to the Closing. For the purposes of any of Buyer
Benefit Plans for which eligibility or vesting of benefits depends on
length of service, and for any benefit for which the amount or level of
benefits depends on length of service, Buyer or Acquisition Sub shall give
(or cause to be given) to each Hired Employee full credit for past service
with Seller as of and through the Closing Date under the Plans ("Prior
Service"), except that no Hired Employee shall receive credit under any
Section 401(k) plan of Buyer or Acquisition Sub for Prior Service. In
addition, and without limiting the generality of the foregoing, each Hired
Employee shall be given credit for Prior Service for purposes of
eligibility to participate, satisfaction of any waiting periods, evidence
of insurability requirements, or the application of any pre-existing
condition limitations. However, nothing herein shall be construed as a
limitation of Buyer's right to modify, amend or terminate, in its sole
discretion and judgment, any such Buyer Benefit Plan.
(e) As soon as practicable after the Closing, Buyer shall permit the Hired
Employees to make, if properly elected on a form acceptable to the plan
administrator, eligible rollover contributions from Seller's 401(k) Plan to
a Section 401(k) plan of Buyer or Acquisition Sub in which the Hired
Employees are entitled to participate pursuant to Section 401(a)(31) of the
Code (including any outstanding Participant Plan Loans). At or prior to the
Closing, Seller shall provide to Buyer a copy of the Internal Revenue
Service determination or opinion letter with respect to the current plan
document for Seller's 401(k) Plan.
(f) The parties intend that Buyer, Acquisition Sub, or another member of
the "Buying Group" (as that term is defined in Treas. Reg. ss.54.4980B-9,
Q&A 2) with respect to the transactions described in this Agreement, shall
be responsible for providing "COBRA" continuation group health coverage
pursuant to Section 4980B of the Code and Sections 601 through 608 of
ERISA, and the regulations promulgated thereunder, to all individuals who
are "M&A Qualified Beneficiaries" (as defined in Treas. Reg. ss.54.4980B-9,
Q&A 4) with respect to the transactions described in this Agreement. In no
event shall Seller, or any other member of the "Selling Group" (as that
term is defined in Treas. Reg. ss.54.4980B-9, Q&A 2) be responsible for
providing such "COBRA" continuation group health coverage. Notwithstanding
the foregoing, to the extent, if any, that Buyer or Acquisition Sub incurs
Liability in connection with providing "COBRA" continuation group health
coverage relating to former Seller employees who were obtaining "COBRA"
continuation group health coverage prior to the Closing, Buyer shall have
the right to recover such Liability against the Indemnification Escrow, as
Buyer Losses, in accordance with the provisions of Article VIII of this
Agreement.
(g) Seller will be solely responsible for, and Buyer will not have any
Liability with respect to: (i) all compensation and benefits agreements and
arrangements that are not included among the Assumed Contracts; (ii) all
obligations to employees or former employees of Seller (regardless of if
they are Hired Employees), including any and all severance, retention,
termination and other compensation or benefit payments (if any), damages
and costs, and the applicable Taxes related thereto, which are or may
become payable, under any Law, Employment Law or contract; (iii) all
employee retirement, health, welfare or benefit plans and programs of
Seller; and (iv) all obligations with respect to unemployment compensation
and workers' compensation from Claims arising on or before the Closing Date
out of the Claimant's employment by Seller.
(h) Except as set forth on Schedule 6.1(h) attached hereto, Seller and each
Hired Employee shall terminate, effective as of the Closing Date, any
employment agreements or arrangements of any sort between them that are in
effect immediately prior to the Closing (and, in each case, shall take such
further actions as are necessary to extinguish any rights thereunder that
might otherwise survive the termination of the underlying employment
agreement or arrangement).
Section 6.2 Enforcement of Rights.
At all times after Closing, upon request from Buyer, Seller will assign
to Buyer its right to take all reasonable actions to enforce the provisions of
any employment, independent contractor or other agreement to which Seller is a
party to the extent that Buyer deems it necessary for the protection of Buyer's
rights to the Transferred Intellectual Property or any other rights acquired by
Buyer hereunder, including, Seller's rights under any non-competition, non-
solicitation, non-disclosure, assignment of invention and similar agreements.
Section 6.3 Non-Solicitation
During the twenty-four (24) month period immediately following the Closing
Date, without the prior written consent of Buyer, Seller will not, directly or
indirectly, hire or otherwise use or solicit the services of any Person who then
is, or who was during the then-preceding six (6) months, an employee of Buyer or
any Seller Subsidiary and who was an employee of Seller or Seller Subsidiary
thereof immediately prior to Closing.
Article VII. CONDITIONS TO CLOSING
Section 7.1 Conditions to the Obligations of Buyer, Acquisition Sub and
Seller.
The obligations of Buyer, Acquisition Sub and Seller to effect Closing are
subject to the satisfaction or waiver by Buyer and Seller prior to Closing of
each of the following conditions:
(a) No Injunctions, Etc. No Governmental Entity will have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, or
judgment, decree, injunction or other final order that is in effect on the
Closing Date and prohibits or prevents Closing or the consummation of the
Transaction.
(b) Business Plan. The Business Plan shall be in existence.
(c) Escrow Agreement. Buyer, Seller and the Escrow Agent shall have duly
executed and delivered the Escrow Agreement.
Section 7.2 Further Conditions to the Obligation of Buyer and Acquisition
Sub.
The obligation of Buyer and Acquisition Sub to effect Closing is subject to
the satisfaction by Seller, or waiver by Buyer prior to Closing, of each of the
following further conditions:
(a) Representations and Warranties. The representations and warranties of
Seller contained herein will have been true and correct in all material
respects when made, and will be true and correct in all material respects
as of Closing as if made as of Closing (except that representations and
warranties that are made as of a specific date need be true and correct
only as of such date and except that representations and warranties which
are qualified as to materiality shall be true and correct in all respects
as made and not subject to a double materiality standard), and Buyer will
have received a certificate to such effect dated the Closing Date and
executed by a duly authorized officer of Seller.
(b) Covenants. The covenants and agreements of Seller to be performed prior
to Closing will have been duly performed in all material respects, and
Buyer will have received a certificate to such effect dated the Closing
Date and executed by a duly authorized officer of Seller.
(c) Indemnification Substitution Agreement. Seller's stockholders that in
the aggregate shall be entitled to receive at least eighty-five percent
(85%) of the Closing Consideration, as adjusted, assuming all of the
Closing Consideration were to be distributed to Seller's stockholders,
shall have assumed, on a pro rata several but not joint basis, Seller's
obligations under Article VIII of this Agreement and each of such
stockholders shall have entered into the Indemnification Substitution
Agreement in the form attached hereto as Exhibit C to effect such
substitution of responsibility under Article VIII of this Agreement;
provided, however, that, to the extent stockholders that in the aggregate
shall be entitled to so receive eighty-five percent (85%) of the Closing
Consideration, as adjusted, shall not have entered into such
Indemnification Substitution Agreement, this condition shall be deemed
satisfied provided that Seller agrees that it will continue to hold, and
will not distribute until at least the end of the period specified in
Section 8.4(i), an amount of the Closing Consideration, as adjusted, equal
to the difference between eighty-five percent (85%) of the Closing
Consideration, as adjusted, and the aggregate Closing Consideration, as
adjusted, that the stockholders entering into such Indemnification
Substitution Agreement shall be entitled to so receive (the
"Indemnification Coverage Gap") until such time as an additional
stockholder or stockholders of the Seller entitled to receive at least an
amount equal to the Indemnification Coverage Gap enter into an escrow
agreement in the form attached hereto as Exhibit D (the "Stockholder Escrow
Agreement").
(d) No Material Adverse Change. Between the date hereof and the Closing
Date, there will not have occurred any event, condition or change
(excluding general economic changes) in the operations, condition
(financial or otherwise) of the Transferred Assets or the Business that has
had, or would be reasonably expected to at a later date have, a Material
Adverse Effect.
(e) Employees. Buyer will be satisfied that Sean Aruda, Ali Bigdeliazari,
Liz Gerald, Martin Bond, Brian Milette, Joanne Regali, Brian Copley,
Michael Onorato and Hamid Nakhaee, as well as two-thirds of the remaining
Hired Employees, shall each have agreed to be employed by Buyer,
Acquisition Sub or their Affiliates.
(f) Master Copy of Software. Seller will have delivered to Buyer a gold
master copy that permits replication of operable copies of each Software
program, in both source code and object code form.
(g) Lien Searches and Releases. Seller will have delivered to Buyer: (i)
personal property and Intellectual Property searches, in a form reasonably
acceptable to Buyer and dated within a reasonable period of time prior to
Closing, listing all recorded Encumbrances or judgments of record affecting
the Transferred Assets and (ii) duly executed documents sufficient, when
filed or recorded, to release any Encumbrances (other than Permitted
Encumbrances) of any third-party or Affiliate with respect to the
Transferred Assets.
(h) Legal Opinion of Seller's Counsel. Choate, Hall & Stewart, counsel to
Seller, will have furnished to Buyer its written opinion, dated the Closing
Date, in form and substance reasonably satisfactory to Buyer and which
shall contain such opinions as are customary. (i) Required Approvals.
Seller will have obtained and delivered to Buyer all Approvals listed on
Schedule 7.2(i), each in a form reasonably acceptable to Buyer.
(j) Additional Closing Deliveries. Seller will have delivered to Buyer the
following:
(i) duly executed bills of sale and other appropriate documents of
transfer, in form and substance reasonably acceptable to Buyer,
transferring to Buyer all tangible personal property included in the
Transferred Assets;
(ii) duly executed assignments, in form and substance reasonably
acceptable to Buyer, transferring to Buyer all Transferred
Intellectual Property;
(iii) subject to the provisions of Sections 2.3, duly executed
assignments or, where necessary, subcontracts, subleases or
sublicenses, in form and substance reasonably acceptable to Buyer,
transferring to Buyer all Assumed Contracts;
(iv) Tax clearance certificates from each U.S. jurisdiction in which
Seller files any corporate Tax Returns (to the extent such
jurisdiction issues such certificates);
(v) a long-form good standing certificate from the Delaware
Secretary of State attesting to the subsistence and good standing of
Seller in such jurisdiction dated no more than three (3) business days
prior to the Closing Date;
(vi) a certificate signed by duly authorized officers of Seller and
dated the Closing Date certifying to Buyer (A) as to the
incumbency and genuineness of the signatures of each officer of Seller
executing this Agreement and any Closing Document on behalf of Seller,
(B) the genuineness of the resolutions (attached thereto) of the board
of directors of Seller authorizing the execution, delivery and
performance of this Agreement and the Closing Documents and Seller's
consummation of the Transaction, and (C) the genuineness of the
resolutions (attached thereto) of the stockholders of Seller
authorizing the execution, delivery and performance of this Agreement
and the Closing Documents and Seller's consummation of the Transaction
and, if applicable, a further certification as to compliance with
Section 228(e) of the Delaware General Corporation Law with a copy of
any notices provided thereunder;
(vii) the certificate contemplated by Section 2.7; and
(viii) such other instruments or documents, in form and substance
reasonably acceptable to Buyer, as may be necessary to effect Closing.
(k) Seller shall have effected the assignment of (i) its OEM Software
License Agreement with Cisco Systems and (ii) its agreement with Signal
Processing Associates to Acquisition Sub.
Section 7.3 Further Conditions to the Obligation of Seller.
The obligation of Seller to effect Closing is subject to the satisfaction
by Buyer or Acquisition Sub, or waiver by Seller prior to Closing, of each of
the following further conditions:
(a) Representations and Warranties. The representations and warranties of
Buyer and Acquisition Sub contained herein will have been true and correct
in all material respects when made, and will be true and correct as of
Closing as if made as of Closing (except that representations and
warranties that are made as of a specific date need be true and correct
only as of such date and except that representations and warranties which
are qualified as to materiality shall be true and correct in all respects
as made and not subject to a double materiality standard), and Seller will
have received a certificate to such effect dated the Closing Date and
executed by a duly authorized officer of Buyer.
(b) Covenants. The covenants and agreements of Buyer to be performed prior
to Closing will have been duly performed in all material respects, and
Seller will have received a certificate to such effect dated the Closing
Date and executed by a duly authorized officer of Buyer.
(c) No Material Adverse Change. Between the date hereof and the Closing
Date, there will not have occurred any material adverse change (excluding
general economic changes) in the operations, condition (financial or
otherwise) or results of operations of Buyer.
(d) Payment. Buyer will have caused the Closing Consideration to be
delivered at Closing as provided by Section 2.6(b) and the Indemnity Escrow
to be delivered to the Escrow Agent.
(e) Legal Opinion of Buyer's Counsel. Harter, Secrest & Emery LLP, counsel
for Buyer and Acquisition Sub, will have furnished to Seller its written
opinion, dated as of the Closing Date, in form and substance reasonably
satisfactory to Seller and which shall contain such opinions as are
customary and reasonably acceptable to Seller.
(f) Employment Agreements. Buyer will have delivered to each of Sean Aruda
and Ali Bigdeliazari an agreement setting forth mutually satisfactory terms
of employment with Acquisition Sub.
(g) Additional Closing Deliveries. Buyer will have delivered to Seller the
following:
(i) such duly executed instruments of assumption and other
instruments or documents, in form and substance reasonably acceptable
to Seller, as may be necessary to effect the assumption by Buyer of
the Assumed Liabilities;
(ii) the certificate contemplated by Section 2.7;
(iii) long-form good standing certificates from the Delaware
Secretary of State attesting to the subsistence and good standing of
Buyer and Acquisition Sub in such jurisdiction dated no more than
three (3) business days prior to the Closing Date;
(iv) a certificate signed by duly authorized officers of Buyer and
Acquisition Sub and dated the Closing Date certifying to Seller (A)
as to the incumbency and genuineness of the signatures of each
officer of Buyer and Acquisition Sub executing this Agreement and any
Closing Document on behalf of Buyer or Acquisition Sub, as the case
may be, (B) the genuineness of the resolutions (attached thereto) of
the board of directors of Buyer and Acquisition Sub authorizing the
execution, delivery and performance of this Agreement and the Closing
Documents and Seller's consummation of the Transaction, and (C) the
genuineness of the resolutions (attached thereto) of the stockholder
of Acquisition Sub authorizing the execution, delivery and performance
of this Agreement and the Closing Documents and the Acquisition Sub's
consummation of the Transaction;
(v) such other instruments or documents, in form and substance
reasonably acceptable to Buyer, as may be necessary to effect Closing.
ARTICLE VIII. INDEMNIFICATION
Section 8.1 Indemnification by Seller.
Subject to the further provisions of this Article VIII, Seller will
indemnify, defend and hold harmless Buyer, Buyer's Affiliates, and their
respective directors, officers, attorneys, accountants, agents and employees and
their heirs, successors and assigns (collectively, the "Buyer Indemnified
Parties"), from, against and in respect of all Losses imposed on, sustained,
incurred or suffered by or asserted against any of the Buyer Indemnified
Parties, directly or indirectly relating to or arising out of any of the
following (collectively, "Buyer Losses"):
(a) any fact or circumstance that constitutes a breach of any representation or
warranty of Seller contained herein;
(b) any act or omission that constitutes a breach of any covenant or agreement
of Seller contained herein; or
(c) any Excluded Liability.
Section 8.2 Indemnification by Buyer.
Subject to the further provisions of this Article VIII, Buyer and
Acquisition Sub, jointly and severally, will indemnify, defend and hold harmless
Seller, Seller's Affiliates, and their respective directors, officers,
attorneys, accountants, agents and employees, and their heirs, successors and
assigns (collectively, the "Seller Indemnified Parties"), from, against and in
respect of any Losses imposed on, sustained, incurred or suffered by or asserted
against any of the Seller Indemnified Parties, directly or indirectly relating
to or arising out of any of the following (collectively, "Seller Losses"):
(a) any fact or circumstance that constitutes a breach of any
representation or warranty of Buyer or Acquisition Sub contained herein; or
(b) any act or omission that constitute a breach of any covenant or
agreement of Buyer or Acquisition Sub contained herein; or
(c) any Assumed Liability.
Section 8.3 Disposition of Indemnification Escrow.
Claims for indemnification by Buyer under this Article VIII shall be
satisfied first from the Escrow Amount to the extent and in the manner
contemplated by the Escrow Agreement. The escrow period shall terminate on March
31, 2005 (the "Escrow Period"), provided, however, that, in the event a Claim
Notice has been delivered to the Escrow Agent and Seller prior to the
termination of the Escrow Period in accordance with Section 8.4 and the Claims
or Losses specified in such Claim Notice have not been resolved or satisfied,
then that portion of the Indemnity Escrow necessary to satisfy such unresolved
or unsatisfied Claims or Losses shall remain in the Escrow Fund until such
Claims or Losses have been resolved.
Section 8.4 Indemnification Procedures.
(a) During the Escrow Period, the Buyer Indemnified Parties' Claims for
indemnification under this Article VIII will be satisfied first out of the
Indemnification Escrow, as provided by Section 8.3 of this Agreement. Once
the Indemnification Escrow is exhausted, the Buyer Indemnified Parties may
assert Claims for indemnification directly against Seller, subject to this
Section 8.4.
(b) In the event that an Indemnified Party has a Claim for indemnification
under this Article VIII, or an action, suit or legal proceeding for which
an Indemnifying Party would be liable to an Indemnified Party hereunder is
commenced against an Indemnified Party by a third party, the Indemnified
Party will promptly (but in no event more than twenty (20) days following
commencement of any such third party action, suit or other legal
proceeding) notify the Indemnifying Party and the Escrow Agent (if the
Escrow Agreement is then in effect) of such Claim and the amount or the
estimated amount thereof to the extent then feasible (which estimate will
not be conclusive of the final amount of such Claim) (the "Claim Notice");
provided, however, that no failure or delay by any Indemnified Party in
giving any Claim Notice will relieve any Indemnifying Party from any
obligation or liability under this Agreement, except to the extent that the
Indemnifying Party is prejudiced by such failure or delay.
(c) The Indemnifying Party will have thirty (30) days from the effective
date of the Claim Notice as determined under Section 10.1 of this Agreement
(the "Notice Period") to notify the Indemnified Party (i) whether or not
the Indemnifying Party disputes its liability to the Indemnified Party
hereunder with respect to such Claim, and (ii) in the case of a litigated
Claim, whether or not it desires to defend the Indemnified Party against
such litigated Claim. All reasonable costs and expenses incurred by the
Indemnifying Party in defending such litigated Claim and all reasonable
costs and expenses of the Indemnified Party incurred prior to the
Indemnifying Party assuming such defense will be a Liability of, and will
be paid by, the Indemnifying Party.
(d) Except as provided in Section 8.4(e) of this Agreement, in the event
that the Indemnifying Party notifies the Indemnified Party within the
Notice Period that it desires to defend the Indemnified Party against a
litigated Claim, the Indemnifying Party will have the right so to defend
the Indemnified Party by appropriate proceedings with counsel of the
Indemnifying Party's choosing, and will have the sole power to direct and
control such defense. If any Indemnified Party desires to participate in
any such defense it may do so at its sole cost and expense.
(e) If the Indemnifying Party elects not to defend the Indemnified Party
against a litigated Claim, whether by not giving the Indemnified Party
timely notice as provided by Section 8.4(c) of this Agreement or otherwise,
then the Indemnified Party will have the right so to defend the litigated
Claim by appropriate proceedings with counsel of the Indemnified Party's
choosing, and will have the sole power to direct and control such defense.
The portion of such litigated Claim as to which the defense by the
Indemnified Party is unsuccessful (and the reasonable costs and expenses
pertaining to the defense of the entire litigated Claim) will be the
Liability of the Indemnifying Party hereunder. The Indemnified Party will
use commercially reasonable efforts in the defense of all such litigated
Claims subject to the limitations contained in Section 8.4(f) of this
Agreement.
(f) The Indemnified Party will not settle any Claim without the consent of
the Indemnifying Party, which consent will not be unreasonably withheld;
provided, however, that the Indemnifying Party will not settle, compromise
or offer to settle or compromise any Claim on a basis that would result in
the imposition of a consent order, injunction or decree that would restrict
the future activity or conduct of the Indemnified Party or any Affiliate
thereof without the consent of the Indemnified Party or any Affiliate
thereof, which consent may be withheld for any reason.
(g) To the extent that the Indemnifying Party directs, controls or
participates in the defense or settlement of any Litigated Claim, the
Indemnified Party will give the Indemnifying Party and its counsel, during
normal business hours, access to the relevant business records and other
documents, and will permit them to consult with the employees and counsel
of the Indemnified Party.
(h) All amounts paid by Seller or Buyer, as the case may be, under this
Article VIII, and all payments to Buyer out of the Indemnification Escrow,
will be treated as adjustments to the Purchase Price for Tax purposes.
(i) No claim for indemnification under this Article VIII shall be made more
than two (2) years after the Closing Date. This provision shall not
extinguish claims that are made within two (2) years of the Closing Date
but that remain unresolved on or after the date that is two (2) years after
the Closing Date.
Section 8.5 Indemnification Limitations.
(a) No Indemnifying Party shall have any Liability hereunder to indemnify
the Indemnified Party for Buyer Losses or Seller Losses, as applicable,
until the aggregate amount of Buyer Losses or Seller Losses, as applicable,
exceed seventy-five thousand dollars ($75,000) in which event the
Indemnified Party shall be entitled to indemnification for all such Losses.
(b) The aggregate indemnification obligation of Seller or Buyer hereunder
for Buyer Losses or Seller Losses, as applicable, shall not exceed the
amount of the Closing Consideration, as adjusted.
(c) Notwithstanding anything to the contrary contained herein, Seller shall
not have any Liability hereunder (i) for Buyer Losses relating to any
breach of the representations and warranties contained in Section 3.22
(Environmental Matters), except to the extent such Buyer Losses represent
amounts actually incurred by Buyer for the performance of remedial action
or the payment of any fine, penalty or damage award in each case ordered by
Governmental Entity or in reasonable settlement of a claim of noncompliance
with any Environmental Laws asserted by any Governmental Entity or other
third party (and related out-of-pocket expenses), (ii) with respect to
Buyer Losses arising out of the breach of any representation or warranty of
Seller to the extent that Seller has made a corresponding reserve in
accordance with GAAP on the Provisional Balance Sheet, , and (iii) with
respect to consequential damages, special damages, incidental damages,
indirect damages, lost profits, unrealized expectations or other similar
items, nor shall any Buyer Losses be calculated using a "multiplier" or an
similar method having a similar effect.
(d) In determining the foregoing thresholds and in otherwise determining
the amount of any Losses for which an indemnified party is entitled to
assert a claim for indemnification, the amount of any such Losses shall be
determined after deducting therefrom the amount of any third party
recoveries received by the indemnifying party in respect of such Losses.
The amount of Losses shall also take into account third party recoveries
by, the indemnifying party as a result of the matters giving rise to the
Losses. If an indemnification payment is received by an indemnified party
and such indemnified party later receives third party recoveries in respect
of the related Losses, the indemnified party shall immediately repay to the
indemnifying party a sum equal to the lesser of (x) the actual amount of
third party recoveries and (y) the actual amount of the indemnification
payment previously paid by the indemnifying party with respect to such
Losses. Buyer shall use all reasonable efforts to obtain such recoveries
from such third parties and, if requested by Seller, shall deliver evidence
of such efforts.
(e) Absent fraud, the indemnification provided for in this Article VIII
shall be the sole and exclusive remedy available to any party against any
other party for any Claims or Losses.
Article IX.TERMINATION
Section 9.1 Termination.
This Agreement may be terminated at any time prior to Closing as follows:
(a) by mutual agreement of Buyer and Seller;
(b) by either Buyer or Seller if: (i) there is in effect any Law that
prohibits or prevents Closing, (ii) if Closing would violate any order,
decree or judgment of any Governmental Entity; or (iii) if any Governmental
Entity issues any final, non-appeallable order, decree, judgment or ruling
or otherwise attempts to prohibit or prevent the Closing or to modify the
material terms of the Transaction;
(c) by Seller if, as a result of any action or inaction by Buyer or its
Affiliates, Closing has not occurred within thirty (30) days following the
date on which all of the conditions to Closing set forth in Sections 7.1
and 7.2 have become capable of satisfaction (or have been waived);
(d) by Buyer if, as a result of any action or inaction by Seller or its
Affiliates, Closing has not occurred within thirty (30) days following the
date on which all of the conditions to Closing set forth in Sections 7.1
and 7.3 have become capable of satisfaction (or have been waived);
(e) by Buyer upon the occurrence of a Material Adverse Effect; and
(f) by either party, by giving written notice of such termination to the
other party, if Closing has not occurred on or prior to January 16, 2004;
provided, however, that such terminating party is not in material breach of
any of its obligations under this Agreement; and
(g) by Seller, if Seller's board of directors concludes in good faith that
it is necessary for such board to act in a manner consistent with its
fiduciary duty to the stockholders of Seller under applicable law, provided
that, Seller shall reimburse Buyer for its reasonable expenses incurred in
connection with this Agreement (such reasonable expenses not to exceed
three hundred fifty thousand dollars ($350,000) immediately upon
consummation of a Purchase Transaction.
Section 9.2 Effect of Termination.
In the event of the termination of this Agreement, as provided by Section
9.1, this Agreement will thereupon become void and have no effect, and no party
will have any Liability to any other party or their respective Affiliates,
directors, officers or employees, except for the obligations of the parties
contained in this Section 9.2 and in Sections 5.6 (Confidentiality), 5.7 (Public
Disclosure), 10.1 (Notices), 10.5 (Expenses), 10.7 (Governing Law), 10.8
(Alternative Dispute Resolution), 10.9 (Submission to Jurisdiction) and 10.13
(Entire Agreement) (and any related definitional provisions set forth in Article
I), and except that nothing in this Section 9.2 will relieve any party from
Liability for any willful breach of this Agreement that arose prior to such
termination, for which Liability the provisions of Article VIII will remain in
effect in accordance with the provisions and limitations thereof.
Article X. IN GENERAL
Section 10.1 Notices.
All notices or other communications given hereunder will be deemed to have
been duly given and made if in writing and if served by personal delivery upon
the party for whom it is intended, if delivered by registered or certified mail,
return receipt requested, or by a nationally recognized, overnight courier
service, or if sent by facsimile, provided that the facsimile is promptly
confirmed by telephone confirmation thereof, to the party at the address set
forth below, or such other address as may be designated in writing hereafter, in
the same manner, by such party:
If to Buyer: Performance Technologies, Incorporated
205 Indigo Creek Drive
Rochester, New York 14626
Attention: Chief Executive Officer
Fax: (585) 256-0791
with a copy to: Harter, Secrest & Emery LLP
1600 Bausch & Lomb Place
Rochester, New York 14604-2711
Attention: Jeffrey H. Bowen, Esq.
Fax: (585) 232-2152
If to Seller: before Closing:
Mapletree Networks, Inc.
315 Norwood Park South
Norwood, Massachusetts 02062
Attention: Sean Aruda
Fax: (781) 751-2470
after Closing:
P. Eric Krauss
Pilot House Ventures Group, LLC
The Pilot House
Lewis Wharf
Boston, MA 02110
Fax (617) 854-3401
in each case
with a copy to (which shall not constitute notice):
Choate, Hall & Stewart
53 State Street
Boston, Massachusetts 02109-2804
Attention: William C. Rogers, Esq.
Fax: (617) 248-4000
All such notices and other communications shall be deemed to have been
given and received effective as of: (i) in the case of personal delivery, on the
date of such delivery; (ii) in the case of registered or certified mail, return
receipt requested, on the third business day after such mail is postmarked;
(iii) in the case of a nationally recognized, overnight courier service, on the
business day following dispatch; or (iii) in the case of a facsimile, provided
that the facsimile is promptly confirmed by telephone confirmation thereof, on
the date of such delivery.
Section 10.2 Amendment; Waiver.
Any provision of this Agreement may be amended or waived if such amendment
or waiver is in writing and signed, in the case of an amendment, by Buyer and
Seller, or in the case of a waiver, by the party against whom the waiver is to
be effective. No failure or delay by any party in exercising any right, power or
privilege hereunder will operate as a waiver thereof nor will any single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege.
Section 10.3 No Assignment or Benefit to Third Parties.
No party may assign any of its rights or delegate any of its obligations
under this Agreement, by operation of law or otherwise, without the prior
written consent of the other party, and any attempt to assign this Agreement
without such consent will be void and of no force or effect; provided, however,
that Seller may assign its right to receive payments hereunder to its
stockholders. Nothing in this Agreement (except for Section 6.1 and Article
VIII), express or implied, is intended to confer upon any Person other than
Buyer, Acquisition Sub, Seller or the Indemnified Parties, or their respective
permitted successors or permitted assigns, any rights or remedies under or by
reason of this Agreement. Without limiting the generality of the foregoing,
nothing in this Agreement creates any rights in any employees or groups of
employees.
Section 10.4 Survival.
(a) All of the respective representations and warranties of Seller, Buyer
and Acquisition Sub contained in this Agreement will survive Closing and
continue if effect until the date that is two (2) years after the Closing
Date. All of the respective covenants and agreements of Seller, Buyer and
Acquisition Sub contained in this Agreement will survive Closing.
(b) If notice of any claim for indemnification has been timely given in
accordance with Article VIII, then such claim for indemnification, and the
underlying representations, warranties, covenants or agreements, and the
indemnification obligations that are the subject thereof, will survive (but
only for the purpose of the resolution of the matter covered by such
notice) until such time as such claim is finally resolved.
Section 10.5 Expenses.
Except as otherwise expressly provided in Article VIII of this Agreement,
whether or not the Transaction is consummated, all costs and expenses incurred
in connection with this Agreement and the Transactions will be borne by the
party incurring the same.
Section 10.6 Schedules, Exhibits, Etc.
(a) Each Schedule, Exhibit (when and as executed), certificate provided
hereunder and written disclosure required hereby is incorporated by
reference into this Agreement and will be considered a part hereof as if
set forth herein in full; provided, however, that information set forth on
any Schedule, certification or written disclosure constitutes a
representation and warranty of the party providing the same, and not the
mutual agreement of the parties as to the facts therein stated. Unless
otherwise specifically noted herein, the contents of the Schedules will not
vary, change or alter the language or substance of the representations and
warranties contained in this Agreement but will qualify and be deemed a
part hereof. Each Schedule is annexed hereto on the date hereof and, if
Buyer consents, will be updated as necessary or amended on or before the
Closing Date. Unless otherwise specifically noted herein, all Schedules
shall be deemed the sole responsibility, obligation, disclosure and
work-product of Seller.
(b) Each party's rights to indemnification or other remedies provided
hereby based on any breach by the other party (or parties) of its
representations, warranties, covenants and agreements will not be affected
by any investigation conducted with respect to, or any knowledge acquired
(or capable of being acquired) by such party at any time, whether before or
after the execution and delivery of this Agreement or the Closing Date,
with respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant or agreement. The due diligence review
conducted by Buyer and its representatives will not relieve Seller of any
duties concerning its representations, warranties, covenants or agreements
contained in this Agreement or in any Ancillary Agreement.
Section 10.7 Governing Law.
This Agreement will be governed by and construed in accordance with the
Laws of the State of New York without regard to its principles of conflicts of
laws.
Section 10.8 Alternate Dispute Resolution.
If any dispute arises between Buyer and Seller regarding this Agreement,
any Closing Document or the Transaction (other than a dispute relating to
Intellectual Property which the parties reserve all rights to litigate in
accordance with Section 10.9 of this Agreement, or otherwise address as they may
agree at the time such dispute arises), the chief executive officer (or his or
her designee), on behalf of Buyer, and P. Eric Krauss on behalf of Seller, or
their respective designees, will attempt in good faith to resolve the dispute.
If the such Persons have not agreed to a resolution within fifteen (15) days
from the date on which the dispute was first presented to them, either party, by
written notice to the other, may require that the dispute be submitted for
resolution to the chief executive officer (or his or her designee), on behalf of
Buyer, and P. Eric Krauss, on behalf of Seller, or their designees
(collectively, the "Senior Managers"). The Senior Managers will meet, in person
or by other means mutually satisfactory to them, to attempt to resolve the
dispute within fifteen (15) days after reference of the matter to them. If the
Senior Managers reach a decision within such fifteen (15) day period, their
decision will be final and binding on the parties for all purposes. If the
Senior Managers fail to resolve the dispute within such period, Buyer and Seller
may, if they then so agree, refer the matter for arbitration on such terms as
they may then agree or, failing that, proceed to litigation.
Section 10.9 Submission to Jurisdiction.
Each party agrees that it may bring any action or proceeding in respect of
any Claim arising out of or related to Intellectual Property between the
parties, whether in tort or contract or at law or in equity, in the U.S.
District Court for the Western District of New York, sitting in Monroe County,
New York (the "Chosen Court") and, solely in connection with Claims arising out
of or related to Intellectual Property, (a) irrevocably submits to the
jurisdiction of the Chosen Court, (b) waives any objection to laying venue in
any such action or proceeding in the Chosen Court, (c) waives any objection that
the Chosen Court is an inconvenient forum or does not have jurisdiction over any
party, and (d) agrees that service of process in any method specified in Section
10.1 of this Agreement will constitute valid in personam service upon such party
and its permitted successors and permitted assigns in any action or proceeding
with respect to any matter as to which it has submitted to jurisdiction
hereunder. EACH PARTY HEREBY ACKNOWLEDGES THAT THIS IS A COMMERCIAL TRANSACTION,
THAT THE FOREGOING PROVISIONS FOR CONSENT TO JURISDICTION AND SERVICE OF PROCESS
HAVE BEEN READ, UNDERSTOOD AND VOLUNTARILY AGREED TO BY SUCH PARTY AND THAT BY
AGREEING TO SUCH PROVISIONS SUCH PARTY IS WAIVING IMPORTANT LEGAL RIGHTS.
Section 10.10 Remedies Cumulative.
The various rights and remedies herein provided will be cumulative and not
exclusive of any other rights or remedies herein provided or any rights or
remedies provided by Law.
Section 10.11 Inferences.
Inasmuch as this Agreement is the result of negotiations between
sophisticated parties of equal bargaining power represented by counsel, no
inference in favor of or against either party will be drawn from the fact that
any portion of this Agreement has been drafted by or on behalf of such party.
Section 10.12 Severability.
The provisions of this Agreement will be deemed severable and the
invalidity or unenforceability of any provision will not affect the validity or
enforceability of the other provisions hereof. If any provision of this
Agreement, or the application thereof to any Person or any circumstance, is
invalid or unenforceable, (a) a suitable and equitable provision will be
substituted therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision,
and (b) the remainder of this Agreement and the application of such provision to
other Persons or circumstances will not be affected by such invalidity or
unenforceability, nor will such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in any
other jurisdiction.
Section 10.13 Entire Agreement.
This Agreement, including the Exhibits, the Schedules, the Ancillary
Agreements and the other Closing Documents contain the entire agreement between
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters,
including, without limitation, that certain Memorandum of Agreement between
Buyer and Seller dated November 7, 2003.
Section 10.14 Headings.
The heading references herein and any tables of contents, indexes or
similar items hereto are for convenience purposes only, do not constitute a part
of this Agreement, and will not be deemed to limit or affect any of the
provisions hereof.
Section 10.15 Counterparts.
This Agreement may be executed in one or more counterparts, each of which
will be deemed an original, and all of which will constitute one and the same
Agreement.
Section 10.16 Facsimiles.
The parties agree that facsimile copies of signatures shall be deemed
originals for all purposes hereof and that a party may produce such copies,
without the need to produce original signatures, to prove the existence of this
Agreement in any proceeding brought hereunder.
Section 10.17 Stockholder Representative.
The parties agree that if Seller is dissolved after Closing at a time while
Buyer continues to have executory obligations under this Agreement with respect
to the Earn Out Consideration, P. Eric Krauss shall serve as the representative
of Seller's stockholders for the purpose of communicating with Buyer regarding
such matters (the "Stockholder Representative"). Specifically, the function of
the Stockholder Representative shall be to facilitate communications between
Buyer and Seller's stockholders and, if necessary, to receive and distribute
payments due to Seller with respect to the Earn Out Consideration. The
Stockholder Representative shall not have any additional liability under this
Agreement by virtue of serving as the Stockholder Representative, nor shall the
Stockholder Representative have any additional ability to bind the other
Stockholders in connection with this Agreement by virtue of serving as the
Stockholder Representative. The Stockholder Representative shall not be liable
for any act done or omitted hereunder as Stockholder Representative while acting
in good faith and in the exercise of reasonable judgment, and any act done or
omitted pursuant to the advice of counsel shall be conclusive evidence of such
good faith. The Stockholder Representative may be changed from time to time upon
not less than ten (10) days' prior written notice to Buyer and upon the
agreement of a majority of Seller's stockholders.
(The signatures of the parties appear on the next page.)
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
BUYER: SELLER:
Performance Technologies, Incorporated Mapletree Networks, Inc.
/s/ Donald L. Turrell /s/ Sean M. Aruda
------------------------------------- -------------------------------------
Signature Signature
Donald L. Turrell Sean M. Aruda
------------------------------------- -------------------------------------
Print Name Print Name
President and Chief Executive Officer Chief Executive Officer
------------------------------------- -------------------------------------
Title Title
ACQUISITION SUB:
PTI Massachusetts Corporation
/s/ Donald L. Turrell
-------------------------------------
Signature
Donald L. Turrell
-------------------------------------
Print Name
President and Chief Executive Officer
-------------------------------------
Title
[Signature Page to Asset Purchase Agreement]
TABLE OF EXHIBITS AND SCHEDULES
Exhibit A Escrow Agreement
Exhibit B Business Plan
Exhibit C Indemnification Substitution Agreement
Exhibit D Stockholder Escrow Agreement
Schedule 1.1 Approvals
Schedule 2.1(a)(i) Transferred Intellectual Property: Software;
Property, Domain Names, Etc.
Schedule 2.1(a)(ii) Transferred Intellectual Property: Patents
Schedule 2.1(a)(iii) Transferred Intellectual Property:
Trademarks
Schedule 2.1(b) Transferred Intellectual Property: Products
Schedule 2.1(c)(i) Assumed Contracts: License Agreements
Schedule 2.1(c)(ii) Assumed Contracts: Other
Schedule 2.1(d) Transferred Assets: Inventory
Schedule 2.1(k) Transferred Assets: Other
Schedule 2.2(i) Excluded Assets: Other
Schedule 2.6(b)(ii) Accounts Payable
Schedule 3.1 Foreign Qualifications
Schedule 3.7(a) Financial Statements
Schedule 3.7(b) Certain Liabilities
Schedule 3.8 Permitted Encumbrances
Schedule 3.9(b) Condition of Transferred Assets
Schedule 3.9(c) Inventory: Certain Software and Products
Schedule 3.9(d) Prepaids and Security Deposits
Schedule 3.11 Litigation and Claims
Schedule 3.12(a) Intellectual Property: Ownership and Rights
Schedule 3.12(c) Intellectual Property: Infringement
Schedule 3.12(d) Intellectual Property: Software: Exceptions
Schedule 3.12(e) Intellectual Property: Patents and
Trademarks: Exceptions
Schedule 3.12(f) Intellectual Property: Products Exceptions
Schedule 3.12(h) Intellectual Property: Copyright Notices
Schedule 3.12(i) Intellectual Property: Trade Secret
Protection Program
Schedule 3.14(a) Licenses to Third Parties
Schedule 3.14(b) Third Party Components in Intellectual
Property
Schedule 3.15 Third Party Interests in Intellectual
Property
Schedule 3.16 Major Vendors and Customers
Schedule 3.18 Warranties
Schedule 3.19 Tax Matters
Schedule 3.20(a) Employment Matters
Schedule 3.21(a) Employee Benefits: Plans
Schedule 3.22 Environmental Matters
Schedule 3.23 Insurance
Schedule 3.24 Subsequent Changes
Schedule 3.25 Related-Party Transactions
Schedule 3.26 Accounts Receivable
Schedule 5.2 Conduct of the Business: Exceptions
Schedule 6.1(a)(i) Applicable Employees
Schedule 6.1(a)(ii) Hired Employees
Schedule 7.2(i) Required Approvals
Illustration A Adjustments in Sections 2.6(b), (c) and (e)