Resources
Business Contracts
MCLE Courses
Projects
Friends
|
printer-friendly
Sample Business Contracts
Home: Sample Business Contracts:
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
THIS AMENDED AND RESTATED ASSET PURCHASE AGREEMENT (the "Agreement"), is
made and entered into as of September 10, 2001, by and among Palm, Inc., a
Delaware corporation ("Parent"), ECA Subsidiary Acquisition Corporation, a
Delaware corporation and an indirect wholly owned Subsidiary of Parent
("Buyer"), and Be Incorporated, a Delaware corporation ("Seller").
RECITALS
A. Parent, Buyer and Seller are parties to that certain Asset Purchase
Agreement dated as of August 16, 2001 (the "Existing Agreement Date"), which
provides for the purchase by Buyer from Seller, and the sale by Seller to
Buyer, of substantially all of the assets relating to, required for, used in or
otherwise constituting the Products (as defined therein), in exchange for
shares of common stock of Parent, the assumption of certain liabilities
relating to the Products and the other consideration set forth therein (the
"Existing Agreement").
B. Concurrently with the execution and delivery of the Existing Agreement,
as a material inducement to Parent and Buyer to enter into the Existing
Agreement, selected Key Employees (as defined below) of Seller entered into
non-competition agreements, substantially in the form attached thereto as
Exhibit A (the "Non-Competition Agreements"), with Parent, each of which shall
become effective as of the Closing Date (as defined therein).
C. Concurrently with the execution and delivery of the Existing Agreement,
as a material inducement to Parent and Buyer to enter into the Existing
Agreement, certain stockholders of Seller executed and delivered stockholder
support agreements, substantially in the form attached thereto as Exhibit B
(the "Support Agreements"), to Buyer.
D. It is contemplated that, subject to approval by Seller's stockholders, as
soon as reasonably practicable following the Closing (as defined in the
Existing Agreement) Seller shall wind-up its business operations in accordance
with applicable law.
E. Parent, Buyer and Seller now desire to amend and restate in its entirety
the Existing Agreement, on the terms and conditions set forth in this
Agreement, in order to reflect certain understandings reached by the parties
subsequent to the execution and delivery of the Existing Agreement.
NOW, THEREFORE, in consideration of the covenants, representations,
warranties and mutual agreements set forth herein, and for other good and
valuable consideration, intending to be legally bound hereby, the parties
hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Capitalized Terms. The following capitalized terms shall have the
meanings set forth below:
(a) "Acquired Assets" shall have the meaning set forth in Section 2.1.
(b) "Adjustment Amount" means the aggregate amount of all Prepaid Service
Payments (as defined in Section 5.7) reflected on the Prepaid Service
Payment Update as of the Closing Date.
(c) "Agreement" means this Asset Purchase Agreement together with all
exhibits and schedules hereto.
A-1
<PAGE>
(d) "Allocation" shall have the meaning set forth in Section 3.3.
(e) "Assumed Liabilities" shall have the the meaning set forth in Section
2.9.
(f) "Benefits Liabilities" means any and all claims, debts, liabilities,
commitments and obligations, whether fixed, contingent or absolute, matured
or unmatured, liquidated or unliquidated, accrued or unaccrued, known or
unknown, whenever or however arising, including all costs and expenses
relating thereto arising under law, rule, regulation, permits, action or
proceeding before any Governmental Entity, order or consent decree or any
award of any arbitrator of any kind relating to any Employee Plan,
Employment Agreement, International Employee Plan or otherwise to an
Employee.
(g) "Books and Records" means all papers and records (in paper or
electronic format) in the care, custody, or control of Seller or any of its
Subsidiaries relating to the Acquired Assets including, without limitation,
all purchasing and sales records, customer and vendor lists, accounting and
financial records, product documentation, product specifications, marketing
requirement documents and software release orders.
(h) "Closing" shall have the meaning set forth in Section 3.1.
(i) "Closing Date" shall have the meaning set forth in Section 3.1.
(j) "Collateral Agreements" shall have the meaning set forth in Section
2.4.
(k) "Code" means the Internal Revenue Code of 1986, as amended.
(l) "Continuing Employees" shall have the meaning set forth in Section
7.10.
(m) "Contract" means any mortgage, indenture, lease, contract, covenant
or other agreement, instrument or commitment, permit, concession, franchise
or license.
(n) "Derivative Work" has the meaning ascribed to it under the United
States Copyright Law, Title 17 U.S.C. Sec. 101 et. seq., as the same may be
amended from time to time.
(o) "Designated Employees" means those employees of Seller listed on
Schedule 1.1(o) hereto.
(p) "DOL" shall mean the Department of Labor.
(q) "Effectively Transferred Contract" means a Transferred Contract as to
which no consent to assignment is required or as to which a consent to
assignment is required and has been obtained prior to the Closing.
(r) "Eligible Contracts" means (i) the Internet Appliance OEM License and
Distribution Agreement between Be Incorporated and Sony Electronics Inc.
dated March 13, 2001 (the "Sony Agreement"), (ii) all Contracts of Seller
that contain license grants to Seller that are not Transferred Contracts on
the Existing Agreement Date and (iii) all nondisclosure agreements,
confidentiality agreements or similar Contracts of Seller.
(s) "Employee" shall mean any current or former or retired employee,
consultant or director of Seller or any Subsidiary of Seller in his or her
capacity as such.
(t) "Employee Plan" means any plan, program, policy, practice, contract,
agreement or other material arrangement providing for compensation,
severance, termination pay, deferred compensation, performance awards, stock
or stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether written, unwritten or otherwise, funded or
unfunded, including, without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA, which is or has been
maintained, contributed to, or required to be contributed to, by Seller for
the benefit of any Designated Employee, or with respect to which Seller has
or may have any liability or obligation to any Designated Employee.
(u) "Employment Agreement" means each management, employment, severance,
consulting, relocation, repatriation, expatriation, visas, work permit or
other agreement, contract or understanding between Seller or any Subsidiary
of Seller and any Designated Employee.
A-2
<PAGE>
(v) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
(w) "Excluded Assets" shall have the meaning set forth in Section 2.2.
(x) "Excluded Contracts" shall mean the Contracts listed on Schedule
1.1(x).
(y) "Excluded Liabilities" shall have the meaning set forth in Section
2.10.
(z) "GAAP" means United States generally accepted accounting principles,
as of the Existing Agreement Date.
(aa) "General Assignment" shall have the meaning set forth in Section
2.4.
(bb) "Governmental Entity" means any court, administrative agency or
commission or other federal, state, county, local or foreign governmental
authority, instrumentality, agency or commission.
(cc) "Indemnified Parties" shall have the meaning set forth in Section
9.2.
(dd) "Intellectual Property Rights" means any or all of the following and
all statutory or common law rights throughout the world in, arising out of,
or associated with: (i) all patents and applications (including provisional
applications) therefor and all reissues, divisions, renewals, extensions,
continuations and continuations-in-part thereof (collectively, "Patents");
(ii) all trade secrets that (A) derive independent economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic
value from its disclosure or use, and (B) are the subject of efforts that
are reasonable under the circumstances to maintain its secrecy, and all
other inventions (whether patentable or not, but which are not the subject
of issued or published Patents), proprietary information, and know how
(collectively, "Trade Secrets"); (iii) all works of authorship, copyrights,
mask works, copyright and mask work registrations and applications
(collectively, "Copyrights"); (iv) all trade names, trademarks and service
marks and all trademark and service mark registrations and applications
(collectively, "Trademarks"); (v) all rights in and to databases and data
collections (including knowledge databases, customer lists and customer
databases); and (vi) any similar, corresponding or equivalent rights to any
of the foregoing types of intellectual property.
(ee) "International Employee Plan" means each Employee Plan that has been
adopted or maintained by Seller or any ERISA Affiliate, whether informally
or formally, or with respect to which Seller or any ERISA Affiliate will or
may have any liability, for the benefit of Employees who perform services
outside the United States.
(ff) "IRS" shall mean the Internal Revenue Service.
(gg) "Kernel" means the level of an operating system that contains system
level services, including thread and team management, virtual and protected
memory management, thread scheduling, interprocess communication (including
semaphores, ports and thread messages), input/output management and node
abstraction layer, kernel module management, ELF executable binary loader,
device driver management, power management and CPU-dependent layer. It also
includes built-in components that could otherwise be loaded, including
platform-dependent modules, generic virtual drivers (null and zero drivers),
generic virtual file-systems (root, pipe and device file systems) and the
kernel debugger module.
(hh) "Key Employee" shall have the meaning set forth in Schedule 1.1(hh).
(ii) "Licensed Intellectual Property" means all Intellectual Property
Rights that, immediately after the sale and assignment of the Transferred
Intellectual Property Rights and other Acquired Assets from Seller to Buyer
occurs, Seller or any of its Subsidiaries has the right to license to the
extent provided in Section 4.1, without breaching any Contract, without
infringing any other Person's Intellectual Property Rights, and without
payment of any royalty, fee or other amount as a result of such license to
Buyer (unless Buyer assumes the obligation to pay such royalty, fee or other
amount).
(jj) "Lien" means, with respect to any asset or right, any mortgage,
lien, pledge, charge, security interest, claim, equity encumbrance,
restriction on transfer, conditional sale or other title retention device or
A-3
<PAGE>
arrangement (including, without limitation, a capital lease), transfer for
the purpose of subjection to the payment of any indebtedness, restriction on
the creation of any of the foregoing, or encumbrance of any kind whatsoever;
provided, however, that the term "Lien" shall not include: (i) statutory
liens for Taxes that are not yet due and payable or are being contested in
good faith by appropriate proceedings and are disclosed in the Seller
Disclosure Schedule or that are otherwise not material; (ii) statutory or
common law liens to secure obligations to landlords, lessors or renters
under leases or rental agreements confined to the premises rented; (iii)
deposits or pledges made in connection with, or to secure payment of,
workers' compensation, unemployment insurance, old age pension or other
social security programs mandated by applicable law; (iv) statutory or
common law liens in favor of carriers, warehousemen, mechanics and
materialmen, to secure claims for labor, materials or supplies and other
like liens; (v) restrictions on transfer of securities imposed by applicable
state and federal securities laws; and (vi) contractual restrictions on
transfer of contractual rights.
(kk) "Loss" and "Losses" shall have the meanings set forth in Section
9.2.
(ll) "Material Adverse Effect" means any (i) change in or effect on the
Acquired Assets, taken as a whole, that is materially adverse to the
Acquired Assets, taken as a whole, or (ii) circumstance, change or event
that materially impairs Buyer's ability to make, use, sell, license,
distribute, market, build, modify, debug and operate the current version or
release of the Products in substantially the same manner as Seller prior to
the Existing Agreement Date (excluding any effect on Buyer's ability to do
the foregoing caused by the absence of the items licensed under the Excluded
Contracts or Non-Transferred Licenses or any facts and circumstances unique
to Buyer).
(mm) "Non-Transferred Licenses" shall mean license agreements granting
licenses to Seller that are Transferred Contracts but which do not become
Effectively Transferred Contracts.
(nn) "Offer Letter" shall have the meaning set forth in Section 7.10.
(oo) "Object Code" means computer software, substantially or entirely in
binary form, which is intended to be directly executable by a computer after
suitable processing and linking but without the intervening steps of
compilation or assembly.
(pp) "Pension Plan" means each Seller Employee Plan which is an "employee
pension benefit plan," within the meaning of Section 3(2) of ERISA.
(qq) "Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as
any syndicate or group of any of the foregoing.
(rr) "Prepaid Service Payment Update" shall have the meaning set forth in
Section 7.14.
(ss) "Platform Business" means the business of developing, marketing,
licensing or distributing operating systems software and associated software
components and software development tools for portable, handheld and
wireless solutions, and personal information management (PIM) applications
designed to run on such operating systems.
(tt) "Products" means any products of Seller or any of its Subsidiaries
(including products under development) listed on Schedule 1.1(tt).
(uu) "PTO" means the United States Patent and Trademark Office.
(vv) "Registered Intellectual Property" means all United States,
international and foreign: (i) Patents; (ii) registered Trademarks and
applications for Trademarks, including intent-to-use applications; (iii)
registered Copyrights and applications for Copyrights; and (iv) any other
Intellectual Property Rights that are the subject of an application,
certificate, filing, registration or other document issued, filed with or
recorded by any Governmental Entity.
(ww) "Software" means computer software and code, including assemblers,
applets, compilers, Source Code, Object Code, data (including image and
sound data), development tools, design tools and user interfaces, in any
form or format, however fixed, including Source Code listings and related
documentation.
A-4
<PAGE>
(xx) "Source Code" means computer software code which may be printed out
or displayed in human readable form, including related programmer comments
and annotations, help text, data and data structures, instructions, and
procedural, object-oriented and other code which may be printed out or
displayed in human readable form.
(yy) "Stock Consideration" means that number of shares of Parent's common
stock, rounded to the nearest number of whole shares (with 0.5 being rounded
up), equal to the quotient determined by dividing (A) $11,000,000 minus the
Adjustment Amount by (B) the opening price of Parent's common stock as
quoted on the Nasdaq National Market on the Closing Date; provided, however,
that the number of shares of Parent's common stock comprising the Stock
Consideration shall be increased above such number or decreased below such
number to the extent provided in Section 7.15.
(zz) "Subsidiary" means, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing
similar functions are at any time directly or indirectly owned by such
Person.
(aaa) "Supplemental Transferred Contracts" means any Eligible Contract of
Seller which becomes a Transferred Contract in accordance with Section 7.26,
in addition to the Transferred Contracts listed on Schedule 1.1(eee).
(bbb) "Tangible Assets" means the tangible assets listed on Schedule
1.1(bbb); provided, however, that Tangible Assets shall not include any
tangible manifestation of Software that is delivered pursuant to a written
agreement or protocol agreed to by Buyer and Seller providing for the remote
electronic transmission of such Software, except for documentation and
manuals.
(ccc) "Tax" and "Taxes" shall mean 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 and any obligation under any agreement
or arrangement with any other person with respect to such amounts and
including any liability for taxes of a predecessor entity.
(ddd) "Third Party Software" means any Software owned by a third party or
in the public domain, including open source Software, public source
Software, or freeware, or any modification or Derivative Work thereof, and
also including any version of any Software licensed pursuant to any GNU
general public license or limited general public license, in each case that
is used in, incorporated into, or integrated or bundled with the current
released version of the Products and any more recent versions thereof
(whether or not released or completed) or Transferred Technology.
(eee) "Transferred Contracts" means those Contracts listed on Schedule
1.1(eee) as of the Existing Agreement Date, and shall also include, from and
after the date Eligible Contracts become Supplemental Transferred Contracts
in accordance with Section 7.26, any such Supplemental Transferred
Contracts.
(fff) "Transferred Intellectual Property Rights" means (i) all
Intellectual Property Rights (other than Trademarks) owned by Seller or any
of its Subsidiaries; and (ii) the Transferred Trademarks.
(ggg) "Transferred Technology" means
(i) the items listed on Schedule 1.1(ggg); and
(ii) any other Source Code and other Software, materials and
information (including development software, development documentation,
compilers, interpreters, system build software, build scripts, test
suites, testing tools and documentation, test scripts, bug databases,
support tools, revision control systems and environments) that are used
by Seller or any of its Subsidiaries to, or that Seller or any of its
Subsidiaries has and are reasonably necessary to, build, modify, debug
and operate the current
A-5
<PAGE>
release or version of the Products, and any more recent versions thereof
(whether or not released or completed), which Seller has the right to
deliver and disclose to Buyer without breaching any Contract or
infringing any other Person's Intellectual Property Rights;
provided, however, that Transferred Technology shall not include any
tangible manifestation of Software that is delivered pursuant to a written
agreement or protocol agreed to by Buyer and Seller providing for the remote
electronic transmission of such Software, except for documentation and
manuals.
(hhh) "Transferred Trademarks" means the Product names and other
Trademarks, if any, listed on Schedule 1.1(hhh).
1.2 Construction.
(a) For purposes of this Agreement, whenever the context requires: the
singular number will include the plural, and vice versa; the masculine
gender will include the feminine and neuter genders; the feminine gender
will include the masculine and neuter genders; and the neuter gender will
include the masculine and feminine genders.
(b) Any rule of construction to the effect that ambiguities are to be
resolved against the drafting party will not be applied in the construction
or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including" and
variations thereof will not be deemed to be terms of limitation, but rather
will be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement to
"Articles," "Schedules," "Sections" and "Exhibits" are intended to refer to
Articles, Schedules, Sections and Exhibits to this Agreement.
(e) The headings in this Agreement are for convenience of reference only,
will not be deemed to be a part of this Agreement, and will not be referred
to in connection with the construction or interpretation of this Agreement.
ARTICLE 2
PURCHASE AND SALE
2.1 Purchase and Sale of Assets. On the Closing Date, and subject to the
terms and conditions set forth in this Agreement, but subject to Section 2.2,
Seller will sell, convey, transfer and assign to Buyer, and Buyer will purchase
from Seller, all of Seller's right, title and interest in and to all of the
following assets, free and clear of any and all Liens (collectively, the
"Acquired Assets"):
(a) the Tangible Assets;
(b) the Transferred Intellectual Property Rights;
(c) all goodwill of Seller or any of its Subsidiaries appurtenant to the
Transferred Trademarks;
(d) the Transferred Technology (for avoidance of doubt, with respect to
portions of the Transferred Technology that are owned by Persons other than
Seller or its Subsidiaries, the rights in such portions of the Transferred
Technology to be transferred and assigned to Buyer are the rights of Seller
and its Subsidiaries under the Effectively Transferred Contracts as
described in clause (e) below);
(e) all rights of Seller or any of its Subsidiaries under the Effectively
Transferred Contracts, other than payment obligations under such Transferred
Contracts (including accounts receivable) earned by Seller or any of its
Subsidiaries as a result of performance by Seller or any of its Subsidiaries
prior to the Closing Date; and
A-6
<PAGE>
(f) all rights to recover past, present and future damages for the
breach, infringement or misappropriation, as the case may be, of any of the
Transferred Intellectual Property Rights and Effectively Transferred
Contracts (other than payment obligations under such Transferred Contracts).
2.2 Excluded Assets. The parties expressly acknowledge and agree that
notwithstanding anything to the contrary in this Agreement, the Acquired Assets
and Transferred Contracts do not include, and Seller does not have and shall be
under no obligation to sell, assign or otherwise transfer to Buyer any of
Seller's fixed assets (other than Tangible Assets), cash and cash equivalents
or receivables, the Sony Agreement, the Excluded Contracts, or any other
assets, claims, causes of action, contracts, licenses or agreements set forth
on Schedule 2.2 hereto, or any other assets, claims, causes of action,
contracts, licenses or agreements not included within the Acquired Assets and
Transferred Contracts as defined herein (collectively, the "Excluded Assets"),
which Excluded Assets shall remain for all purposes the properties and assets
of Seller.
2.3 Delivery of Acquired Assets. At the Closing, Seller shall deliver to
Buyer all of the Tangible Assets and Transferred Technology. Without limiting
the foregoing, all Software included in the Transferred Technology shall, at
Buyer's request, be delivered to Buyer by electronic means.
2.4 Assignments. At the Closing, Seller shall deliver to Buyer, duly
executed by Seller, and Seller shall deliver to Buyer, duly executed by Buyer:
(i) an Assignment and Assumption Agreement and Bill of Sale substantially in
the form of Exhibit C hereto (the "General Assignment"); (ii) the copyright
registrations and assignments required pursuant to Section 2.5, the patent
assignments required pursuant to Section 2.6 and the trademark assignments
required pursuant to Section 2.7; and (iii) such other instruments of
conveyance, assignment and transfer as Buyer may reasonably request in order to
vest in Buyer good and valid title in and to the Acquired Assets (the General
Assignment and the other instruments referred to in clauses (i), (ii) and (iii)
being collectively referred to herein as the "Collateral Agreements").
2.5 Transfer of Product Software Copyrights. For each Copyright included in
the Transferred Intellectual Property Rights for which Seller has filed a
copyright registration with the United States Copyright Office, Seller shall
deliver to Buyer at Closing an assignment, on a form reasonably acceptable to
Buyer, to record the transfer of such copyright to Buyer in the United States
Copyright Office. If Seller has not registered the copyright in a Product prior
to the Closing Date, Seller shall deliver to Buyer at the Closing an
application, on the applicable form, to register such copyright in each Product
with the United States Copyright Office.
2.6 Transfer of Patent Rights. For each of Seller's Patents included in the
Transferred Intellectual Property Rights, Seller shall deliver to Buyer at
Closing an assignment in form reasonably acceptable to Buyer to evidence the
transfer of such Patents to Buyer. Such assignment shall specify Buyer as the
owner by assignment of such Patents.
2.7 Transfer of Trademarks. For each of the Transferred Trademarks, Seller
shall deliver to Buyer at Closing an assignment in form reasonably acceptable
to Buyer to evidence the transfer of such Trademarks to Buyer. Such assignment
shall specify Buyer as the owner by assignment of such Trademarks.
2.8 Transferred Contracts. At the Closing, Seller shall deliver to Buyer all
of the Transferred Contracts to the extent not previously delivered to Buyer.
2.9 Assumed Liabilities. As of the Closing, Buyer hereby agrees to assume
the following, and only the following (collectively, the "Assumed
Liabilities"): the obligations of Seller or any of its Subsidiaries under the
Transferred Contracts, in each case solely to the extent such obligations arise
from and after the Closing Date; provided, however, that notwithstanding the
foregoing, Buyer shall be responsible for liabilities that arise solely out of
its ownership or operation of the Acquired Assets or its performance of the
Transferred Contracts on or subsequent to the Closing Date. As of the Closing,
Parent shall be deemed to guarantee the obligations of Buyer under the Assumed
Liabilities.
A-7
<PAGE>
2.10 Excluded Liabilities. Except for the Assumed Liabilities, Buyer is not
assuming any other debt, liability, duty or obligation, whether known or
unknown, fixed or contingent, of Seller or any of its Subsidiaries (the
"Excluded Liabilities"). Without limiting the foregoing, all liabilities of
Seller and its Subsidiaries, including any liabilities for Taxes, arising from
or related to: (i) Seller's operations or the operation of any of its
Subsidiaries, whenever arising or incurred, including Seller's or any of its
Subsidiaries' sale or ownership of the Products and Acquired Assets through the
Closing Date; (ii) Seller's or any of its Subsidiaries' termination of any
Contracts that are not Transferred Contracts; (iii) the Sony Agreement, (iv)
the employment or engagement by Seller of employees, agents, consultants or
independent contractors through the Closing Date; or (v) any Benefit
Liabilities, shall be Excluded Liabilities and shall remain the responsibility
of Seller, unless any such liabilities described in this sentence are otherwise
included within the Assumed Liabilities.
ARTICLE 3
CLOSING AND CONSIDERATION
3.1 Closing. The closing of the transactions contemplated by this Agreement
(the "Closing") will take place at the offices of Wilson Sonsini Goodrich &
Rosati, Professional Corporation, in Palo Alto, California at 6:30 a.m., local
time, two (2) business days following the satisfaction or written waiver of the
last of the conditions of Closing as set forth in ARTICLE 8 hereof, or on such
other date as the parties may mutually determine (the "Closing Date").
3.2 Stock Consideration. At the Closing, Parent and Buyer shall cause to be
issued to Seller a duly authorized and issued stock certificate representing
the Stock Consideration, and following the Closing, to the extent that the
Resale Registration Statement is filed with the SEC and the provisions of
Section 7.15 apply, (i) in the case where the number of shares issuable upon
the effectiveness of the Resale Registration Statement is increased pursuant to
Section 7.15(b), Parent and Buyer shall cause to be issued to Seller
immediately upon the effectiveness of the Resale Registration Statement an
additional stock certificate representing the number of any such whole shares
of Parent's common stock required to be issued to Seller in accordance with
such Section, and (ii) in the case where the number of shares issuable upon the
effectiveness of the Resale Registration Statement is decreased pursuant to
Section 7.15(b), Parent and Buyer shall, upon delivery by Seller for
cancellation to Buyer of the original stock certificate issued to Seller, cause
to be issued to Seller immediately upon the effectiveness of the Resale
Registration Statement a replacement stock certificate representing the total
number of shares of Parent's common stock representing the Stock Consideration,
as adjusted in accordance with such Section. In addition, whether at the
Closing (in the event the Form S-4 Registration Statement has been declared
effective under the Securities Act prior to the Closing) or upon the
effectiveness of the Resale Registration Statement (in the event the Form S-4
Registration Statement has not been declared effective under the Securities Act
prior to the Closing), Parent and Buyer shall, at the request of Seller,
deliver such other instruments, coordinate with Parent's transfer agent, and
use commercially reasonable efforts to do and perform such other acts and
things as may be reasonably necessary to enable Seller to immediately sell,
transfer or otherwise liquidate the shares of Parent's common stock
constituting the Stock Consideration in the public markets.
3.3 Allocation of Consideration. The parties hereto intend that the purchase
be treated as a taxable transaction for federal and state income tax purposes.
Prior to the Closing Date, Buyer and Seller shall negotiate in good faith and
determine the allocation of the Stock Consideration among the Acquired Assets
(the "Allocation"). The Allocation shall be conclusive and binding upon Buyer
and Seller for all purposes, and the parties agree that all returns and reports
(including IRS Form 8594) and all financial statements shall be prepared in a
manner consistent with (and the parties shall not otherwise file a Tax return
position inconsistent with) the Allocation unless required by the IRS or any
other applicable taxing authority.
3.4 Transfer Taxes. Buyer and Seller shall each be responsible for fifty
percent (50%) of the aggregate amount of any sales, use, excise or similar
Taxes that may be payable in connection with the sale or purchase of
A-8
<PAGE>
the Acquired Assets and the granting of the licenses hereunder, including any
sales, use, excise or similar transfer Taxes. The parties hereto shall
cooperate with each other and use their reasonable best efforts to minimize the
transfer Taxes attributable to the sale of the Acquired Assets, including but
not limited to the transfer of all Software by remote electronic transmission.
ARTICLE 4
LICENSE TO BUYER
4.1 License of Licensed Intellectual Property. Effective as of the Closing
(and subject to the conditions thereto set forth herein), Seller shall be
deemed to have granted to Buyer under all of the Licensed Intellectual
Property, a royalty-free, fully-paid, world-wide, perpetual, irrevocable,
non-terminable, transferable right and license, with the right to grant and
authorize sublicenses, to fully exercise, use and otherwise exploit the
Licensed Intellectual Property in any manner and without limitation, including
the right and license under Copyrights to copy, create Derivative Works from,
distribute, publicly perform and display and transmit Software products and
other copyrightable works, and under Patent rights to make, have made, use,
sell, offer for sale and import products. To the extent that the foregoing
license is broader in any respect (including, without limitation, the rights
being licensed, the duration and revocability of the license, the geographic
scope of the license, and the transferability of the license) than the license
Seller has the right to grant without breaching any Contract, without
infringing any other Person's Intellectual Property Rights, and without being
required to pay any additional royalty, fee or other amount to any other Person
as a result of such license to Buyer, then the foregoing license will be deemed
to be limited in all such respects to the license Seller has the right to grant
without breaching any Contract, without infringing any other Person's
Intellectual Property Rights, and without being required to pay any royalty,
fee or other amount to any other Person. If, in order to grant the foregoing
license to Buyer with respect to any Licensed Intellectual Property owned by
any Person other than Seller or its Subsidiaries, Seller is required to notify
any such other Person of the license, obtain the approval or consent of any
such other Person, provide a copy of the license agreement to any such other
Person, obtain Buyer's written agreement to any particular term or condition
(each, a "Pass-Through Term"), or comply with any obligation, condition, or
requirement (collectively, "Sublicensing Requirements"), the foregoing license
will be effective with respect to such Licensed Intellectual Property only if
and when (a) Buyer authorizes Seller in writing to comply with such
Sublicensing Requirements, (b) Seller complies with all applicable Sublicensing
Requirements, (c) Buyer agrees in writing to be bound by and to comply with all
applicable Pass-Through Terms, if any, and (d) Buyer pays any royalty, fee or
other amount which is authorized by Buyer and is required to be paid by Seller
as the result of such license to Buyer.
4.2 Bankruptcy. The license granted to Buyer under Section 4.1 is, and shall
otherwise be deemed to be, for purposes of Section 365(n) of the United States
Bankruptcy Code, a license to rights of "Intellectual Property Rights" as
defined thereunder.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as disclosed in the disclosure schedule delivered to Parent and Buyer
on the Existing Agreement Date (the "Seller Disclosure Schedule"), Seller
hereby represents and warrants to Parent and Buyer, as of the Existing
Agreement Date (except to the extent such representations and warranties
address matters as of a particular date or period, in which case such
representations and warranties are made as of such date or period), as follows:
5.1 Organization of Seller.
(a) Except as set forth in Section 5.1(a) of the Seller Disclosure
Schedule, Seller has no Subsidiaries.
A-9
<PAGE>
(b) Seller is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
necessary corporate power and authority: (i) to conduct its business in the
manner in which its business is currently being conducted; (ii) to own and
use its assets in the manner in which its assets are currently owned and
used; and (iii) to perform its obligations under all Contracts by which it
is bound.
(c) Seller is qualified to do business as a foreign corporation, and is
in good standing, under the laws of all jurisdictions where the nature of
its business requires such qualification and where the failure to so qualify
would have a Material Adverse Effect.
(d) Seller has delivered or made available to Buyer a true and correct
copy of the certificate of incorporation (including any certificate of
designations) and bylaws of Seller and similar governing instruments, each
as amended to date (collectively, the "Seller Charter Documents"), and each
such instrument is in full force and effect. Seller is not in violation of
any of the provisions of Seller Charter Documents.
5.2 Authority. Seller has all requisite corporate power and authority to
enter into this Agreement and the Collateral Agreements and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the Collateral Agreements and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of Seller, and, except for approval by
the stockholders of Seller, no further action is required on the part of
Seller, any of its Subsidiaries or any of Seller's stockholders to authorize
the Agreement and the Collateral Agreements and the transactions contemplated
hereby. A vote of the holders of a majority of the outstanding shares of
Seller's common stock is sufficient for Seller's stockholders to approve and
adopt this Agreement and approve the transactions contemplated hereby and the
Dissolution (as defined in Section 7.16). This Agreement and the transactions
contemplated hereby have been approved by the Board of Directors of Seller.
This Agreement has been duly executed and delivered by Seller and, assuming the
due authorization, execution and delivery by Parent and Buyer, constitutes a
valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms, subject to any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to creditors' rights generally or to other equitable remedies.
5.3 No Conflict. The execution and delivery of this Agreement by Seller do
not, and the execution and delivery of the Collateral Agreements by Seller and
the performance of this Agreement and the Collateral Agreements by Seller will
not, (i) conflict with or violate the Seller Charter Documents, (ii) subject to
obtaining the approval and adoption of this Agreement by Seller's stockholders
as contemplated in Section 7.16, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Seller or any of its
Subsidiaries or by which any of their properties is bound or affected, or (iii)
result in any breach of or constitute a default (or an event that with notice
or lapse of time or both would become a default) under, or impair the rights of
Seller or any of its Subsidiaries or alter the rights or obligations of any
third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien on any of
the properties or assets of Seller or any of its Subsidiaries pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise, concession, or other instrument or obligation to which Seller or any
of its Subsidiaries is a party or by which Seller, any of its Subsidiaries or
the Acquired Assets are bound or affected, except with respect to clauses (ii)
and (iii), for the matters set forth on Section 5.3 of the Seller Disclosure
Schedule and for matters the existence of which would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
5.4 SEC Filings; Seller Financial Statements.
(a) Seller has delivered or made available to Parent (through reference
to documents filed by EDGAR or otherwise) accurate and complete copies of
all forms, reports and documents filed by Seller with the Securities and
Exchange Commission ("SEC") since January 1, 2000 (the "Seller SEC
Reports"), which are all the forms, reports and documents required to be
filed by Seller with the SEC since such date. As of their
A-10
<PAGE>
respective dates, the Seller SEC Reports (i) were prepared in accordance and
complied in all material respects with the requirements of the Securities
Act of 1933, as amended (the "Securities Act"), or the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), as the case may be, and the
rules and regulations of the SEC thereunder applicable to such Seller SEC
Reports and (ii) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in Seller SEC Reports (the
"Seller Financials") (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii)
were prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited interim financial statements, as may be
permitted by the SEC on Form 10-Q under the Exchange Act) and (iii) fairly
presented the financial position of Seller as at the respective dates
thereof and the results of Seller's operations and cash flows for the
periods indicated, except that the unaudited interim financial statements
may not contain footnotes and were or are subject to normal and recurring
year-end adjustments. The balance sheet of Seller contained in the Form 10-Q
of Seller filed on August 14, 2001 is hereinafter referred to as the "Seller
Balance Sheet."
(c) Except as disclosed in the Seller Financials, since the date of
Seller Balance Sheet Seller has incurred no liabilities required under GAAP
to be set forth on a consolidated balance sheet (absolute, accrued,
contingent or otherwise), except for liabilities incurred (i) since the date
of the Seller Balance Sheet in the ordinary course of business consistent
with past practices or (ii) pursuant to this Agreement, which liabilities
would not reasonably be expected, individually or in the aggregate, to have
a Material Adverse Effect.
5.5 Transferred Contracts. True and complete copies of all of the
Transferred Contracts as of the Existing Agreement Date have been delivered to
Buyer. Each such Transferred Contract is in full force and effect. None of
Seller, any of its Subsidiaries or, to Seller's knowledge, any other party
thereto is in default or breach under the terms of any such Transferred
Contract and, to the Seller's knowledge, no event or circumstance has occurred
that, with notice or lapse of time or both, would reasonably be expected to
constitute any event of default thereunder.
5.6 Consents. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity or any third
party, including a party to any agreement with Seller or any of its
Subsidiaries, is required by or with respect to Seller or any of its
Subsidiaries in connection with the execution and delivery of this Agreement
and the Collateral Agreements or the consummation of the transactions
contemplated hereby, except for the filing of the Proxy Statement/Prospectus
(as defined in Section 7.15) with the SEC in accordance with the Exchange Act,
and the Consents listed on Section 5.6 of the Seller Disclosure Schedule.
5.7 Support and Service Contracts. Section 5.7 of the Seller Disclosure
Schedule sets forth a true and complete list of all Transferred Contracts
pursuant to which Seller or any of its Subsidiaries is obligated to provide
support, maintenance or other services to third parties following the Existing
Agreement Date, together with the amounts of prepaid fees that are associated
with the executory support, maintenance and other service obligations under
such Transferred Contracts and the portion of such fees attributable to
obligations to be performed subsequent to the Existing Agreement Date (each, a
"Prepaid Service Payment"). Each Prepaid Service Payment is as reflected in the
Books and Records.
A-11
<PAGE>
5.8 No Liquidation, Insolvency, Winding-Up
(a) Except as contemplated by this Agreement, no order has been made or
petition presented, or resolution passed by the board of directors or
stockholders of Seller for the dissolution or winding-up of Seller and there
is not outstanding:
(i) any petition or order for the winding-up of Seller;
(ii) any appointment of a receiver over the whole or part of the
undertaking of assets of Seller;
(iii) any petition or order for administration of Seller;
(iv) any voluntary arrangement between Seller and any of its
creditors;
(v) any assignment for the benefit of Seller's creditors or similar
creditor arrangement or remedy;
(vi) any voluntary petition, involuntary petition or order for relief
with respect to the Seller under the Bankruptcy Code, 11 U.S.C. section
101, et. seq.;
(vii) any distress or execution or other process levied in respect of
Seller which remains undischarged; and
(viii) any unfulfilled or unsatisfied judgment or court order against
Seller.
(b) Seller is not now insolvent, and will not be rendered insolvent by
any of the transactions contemplated by this Agreement. As used in this
section, "insolvent" means either of the following:
(i) at fair valuations, the sum of Seller's debts and other
liabilities, including, without limitation, contingent liabilities, is
greater than all of Seller's assets, provided that (A) such assets are
not to include any rights of Seller or any successor to Seller under any
fraudulent transfer, preference or similar theories to recover Seller's
property that was transferred, concealed or removed, and (B) the
valuation of such assets is to assume that the Closing occurs, but
otherwise is to be based on liquidation values of any assets not being
sold to Buyer under this Agreement (assuming a liquidation within 120
days following the Closing), and
(ii) Seller is not generally paying its debts as they come due
(within the meaning of Section 3439 of the California Civil Code).
(c) Upon occurrence of the transfers of property from Seller to Buyer
under this Agreement, Seller will have adequate capital for any business or
transaction in which Seller is or will be engaged.
(d) Seller has not incurred, does not intend to incur, and does not
reasonably believe it will incur debts beyond its ability to pay as such
debts mature or become due.
(e) Seller intends to and will wind-up its business operations in
accordance with applicable law as soon as reasonably practicable after the
Closing consistent with this Agreement and in a manner providing for full
payment to or adequate provision for all creditors. The parties agree that
notwithstanding anything to the contrary herein, the Dissolution (as defined
herein) shall not mandate that Seller effect the dissolution of its
corporate entity in accordance with Delaware law except to the extent that
the failure to do so would have a Material Adverse Effect or would
materially adversely impact Parent or Buyer.
5.9 Restrictions on Business Activities. There is no agreement (not to
compete or otherwise), commitment, judgment, injunction, order or decree to
which Seller or any of its Subsidiaries is a party which has or could
reasonably have the effect of prohibiting the transactions contemplated by this
Agreement, or which could reasonably have a Material Adverse Effect.
5.10 Title to Properties; Absence of Liens and Encumbrances.
(a) Seller does not own any real property.
(b) Seller has good and valid title to or, in the case of leased
properties and assets, valid leasehold interests in, all of the Acquired
Assets, free and clear of any Liens.
(c) None of the Subsidiaries of Seller has, or will as of the Closing
Date have, any right, title or interest in, or to any of the Acquired Assets
or any of the Transferred Contracts.
A-12
<PAGE>
5.11 Intellectual Property.
(a) Section 5.11(a) of the Seller Disclosure Schedule lists all
Registered Intellectual Property Rights included among the Transferred
Intellectual Property Rights. All such Registered Intellectual Property
Rights are currently in compliance with formal legal requirements (including
payment of filing, examination and maintenance fees and proofs of use), are
valid (except with respect to pending applications for any patents,
trademarks, or other forms of intellectual property, as to which no
representation or warranty concerning validity is made) and subsisting, and
are not subject to any unpaid maintenance fees or taxes or actions. All such
Registered Intellectual Property Rights have been assigned to Seller and
such assignments have been properly recorded prior to the Closing. There are
no pending proceedings or actions before any court or tribunal (including
the PTO or equivalent authority anywhere in the world) related to any such
Registered Intellectual Property Rights.
(b) Each item of Transferred Intellectual Property Rights embodied in or
relating to the Transferred Technology is free and clear of any Liens.
(c) To the extent that any Transferred Intellectual Property Rights
embodied in or relating to the Transferred Technology were originally owned
or created by or for any third party, including any contractor or employee
of Seller and any predecessor of Seller: (i) Seller has a written agreement
with such third party or parties with respect thereto, pursuant to which
Seller has obtained complete, unencumbered and unrestricted ownership and is
the exclusive owner of, all such Transferred Intellectual Property Rights by
valid assignment or otherwise; and (ii) the assignment by Seller to Buyer
hereunder of such Transferred Intellectual Property Rights will not violate
such third party agreements.
(d) Seller has not transferred ownership of, or granted any license of or
right to use that is in effect as of the Existing Agreement Date, or
authorized the retention of any rights to use, any Transferred Intellectual
Property Right embodied in or relating to the Transferred Technology to any
other Person, except for non-exclusive Object Code end-user licenses, and
non-exclusive end-user licenses to immaterial portions of the Source Code,
granted to customers in the ordinary course of business.
(e) The Transferred Technology delivered to Buyer under this Agreement
includes all Source Code, tools, and other Software used by Seller to, or
necessary to, build, modify, debug and operate the current versions or
releases of the Products in substantially the same manner as Seller did so
prior to the Existing Agreement Date, except for those items licensed to
Seller under the Excluded Contracts and the Non-Transferred Licenses which
Seller is prohibited from providing to Buyer under the Excluded Contracts or
the Non-Transferred Licenses. The Acquired Assets and the Licensed
Intellectual Property, along with the Intellectual Property Rights licensed
under the Excluded Contracts or the Non-Transferred Licenses, are sufficient
to make, use, sell, license, distribute and market the current version or
release of the Products in substantially the same manner as Seller did so
prior to the Existing Agreement Date without infringing or misappropriating
any other Person's Intellectual Property Rights. Seller has the right to
deliver all Software and other materials and information delivered to Buyer
under this Agreement without infringing or misappropriating any other
Person's Intellectual Property Rights.
(f) Seller hereby represents and warrants to Parent and Buyer, only as of
the Closing Date, that Section 5.11(f) of the Seller Disclosure Schedule to
be delivered pursuant to Section 7.2(h) will list all Third Party Software
in the Transferred Technology.
(g) No government funding, facilities of a university, college, other
educational institution or research center or funding from third parties was
used in the development of the Transferred Technology.
(h) To the knowledge of Seller, the making, using, selling, licensing and
distribution of the current version or release of the Products by Seller
does not (i) infringe or misappropriate the Intellectual Property Rights of
any Person, or (ii) constitute unfair competition or trade practices under
the laws of any jurisdiction. Seller has not received written notice from
any Person claiming that the making, using, selling, licensing or
distribution of the current versions or releases of the Products infringes
or misappropriates the
A-13
<PAGE>
Intellectual Property Rights of any Person or constitutes unfair competition
or trade practices under the laws of any jurisdiction.
(i) There are no Contracts between Seller and any other Person with
respect to the Acquired Assets, including the Transferred Intellectual
Property Rights, under which there is any pending dispute or (to Seller's
knowledge) threatened dispute regarding the scope of such Contract or
performance under such Contract.
(j) To the knowledge of Seller, no Person is infringing or
misappropriating the Transferred Intellectual Property Rights embodied in or
relating to the Transferred Technology.
(k) Seller has taken all reasonable steps that are required to protect
its rights in the Trade Secrets associated with or related to the
Transferred Technology, and Seller has taken reasonable steps to prevent
misappropriation of any Trade Secrets of any third party.
(l) Except as set forth in Section 5.11(l) of the Disclosure Schedule, no
third party possesses any copy of any Source Code for the Kernel for any
Product. In addition, no third party possesses any copy of any other Source
Code for any Product, other than portions of the Source Code the use of
which by any other Person would not have a Material Adverse Effect.
(m) There is no Third Party Software incorporated in the Kernel for the
current version of any Product.
(n) Seller has and enforces a policy requiring each employee and
consultant of Seller to execute a proprietary rights and confidentiality
agreement substantially in a form that Seller has delivered to Buyer, and
all current and former employees and consultants of Seller or any of its
Subsidiaries who have created or modified in any material respect any of the
Transferred Technology have executed such an agreement, except where the
failure to have obtained such an agreement would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
(o) No Transferred Intellectual Property Rights embodied in or relating
to the Transferred Technology are subject to any proceeding or outstanding
decree, order, judgment, or stipulation that restricts the use, transfer or
licensing thereof or may affect the validity, use, or enforceability
thereof.
(p) To the extent that Seller has distributed or licensed any Product to
an end user pursuant to any form of encryption key, no third party has had
access to any such keys enabling disclosure of such keys to a third party.
5.12 Litigation. There is no action, suit, claim, proceeding or
investigation of any nature pending or (to the knowledge of Seller) threatened
relating to the Products, the Acquired Assets or the Designated Employees as of
the Existing Agreement Date. To the knowledge of Seller, there is no
investigation or other proceeding pending or threatened relating to the
Acquired Assets or the Designated Employees by or before any Governmental
Entity as of the Existing Agreement Date. There are no judgments, orders,
decrees, citations, fines or penalties heretofore assessed against Seller or
any of its Subsidiaries under any foreign, federal, state or local law that
would reasonably have a Material Adverse Effect.
5.13 Brokers' or Finders' Fees. Except as set forth in Section 5.13 of the
Seller Disclosure Schedule, Seller has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
5.14 Tax Matters
(a) Tax Returns and Audits.
(i) To the extent failure to do so could reasonably have a Material
Adverse Effect or would materially adversely impact Parent or Buyer,
Seller and each of its Subsidiaries has prepared and timely filed all
required federal, state, local and foreign returns, estimates,
information statements and
A-14
<PAGE>
reports ("Returns") relating to any and all Taxes concerning or
attributable to Seller, its Subsidiaries or the operations of Seller and
its Subsidiaries and such Returns are true and correct and have been
completed, in all material respects, in accordance with applicable law.
(ii) To the extent failure to do so could reasonably have a Material
Adverse Effect or would materially adversely impact Parent or Buyer,
Seller and each of its Subsidiaries (A) has paid all Taxes shown to be
due on such returns and (B) has withheld with respect to its employees
all federal, state and foreign income taxes and social security charges
and similar fees, Federal Insurance Contribution Act, Federal
Unemployment Tax Act and other Taxes required to be withheld.
(iii) To the extent failure to do so could reasonably have a Material
Adverse Effect or would materially adversely impact Parent or Buyer,
neither Seller nor any of its Subsidiaries has been delinquent in the
payment of any Tax, nor is there any Tax deficiency outstanding,
assessed or proposed against Seller, nor has Seller executed any waiver
of any statute of limitations on or extending the period for the
assessment or collection of any Tax.
(iv) No audit or other examination of any Return of Seller or any of
its Subsidiaries is presently in progress, nor has Seller or any of its
Subsidiaries been notified in writing of any request for such an audit
or other examination pursuant to which an assessment could reasonably
have a Material Adverse Effect or would materially adversely impact
Parent or Buyer.
(v) Seller is not aware of, and knows no factual basis for the
assertion of any material claim for Taxes for which Buyer would become
liable as a result of the transactions contemplated by this Agreement
and the Collateral Agreements.
5.15 Power of Attorney. There are no outstanding powers of attorney executed
on behalf of Seller in respect of the Acquired Assets except as granted to
Buyer hereunder.
5.16 Compliance with Laws. Seller and each of its Subsidiaries have complied
with, are not in violation of, and have not received any notices of violation
with respect to, any foreign, federal, state or local statute, law or
regulation with respect to the sale and distribution of the Products, or
otherwise with respect to the Acquired Assets, except for any non-compliance or
violations the existence of which would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
5.17 Product Warranties. Except for any of the following the existence of
which would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect, (i) each Product manufactured, sold, leased,
licensed or delivered by Seller has been done so in conformity with all
applicable contractual commitments and all express and implied warranties, and
(ii) Seller has no liability for replacement or repair thereof or other damages
in connection therewith.
5.18 Employee Matters.
(a) Pension Plan. Seller has never maintained, established, sponsored,
participated in, or contributed to, any Pension Plan which is subject to
Title IV of ERISA or Section 412 of the Code.
(b) Scheduled Employees. Concurrent with the execution of the Existing
Agreement, Seller delivered to Buyer a written statement that contains the
names of individuals (including dependents) (i) currently receiving COBRA
continuation coverage under any heath plan of Seller, (ii) terminated within
115 days prior to the Existing Agreement Date, (iii) employed by Seller as
of the date immediately preceding the Existing Agreement Date and who will
be terminated in connection with the acquisition, and (iv) who are
Designated Employees.
(c) Multiemployer and Multiple Employer Plans. At no time has Seller
contributed to or been obligated to contribute to any Multiemployer Plan.
Seller has never maintained, established, sponsored, participated in, or
contributed to any multiple employer plan, or to any plan described in
Section 413 of the Code.
A-15
<PAGE>
(d) No Post-Employment Obligations. Except as set forth in Section
5.18(d) of the Seller Disclosure Schedule, no Employee Plan provides, or
reflects or represents any liability to provide retiree health to any person
for any reason, except as may be required by COBRA or other applicable
statute.
(e) Effect of Transaction.
(i) Except as set forth on Section 5.18(e) of the Seller Disclosure
Schedule, the execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event
under any Employee Plan or Employment Agreement that will or would
reasonably result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with
respect to any Employee.
(f) Health Care Compliance. Neither Seller nor any ERISA Affiliate is in
violation, in any material respect, of the health care continuation
requirements of COBRA, the requirements of the Family Medical Leave Act of
1993, as amended, the requirements of the Health Insurance Portability and
Accountability Act of 1996, the requirements of the Women's Health and
Cancer Rights Act of 1998, the requirements of the Newborns' and Mothers'
Health Protection Act of 1996, or any amendment to each such act, or any
similar provisions of state law applicable to its Employees.
(g) Employment Matters. Seller: (i) is in compliance in all respects with
all applicable foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees;
(ii) has withheld and reported all amounts required by law or by agreement
to be withheld and reported with respect to wages, salaries and other
payments to Employees; (iii) is not liable for any arrears of wages or any
taxes or any penalty for failure to comply with any of the foregoing; and
(iv) is not liable for any payment to any trust or other fund governed by or
maintained by or on behalf of any governmental authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice).
(h) Labor. No work stoppage or labor strike against Seller is pending or,
to the knowledge of Seller, threatened involving any of the Designated
Employees. Seller does not know of any activities or proceedings of any
labor union to organize any of the Designated Employees. Except as set forth
in Section 5.18(h) of the Seller Disclosure Schedule, there are no actions,
suits, claims, labor disputes or grievances pending, or, to the knowledge of
Seller, threatened relating to any labor, safety or discrimination matters
involving any Designated Employee, including, without limitation, charges of
unfair labor practices or discrimination complaints, which, if adversely
determined, would, individually or in the aggregate, result in any material
liability to Seller. Except as set forth in Section 5.18(h) of the Seller
Disclosure Schedule, Seller is not a party to, or bound by, any collective
bargaining agreement or union contract with respect to any of the Designated
Employees and no collective bargaining agreement is currently being
negotiated by Seller.
5.19 International Employee Plan. Seller does not now, nor has it in the
last two years had the obligation to, maintain, establish, sponsor, participate
in, or contribute to any International Employee Plan.
5.20 Business Changes. From June 30, 2001 through the Existing Agreement
Date, except as otherwise contemplated by this Agreement, or as set forth in
Section 5.20 of the Seller Disclosure Schedule:
(a) There have been no changes in the condition (financial or otherwise),
business, net worth, assets, operations, obligations or liabilities of
Seller which, in the aggregate, have had or may be reasonably expected to
have a Material Adverse Effect.
(b) Seller has not mortgaged, pledged, or otherwise encumbered any of the
Acquired Assets.
(c) Seller has not sold, assigned, licensed, leased, transferred or
conveyed, or committed itself to sell, assign, license, lease, transfer or
convey, any of the Acquired Assets except for non-exclusive licenses entered
into in the ordinary course of business.
A-16
<PAGE>
(d) There has been no destruction of, damage to or loss of any of the
Acquired Assets.
(e) There has been no notice of any claim or potential claim of ownership
by any Person other than Seller or its Subsidiaries of the Transferred
Technology, the Transferred Intellectual Property Rights, the Licensed
Intellectual Property Rights, or the Licensed Technology or of infringement
by Buyer or its Subsidiaries of any other Person's Intellectual Property
Rights.
(f) There has been no dispute, proceeding, litigation, arbitration or
mediation pending or (to the knowledge of Seller) threatened against Seller
or any of its Subsidiaries related to the Acquired Assets.
(g) There has been no event or condition of any character that has had or
is reasonably likely to have a Material Adverse Effect.
(h) There has been no agreement by Seller or any of its Subsidiaries or
any employees, agents or affiliates of Seller or its Subsidiaries to do any
of the things described in the preceding clauses (a) through (g) (other than
negotiations with Parent and Buyer and their representatives regarding the
transactions contemplated by this Agreement).
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Except as disclosed in the Disclosure Schedule delivered to Seller on the
Existing Agreement Date (the "Parent Disclosure Schedule"), Parent and Buyer
hereby jointly and severally represent and warrant to Seller, as of the
Existing Agreement Date (except to the extent such representations and
warranties address matters as of a particular date or period, in which case
such representations and warranties are made as of such date or period), as
follows:
6.1 Organization, Good Standing and Qualification. Each of Parent and Buyer
is a corporation duly organized, validly existing, and in good standing under
the laws of Delaware. Buyer is a wholly owned Subsidiary of El Camino
Acquisition Corporation, which is in turn a wholly owned Subsidiary of Parent.
6.2 Authority. Each of Parent and Buyer has all requisite corporate power
and authority to enter into this Agreement and the Collateral Agreements and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Collateral Agreements and the consummation
of the transactions contemplated hereby and thereby have been duly authorized
by all necessary corporate action on the part of Parent and Buyer. This
Agreement and the Collateral Agreements have been duly executed and delivered
by Parent and Buyer and constitute the valid and binding obligations of Parent
and Buyer, enforceable in accordance with their terms, except as such
enforceability may be limited by principles of public policy and subject to the
rules of law governing specific performance, injunctive relief or other
equitable remedies.
6.3 No Conflict. Neither the execution and delivery of this Agreement and
the Collateral Agreements, nor the consummation of the transactions
contemplated hereby and thereby, will conflict with, or result in any violation
of, or default under (with or without notice or lapse of time, or both) (i) any
provision of the certificate of incorporation, as amended, and bylaws, as
amended, of Parent or Buyer, (ii) any Contract to which Parent or Buyer or any
of their respective properties or assets are subject and which has been filed
as an exhibit to Parent's filings under the Securities Act or the Exchange Act,
or (iii) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent or Buyer or their respective properties or
assets, except in each case where such conflict, violation or default will not
have a material adverse effect on Parent or Buyer or will not affect the
legality, validity or enforceability of this Agreement or the Collateral
Agreements.
6.4 SEC Filings. Parent has delivered or made available to Seller (through
reference to documents filed by EDGAR or otherwise) accurate and complete
copies of all forms, reports and documents filed by Parent with
A-17
<PAGE>
the SEC since March 2, 2000 (the "Parent SEC Reports"), which are all the
forms, reports and documents required to be filed by Parent with the SEC since
such date. As of their respective dates, the Parent SEC Reports (i) were
prepared in accordance and complied in all material respects with the
requirements of the Securities Act, or the Exchange Act, as the case may be,
and the rules and regulations of the SEC thereunder applicable to such Parent
SEC Reports and (ii) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. None of
Parent's Subsidiaries is required to file any forms, reports or other documents
with the SEC.
6.5 Consents. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, or any third
party is required by or with respect to Parent or Buyer in connection with the
execution and delivery of this Agreement and the Collateral Agreements or the
consummation of the transactions contemplated hereby, except for such consents,
waivers, approvals, orders, authorizations, registrations, declarations and
filings which, if not obtained or made, would not have a material adverse
effect on Parent or Buyer.
6.6 Brokers' and Finders' Fees. Neither Parent nor Buyer has incurred, nor
will they incur, directly or indirectly, any liability for brokerage or
finders' fees or agents' commissions or any similar charges in connection with
this Agreement or the transactions contemplated hereby.
ARTICLE 7
COVENANTS AND AGREEMENTS
7.1 Access. During the period commencing on the Existing Agreement Date and
continuing through the earlier of the Closing Date or the termination of this
Agreement, Seller, upon reasonable prior notice from Parent or Buyer to Seller,
and subject to the Confidentiality Agreement, will (a) afford to Buyer and its
representatives, at reasonable times during normal business hours, reasonable
access to the appropriate members of Seller's personnel, Seller's professional
advisors, and Seller's properties, and (b) furnish Buyer and its
representatives with reasonable access to or copies of Transferred Contracts,
relevant Books and Records, and other existing documents and data related to
the Acquired Assets as Buyer may reasonably request (including to enable Buyer
to assess Seller's compliance with its obligations under this Agreement).
Except as otherwise provided herein, no information or knowledge obtained in
any investigation pursuant to this Section 7.1 shall affect or be deemed to
modify any representation or warranty contained herein or the conditions to the
obligations of the parties hereto to consummate the transactions contemplated
hereby.
7.2 Pre-Closing Activities of Seller. Between the Existing Agreement Date
and the earlier of the Closing Date or the termination of this Agreement,
unless otherwise agreed in writing by Parent or Buyer, Seller will:
(a) conduct its business (as it relates to the Acquired Assets) in a
commercially reasonable manner;
(b) pay its debts and Taxes when due, where failure to pay when due would
be reasonably likely to have a Material Adverse Effect;
(c) pay or perform other obligations related to the Acquired Assets,
where failure to pay or perform would be reasonably likely to have a
Material Adverse Effect;
(d) use commercially reasonable, good faith efforts to maintain its
relations and goodwill with suppliers, customers, distributors, licensors,
licensees, landlords, trade creditors, employees, agents and others having
business relationships with Seller relating to the Acquired Assets to the
extent Seller knows or has reason to believe that Buyer intends to have
business relations with such parties with respect to the Acquired Assets
following the Closing;
A-18
<PAGE>
(e) keep Buyer reasonably informed concerning material business or
operational matters relating to the Acquired Assets;
(f) use commercially reasonable, good faith efforts to maintain the
Acquired Assets in their current condition, ordinary wear and tear excepted;
(g) use commercially reasonable efforts to identify and notify Buyer of
material Sublicensing Requirements and, upon receipt of Buyer's written
authorization to do so, comply with the Sublicensing Requirements for the
Licensed Intellectual Property specified in Buyer's authorization to the
extent provided in Section 4.1; provided, however, that, with respect to
those Sublicensing Restrictions that require the consent, approval or other
action of any third party, Seller shall only be required to use commercially
reasonable efforts to comply with such Sublicensing Restrictions; and
(h) complete and deliver to Buyer and Parent Section 5.11(f) of the
Seller Disclosure Schedule on or before the Closing Date.
7.3 Conduct Prior to Closing. Except as otherwise expressly permitted by
this Agreement, between the Existing Agreement Date and the earlier of (i) the
Closing Date and (ii) the termination of this Agreement, Seller will not take
any action as a result of which any of the changes or events described in
Section 5.20 of this Agreement would likely or foreseeably occur. In addition,
between the Existing Agreement Date and the earlier of (i) the Closing Date and
(ii) the termination of this Agreement, Seller will not, without the prior
written consent of Parent or Buyer, which consent shall not be unreasonably
withheld:
(a) take any action to materially impair, encumber, or create a Lien
against the Acquired Assets;
(b) except to comply with existing contractual obligations or commitments
or with respect to non-exclusive licenses entered into in the ordinary
course of business consistent with past practice, buy, or enter into any
inbound license agreement with respect to, Third Party Technology or the
Intellectual Property Rights of any third party to be incorporated in or
used in connection with the Products or sell, lease or otherwise transfer or
dispose of, or enter into any outbound license agreement with respect to,
any of the Acquired Assets with any third party;
(c) except to comply with existing contractual obligations or commitments
or with respect to non-exclusive licenses entered into in the ordinary
course of business consistent with past practice, enter into any Contract
relating to (i) the sale or distribution of any Product, (ii) any of the
Acquired Assets, or (iii) any Licensed Intellectual Property (subject to
Section 7.2(g) above);
(d) change pricing or royalties charged to customers or licensees of the
Acquired Assets;
(e) enter into any strategic arrangement or relationship, development or
joint marketing arrangement or agreement relating to the Acquired Assets;
(f) fire, or give notice of termination to, any Designated Employee,
except as permitted under the terms of that certain Funding Agreement
between Buyer and Seller of even date herewith (the "Funding Agreement");
(g) amend or modify, except to the extent required by the terms thereof,
or violate the terms of, any of the Transferred Contracts;
(h) adopt or change any accounting method in respect of Taxes, enter into
any closing agreement, settle any claim or assessment in respect of Taxes,
or consent to any extension or waiver of the limitation period applicable to
any claim or assessment in respect of Taxes, in each case where such action
would reasonably have a Material Adverse Effect; and
(i) agree in writing or otherwise to take any of the actions described in
Sections 7.3(a) through (h) above.
A-19
<PAGE>
7.4 Confidentiality. Each of the parties hereto hereby agrees that the
information obtained in any investigation pursuant to Section 7.1, or pursuant
to the negotiation and execution of this Agreement or the effectuation of the
transactions contemplated hereby, shall be governed by the terms of the Mutual
Nondisclosure Agreement between Parent and Seller dated June 22, 2000, as
amended by Amendment Number 1 to such agreement dated June 21, 2001.
7.5 Use of Confidential Information. Notwithstanding anything to the
contrary contained herein or in any other agreement of Seller, including any
agreement between Seller and any employee of Seller, after the Closing, Buyer
shall have the unrestricted, sublicensable and transferable right, and Seller
hereby consents to such rights of Buyer, to use, disclose and exploit in any
manner and without restriction any and all confidential information embodied in
any of the Acquired Assets. To the extent that any Designated Employee may be
bound by any agreement or policy of Seller or any of its Subsidiaries that
would in any way limit or restrict the rights of Buyer to such confidential
information hereunder, Seller shall not assert, enforce or otherwise exercise
its rights under such agreement or policy against any Designated Employee or
Buyer.
7.6 Seller Intellectual Property Covenants. After the Closing, Seller shall
not: (i) transfer or license any Intellectual Property Rights to any third
party; (ii) use, exercise or otherwise exploit any Transferred Technology; or
(iii) disclose any Trade Secrets related to the Transferred Intellectual
Property Rights to any third party. Prior to the Closing, at Seller's request
Seller and Parent shall enter into an escrow agreement with a third party
escrow agent (the "Escrow Agreement") which shall provide that: (1) Seller
shall deposit, with such escrow agent, prior to the Closing, a copy of the
Source Code for the Products (including prior versions thereof) and related
materials or information (the "Escrowed Materials") which Seller reasonably
expects could be necessary for the prosecution or defense of claims or causes
of action by or against Seller for violations of (or that otherwise arise
under) the antitrust laws of any jurisdiction, and (2) Seller shall have the
right to obtain from such escrow agent a copy of the Escrowed Materials that
are reasonably necessary for the prosecution or defense of any such antitrust
claim or cause of action by or against Seller, provided that Seller first
obtains certain protective orders or other reasonable confidentiality
protections as set forth in the Escrow Agreement, and provided further that
Seller shall have the right to use such materials only in connection with such
specific claim or cause of action, and shall return to the escrow agent or
destroy such materials upon the final resolution (including through any
appeals) of such claim or cause of action. Except with respect to Escrowed
Materials released to Seller as described above, after the Closing, upon
written notice from Buyer, Seller shall destroy all copies of Source Code in
Seller's possession or control relating to the current version and all prior
versions of the Product and all copies in Seller's possession or control of
specifications, documentation, and other materials and information relating
thereto.
7.7 Covenant Not to Compete or Solicit.
(a) Subject to the Closing, and without limiting Seller's ability to
prosecute antitrust claims against third parties, beginning on the Closing
Date and ending on the second (2nd) anniversary of the Closing Date (the
"Non-Competition Period"), Seller shall not directly or indirectly (other
than on behalf of Buyer), without the prior written consent of Parent or
Buyer, engage in a Competitive Business Activity (as defined below) anywhere
in the Restricted Territory (as defined below). For all purposes hereof, the
term "Competitive Business Activity" shall mean: (i) engaging in, managing
or directing persons engaged in any business in competition with Parent's
Platform Business; (ii) acquiring or having an ownership interest in any
entity which derives revenues from any business in competition with Parent's
Platform Business (except for ownership of one percent (1%) or less of any
entity whose securities have been registered under the Securities Act, or
Section12 of the Exchange Act); or (iii) participating in the operation,
management or control of any firm, partnership, corporation, entity or
business described in clause (ii) of this sentence. For all purposes hereof,
the term "Restricted Territory" shall mean each and every country, province,
state, city or other political subdivision of the world including those in
which Parent is currently engaged in business or otherwise distributes,
licenses or sells products.
(b) Subject to the Closing, and beginning on the Closing Date and ending
on the second (2nd) anniversary of the Closing Date, Seller shall not
solicit, encourage or take any other action which is intended
A-20
<PAGE>
to induce or encourage or could reasonably be expected to have the effect of
inducing or encouraging, any employee of Parent or any Subsidiary of Parent
or any Continuing Employee to terminate his or her employment with Parent or
any Subsidiary of Parent; provided, however, that any general solicitation
of employees not specifically targeted to employees of Parent or any
Subsidiary of Parent or any Continuing Employee shall not be deemed a
violation of this Section 7.7(b).
(c) The covenants contained in Section 7.7(a) shall be construed as a
series of separate covenants, one for each country, province, state, city or
other political subdivision of the Restricted Territory. Except for
geographic coverage, each such separate covenant shall be deemed identical
in terms to the covenant contained in Section 7.7(a). If, in any judicial
proceeding, a court refuses to enforce any of such separate covenants (or
any part thereof), then such unenforceable covenant (or such part) shall be
eliminated from this Agreement to the extent necessary to permit the
remaining separate covenants (or portions thereof) to be enforced. In the
event that the provisions of this Section 7.7(a) are deemed to exceed the
time, geographic or scope limitations permitted by applicable law, then such
provisions shall be reformed to the maximum time, geographic or scope
limitations, as the case may be, permitted by applicable laws.
(d) Seller acknowledges (without in any way representing to Parent or
Buyer any of the following) that (i) the value of the Acquired Assets is an
integral component of the value to Buyer of the transactions contemplated by
this Agreement and is reflected in the value of the Stock Consideration to
be received by Seller, and (ii) Seller's agreement as set forth in Sections
7.7(a) and 7.7(b) is necessary to preserve the value of the Acquired Assets
for Buyer following the Closing. Seller also acknowledges that the
limitations of time, geography and scope of activity agreed to in Section
7.7(a) are reasonable because, among other things, (A) Seller has had unique
access to the Trade Secrets and know-how relating to the Acquired Assets,
including, without limitation, the plans and strategy (and, in particular,
the competitive strategy) relating to the Acquired Assets, and (B) Seller is
receiving significant consideration in connection with the consummation of
the transactions contemplated by this Agreement.
(e) The parties agree that in the event of a breach or threatened breach
by Seller of any of the covenants set forth in Sections 7.7(a) and 7.7(b),
monetary damages alone would be inadequate to fully protect Buyer from, and
compensate Buyer for, the harm caused by such breach or threatened breach.
Accordingly, Seller agrees that if it breaches or threatens breach of any
provision of Sections 7.7(a) and 7.7(b), Buyer shall be entitled to, in
addition to any other right or remedy otherwise available, the right to seek
injunctive relief restraining such breach or threatened breach and to
specific performance of any such provision of Sections 7.7(a) and 7.7(b),
and Buyer shall not be required to post a bond in connection with, or as a
condition to, obtaining such relief before a court of competent
jurisdiction.
7.8 No Solicitation.
(a) From and after the Existing Agreement Date until the earlier of (i)
the Closing Date and (ii) termination of this Agreement pursuant to ARTICLE
10, neither Seller nor any of its Subsidiaries will, nor will they authorize
or permit any of their officers, directors or affiliates to, nor will they
authorize or knowingly permit any of their employees or any investment
banker, attorney or other advisor or representative retained by them to,
directly or indirectly, (i) solicit, initiate, knowingly encourage or induce
the making, submission or announcement of any Acquisition Proposal (as
hereinafter defined), (ii) engage or participate in any discussions or
negotiations regarding, or furnish to any person any non-public information
with respect to, or knowingly take any other action to facilitate or that
could reasonably be expected to lead to, any Acquisition Proposal, (iii)
approve, endorse or recommend any Acquisition Proposal other than in
compliance with Section 7.16(c), or (iv) enter into any letter of intent or
similar document or any contract agreement or commitment contemplating or
otherwise relating to any Acquisition Transaction; provided, however, that
nothing contained in this Section 7.8 shall prohibit the Board of Directors
of Seller from (i) in response to a bona fide written Acquisition Proposal
for a Qualifying Acquisition Transaction not solicited by Seller in
violation of this Section 7.8(a) that the Board of Directors of Seller has
in good faith concluded (based on, among other things, the advice of a
financial advisor of nationally recognized reputation), is reasonably likely
to lead to a Superior Offer, furnishing nonpublic
A-21
<PAGE>
information to the party making such Acquisition Proposal, and submitting to
the party making such Acquisition Proposal written questions, the sole
purpose of which is to elicit clarifications as to the material terms of
such Acquisition Proposal so as to enable the Board of Directors of Seller
to make a determination whether to construe such Acquisition Proposal as a
Superior Offer, to the extent that (A) the Board of Directors of Seller
concludes in good faith, after consultation with its outside counsel, that
its fiduciary obligations under applicable law require it to do so, (B) (x)
concurrently with furnishing any such nonpublic information to, or written
questions to such party, Seller gives Buyer written notice of Seller's
intention to furnish nonpublic information, or written questions to such
party and (y) Seller receives from such party an executed confidentiality
agreement containing customary limitations on the use and disclosure of all
nonpublic written and oral information furnished to such party on behalf of
Seller, the terms of which are at least as restrictive as the terms
contained in the Confidentiality Agreement, and (C) contemporaneously with
furnishing any such nonpublic information to such party, Seller furnishes
such nonpublic information to Buyer (to the extent such nonpublic
information has not been previously furnished by Seller to Buyer) and (ii)
in response to a bona fide written Acquisition Proposal not solicited by
Seller in violation of this Section 7.8(a) that constitutes a Superior
Offer, engaging in negotiations with the party making such Acquisition
Proposal to the extent that (A) the Board of Directors of Seller concludes
in good faith, after consultation with its outside counsel, that its
fiduciary obligations under applicable law require it to do so, (B) (x)
concurrently with entering into negotiations with such party, Seller gives
Buyer written notice of Seller's intention to enter into negotiations with
such party and (y) Seller receives from such party an executed
confidentiality agreement containing customary limitations on the use and
disclosure of all nonpublic written and oral information furnished to such
party on behalf of Seller, the terms of which are at least as restrictive as
the terms contained in the Confidentiality Agreement. Seller will
immediately cease any and all existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal. Without limiting the foregoing, it is understood that
any violation of the restrictions set forth in the preceding two sentences
by any officer or director of Seller shall be deemed to be a breach of this
Section 7.8 by Seller.
(b) For purposes of this Agreement, "Acquisition Proposal" shall mean any
offer or proposal (other than an offer or proposal by Parent or Buyer)
relating to any Acquisition Transaction. For purposes of this Agreement,
"Acquisition Transaction" shall mean any transaction or series of related
transactions involving: (i) any purchase from Seller or acquisition by any
person or "group" (as defined under Section13(d) of the Exchange Act and the
rules and regulations thereunder) of more than a 15% interest in the total
outstanding voting securities of Seller or any tender offer or exchange
offer that if consummated would result in any person or "group" (as defined
under Section13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning 15% or more of the total outstanding voting
securities of Seller or any merger, consolidation, business combination or
similar transaction involving Seller; or (ii) any sale, lease (other than in
the ordinary course of business), exchange, transfer, license (other than
non-exclusive licenses in the ordinary course of business), acquisition or
disposition of more than 15% of the assets of Seller or of any of the
Acquired Assets, except for an immaterial (individually or in the aggregate)
portion of such Acquired Assets. In addition, for the purposes of this
Agreement "Qualifying Acquisition Transaction" shall mean any Acquisition
Transaction pursuant to which (i) the stockholders of Seller immediately
preceding such Acquisition Transaction would immediately following such
Acquisition Transaction hold less than fifty percent (50%) of the aggregate
equity interests in the Seller (or if the Seller does not survive such
Acquisition Transaction, in the surviving or resulting entity); or (ii)
Seller would sell all or substantially all of its assets.
(c) In addition to the obligations of Seller set forth in paragraph (a)
of this Section 7.8, Seller as promptly as practicable after learning of any
of the following matters shall advise Buyer in writing of any Acquisition
Proposal or any request for non-public information or inquiry which Seller
reasonably believes would lead to an Acquisition Proposal or to any
Acquisition Transaction the material terms and conditions of such,
Acquisition Proposal, or request inquiry, and the identity of the person or
group making any such request, Acquisition Proposal or inquiry. Seller will
keep Buyer informed as promptly as practicable after
A-22
<PAGE>
learning of any of the following matters in all material respects of the
status and details (including material amendments or proposed material
amendments) of any such request, Acquisition Proposal or inquiry.
7.9 Notification of Certain Matters.
(a) Seller shall give prompt notice to Buyer of (i) the occurrence or
non-occurrence of any event, the occurrence or non-occurrence of which is
likely to cause any representation or warranty of Seller contained in this
Agreement to be untrue or inaccurate in any material respect at the Closing,
and (ii) any failure of Seller to comply with or satisfy in any material
respect any covenant or agreement required to be complied with or satisfied
by it hereunder, in either case such that the conditions set forth in
Section 8.2(a) might reasonably not be satisfied by the End Date; provided,
however, that the delivery of any notice pursuant to this Section 7.9(a)
shall not (a) limit or otherwise affect any remedies available to the party
receiving such notice or (b) constitute an acknowledgment or admission of a
breach of this Agreement. No disclosure by Seller pursuant to this Section
7.9(a), however, shall be deemed to amend or supplement the Seller
Disclosure Schedule or prevent or cure any misrepresentations, breach of
warranty or breach of covenant by Seller hereunder.
(b) Parent or Buyer shall give prompt notice to Seller of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence
of which is likely to cause any representation or warranty of Parent or
Buyer contained in this Agreement to be untrue or inaccurate in any material
respect at the Closing, and (ii) any failure of Parent or Buyer to comply
with or satisfy in any material respect any covenant, condition or agreement
required to be complied with or satisfied by it hereunder, in either case
such that the conditions set forth in Section 8.3(a) might reasonably not be
satisfied by the End Date; provided, however, that the delivery of any
notice pursuant to this Section 7.9(b) shall not (a) limit or otherwise
affect any remedies available to Seller, or (b) constitute an acknowledgment
or admission by Parent or Buyer of a breach of this Agreement. No disclosure
by Parent or Buyer pursuant to this Section 7.9(b), however, shall be deemed
to amend or supplement the Buyer Disclosure Schedule or prevent or cure any
misrepresentations, breach of warranty or breach of covenant by Parent or
Buyer hereunder.
7.10 New Employment Arrangements. Parent has offered each person who is a
Designated Employee "at-will" employment with Parent, to be effective as of the
Closing Date, subject to proof evidencing a legal right to work in his or her
country of current employment. Such "at-will" employment arrangements have been
set forth in offer letters based on Parent's standard form delivered to the
Designated Employees prior to the Existing Agreement Date (each, an "Offer
Letter"), copies of which have been provided to Seller. At least seven of the
Key Employees executed an Offer Letter prior to or concurrent with the
execution of the Existing Agreement, which Offer Letters shall be effective as
of the Closing Date. Each employee of Seller who becomes an employee of Parent
after the Closing Date shall be referred to hereafter as a "Continuing
Employee." Continuing Employees shall be eligible to receive benefits
consistent with Parent's standard human resources policies. In furtherance of
the foregoing, at the Closing Seller shall terminate all employment agreements
and other arrangements with any Continuing Employees who have accepted
employment with Parent, and waive any non-competition agreements and any duty
of confidentiality owed to Seller by any such Continuing Employee, effective as
of the Closing Date.
7.11 Public Disclosure. Except as may be required by law or any listing
agreement with a national securities exchange, no party shall issue any
statement or communication to any third party (other than their respective
agents) regarding the subject matter of this Agreement or the transactions
contemplated hereby, including, if applicable, the termination of this
Agreement and the reasons therefor, without the consent of the other party,
which consent shall not be unreasonably withheld. Immediately following the
execution of the Existing Agreement, each of Parent and Seller issued a press
release announcing the execution of the Existing Agreement and the transactions
contemplated thereby, and each of Parent and Seller shall be entitled, in its
discretion, to file a current report with the SEC disclosing the foregoing
matters.
A-23
<PAGE>
7.12 Consents. Seller shall use commercially reasonable efforts to obtain
the consents, waivers and approvals under any of the Transferred Contracts or
under any contractual restrictions relating to the Tangible Assets that are
necessary to permit the transfer of such Transferred Contracts or Tangible
Assets to Buyer as may be required in connection with this Agreement, as well
as any consents that may be necessary to permit the transfer to Buyer of any
Supplemental Transferred Contracts. Buyer shall reasonably cooperate in
Seller's efforts to obtain such consents, waivers and approvals.
7.13 COBRA Continuation Coverage. Seller agrees and acknowledges that the
selling group (as defined in Treasury Regulation Section 54.4980B-9, Q&A-3(a))
of which it is a part (the "Selling Group") will continue to offer a group
health plan to employees of Seller after the Closing Date and, accordingly,
that Seller and the Selling Group shall be solely responsible for providing
continuation coverage under COBRA to those individuals who are M&A qualified
beneficiaries (as defined in Treasury Regulation Section 54.4980B-9, Q&A-4(a))
with respect to the transactions contemplated by this Agreement (collectively,
the "M&A Qualified Beneficiaries"). Seller further agrees and acknowledges that
in the event that the Selling Group ceases to provide any group health plan to
any employee prior to the expiration of the continuation coverage period for
all M&A Qualified Beneficiaries (pursuant to Treasury Regulation Section
54.4980B-9, Q&A-8(c)), then Seller shall provide Buyer with (i) written notice
of such cessation as far in advance of such cessation as is reasonably
practicable (and, in any event, at least thirty (30) days prior to such
cessation), and (ii) all information necessary or appropriate for Purchaser to
offer continuation coverage to such M&A Qualified Beneficiaries.
7.14 Prepaid Service Payment Update. Seller shall prepare and deliver, at
least three(3) business days prior to the Closing Date, an updated Section 5.7
of the Seller Disclosure Schedule estimated as of the Closing Date (the
"Prepaid Service Payment Update"), including an update to each Prepaid Service
Payment contained thereon, that has been prepared on a basis consistent with
Section 5.7 of the Seller Disclosure Schedule delivered on the Existing
Agreement Date.
7.15 Registration Statement.
(a) As promptly as practicable after the execution of this Agreement,
Seller will prepare a proxy statement with respect to the transactions
contemplated by this Agreement (the "Proxy Statement/Prospectus") and Parent
shall prepare and file with the SEC a registration statement on Form S-4
with respect to the registration of the Stock Consideration (the "Form S-4
Registration Statement"), in which the Proxy Statement/Prospectus will be
included as a prospectus. Each of Parent and Seller will use all reasonable
efforts to (i) cause the Form S-4 Registration Statement and the Proxy
Statement/Prospectus to comply with the rules and regulations promulgated by
the SEC, (ii) respond promptly to any comments of the SEC, and (iii) have
the Form S-4 Registration Statement declared effective under the Securities
Act as promptly as practicable after it is filed with the SEC. As promptly
as practicable after the effective date of the Form S-4 Registration
Statement, Seller shall cause the Proxy Statement/Prospectus to be mailed to
the stockholders of Seller. Each of the Parent and Seller will notify the
other promptly upon the receipt of any comments from the SEC or its staff or
any other government officials in connection with any filing made pursuant
hereto and of any request by the SEC or its staff or any other government
officials for amendments or supplements to the Form S-4 Registration
Statement or the Proxy Statement/Prospectus or for additional information.
Each of the Parent and Seller will supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the
other hand, with respect to the Form S-4 Registration Statement or the Proxy
Statement/Prospectus. Each party will cause all documents that it is
responsible for filing with the SEC or other regulatory authorities under
this Section 7.15 to comply in all material respects with all applicable
requirements of law and the rules and regulations promulgated thereunder.
Whenever any event occurs that is required to be set forth in an amendment
or supplement to the Form S-4 Registration Statement or the Proxy
Statement/Prospectus, each of Parent and Seller will promptly inform the
other of such occurrence and cooperate in filing with the SEC or its staff
or any other government officials, or mailing to stockholders of Seller,
such amendment or supplement. No amendment or supplement to the Form S-4
Registration Statement or the Proxy Statement/Prospectus shall be made
without the approval of Parent and
A-24
<PAGE>
Seller, which approval shall not be unreasonably withheld or delayed. In the
event that, at any time prior to the effectiveness of the Form S-4
Registration Statement under the Securities Act, the SEC shall take the
position that Form S-4 is not available or is otherwise inappropriate with
respect to the registration of the Stock Consideration, (i) Parent shall
issue the Stock Consideration hereunder pursuant to the Resale Registration
Statement as provided in Section 7.15(b), (ii) the parties shall comply with
Section 7.15(b) and (iii) Parent shall use commercially reasonable efforts
to seek a waiver from Foothill Capital Corporation to enable Parent to make
the Cash Loan in accordance with Section 7.15(c)(the "Waiver").
(b) In the event that, at any time prior to the effectiveness of the Form
S-4 Registration Statement under the Securities Act, the SEC shall take the
position that Form S-4 is not available or is otherwise inappropriate with
respect to the registration of the Stock Consideration, Parent shall, at
Parent's own expense, file with the SEC promptly (and in any event not more
than two business days) following the Closing, a resale registration
statement on Form S-3 (the "Resale Registration Statement") under the
Securities Act to provide for the resale by Seller of such number of shares
of Parent's common stock as may be required to be issued to Seller in
accordance with the last sentence of this clause (b), and will use
commercially reasonable efforts to cause such Resale Registration Statement
to become effective as promptly as reasonably practicable thereafter;
provided, however, that Parent will not be required to cause such Resale
Registration Statement to become effective until at least one (1) Business
Day after Parent publicly discloses operating results from its most recently
ended fiscal quarter. Parent will use its reasonable best efforts to keep
such Resale Registration Statement effective for a period of thirty (30)
days after such Resale Registration Statement becomes effective; provided,
however, that at any time after fifteen (15) days after the SEC shall have
declared the Resale Registration Statement effective, Parent may suspend the
use of the Resale Registration Statement beginning on the fifteenth (15th)
day of the last month prior to the end of each fiscal quarter of Parent and
ending one (1) business day after Parent publicly discloses operating
results from such fiscal quarter, in keeping with the black-out periods in
Parent's standard stock trading policy, and during any other black-out
period designated by Parent under Parent's standard stock trading policy;
provided, however, that in no event shall Parent suspend the effectiveness
of the Resale Registration Statement for more than 60 consecutive days.
Seller shall, on or prior to the Closing Date, complete a selling
stockholder questionnaire containing customary investment representations in
such form as may be reasonably provided by Parent not later than the tenth
(10th) day prior to the Closing Date. In the event that Seller shall have
failed to furnish such completed questionnaire to Parent on or prior to the
Closing Date, Parent will be entitled, in its reasonable discretion, to (i)
defer the filing of the Resale Registration Statement until the earlier to
occur of the tenth (10th) day after Seller will have furnished such
information or the thirtieth (30th) day after such Resale Registration
Statement is otherwise required to filed pursuant to this Section 7.15(b).
In the event that Parent shall file the Resale Registration Statement, and
Seller shall not have otherwise disposed of the Stock Consideration prior to
the effectiveness of the Resale Registration Statement, the Stock
Consideration shall be increased or decreased so that Seller shall receive
that number of shares of Parent's common stock, rounded up or down to the
nearest number of whole shares (with 0.5 being rounded up) equal to the
quotient determined by dividing (A) $11,000,000 minus the Adjustment Amount,
by (B) the opening price of Parent's common stock as quoted on the Nasdaq
National Market on the first trading day following the declaration of
effectiveness of the Resale Registration Statement.
(c) Provided that Parent obtains the Waiver, (i) if the Resale
Registration Statement is not declared effective by the SEC on or prior to
the 15th day after the Closing Date, Parent shall immediately make a loan to
Seller of $5,500,000 in cash, and (ii) if the Resale Registration Statement
is not declared effective by the SEC on or prior to the 30th day after the
Closing Date, Parent shall immediately make a second loan to Seller of
$5,500,000 in cash (collectively, the "Cash Loans"). The Cash Loans shall
not bear any interest. Repayment of each Cash Loan shall be secured by a
pledge of the Stock Consideration, and Seller and Parent agree to enter into
a promissory note and security agreement containing customary and reasonable
terms and conditions relating to such Cash Loan. The Cash Advances shall be
repayable at any time by Seller, without interest or penalty. In the event
that Buyer makes the Cash Loan, Seller shall be obligated to sell the Stock
Consideration promptly (but, in any event, within two business days)
following the
A-25
<PAGE>
effectiveness of the Resale Registration Statement and simultaneously repay
the Cash Loan with the proceeds of such sale.
(d) In the event that the SEC shall take the position, at any time prior
to the effectiveness of the Form S-4 Registration Statement under the
Securities Act, that Form S-4 is not available or is otherwise inappropriate
with respect to the registration of the Stock Consideration and the Form S-4
Registration Statement shall not have been declared effective under the
Securities Act by the Closing, the Stock Consideration issued to Seller at
Closing shall constitute "restricted securities" within the meaning of Rule
144 of the Securities Act and will be issued in a private placement
transaction in reliance upon the exemption from the registration and
prospectus delivery requirements of Section 5 of the Securities Act afforded
by Section 4(2) of the Securities Act and Regulation D promulgated
thereunder and pending the effectiveness of the Registration Statement, will
be subject to the following legend to identify such privately placed shares
as being "restricted securities" under the Securities Act, to comply with
foreign, provincial, state and federal securities laws and to notice the
restrictions on transfer of such shares:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THESE SECURITIES MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS (A) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT COVERING SUCH
SECURITIES, OR (B) A VALID EXEMPTION THEREFROM AND THE CORPORATION
RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES
REASONABLY SATISFACTORY TO THE CORPORATION, STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT."
7.16 Meeting of Seller's Stockholders
(a) Seller will take all action necessary in accordance with Delaware law
and its certificate of incorporation and bylaws to convene a meeting (the
"Seller Stockholders' Meeting") of Seller's stockholders to consider
adoption and approval of this Agreement and the dissolution or winding-up of
Seller's business after the Closing in a manner providing for full payment
to or adequate provision for creditors in advance of any distribution to
Seller's stockholders (the "Dissolution") to be held as promptly as
practicable after the Form S-4 Registration Statement is declared effective
under the Securities Act or, in the event that the SEC shall take the
position, at any time prior to the effectiveness of the Form S-4
Registration Statement under the Securities Act, that Form S-4 is not
available or is otherwise inappropriate with respect to the registration of
the Stock Consideration, within 45 days after Seller is notified of the
SEC's position. Subject to Section 7.16(c), Seller will use its commercially
reasonable efforts to solicit from its stockholders proxies in favor of the
adoption and approval of this Agreement and the Dissolution and to take all
other action necessary or advisable to secure the vote or consent of its
stockholders required by Delaware law in favor of such matters.
Notwithstanding anything to the contrary contained in this Agreement, Seller
may adjourn or postpone the Seller Stockholders' Meeting to the extent
necessary to ensure that any necessary supplement or amendment to the Proxy
Statement/Prospectus is provided to Seller's stockholders in advance of a
vote on this Agreement and the Dissolution or, if as of the time for which
Seller Stockholders' Meeting is originally scheduled (as set forth in the
Proxy Statement/Prospectus) there are insufficient shares of Seller's common
stock represented (either in person or by proxy) to constitute a quorum
necessary to conduct the business of the Seller Stockholders' Meeting.
Seller shall ensure that Seller Stockholders' Meeting is called, noticed,
convened, held and conducted, and that all proxies solicited by Seller in
connection with Seller Stockholders' Meeting are solicited, in compliance
with the Delaware law, Seller's certificate of incorporation and bylaws, the
rules of Nasdaq and all other applicable legal requirements. Seller's
obligation to call, give notice of, convene and hold the Seller
Stockholders' Meeting in accordance with this Section 7.16(a) shall not be
limited to or otherwise affected by the commencement, disclosure,
announcement or submission to Seller of any Acquisition Proposal (as defined
in Section 7.8), or by any
A-26
<PAGE>
withdrawal, amendment or modification of the recommendation of the Board of
Directors of Seller with respect to this Agreement and the Dissolution.
(b) Subject to Section 7.16(c): (i) the Board of Directors of Seller
shall recommend that Seller's stockholders vote in favor of the adoption and
approval of this Agreement and the approval of the Dissolution at the Seller
Stockholders' Meeting; (ii) the Proxy Statement/Prospectus shall include a
statement to the effect that the Board of Directors of Seller has
recommended that Seller's stockholders vote in favor of the adoption and
approval of this Agreement and the Dissolution at the Seller Stockholders'
Meeting; and (iii) neither the Board of Directors of Seller nor any
committee thereof shall withdraw, amend or modify, or propose or resolve to
withdraw, amend or modify in a manner adverse to Buyer, the recommendation
of the Board of Directors of Seller that Seller's stockholders vote in favor
of the adoption and approval of this Agreement and the approval of the
Dissolution.
(c) Nothing in this Agreement shall prevent the Board of Directors of
Seller from withholding, withdrawing, amending or modifying its
recommendation in favor of the adoption and approval of this Agreement and
the approval of the Dissolution if (i) a Superior Offer (as defined below)
is made to Seller and is not withdrawn, (ii) Seller shall have provided
written notice to Buyer (a "Notice of Superior Offer") advising Buyer that
Seller has received a Superior Offer, specifying the material terms and
conditions of such Superior Offer and identifying the person or entity
making such Superior Offer, (iii) Buyer shall not have, within five (5)
business days of Buyer's receipt of the Notice of Superior Offer, made an
offer that the Board of Directors of Seller by a majority vote determines in
its good faith judgment (based on, among other things, the advice of a
financial adviser of nationally recognized reputation) to be at least as
favorable to Seller's stockholders as such Superior Offer (it being agreed
that Board of Directors of Seller shall convene a meeting to consider any
such offer by Buyer promptly following the receipt thereof), (iv) the Board
of Directors of Seller concludes in good faith, after consultation with its
outside counsel, that, in light of such Superior Offer, the withholding,
withdrawal, amendment or modification of such recommendation is required in
order for the Board of Directors of Seller to comply with its fiduciary
obligations to Seller's stockholders under applicable law and (v) neither
Seller nor any of its representatives shall have violated any of the
restrictions set forth in Section 7.8 or this Section 7.16 in connection
with such Superior Offer. Seller shall provide Buyer with at least three
business days' prior notice (or such lesser prior notice as provided to the
members of Seller's Board of Directors) of any meeting of Seller's Board of
Directors at which Seller's Board of Directors is reasonably expected to
consider any Acquisition Transaction (as defined below). Nothing contained
in this Section shall limit Seller's obligation to hold and convene the
Seller Stockholders' Meeting (regardless of whether the recommendation of
the Board of Directors of Seller shall have been withdrawn, amended or
modified). For purposes of this Agreement "Superior Offer" shall mean a bona
fide written offer not solicited by Seller in violation of Section 7.8(a) to
acquire, directly or indirectly, including pursuant to a tender offer,
exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction, for
consideration consisting of cash or securities, either (x) a
majority-in-interest of the total outstanding voting securities of Seller,
if as a result of such transaction, the stockholders of Seller immediately
preceding such transaction would hold less than fifty percent (50%) of the
equity interest in the surviving corporation or resulting entity of such
transaction or (y) all or substantially all the assets of Seller, on terms
that the Board of Directors of Seller determines, in its good faith judgment
(based on, among other things, the advice of a financial adviser of
nationally recognized reputation) to be more favorable to Seller's
stockholders than the terms of the transaction contemplated by this
Agreement and is reasonably capable of being consummated; provided, however,
that any such offer s |
