Asset Purchase Agreement - Palm Inc. and Be Inc.
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.
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(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.
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(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
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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.
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(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
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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
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(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.
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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
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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.
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(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
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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.
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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.
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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
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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
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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.
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(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.
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(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
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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;
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(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.
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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
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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
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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
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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.
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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
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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
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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
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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 shall not be deemed to be a "Superior Offer" if any
financing required to consummate the transaction contemplated by such offer
is not committed and is not likely in the judgment of Seller's Board of
Directors to be obtained by the entity making such Acquisition Proposal on a
timely basis.
(d) Nothing contained in this Agreement shall prohibit Seller or its
Board of Directors from taking and disclosing to its stockholders a position
contemplated by Rules14d-9 and 14e-2(a) promulgated under the Exchange Act
with respect to a Superior Offer; provided, however, that the content of any
such disclosure shall not be inconsistent with the terms of this Agreement.
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7.17 Reasonable Efforts. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use commercially reasonable
efforts to take promptly, or cause to be taken, all actions, and to do
promptly, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated hereby, to obtain all necessary waivers, consents and
approvals and to effect all necessary registrations and filings and to remove
any injunctions or other impediments or delays, legal or otherwise, in order to
consummate and make effective the transactions contemplated by this Agreement
for the purpose of securing to the parties hereto the benefits contemplated by
this Agreement; provided that no party to this Agreement shall be required to
agree to any divestiture of shares of capital stock or of any business, assets
or property of Buyer or its Subsidiaries or affiliates or of Seller, as the
case may be, or the imposition of any material limitation on the ability of any
of them to conduct their businesses or to own or exercise control of such
assets, properties and stock.
7.18 Change of Control Agreements. Upon the written request of Buyer, Seller
shall take commercially reasonable actions to have any Continuing Employee
waive any right under any change of control agreement with Seller that, if not
waived, would reasonably be expected to have the effect of providing such
Continuing Employee in the future with similar rights in connection with any
future change of control of Parent or Buyer.
7.19 Post Closing Tax Covenants.
(a) Subject to Section 7.19(c) below, Seller and its Subsidiaries will be
responsible for the preparation and filing of all Tax Returns of Seller and
its Subsidiaries (including Tax Returns required to be filed after the
Closing Date) to the extent such Tax Returns include or relate to the use or
ownership of the Acquired Assets by Seller or any of its Subsidiaries, or to
sales, use and employment taxes. The Tax Returns of Seller and its
Subsidiaries to the extent they relate to the Acquired Assets or to sales,
use and employment taxes shall be true, complete and correct and prepared in
accordance with applicable law in all material respects. Seller and its
Subsidiaries will be responsible for and make all payments of Taxes shown to
be due on such Tax Returns to the extent they relate to the Acquired Assets
or to sales, use and employment taxes.
(b) Buyer will be responsible for the preparation and filing of all Tax
Returns it is required to file with respect to Buyer's ownership or use of
the Acquired Assets attributable to taxable periods (or portions thereof)
commencing on or after the Closing Date. Buyer's Tax Returns, to the extent
they related to the Acquired Assets, shall be true, complete and correct and
prepared in accordance with applicable law in all material respects. Buyer
will make all payments of Taxes shown to be due on such Tax Returns to the
extent they relate to the Acquired Assets.
(c) In the case of any real or personal property taxes (or other similar
Taxes) attributable to the Acquired Assets which returns cover a taxable
period commencing before the Closing Date and ending thereafter, Buyer shall
prepare such returns and make all payments required with respect to any such
return; provided, however, Seller will promptly reimburse Buyer upon receipt
of a copy of the filed Tax return to the extent any payment made by Buyer
relates to that portion of the taxable period ending on or before the
Closing Date which amount shall be determined and prorated on a per diem
basis.
(d) To the extent relevant to the Acquired Assets, each party shall (i)
provide the other with such assistance as may reasonably be required in
connection with the preparation of any Tax Return and the conduct of any
audit or other examination by any taxing authority or in connection with
judicial or administrative proceedings relating to any liability for Taxes
and (ii) retain and provide the other with all records or other information
that may be relevant to the preparation of any Tax Returns, or the conduct
of any audit or examination, or other proceeding relating to Taxes. Seller
and its Subsidiaries shall retain all documents, including prior years' Tax
Returns, supporting work schedules and other records or information with
respect to all sales, use and employment tax returns and, absent the receipt
by Seller or any of its Subsidiaries of the relevant Sales Tax Certificates,
shall not destroy or otherwise dispose of any such records for six (6) years
after closing without the prior written consent of Buyer or Parent.
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(e) On or before September 14, 2001, Seller shall file or cause to be
filed properly completed applications or other appropriate forms of request
with (i) California's Employment Development Department (or any other
appropriate or analogous governmental agency) to obtain a certificate of
release as authorized in, and pursuant to, California's Unemployment
Insurance Code sections 1731 through and including 1734, and, to the extent
available under analogous law, a certificate of release or payment pursuant
to the law of Washington state (the "Employment Tax Certificates") and (ii)
California's State Board of Equalization to obtain a certificate of receipt
of payment of all sales and use taxes as authorized in and pursuant to
California Revenue and Taxation Code sections 6811 through and including
6814 and, to the extent available under analogous law, a certificate of
payment pursuant to the law of Washington state (the "Sales and Use Tax
Certificates"). The Employment Tax Certificates and the Sales and Use Tax
Certificates are collectively referred to as the "State Tax Certificates".
7.20 Employee Withholding. Seller shall prepare and furnish to Continuing
Employees a Form W-2 which shall reflect all wages and compensation paid to
Continuing Employees for that portion of the calendar year in which the Closing
Date occurs during which the Continuing Employees were employed by Seller.
Seller shall furnish to Parent the Forms W-4 and W-5 of each Continuing
Employee. Parent shall send to the appropriate Social Security Administration
office a duly completed Form W-3 and accompanying copies of the duly completed
Forms W-2. It is the intent of the parties hereunder that the obligations of
Parent and Seller under this Section 7.20 shall be carried out in accordance
with Section 5 of Revenue Procedure 96-60.
7.21 Termination of Compaq Agreement. Prior to September 19, 2001, Seller
shall deliver a notice of termination to Compaq Computer Corporation in
accordance with Section 14.1 of the Web Appliance OEM License and Distribution
Agreement between Seller and Compaq. Seller shall use commercially reasonable
efforts to obtain the consent of Compaq to terminate all maintenance and other
obligations that continue beyond the end of the term. Buyer shall reasonably
cooperate in Seller's efforts to obtain such consent.
7.22 Additional Documents and Further Assurances. Each party hereto, at the
request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be reasonably
necessary or desirable for effecting the consummation of this Agreement and the
transactions contemplated hereby. Without limiting the foregoing, at any time
or from time to time after the Closing, at Buyer's request and expense, Seller
shall at the expense of Buyer: (i) execute and deliver to Buyer such other
instruments of sale, transfer, conveyance, assignment and confirmation; (ii)
provide such materials and information; (iii) take such other actions, as Buyer
may reasonably deem necessary or desirable in order effectively to transfer,
convey and assign to Buyer, to confirm Buyer's title to, all of the Acquired
Assets, and, to the full extent permitted by law, to put Buyer in actual
possession and operating control of the Acquired Assets; and (iv) provide
reasonable assistance and information in connection with the filing,
prosecution and enforcement of the Transferred Intellectual Property Rights. In
the event Seller is unable or unwilling to execute any document described in
clause (i) above, Seller hereby appoints Buyer as its attorney-in-fact to
execute such documents on its behalf. Such appointment shall be deemed a power
coupled with an interest and is therefore irrevocable. Buyer shall only
exercise such power if Seller fails to execute the necessary document within
thirty (30) business days of Buyer's written request to do so.
7.23 Disclosure by Seller. None of the information supplied or to be
supplied by or on behalf of Seller for inclusion or incorporation by reference
in the Form S-4 Registration Statement or the Resale Registration Statement, if
applicable, will, at the time such documents are filed with the SEC or at the
time either the Form S-4 Registration Statement or the Resale Registration
Statement, if applicable, becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any 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 are made, not
misleading. None of the information supplied or to be supplied by or on behalf
of Seller for inclusion or incorporation by reference in the Proxy
Statement/Prospectus to be filed with the SEC, will, at the time the Proxy
Statement/Prospectus is mailed to the stockholders of Seller, or at the time of
the Seller Stockholders' Meeting, contain any untrue statement of a material
fact or omit to state any material fact required
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to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not misleading. The
Proxy Statement/Prospectus will comply as to form in all material respects with
the provisions of the Exchange Act and the rules and regulations promulgated by
the SEC thereunder, except that no representation or warranty is made by Seller
with respect to statements made or incorporated by reference therein based on
information supplied by Parent or Buyer for inclusion or incorporation by
reference in the Proxy Statement/Prospectus.
7.24 Disclosure by Buyer or Parent. None of the information supplied or to
be supplied by or on behalf of Parent or Buyer for inclusion or incorporation
by reference in the Form S-4 Registration Statement or the Resale Registration
Statement, if applicable, will, at the time such documents are filed with the
SEC or at the time either the Form S-4 Registration Statement or the Resale
Registration Statement becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any 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 are made, not misleading. None
of the information supplied or to be supplied by or on behalf of Parent or
Buyer for inclusion or incorporation by reference in the Proxy
Statement/Prospectus to be filed with the SEC, will, at the time the Proxy
Statement/Prospectus is mailed to the stockholders of Seller, or at the time of
the Seller Stockholders' Meeting, contain any untrue statement of a material
fact or omit to state any 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 are made, not misleading. The Form S-4
Registration Statement and the Resale Registration Statement, if applicable,
will comply as to form in all material respects with the provisions of the
Securities Act and the rules and regulations promulgated by the SEC thereunder,
except that no representation or warranty is made by Parent or Buyer with
respect to statements made or incorporated by reference therein based on
information supplied by Seller for inclusion or incorporation by reference in
the Form S-4 Registration Statement or the Resale Registration Statement, if
applicable.
7.25 Sublicensing Requirements. To the extent that Seller was not able prior
to the Closing Date to identify all material Sublicensing Requirements or, upon
receipt of Buyer's written authorization to do so, to comply with the
Sublicensing Requirements for the Licensed Intellectual Property specified in
Buyer's authorization, Seller shall do so until the earlier of (a) six (6)
months after the Closing Date or (b) the date on which Seller files its
certificate of dissolution with the Secretary of State of the State of
Delaware; 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.
7.26 Supplemental Transferred Contracts. At any time prior to the Closing,
if Buyer elects, in its sole discretion, to assume one or more additional
Eligible Contracts of Seller by delivering a written notice of such election to
Seller, Seller agrees that such an Eligible Contract shall thereafter be
considered a Transferred Contract hereunder, unless Seller reasonably
determines in good faith that Seller cannot transfer such Eligible Contract to
Buyer due to a change in circumstances between the Existing Agreement Date and
the date of Buyer's written notice. Seller shall deliver true and complete
copies of all Supplemental Transferred Contracts to Buyer.
ARTICLE 8
CONDITIONS TO THE CLOSING
8.1 Conditions to Obligations of Each Party. The respective obligations of
Parent, Buyer and Seller to effect the transactions contemplated hereby shall
be subject to the satisfaction, at or prior to the Closing, of the following
conditions, any of which may be waived, in writing, by Parent and Buyer (on the
one hand) and Seller (on the other hand):
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(a) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which has the effect of making the
transactions contemplated hereby illegal or otherwise prohibiting the
consummation of the transactions contemplated hereby.
(b) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the transactions contemplated hereby shall be
in effect, nor shall any proceeding brought by a Governmental Entity seeking
any of the foregoing be pending.
(c) Stockholder Approval. This Agreement shall have been approved and
adopted, and the Dissolution shall have been duly approved, by the requisite
vote under applicable law and the certificate of incorporation of Seller by
the stockholders of Seller.
(d) Governmental Approval. Any governmental or regulatory notices,
approvals or other requirements necessary to consummate the transactions
contemplated hereby and shall have been given, obtained or complied with, as
applicable.
8.2 Additional Conditions to the Obligations of Parent and Buyer. The
obligations of Parent and Buyer to consummate the transactions contemplated
hereby shall be subject to the satisfaction at or prior to the Closing of each
of the following conditions, any of which may be waived, in writing,
exclusively by Parent and Buyer:
(a) Representations, Warranties and Covenants. (i) The representations
and warranties of Seller in this Agreement shall have been true and correct
on the date they were made and shall be true and correct on and as of the
Closing Date as though such representations and warranties were made on and
as of such date, except in either case to the extent that the aggregate of
all breaches thereof has not had and would not reasonably be expected to
have a Material Adverse Effect (without giving effect to any limitation as
to "materiality" or "Material Adverse Effect" set forth therein) and except
to the extent such representations and warranties address matters as of a
particular date or period, in which case such representations and warranties
shall be true and correct as of such date or period (and in any event,
subject to the foregoing Material Adverse Effect qualification), and (ii)
Seller shall have performed and complied in all material respects with all
covenants and obligations under this Agreement required to be performed and
complied with by Seller as of the Closing.
(b) Litigation. There shall be no action or proceeding of any nature
pending or threatened with respect to the Acquired Assets against Seller or
any of its Subsidiaries where such action is reasonably likely to have a
Material Adverse Effect.
(c) Opinion of Financial Advisor. Buyer shall have received an opinion of
a financial advisor or appraiser, in form and substance reasonably
acceptable to Buyer, that (i) Seller is not insolvent as of the Closing
Date, and (ii) the sale of the Acquired Assets will not cause Seller to be
insolvent immediately following the Closing. Notwithstanding anything to the
contrary in this Agreement, Buyer shall bear and incur all costs related to
the issuance of such opinion, and Buyer agrees that any opinion in
substantially the form of Exhibit D hereto shall presumptively be deemed to
be acceptable to Buyer.
(d) New Employment Arrangements. At least seven of the Key Employees
(provided that such seven Key Employees include both Key Employees set forth
on Schedule 8.2(d)) and at least 33 of the Designated Employees other than
the Key Employees shall have entered into "at-will" employment arrangements
with Parent pursuant to their execution of an Offer Letter and shall be
employees of Seller immediately prior to the Closing. In addition, effective
as of the Closing Date, Seller shall have terminated all employment
agreements and other arrangements with the Continuing Employees and waived
all of its rights with respect to any duty of confidentiality owed to Seller
by any such Continuing Employee with respect to the Acquired Assets or any
other intellectual property or technology of Seller.
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(e) Non-Competition Agreements. Each of the Key Employees set forth on
Schedule 8.2(e) shall have executed Non-Competition Agreements concurrent
with the execution and delivery of the Existing Agreement and such
Non-Competition Agreements shall be in full force and effect as of the
Closing Date.
(f) Certificate of Seller. Buyer shall have received a certificate,
validly executed by a duly authorized officer of Seller for and on its
behalf (the "Certificate of Seller"), to the effect that, as of the Closing,
each of the conditions specified in Section 8.2(a) and Section 8.2(b) have
been satisfied.
(g) Certificate of Secretary of Seller. Buyer shall have received a
certificate, validly executed by the Secretary of Seller, certifying as to
(i) the terms and effectiveness of the certificate of incorporation and the
bylaws of Seller, (ii) the valid adoption of resolutions of the Board of
Directors of Seller approving this Agreement, and (iii) the valid adoption
and approval of this Agreement and approval of the Dissolution by the
stockholders of Seller.
(h) Prepaid Service Payment Update. Buyer shall have received from Seller
the Prepaid Service Payment Update pursuant to Section 7.14.
(i) Deliveries. Seller shall have delivered to Buyer executed copies of
the Collateral Agreements.
(j) State Tax Certificates. Buyer shall have received from Seller
certified copies of the completed and date stamped applications or filings
made in satisfaction of the covenant in Section 7.19(e) or, if received,
true and complete copies of the State Tax Certificates.
8.3 Additional Conditions to Obligations of Seller. The obligations of
Seller to consummate and effect the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Closing of each of the following
conditions, any of which may be waived, in writing, exclusively by Seller:
(a) Representations, Warranties and Covenants. (i) The representations
and warranties of Parent and Buyer in this Agreement shall have been true
and correct on the date they were made and shall be true and correct on and
as of the Closing Date as though such representations and warranties were
made on and as of such date, except in either case to the extent that the
aggregate of all breaches thereof has not had and would not reasonably be
expected to have a material adverse effect on Parent or Buyer (without
giving effect to any limitation as to "materiality" or "material adverse
effect" set forth therein) and except to the extent such representations and
warranties address matters as of a particular date or period, in which case
such representations and warranties shall be true and correct as of such
date or period (and in any event, subject to the foregoing material adverse
effect qualification), and (ii) Parent and Buyer shall have performed and
complied in all material respects with all covenants and obligations under
this Agreement required to be performed and complied with by Parent or Buyer
as of the Closing.
(b) Certificate of Parent and Buyer. Seller shall have received a
certificate, validly executed by an executive officer of both Parent and
Buyer for and on behalf of each of them (the "Certificate of Buyer"), to the
effect that, as of the Closing, each of the conditions specified in Section
8.3(a) have been satisfied.
(c) Certificate of Secretaries of Parent and Buyer. Seller shall have
received certificates, validly executed by the Secretaries of Parent and
Buyer, certifying as to (i) the terms and effectiveness of the certificates
of incorporation and the bylaws of Parent and Buyer, and (ii) the valid
adoption of resolutions of the Board of Directors of Parent and Buyer
approving this Agreement.
(d) Deliveries. Buyer shall have delivered to Seller executed copies of
the Collateral Agreements.
(e) Securities Approvals. Parent shall have received all state securities
laws or "blue sky" permits and authorizations necessary to issue the Stock
Consideration.
(f) Effectiveness of Registration Statement. The Form S-4 Registration
Statement shall have become effective in accordance with the provisions of
the Securities Act, and no stop order shall have been issued and still be
pending, and no proceeding for that purpose shall have been initiated or be
threatened by the SEC with respect to the Form S-4 Registration Statement,
and Parent shall have duly authorized and issued and made available for
delivery to Seller at the Closing a stock certificate that in form and
substance is
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sufficient to enable Seller to immediately sell on the open market the
shares of Parent's common stock comprising the Stock Consideration;
provided, however, that 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, this condition shall be deemed to have been satisfied if
Parent duly and validly issues the Stock Consideration to Seller in a
transaction exempt from the registration requirements of the Securities Act,
and provides Seller with evidence reasonably satisfactory to Seller that
Parent is prepared to file the Resale Registration Statement immediately
following the Closing.
ARTICLE 9
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
9.1 Survival of Representations, Warranties and Covenants. The
representations and warranties of Seller contained in this Agreement, or in the
Certificate of Seller, shall terminate on the earliest of (i) the first
anniversary of the Closing Date, (ii) the date on which Seller files its
certificate of dissolution with the Delaware Secretary of State and (iii) the
date 15 days following the delivery of a Dissolution Notice; provided, however,
that a termination pursuant to clause (iii) shall be rescinded if a certificate
of dissolution is not filed with the Delaware Secretary of State within 30 days
following the delivery of such Dissolution Notice. A "Dissolution Notice" shall
mean a notice delivered by Seller to Buyer indicating Seller's good faith
intention to file a certificate of dissolution with the Delaware Secretary of
State within 30 days. The representations and warranties of Buyer contained in
this Agreement, or in any certificate or other instrument delivered pursuant to
this Agreement, shall terminate at the Closing.
9.2 Indemnification. Seller agrees to indemnify and hold Parent and Buyer
and their respective officers, directors and affiliates (collectively, the
"Indemnified Parties"), harmless against all claims, losses, liabilities,
damages, deficiencies, costs and expenses, including reasonable attorneys' fees
and expenses of investigation and defense (hereinafter individually a "Loss"
and collectively "Losses") incurred or sustained by the Indemnified Parties, or
any of them, arising out of (i) any breach or inaccuracy of a representation or
warranty of Seller contained in this Agreement as of the Existing Agreement
Date (or such other particular date or period that is addressed by such
representation or warranty) and as of the Closing Date or in the Certificate of
Seller, (ii) any failure by Seller to perform or comply with any covenant given
or made by it contained in this Agreement, or (iii) any failure on the part of
Seller to perform and discharge in full the Excluded Liabilities.
9.3 Indemnification Procedure. An Indemnified Party seeking indemnification
pursuant to Section 9.2 shall deliver an Officer's Certificate to Seller.
Seller may object to such claim by written notice to such Indemnified Party
specifying the basis for Seller's objection, within thirty (30) days following
receipt by Seller of notice from such Indemnified Party regarding such claim.
If no objection is made, Seller shall promptly pay the claim. For the purposes
hereof, "Officer's Certificate" shall mean a certificate signed in good faith
by any executive officer of Buyer: (1) stating that Buyer has paid, sustained,
incurred, or properly accrued, or reasonably anticipates that it will have to
pay, sustain, incur, or accrue Losses, and (2) specifying in reasonable detail
the individual items of Losses included in the amount so stated, the date each
such item was paid, sustained, incurred, or properly accrued, or the basis for
such anticipated liability, and the nature of the misrepresentation, breach of
warranty or covenant or Excluded Liability to which such item is related.
9.4 Resolution of Conflicts; Arbitration.
(a) In case Seller shall object in writing to any claim or claims made in
any Officer's Certificate to recover Losses within thirty (30) days after
delivery of such Officer's Certificate, Seller and Buyer shall attempt in
good faith to agree upon the rights of the respective parties with respect
to each of such claims. If Seller and Buyer should so agree, a memorandum
setting forth such agreement shall be prepared and signed by both parties
and Seller shall promptly pay to the Indemnified Party the amount of the
claim agreed upon, if any.
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(b) If no such agreement can be reached after good faith negotiation and
prior to sixty (60) days after delivery of an Officer's Certificate, Buyer
or Seller may demand arbitration of the matter unless the amount of the Loss
is at issue in pending litigation with a third party, in which event
arbitration shall not be commenced until such amount is ascertained or both
parties agree to arbitration, and in either such event the matter shall be
settled by arbitration conducted by one arbitrator mutually agreeable to
Buyer and Seller. In the event that, within thirty (30) days after
submission of any dispute to arbitration, Buyer and Seller cannot mutually
agree on one arbitrator, then, within fifteen (15) days after the end of
such thirty (30) day period, Buyer and Seller shall each select one
arbitrator. The two arbitrators so selected shall select a third arbitrator.
If Seller does not select an arbitrator during this fifteen (15) day period,
then the parties agree that the arbitration will be conducted by one
arbitrator selected by Buyer.
(c) Any such arbitration shall be held in Santa Clara County, California,
under the rules then in effect of the American Arbitration Association. The
arbitrator(s) shall determine how all expenses relating to the arbitration
shall be paid, including without limitation, the respective expenses of each
party, the fees of each arbitrator and the administrative fee of the
American Arbitration Association. The arbitrator or arbitrators, as the case
may be, shall set a limited time period and establish procedures designed to
reduce the cost and time for discovery while allowing the parties an
opportunity, adequate in the sole judgment of the arbitrator or majority of
the three arbitrators, as the case may be, to discover relevant information
from the opposing parties about the subject matter of the dispute. The
arbitrator or a majority of the three arbitrators, as the case may be, shall
rule upon motions to compel or limit discovery and shall have the authority
to impose sanctions, including attorneys' fees and costs, to the same extent
as a competent court of law or equity, should the arbitrators or a majority
of the three arbitrators, as the case may be, determine that discovery was
sought without substantial justification or that discovery was refused or
objected to without substantial justification. The decision of the
arbitrator or a majority of the three arbitrators, as the case may be, as to
the validity and amount of any claim in such Officer's Certificate shall be
final, binding, and conclusive upon the parties to this Agreement. Such
decision shall be written and shall be supported by written findings of fact
and conclusions which shall set forth the award, judgment, decree or order
awarded by the arbitrator(s). Within thirty (30) days of a decision of the
arbitrator(s) requiring payment by one party to another, such party shall
make the payment to such other party.
(d) Judgment upon any award rendered by the arbitrator(s) may be entered
in any court having jurisdiction.
9.5 Third-Party Claims. In the event Buyer becomes aware of a third-party
claim which Buyer reasonably believes is reasonably likely to result in a
demand for indemnification pursuant to this ARTICLE 9, Buyer shall notify
Seller in writing of such claim, and Seller shall be entitled, at its expense,
to participate in, but not to determine or conduct, the defense of such claim.
Buyer shall have the right in its sole discretion to conduct the defense of and
settle any such claim; provided, however, that except with the written consent
of Seller, no settlement of any such claim with third-party claimants shall be
determinative of the amount of Losses relating to such matter. In the event
that Seller has consented to any such settlement, Seller shall have no power or
authority to object under any provision of this ARTICLE 9 to the amount of any
claim by Buyer against Seller with respect to such settlement.
9.6 Maximum Payments; Remedy
(a) Except with respect to (A) any Excluded Liabilities, and (B) Taxes
referred to in Section 3.4 and 5.14 that are owed by Seller and which Buyer
may become obligated to pay, the aggregate maximum amount the Indemnified
Parties may recover from Seller pursuant to the indemnity set forth in
Section 9.2 or otherwise for Losses, or otherwise in respect of any breaches
of any of the representations, warranties or covenants of Seller hereunder
or in the Certificate of Seller, shall be limited to $3,300,000.
(b) The maximum amount an Indemnified Party may recover from Seller in
respect of Losses arising out of any Excluded Liabilities shall not be
limited.
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(c) Without limiting the effect of any of the other limitations set forth
herein, Seller shall not be required to make any indemnification payment
hereunder until such time as the total amount of all Losses that have been
suffered or incurred by any one or more of the Indemnified Parties and to
which any Indemnified Party is entitled to indemnification hereunder, or to
which any one or more of the Indemnified Parties has or have otherwise
become subject with respect to which any Indemnified Party is entitled to
indemnification hereunder, exceeds $100,000 in the aggregate, at which point
Seller shall indemnify the full amount of such claims and all claims
thereafter, subject to any other applicable limitations under this ARTICLE
9.
(d) The right of Parent and Buyer hereto and their related Indemnified
Parties to assert indemnification claims and receive indemnification
payments pursuant to this ARTICLE 9 shall be the sole and exclusive right
and remedy exercisable by Parent and Buyer with respect to any breach by
Seller of any representation, warranty or covenant hereunder or other matter
with respect to which such indemnification is provided; provided, however,
that the foregoing clause of this sentence shall not be deemed a waiver by
any Indemnified Party of any right to specific performance or injunctive
relief, or any right or remedy they may otherwise have against any Person
that has committed fraud with respect to this Agreement.
(e) Nothing herein shall limit the liability of Seller, Buyer or Parent
for any breach or inaccuracy of any representation, warranty or covenant
contained in this Agreement if the Closing does not occur.
9.7 Liability of Parent and Buyer. The fact that neither Parent nor Buyer is
obligated to indemnify Seller hereunder shall not be construed so as to limit
the rights or remedies that Seller may otherwise have against Parent or Buyer,
whether under this Agreement or applicable law, in the event of (a) any breach
or inaccuracy of a representation or warranty of Parent or Buyer contained in
this Agreement or in the Certificate of Buyer, (ii) any failure by Parent or
Buyer to perform or comply with any covenant given or made by either of them
contained in this Agreement, or (iii) any failure on the part of Buyer to
perform and discharge in full the Assumed Liabilities.
ARTICLE 10
TERMINATION, AMENDMENT AND WAIVER
10.1 Termination. Except as provided in Section 10.3, this Agreement may be
terminated and the transactions contemplated hereby abandoned at any time prior
to the Closing whether before or after the requisite approval of the
stockholders of Seller:
(a) by mutual written consent duly authorized by the Boards of Directors
of Parent, Buyer and Seller;
(b) by any party if the Closing Date shall not have occurred for any
reason (i) in the event that the SEC has determined to review the Form S-4
Registration Statement, by December 31, 2001, or (ii) in the event the SEC
has determined not to review the Form S-4 Registration Statement, by
November 30, 2001 (in either case, the "End Date"); provided, however, that
the right to terminate this Agreement under this Section 10.1(b) shall not
be available to any party whose (or whose affiliate's) action or failure to
act has been a principal cause of or resulted in the failure of the Closing
Date to occur on or before such date and such action or failure to act
constitutes a material breach of this Agreement;
(c) by any party if a Governmental Entity shall have issued an order,
decree or ruling or taken any other action, in any case having the effect of
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated hereby, which order, decree, ruling or other action is final
and nonappealable;
(d) by any party if (i) the Seller Stockholders' Meeting (including any
adjournments and postponements thereof) shall not have been held and
completed prior to the End Date or shall have been held and completed and
the stockholders of Seller shall have taken a final vote on a proposal to
adopt and
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approve this Agreement and the transactions contemplated by this Agreement;
and (ii) this Agreement and the transactions contemplated by this Agreement
shall not have been adopted and approved at the Seller Stockholders' Meeting
(and shall not have been adopted and approved at any adjournment or
postponement thereof) by the required approval of the stockholders of
Seller; provided, however, that the right to terminate this Agreement under
this Section 10.1(d) shall not be available to Seller where the failure to
hold the Seller Stockholders' Meeting and to obtain Seller stockholder
approval shall have been caused by (A) the action or failure to act of
Seller and such action or failure to act constitutes a breach by Seller of
this Agreement or (B) a material breach of any Support Agreement by any
party thereto other than Buyer; provided further, however, that the right to
terminate this Agreement under this Section 10.1(d) shall not be available
to Parent or Buyer where the failure to hold the Seller Stockholders'
Meeting and to obtain Seller stockholder approval shall have been caused by
the action or failure to act of Parent or Buyer and such action or failure
to act constitutes a breach by Parent or Buyer of this Agreement;
(e) by Buyer (at any time prior to the adoption and approval of this
Agreement and the approval of the Dissolution by the required vote of the
stockholders of Seller) if a Seller Triggering Event (as defined below)
shall have occurred;
(f) by Seller (at any time prior to the adoption and approval of this
Agreement and the approval of the Dissolution by the required vote of the
stockholders of Seller) if Parent shall have breached (and failed to cure
within 10 days after notice of such breach is delivered by Seller to Parent)
any of its obligations under the Funding Agreement;
(g) by Seller (at any time prior to the adoption and approval of this
Agreement and the approval of the Dissolution by the required vote of the
stockholders of Seller) in the event that (i) 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, and (ii) Parent shall not have obtained the Waiver within ten
(10) business days following the taking of such position by the SEC;
(h) by Buyer, upon a breach of any representation, warranty, covenant or
agreement on the part of Seller set forth in this Agreement, or if any
representation or warranty of Seller shall have become untrue, in either
case such that the conditions set forth in Section 8.2(a) would not be
satisfied by the End Date, provided, that if such inaccuracy in Seller's
representations and warranties or breach by Seller is curable by Seller
through the exercise of its commercially reasonable efforts, then Buyer may
not terminate this Agreement under this Section 10.1(h) prior to the End
Date, provided Seller continues to exercise commercially reasonable efforts
to cure such breach (it being understood that Buyer may not terminate this
Agreement pursuant to this paragraph (h) if it shall have materially
breached this Agreement or if such breach by Seller is cured prior to the
End Date); and
(i) by Seller, upon a breach of any representation, warranty, covenant or
agreement on the part of Parent or Buyer set forth in this Agreement, or if
any representation or warranty of Parent or Buyer shall have become untrue,
in either case such that the conditions set forth in Section 8.3(a) would
not be satisfied by the End Date, provided, that if such inaccuracy in
Parent's or Buyer's representations and warranties or breach by Parent or
Buyer is curable by Parent or Buyer through the exercise of its commercially
reasonable efforts, then Seller may not terminate this Agreement under this
Section 10.1(i) prior to the End Date, provided Parent or Buyer (as the case
may be) continues to exercise commercially reasonable efforts to cure such
breach (it being understood that Seller may not terminate this Agreement
pursuant to this paragraph (i) if it shall have materially breached this
Agreement or if such breach by Parent or Buyer is cured prior to the End
Date).
For the purposes of this Agreement, a "Seller Triggering Event" shall be
deemed to have occurred if: (i) the Board of Directors of Seller or any
committee thereof shall for any reason have withdrawn or shall have amended or
modified in a manner adverse to Buyer its recommendation in favor of the
adoption and approval of this Agreement or the approval of the Dissolution;
(ii) Seller shall have failed to include in the Proxy Statement/
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Prospectus the recommendation of the Board of Directors of Seller in favor of
the adoption and approval of the Agreement and the approval of the Dissolution;
(iii) the Board of Directors of Seller fails to reaffirm its recommendation in
favor of the adoption and approval of the Agreement and the approval of the
Dissolution within ten (10) days after Buyer requests in writing that such
recommendation be reaffirmed following the public announcement of an
Acquisition Proposal; (iv) the Board of Directors of Seller or any committee
thereof shall have approved or recommended any Acquisition Proposal; or (v) a
tender or exchange offer relating to securities of Seller shall have been
commenced by a Person unaffiliated with Buyer and Seller shall not have sent to
its securityholders pursuant to Rule 14e-2 promulgated under the Securities
Act, within ten (10) business days after such tender or exchange offer is first
published sent or given, a statement disclosing that Seller recommends
rejection of such tender or exchange offer.
10.2 Notice of Termination. Any termination of this Agreement under Section
10.1 will be effective immediately upon the delivery of written notice thereof
by the terminating party to the other parties hereto (or, in the case of
termination pursuant to Section 10.1(h) or Section 10.1(i), on the date
specified therein).
10.3 Effect of Termination. In the event of termination of this Agreement as
provided in Section 10.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of any party hereto, or its
affiliates, officers, directors or stockholders, provided that each party shall
remain liable for any breaches of this Agreement prior to its termination; and
provided further that, the provisions of Section 7.4, Section 7.10, ARTICLE 11
and this Section 10.3 of this Agreement shall remain in full force and effect
and survive any termination of this Agreement. Notwithstanding the foregoing,
no termination of this Agreement shall relieve any party from liability for any
breach hereof prior to such termination.
10.4 Amendment. This Agreement may be amended by the parties hereto at any
time by execution of an instrument in writing signed on behalf of each of the
parties hereto.
10.5 Extension; Waiver. At any time prior to the Closing, Buyer, on the one
hand, and Seller, on the other hand, may, to the extent legally allowed, (i)
extend the time for the performance of any of the obligations of the other
party hereto, (ii) waive any inaccuracies in the representations and warranties
made to such party contained herein or in any document delivered pursuant
hereto, and (iii) waive compliance with any of the agreements or conditions for
the benefit of such party contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party.
ARTICLE 11
GENERAL
11.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
messenger or courier service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice); provided, however,
that notices sent by mail will not be deemed given until received:
(a) if to Buyer, to:
Palm, Inc.
5470 Great America Parkway
Santa Clara, California 95052
Attention: General Counsel
Telephone No.: (408) 878-9000
Facsimile No.: (408) 878-2750
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with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attention: Katharine A. Martin, Esq.
Robert Sanchez, Esq.
Telephone No.: (650) 493-9300
Facsimile No.: (650) 493-6811
(b) if to Seller, to:
Be Incorporated
800 El Camino Real
Menlo Park, California 94025
Attention: General Counsel
Telephone No.: (650) 462-4100
Facsimile No.: (650) 462-4129
with a copy to:
Cooley Godward LLP
5 Palo Alto Square
3000 El Camino Real
Palo Alto, California 94306
Attention: David Lipkin, Esq.
Telephone No.: (650) 843-5000
Facsimile No.: (650) 849-7400
11.2 Entire Agreement; Assignment. This Agreement, the Exhibits hereto, the
Seller Disclosure Schedule, the Parent Disclosure Schedule, the Non-Disclosure
Agreement, the Collateral Agreements and the documents and instruments and
other agreements among the parties hereto referenced herein: (i) constitute the
entire agreement among the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings both written and oral,
among the parties with respect to the subject matter hereof; (ii) are not
intended to confer upon any other person any rights or remedies hereunder; and
(iii) shall not be assigned by operation of law or otherwise, except that Buyer
may assign its rights and delegate its obligations hereunder to Parent. The
Existing Agreement is hereby amended and restated in its entirety by this
Agreement, and each of Seller, Buyer and Parent agree that, without limiting
any liability that any party may have by reason of any breach of the Existing
Agreement, this Agreement shall from and after the date first set forth above
supersede in its entirety the Existing Agreement.
11.3 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
11.4 Other Remedies. Any and all remedies herein expressly conferred upon a
party will be deemed cumulative with and not exclusive of any other remedy
conferred hereby, or by law or equity upon such party, and the exercise by a
party of any one remedy will not preclude the exercise of any other remedy.
11.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, REGARDLESS OF THE LAWS
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THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS
THEREOF.
11.6 Jurisdiction and Venue. Each of the parties hereto irrevocably consents
to the exclusive jurisdiction and venue of any court within Santa Clara County,
State of California, in connection with any matter based upon or arising out of
this Agreement or the matters contemplated herein, agrees that process may be
served upon them in any manner authorized by the laws of the State of
California for such persons and waives and covenants not to assert or plead any
objection which they might otherwise have to such jurisdiction, venue and such
process.
11.7 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefor, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
11.8 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY AND ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE ACTIONS OF ANY PARTY HERETO IN NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
11.9 Fees and Expenses. Except as otherwise provided herein, whether or not
the transactions contemplated herein are consummated, all expenses, including
without limitation all legal, accounting, financial advisory, consulting and
other fees, incurred in connection with the negotiation or effectuation of this
Agreement or consummation of such transactions, shall be the obligation of the
respective party incurring such expenses.
11.10 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the date first above written.
PALM, INC.
By: /s/ Judy Bruner
_________________________________
Name: Judy Bruner
_______________________________
Title: Senior Vice President and
_______________________________
Chief Financial Officer
_______________________________
BE INCORPORATED
By: /s/ Steve Sakoman
_________________________________
Name: Steve Sakoman
_______________________________
Title: Chief Operating Officer
_______________________________
ECA SUBSIDIARY ACQUISITION
CORPORATION
By: /s/ Stephen Yu
_________________________________
Name: Stephen Yu
_______________________________
Title: President
_______________________________
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