Exhibit 2.1
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ASSET PURCHASE AGREEMENT
by and among
TAB Products Co.,
a Delaware corporation; and
Bunt Acquisition Corp.,
a Delaware corporation and a wholly-owned subsidiary of TAB Products Co.;
on the one hand
and
Docucon, Incorporated,
a corporation organized under the laws of Delaware;
on the other hand.
_______________________________
Dated as of March 7, 2000
_______________________________
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 "Accounts Payable" . . . . . . . . . . . . . . . . . . . . . . .1
1.2 "Accounts Receivable". . . . . . . . . . . . . . . . . . . . . .1
1.3 "Acquisition". . . . . . . . . . . . . . . . . . . . . . . . . .1
1.4 "Acquisition Proposal" . . . . . . . . . . . . . . . . . . . . .2
1.5 "Additional Business Liabilities". . . . . . . . . . . . . . . .2
1.6 "Affiliate". . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.7 "Assets" . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.8 "Assumed Contracts". . . . . . . . . . . . . . . . . . . . . . .2
1.9 "Assumed Liabilities". . . . . . . . . . . . . . . . . . . . . .2
1.10 "Business" . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.11 "Business Financial Statements". . . . . . . . . . . . . . . . .2
1.12 "Business Records" . . . . . . . . . . . . . . . . . . . . . . .2
1.13 "Cash Payment" . . . . . . . . . . . . . . . . . . . . . . . . .2
1.14 "Closing". . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.15 "Closing Date" . . . . . . . . . . . . . . . . . . . . . . . . .2
1.16 "Closing Net Assets Value" . . . . . . . . . . . . . . . . . . .3
1.17 "Closing Statement". . . . . . . . . . . . . . . . . . . . . . .3
1.18 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.19 "Confidentiality Agreement". . . . . . . . . . . . . . . . . . .3
1.20 "Contracts". . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.21 "Dispute Notice" . . . . . . . . . . . . . . . . . . . . . . . .3
1.22 "Encumbrances" . . . . . . . . . . . . . . . . . . . . . . . . .3
1.23 "Environmental Laws" . . . . . . . . . . . . . . . . . . . . . .3
1.24 "Equipment Leases" . . . . . . . . . . . . . . . . . . . . . . .3
1.25 "ERISA". . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.26 "Excluded Assets". . . . . . . . . . . . . . . . . . . . . . . .3
1.27 "Excluded Liabilities" . . . . . . . . . . . . . . . . . . . . .3
1.28 "Facility" . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.29 "GAAP" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.30 "Governmental Contracts" . . . . . . . . . . . . . . . . . . . .4
1.31 "Governmental Entity". . . . . . . . . . . . . . . . . . . . . .4
1.32 "Handling" or "Handled". . . . . . . . . . . . . . . . . . . . .4
1.33 "Hazardous Materials". . . . . . . . . . . . . . . . . . . . . .4
1.34 "Indemnifiable Losses" . . . . . . . . . . . . . . . . . . . . .4
1.35 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . .4
1.36 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . .4
1.37 "Initial Purchase Price" . . . . . . . . . . . . . . . . . . . .4
1.38 "Intangibles". . . . . . . . . . . . . . . . . . . . . . . . . .4
1.39 "Inventory". . . . . . . . . . . . . . . . . . . . . . . . . . .4
1.40 "Key Employees". . . . . . . . . . . . . . . . . . . . . . . . .4
1.41 "Knowledge" or "Known" . . . . . . . . . . . . . . . . . . . . .4
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1.42 "Laws or Decrees". . . . . . . . . . . . . . . . . . . . . . . .4
1.43 "Liability". . . . . . . . . . . . . . . . . . . . . . . . . . .4
1.44 "Losses" . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.45 "Material Adverse Change". . . . . . . . . . . . . . . . . . . .5
1.46 "Material Adverse Effect". . . . . . . . . . . . . . . . . . . .5
1.47 "Net Assets" . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.48 "Permits". . . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.49 "Permitted Encumbrances" . . . . . . . . . . . . . . . . . . . .5
1.50 "Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.51 "Prepaid Expenses" . . . . . . . . . . . . . . . . . . . . . . .5
1.52 "Proxy Statement". . . . . . . . . . . . . . . . . . . . . . . .5
1.53 "Released" . . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.54 "Required Seller Stockholder Vote" . . . . . . . . . . . . . . .5
1.55 "Seller Accounting Principles" . . . . . . . . . . . . . . . . .6
1.56 "Seller Board Recommendation". . . . . . . . . . . . . . . . . .6
1.57 "Seller SEC Documents" . . . . . . . . . . . . . . . . . . . . .6
1.58 "Seller Stockholders Meeting". . . . . . . . . . . . . . . . . .6
1.59 "Seller Triggering Event". . . . . . . . . . . . . . . . . . . .6
1.60 "Software Programs". . . . . . . . . . . . . . . . . . . . . . .6
1.61 "Superior Proposal". . . . . . . . . . . . . . . . . . . . . . .6
1.62 "Tangible Assets". . . . . . . . . . . . . . . . . . . . . . . .7
1.63 "Tax". . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
1.64 "Tax Return" . . . . . . . . . . . . . . . . . . . . . . . . . .7
1.65 "Transaction". . . . . . . . . . . . . . . . . . . . . . . . . .7
1.66 "Trust". . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
1.67 "Trust Account". . . . . . . . . . . . . . . . . . . . . . . . .7
1.68 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . .7
1.69 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . .7
1.70 "Withholding Taxes". . . . . . . . . . . . . . . . . . . . . . .7
ARTICLE II PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES . . . . . .7
2.1 Purchase and Sale of Assets and Assumption of Assumed
Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.2 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.3 Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . .9
2.4 Assumption of Liabilities. . . . . . . . . . . . . . . . . . . .9
2.5 Liabilities Not Assumed. . . . . . . . . . . . . . . . . . . . 10
2.6 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . 11
2.7 Purchase Price Adjustment. . . . . . . . . . . . . . . . . . . 11
2.8 Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE III THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . 13
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . 13
4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.3 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . 13
4.4 No Conflicts; Consents . . . . . . . . . . . . . . . . . . . . 14
4.5 Title to Assets. . . . . . . . . . . . . . . . . . . . . . . . 14
4.6 Tangible Assets. . . . . . . . . . . . . . . . . . . . . . . . 14
4.7 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.8 Litigation and Claims. . . . . . . . . . . . . . . . . . . . . 15
4.9 Compliance with Laws and Regulations; Governmental
Licenses, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 15
4.10 Financial Statements, SEC Reports. . . . . . . . . . . . . . . 15
4.11 Absence of Certain Changes or Events . . . . . . . . . . . . . 17
4.12 Intellectual Property. . . . . . . . . . . . . . . . . . . . . 18
4.13 Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.14 Contracts and Arrangements . . . . . . . . . . . . . . . . . . 21
4.15 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.16 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.17 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . 22
4.18 Warranties and Service Payment Obligations . . . . . . . . . . 23
4.19 Business Records . . . . . . . . . . . . . . . . . . . . . . . 23
4.20 No Suspension or Debarment.. . . . . . . . . . . . . . . . . . 23
4.21 Environmental Matters. . . . . . . . . . . . . . . . . . . . . 23
4.22 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.23 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . 25
4.24 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . 27
4.25 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.26 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . 28
4.27 Accuracy of Material Facts; Copies of Materials. . . . . . . . 28
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER . . . . . . . . . . . 28
5.1 Organization and Good Standing . . . . . . . . . . . . . . . . 29
5.2 Power, Authorization and Validity. . . . . . . . . . . . . . . 29
5.3 No Violation of Existing Agreements. . . . . . . . . . . . . . 29
5.4 Compliance With Other Instruments and Laws . . . . . . . . . . 29
5.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.6 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.7 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VI PRE-CLOSING COVENANTS OF SELLER. . . . . . . . . . . . . . . . . 30
6.1 Advice of Changes. . . . . . . . . . . . . . . . . . . . . . . 30
6.2 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . 30
6.3 Access to Information. . . . . . . . . . . . . . . . . . . . . 31
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6.4 Obtaining Necessary Consents and Addition of Purchaser as
Party to Certain Contracts . . . . . . . . . . . . . . . . . . 32
6.5 Satisfaction of Conditions Precedent . . . . . . . . . . . . . 32
6.6 No Solicitation. . . . . . . . . . . . . . . . . . . . . . . . 32
6.7 Proxy Statement. . . . . . . . . . . . . . . . . . . . . . . . 33
6.8 Stockholders' Meeting. . . . . . . . . . . . . . . . . . . . . 33
6.9 Bulk Sales . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.10 Collection of Accounts Receivable. . . . . . . . . . . . . . . 35
6.11 Establishment of Trust; Satisfaction by Seller of
Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.12 Notice to Vendors. . . . . . . . . . . . . . . . . . . . . . . 35
6.13 Distribution from Seller's 401(k) Plan.. . . . . . . . . . . . 36
ARTICLE VII PRE-CLOSING COVENANTS OF PARENT AND PURCHASER . . . . . . . . . 36
7.1 Advice of Changes. . . . . . . . . . . . . . . . . . . . . . . 36
7.2 Satisfaction of Conditions Precedent . . . . . . . . . . . . . 36
ARTICLE VIII MUTUAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 36
8.1 Confidentiality and Publicity. . . . . . . . . . . . . . . . . 36
8.2 Regulatory Filings; Consents; Reasonable Efforts . . . . . . . 36
8.3 Governmental Filings . . . . . . . . . . . . . . . . . . . . . 37
8.4 Further Assurances . . . . . . . . . . . . . . . . . . . . . . 37
8.5 Communications Plan. . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE IX CONDITIONS TO CLOSING. . . . . . . . . . . . . . . . . . . . . . 37
9.1 Conditions to Each Party's Obligations . . . . . . . . . . . . 37
9.2 Conditions to Obligations of Seller. . . . . . . . . . . . . . 38
9.3 Conditions to Obligations of Parent and Purchaser. . . . . . . 39
ARTICLE X POST-CLOSING MATTERS. . . . . . . . . . . . . . . . . . . . . . . 41
10.1 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.2 Further Assurances of Seller . . . . . . . . . . . . . . . . . 42
10.3 Further Assurances of Purchaser. . . . . . . . . . . . . . . . 42
10.4 Access to Business Records . . . . . . . . . . . . . . . . . . 42
10.5 Tax Liability. . . . . . . . . . . . . . . . . . . . . . . . . 43
10.6 Group Health Plans.. . . . . . . . . . . . . . . . . . . . . . 43
10.7 Financial Statement. . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE XI TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . 43
11.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . 45
11.3 Expenses; Termination Fees.. . . . . . . . . . . . . . . . . . 45
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ARTICLE XII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION . . 46
12.1 Survival of Representations and Warranties . . . . . . . . . . 46
12.2 Indemnification by Seller. . . . . . . . . . . . . . . . . . . 46
12.3 Escrow Fund. . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.4 Escrow Period; Release From Escrow.. . . . . . . . . . . . . . 47
12.5 Claims Upon Escrow Fund. . . . . . . . . . . . . . . . . . . . 48
12.6 Objections to Claims.. . . . . . . . . . . . . . . . . . . . . 48
12.7 Resolution of Conflicts and Arbitration. . . . . . . . . . . . 48
12.8 Third-Party Claims.. . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE XIII GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
13.1 Governing Law; Jurisdiction; Venue . . . . . . . . . . . . . . 49
13.2 Assignment; Binding upon Successors and Assigns. . . . . . . . 50
13.3 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 50
13.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 50
13.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 50
13.6 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . 50
13.7 Amendment and Waivers. . . . . . . . . . . . . . . . . . . . . 50
13.8 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
13.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
13.10 Construction and Interpretation of Agreement . . . . . . . . . 52
13.11 No Joint Venture . . . . . . . . . . . . . . . . . . . . . . . 52
13.12 Absence of Third Party Beneficiary Rights. . . . . . . . . . . 52
v
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
March 7, 2000, by and among TAB Products Co., a Delaware corporation ("Parent"),
Bunt Acquisition Corporation, a Delaware corporation and a wholly-owned
subsidiary of Parent ("Purchaser") on the one hand, and Docucon, Incorporated, a
Delaware corporation ("Seller") on the other hand.
RECITALS
A. Seller is engaged in the business of providing electronic imaging
services to convert documents to electronic formats for computer system access
(excluding the Excluded Assets, as defined below, the "Business"); and Purchaser
is interested in purchasing, and Seller is interested in selling, the Business;
and
B. The parties hereto desire that Seller sell, assign, transfer and
convey to Purchaser, and that Purchaser purchase from Seller, the Assets (as
defined below) in exchange for cash, cancellation of indebtedness and assumption
of the Assumed Liabilities (as defined below), all according to the terms and
subject to the conditions set forth in this Agreement (the "Transaction").
NOW, THEREFORE, in consideration of the representations, warranties and
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
set forth or referenced below:
1.1 "ACCOUNTS PAYABLE" shall mean those amounts owing by Seller under
Assumed Contracts or otherwise arising in connection with the Business listed on
SCHEDULE 1.2 as such SCHEDULE 1.1 may be updated through Closing to include
those accounts payable arising in the ordinary course of business in connection
with the Business subject to the review and approval of Parent.
1.2 "ACCOUNTS RECEIVABLE" shall mean the accounts receivable and notes
receivable of or amounts owing or payable to Seller in connection with or
relating to the Business, including those set forth on SCHEDULE 1.2.
1.3 "ACQUISITION" shall mean any transaction or series of transactions
involving:
(a) any merger, consolidation, share exchange, business
combination, issuance of securities, Acquisition of securities, tender offer,
exchange offer or other similar transaction (i) in which the Seller is a
constituent corporation, (ii) in which a Person or "group"
(as defined in the Exchange Act and the rules promulgated thereunder) of
Persons directly or indirectly acquires beneficial or record ownership of
securities representing more than 20% of the outstanding securities of any
class of voting securities of Seller, or (iii) in which Seller issues
securities representing more than 20% of the outstanding securities of any
class of voting securities of Seller;
(b) any sale, lease, exchange, transfer, license, acquisition
or disposition of any business or businesses or assets that constitute or
account for 10% or more of the consolidated net revenues, net income or assets
of Seller; or
(c) any liquidation or dissolution of Seller.
1.4 "ACQUISITION PROPOSAL" shall mean any offer, proposal, inquiry or
indication of interest (other than an offer, proposal, inquiry or indication of
interest by Parent) contemplating or otherwise relating to any Acquisition.
1.5 "ADDITIONAL BUSINESS LIABILITIES" shall mean the liabilities
listed on SCHEDULE 1.5, as such schedule shall be updated through Closing to
include liabilities arising in the ordinary course of business in connection
with the Business through the Closing Date subject to review and approval of
Parent.
1.6 "AFFILIATE" shall mean a Person that directly or indirectly,
through one or more intermediaries, is controlled by, or is under common control
with another Person.
1.7 "ASSETS" shall have the meaning set forth in Section 2.2 hereof.
1.8 "ASSUMED CONTRACTS" shall mean only those Contracts listed on
SCHEDULE 1.8, as such schedule may be updated through the Closing Date to
include Contracts entered into in the ordinary course of business and subject to
review and approval of Parent.
1.9 "ASSUMED LIABILITIES" shall have the meaning set forth in
Section 2.4(a) hereof.
1.10 "BUSINESS" shall have the meaning set forth in Recital A.
1.11 "BUSINESS FINANCIAL STATEMENTS" shall have the meaning set forth
in Section 4.10(a).
1.12 "BUSINESS RECORDS" shall mean any and all books, records, files,
drawings, documentation, data or information that have been or now are used in
or with respect to, in connection with or otherwise relating to the Business,
the Assets or the Assumed Liabilities.
1.13 "CASH PAYMENT" shall have the meaning set forth in
Section 2.6(a) hereof.
1.14 "CLOSING" shall have the meaning set forth in Section 3.1 hereof.
1.15 "CLOSING DATE" shall have the meaning set forth in Section 3.1
hereof.
2
1.16 "CLOSING NET ASSETS VALUE" shall have the meaning set forth in
Section 2.7(b) hereof.
1.17 "CLOSING STATEMENT" shall have the meaning set forth in
Section 2.7(a) hereof.
1.18 "CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
1.19 "CONFIDENTIALITY AGREEMENT" shall mean the mutual confidentiality
agreement, dated November 3, 1999, by and between Parent and Seller.
1.20 "CONTRACTS" shall mean all those contracts and arrangements
relating to the Business.
1.21 "DISPUTE NOTICE" shall have the meaning set forth in
Section 2.7(a) hereof.
1.22 "ENCUMBRANCES" shall mean any and all restrictions on or
conditions to transfer or assignment, claims, liabilities, liens, pledges,
mortgages, restrictions, and encumbrances of any kind, whether accrued,
absolute, contingent or otherwise affecting the Assets.
1.23 "ENVIRONMENTAL LAWS" shall mean any and all applicable civil,
criminal, and administrative laws (including common law), statutes, codes,
rules, regulations, ordinances, orders, decrees, judgments, permits, licenses,
approvals, authorizations, and other requirements, directives, consents and
obligations lawfully imposed by any Governmental Entity pertaining to the
protection of the environment, protection of ecology, protection of public
health, protection of worker health and safety, and/or the treatment, emission
and/or discharge of gaseous, particulate and/or effluent pollutants, and/or the
Handling of Hazardous Materials, and regulations, guidelines, and policies
promulgated under any of the foregoing, all as amended from time to time.
1.24 "EQUIPMENT LEASES" shall mean leases related to any of the
Tangible Assets.
1.25 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
1.26 "EXCLUDED ASSETS" shall mean the assets of Seller as of the
Closing set forth in SCHEDULE 2.3.
1.27 "EXCLUDED LIABILITIES" shall have the meaning set forth in
Section 2.5 hereof.
1.28 "FACILITY" shall mean any facility or real property, including
without limitation any improvement, equipment, structure, building, or fixture,
that is or was owned, used, operated, occupied, controlled, or rented, in
connection with the Business.
1.29 "GAAP" shall mean generally accepted accounting principles, as in
effect in the United States from time to time, as supplemented by Regulation S-X
as promulgated by the United States Securities and Exchange Commission, as in
effect from time to time, consistently applied.
3
1.30 "GOVERNMENTAL CONTRACTS" shall mean all contracts listed on
SCHEDULE 1.8 under which Seller is required to, or may, provide services to
agencies of the United States Government.
1.31 "GOVERNMENTAL ENTITY" shall mean any court, or any federal, state,
municipal, provincial or other governmental authority, department, commission,
board, service, agency, political subdivision or other instrumentality.
1.32 "HANDLING" or "HANDLED" shall mean used, generated, manufactured,
processed, contained, transferred, recycled, stored, treated, loaded,
transported, removed or Released.
1.33 "HAZARDOUS MATERIALS" shall mean any substance, waste, material,
chemical, compound or mixture which is defined, listed, designated, described or
characterized under Environmental Laws or under any rules, guidances, policies,
or regulations promulgated thereunder, as hazardous, toxic, a contaminant, a
pollutant or words of similar import, and includes without limitation any
asbestos, polychlorinated biphenyls, petroleum (including crude oil or any
fraction or distillate thereof), natural gas, natural gas liquids, and liquefied
natural gas.
1.34 "INDEMNIFIABLE LOSSES" shall have the meaning set forth in
Section 12.2(a) hereof.
1.35 Intentionally Omitted.
1.36 Intentionally Omitted.
1.37 "INITIAL PURCHASE PRICE" shall have the meaning set forth in
Section 2.6 hereof.
1.38 "INTANGIBLES" shall mean guarantees, rights, warranties, defenses
and claims, choses in action, causes of action, demands, rights of recovery,
suits, covenants not to compete and other rights in favor of Seller relating to
the Assets, the Assumed Liabilities or the Business.
1.39 "INVENTORY" shall mean the inventory, including supplies,
consumables, parts (including retainable parts), materials, spares, training and
testing units, wherever located, owned, primarily employed or held for use in
the conduct of the Business, including the items listed on SCHEDULE 1.39.
1.40 "KEY EMPLOYEES" shall mean those persons listed on SCHEDULE 1.40
attached hereto.
1.41 "KNOWLEDGE" or "KNOWN" shall mean the current actual knowledge,
after reasonable inquiry, of any of the officers, directors or employees of a
Person.
1.42 "LAWS OR DECREES" shall mean all applicable federal, state,
provincial and local laws, ordinances, rules, statutes, regulations and all
orders, writs, injunctions, awards, judgments or decrees.
1.43 "LIABILITY" shall mean any direct or indirect liability,
indebtedness, obligation, guarantee or endorsement, whether known or unknown,
whether accrued or unaccrued, whether absolute or contingent, whether due or to
become due, or whether liquidated or unliquidated.
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1.44 "LOSSES" shall mean any loss, demand, action, cause of action,
assessment, damage, Liability, cost or expense, including without limitation,
interest, penalties and reasonable attorneys' and other professional fees and
expenses incurred in the investigation, prosecution, defense or settlement
thereof, but excluding special or consequential damages (including without
limitation loss of profits or revenues) related to any such loss, demand,
action, cause of action, assessment, damage, liability, cost or expense, other
than special or consequential damages actually awarded to a third party and paid
or payable to such third party by a party hereto.
1.45 "MATERIAL ADVERSE CHANGE" shall mean any material adverse change
in the Business, operations, properties, Assets, Intellectual Property,
financial condition, Assumed Liabilities, results of operations or prospects,
whether or not occurring in the ordinary course of business.
1.46 "MATERIAL ADVERSE EFFECT" shall mean any material adverse effect
on the business, operations, properties, the Assets, financial condition, the
Assumed Liabilities, results of operations or prospects, whether or not
occurring in the ordinary course of business.
1.47 "NET ASSETS" shall mean the book value of the Assets, net of
depreciation amortization and reserves, as set forth on SCHEDULE 1.47, as such
schedule may be updated through the Closing Date.
1.48 "PERMITS" shall mean any and all licenses, permits,
authorizations, certificates, franchises, variances, waivers, consents and other
approvals from any Governmental Entity relating to the Business, the Assets or
the Assumed Liabilities.
1.49 "PERMITTED ENCUMBRANCES" shall mean (a) liens for current taxes
which are not past due, (b) liens described in any schedule hereto which secure
Assumed Liabilities, and (c) easements, covenants, rights-of-way or other
similar restrictions and imperfections of title.
1.50 "PERSON" shall mean an individual, a partnership, a corporation,
an association, a joint stock company, a trust, a joint venture, an
unincorporated organization or a Governmental Entity.
1.51 "PREPAID EXPENSES" shall mean all prepaid expenses, advances,
deposits, and rights to volume and other rebates due from suppliers, as well as
performance bonds, including those listed on SCHEDULE 1.51.
1.52 "PROXY STATEMENT" shall mean the proxy statement/prospectus to be
sent to Seller's stockholders in connection with the Seller Stockholder's
Meeting.
1.53 "RELEASED" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment, or in a manner or with a consequence not
authorized by Environmental Laws.
1.54 "REQUIRED SELLER STOCKHOLDER VOTE" shall have the meaning set
forth in Section 4.3.
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1.55 "SELLER ACCOUNTING PRINCIPLES" shall have the meaning set forth in
Section 2.7(a) hereof.
1.56 "SELLER BOARD RECOMMENDATION" shall have the meaning set forth in
Section 6.8(b).
1.57 "SELLER SEC DOCUMENTS" shall have the meaning set forth in
Section 4.10(c).
1.58 "SELLER STOCKHOLDERS MEETING" shall have the meaning set forth in
Section 6.8(a).
1.59 "SELLER TRIGGERING EVENT" -- A "Seller Triggering Event" shall be
deemed to have occurred if: (i) the board of directors of Seller shall have
failed to recommend that Seller's stockholders vote to approve this Agreement,
or shall have withdrawn or modified in a manner adverse to Parent the Seller
Board Recommendation (as defined below), or shall have taken any other action
which is reasonably determined by Parent to suggest that the Board of Directors
of Seller might not support the Acquisition or might not believe that the
Acquisition is in the best interests of Seller's stockholders; (ii) Seller shall
have failed to include in the Proxy Statement the Seller Board Recommendation or
a statement to the effect that the board of directors of Seller has determined
and believes that the Acquisition is in the best interests of Seller's
stockholders; (iii) the board of directors of Seller fails to reaffirm the
Seller Board Recommendation, or fails to reaffirm its determination that the
Acquisition is in the best interests of Seller's stockholders, within five
business days after Parent requests in writing that such recommendation or
determination be reaffirmed; (iv) the board of directors of Seller shall have
approved, endorsed or recommended any Acquisition Proposal; (v) Seller shall
have entered into any letter of intent or similar document or any Contract
relating to any Acquisition Proposal; (vi) Seller shall have failed to hold the
Seller Stockholders' Meeting as promptly as practicable; (vii) a tender or
exchange offer relating to securities of Seller shall have been commenced and
Seller shall not have sent to its securityholders, within ten business days
after the commencement of such tender or exchange offer, a statement disclosing
that Seller recommends rejection of such tender or exchange offer; (viii) an
Acquisition Proposal is publicly announced, and Seller fails to issue a press
release announcing its opposition to such Acquisition Proposal within ten
business days after such Acquisition Proposal is announced; or (ix) Seller or
any Representative of Seller shall have violated any of the restrictions set
forth in Section 4.3.
1.60 "SOFTWARE PROGRAMS" shall mean software programs, including any
available (a) source code (in all forms), object code, program descriptions,
databases, interfaces, modifications, updates, previous versions, and
(b) documentation relating to the foregoing, and (c) disks, tapes and other
tangible embodiments of the foregoing.
1.61 "SUPERIOR PROPOSAL" shall mean an unsolicited, bona fide written
offer made by a third party to purchase all or substantially all of the
outstanding common stock of Seller or all or substantially all of the Assets and
Liabilities of the Business on terms that the board of directors of Seller
determines, in its reasonable judgment, based upon a written opinion of an
independent financial advisor of nationally recognized reputation, to be more
favorable to Seller's stockholders than the terms of the Acquisition; PROVIDED,
HOWEVER, that any such offer shall not be deemed to be a "Superior Proposal" if
any financing required to consummate the transaction
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contemplated by such offer is not committed and is not reasonably capable of
being obtained by such third party.
1.62 "TANGIBLE ASSETS" shall mean all tangible assets, equipment and
other fixed assets, including all computer hardware, service tools, aids,
manuals, schematics, diagnostics, machinery and office furnishings, owned,
primarily employed or held for use in the conduct of the Business, including the
Tangible Assets listed on SCHEDULE 1.62.
1.63 "TAX" shall mean any federal, provincial, territorial, local, or
foreign income, profits, gross receipts, capital gains taxes, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental, customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, business license, occupation,
value added, goods and service, alternative or add-on minimum, estimated, or
other tax or governmental charge of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not, relating to the Assets or
the Business.
1.64 "TAX RETURN" shall mean any return, declaration, report,
estimates, claim for refund, or information return or statement relating to
Taxes, including any schedule or attachment thereto, and including any amendment
thereof, covering or relating to the Assets or the Business.
1.65 "TRANSACTION" shall have the meaning set forth in Recital B.
1.66 "TRUST" shall have the meaning set forth in Section 6.11 hereof.
1.67 "TRUST ACCOUNT" shall have the meaning set forth in Section 6.11
hereof.
1.68 Intentionally Omitted.
1.69 Intentionally Omitted.
1.70 "WITHHOLDING TAXES" shall have the meaning set forth in
Section 2.6(b).
ARTICLE II
PURCHASE AND SALE OF ASSETS;
ASSUMPTION OF LIABILITIES
2.1 PURCHASE AND SALE OF ASSETS AND ASSUMPTION OF ASSUMED LIABILITIES.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, effective as of the Closing Date:
(i) Seller agrees to sell, assign, transfer, convey and
deliver to Parent or Purchaser, as designated by Parent at the Closing, and
Parent or Purchaser, as the case may be, agrees to purchase from Seller, all of
Seller's right, title and interest in and to the Assets, free and clear of all
Encumbrances except Permitted Encumbrances;
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(ii) Seller agrees to assign to Parent or Purchaser, as
designated by Parent at the Closing, and Parent or Purchaser, as the case may
be, agrees to assume from Seller, the Assumed Liabilities; and
(iii) Seller agrees to assign to Parent or Purchaser, as
designated by Parent at the Closing, and Parent or Purchaser, as the case may
be, shall assume from Seller, all of Seller's rights and obligations under the
Assumed Contracts, subject to the obtaining of all necessary consents by the
other parties thereto.
(b) In connection with the Transaction, on the Closing Date,
Seller shall take (and shall cause its Affiliates to take) any and all actions
that may be required, or reasonably requested by Purchaser, to transfer good and
marketable title to all of the Assets free and clear of all Encumbrances (except
Permitted Encumbrances) to Purchaser. Seller shall deliver possession of all of
the Assets to Purchaser on the Closing Date at the location and by such means as
are reasonably designated by Purchaser, and Seller shall further deliver to
Purchaser proper assignments, bills of sale, conveyances and other instruments
of sale and/or transfer in forms reasonably satisfactory to Purchaser in order
to convey to Purchaser good and marketable title to all Assets, free and clear
of all Encumbrances (except Permitted Encumbrances), as well as such other
instruments of sale and/or transfer as counsel to Purchaser may reasonably
request (whether at or after the Closing Date) to evidence and effect the
Transaction contemplated herein. Seller agrees that, to the extent any Assets
are owned or held by any Affiliate of Seller, Seller shall also cause good and
marketable title to such Assets to be transferred and assigned to Purchaser free
and clear of all Encumbrances (except Permitted Encumbrances) on the Closing
Date.
2.2 ASSETS. As used in this Agreement, the term "Assets" means,
collectively, all right, title and interest in and to all of the assets,
properties, rights and claims owned or primarily employed or held for use in the
conduct of the Business, including the following, but excluding the Excluded
Assets (as defined below):
(a) BUSINESS. The Business as a going concern, including
without limitation, all of its goodwill;
(b) INVENTORY. All Inventory;
(c) ASSUMED CONTRACTS. All rights and benefits of Seller in
existence on the Closing Date or arising from and after the Closing Date under
the Assumed Contracts;
(d) INTELLECTUAL PROPERTY. All Intellectual Property (as
defined below) owned, primarily employed in or held for use in the Business;
(e) TANGIBLE ASSETS. All Tangible Assets;
(f) BUSINESS RECORDS. All Business Records;
(g) PREPAID EXPENSES. All Prepaid Expenses;
(h) PERMITS. All Permits to the extent transferable by Seller;
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(i) ACCOUNTS RECEIVABLE. All Accounts Receivable;
(j) INTANGIBLES. All Intangibles;
(k) INVESTMENTS. All bank accounts and investments held for
the benefit of the Business, including those bank accounts listed on
SCHEDULE 2.2(k) and all securities held by Cross Securities;
(l) CASH. All cash, cash equivalents, certificates of
deposits, money market funds and other securities deposited or held at Bank One
and/or with Dreyfus Money Market Fund, together with any such deposits in any
other accounts for the benefit of the Business and all cash held as xxxxx cash
at the principal place of business of the Business, but excluding therefrom all
cash (not to exceed Ten Thousand Dollars ($10,000.00)) deposited in an account
held at Millennium Bank in Malvern, Pennsylvania; and
(m) TELEPHONE AND FAX NUMBERS; WEBSITES. The telephone and fax
numbers and websites set forth on SCHEDULE 2.2(m).
2.3 EXCLUDED ASSETS. Notwithstanding anything herein to the contrary,
Seller shall retain all of its right, title and interest in and to, and neither
Purchaser nor Parent shall acquire any interest in, the assets identified on
SCHEDULE 2.3 (the "Excluded Assets").
2.4 ASSUMPTION OF LIABILITIES.
(a) Subject to and upon the terms and conditions of this
Agreement, effective as of the Closing Date, Purchaser and Parent agree to
assume from Seller and to thereafter pay, perform and/or otherwise discharge in
a timely manner only the following Liabilities of Seller (the "Assumed
Liabilities"):
(i) Liabilities arising from and after the Closing Date
under the Assumed Contracts OTHER THAN (A) Liabilities arising from any tort,
infringement or violation of law by Seller that occurred (or arose from facts
occurring) prior to the Closing Date, and (B) Liabilities arising from any
performance, payment, breach or default of any Assumed Contracts to the extent
occurring (or arising from facts and/or activities occurring) prior to the
Closing Date; provided, however, the exception stated above under subparagraph
2.4(a)(i)(B) shall not apply to any Assumed Contract which is also a Government
Contract, nor shall either exception stated under subparagraphs 2.4(a)(i)(A) or
(B) apply to any items set forth in the attached Schedules;
(ii) the Accounts Payable; and
(iii) Additional Business Liabilities.
(b) Each Government Contract listed on SCHEDULE 1.8 is assigned
to Parent subject to approval by the United States Government of the novation of
such Government Contract in favor of Parent in accordance with the Assignment of
Claims Act.
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(c) Nothing herein shall be deemed to deprive Parent,
Purchaser or any Affiliate of Parent, or Purchaser, as applicable, of any
defenses, set-offs or counterclaims which Seller may have had or which
Parent, Purchaser, as applicable, or any Affiliate of Parent or Purchaser, as
applicable, shall have (to the extent relating to the Assumed Liabilities) to
any of the Assumed Liabilities (the "Defenses and Claims"). Effective as of
the Closing, Seller agrees to assign, transfer and convey to Parent,
Purchaser, as applicable, all Defenses and Claims and agrees to cooperate
with Parent, Purchaser, as applicable, to maintain, secure, perfect and
enforce such Defenses and Claims.
2.5 LIABILITIES NOT ASSUMED. Except as expressly set forth in
Section 2.4 above, neither Parent nor Purchaser shall assume or become liable or
obligated in any way, and Seller shall retain and remain solely liable for and
obligated to discharge and indemnify and hold Parent or Purchaser, as
applicable, harmless for, all debts, expenses, accounts payable, contracts,
agreements, commitments, obligations, claims, suits and other liabilities of
Seller of any nature whatsoever, whether or not related to the Business or the
Assets, whether known or unknown, accrued or not accrued, fixed or contingent,
current or arising hereafter, including, without limitation, any of the
following (collectively referred to herein as "Excluded Liabilities"):
(a) Any Liability arising out of or as a result of any legal or
equitable action or judicial or administrative proceeding initiated at any time
to the extent arising out of facts occurring prior to the Closing Date;
(b) Any liability of the Seller for unpaid Taxes (with respect
to the Business, the Assets, or Seller's employees or otherwise), any liability
of the Seller for Taxes arising in connection with the consummation of the
Acquisition (including any income Taxes) arising because the Seller is
transferring the Assets or any liability of the Seller for the unpaid Taxes of
any Person other than the Seller, or a transferee or successor of Seller, by
contract or otherwise;
(c) Any liabilities related to or arising from any breach or
default by Seller or its Affiliates, whether before or after the Closing Date,
of any Contract or related to or arising from any tort, infringement or
violation of Laws or Decrees by Seller, in each case to the extent occurring or
arising from facts occurring on or prior to the Closing Date;
(d) Any liability of Seller or any of Seller's Affiliates
incurred in connection with or under this Agreement (including, without
limitation, with respect to any of Seller's or its Affiliates' representations,
warranties, agreements, covenants or indemnities hereunder) relating to the
execution or performance of this Agreement and the transactions contemplated
herein;
(e) Any Liability of Seller under any of Seller's Employee
Plans with respect to any obligation of Seller to contribute or to make payments
to or provide benefits on behalf of Seller's employees; provided, however,
Purchaser shall assume "tail" liability on Seller's health insurance policy
related to the Business to the extent the same has been accrued, and is shown,
on the Business Financial Statements for the fiscal year ending December 31,
1999;
(f) Any fees or expenses incurred by Seller or any of Seller's
Affiliates or hereunder with respect to Seller's or any of its Affiliates'
engagement of its counsel, or any investment banker, appraiser or accounting
firm engaged to perform services hereunder;
10
(g) any outstanding obligations of Seller for borrowed money
due and owing to banks or other lenders, other than obligations under the
Assumed Contracts to the extent assumed pursuant to Section 2.4(a); or
(h) any Liability of Seller not related to the Business,
including the Liabilities set forth on SCHEDULE 2.5.
2.6 PURCHASE PRICE.
(a) The aggregate consideration for the Business and the Assets
shall be the assumption of the Assumed Liabilities pursuant to Section 2.4 and
(i) the total dollar amount of the Net Assets as set forth on SCHEDULE 1.47 as
delivered at Closing PLUS (ii) $1,900,000 (collectively, the dollar amounts
determined pursuant to subsections (i) and (ii) are referred to as the "Initial
Purchase Price"), subject to adjustment as provided in Section 2.7. At Closing
the Initial Purchase Price, less any Withholding Taxes deducted pursuant to
Section 2.6(b), shall be paid by (i) cancellation of all indebtedness, including
principal and accrued interest, owing by Seller to Parent pursuant to one or
more promissory notes issued by Seller to Parent from January 19, 2000, through
the Closing (the "Notes") and (ii) the wire transfer to the Trust Account
established by Seller pursuant to Section 6.11 of the Initial Purchase Price
LESS the aggregate indebtedness cancelled pursuant to this Section 2.6(a) (the
"Cash Payment").
(b) Purchaser may deduct from the Cash Payment any Taxes
required to be withheld and paid by Purchaser for the account of Seller with
respect to the consideration (the "Withholding Taxes"). Purchaser shall provide
Seller with evidence of payment to the appropriate taxing authorities of the
withheld Withholding Taxes. If for any reason the appropriate amount of
Withholding Taxes is not withheld from the Cash Payment, such required
Withholding Taxes not withheld shall remain Excluded Liabilities despite such
nonwithholding.
(c) Section 7 of the Convertible Secured Note issued by Seller
to Parent dated January 19, 2000, in the principal amount of $200,000 (the
"January 2000 Note") shall be void and have no further force and effect.
2.7 PURCHASE PRICE ADJUSTMENT.
(a) CLOSING STATEMENT. As soon as possible, but in any event
on or before the thirtieth (30th) day after Closing, Seller shall prepare and
deliver to Parent a statement (and supporting schedules) (collectively the
"Closing Statement") setting forth, in detail, calculation of the Closing Net
Assets Value as of the Closing Date, which shall be certified by the Chief
Accounting Officer of Seller as being prepared in accordance with the
definitions herein and the accounting principles set forth on SCHEDULE 2.7(a),
and to the extent a relevant principle is not set forth on SCHEDULE 2.7(a), then
in accordance with those generally accepted accounting principles consistently
applied with prior practice for earlier periods (collectively, the "Seller
Accounting Principles"). For purposes of preparation of the Closing Statement,
all calculations shall be made with precision, and lack of materiality shall not
be a defense to the requirement of precise and proper determinations. Parent
and its auditors or other representatives shall be provided an opportunity to
review the procedures performed in connection with preparation of the Closing
Statement. Immediately following delivery of the Closing Statement, Seller
shall make
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available, and shall cause its auditors to make available, all records, work
papers and employees at Seller's expense reasonably requested by Parent in
connection with its review of the Closing Statement.
The Closing Statement, subject to any adjustments agreed to by Parent and
Seller, shall be used for determining any post-Closing adjustments to the
Initial Purchase Price, unless either party provides the other with a notice of
dispute (a "Dispute Notice") within fifteen (15) days of receipt of the Closing
Statement. If a Dispute Notice is given, Parent and Seller shall promptly meet
in good faith to attempt to resolve any issues, and if any issues are unresolved
within fifteen (15) days of the Dispute Notice, the unresolved issues shall be
submitted to a "Big Five" auditing firm with no material existing relationship
to Parent or Seller, which shall be selected by Parent and approved by Seller,
which approval will not be unreasonably withheld or delayed. The independent
auditor shall be directed to issue a final and binding decision as to the
matters in dispute within thirty (30) days of its engagement. The fees and
expenses of the independent auditor shall be divided equally between the
parties.
The Closing Statement in the form accepted by Parent and Seller, or
determined by the independent auditor, shall be used to adjust the Initial
Purchase Price in the manner set forth in Section 2.7(c) of this Agreement. Any
payments provided for in Section 2.7(c) shall be made within five business days
of the acceptance of the Closing Statement or the independent auditor's
decision. The full force and effect of the representations and warranties
contained herein shall not be diminished by the Closing Statement, the
acceptance thereof by Parent or the decision of the independent auditor.
(b) DEFINITIONS. "Closing Net Assets Value" shall mean the
book value of the Assets, net of depreciation, amortization, and reserves, as of
the Closing Date.
(c) PURCHASE PRICE ADJUSTMENT. If the Closing Net Assets Value
is less than the amount shown on SCHEDULE 1.47 delivered at Closing, Seller
(through the Trust) shall pay Parent an amount equal to the difference. If the
Closing Net Assets Value is greater than the amount shown on SCHEDULE 1.47
delivered at Closing, Parent shall pay Seller an amount equal to the difference.
A payment to Seller shall be made by wire transfer to the Trust Account.
A payment to Parent shall be made by wire transfer to an account designated in
writing by Parent.
2.8 ALLOCATION. Seller and Parent shall cooperate in the preparation
of a joint schedule (the "Allocation Schedule") allocating the purchase price
(including the Assumed Liabilities) among the Assets. If Seller and Parent are
able to agree upon the Allocation Schedule within 30 days following the Closing
Date, Seller and Parent shall each file IRS Form 8594, and all federal, state,
local and foreign tax returns, in accordance with the Allocation Schedule. If
Parent and Seller are unable to complete the Allocation Schedule within 30 days
following the Closing Date, each of Seller and Parent may file IRS Form 8594 and
any federal, state, local and foreign tax returns, allocating the aggregate
consideration (including the Assumed Liabilities) among the Assets in the manner
each believes appropriate, provided such allocation is reasonable and in
accordance with Section 1060 of the Internal Revenue Code of 1986, as amended,
and the regulations thereunder.
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ARTICLE III
THE CLOSING
3.1 THE CLOSING. The consummation of the Acquisition will take place
at a closing to be held at the offices of Xxxx Xxxx Xxxx & Freidenrich LLP,
000 Xxxxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx (the "Closing") on the date five (5)
business days after all conditions (other than the respective delivery
obligations of the parties) hereto have been satisfied or waived, or at such
other time or date as may be agreed to by the parties to this Agreement (the
"Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as otherwise set forth in the Seller Disclosure Schedule provided
to each of Parent and Purchaser, a copy of which is attached hereto as
SCHEDULE IV, the following representations and warranties are made, jointly and
severally, by Seller as set forth below:
4.1 ORGANIZATION. Seller is a corporation duly organized, validly
existing and in good standing under the laws of Delaware. Seller is duly
qualified or licensed to do business as a foreign corporation in each state of
the United States in which it is required to be so qualified or licensed, except
in states which the failure to qualify, in the aggregate, would not have a
Material Adverse Effect on the Business.
4.2 SUBSIDIARIES. The Seller owns no equity interest, directly or
indirectly, in any corporation, partnership, limited liability company, joint
venture, business, trust or other entity, whether or not incorporated, which is
engaged primarily in the Business.
4.3 AUTHORIZATION. This Agreement, the Escrow Agreement described in
Section 12.3 below and all other agreements in connection with the Transaction
to which Seller is or will be a party (such Escrow Agreement and any other
agreements being referred to hereafter as the "Ancillary Agreements") have been,
or upon their execution and delivery hereunder will have been, duly and validly
executed and delivered by Seller and constitute, or will constitute, valid and
binding agreements of Seller enforceable against Seller in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or by general equitable principles or the exercise of judicial
discretion in accordance with such principles. Seller has all requisite power
and authority to execute and deliver this Agreement and, at the time of the
Closing, will have all requisite power and authority to carry out the
transactions contemplated in this Agreement and the Ancillary Agreements to
which it is or will be a party. All requisite corporate action on the part of
Seller has been taken to authorize the execution and delivery of this Agreement
and the Ancillary Agreements to which Seller is or will be a party subject only
to the approval of the Transaction and this Agreement by Seller's stockholders
as contemplated by Section 6.8(a). The affirmative vote of the holders of a
majority of the shares of common stock of Seller outstanding on the record date
for the stockholders meeting called pursuant to Section 6.8(a) (the "Required
Seller Stockholder Vote") is the only vote of the holders of any of Seller's
capital stock necessary under Delaware Law to approve this Agreement and the
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transactions contemplated hereby. The Board of Directors of Seller has
unanimously (i) approved this Agreement and the Transaction, (ii) determined
that in its opinion the Transaction and this Agreement is in the best interests
of the stockholders of Seller and is on terms that are fair to such stockholders
and (iii) recommended that the stockholders of Seller approve this Agreement and
the Merger.
4.4 NO CONFLICTS; CONSENTS. The execution and the delivery of this
Agreement and the Ancillary Agreements to which Seller is or will be a party by
Seller, do not, and the consummation of the transactions contemplated herein and
therein and compliance with the provisions hereof and thereof will not, conflict
with, result in a breach of, constitute a default (with or without notice or
lapse of time, or both) under or violation of, or result in the creation of any
lien, charge or Encumbrance pursuant to, (a) any provision of the Certificate of
Incorporation or Bylaws of Seller, (b) any Law or Decree or (c) any provision of
any agreement, instrument or understanding to which Seller is a party or by
which Seller or any of its properties or assets is bound or affected, nor will
such actions give to any other Person or entity any interests or rights of any
kind, including rights of termination, acceleration or cancellation, in or with
respect to the Business, any of the Assets, the Assumed Liabilities or the
Assumed Contracts. Except as set forth in the immediately preceding sentence,
no consent of any third party or any Governmental Entity is required to be
obtained on the part of Seller to permit the consummation of the transactions
contemplated in this Agreement or the Ancillary Agreements to which Seller is or
will be a party.
4.5 TITLE TO ASSETS. Seller has good and marketable title to all of
the Assets, free and clear of all Encumbrances except for Permitted
Encumbrances. At the Closing, Seller will sell, convey, assign, transfer and
deliver to Parent and Purchaser good, valid and marketable title, and all
Seller's respective right and interest, in and to all of the Assets, free and
clear of any Encumbrances, except for Permitted Encumbrances. The Assets
include all property, tangible and intangible, and all agreements and rights
used in the Business.
4.6 TANGIBLE ASSETS. SCHEDULE 1.62 sets forth a complete and accurate
list of the Tangible Assets used in the Business, which description identifies,
to the extent available, original acquisition date and cost of such items.
Except as set forth in SCHEDULE 1.62, each Tangible Asset is, and as of the
Closing Date will be, in good operating condition and good repair, ordinary wear
and tear excepted, will be free from all defect and damage, and are usable in
the ordinary course of business. SCHEDULE 1.62 also sets forth by category the
location of the Tangible Assets as of the Closing Date.
4.7 INVENTORY. The inventories shown on the Business Financial
Statements or thereafter acquired by Seller were acquired and maintained in the
ordinary course of business, are of good and merchantable quality, and consist
of items of a quantity and quality usable or salable in the ordinary course of
business. Since December 31, 1999, Seller has continued to replenish
inventories in a normal and customary manner consistent with past practices.
The values at which inventories are carried reflect the inventory valuation
policy of Seller, which is consistent with its past practice and in accordance
with generally accepted accounting principles applied on a consistent basis.
Since December 31, 1999, adequate provision has been made on the books of Seller
in the ordinary course of business consistent with past practices to provide for
all slow-moving, obsolete, or unusable inventories to their estimated useful or
scrap values and
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such inventory reserves are adequate to provide for such slow-moving,
obsolete or unusable inventory and inventory shrinkage. SCHEDULE 1.39 to
this Agreement sets forth by category and amount the location of the
Inventory as of the Closing Date.
4.8 LITIGATION AND CLAIMS. There are no claims, actions, suits,
proceedings or, to Seller's Knowledge, investigations, pending before any
Governmental Entity, or to Seller's Knowledge, threatened or reasonably
expected, against Seller (a) relating to the Business, the Assets, the Assumed
Liabilities or the Intellectual Property, (b) which questions or challenges the
validity of this Agreement or any of the Ancillary Agreements to which either
Seller is or will be a party, or any of the transactions contemplated herein or
therein or (c) which might be reasonably expected to have a Material Adverse
Effect on Seller. Seller is not a party to or subject to any decree, order or
arbitration award (or agreement entered into in any administrative, judicial or
arbitration proceeding with any Governmental Entity) with respect to or
affecting the Business, or any of the Assets, the Assumed Liabilities or the
Intellectual Property.
4.9 COMPLIANCE WITH LAWS AND REGULATIONS; GOVERNMENTAL LICENSES, ETC.
Seller is in compliance with all applicable Laws or Decrees with respect to or
affecting the Business or the Assets, the Assumed Liabilities or the
Intellectual Property, including, without limitation, Laws or Decrees relating
to anticompetitive or unfair pricing or trade practices, false advertising,
consumer protection, export or import controls, government contracting,
occupational health and safety, equal employment opportunities, fair employment
practices, and sex, race, religious and age discrimination, except for such
failure to comply as which would not result in a Material Adverse Effect on the
Business, the Assets, the Assumed Liabilities or the Intellectual Property.
Seller is not subject to any order, injunction or decree issued by any
Governmental Entity which could impair the ability of Seller to consummate the
transactions contemplated herein or which could adversely affect Purchaser's
conduct of the Business or its use and enjoyment of the Assets or the
Intellectual Property from and after the Closing Date. Seller possesses all
Permits which are required in order for Seller to operate the Business as
presently conducted, and is in compliance with all such Permits. SCHEDULE 4.9
to this Agreement contains a complete list of such Permits held by Seller
relating to the Business, the date of expiration of each such Permit, and
whether each such Permit is transferable. Neither the sale and transfer of the
Assets pursuant to this Agreement, nor Purchaser's possession and use thereof
from and after the Closing Date because of such sale and transfer will:
(a) violate any law pertaining to bulk sales or transfers or to the
effectiveness of bulk sales or transfers as against creditors of Seller or
(b) result in the imposition of any liability upon Purchaser for appraisal
rights or other liability owing to any shareholder of Seller.
4.10 FINANCIAL STATEMENTS, SEC REPORTS.
(a) Seller has delivered to Purchaser copies of (i) Seller's
unaudited balance sheets pertaining to the Business as of December 31, 1999 (the
"Interim Balance Sheet") and statement of operations pertaining to the Business
for the year then ended (collectively, the "Business Financial Statements").
The Business Financial Statements have been prepared in accordance with GAAP,
and present fairly the financial position of the Business as of their respective
dates and the results of operations and changes in financial position of the
Business for the periods indicated, except that the unaudited Business Financial
Statements do not contain all footnotes and other information required by GAAP.
15
(b) There is no debt, liability, or obligation of any nature,
whether accrued, absolute, contingent, or otherwise, and whether due or to
become due, that is not reflected or reserved against in the Business Financial
Statements except for those (i) that have been incurred after December 31, 1999
or (ii) that are not required by GAAP to be included in a balance sheet or the
notes thereto. All debts, liabilities, and obligations incurred by the Business
after December 31, 1999 were incurred in the ordinary course of business. The
Business Financial Statements in accordance with GAAP reflect all costs and
expenses incurred in the operation of the Business.
(c) Seller has made available to Parent or its counsel through
XXXXX a true and complete copy of each statement, report, registration statement
(with the prospectus in the form filed pursuant to Rule 424(b) of the Securities
Act), definitive proxy statement, and other filing filed with the SEC by Seller
since January 1, 1997, and, prior to the Closing, Seller will have made
available to Parent or its counsel through XXXXX true and complete copies of any
additional documents filed with the SEC by Seller prior to the Closing
(collectively, the "Seller SEC Documents"). In addition, Seller has made
available to Parent all exhibits to the Seller SEC Documents filed prior to the
date hereof which are (i) requested by Parent and (ii) are not available in
complete form through XXXXX ("Requested Confidential Exhibits") and will
promptly make available to Parent all Requested Confidential Exhibits to any
additional Seller SEC Documents filed prior to the Closing. All documents
required to be filed as exhibits to the Parent SEC Documents have been so filed,
and all material contracts so filed as exhibits are in full force and effect,
except those which have expired in accordance with their terms, and neither
Seller nor any of its subsidiaries is in default thereunder. As of their
respective filing dates, none of the Seller SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the extent
corrected by a subsequently filed Seller SEC Document prior to the date hereof.
The financial statements of Seller, including the notes thereto, included in the
Seller SEC Documents (the "Seller Financial Statements"), complied as to form in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto as of their
respective dates, and have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent throughout the periods
indicated and consistent with each other (except as may be indicated in the
notes thereto or, in the case of unaudited statements included in Quarterly
Reports on Form 10-Qs, as permitted by Form 10-Q of the SEC). The Seller
Financial Statements fairly present the consolidated financial condition and
operating results of Seller and its subsidiaries at the dates and during the
periods indicated therein (subject, in the case of unaudited statements, to
normal, recurring year-end adjustments). There has been no change in Seller
accounting policies except as described in the notes to the Seller Financial
Statements.
4.11 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1999,
Seller has conducted the Business in the ordinary and usual course consistent
with past practices and, without limiting the generality of the foregoing, has
not:
(a) suffered any Material Adverse Change in the results of
operation, financial condition, Assets, Intellectual Property, business,
operation or prospects relating to the Business;
16
(b) suffered any damage, destruction or loss, whether or not
covered by insurance, having a Material Adverse Change in the Assets, the
Intellectual Property or the Business;
(c) effected any acquisition, sale or transfer of any material
asset of Seller or any of its subsidiaries other than in the ordinary course of
business and consistent with past practice;
(d) effected any change in accounting methods or practices
(including any change in depreciation or amortization policies or rates) by
Seller or any revaluation by Seller of any of its or any of its subsidiaries'
assets;
(e) declared, set aside, or paid a dividend or other
distribution with respect to the shares of Seller, or directly or indirectly
redeemed, purchased or otherwise acquired any of its shares of capital stock;
(f) entered into any Contract, other than in the ordinary
course of business, or amended or terminated, or defaulted under, any material
Contract to which Seller is a party or by which it is bound;
(g) granted any increase in the compensation payable or to
become payable by Seller to any Seller employees employed in the Business,
except those occurring in the ordinary course of business, consistent with
Seller's past practices;
(h) granted any exclusive license with respect to the
Intellectual Property;
(i) incurred any liabilities relating to the Business except in
the ordinary course of business and consistent with past practice;
(j) permitted or allowed any of the Assets to be subjected to
any Encumbrance of any kind (other than a Permitted Encumbrance) other than in
the ordinary course of business consistent with past practices;
(k) waived any rights under or terminated any Contract relating
to the Business;
(l) with respect to the Business or the Assumed Contracts,
incurred any contingent liability as guarantor or otherwise with respect to the
obligations of others, other than in the ordinary course, consistent with past
practices; or
(m) agreed to take any action described in this Section 4.11 or
outside of its ordinary course of business or which would constitute a breach of
any of the representations or warranties of Seller contained in this Agreement.
4.12 INTELLECTUAL PROPERTY.
(a) For purposes of this Agreement, "Intellectual Property"
means:
17
(i) all issued patents, reissued or reexamined patents,
revivals of patents, utility models, certificates of invention, registrations of
patents and extensions thereof, regardless of country or formal name
(collectively, "Issued Patents");
(ii) all published or unpublished nonprovisional and
provisional patent applications, reexamination proceedings, invention
disclosures and records of invention (collectively "Patent Applications" and,
with the Issued Patents, the "Patents");
(iii) all copyrights, copyrightable works, semiconductor
topography and mask work rights, including all rights of authorship, use,
publication, reproduction, distribution, performance transformation, moral
rights and rights of ownership of copyrightable works, semiconductor topography
works and mask works, and all rights to register and obtain renewals and
extensions of registrations, together with all other interests accruing by
reason of international copyright, semiconductor topography and mask work
conventions (collectively, "Copyrights");
(iv) trademarks, registered trademarks, applications for
registration of trademarks, service marks, registered service marks,
applications for registration of service marks, trade names, registered trade
names and applications for registrations of trade names (collectively,
"Trademarks");
(v) all technology, ideas, inventions, designs,
proprietary information, manufacturing and operating specifications, know-how,
formulae, trade secrets, technical data, computer programs, hardware, software
and processes; and
(vi) all other intangible assets, properties and rights
(whether or not appropriate steps have been taken to protect, under applicable
law, such other intangible assets, properties or rights).
(b) Seller and its subsidiaries own and have good and
marketable title to, or possess legally enforceable rights to use, all
Intellectual Property used or currently proposed to be used in the Business as
currently conducted or as proposed to be conducted by Seller and its
subsidiaries. The Intellectual Property owned by and licensed to Seller
collectively constitute all of the Intellectual Property necessary to enable
Seller to conduct the Business as the Business is currently being conducted. No
current or former officer, director, stockholder, employee, consultant or
independent contractor of Seller has any right, claim or interest in or with
respect to any Intellectual Property used in the Business. There is no
unauthorized use, disclosure or misappropriation of any Intellectual Property
used in the Business by any employee or, to Seller's knowledge, former employee
of Seller or any of its subsidiaries or, to Seller's knowledge, by any other
third party. There are no royalties, fees or other payments payable by Seller
to any Person under any written or oral contract or understanding by reason of
the ownership, use, sale or disposition of Intellectual Property used in the
Business.
(c) With respect to each item of Intellectual Property used in
the Business (except "off the shelf" or other software widely available through
regular commercial distribution channels at a cost not exceeding $10,000 on
standard terms and conditions, as modified for Seller's operations) ("Seller
Intellectual Property") SCHEDULE 4.12 lists all Patents
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and Patent Applications and all registered Trademarks, and trademark
applications and all registered Copyrights, including the jurisdictions in
which each such Intellectual Property has been issued or registered or in
which any such application for such issuance and registration has been filed.
(d) SCHEDULE 4.12 contains an accurate list as of the date of
this Agreement of all licenses, sublicenses and other agreements to which Seller
or its Subsidiaries are a party and pursuant to which Seller or its Subsidiaries
are authorized to use any Intellectual Property owned by any third party,
excluding "off the shelf" or other software at a cost not exceeding $10,000 and
widely available through regular commercial distribution channels on standard
terms and conditions ("Third Party Intellectual Property").
(e) There is no unauthorized use, disclosure, infringement or
misappropriation of any Seller Intellectual Property, including any Third Party
Intellectual Property by any third party, including any employee or former
employee of Seller or any of its subsidiaries. Neither Seller nor any of its
subsidiaries has entered into any agreement to indemnify any other person
against any charge of infringement of any Intellectual Property. There are no
royalties, fees or other payments payable by Seller to any Person by reason of
the ownership, use, sale or disposition of Intellectual Property.
(f) Seller is not in breach of any license, sublicense or other
agreement relating to the Seller Intellectual Property or Third Party
Intellectual Property. Neither the execution, delivery or performance of this
Agreement or any ancillary agreement contemplated hereby nor the consummation of
the Acquisition will contravene, conflict with or result in an infringement on
the Parent's right to own or use any Seller Intellectual Property, including any
Third Party Intellectual Property.
(g) All Patents, registered Trademarks, registered service
marks and registered Copyrights held by Seller are valid and subsisting. All
maintenance and annual fees have been fully paid and all fees paid during
prosecution and after issuance of any patent comprising or relating to such item
have been paid in the correct entity status amounts. Seller is not infringing,
misappropriating or making unlawful use of, or received any notice or other
communication (in writing or otherwise) of any actual, alleged, possible or
potential infringement, misappropriation or unlawful use of any proprietary
asset owned or used by any third party. There is no proceeding pending or
threatened to the knowledge of Seller, nor has any claim or demand been made,
which challenges the legality, validity, enforceability or ownership of any item
of Seller Intellectual Property or Third Party Intellectual Property or alleges
a claim of infringement of any Patents, Trademarks, service marks, Copyrights or
violation of any trade secret or other proprietary right of any third party.
Seller has not brought a proceeding alleging infringement of Seller Intellectual
Property or breach of any license or agreement involving Intellectual Property
against any third party.
(h) All current and former officers of Seller have executed and
delivered to Seller an agreement (containing no exceptions or exclusions from
the scope of its coverage) regarding the protection of proprietary information
and the assignment to Seller of any Intellectual Property arising from services
performed for Seller by such persons, the form of which has been supplied to
Parent. All current and former consultants and independent
19
contractors to Seller involved in the development, modification, marketing
and servicing of Seller Intellectual Property have executed and delivered to
Seller an agreement in the form provided to Parent or its counsel (containing
no exceptions or exclusions from the scope of its coverage) regarding the
protection of proprietary information and the assignment to Seller of any
Intellectual Property arising from services performed for Seller by such
persons. It has at all times been Seller's practice and procedure to require
all employees of Seller to execute and deliver to Seller an agreement
(containing no exceptions or exclusions from the scope of its coverage)
regarding the protection of proprietary information and the assignment to
Seller of any Intellectual Property arising from services performed for
Seller by such employees, the form of which has been provided to Parent; and
substantially all of Seller's current and former employees, including all
current and former software engineers, each of which have had access to the
Seller's computer software, have executed such agreements, although some
current or former employees other than those related to software may not have
done so. To Seller's knowledge, no current or former officer, employee or
independent contractor of Seller is in violation of any term of any agreement
regarding the protection of proprietary information and the assignment to
Seller of any Intellectual Property arising from services performed for
Seller by such persons or any employment contract or any other contract or
agreement relating to the relationship of any such officer, employee or
independent contractor with Seller. No current or former officer, director,
stockholder, employee, consultant or independent contractor has any right,
claim or interest in or with respect to any Seller Intellectual Property.
(i) Seller has taken all commercially reasonable and customary
measures and precautions necessary to protect and maintain the confidentiality
of all Seller Intellectual Property (except such Seller Intellectual Property
whose value would be unimpaired by public disclosure) and otherwise to maintain
and protect the full value of all Intellectual Property it owns or uses. All
use, disclosure or appropriation of Intellectual Property not otherwise
protected by patents, patent applications or copyright ("Confidential
Information") owned by Seller by or to a third party has been pursuant to the
terms of a written agreement between Seller and such third party. All use,
disclosure or appropriation of Confidential Information not owned by Seller has
been pursuant to the terms of a written agreement between Seller and the owner
of such Confidential Information, or is otherwise lawful.
(j) No product liability claims have been communicated in
writing to or, to Seller's knowledge, threatened against Seller.
(k) A complete list of Seller's proprietary software ("Seller
Software"), together with a brief description of each, is set forth in
SCHEDULE 4.12. Seller Software conforms in all material respects with any
specification, documentation, performance standard, representation or statement
provided with respect thereto by or on behalf of Seller.
(l) Seller is not subject to any proceeding or outstanding
decree, order, judgment, or stipulation restricting in any manner the use,
transfer, or licensing thereof by Seller, or which may affect the validity, use
or enforceability of such Seller Intellectual Property. Seller is not subject
to any agreement which restricts in any material respect the use, transfer, or
licensing by Seller of the Seller Intellectual Property.
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(m) Seller is not aware that any of Seller's Information
Technology (as defined below) is not Year 2000 Compliant or will cause an
interruption in the ongoing operations of Seller's business on or after
January 1, 2000. For purposes of the foregoing, the term "Information
Technology" shall mean and include all material software, hardware, firmware,
telecommunications systems, network systems, embedded systems and other systems,
components and/or services (other than general utility services including gas,
electric, telephone and postal) that are owned or used by Seller in the conduct
of the Business. Seller has implemented a comprehensive, detailed program to
analyze and address the risk that the computer hardware and software used by
them may be unable to recognize and properly execute date-sensitive functions
involving certain dates prior to and any dates after December 31, 1999 (the
"Year 2000 Problem"), and reasonably believe that such risk will be remedied on
a timely basis and will not have a Material Adverse Effect and Seller believes,
after due inquiry, that each suppler, vendor, customer or financial service
organization used or serviced by Seller has remedied or will remedy on a timely
basis the Year 2000 Problem, except to the extent that a failure to remedy by
any such suppler, vendor, customer or financial service organization would not
have a Material Adverse Effect.
4.13 FACILITIES. SCHEDULE 4.13 provides an accurate and complete list
of the current Facilities. Seller has provided Purchaser true and complete
copies of (i) the leases for any rented Facilities, and (ii) any acquisition
agreements, loan documents, and title reports applicable to any currently owned
Facilities or applicable to any Facilities which Seller has contracted to
acquire in connection with the Business. Seller enjoys peaceful and undisturbed
possession of all current Facilities. Except as set forth on SCHEDULE 4.13,
there exists no event of default by Seller (nor any event which with notice or
lapse of time would constitute an event of default by Seller) with respect to
any agreement or instrument with regard to any current Facility, and to Seller's
Knowledge there exists no event of default by any of the other parties thereto
(nor any event which with notice or lapse of time would constitute an event of
default by any of the other parties thereto) with respect to any such agreement
or instrument, except where such default would not have a Material Adverse
Effect on the Business. Except as set forth on SCHEDULE 4.13, all such
agreements and instruments are in full force and effect.
4.14 CONTRACTS AND ARRANGEMENTS.
(a) SCHEDULE 4.14 hereto contains a true and accurate list of
all Contracts, pursuant to which Seller enjoys any right or benefit or
undertakes any obligation related to the Business, the Intellectual Property,
the Assumed Liabilities or the Assets. Except for the Contracts, Seller is not
a party to or otherwise bound by the terms of any contract, agreement or
obligation, written or oral, affecting the Business, the Assets, Intellectual
Property, or the Assumed Liabilities. Each of the Assumed Contracts is
(assuming due authorization and execution by the other party or parties hereto)
valid, binding and in full force and effect and enforceable by Seller in
accordance with its terms, except as enforcement may be limited by general
equitable principles and the exercise of judicial discretion in accordance with
such principles. Neither Seller, nor, to Seller's Knowledge, any other party,
is in default under any Assumed Contract, and there are no existing disputes or
claims of default relating thereto, or any facts or conditions Known to Seller
which, if continued, will result in a default or claim of default thereunder,
which default could reasonably be expected to have a Material Adverse Effect on
the Business, the Assets, the Assumed Contracts or the Assumed Liabilities. No
21
Assumed Contract contains any liquidated damages, penalty or similar provision.
There is no Assumed Contract which Seller can reasonably foresee will result in
any material loss upon the performance thereof by Purchaser from and after the
Closing Date. To Seller's Knowledge, no party to any Contract has notified
Seller that it intends to cancel, withdraw, modify or amend such Contract.
Except as set forth on SCHEDULE 4.14 attached hereto, no consents are necessary
for the effective assignment to and assumption by Parent or Purchaser of any of
the Assumed Contracts.
(b) To Seller's Knowledge, there are no unresolved claims
between Seller and any of the principal licensors, vendors, suppliers,
distributors, representatives or customers of the Business, and no event which
could reasonably be expected to result in (i) a material breach of an Assumed
Contract, (ii) a request for a material accommodation or concession in
connection with the sale of services, distributors, representatives or customers
or (iii) a significant impairment of the relationships of any Business with its
principal licensors, vendors, suppliers, distributors, representatives, or
customers, and none of such persons has advised Seller of its intention to cease
doing business with Seller or with Parent or the Purchaser following the Closing
Date, whether as a result of the transactions contemplated hereunder or
otherwise.
(c) Each accepted and unfilled order entered into by Seller for
the provisions of services by Seller, and each agreement, contract or commitment
for the purchase of supplies, included in the Contracts was made in the ordinary
course of the Business.
4.15 INSURANCE. Seller maintains insurance policies relating to the
Business providing coverage described on SCHEDULE 4.15. All of such policies
are in full force and effect, and Seller is not in default with respect to any
material provision of any of such policies. Seller has not received notice from
any issuer of any such policies of its intention to cancel, terminate or refuse
to renew any policy issued by it.
4.16 BROKERS. There is no broker, finder, investment banker or other
person, other than Oak Tree Resources, Inc., whose fees are to be paid by
Seller, who would have any valid claim against any of the parties to this
Agreement for a commission or brokerage fee or payment in connection with this
Agreement or the transactions contemplated herein as a result of any agreement
of, or action taken by, Seller.
4.17 ACCOUNTS RECEIVABLE. Subject to any reserves set forth in the
Business Financial Statements, the accounts receivable shown on the Business
Financial Statements are valid and genuine, have arisen solely out of bona fide
sales and deliveries of goods, performance of services, and other business
transactions in the ordinary course of business consistent with past practices
in each case with persons other than Affiliates, are not subject to any prior
assignment, lien or security interest and are not subject to valid defenses,
set-offs or counter claims. The accounts receivable will be collected in
accordance with their terms at their recorded amounts, subject only to the
reserve for doubtful accounts on the Business Financial Statements.
4.18 WARRANTIES AND SERVICE PAYMENT OBLIGATIONS. SCHEDULE 4.18 sets
forth (a) copies of all forms of warranties or warranty agreements or
obligations now in effect with respect to any of the services provided, or to be
provided, by Seller in connection therewith, (b) a complete and accurate list of
all agreements pursuant to which Seller is obligated to provide service or
support
22
services, (c) a complete and accurate list of all other agreements of Seller
which are either included in the Assumed Contracts or relate to any services,
and pursuant to which Seller is obligated to make any other accommodation for
such purchaser or distributor, including, without limitation, any warranties
and (d) an analysis of the warranty reserve included in the Business
Financial Statements for the year ended December 31, 1999. All services have
been, or are being, made pursuant to the form of warranty set forth in
SCHEDULE 4.18, or the terms of a Contract set forth in SCHEDULE 4.18 and no
other warranty, express or implied, has been made or extended by Seller with
respect to the services provided by Seller in relation thereto.
4.19 BUSINESS RECORDS. The Business Records to be delivered to
Purchaser are complete, true and accurate in all material respects and
accurately reflect all actions and transactions referred to in such Business
Records.
4.20 NO SUSPENSION OR DEBARMENT. Neither Seller nor any of its
Affiliates are presently debared, suspended, proposed for debarment, or declared
ineligible for the award of contracts by any Federal agency; have,within the
three year preceding the Closing, been convicted of or had a civil judgment
rendered against any of them for commission of a fraud or criminal offense in
connection with obtaining, attempting to obtain or performing a public (Federal,
state or local) contract or subcontract, violation of Federal or state antitrust
statutes relating to the submission of offers or commission of embezzlement,
theft, forgery, bribery, falsification or destruction of records, making false
statements or receiving stolen property; are presently indicted for or otherwise
criminally or civilly charged by a Governmental Entity with, commission of any
of the above offenses; and, within the three years preceding the Closing, have
had one or more contracts terminated for default by any Federal agency.
4.21 ENVIRONMENTAL MATTERS. Seller has obtained all Permits required
under Environmental Laws to conduct the Business (collectively, "Licenses"), and
all such Licenses are current, valid and in good standing, and copies of all
such Licenses have been provided to Purchaser. The Business is conducted and at
all times has been conducted in compliance with Environmental Laws and Licenses,
including without limitation, as may be applicable to the ownership, use,
occupation, control, possession and rental of all prior and current Facilities.
No civil, criminal or administrative actions, proceedings, directives,
inquiries, or investigations are pending, or to the Knowledge of Seller
threatened, pertaining to Seller or the Business and brought by any Governmental
Entity or Person, regarding any alleged non-compliance by the Business or any
Facility with Environmental Laws, or regarding any alleged Release of Hazardous
Materials. No Governmental Entity or Person has, currently or in the past,
alleged or, to the Knowledge of Seller threatened to allege, against Seller, an
affiliate of Seller, or the Business, in connection with the Business or any
Facility, that Hazardous Materials have been Handled improperly or in violation
of Environmental Laws or in such a manner as to harm or threaten to harm human
health, ecology, or the environment. Seller has not received any notice with
respect to any Facility, and is not aware of the issuance, at any time, to any
Person of any notice with respect to any Facility, alleging that (i) a Release
of Hazardous Materials occurred, or is suspected of having occurred, at any time
at a Facility, or (ii) a Facility has been listed or is proposed to be listed on
any list, registry or inventory maintained by any Governmental Entity of sites
where a Release of Hazardous Materials has occurred or is suspected of having
occurred. No Release of Hazardous Materials has occurred at any time in
connection with the Business or during any period that Seller owned, used,
occupied, controlled, or rented any current or prior
23
Facility. There are no conditions existing at any Facility in connection
with the Business which require any remedial action, removal action,
corrective action, closure action, or other environmental response action
under Environmental Laws or Licenses. There are not present at any current
Facility, nor to Seller's Knowledge were there present at any prior Facility,
nor are there any plans to install at any current Facility, any aboveground
or underground storage tanks, vaults, containments, impoundments or other
aboveground or underground structures or equipment, that are used, will be
used, or were used, or that are or were intended to be used, for Handling
Hazardous Materials. No equipment or improvements used in the Business
presently require, or to the Knowledge of Seller may require, any expenditure
of funds or any removal, closure, updating, modification or replacement to
comply with Environmental Laws and Licenses. To the Knowledge of Seller, no
Release of Hazardous Materials has migrated to or from, or threatens to
migrate to or from, the soil, surface water, or groundwater of any current
Facility. With respect to the Business and to the Knowledge of Seller, there
are no conditions existing at any site to which Seller has sent Hazardous
Materials at any time for transportation, transfer, recycling, treatment,
storage, or disposal, which require any investigation, remedial action,
removal action, corrective action, or other environmental response action
pursuant to Environmental Laws. No employee of Seller and no other Person
currently asserts, has asserted or, to the Knowledge of Seller threatened or
has threatened to assert, a demand or claim pertaining to Seller, an
affiliate of Seller, or the Business, based upon or relating to alleged
damage to health caused by any Hazardous Material allegedly used in
connection with the Business or which was allegedly present at any Facility.
4.22 TAXES. As used in this Agreement, the terms "Tax" and,
collectively, "Taxes" mean any and all federal, state and local taxes of any
country, 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, stamp transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
(a) Seller has prepared and timely filed all returns,
estimates, information statements and reports (and extensions of time for filing
any of the foregoing) required to be filed with any taxing authority ("Returns")
relating to any and all Taxes concerning or attributable to Seller or its
operations with respect to Taxes for any period ending on or before the Closing
Date and such Returns are true and correct in all material respects and have
been completed in accordance with applicable law.
(b) Seller, as of the Closing Date: (i) will have paid all
Taxes shown to be payable on such Returns covered by Section 4.22(a) and
(ii) will have withheld with respect to its employees all Taxes required to be
withheld.
(c) There is no Tax deficiency outstanding or assessed or, to
Seller's knowledge, proposed against Seller that is not reflected as a liability
on the Seller Balance Sheet nor has Seller executed any agreements or waivers
extending any statute of limitations on or extending the period for the
assessment or collection of any Tax.
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(d) Seller is not a party to any tax-sharing agreement or
similar arrangement with any other party, and Seller has not assumed to pay any
Tax obligations of, or with respect to any transaction relating to, any other
person or agreed to indemnify any other person with respect to any Tax.
(e) Seller's Returns have never been audited by a government or
taxing authority, nor is any such audit in process or pending, and Seller has
not been notified of any request for such an audit or other examination.
(f) Seller has never been a member of an affiliated group of
corporations filing a consolidated federal income tax return.
(g) Seller has made available to Parent copies of all Returns
filed for all periods since December 31, 1996.
4.23 EMPLOYEE BENEFIT PLANS.
(a) SCHEDULE 4.23 contains a complete and accurate list of each
plan, program, policy, practice, contract, agreement or other arrangement
providing for employment, compensation, retirement, deferred compensation,
loans, severance, separation, relocation, repatriation, expatriation, visas,
work permits, termination pay, performance awards, bonus, incentive, stock
option, stock purchase, stock bonus, phantom stock, stock appreciation right,
supplemental retirement, fringe benefits, cafeteria benefits, or other benefits,
whether written or unwritten, including, without limitation, each "employee
benefit plan" within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") which is or has been
sponsored, maintained, contributed to, or required to be contributed to by
Seller, any subsidiary of Seller and, with respect to any such plans which are
subject to Code Section 401(a), any trade or business (whether or not
incorporated) which is or, at any relevant time, was treated as a single
employer with Seller within the meaning of Section 414(b), (c),(m) or (o) of the
Code (an "ERISA Affiliate"), for the benefit of any person who performs or who
has performed services for Seller or with respect to which Seller, any
subsidiary, or ERISA Affiliate has or may have any liability (including, without
limitation, contingent liability) or obligation (collectively, the "Seller
Employee Plans"). SCHEDULE 4.23 separately lists each Seller Employee Plan that
has been adopted or maintained by Seller, whether formally or informally, for
the benefit of employees outside the United States ("Seller International
Employee Plans").
(b) DOCUMENTS. Seller has furnished to Parent true and
complete copies of documents embodying each of the Seller Employee Plans and
related plan documents, including (without limitation) trust documents, group
annuity contracts, plan amendments, insurance policies or contracts,
participant agreements, employee booklets, administrative service agreements,
summary plan descriptions, compliance and nondiscrimination tests for the
last three plan years, standard COBRA forms and related notices, registration
statements and prospectuses, and, to the extent still in its possession, any
material employee communications relating thereto. With respect to each
Seller Employee Plan which is subject to ERISA reporting requirements, Seller
has provided copies of the Form 5500 reports filed for the last five plan
years. Seller has furnished Parent with the most recent Internal Revenue
Service determination or opinion letter issued with respect to each such
Seller Employee Plan, and nothing has occurred since the
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issuance of each such letter which could reasonably be expected to cause the
loss of the tax-qualified status of any Seller Employee Plan subject to Code
Section 401(a).
(c) COMPLIANCE. (i) Each Seller Employee Plan has been
administered in accordance with its terms and in compliance with the
requirements prescribed by any and all statutes, rules and regulations
(including ERISA and the Code), except as would not have, in the aggregate, a
Material Adverse Effect, and Seller and each subsidiary or ERISA Affiliate have
performed all material obligations required to be performed by them under, are
not in material respect in default under or violation of, and have no knowledge
of any material default or violation by any other party to, any of the Seller
Employee Plans; (ii) any Seller Employee Plan intended to be qualified under
Section 401(a) of the Code has either obtained from the Internal Revenue Service
a favorable determination letter as to its qualified status under the Code,
including all amendments to the Code which are currently effective, or has time
remaining to apply under applicable Treasury Regulations or Internal Revenue
Service pronouncements for a determination or opinion letter and to make any
amendments necessary to obtain a favorable determination or opinion letter;
(iii) none of the Seller Employee Plans promises or provides retiree medical or
other retiree welfare benefits to any person; (iv) there has been no "prohibited
transaction," as such term is defined in Section 406 of ERISA or Section 4975 of
the Code, with respect to any Seller Employee Plan; (v) none of Seller, any
subsidiary or any ERISA Affiliate is subject to any liability or penalty under
Sections 4976 through 4980 of the Code or Title I of ERISA with respect to any
Seller Employee Plan; (vi) all contributions required to be made by Seller, any
subsidiary or ERISA Affiliate to any Seller Employee Plan have been paid or
accrued; (vii) with respect to each Seller Employee Plan, no "reportable event"
within the meaning of Section 4043 of ERISA (excluding any such event for which
the thirty (30) day notice requirement has been waived under the regulations to
Section 4043 of ERISA) nor any event described in Section 4062, 4063 or 4041 or
ERISA has occurred; (viii) each Seller Employee Plan subject to ERISA has
prepared in good faith and timely filed all requisite governmental reports
(which were true and correct as of the date filed) and has properly and timely
filed and distributed or posted all notices and reports to employees required to
be filed, distributed or posted with respect to each such Seller Employee Plan;
(ix) no suit, administrative proceeding, action or other litigation has been
brought, or to the knowledge of Seller is threatened, against or with respect to
any such Seller Employee Plan, including any audit or inquiry by the IRS or
United States Department of Labor; and (x) there has been no amendment to,
written interpretation or announcement by Seller, any subsidiary or ERISA
Affiliate which would materially increase the expense of maintaining any Seller
Employee Plan above the level of expense incurred with respect to that Plan for
the most recent fiscal year included in Seller's financial statements.
(d) NO TITLE IV OR MULTIEMPLOYER PLAN. None of Seller, any
subsidiary or any ERISA Affiliate has ever maintained, established, sponsored,
participated in, contributed to, or is obligated to contribute to, or otherwise
incurred any obligation or liability (including, without limitation, any
contingent liability) under any "multiemployer plan" (as defined in
Section 3(37) of ERISA) or to any "pension plan" (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA or Section 412 of the Code. None of Seller,
any subsidiary or any ERISA Affiliate has any actual or potential withdrawal
liability (including, without limitation, any contingent liability) for any
complete or partial withdrawal (as defined in Sections 4203 and 4205 of ERISA)
from any multiemployer plan.
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(e) COBRA, FMLA, HIPAA, CANCER RIGHTS. With respect to each
Seller Employee Plan, Seller and each of its United States subsidiaries have
complied with (i) the applicable health care continuation and notice provisions
of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the
regulations thereunder or any state law governing health care coverage extension
or continuation; (ii) the applicable requirements of the Family and Medical
Leave Act of 1993 and the regulations thereunder; (iii) the applicable
requirements of the Health Insurance Portability and Accountability Act of 1996
("HIPAA"); and (iv) the applicable requirements of the Cancer Rights Act of
1998, except to the extent that such failure to comply would not in the
aggregate have a Material Adverse Effect. Seller has no material unsatisfied
obligations to any employees, former employees, or qualified beneficiaries
pursuant to COBRA, HIPAA, or any state law governing health care coverage
extension or continuation.
(f) EFFECT OF ACQUISITION. The consummation of the
transactions contemplated by this Agreement will not (i) entitle any current
or former employee or other service provider of Seller, any subsidiary or any
ERISA Affiliate to severance benefits or any other payment (including,
without limitation, unemployment compensation, golden parachute, bonus or
benefits under any Seller Employee Plan), except as expressly provided in
this Agreement or (ii) accelerate the time of payment or vesting of any such
benefits or increase the amount of compensation due any such employee or
service provider. No benefit payable or which may become payable by Seller
pursuant to any Seller Employee Plan or as a result of or arising under this
Agreement shall constitute an "excess parachute payment" (as defined in
Section 280G(b)(1) of the Code) which is subject to the imposition of an
excise Tax under Section 4999 of the Code or the deduction for which would be
disallowed by reason of Section 280G of the Code. Each Seller Employee Plan
can be amended, terminated or otherwise discontinued after the Closing in
accordance with its terms, without material liability to Parent and/or
Purchaser, as the case may be, or Seller (other than ordinary administration
expenses typically incurred in a termination event).
(g) SALE OF SUBSTANTIALLY ALL ASSETS. Seller agrees that the
consummation of the transactions contemplated by this Agreement constitute, as
provided in Code Section 401(k)(10)(A)(ii), a sale of substantially all the
assets (within the meaning of Code Section 409(d)(2)) used by Seller in any
trade or business.
4.24 EMPLOYEE MATTERS. Seller is in compliance with all currently
applicable laws and regulations respecting terms and conditions of employment
including, without limitation, applicant and employee background checking,
immigration laws, discrimination laws, verification of employment eligibility,
employee leave laws, classification of workers as employees and independent
contractors, wage and hour laws, and occupational safety and health laws. There
are no proceedings pending or, to Seller's knowledge, reasonably expected or
threatened, between Seller, on the one hand, and any or all of its current or
former employees, on the other hand, including, but not limited to, any claims
for actual or alleged harassment or discrimination based on race, national
origin, age, sex, sexual orientation, religion, disability, or similar tortious
conduct, breach of contract, wrongful termination, defamation, intentional or
negligent infliction of emotional distress, interference with contract or
interference with actual or prospective economic disadvantage. There are no
claims pending, or, to Seller's knowledge, reasonably expected or threatened,
against Seller under any workers' compensation or long term
27
disability plan or policy. Seller is not a party to any collective
bargaining agreement or other labor union contract, nor does Seller know of
any activities or proceedings of any labor union to organize its employees.
Seller has provided all employees with all wages, benefits, relocation
benefits, stock options, bonuses and incentives, and all other compensation
which became due and payable through the date of this Agreement.
4.25 INSURANCE. Seller and each of its subsidiaries have policies of
insurance and bonds of the type and in amounts customarily carried by persons
conducting businesses or owning assets similar to those of Seller and its
subsidiaries. There is no material claim pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid and Seller and its subsidiaries are
otherwise in compliance with the terms of such policies and bonds. Seller has
no knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies.
4.26 COMPLIANCE WITH LAWS. Each of Seller and its subsidiaries has
complied with, is not in violation of and has not received any notices of
violation with respect to, any federal state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for such violations or failures to comply as
do not and could not be reasonably expected to have a Material Adverse Effect on
Seller.
4.27 ACCURACY OF MATERIAL FACTS; COPIES OF MATERIALS. No
representation, warranty or covenant of Seller contained in this Agreement or in
any certificate, schedule or exhibit delivered pursuant to this Agreement
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements contained herein and therein,
taken as a whole, not misleading in light of the circumstances under which such
statements were made. Seller has delivered to Purchaser complete and accurate
copies of each contract, agreement, license, lease and similar document (or, if
oral, summaries of same) referred to in any schedule hereto or included in the
Assets or the Assumed Contracts, or the Assumed Liabilities.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Except as otherwise set forth in the Purchaser Disclosure Schedule
provided to Seller, a copy of which is attached as SCHEDULE V, each of Parent,
and Purchaser, jointly and severally, hereby represents and warrants to Seller
that:
5.1 ORGANIZATION AND GOOD STANDING. Parent is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has full power and authority to carry on its businesses as now
conducted. Parent is duly qualified or licensed to do business as a foreign
corporation in each state of the United States in which it is required to be so
qualified or licensed except in such states in which failure to be so qualified
or licensed would not have a Material Adverse Effect on Parent. Purchaser is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has full power and authority to carry on its
businesses as now conducted. Purchaser is duly qualified or licensed to do
business as a foreign corporation in each state of the United States in
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which is required to be so qualified or licensed, except in such states in
which failure to be so qualified or licensed would not have a Material
Adverse Effect on Purchaser.
5.2 POWER, AUTHORIZATION AND VALIDITY. Each of Parent and Purchaser
has the right, power, legal capacity and authority to enter into and perform its
respective obligations under this Agreement and the other Ancillary Agreements
to which it is or will be a party. The execution and delivery of this Agreement
and the other Ancillary Agreements to which any of Parent and Purchaser is or
will be a party have been duly and validly approved and authorized by the
respective boards of directors of each of Parent and Purchaser. No
authorization or approval, corporate, governmental or otherwise, is necessary in
order to enable each any of Parent and Purchaser to enter into and to perform
the terms of this Agreement or the other Ancillary Agreements on its part to be
performed, except for (i) filings under applicable securities laws, and (ii) the
termination of any waiting period under any other applicable Law or Decree.
This Agreement is and the other Ancillary Agreements, when executed and
delivered by Parent and Purchaser shall be, the valid and binding obligations of
Parent and Purchaser, enforceable in accordance with their respective terms,
subject to (i) laws of general application relating to bankruptcy, insolvency,
and the relief of debtors and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
5.3 NO VIOLATION OF EXISTING AGREEMENTS. Neither the execution and
delivery of this Agreement or any of the Ancillary Agreements to which any of
Parent and Purchaser is or will be a party, nor the consummation of the
transactions contemplated herein or therein will conflict with, or result in a
material breach or violation of, or constitute a default (with or without
notice, lapse of time or both) or give any party any right to terminate,
accelerate or cancel any provision of Parent's or Purchaser's respective charter
documents as currently in effect, any material instrument, contract or
understanding to which any of Parent and Purchaser is a party or by which any of
Parent and Purchaser is bound, or by which Parent or Purchaser or any of their
respective properties are bound, or any federal, state or local judgment, writ,
decree, order, statute, rule or regulation applicable to Parent or Purchaser.
Neither the execution and delivery of this Agreement or any of the Ancillary
Agreements to which each of Parent and Purchaser is or will be a party, nor the
consummation of the transactions contemplated herein or therein, will have a
Material Adverse Effect on the respective operations, assets, or financial
condition of Parent and Purchaser.
5.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. Neither Parent nor
Purchaser is in violation of (a) any provisions of its respective charter
documents as currently in effect or (b) any applicable Law or Decree in any
material respect.
5.5 LITIGATION. There is no suit, action, proceeding, claim or, to
Purchaser's Knowledge, investigation, pending or, to Purchaser's Knowledge,
threatened against Parent or Purchaser before any Governmental Entity which
questions or challenges the validity of this Agreement or any of the Ancillary
Agreements to which any of Parent or Purchaser is or will be a party, or any of
the transactions contemplated herein or therein.
5.6 BROKERS. There is no broker, finder, investment banker or other
person whose fees are to be paid by Parent or Purchaser, who would have any
valid claim against any of the parties to this Agreement for a commission or
brokerage fee or payment in connection with this
29
Agreement or the transactions contemplated herein as a result of any
agreement of, or action taken by, Parent or Purchaser.
5.7 DISCLOSURE. No representation, warranty or covenant of each of
Parent and Purchaser contained in this Agreement or in any certificate, schedule
or exhibit to this Agreement, contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the statements
contained herein and therein, taken as a whole, not misleading in light of the
circumstances in which such statements were made.
ARTICLE VI
PRE-CLOSING COVENANTS OF SELLER
6.1 ADVICE OF CHANGES. Seller will promptly notify each of Parent and
Purchaser in writing of (a) any event occurring subsequent to the date of this
Agreement that would render any representation or warranty of Parent and
Purchaser contained in this Agreement, if made on or as of the date of that
event or the Closing Date, untrue or inaccurate in any material respect and
(b) any Material Adverse Change in the Assets, Assumed Liabilities, the
Intellectual Property or the financial condition, results of operations,
business or prospects of the Business.
6.2 CONDUCT OF BUSINESS. During the period on and from the date of
this Agreement through and including the Closing Date, Seller will conduct the
Business in the ordinary course consistent with past practices and will use its
reasonable commercial efforts to retain Seller's employees employed in the
Business, protect and preserve the Assets and the Intellectual Property, and
maintain and preserve intact Seller's relationships with its consultants,
independent contractors, licensors, suppliers, vendors, representatives,
distributors and other customers and all others with whom it deals, all in
accordance with the ordinary course of business. During the period on and from
the date of this Agreement through and including the Closing Date, Seller will
not without the prior written consent of each of Parent and Purchaser:
(a) mortgage, pledge, subject to a lien, or grant a security
interest in, or suffer to exist or otherwise encumber, any of the Assets;
(b) sell, dispose of or license any of the Assets to any
Person, except Inventory in the ordinary course of business consistent with past
practices;
(c) fail to maintain the Tangible Assets in good working
condition and repair according to the standards it has maintained up to the date
of this Agreement, subject only to ordinary wear and tear;
(d) fail to pay and discharge any trade payables relating to
the Assets or the Business in accordance with Seller's customary business
practices as of the date of execution hereof;
(e) enter into any agreement or arrangement to pay any bonus,
increased salary, or special remuneration to any Seller employee employed in the
Business (other than amounts not in excess of normal payments made on a regular
basis and amounts paid to Seller
30
employees who, at the time of such agreement or arrangement, have not been
extended an offer to become employees of Purchaser);
(f) change accounting methods relating to or affecting the
Assets, the Assumed Liabilities or the Business;
(g) amend, terminate or waive any rights under any Contract,
except in the ordinary course of the Business;
(h) waive or release any right or claim relating to any Assets,
except in the ordinary course of business consistent with past practices;
(i) enter into any agreements or other obligations or
commitments (excluding purchases of new materials) relating to the Business,
except agreements or purchase orders (A) involving the payment by Seller, as
applicable, of less than $50,000 individually, or $100,000 in the aggregate, and
(B) which are on commercially reasonable terms in the ordinary course of
business, consistent with past practices of Seller with respect to the Business;
(j) fail to comply in any material respect with any Law or
Decree applicable to the Business;
(k) take any action to terminate or modify, or permit the lapse
or termination of, the present insurance policies and coverages of Seller
relating to or applicable to Seller, the Business or the Assets;
(l) incur, with respect to the Business or the Assets, any
Liabilities other than Liabilities incurred in the ordinary course of business
consistent with past practices; or
(m) agree to do any of the things described in the preceding
clauses of this Section 6.2.
6.3 ACCESS TO INFORMATION. Until the Closing, Seller will allow each
of Parent and Purchaser and its agents reasonable access upon reasonable notice
and during normal working hours to the Business Records and Facilities relating
to the Assets, all aspects of the Business and its financial and legal affairs
and the financial condition of the Seller. Until the Closing, Seller shall
cause its respective accountants to cooperate with each of Parent and Purchaser
and its agents in making available all financial information requested,
including without limitation the right to examine all working papers pertaining
to all Business Financial Statements prepared or audited by such accountants.
6.4 OBTAINING NECESSARY CONSENTS AND ADDITION OF PURCHASER AS PARTY TO
CERTAIN CONTRACTS. Seller shall use its reasonable commercial efforts to obtain
any and all consents necessary for the effective assignment to and assumption by
Parent or Purchaser of the Assumed Contracts, which consents are set forth on
SCHEDULE 6.4 hereto. All such consents shall be in writing and executed
counterparts thereof shall be delivered promptly to Parent and/or Purchaser, as
applicable. Seller shall not agree to any modification of any Assumed Contract
in the course of obtaining any such consent, where such modification would
materially and adversely affect Parent's or Purchaser's ability to conduct the
Business as heretofore conducted. To the extent
31
permitted by applicable law, in the event consents to the assignment of such
Assumed Contracts are not obtained by Seller as of the Closing, and Parent
and Purchaser agree to close the Acquisition, such Assumed Contracts shall be
held, as and from the Closing Date, by Seller in trust for Parent or
Purchaser as designated by Parent, and the covenants and obligations
thereunder shall be performed by Parent or Purchaser in Seller's respective
name and all benefits and obligations existing thereunder shall be for
Parent's or Purchaser's, as applicable, account PROVIDED that such
performance by Parent or Purchaser, as applicable, shall be contingent on the
passing of all benefits of such Assumed Contracts to Parent and/or Purchaser.
Seller shall take or cause to be taken such actions in its name or otherwise
as Parent or Purchaser, as applicable, may reasonably request so as to
provide Parent or Purchaser with the benefits of the Assumed Contracts and to
effect collection of money or other consideration to become due and payable
under the Assumed Contracts, and Seller shall promptly pay over to Purchaser
all money or other consideration received by it in respect to all Assumed
Contracts. The compliance of Seller with this provision shall not excuse
Seller from any breach of the representations, warranties and covenants of
Seller resulting from such non-assignment.
6.5 SATISFACTION OF CONDITIONS PRECEDENT. Seller will use its
reasonable commercial efforts to satisfy or cause to be satisfied all the
conditions precedent to the Closing hereunder, and to cause the transactions
contemplated herein to be consummated, and, without limiting the generality of
the foregoing, to obtain all consents and authorizations of third parties and to
make all filings with, and give all notices to, third parties, which may be
necessary or reasonably required on its part in order to effect the transactions
contemplated herein.
6.6 NO SOLICITATION.
(a) Seller shall not directly or indirectly, and shall not
authorize or permit any Affiliate or any Representative of the Seller directly
or indirectly to, (i) solicit, initiate, encourage, induce or facilitate the
making, submission or announcement of any Acquisition Proposal or take any
action that could reasonably be expected to lead to an Acquisition Proposal,
(ii) furnish any information regarding Seller to any Person in connection with
or in response to an Acquisition Proposal or an inquiry or indication of
interest that could lead to an Acquisition Proposal, (iii) engage in discussions
or negotiations with any Person with respect to any Acquisition Proposal,
(iv) approve, endorse or recommend any Acquisition Proposal or (v) enter into
any letter of intent or similar document or any Contract contemplating or
otherwise relating to any Acquisition; PROVIDED, HOWEVER, that prior to the
adoption of this Agreement by the Required Seller Stockholder Vote, this
Section 6.6(a) shall not prohibit Seller from furnishing nonpublic information
regarding Seller to, or entering into discussions with, any Person in response
to a Superior Proposal that is submitted to Seller by such Person (and not
withdrawn) if (1) neither Seller nor any Representative of Seller shall have
violated any of the restrictions set forth in this Section 6.6, (2) the board of
directors of Seller concludes in good faith, after having taken into account the
advice of its outside legal counsel, that such action is required in order for
the board of directors of Seller to comply with its fiduciary obligations to
Seller's stockholders under applicable law, (3) at least two business days prior
to furnishing any such nonpublic information to, or entering into discussions
with, such Person, Seller gives Parent written notice of the identity of such
Person and of Seller's intention to furnish nonpublic information to, or enter
into discussions with, such Person, and Seller receives from such Person an
executed confidentiality agreement containing customary limitations on the use
and disclosure of all
32
nonpublic written and oral information furnished to such Person by or on
behalf of Seller, and (4) at least two business days prior to furnishing any
such nonpublic information to such Person, Seller furnishes such nonpublic
information to Parent (to the extent such nonpublic information has not been
previously furnished by Seller to Parent). Without limiting the generality
of the foregoing, Seller acknowledges and agrees that any violation of any of
the restrictions set forth in the preceding sentence by any Representative of
Seller, whether or not such Representative is purporting to act on behalf of
Seller, shall be deemed to constitute a breach of this Section 6.6 by Seller.
(b) Seller shall promptly (and in no event later than 24 hours
after receipt of any Acquisition Proposal, any inquiry or indication of interest
that could lead to an Acquisition Proposal or any request for nonpublic
information) advise Parent orally and in writing of any Acquisition Proposal,
any inquiry or indication of interest that could lead to an Acquisition Proposal
or any request for nonpublic information relating to Seller (including the
identity of the Person making or submitting such Acquisition Proposal, inquiry,
indication of interest or request, and the terms thereof) that is made or
submitted by any Person prior to Closing. Seller shall keep Parent fully
informed with respect to the status of any such Acquisition Proposal, inquiry,
indication of interest or request and any modification or proposed modification
thereto.
(c) Seller shall immediately cease and cause to be terminated
any existing discussions with any Person that relate to any Acquisition
Proposal.
6.7 PROXY STATEMENT. As promptly as practicable after the date of
this Agreement, Seller shall prepare and cause to be filed with the SEC the
Proxy Statement. Seller shall use all reasonable efforts to cause the Proxy
Statement to comply with the rules and regulations promulgated by the SEC and to
respond promptly to any comments of the SEC or its staff. Seller will use all
reasonable efforts to cause the Proxy Statement to be mailed to Seller's
stockholders as promptly as practicable. Parent shall promptly furnish to
Seller all information concerning Parent that may be required or reasonably
requested in connection with any action contemplated by this Agreement. If any
event relating to Seller occurs, or if Seller becomes aware of any information,
that should be disclosed in an amendment or supplement to the Proxy Statement,
then Seller shall promptly inform Parent thereof and shall file such amendment
or supplement with the SEC and, if appropriate, mail such amendment or
supplement to the stockholders of Seller.
6.8 STOCKHOLDERS' MEETING.
(a) Seller shall take all action necessary under all applicable
legal requirements to call, give notice of and hold a meeting of the holders of
Seller's common stock to vote on a proposal to approve this Agreement and the
Acquisition (the "Seller Stockholders' Meeting"). The Seller Stockholders'
Meeting shall be held (on a date selected by Seller in consultation with Parent)
as promptly as practicable. Seller shall ensure that all proxies solicited in
connection with Seller Stockholders' Meeting are solicited in compliance with
all applicable legal requirements.
(b) Subject to Section 6.8(c): (i) the Proxy Statement shall
include a statement to the effect that the Board of Directors of Seller
unanimously recommends that
33
Seller's stockholders vote to approve this Agreement and the Acquisition at
the Seller Stockholders' Meeting (the unanimous recommendation of Seller's
board of directors that Seller's stockholders vote to adopt this Agreement
being referred to as the "Seller Board Recommendation"); and (ii) the Seller
Board Recommendation shall not be withdrawn or modified in a manner adverse
to Parent, and no resolution by the board of directors of Seller or any
committee thereof to withdraw or modify the Seller Board Recommendation in a
manner adverse to Parent shall be adopted or proposed.
(c) Notwithstanding anything to the contrary contained in
Section 6.8, at any time prior to the adoption of this Agreement by the Required
Seller Stockholder Vote, the Seller Board Recommendation may be withdrawn or
modified in a manner adverse to Parent if: (i) a proposal to acquire (by merger
or otherwise) all of the outstanding shares of Seller's common stock is made to
Seller and is not withdrawn; (ii) Seller provides Parent with at least five
business days prior notice of any meeting of Seller's board of directors at
which such board of directors will consider and determine whether such offer is
a Superior Proposal; (iii) Seller's board of directors determines in good faith
that such offer constitutes a Superior Proposal; (iv) Seller's board of
directors determines in good faith, after having taken into account the advice
of Seller's outside legal counsel, that, in light of such Superior Proposal, the
withdrawal or modification of the Seller Board Recommendation is required in
order for Seller's board of directors 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 6.6.
(d) Seller's obligation to call, give notice of and hold the
Seller Stockholders' Meeting in accordance with Section 6.8 shall not be limited
or otherwise affected by the commencement, disclosure, announcement or
submission of any Superior Proposal or other Acquisition Proposal, or by any
withdrawal or modification of the Seller Board Recommendation.
(e) Notwithstanding anything to the contrary contained in this
Agreement, if the Seller Board Recommendation shall be withdrawn or modified in
a manner adverse to Parent, then, at the request of Parent:
(i) Seller shall call, give notice of and hold the
Seller Stockholders' Meeting on a date and at a time and place determined by
Parent;
(ii) Seller shall set a record date for persons entitled
to notice of, and to vote at, the Seller Stockholders' Meeting on a date
determined by Parent;
(iii) Seller shall cause its transfer agent to make a
stockholder list and other stock transfer records relating to Seller available
to Parent;
(iv) Seller shall waive any standstill or similar
provisions applicable to Parent; and
(v) Seller shall render such other reasonable assistance
to Parent in the solicitation of proxies by Parent in favor of the adoption of
this Agreement as Parent shall request.
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6.9 BULK SALES. Purchaser hereby waives compliance with applicable
bulk transfer or similar laws, if any, and Seller hereby indemnifies and holds
harmless Purchaser from any liabilities and obligations arising from claims made
by third parties under applicable bulk transfer or similar laws, if any,
applicable to the transactions contemplated in this Agreement herein.
6.10 COLLECTION OF ACCOUNTS RECEIVABLE. To the extent Seller receives
any payment after the Closing from a customer on account of an Acount
Receivable, Seller shall hold such payment in trust for the benefit of
Purchaser, promptly notify Purchaser and remit such funds to Purchaser.
6.11 ESTABLISHMENT OF TRUST; SATISFACTION BY SELLER OF LIABILITIES. As
of the Closing Date, Seller shall establish a trust (the "Trust") for the
benefit of Seller's creditors for the payment of the Excluded Liabilities, and
the Cash Payment shall be wired by Parent to the Trust account established by
the Trust (the "Trust Account"). From and after the Closing Date, the Trust
shall timely pay, and Seller shall timely pay, perform, discharge and/or settle
(i) all Excluded Liabilities and any other Liability of Seller which is not an
Assumed Liability, in all material respects unless contested by Seller in good
faith and (ii) all covenants and obligations of this Agreement imposed on
Seller. From and after the Closing Date, the Trust shall timely pay any invoice
or account payable in accordance with its terms and, in the event that the Trust
fails to so timely pay any of such invoices or accounts payable in accordance
with its terms, and, in the reasonable judgment of Parent, such failure could
aversely affect Parent's or Purchaser's relationship with any of Parent's
vendors, then Parent shall have the right, but not the obligation, to pay such
invoices or accounts payable on behalf of Seller and to obtain reimbursement out
of the Escrow Fund pursuant to Section 12.5 and such reimbursement shall not be
subject to the limitations set forth in Section 12.2(b). In connection with any
settlement or other discharge of any obligation of Seller which is not
accompanied by payment and/or performance in full of such obligations, Seller
shall obtain a written settlement agreement with respect thereto that, among
other things, provides for a full release of all claims against Seller and its
successors and assigns.
6.12 NOTICE TO VENDORS. Purchaser shall, as soon as practicable
following the Closing Date, send to each vendor under an Assumed Contract a
written notice of the assignment to Purchaser of Seller's obligation under such
Assumed Contract, which notice shall request such vendor's agreement to look
solely to Purchaser for payment or performance of such Assumed Contract and to
release Seller from all obligations thereunder.
6.13 DISTRIBUTION FROM SELLER'S 401(k) PLAN. To the extent that Parent
and or Purchaser hire individuals who were employed by Seller as of the Closing
Date ("Former Seller Employees"), Seller hereby agrees that it shall cause the
accounts, if any, of such Former Seller Employees in Seller's 401(k) Plan to be
distributed as provided by Code Section 401(k)(10)(A)(ii).
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ARTICLE VII
PRE-CLOSING COVENANTS OF PARENT AND PURCHASER
7.1 ADVICE OF CHANGES. Each of Parent and Purchaser will promptly
notify Seller in writing of any event occurring subsequent to the date of this
Agreement that would render any representation or warranty of Parent or
Purchaser, as applicable, contained in this Agreement, if made on or as of the
date of that event or the Closing Date, untrue or inaccurate in any material
respect.
7.2 SATISFACTION OF CONDITIONS PRECEDENT. Subject to Subsection 7.2,
each of Parent and Purchaser will use its reasonable commercial efforts to
satisfy or cause to be satisfied all the conditions precedent to the Closing
hereunder, and to cause the transactions contemplated herein to be consummated,
and, without limiting the generality of the foregoing, to obtain all consents
and authorizations of third parties and to make all filings with, and give all
notices to, third parties which may be necessary or reasonably required on its
part in order to effect the transactions contemplated herein.
ARTICLE VIII
MUTUAL COVENANTS
8.1 CONFIDENTIALITY AND PUBLICITY. The parties acknowledge that the
Confidentiality Agreement is binding upon the parties hereto and in full force
and effect, except to the extent that the provisions hereof supersede provisions
to similar effect contained in the Confidentiality Agreement. The terms of the
Confidentiality Agreement (exclusive of such superseded provisions) are
incorporated in this Agreement by this reference.
8.2 REGULATORY FILINGS; CONSENTS; REASONABLE EFFORTS. Subject to the
terms and conditions of this Agreement, each of Seller and Purchaser shall use
its respective reasonable commercial efforts to (a) make all necessary filings
with respect to the Acquisition and this Agreement under the Securities Act, the
Exchange Act and applicable blue sky or similar securities laws and obtain
required approvals and clearances with respect thereto and supply all additional
information requested in connection therewith, (b) make premerger notification
or other appropriate filings with federal, state, provincial or local
governmental bodies or applicable foreign governmental agencies and obtain
required approvals and clearances with respect thereto and supply all additional
information requested in connection therewith, (c) obtain all consents, waivers,
approvals, authorizations and orders required in connection with the
authorization, execution and delivery of this Agreement and the Ancillary
Agreements and the consummation of the Acquisition and (d) take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated in this Agreement as promptly as practicable.
8.3 GOVERNMENTAL FILINGS. As promptly as practicable after the
execution of this Agreement, each of Seller and Purchaser shall make any and all
required governmental filings required with respect to the transactions
contemplated in this Agreement and the Ancillary
36
Agreements, and shall use its respective best efforts to respond promptly to
all inquiries or requests for additional information or documentation from
any Governmental Entity.
8.4 FURTHER ASSURANCES. Prior to and following the Closing, each
party to this Agreement agrees to cooperate fully with the other party and to
execute such further instruments, documents and agreements, and to give such
further written assurances, as may be reasonably requested by any other party to
better evidence and reflect the transactions described herein and the Ancillary
Agreements and contemplated herein and therein and to carry into effect the
intent and purposes of this Agreement. Prior to and after the Closing Date,
Seller shall reasonably cooperate with Parent and/or Purchaser, as applicable,
in attempting to obtain the agreement of parties to the Contracts necessary for
Parent's or Purchaser's enjoyment of the Assets or the Intellectual Property or
Parent's or Purchaser's conduct of the Business following the Closing Date to
extend the benefits and obligations of such Contracts to Parent and/or
Purchaser.
8.5 COMMUNICATIONS PLAN. Purchaser and Seller shall use their
respective reasonable commercial efforts to carry out the communications plan as
agreed to among the parties as of the date of this Agreement with respect to
communications to their respective customers, suppliers, employees, investors
and strategic partners concerning the transactions contemplated hereby.
ARTICLE IX
CONDITIONS TO CLOSING
9.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each party to this Agreement to effect the transactions to be
performed by such party at the Closing are, at the option of such party, subject
to the satisfaction at or prior to the Closing of the following conditions:
(a) NO ORDERS. No order shall have been entered, and not
vacated, by a court or administrative agency of competent jurisdiction, in any
action or proceeding which enjoins, restrains or prohibits the Acquisition or
the consummation of any other transaction contemplated herein.
(b) PERMITS, AUTHORIZATIONS AND APPROVALS. All permits,
authorizations, approvals and orders required to be obtained under all
applicable Laws or Decrees in connection with the transactions contemplated
herein, including but not limited to any applicable consent or termination of
any applicable waiting period under any Law shall have been obtained and shall
be in full force and effect at the Closing Date.
(c) NO LITIGATION. There shall be no litigation pending or
threatened by any Governmental Entity in which (i) an injunction is or may be
sought against the transactions contemplated herein or (ii) relief is or may be
sought against any party hereto as a result of this Agreement and in which, in
the good faith judgment of the board of directors of either Parent or Seller
(relying on the advice of their respective legal counsel), such Governmental
Entity has the probability of prevailing and such relief would have a Material
Adverse Effect upon such party.
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(d) STOCKHOLDER APPROVAL. This Agreement and the transactions
contemplated hereby shall be approved by the shareholders of Seller by the
requisite vote under applicable law and the Seller's Certificate of
Incorporation.
9.2 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Seller to
effect the transactions to be performed by it at the Closing are, at the option
of Seller, subject to the satisfaction at or prior to the Closing of the
following additional conditions:
(a) REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of Purchaser set forth in ARTICLE V hereof shall be true and
correct in all material respects on and as of the Closing Date with the same
force and effect as if such representations and warranties had been made at the
Closing, and each of Parent and Purchaser shall have delivered to Seller a
certificate (the "Purchaser Compliance Certificate") to such effect dated as of
the Closing Date and signed by the President of Parent and Purchaser,
respectively.
(b) PERFORMANCE. All of the terms, covenants and conditions of
this Agreement to be complied with and performed by each of Parent and
Purchaser, as applicable, at or prior to the Closing shall have been duly
complied with and performed in all material respects, and Purchaser shall have
delivered to Seller the Purchaser Compliance Certificate to such effect.
(c) PURCHASE PRICE CONSIDERATION. Purchaser shall have
delivered the Initial Purchase Price to Seller in accordance with Section 2.6(a)
hereof.
(d) ANCILLARY AGREEMENTS. Each of Parent and Purchaser shall
have executed and delivered to Seller each of the Ancillary Agreements,
including the Escrow Agreement in the form attached hereto as EXHIBIT "A".
(e) PURCHASER'S CLOSING DELIVERABLES. At the Closing,
Purchaser will deliver to Seller the following items:
(i) the Purchase Price;
(ii) the Purchaser Compliance Certificate in accordance
with Section 9.2(a) and (b) hereof;
(iii) copies of each of the Ancillary Agreements executed
by Parent or Purchaser, as applicable;
(iv) a certificate, signed by the Secretary of Parent and
Purchaser, as applicable, respectively, certifying as to and accuracy of, and
attaching copies of, Parent's and Purchaser's respective charter documents and
all board of directors resolutions adopted in connection with the Acquisition,
of Parent and Purchaser, as applicable, respectively; and
(v) all other documents required to be delivered to
Seller under this Agreement.
9.3 CONDITIONS TO OBLIGATIONS OF PARENT AND PURCHASER. The
obligations of Parent and Purchaser to effect the transactions to be performed
by it at the Closing are, at the option of
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Parent and Purchaser, subject to the satisfaction at or prior to the Closing
of the following additional conditions:
(a) REPRESENTATIONS AND WARRANTIES. All the representations
and warranties of Seller set forth in ARTICLE IV hereof shall be true and
correct in all material respects on and as of the Closing Date with the same
force and effect as if such representations and warranties had been made at the
Closing, and Seller shall have delivered to each of Parent and Purchaser a
certificate (the "Seller Compliance Certificate") to such effect dated as of the
Closing Date and signed by the President of Seller.
(b) PERFORMANCE. All of the terms, covenants and conditions of
this Agreement to be complied with and performed by Seller at or prior to the
Closing shall have been duly complied with and performed in all material
respects, and Seller shall have delivered to each of Parent and Purchaser the
Seller Compliance Certificate to such effect.
(c) REQUIRED CONSENTS. Any and all required consents from
third parties to the Assumed Contracts and other instruments required to allow
the consummation of the Acquisition and the other transactions contemplated
herein shall have been obtained, and evidence thereof satisfactory to Parent and
Purchaser shall have been delivered to Parent and Purchaser.
(d) BANK CONSENTS AND RELEASES. Silicon Valley Bank shall have
consented to the transactions contemplated hereby and to the assignment and
assumption of the Silicon Valley Bank Loan Agreement, all at no additional cost
to Parent and Purchaser; or, at the option of Parent and Purchaser, Silicon
Valley Bank shall allow the repayment of such financing at the Closing without
penalty or premium.
(e) MATERIAL ADVERSE CHANGE. There shall have been no Material
Adverse Change relating the Assumed Liabilities, to the Assets or the Business.
(f) ANCILLARY AGREEMENTS. Seller shall have executed and
delivered to each of Parent and Purchaser, as applicable, each of the Ancillary
Agreements to which it is a party, including the Escrow Agreement in the form
attached hereto as EXHIBIT "A".
(g) ASSIGNMENTS OF GOVERNMENT CONTRACTS; AND SECURITY CLEARANCE
TRANSFER. Seller shall have obtained an effective novation of all the
Governmental Contracts, set forth on SCHEDULE 1.8 hereof, all in form and
substance reasonably satisfactory to counsel to Purchaser, and Parent shall have
received a facilities securities clearance from all appropriate agencies of the
Federal government.
(h) TRANSFER DOCUMENTS. All documentation pursuant to which
the transactions contemplated herein are to be accomplished, including bills of
sale, assignments and other documents or instruments of transfer, shall have
been presented to each of Parent and Purchaser and their counsel for review and
shall have been consistent with this Agreement and reasonably satisfactory in
form and substance to Parent and Purchaser and their counsel prior to the
consummation of such transactions. All of the Assets, including the Assumed
Contracts, shall have been transferred or assigned from Seller to Parent and
Purchaser free and clear of all
39
Encumbrances (except Permitted Encumbrances), and Parent and Purchaser and
their counsel shall have received evidences of such transfers reasonably
satisfactory to them.
(i) AUDITED FINANCIAL STATEMENTS. Seller shall have delivered
to each of Parent and Purchaser audited balance sheets pertaining to the Seller
as of December 31, 1998 and December 31, 1999 and audited statements of
operations and cash flow pertaining to the Seller for the years then ended, all
prepared in accordance with GAAP.
(j) PRECLOSING PRO FORMA BALANCE SHEET. Seller shall have
delivered to Parent and Purchaser at least five (5) days before the Closing a
pro forma balance sheet of Seller as of the most recent calendar month end prior
to the date of delivery of such statement together with a good faith reasonable
projection of changes to such balance sheet through the Closing (after giving
effect to the Transaction), the form and content of which shall be acceptable to
Parent and Purchaser, such judgment to be exercised in good faith.
(k) OPINION OF COUNSEL. Seller's counsel shall have delivered
an opinion of counsel to Parent and Purchaser as to the matters set forth in
EXHIBIT "B" in form and substance satisfactory to Parent and its counsel.
(l) EMPLOYEES. As of the Closing Date, all of the Key
Employees and at least eighty percent (80%) of the Seller employees employed by
the Business who are not Key Employees shall be Seller employees and shall have
accepted written offers of employment extended by Purchaser at substantially
equal pay rates and pursuant to Parent's usual benefit package.
(m) SELLER'S CLOSING DELIVERABLES. At the Closing, Seller will
deliver to Purchaser the following items:
(i) a xxxx of sale, intellectual property assignments,
assignments and assumptions of contracts and such other good and sufficient
instruments of conveyance, assignment and transfer, in form and substance
reasonably satisfactory to counsel to Parent and Purchaser as shall be legally
sufficient to vest in Parent and Purchaser, as applicable, good and marketable
title to the Assets (including the Assumed Contracts);
(ii) all Business Records;
(iii) the Seller Compliance Certificate in accordance with
Section 9.3(a) and (b) hereof;
(iv) all required consents from third parties to the
Contracts in accordance with Section 9.3(c) hereof;
(v) the executed opinion of counsel to Seller in
accordance with Section 9.3(k) hereof;
(vi) intentionally omitted;
(vii) executed copies of each of the Ancillary Agreements;
40
(viii) the audited financial statements in accordance with
Section 9.3(i) hereto;
(ix) a certificate, signed by the Secretary of Seller,
certifying as to the truth and accuracy of, and attaching copies of, Seller's
charter documents and board of directors and shareholder resolutions adopted in
connection with the Transaction;
(x) the assignments of the Assumed Contracts in
accordance with Section 9.3(g) hereof;
(xi) all other documents required to be delivered to
Parent and/or Purchaser, as applicable, under the provisions of this Agreement.
(n) TRUST. The Trust shall be established and the agreement
establishing the Trust shall have been reasonably approved by Parent and
Purchaser. Said agreement shall not be materially modified or terminated
without the prior written consent of Parent and Purchaser, which consent shall
not be unreasonably withheld.
ARTICLE X
POST-CLOSING MATTERS
10.1 EMPLOYEES.
(a) EMPLOYMENT OFFER AND EMPLOYMENT TERMS AND CONDITIONS. An
offer of employment shall be made by Parent or Purchaser to Seller employees
employed by the Business ("Prospective New Purchaser Employees"). Seller agrees
to use its best efforts to retain employees employed by the Business, including
Key Employees, and shall notify Purchaser promptly if, notwithstanding the
foregoing, any Seller employee employed by the Business submits a resignation to
terminate employment or terminates employment prior to the Closing Date.
(b) SELLER'S OBLIGATIONS AND LIABILITIES.
(i) Seller shall be solely responsible for filing all
tax returns with respect to its employment of any Seller employee through the
Closing Date.
(ii) Seller shall be solely liable for and obligated to
pay, and shall indemnify and hold Parent and Sub and any Affiliates thereof
harmless from, any and all liabilities with respect to Seller's termination of
employment of any employee on or before the Closing Date.
(iii) Seller shall be responsible for any liability for
claims filed with respect to any employee of Seller eligible for coverage,
reimbursement and/or benefits under the terms of any of Seller's Employee Plans,
provided such liability (A) accrued or became payable during the period of such
employee's employment with Seller on or before the Closing Date or (B) arose out
of Seller's termination of such employee's employment on or before the Closing
Date. Additionally, Seller shall be responsible for any liability for accrued
benefits with respect
41
to any Prospective New Purchaser Employee who, as a result of employment with
Seller on or before the Closing Date, was a participant in any of Seller's
Employee Plan.
(c) NO RIGHTS CONFERRED UPON EMPLOYEES. The parties hereby
acknowledge that, except as otherwise provided in Section 10.1(a) and (b),
Purchaser is not under any obligation to employ any current or future employee
of Seller or any Affiliate thereof. Further, nothing in this Agreement shall
confer any rights or remedies under this Agreement on any employee.
10.2 FURTHER ASSURANCES OF SELLER. Seller shall, from time to time, at
the request of Purchaser, and without further consideration, execute and deliver
such instruments of transfer, conveyance and assignment in addition to those
delivered pursuant to Sections 2.1 and 9.3 hereof, and take such other actions,
as may be reasonably necessary to assign, transfer, convey and vest in
Purchaser, and to put Purchaser in possession of, the Assets, including but not
limited to obtaining any and all required consents of third parties which Seller
has not obtained as of the Closing Date. Seller shall use its reasonable
commercial efforts to obtain for Purchaser any and all consents of third
parties, as required under Section 6.4 which Seller has not obtained as of the
Closing Date.
10.3 FURTHER ASSURANCES OF PURCHASER. Purchaser shall, from time to
time at the request of Seller, and without further consideration, execute and
deliver such instruments of assumption, and take such other action, as may be
reasonably necessary to effectively confirm the assumption by Purchaser of the
Assumed Liabilities.
10.4 ACCESS TO BUSINESS RECORDS. From and after the Closing Date,
Purchaser shall use ordinary care to maintain the Business Records acquired by
it pursuant hereto and, damage by fire or other casualty or accident excepted,
shall not for a period of six (6) years after the Closing Date destroy or
dispose of any such Business Records unless it shall first have notified Seller
of its intention to do so and shall have afforded Seller an opportunity to take
possession thereof. Seller shall have the right to retain a copy of the
Business Records. Similarly, from and after the Closing Date, Seller shall use
ordinary care to maintain Seller's copy of the Business Records and of any
records relating to the Business not transferred to Purchaser and, damage by
fire or other casualty or accident excepted, shall not for a period of six (6)
years after the Closing Date destroy or dispose of any such records unless it
shall first have notified Purchaser of its intention to do so and shall have
afforded Purchaser an opportunity to take possession thereof. From and after
the Closing Date, each party shall afford the other access to all preclosing
Business Records and other information acquired or retained by it pursuant
hereto, including data processing information, upon reasonable notice during
ordinary business hours for all reasonable business purposes, and each party
shall permit the other party to make copies of any such records and retain
possession of such copies. Each of Purchaser and Seller shall use reasonable
care to maintain the confidentiality of the Business Records in the possession
of such party pursuant to the terms and subject to the conditions set forth in
the Confidentiality Agreement.
10.5 TAX LIABILITY.
(a) Except as set forth herein, Seller shall pay all Taxes
arising from or relating to the transactions contemplated in this Agreement (the
"Transaction Taxes"). If a resale
42
certificate, resale purchase exemption certificate, production machinery and
equipment exemption certificate or other certificate or document of exemption
is required to reduce or eliminate the Transaction Taxes, Purchaser will
promptly furnish such certificate or document to Seller or Purchaser will
cooperate with Seller to allow Seller to obtain such reduction or exemption
from Transaction Taxes.
(b) All ad valorem, property (whether real or personal) and
similar taxes ("Property Taxes") with respect to the Assets for any tax period
in which the Closing Date occurs shall be prorated between the Buyer and the
Seller, with the Seller economically responsible for the Property Taxes for the
portion of the tax year prior to and including the Closing Date. Seller shall be
responsible for the preparation and filing of any tax returns or reports related
to the Assets that are required to be filed on or before the Closing Date.
Seller shall be responsible for all taxes imposed on or with respect to the
Assets that are attributable to any whole or partial taxable period ending on or
before the Closing Date. Buyer, with the cooperation of Seller, shall be
responsible for the preparation and filing of all other tax returns or reports
related to the Assets.
10.6 GROUP HEALTH PLANS. Seller shall maintain and keep in full force
and effect, at Seller's sole cost, for a period of not less than six (6) months
after the Closing, all currently maintained Seller Employee Plans which provide
health and medical benefits to Seller's current and former employees. In
addition, Seller acknowledges that it will be responsible for providing COBRA
notices and applicable COBRA coverage for those employees and former employees
who are or will be M&A qualified beneficiaries (as that term is defined in
proposed treasury regulation section 54.4980B-9 Q&A 4).
10.7 FINANCIAL STATEMENT. Seller shall use its reasonable commercial
efforts to cause its independent accountants ("Seller's Accountants"), at
Purchaser's expense, to (i) consent to Purchaser's inclusion of Seller's
Accountants' report on Seller's annual financial statements for the periods
ending December 31, 1998 and December 31, 1999, and/or (ii) audit and consent to
Purchaser's inclusion of Seller's Accountants' report on Seller's interim
financial statements for periods after December 31, 1999 and/or the annual
financial statements of the Business for the periods ending December 31, 1998
and December 31, 1999 and any interim periods thereafter, all as required by
Regulation S-X under the Securities Act of 1933 to be included in Purchaser's
reports filed with the SEC.
ARTICLE XI
TERMINATION OF AGREEMENT
11.1 TERMINATION. This Agreement may be terminated prior to the
Closing (whether before or after approval of this Agreement by Seller's
stockholders:
(a) by mutual written consent of Parent and Seller;
(b) by either Parent or Seller if the Closing shall not have
occurred by June 30, 2000 (unless the failure to consummate the Transaction is
attributable to a failure on the
43
part of the party seeking to terminate this Agreement to perform any material
obligation required to be performed by such party at or prior to the Closing);
(c) by either Parent or Seller if a court of competent
jurisdiction or other Governmental Entity shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other action,
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger;
(d) by either Parent or Seller if (i) Seller Stockholders'
Meeting (including any adjournments and postponements thereof) shall have been
held and completed and Seller's stockholders shall have taken a final vote on a
proposal to adopt this Agreement, and (ii) this Agreement shall not have been
adopted at such meeting by the Required Seller Stockholder Vote (and shall not
have been adopted at any adjournment or postponement thereof); PROVIDED,
HOWEVER, that (A) a party shall not be permitted to terminate this Agreement
pursuant to this Section 11.1(d) if the failure to obtain such stockholder
approval is attributable to a failure on the part of such party to perform any
material obligation required to be performed by such party at or prior to the
Closing, and (B) Seller shall not be permitted to terminate this Agreement
pursuant to this Section 11.1(d) unless Seller shall have made the payment
required to be made to Parent pursuant to Section 11.3(a) and shall have paid to
Parent any fee required to be paid to Parent pursuant to Section 11.3(b);
(e) by Parent (at any time prior to the adoption of this
Agreement by the Required Seller Stockholder Vote) if a Seller Triggering Event
shall have occurred;
(f) by Parent if (i) any of Seller's representations and
warranties contained in this Agreement shall be inaccurate as of the date of
this Agreement, or shall have become inaccurate as of a date subsequent to the
date of this Agreement (as if made on such subsequent date), such that the
condition set forth in Section 9.3(a) would not be satisfied (it being
understood that, for purposes of determining the accuracy of such
representations and warranties as of the date of this Agreement or at any
subsequent date, (A) all "Material Adverse Effect" qualifications and other
materiality qualifications, and any similar qualifications, contained in such
representations and warranties shall be disregarded and (B) any update of or
modification to Seller Disclosure Schedule made or purported to have been made
after the date of this Agreement shall be disregarded), or (ii) any of Seller's
covenants contained in this Agreement shall have been breached such that the
condition set forth in Section 9.3(b) would not be satisfied; PROVIDED, HOWEVER,
that if an inaccuracy in Seller's representations and warranties or a breach of
a covenant by Seller is curable by Seller and Seller is continuing to exercise
all reasonable efforts to cure such inaccuracy or breach, then Parent may not
terminate this Agreement under this Section 11.1(f) on account of such
inaccuracy or breach;
(g) by Seller if (i) any of Parent's representations and
warranties contained in this Agreement shall be inaccurate as of the date of
this Agreement, or shall have become inaccurate as of a date subsequent to the
date of this Agreement (as if made on such subsequent date), such that the
condition set forth in Section 9.2(a) would not be satisfied (it being
understood that, for purposes of determining the accuracy of such
representations and warranties as of the date of this Agreement or at any
subsequent date, (A) all "Material Adverse Effect" qualifications and other
materiality qualifications, and any similar qualifications, contained in
44
such representations and warranties shall be disregarded and (B) any update
of or modification to the Parent Disclosure Schedule made or purported to
have been made after the date of this Agreement shall be disregarded), or
(ii) if any of Parent's covenants contained in this Agreement shall have been
breached such that the condition set forth in Section 9.2(b) would not be
satisfied; PROVIDED, HOWEVER, that if an inaccuracy in Parent's
representations and warranties or a breach of a covenant by Parent is curable
by Parent and Parent is continuing to exercise all reasonable efforts to cure
such inaccuracy or breach, then Seller may not terminate this Agreement under
this Section 11.1(g) on account of such inaccuracy or breach; or
(h) by Parent if, since the date of this Agreement, there shall
have occurred any Material Adverse Effect on the Business, the Assets or the
Assumed Liabilities, or there shall have occurred any event or circumstance
that, in combination with any other events or circumstances, could reasonably be
expected to have a Material Adverse Effect on the Business, the Assets or the
Assumed Liabilities.
11.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 11.1, this Agreement shall be of no further
force or effect; PROVIDED, HOWEVER, that (i) this Section 11.2, Section 11.3 and
ARTICLE XIII shall survive the termination of this Agreement and shall remain in
full force and effect, and (ii) the termination of this Agreement shall not
relieve any party from any liability for any willful breach of any
representation, warranty or covenant contained in this Agreement.
11.3 EXPENSES; TERMINATION FEES.
(a) Except as set forth in this Section 11.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses, whether or not the Transaction is consummated; PROVIDED, HOWEVER, that
if this Agreement is terminated by Parent or Seller pursuant to Section 11.1(d)
or by Parent pursuant to Section 11.1(f), then Seller shall make a nonrefundable
cash payment to Parent (in addition to any fee that may be payable pursuant to
Section 11.3(b) or otherwise), at the time specified in the next sentence, in an
amount equal to the aggregate amount of all fees and expenses (including all
attorneys' fees, accountants' fees, financial advisory fees and filing fees)
that have been paid or that may become payable by or on behalf of Parent in
connection with the preparation and negotiation of this Agreement and otherwise
in connection with the Transaction; and
(b) If (i) this Agreement is terminated by Parent or Seller
pursuant to Section 11.1(d) and at or prior to the time of such termination an
Acquisition Proposal shall have been disclosed, announced, commenced, submitted
or made, or (ii) this Agreement is terminated by Parent pursuant to
Section 11.1(e), then, in either such case, Seller shall pay to Parent, in cash
at the time specified in the next sentence (in addition to any payment required
to be made pursuant to Section 11.3(a)), a nonrefundable fee in the amount of
$250,000. In the case of termination of this Agreement by Seller pursuant to
Section 11.1(d), the fee referred to in the preceding sentence shall be paid by
Seller prior to such termination, and in the case of termination of this
Agreement by Parent pursuant to Section 11.1(d) or Section 11.1(e), the fee
referred to in the preceding sentence shall be paid by Seller within two
business days after such termination.
45
ARTICLE XII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. (a) The
representations and warranties made by Seller or Purchaser herein, or in any
certificate, schedule or exhibit delivered pursuant hereto, shall in no manner
be limited by any investigation of the subject matter thereof made by or on
behalf of either party or by the waiver or satisfaction of any condition to
closing and shall survive the Closing and continue in full force and until the
first anniversary of the Closing Date (the "Expiration Date").
(b) The obligations of Seller to indemnify members of the
Purchaser Group (as defined below) for any Indemnifiable Losses is subject to
the condition that Seller shall have received an Indemnification Claim for all
Indemnifiable Losses for which indemnity is sought on or before the Expiration
Date.
12.2 INDEMNIFICATION BY SELLER.
(a) Subject to the terms and conditions of this ARTICLE XII,
Seller agrees to indemnify, defend and hold harmless Parent, its shareholders,
officers, directors, employees, attorneys, all subsidiaries and affiliates of
Parent, and the respective officers, directors, employees and attorneys of such
entities (all such persons and entities being collectively referred to as the
"Purchaser Group") from, against, for and in respect of any and all Losses
asserted against, relating to, imposed upon or incurred by Parent and/or any
other member of the Purchaser Group by reason of, resulting from, based upon or
arising out of any of the following (collectively, "Indemnifiable Losses"):
(i) the breach, inaccuracy, untruth or incompleteness of
any representation or warranty of Seller contained in or made pursuant to this
Agreement or any certificate, schedule or exhibit delivered by Seller in
connection with this Agreement;
(ii) the breach or nonperformance of any covenant or
agreement of Seller contained in or made pursuant to this Agreement or any of
the Ancillary Agreements;
(iii) any Losses arising out of any oral contract to which
Seller is a party and which is not disclosed to Purchaser in writing on or prior
to the date of this Agreement;
(iv) any Excluded Liability; or
(v) any breach by Seller of this ARTICLE XII.
(b) Subject to Section 12.2(c), Seller shall not be required to
indemnify Parent and/or any other member of the Purchaser Group for any
Indemnifiable Losses under Section 12.2(a) until the aggregate amount of all
Indemnifiable Losses under all individual Indemnification Claims shall exceed
$50,000 (the "Seller's Indemnification Floor"); PROVIDED, HOWEVER, that if the
aggregate amount of Indemnifiable Losses in respect of such Indemnification
Claims shall exceed the Seller's Indemnification Floor, Seller shall indemnify
Purchaser for all Indemnifiable Losses in respect of such Indemnification
Claims, subject to the further limitations
46
set forth in this ARTICLE XII. The aggregate amount for which Seller may be
liable under this ARTICLE XII shall not exceed $250,000.
(c) Purchaser's sole and exclusive remedy against Seller for
any Losses shall be indemnification under this ARTICLE XII; PROVIDED, HOWEVER,
that (A) nothing contained in this ARTICLE XII shall limit in any manner any
remedy at law or in equity to which Purchaser or any other member of the
Purchaser Group shall be entitled against Seller as a result of willful fraud or
intentional misrepresentation by Seller, or any of its representatives or agents
and (B) the provisions of Sections 12.2(b) above shall not limit, in any manner,
Seller's obligation to indemnify members of the Purchaser Group for any breach
of any covenant or agreement of Seller to be performed by Seller following the
Closing Date, including, without limitation, Seller's obligation to perform and
discharge all Excluded Liabilities and Seller's obligations arising out of the
Confidentiality Agreement, and the Ancillary Agreements.
12.3 ESCROW FUND. At the Closing, $250,000 shall be deposited with,
Bank of America, NT&SA (or other institution selected by Parent with the
reasonable consent of Seller) as escrow agent (the "Escrow Agent"), such deposit
to constitute the Escrow Fund and to be governed by the terms set forth herein
and in the Escrow Agreement attached hereto as EXHIBIT "A". The Escrow Fund
shall be available to compensate Seller pursuant to the indemnification
obligations of the shareholders of Seller.
12.4 ESCROW PERIOD; RELEASE FROM ESCROW.
(a) The Escrow Period shall terminate six (6) months after the
Closing (the "Termination Date"); provided, however, that a portion of the
Escrow Fund, which, in the reasonable judgment of Parent, subject to the
objection of Seller and the subsequent arbitration of the matter in the manner
provided in Section 12.7 hereof, is necessary to satisfy any unsatisfied claims
specified in any Officer's Certificate theretofore delivered to the Escrow Agent
prior to termination of the Escrow Period with respect to facts and
circumstances existing prior to expiration of the Escrow Period, shall remain in
the Escrow Fund until such claims have been resolved.
(b) Within three (3) business days after the Termination Date
(the "Release Date"), the Escrow Agent shall release from escrow to Seller the
Escrow Fund less the dollar amount equal to (A) any portion of the Escrow Fund
delivered to Parent in accordance with Section 12.5 in satisfaction of
indemnification claims by Parent and/or Purchaser (collectively, "Indemnitee")
and (B) any portion of the Escrow Fund subject to delivery to Indemnitee in
accordance with Section 12.4(a) with respect to any pending but unresolved
indemnification claims of Indemnitee. Any portion of the Escrow Fund held as a
result of clause (B) shall be released to Seller or released to Parent (as
appropriate) promptly upon resolution of each specific indemnification claim
involved.
(c) The Escrow Agent is hereby granted the power to effect any
transfer of the Escrow Fund contemplated by this Agreement.
12.5 CLAIMS UPON ESCROW FUND. Upon receipt by the Escrow Agent on or
before the Release Date of a certificate signed by any officer of Parent (an
"Officer's Certificate") stating
47
that with respect to the indemnification obligations of the Seller set forth
in Section 12.2, damages exist and specifying in reasonable detail the
individual items of such damages included in the amount so stated, the date
each such item was paid, or properly accrued or arose, and the nature of the
misrepresentation, breach of warranty, covenant or claim to which such item
is related, the Escrow Agent shall, subject to the provisions of this ARTICLE
XII, deliver to Parent out of the Escrow Fund, as promptly as practicable,
cash held in the Escrow Fund having a value equal to such damages.
12.6 OBJECTIONS TO CLAIMS.
(a) At the time of delivery of any Officer's Certificate to the
Escrow Agent, a duplicate copy of such Officer's Certificate shall be delivered
to Seller and for a period of thirty (30) days after such delivery, the Escrow
Agent shall make no delivery of the Escrow Fund hereof unless the Escrow Agent
shall have received written authorization from Seller to make such delivery.
After the expiration of such thirty (30) day period, the Escrow Agent shall make
delivery of the portion of the Escrow Fund or other property in the Escrow Fund
in accordance with Section 12.5 hereof, provided that no such payment or
delivery may be made if Seller shall object in a written statement to the claim
made in the Officer's Certificate, and such statement shall have been delivered
to the Escrow Agent and Parent prior to the expiration of such thirty (30) day
period.
(b) In case Seller shall so object in writing to any claim or
claims by Parent made in any Officer's Certificate, Parent shall have thirty
(30) days to respond in a written statement to the objection of Seller. If
after such thirty (30) day period there remains a dispute as to any claims,
Seller and Parent shall attempt in good faith for sixty (60) days to agree upon
the rights of the respective parties with respect to each of such claims. If
Seller and Parent should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties and shall be furnished to the
Escrow Agent. The Escrow Agent shall be entitled to rely on any such memorandum
and shall distribute the cash from the Escrow Fund in accordance with the terms
thereof.
12.7 RESOLUTION OF CONFLICTS AND ARBITRATION.
(a) If no agreement can be reached after good faith negotiation
between the parties pursuant to Sections 12.6, either party may, by written
notice to the other, demand arbitration of the matter unless the amount of the
damages 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. Parent and Seller shall
agree on the arbitrator, provided that if Parent and Seller cannot agree on such
arbitrator, either Parent or Seller can request that Judicial Arbitration and
Mediation Services ("JAMS") select the arbitrator. The arbitrator 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, to discover relevant information from the
opposing parties about the subject matter of the dispute. The arbitrator 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
court of competent law or equity, should the arbitrator determine that discovery
was sought
48
without substantial justification or that discovery was refused or objected
to without substantial justification. The decision of the arbitrator shall
be written, shall be in accordance with applicable law and with this
Agreement, and shall be supported by written findings of fact and conclusion
of law which shall set forth the basis for the decision of the arbitrator.
The decision of the arbitrator as to the validity and amount of any claim in
such Officer's Certificate shall be binding and conclusive upon the parties
to this Agreement, and notwithstanding anything in ARTICLE XII hereof, the
Escrow Agent and the parties shall be entitled to act in accordance with such
decision and the Escrow Agent shall be entitled to make or withhold payments
out of the Escrow Fund in accordance therewith.
(b) Judgment upon any award rendered by the arbitrator may be
entered in any court having jurisdiction. Any such arbitration shall be held in
Santa Xxxxx County, California under the commercial rules then in effect of the
American Arbitration Association. For purposes of this Section 12.7(b), in any
arbitration hereunder in which any claim or the amount thereof stated in the
Officer's Certificate is at issue, the party seeking indemnification shall be
deemed to be the Non-Prevailing Party unless the arbitrators award the party
seeking indemnification more than one-half (1/2) of the amount in dispute, plus
any amounts not in dispute; otherwise, the person against whom indemnification
is sought shall be deemed to be the Non-Prevailing Party. The Non-Prevailing
Party to an arbitration shall pay its own expenses, the fees of the arbitrator,
any administrative fee of JAMS, and the expenses, including attorneys' fees and
costs, reasonably incurred by the other party to the arbitration.
12.8 THIRD-PARTY CLAIMS. In the event Parent becomes aware of a
third-party claim which Parent believes may result in a demand against the
Escrow Fund, Parent shall notify Seller of such claim, and Seller shall be
entitled, at its expense, to participate in any defense of such claim with
the consent of Parent which shall not be unreasonably withheld. Parent shall
have the right in its sole discretion to settle any such claim. In the event
that Seller has consented to any such settlement, Seller shall have no power
or authority to object under ARTICLE XII or any other provision of this
Section 12.6 to the amount of any claim by Parent against the Escrow Fund for
indemnity with respect to such settlement.
ARTICLE XIII
GENERAL
13.1 GOVERNING LAW; JURISDICTION; VENUE. It is the intention of the
parties hereto that the internal laws of the State of California (irrespective
of its choice of law principles) shall govern the validity of this Agreement,
the construction of its terms, and the interpretation and enforcement of the
rights and duties of the parties hereto. Any action to enforce, or which arises
out of or in any way relates to, any of the provisions of this Agreement, or any
of the Ancillary Agreements shall be brought and prosecuted exclusively in the
United States District Court, Northern District of California (or, in the event
such court does not have jurisdiction, the courts of the State of California
located in such district), and the parties hereto hereby consent to the
jurisdiction of such court or courts and to service of process by registered
mail, return receipt requested, or by any other manner provided by the law of
the State of California and the rules of such courts.
49
13.2 ASSIGNMENT; BINDING UPON SUCCESSORS AND ASSIGNS. None of the
parties hereto may assign any of its rights or obligations hereunder without the
prior written consent of the other party, which consent shall not be
unreasonably withheld; PROVIDED, HOWEVER, that Parent may assign its rights
under this Agreement (a) to any majority-owned subsidiary of Purchaser, provided
that Parent guarantees the obligations of such subsidiary hereunder or (b) to
any successor of Parent through any merger or consolidation, or purchase of all
or substantially all of Parent's stock or all or substantially all of Parent's
assets. This Agreement will be binding upon and inure to the benefit of the
parties hereto and their respective permitted successors and assigns.
13.3 SEVERABILITY. If any provision of this Agreement, or the
application thereof, shall for any reason and to any extent be held to be
invalid or unenforceable, the remainder of this Agreement and the application of
such provision to other persons or circumstances shall be interpreted so as best
to reasonably effect the intent of the parties hereto. The parties further
agree to replace such invalid or unenforceable provision of this Agreement with
a valid and enforceable provision which will achieve, to the extent possible,
the economic, business and other purposes of the invalid or unenforceable
provision.
13.4 ENTIRE AGREEMENT. This Agreement, the exhibits and schedules
hereto, the certificates referenced herein, the exhibits thereto, and the
Confidentiality Agreement constitute the entire understanding and agreement of
the parties hereto with respect to the subject matter hereof and thereof and
supersede all prior and contemporaneous agreements or understandings,
inducements or conditions, express or implied, written or oral, between the
parties with respect hereto and thereto including, without limitation, that
certain letter of intent between the parties dated January 19, 2000.
13.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument.
13.6 OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party shall be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law on such party,
and the exercise of any one remedy shall not preclude the exercise of any other.
13.7 AMENDMENT AND WAIVERS. Any term or provision of this Agreement
may be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof for default in payment of any amount due
hereunder or default in the performance hereof shall not be deemed to constitute
a waiver of any other default or any succeeding breach or default.
13.8 WAIVER. Each party hereto may, by written notice to the others:
(a) waive any of the conditions to its obligations hereunder or extend the time
for the performance of any of the obligations or actions of the others,
(b) waive any inaccuracies in the representations of the others contained in
this Agreement or in any documents delivered pursuant to this Agreement,
(c) waive compliance with any of the covenants of the others contained in this
Agreement or
50
(d) waive or modify performance of any of the obligations of the others. No
action taken pursuant to this Agreement, including without limitation any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, condition or agreement contained herein. Waiver of the breach of
any one or more provisions of this Agreement shall not be deemed or construed
to be a waiver of other breaches or subsequent breaches of the same
provisions.
13.9 NOTICES. All notices and other communications hereunder will be
in writing and will be deemed given (a) upon receipt if delivered personally (or
if mailed by registered or certified mail), (b) the day after dispatch if sent
by overnight courier, (c) upon dispatch if transmitted by telecopier or other
means of facsimile transmission (and confirmed by a copy delivered in accordance
with clause (a) or (b)), properly addressed to the parties at the following
addresses:
Seller: Docucon, Incorporated
00 Xxxxxx Xxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attention: President
Facsimile: (000) 000-0000
with a required copy to: Xxxxx & Xxxxxx LLP
000 Xxxxx Xx. Xxxx'x Xxxxxx
Xxxxx 000
Xxx Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
Parent: Tab Products Co.
0000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
with a required copy to: Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxx Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Either party may change its address for such communications by giving
notice thereof to the other party in conformity with this Section.
51
13.10 CONSTRUCTION AND INTERPRETATION OF AGREEMENT.
(a) This Agreement has been negotiated by the parties hereto
and their respective attorneys, and the language hereof shall not be construed
for or against either party by reason of its having drafted such language.
(b) The titles and headings herein are for reference purposes
only and shall not in any manner limit the construction of this Agreement, which
shall be considered as a whole.
(c) As used in this Agreement, any reference to any state of
facts, event, change or effect being "material" with respect to any entity means
a state of facts that is material to the current condition (financial or
otherwise), properties, assets, liabilities, business or operations of such
entity. Whenever the term "enforceable in accordance with its terms" or like
expression is used in this Agreement, it is understood that excepted therefrom
are any limitations on enforceability under applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting the
enforcement of creditor's rights.
13.11 NO JOINT VENTURE. Nothing contained in this Agreement shall be
deemed or construed as creating a joint venture or partnership between any of
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party shall have
the power to control the activities and operations of any other and their status
is, and at all times, will continue to be, that of independent contractors with
respect to each other. No party shall have any power or authority to bind or
commit any other. No party shall hold itself out as having any authority or
relationship in contravention of this Section.
13.12 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provisions of this
Agreement are intended, nor shall be interpreted, to provide or create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, shareholder, partner of any party hereto or any other
person or entity unless specifically provided otherwise herein, and, except as
so provided, all provisions hereof shall be personal solely between the parties
to this Agreement.
52
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the respective dates set forth next to their signatures below.
Executed on March 7, 2000 DOCUCON, INCORPORATED,
a Delaware corporation
By: Xxxxxxx X. Xxxx
----------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
Executed on March 8, 2000 TAB PRODUCTS,
a Delaware corporation
By: Xxxxxx X. Xxxxx
----------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
Executed on March 8, 2000 BUNT ACQUISITION CORPORATION,
a Delaware corporation
By: Xxxxxx X. Xxxxx
----------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
53
EXHIBITS AND SCHEDULES
Exhibit Description
------- -----------
A Escrow Agreement
B Opinion of Seller's Counsel
Schedule Title
-------- -----
Schedule 1.1 Accounts Payable
Schedule 1.2 Accounts Receivable
Schedule 1.5 Additional Business Liabilities
Schedule 1.8 Assumed Contracts
Schedule 1.39 Inventory
Schedule 1.40 Key Employees
Schedule 1.47 Net Assets
Schedule 1.51 Prepaid Expenses
Schedule 1.62 Tangible Assets
Schedule 2.2(k) Investments
Schedule 2.2(m) Telephone and Fax Numbers; Website
Schedule 2.3 Excluded Assets
Schedule 2.5 Excluded Liabilities
Schedule 2.7(a) Procedures
Schedule IV Disclosure Schedule Provided to Parent and Purchaser
Schedule 4.9 Permits
Schedule 4.12 Intellectual Property
Schedule 4.13 Facilities
Schedule 4.14 Company-Wide Contracts
Schedule 4.15 Insurance
Schedule 4.18 Warranties and Service Payment Obligations
Schedule 4.23 Employee Benefit Plans
Schedule V Disclosure Schedule Provided to Seller
Schedule 6.4 Necessary Consents
EXHIBIT A
---------
ESCROW FUND AGREEMENT (INDEMNITY)
---------------------------------
This Escrow Fund Agreement (this "AGREEMENT") is entered into as of May
___, 2000, by and among Bunt Acquisition Corporation, a Delaware corporation
("PURCHASER," a wholly-owned subsidiary of TAB Products Co., a Delaware
corporation ("PARENT")), Docucon, Incorporated, a Delaware corporation
("SELLER"), and Xxxxx Fargo Bank, National Association, as escrow agent (the
"ESCROW AGENT").
RECITALS
--------
WHEREAS, pursuant to a certain agreement dated March 7, 2000, between
the Parent, Purchaser, and Seller (the "PURCHASE AGREEMENT"), there is
required to be deposited as collateral certain funds to be held by the Escrow
Agent subject to the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
1. APPOINTMENT OF ESCROW AGENT. The Escrow Agent is hereby appointed by the
other parties hereto to act as escrow agent hereunder. The Escrow Agent hereby
accepts such appointment and agrees to hold and administer the Fund (as defined
below) in accordance with the terms and subject to the conditions set forth
herein.
2. PURPOSE. In the event that, pursuant and subject to the provisions of
Article 12 of the Purchase Agreement, Seller shall have any liability to
Purchaser for any losses suffered by the Purchaser, payments from the Fund
pursuant to the terms of this Agreement shall be used to satisfy such liability
to the extent stated in Article 12 of the Purchase Agreement. Upon the
expiration of such indemnification obligations under the Purchase Agreement, the
Escrow Agent will distribute the balance of the Fund, if any, to Seller as set
forth in this Agreement.
3. DEPOSIT OF FUND. During the term of this Agreement, the Fund shall be
invested and reinvested by the Escrow Agent, in the Xxxxx Fargo Funds 100%
Treasury Fund with the Escrow Agent. Interest will be computed daily and
credited to the account monthly. All interest or earnings on the Fund ("Escrow
Earnings") shall be reinvested and shall be credited, and considered part of the
Fund. The Escrow Agent shall maintain records of the "Principal Amount" (as such
term is defined in the following sentence) of the Fund and the Escrow Earnings
on the Fund. The Principal Amount shall be defined as the Initial Amount less
all releases of funds pursuant to Section 6(a), Section 6(b), Section 8(a)(i)
and Section 8(a)(ii), below, exclusive of such portions of such releases as
constitute a release of Escrow Earnings. The Escrow Agent shall have no
responsibility or liability for any diminution of the Fund which may result from
any investment made pursuant to this Section, including any losses on any
investment required to be liquidate prior to maturity in order to make a payment
required hereunder.
4. TRANSFERS. In the event funds transfer instructions are given (other
than in writing at the time of execution of the Agreement), whether in
writing, by telecopier or otherwise, the Escrow Agent is authorized to seek
confirmation of such instructions by telephone call-back to
the person or persons designated on Schedule 1 hereto, and the Escrow Agent
may rely upon the confirmations of anyone purporting to be the person or
persons so designated. The persons and telephone numbers for call-backs may
be changed only in a writing actually received and acknowledged by the Escrow
Agent. The parties to this Agreement acknowledge that such security procedure
is commercially reasonable.
It is understood that the Escrow Agent and the beneficiary's bank in any
funds transfer may rely solely upon any account numbers or similar
identifying number provided by either of the other parties hereto to identify
(i) the beneficiary, (ii) the beneficiary's bank, or (iii) an order it
executes using any such identifying number, even where its use may result in
a person other than the beneficiary being paid, or the transfer of funds to a
bank other than the beneficiary's bank, or an intermediary bank designated.
5. THE FUND. Simultaneously with the execution and delivery of this
Agreement, Purchaser is delivering to the Escrow Agent cash in the amount of Two
Hundred Fifty Thousand Dollars ($250,000.00) (the "FUND"). The Escrow Agent
hereby acknowledges receipt of the Fund. The Escrow Agent shall hold the Fund in
escrow upon the terms and subject to the conditions of this Agreement. The Fund
shall be held as a trust fund and shall not be subject to any lien, attachment,
trustee process or any other judicial process of any creditor of any party
hereto. The Escrow Agent shall hold the cash in the Fund until authorized to
release any of such cash (a) to the Indemnified Parties, to the Seller or as
instructed by Seller pursuant to the provisions of Section 6 hereof, or (b) to
Seller pursuant to the provisions of Section 8 hereof.
6. CLAIMS AGAINST ESCROW.
(a) Purchaser may, at any time and from time to time on or prior to one
hundred eighty (180) days following the date of the Closing of the Transaction
(the "ESCROW TERMINATION DATE"), in a written notice (a "CLAIM NOTICE") to the
Escrow Agent, direct the Escrow Agent to use any or all of the cash in the Fund
to reimburse the Indemnified Parties for any losses suffered by Purchaser. The
Claim Notice shall set forth, to the extent known to the Indemnified Party on
whose behalf the claim is being submitted, the nature of the claim (including a
reference to the representation, warranty or covenant in the Purchase Agreement
which allegedly has been breached or proven inaccurate), the date on or about
which the claim is believed to have occurred or accrued and the amount of
losses. Purchaser shall within five (5) business days following delivery of the
Claim Notice to the Escrow Agent forward to Seller a copy of such Claim Notice.
(i) Upon receipt by either Purchaser or Seller of any notice sent
pursuant to Section 6(a)(i) above (each a "Release Request Notice") by the
other party (the "Sending Party"), such receiving party (the "Receiving Party")
shall review such Release Request Notice and the Receiving Party shall within
thirty (30) days of receipt by such Receiving Party send a response (a "Claim
Response Notice") to the Escrow Agent, with a copy to the Sending Party. The
Claim Response Notice shall state the nature of any good faith objection to the
original claim notice and such portion, if any, (including the amount thereof)
which is not in dispute.
(ii) Upon receipt by the Escrow Agent of a Claim Response Notice,
the Escrow Agent shall be authorized to, and shall pay, any amount
contained in the original Release Request Notice which is not in dispute
(including any Escrow Earnings attributable thereto as may be provided pursuant
to the terms of this Agreement), and shall continue to hold in the Fund any
portion which has been objected to until such time as the Escrow Agent shall
receive a writing executed by both Purchaser and Seller directing the release of
such disputed amounts or notice of final adjudication of such dispute in
accordance with Section 7 hereof.
(iii) If the Claim Response Notice shall have objected to any
portion of the original Release Request Notice such dispute shall be
resolved in accordance with the terms of Section 7 hereof. If the Sending Party
shall not receive a Claim Response Notice within thirty (30) days after delivery
of the original Release Request Notice to the Receiving Party the Sending Party
shall have the right to immediately request arbitration of such dispute in
accordance with the terms of Section 7 hereof by delivery of an "Arbitration
Notice" (as such term is defined in Section 7) to the Receiving Party.
7. DISPUTE RESOLUTION FOR CLAIMS FOR REIMBURSEMENT. Purchaser and Seller
shall make a good faith effort to settle any disputes with respect to
reimbursements to be made under Section 6 hereof. If such parties do not settle
the matter within sixty (60) days of the delivery by Seller or Purchaser of a
notice under Section 6 hereof disputing a reimbursement to be made thereunder,
either Purchaser or Seller shall have the right, by delivery of written notice
thereof (the "ARBITRATION NOTICE") to the other party, to submit the matter to
binding arbitration in Santa Xxxxx County, California. All matters so submitted
to arbitration shall be settled by one (except as otherwise provided below)
arbitrator in accordance with the Commercial Arbitration Rules then in effect of
the American Arbitration Association (the "AAA RULES"). Seller and Purchaser
shall agree on such arbitrator within fifteen (15) days of the delivery of the
Arbitration Notice. If Seller and Purchaser cannot agree on such arbitrator, the
arbitrator shall be selected by Judicial Arbitration and Mediation Services
("JAMS"). The arbitrator 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, to
discover relevant information from the opposing parties about the subject matter
of the dispute. The arbitrator 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 court of competent law or equity, should
the arbitrator determine that discovery was sought without substantial
justification or that discovery was refused or objected to without substantial
justification. The final decision of the arbitrator shall be furnished to
Seller, Purchaser and the Escrow Agent in writing and shall constitute a
conclusive determination of the matter in question, binding upon Seller,
Purchaser and the Escrow Agent, shall not be contested by any of them, and may
be confirmed and judgment on the award be entered in any court or agency of
competent jurisdiction. All costs and expenses of any proceeding described in
this section, including any expenses of the arbitrators, may be awarded to the
prevailing party in any such proceeding (with costs and expenses to be assessed
and assigned by the arbitrators in the event of an arbitration in which there is
no losing party) with any amount payable by Seller to be paid out of the Fund.
8. RELEASE FROM ESCROW.
(a) One hundred eighty one (181) days after the date of the Closing of
the Transaction, unless prior to such time Claim Notices shall have been
submitted by Purchaser to the Escrow Agent with respect to any remaining portion
of the Fund, Seller shall be entitled to receive the remaining Fund reduced by
the aggregate amount of all Claim Notices submitted by Purchaser to the Escrow
Agent prior to such date and not yet resolved as of such date. The Escrow Agent
shall make the disbursements provided for in this Section 8(a) only in
accordance with the instructions in a written notice executed by both Seller and
Purchaser.
(b) Notwithstanding the foregoing, the Escrow Agent shall withhold from
the Final Distribution the amount of losses specified in any Claim Notice
sent prior to the Escrow Termination Date, until the earliest to occur of (i)
the reimbursement of Purchaser specified in such Claim Notice, or (ii) the final
resolution, by negotiation, arbitration, or the expiration of any applicable
notice periods, of any disputes related to the reimbursement of the Indemnified
Party as specified in such Claim Notice. Any Escrow Earnings on Funds withheld
pursuant to this Section 8(b) shall be paid to the party entitled to receive the
Funds on final resolution of such claims.
9. CONSENT TO JURISDICTION. Subject to Section 7 hereof, with respect to
any dispute arising under this Agreement relating to (i) the delivery, ownership
or right of possession of the Fund or any portion thereof, (ii) the facts
forming the basis of any determination by the Escrow Agent hereunder, (iii) the
duties of the Escrow Agent hereunder, or (iv) any other question arising
hereunder, the parties hereto irrevocably submit to the exclusive jurisdiction
of the United States District Court Northern District of California, or if, and
only if, that court may not exercise jurisdiction, in any state court located in
the county of Santa Clara, California. In any such litigation, each of the
parties hereto (a) waives personal service of any summons and complaint and
agrees that service thereof may be made in accordance with the notice provisions
hereof, (b) agrees that it or they will not attempt to deny or defeat the
personal jurisdiction of such court by motion asserting lack of personal
jurisdiction or FORUM NON CONVENIENS or other request for leave from such court,
and (c) agrees that they will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court or forum
other than the court specified herein.
10. LIMITATION OF ESCROW AGENT'S DUTIES AND LIABILITY.
(a) Purchaser and Seller acknowledge and agree that Escrow Agent (i)
shall not be responsible for any of the agreements referred to herein but
shall be obligated only for the performance of such duties as are specifically
set forth in this Agreement and as set forth in any additional written escrow
instructions which Escrow Agent may receive after the date of this Agreement
that are signed by an officer of Purchaser and Company or Seller, as applicable,
and agreed to and signed by the Escrow Agent; (ii) shall not be obligated to
take any legal or other action hereunder which might in its reasonable judgment
involve expense or liability unless it shall have been furnished with indemnity
reasonably acceptable to it; and (iii) may rely on and shall be protected in
acting or refraining from acting upon any written notice, instruction,
instrument, statement, request or document furnished to it hereunder and
reasonably believed by it to be genuine and to have been signed or presented by
the proper person.
(b) Escrow Agent is hereby expressly authorized to comply with and obey
orders, judgments or decrees of any court or written decision of any arbitrator.
In case Escrow Agent obeys or complies with any such order, judgment or decree
of any court, Escrow Agent shall not be liable to any of the parties hereto or
to any other person by reason of such compliance, notwithstanding any such
order, judgment or decree being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without jurisdiction.
(c) Escrow Agent shall not be liable in any respect on account of the
identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver this Agreement or any documents or papers
deposited or called for hereunder.
(d) Escrow Agent shall not be liable for the expiration of any rights
under any statute of limitations with respect to this Agreement or any
documents deposited with Escrow Agent.
(e) Neither Escrow Agent nor any of its directors, officers or
employees shall be liable to anyone for any action taken or omitted to be
taken by it or any of its directors, officers or employees hereunder except in
the case of gross negligence, bad faith or willful misconduct. Subject to
Section 11(g) below, Purchaser and Seller (collectively, the "INDEMNIFYING
PARTIES") covenant and agree to jointly and severally indemnify Escrow Agent and
hold it harmless from and against any fee, loss, liability or expense (including
reasonable attorney's fees and expenses) (a "LOSS") incurred by Escrow Agent
arising out of or in connection with the performance of its obligations in
accordance with the provisions of this Agreement or with the administration of
its duties hereunder, unless such Loss shall arise out of or be caused by Escrow
Agent's gross negligence, bad faith or willful misconduct; PROVIDED, HOWEVER,
that indemnification for Escrow Agent's standard fees and expenses set forth on
the fee schedule attached hereto as SCHEDULE 2 shall be borne one half by the
Seller and one half by Purchaser, and provided further that the indemnity
agreement contained in this Section 10(e) shall not apply to amounts paid in
settlement of any Loss if such settlement is effected without the consent of
Purchaser and Seller.
Anything in this Agreement to the contrary notwithstanding, in no event
shall the Escrow Agent be liable for special, indirect or consequential loss
or damage of any kind whatever (including but not limited to lost profits),
even if the Escrow Agent has been advised of the likelihood of such loss or
damage and regardless of the form of action.
(f) To the extent that Escrow Agent becomes liable for the payment of
any taxes in respect of income derived from the investment of funds held or
payments made hereunder (the "INDEMNIFICATION LIABILITY"), Escrow Agent shall
satisfy such liability to the extent possible from the Fund. Subject to Section
10(g) below, Indemnifying Parties agree to jointly and severally indemnify and
hold Escrow Agent harmless from and against any taxes, additions for late
payment, interest, penalties and other expenses, that may be assessed against
Escrow Agent on any payment or other activities under this Agreement unless any
such tax, addition for late payment, interest, penalty or other expense shall
arise out of or be caused by the actions of, or a failure to act by, Escrow
Agent.
(g) Subject to the foregoing, each of the Indemnifying Parties shall
contribute to the Indemnification Liability in such proportion as is appropriate
to reflect the relative fault of each individual Indemnifying Party, including
up to all such Indemnification Liability in the case of any tax liability
arising from failure to provide correct information with respect to any taxes
pursuant to Section 10(f) above. In all cases where there is no such basis for
allocating contribution for such Indemnification Liability or except as
otherwise provided in Section 10(e), the total Indemnification Liability shall
be paid out of the Fund.
11. ESCROW AGENT FEES, EXPENSES AND TAXES. The fees of the Escrow Agent for
its normal services hereunder in accordance with the fee schedule attached
hereto as SCHEDULE 2 shall be paid one-half by Purchaser and one-half by the
Seller. The Escrow Agent shall be entitled to reimbursement upon 30 days'
written notice for all expenses incurred in connection with Sections 10(e) and
10(f) above, and payment of any legal fees and expenses incurred by the Escrow
Agent in connection with the resolution of any claim by any party hereunder and
shall be paid one-half by Purchaser and one-half by the Seller. The Escrow Agent
shall be entitled to withhold from the Escrow Fund such fees and expenses as are
attributable to the Seller and shall debit the Escrow Fund for any Escrow Agent
Fees due from the Seller. Taxes incurred with respect to the Escrow Earnings of
the Fund and payments made hereunder shall be borne by the party to whom such
Escrow Earnings are distributed (or to be distributed) or to whom such payment
is made.
(a) Purchaser and Seller agree that, for tax reporting purposes, all
interest or other taxable income earned from the investment of the Fund in any
tax year shall be taxable to Seller.
(b) The parties hereto shall, within 30 days after the date hereof,
provide the Escrow Agent with certified tax identification numbers by
furnishing appropriate forms W-9 or W-8 and other forms and documents that the
Escrow Agent may reasonably request. The parties hereto understand that if such
tax reporting documentation is not so certified to the Escrow agent, the Escrow
Agent may be required by the Internal Revenue Code of 1986, as amended, to
withhold a portion of any interest or other income earned on the investment of
monies or other property held by the Escrow Agent pursuant to this Agreement.
12. SUCCESSOR ESCROW AGENT.
(a) In the event the Escrow Agent becomes unavailable or unwilling to
continue in its appointed capacity hereunder, the Escrow Agent may resign and be
discharged from its duties or obligations hereunder by giving notice of
resignation to each of the parties hereto, specifying a date not less than sixty
(60) days following such notice date when such resignation will take effect;
PROVIDED, HOWEVER, that such resignation shall in no event take effect before
the successor to the Escrow Agent shall have been appointed pursuant to this
section. Purchaser shall appoint a successor to the Escrow Agent with the
consent of Seller, which consent shall not be unreasonably withheld. The Escrow
Agent shall promptly transfer the Fund to such designated successor.
(b) Any corporation into which the Escrow Agent in its individual
capacity may be merged or converted or with which it may be consolidated,
or any corporation resulting
from any merger, conversion or consolidation to which the Escrow Agent in
its individual capacity shall be a party, or any corporation to which
substantially all of the corporate trust business of the Escrow Agent in its
individual capacity may be transferred, shall be the Escrow Agent under this
Agreement without further act.
13. SELLER'S INTEREST HEREIN. There shall be no transfer of any right or
interest of a Holder's interest in the Fund, other than as provided herein or as
required by applicable law. The interest of the Seller in the Fund (a) will not
be represented by any form of certificate or instrument other than this
Agreement, (b) will not be assignable or transferable, except by operation of
law, and (c) will not be represented by a separate security with a separate
trading market.
14. NOTICES. All notices, instructions and other communications given
hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered mail, return
receipt requested, postage prepaid, (ii) via a reputable nationwide overnight
courier service, (iii) by certified mail, return receipt requested, postage
prepaid, or (iv) by facsimile transmission (provided receipt of which is
confirmed in writing or in permanently stored electronic form), in each case to
the parties hereto at the following addresses set forth below or at any such
address as may be specified by like notice by any of the parties.
If to Purchaser, to:
Bunt Acquisition Corporation
0000 Xxxx Xxxxxx
X.X. Xxx 000000
Xxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Chief Executive Officer
Facsimile:
Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to Seller, to:
Docucon, Incorporated
00 Xxxxxx Xxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxxxxxx 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to:
Xxxxx & Xxxxxx LLP
000 Xxxxx Xx. Xxxx'x Xxxxxx
Xxxxx 000
Xxx Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
If to the Escrow Agent, to:
Xxxxx Fargo Bank, National Association
000 Xxxxxxxx Xxxx., 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Mar
Facsimile: (000) 000-0000
15. ACKNOWLEDGE OF LIMITATIONS ON INDEMNITY. Seller and Purchaser
acknowledge and agree that all claims for indemnification and/or reimbursement
presented under this Agreement shall be subject to the limitations imposed on
such claims pursuant to Article 12 of the Purchase Agreement and that Seller and
Purchaser shall each be entitled to raise objections to claims for
indemnification and/or reimbursement in the manner set forth in Section 6 of
this Agreement if such limitations are exceeded or violated. Seller and
Purchaser further agree that, except where such limitations are expressly set
forth in this Agreement, the Escrow Agent shall not be responsible for
determining whether a particular claim for indemnification and/or reimbursement
falls within or would exceed such limitations and shall not be liable for any
claims paid to the Indemnified Parties, Seller or third parties in accordance
with the terms this Agreement which fail to fall within such limitations.
16. GOVERNING LAW. The construction and performance of this Agreement shall
be governed by and construed in accordance with the laws of the State of
California (without regard to the choice of law provisions thereof).
17. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of each party hereto and its respective successors, assigns
and transferees. The parties may not assign or delegate their respective rights
and obligations under this Agreement to any third party, except with respect to
the Escrow Agent, as provided in Section 12 hereof, and except that Purchaser
may assign, in its sole discretion, any or all of its rights, interests and
obligations hereunder to any direct or indirect wholly or majority owned
subsidiary or affiliate of Purchaser.
18. AMENDMENT. This Agreement may be amended by the written agreement of
each of the parties hereto; PROVIDED, HOWEVER, that in the event the Escrow
Agent does not agree to an amendment otherwise agreed by each of the other
parties hereto, the Escrow Agent shall resign and a successor escrow agent shall
be appointed in accordance herewith.
19. TERMINATION. This Agreement shall terminate upon the release by the
Escrow Agent of all amounts contained in the Fund in accordance with this
Agreement; PROVIDED, that the provisions of Sections 11(c) and 11(d) hereof
shall survive such termination or the resignation or removal of the Escrow Agent
pursuant to Section 12(a) hereof.
20. NO ENFORCEMENT BY THIRD PARTY BENEFICIARIES. Nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person or
persons, other than Purchaser or its permitted assigns, any right to enforce any
provision of this Agreement.
21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
22. ENTIRE AGREEMENT. This Agreement and the Purchase Agreement constitute
the entire understanding and agreement of the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
written or oral, between the parties hereto with respect to the subject matter
hereof.
23. WAIVERS. No waiver by any party hereto of any condition or of any
breach of any provision of this Agreement shall be effective unless in writing
and signed by a duly authorized representative of the party or parties granting
such waiver. No waiver by any party of any such condition or breach in any one
instance shall be deemed to be a further or continuing waiver of such condition
or breach or a waiver of any other condition or breach of any other provision
contained herein.
IN WITNESS WHEREOF, the parties hereto have duly executed or have caused
this Agreement to be duly executed by their authorized officers as of the date
and year first above written.
BUNT ACQUISITION CORPORATION,
a Delaware corporation
By: __________________________________
Name: ________________________________
Title: _______________________________
DOCUCON INCORPORATED,
a Delaware corporation
By: __________________________________
Name: ________________________________
Title: _______________________________
XXXXX FARGO BANK, NATIONAL
ASSOCIATION, as Escrow Agent
By: __________________________________
Name: Xxxxxx Mar
Title: Vice President
SCHEDULE 1
----------
Telephone Number(s) and Call-Backs and
Person(s) Designated to Confirm Funds Transfer Instructions
-----------------------------------------------------------
If to Purchaser:
Name Telephone Number
---- ----------------
1. Xxxxxx X. Xxxxx 1. (000) 000-0000
If to Seller:
Name Telephone Number
---- ----------------
1. Xxxxxxx X. Xxxx 1. (000) 000-0000
Telephone call-backs shall be made to each of Purchaser and Seller if joint
instructions are required pursuant to the Agreement.
SCHEDULE 2
----------
Fee Schedule.
EXHIBIT B
---------
[Letterhead of Counsel to Seller]
[Closing Date]
[Buyer]
-----------------------
-----------------------
Ladies and Gentlemen:
We have acted as counsel to ____________________, a Delaware corporation
(the "Company"), in connection with the sale of the Assets to
____________________, a Delaware corporation ("Buyer"), pursuant to the Asset
Purchase Agreement dated ___________, 2000, by and among [Buyer],
[_______________] and the Company (the "Purchase Agreement"). This opinion is
furnished to you pursuant to Section _______ of the Purchase Agreement. Each
capitalized term used but not otherwise defined in this opinion has the
meaning given to it in the Purchase Agreement or the Accord (see below).
This Opinion Letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section
of Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this
Opinion Letter should be read in conjunction therewith. The law covered by
the opinions expressed herein is limited to Federal Law of the United States
and the Law of the State of Texas.
In expressing the opinions set forth below, we have relied upon factual
representations made by the Company in the Purchase Agreement and any
exhibits or schedules thereto. Each of the opinions expressed herein are made
subject to any matters disclosed in the Purchase Agreement and any exhibits
or schedules thereto.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, has all requisite
corporate power to own, lease and operate its properties and to carry on its
business as currently being conducted and is duly qualified to do business
and is in good standing in each jurisdiction in which it is currently doing
business.
2. The Company has all requisite corporate power and authority to
execute and deliver the Purchase Agreement, the Escrow Agreement and the
other Ancillary Agreements, to perform its obligations thereunder and to
consummate the transactions contemplated thereby. The execution and delivery
of the Purchase Agreement, the Escrow Agreement and the other Ancillary
Agreements and the consummation of the transactions contemplated thereby have
been duly authorized by all necessary corporate action on the part of the
Company. The Purchase Agreement, the Escrow Agreement and the other Ancillary
Agreements have been duly executed
[Buyer]
Page 2
and delivered by the Company and constitute the valid and binding obligation of
the Company, enforceable against the Company in accordance with their
respective terms.
3. Subject to any matters set forth in the Purchase Agreement, and any
exhibits or schedules thereto, the execution and delivery by the Company of
the Purchase Agreement, the Escrow Agreement and the other Ancillary
Agreements does not, and the consummation of the transactions contemplated
thereby will not, (i) conflict with, or result in any violation or breach of
any provision of, the Certificate of Incorporation or Bylaws of the Company,
(ii) result in any violation or breach of, or constitute (with or without
notice or lapse of time, or both) a default under, or give rise to a right of
termination, cancellation or acceleration of any material obligation or loss
of any material benefit under, any note, mortgage, indenture, lease, contract
or other agreement or obligation to which the Company is a party or to which
any of the Assets is subject, or (iii) conflict with or violate any statute,
law, ordinance, rule or regulation applicable to the Company or the Assets.
4. Subject to any matters set forth in the Purchase Agreement, and any
exhibits or schedules thereto, no consent, approval, order or authorization
of, or registration, declaration, qualification or filing with, any court,
regulatory authority or other governmental or administrative body is required
by or with respect to the Company in connection with the execution and
delivery of the Purchase Agreement, the Escrow Agreement and the other
Ancillary Agreements or the consummation of the transactions contemplated
thereby.
5. To our knowledge, there is no action, suit, proceeding, claim,
arbitration or investigation pending or overly threatened in writing before
any agency, court or tribunal against the Company or the Assets, nor any
judgment, decree or order, which (i) seeks to affect the enforceability of
the Purchase Agreement, the Escrow Agreement and the other Ancillary
Agreements, or (ii) except as disclosed in the Purchase Agreement, or any
exhibits or schedules thereto, comes within the objective standard
established in the Purchase Agreement for disclosure of such matters.
6. The Xxxx of Sale and Assignment and Assumption of Contracts delivered
by the Company and in accordance with the Purchase Agreement, the Escrow
Agreement and the other Ancillary Agreements transfers all of the Company `s
rights, title and interest in the Assets.
The General Qualifications of the Accord apply to all of the opinions
set forth above in paragraphs 1,2,3,4,5 and 6.
[Buyer]
Page 3
This opinion is intended solely for your use in connection with the
Purchase Agreement, the Escrow Agreement and the other Ancillary Agreements
and the transactions contemplated therein and is not to be made available to
any other person or entity, or relied upon for any other purpose, without our
express written consent. This opinion is rendered as of the date hereof, and
we disclaim any undertaking to advise you hereafter of any facts,
circumstances, events or developments hereafter occurring or coming to our
attention which may alter, affect or modify the opinions expressed herein.
Very truly yours,
[COUNSEL TO THE COMPANY]
