Exhibit 2.1
ASSET PURCHASE AGREEMENT
effective as of
December 31, 1999
by and among
BORG ADAPTIVE TECHNOLOGIES, INC.,
a Colorado corporation
nSTOR CORPORATION, INC.,
a Delaware corporation
QLOGIC ACQUISITION CORPORATION,
a Colorado corporation
and
QLOGIC CORPORATION,
a Delaware corporation
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of January
10, 2000 (the "Closing Date," as set forth in Section 10.1 hereof), and
effective as of December 31, 1999 (the "Effective Date"), by and among BORG
ADAPTIVE TECHNOLOGIES, INC., a Colorado corporation (the "Seller"), nSTOR
CORPORATION, INC., a Delaware corporation and sole shareholder of Seller (the
"Seller's Parent"), QLOGIC ACQUISITION CORPORATION, a Colorado corporation (the
"Buyer"), and QLOGIC CORPORATION, a Delaware corporation and sole shareholder of
Buyer (the "Buyer's Parent"). Seller and Seller's Parent are hereinafter
sometimes individually referred to as the "Selling Party" and collectively as
the "Selling Parties."
R E C I T A L S :
A. The Selling Parties own certain intangible assets, including
AdaptiveRAID products and technology, and Seller owns certain tangible assets
located at Seller's facility at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"Boulder Facility").
B. Buyer desires to purchase, and the Selling Parties desire to sell
and transfer to Buyer, certain specified assets of the Selling Parties, and the
Selling Parties desire to license certain of such assets from Buyer, upon the
terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the terms, covenants, and
conditions hereinafter set forth, the parties hereto agree as follows:
1. Assets and Liabilities Being Purchased and Assumed.
1.1 Purchased Assets. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing on the Closing Date (as
such terms are defined in Section 10 hereof), Buyer agrees to purchase from the
Selling Parties, and the Selling Parties hereby agree to sell, transfer, grant,
convey and assign to Buyer, free of any and all legal or equitable liens,
security interests, claims or encumbrances of any kind whatsoever (collectively,
the "Liens"), with the express exception of the license as set forth in Section
7.3 of this Agreement, all right, title and interest in the Purchased Assets (as
hereinafter defined), and the Selling Parties shall deliver title to the
Purchased Assets, together with such bills of sale, assignments and other
instruments of conveyance to permit such delivery, and such documents and
instruments to establish title as may be reasonably requested by Purchaser
(including without limitation the waivers and releases as required under Section
8.3 hereof). The Purchased Assets shall consist of the following:
(a) All intellectual property rights relating to the
AdaptiveRAID products and technology set forth on Attachment 1 to the License
Agreement (as hereinafter defined in Section 7.3), and all copies and
embodiments thereof, including, without limitation, patents, know-how,
unpatented inventions, potential and in-process patents, ideas, trade secrets,
secret formulas, business and marketing plans, industrial property rights,
copyrights, trademarks, service marks, unregistered trademarks and service
marks, trade names, all names and slogans used by the Selling Parties in
connection therewith and all rights and licenses thereto and applications and
registrations therefor, in each case listed on Schedule 4.6(a) (the
"Intellectual Property Assets"), with the express exception of the intellectual
property developed by either Selling Party after the Closing Date without
violating the terms of this Agreement and/or in compliance with and subject to
the license, as set forth in Section 7.3 of this Agreement.
(b) All computer software and hardware purchased or
licensed for use at the Boulder Facility, and all tenant improvements,
development, test and office equipment and other tangible personal property used
in the Boulder Facility, in each case listed on Schedule 4.6(b) (the
"Equipment"), with the express exception of (i) Seller's branded hardware and
(ii) third-party products owned or held by Seller on loan.
(c) All schedules, lists, files, books, publications,
documentation and other records and data relating to the Purchased Assets
described in subsections (a) and (b) above; and
(d) All goodwill associated with the Purchased
Assets.
1.2 Real Property and Equipment Leases. Buyer hereby agrees to
assume Seller's lease obligations under (i) the Real Property Lease for the
Boulder Facility (as described in Schedule 4.6(c) hereof) and (ii) the equipment
leases described on Schedule 4.6(d) hereto (the "Equipment Leases" and, together
with the Real Property Lease, the "Leases"), for periods after the Closing Date.
The Selling Parties jointly and severally represent and warrant that the Seller
is not, and on the Closing Date will not be, in default in any material respect
of the Leases and Buyer shall not be obligated to assume the Leases if Seller is
in default in any material respect on the Closing Date. If the Leases are
assumed by Buyer pursuant hereto, then the Purchased Assets shall be deemed to
include the Leases.
2. Liabilities Not Assumed.
Buyer shall not assume any liability or obligation of the Selling
Parties other than the Leases. Without limiting the generality of the foregoing
and notwithstanding anything to the contrary contained elsewhere in this
Agreement, the Selling Parties agree that Buyer will not assume, and shall have
no obligation (whether to the Selling Parties or any other person) to perform,
and the Selling Parties shall jointly and severally be responsible for and shall
indemnify, hold harmless and defend Buyer and Buyer's Parent, in accordance with
Section 13 hereof, from and against, each of the Retained Liabilities (as
defined herein), regardless of when asserted. For purposes herein, "Retained
Liabilities" shall include each of the following obligations and liabilities of
the Selling Parties:
(a) Obligations and liabilities as of the
Closing Date, to any third party, including ▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇, Ambex Technologies, Inc., Ambex Venture Group, LLC, Borg
Technologies, Inc., Borg Development Partners, LLC, and Seek Systems, Inc.,
whether or not under and pursuant to any agreement, commitment or understanding,
including without limitation any asset purchase agreement; stock purchase
agreement or other right or option to acquire any shares of capital stock or
other securities; power of attorney; employmentagreement; capital, equipment or
real property lease; license agreement; manufacturing, development or purchase
agreement; non-compete agreement; royalty agreement; promissory note or other
instrument evidencing a loan, credit or borrowing arrangement or agreement;
security agreement; or any other agreement, document or instrument contemplated
under any of the foregoing, to which the Selling Parties or any of their
predecessors in interest are parties;
(b) Benefits payable and liabilities arising
under employee pension, profit sharing or any other employee benefit plan of the
Seller or for any severance pay or other compensation due any employees of the
Seller as a result of the transactions contemplated hereby including, without
limitation, severance and sick pay through the close of business on the Closing
Date;
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(c) Federal, state, local, foreign or other Taxes
(as defined hereinafter) of the Selling Parties, whether currently due, deferred
or otherwise to become due, sales taxes arising in connection with or out of the
purchase of the Purchased Assets by Buyer from the Selling Parties based solely
upon the allocation of the Purchase Price as set forth in Schedule 6.1 attached
hereto, and, all other Taxes imposed on the Selling Parties arising in
connection with or out of the transactions contemplated by this Agreement,
except any Taxes imposed on the Selling Parties by any governmental authority in
the State of California as a result of holding the Closing in California;
(d) Injuries to or the death of any person, or
any employee of the Seller, or property damage, that have occurred (i) prior to
the Closing at the Boulder Facility and (ii) either prior to or after the
Closing in connection with or arising from any other business or operations of
the Seller, whether or not such injuries, deaths or property damage are
disclosed on the Disclosure Schedules hereto and even if not discovered until
after the Closing Date;
(e) Any Liens;
(f) Any claims, demands, actions, suits and
legal or other proceedings, whether or not listed on Schedule 4.11, to which
either Selling Party is a party, to the extent not already included within
Section 2(c) above;
(g) Any and all liabilities and obligations
incurred in connection with or secured by a lien, claim or encumbrance on any of
the Purchased Assets; and
(h) Accrued professional fees of the
Selling Parties, including legal fees and broker and finders' fees of the
Selling Parties incurred in connection with the preparation, negotiation and
consummation of this Agreement and the other documents and transactions
contemplated hereby.
3. Purchase Price. As consideration for the sale hereunder of the
Purchased Assets, Buyer shall pay to the Selling Parties a purchase price (the
"Purchase Price") of Seven Million Five Hundred Thousand Dollars ($7,500,000),
by wire transfer to the bank account specified by the Seller.
4. Representations and Warranties of the Selling Parties.
Except as disclosed in the disclosure schedules delivered to Buyer and
Buyer's Parent concurrently herewith (the "Disclosure Schedules"), the Selling
Parties jointly and severally make the following representations and warranties
to Buyer and Buyer's Parent, each of which shall be deemed to be independently
material and relied upon by Buyer and Buyer's Parent on the Closing Date,
regardless of any investigation made by, or information known to the Buyer or
Buyer's Parent:
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4.1 Authority; Necessary Actions; Binding Effect. The Selling
Parties possess full corporate power and authority to execute and deliver, and
to perform their respective obligations under this Agreement and to carry out
the transactions and agreements contemplated hereby, and this Agreement has been
duly executed and delivered by the Selling Parties. The Selling Parties and
their respective Boards of Directors have taken all corporate action necessary
to authorize the execution and delivery of, and the performance of their
respective obligations under this Agreement, and the transactions and agreements
contemplated hereby. This Agreement constitutes a valid obligation of the
Selling Parties that is legally binding on and enforceable against the Selling
Parties in accordance with its terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, moratorium or other similar laws
affecting creditors' rights, and (ii) general principles of equity relating to
the availability of equitable remedies (regardless of whether such Agreement is
sought to be enforced in a proceeding at law or in equity).
4.2 Organization and Good Standing; Corporate Matters. Each
Selling Party is a corporation duly organized, validly existing and in good
standing under the laws of its respective state of incorporation, and is duly
authorized or qualified to do business as a foreign corporation in each other
jurisdiction in which the character of the properties owned by it or the nature
of the business it conducts makes such authorization or qualification necessary
and where the failure to be so authorized or qualified would have a Material
Adverse Effect (as hereinafter defined) on the Purchased Assets. As used in this
Agreement, unless otherwise indicated, the term "Material Adverse Effect" when
used in connection with the Selling Parties, means any event, circumstance,
change or effect that is, or could reasonably be expected to be, materially
adverse to the condition (financial or otherwise) of the Purchased Assets either
prior to or following the Closing. Each Selling Party has all necessary
corporate power and authority to own, lease and/or operate the Purchased Assets.
The Seller's Parent has all necessary corporate power and authority to lease the
Boulder Facility. Each Selling Party has delivered to Buyer true and correct
copies of (a) its charter document and all amendments thereto, certified by the
Secretary of State or other appropriate state agency of its respective state of
incorporation, and (b) its Bylaws and all amendments thereto, duly certified by
its respective corporate secretary.
Except as set forth in Schedule 4.2, each of such charter document and Bylaws
are in full force and effect and neither Selling Party is in violation of its
respective charter document or Bylaws.
4.3 No Conflicts. Except as set forth in Schedule 4.3 attached
hereto, neither the execution and delivery of this Agreement by either Selling
Party, the performance by either Selling Party of its obligations hereunder, the
execution and delivery by either Selling Party of any agreement required to be
entered into pursuant to this Agreement, nor the consummation of the
transactions contemplated hereby, will result in any of the following: (a) a
default or an event that, with notice or lapse of time, or both, would
constitute a default, breach or violation of (i) any provision of the respective
charter document or Bylaws of either Selling Party, or (ii) any of the terms,
conditions or provisions of any lease, license, franchise, promissory note,
contract, agreement, commitment, indenture, mortgage, deed of trust, or other
instrument, document or arrangement relating to the Purchased Assets to which
either Selling Party is a party or by which it or any of the Purchased Assets
may be bound and which is material to the Purchased Assets (a "Material
Contract"); (b) the creation or imposition of any Lien on any of the Purchased
Assets, (c) the termination of any Material Contract or the acceleration of the
maturity of any indebtedness or other material obligation related to the
Purchased Assets; (d) a violation or breach of any order, writ, injunction,
decree, law, statute or regulation of any court or governmental authority
applicable to the Purchased Assets; or (e) any adverse effect on the
Intellectual Property Assets (as defined in Section 1.1(a) hereof).
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4.4 Consents and Approvals. Except as set forth in Schedule
4.4, no consent, approval, order or authorization of, or registration,
declaration or filing with, any person or entity or any court, administrative
agency or commission or other governmental authority or instrumentality is
required by or with respect to either Selling Party in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
4.5 Absence of Certain Changes. Except as set forth in
Schedule 4.5 attached hereto, each Selling Party has conducted its business
relating to the Purchased Assets in the ordinary course, and, since the
applicable dates set forth below, there has not been or occurred with respect to
either Selling Party: (i) any change in or amendment to its charter document or
Bylaws since the date copies of such document were delivered to Buyer; (ii) any
damage, destruction or loss, whether or not covered by insurance, which has had
or may have a Material Adverse Effect on the Purchased Assets since February 3,
1998; (iii) any amendment, modification or termination of any Material Contract
or the termination, cessation or loss of or any material change in the pricing
or other material terms of any product supply or other business arrangement or
relationship relating to the Purchased Assets, since the date the terms of such
Material Contract were disclosed to the Buyer; (iii) other than immaterial
increases in regular salaries or wages made in the ordinary course of business
and consistent with past practices, any increase in, or commitment to increase,
the direct or indirect compensation or benefits payable or to become payable to
any of the Seller's officers, employees, agents, or independent contractors, or
the payment or awarding, or the making of any commitment to pay, any severance,
bonus, incentive or special or deferred compensation to or similar arrangements
with any of such officers, employees, agents or independent contractors or the
adoption of any new, or any material amendment or modification of any existing,
Employee Plan (as hereinafter defined), since the date such matters were
previously disclosed to Buyer; (iv) any waiver or release of any material right
or claim of the Selling Parties relating to the Purchased
Assets, since February 3, 1998; (v) any other event or condition of any
character that has had or could reasonably be expected to result in a Material
Adverse Effect on the Purchased Assets, since February 3, 1998; or (vi) any
agreement or commitment by the Selling Parties to do any of the things described
in the preceding clauses (i) through (vii), since the applicable dates set forth
therein.
4.6 Property of the Selling Parties. The Selling Parties
collectively own or otherwise have the right to use (free of any burdensome
conditions or restrictions) all of the Purchased Assets.
(a) Intellectual Property Assets. Schedule
4.6(a) attached hereto contains a true, correct and complete list of the
Intellectual Property Assets (as defined in Section 1.1(a) hereof). Each of the
copyrights, trademark applications and registrations listed on Schedule 4.6(a)
are valid. All software, manuals and related materials listed or described in
Schedule 4.6(a) (i) were written exclusively by employees of the Selling Parties
or by contractors under written agreements with work-for-hire provisions, and
(ii) constitute unpublished work for purposes of copyright registration. All
software listed on Schedule 4.6(a) has been sold or licensed only under terms of
confidentiality. To the Selling Parties' knowledge, all patents listed on
Schedule 4.6(a) are valid and enforceable, and all patents issuing from allowed
applications will be valid and enforceable. The Selling Parties own or are
licensed, or otherwise have the full right and authority to use, all the
Intellectual Property Assets, and such ownership or use does not conflict with,
infringe upon or violate any trademark, trade name, copyright, patent rights or
trade secret rights of any other person or entity. Neither Selling Party nor any
of the products or advertising or marketing materials relating to the
Intellectual Property Assets, (i) has infringed, or is now infringing, any
patent, trade name, trademark, service ▇▇▇▇, copyright, trade secret,
technology, know-how or process belonging to any other person, firm or
corporation, which infringement would have a Material Adverse Effect on the
Purchased Assets; or (ii) has breached or violated or is in breach or violation
of any license agreement governing the use of any intellectual property by the
Selling Parties which would have a Material Adverse Effect on the Purchased
Assets. Neither Selling Party has received any written notice or other
indication of any such claim of infringement or violation.
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(b) Equipment. Schedule 4.6(b) hereto contains
a true and correct listing of the Equipment (as defined in Section 1.1(b)
hereof). Such assets are in good operating condition and repair, ordinary wear
and tear excepted, and have been properly maintained. Except as set forth in
Schedule 4.6(b), none of the Equipment is held under any lease, security
agreement, conditional sales contract, or other title retention or security
agreement, or is located other than in the possession of the Seller at the
Boulder Facility. A copy of each Equipment Lease, and all amendments thereto,
have been provided to Buyer. The Equipment Leases are valid, binding and
enforceable against the Seller's Parent in accordance with their terms, and are
in full force and effect. The Seller's Parent is not in material default, and,
to the Seller's Parent's knowledge, no event has occurred which, with the giving
of notice or lapse of time or both, would constitute a material default under,
or which would entitle the lessor to terminate, the Equipment Leases.
(c) Real Property. Seller does not own any real
property. Schedule 4.6(c) attached hereto contains a correct list of the
addresses of each parcel of real property leased to or used in any way by the
Seller relating to the Purchased Assets (the "Real Properties"), together with a
brief description of the structures thereon and the uses being made thereof, and
a copy of the Real Property Lease under which the Seller possesses or uses the
Boulder Facility. A true and correct copy of the Real Property Lease, and any
and all amendments thereto, have been delivered to Buyer. The Real Property
Lease is valid, binding and enforceable against Seller in accordance with its
terms, and is in full force and effect. The Seller is not in material default,
and, to the Selling Parties' knowledge, no event has occurred which, with the
giving of notice or lapse of time or both, would constitute a material default
under, or which would entitle the lessor to terminate, the Real Property Lease.
To the Selling Parties' knowledge, the zoning of each parcel of Real Property
permits the presently existing improvements and structures and the continuation
of the business presently conducted thereon. To the best knowledge of the
Selling Parties, no changes in such zoning are pending or threatened, and no
condemnation or similar proceedings are pending against any such parcel of real
property.
(d) Title. The Selling Parties have title to, or a
valid leasehold interest in, all of the Purchased Assets, free and clear of any
and all Liens.
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4.7 Contracts and Agreements. Except as described in Schedules
4.6, 4.7 or 4.8 attached hereto, none of the Purchased Assets are subject to:
(a) any employment contract with any officer, consultant, director or employee
or any affiliate of the foregoing; (b) any lease of real or personal property;
(c) any instrument creating or providing for the creation of any Lien on any of
the Purchased Assets; or (d) any other Material Contract, which shall include,
without limitation, any contracts or agreements relating to, or entered into by
either Selling Party in connection with, the purchase or sale of any of the
Purchased Assets. There has been delivered to Buyer (i) true and correct copies
of each written contract or agreement listed on Schedules 4.6, 4.7 or 4.8, and
any and all amendments thereto, and (ii) an accurate written summary of the
terms of any oral agreement listed on Schedules 4.6, 4.7 or 4.8, and any
amendments thereto. Except as otherwise set forth on Schedule 4.7, each of such
contracts, agreements, licenses and instruments so listed, or required to be so
listed, or described or required to be described in a written summary required
to be delivered pursuant hereto, is a valid and binding obligation of the
Selling Parties, and is enforceable in accordance with its terms, except as
enforceability may be affected by bankruptcy, insolvency, moratorium or similar
laws affecting creditors' rights generally and general principles of equity
relating to the availability of equitable remedies. Except as otherwise set
forth in Schedule 4.7 hereto there have not been any defaults by the Selling
Parties or any defaults or claims of default or of non-enforceability by the
other party or parties to such contracts, agreements, licenses and instruments
which, individually or in the aggregate, would have a Material Adverse Effect on
the Purchased Assets and, to the Selling Parties' knowledge, there are no facts,
events or conditions that have occurred which, through the passage of time or
the giving of notice, or both, would constitute a default by the Selling Parties
or by the other party or parties under any of such contracts, agreements,
licenses and instruments that could reasonably be expected to have a Material
Adverse Effect on the Purchased Assets or that would create or result in the
imposition of a Lien on any of the Purchased Assets.
4.8 Employees; Labor Matters and Employee Plans.
(a) Schedule 4.8 attached hereto contains a
complete, current and correct list of each employee of the Seller located at the
Boulder Facility, which list includes the job position(s) of and compensation
and benefits payable to each of such individuals as a result of his or her
employment by or association with the Seller. Seller has engaged no consultants
and any other independent contractors that have provided professional or other
services to the Seller and have received or are expected to receive fees or
other compensation from the Seller.
(b) Except as set forth in Schedule 4.8, the
Seller is not a party to or otherwise bound by or subject to any collective
bargaining or other labor, employment, retainer or consulting agreement or
contract relating to the Seller's business in connection with the Purchased
Assets. Except as set forth in Schedule 4.8, there has been no strike or other
work stoppage by, nor has there been any union organizing activity among any of
the employees of the Seller. The Seller is in compliance, in all material
respects, with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and is not
engaged in any unfair labor practice. Except as set forth in Schedule 4.8, there
is no unfair labor practice complaint pending or threatened against the Seller,
nor is there any factual basis for any such complaint.
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(c) Schedule 4.8 also contains a complete,
current and correct list of all Employee Plans (as hereinafter defined)
maintained by the Seller since February 3, 1998 (true, correct and complete
copies of which have been delivered to Buyer). For purposes of this Agreement,
the term "Employee Plan" includes all present plans, programs, agreements or any
other arrangements administered by the Seller (including all amendments to and
components of the same, such as a trust with respect to a plan) providing any
remuneration or benefits, other than current cash compensation, to any current
or former employee of the Seller or to any other person who provides, or at any
time provided, services to the Seller relating to the Purchased Assets, whether
or not such plans, programs, agreements or any such other arrangements, are
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or are qualified under the Internal Revenue Code of 1986, (as
amended, the "Code"). By way of example, but without limiting the generality of
the foregoing, the term Employee Plan includes, but is not limited to, employee
benefit plans (as defined in Section 3(3) of ERISA), pension, retirement, profit
sharing, stock option, stock bonus, and non-qualified deferred compensation
plans, any multiemployer plan (as defined in Section 3(37) of ERISA),
disability, medical, dental, health insurance, life insurance, incentive
compensation, vacation benefit, and fringe benefit plans, programs or
arrangements. Any and all tax returns, reports, forms or other documents
required to be filed by the Seller under applicable federal, state or local law
with respect to the Employee Plans have been timely filed and are correct and
complete in all material respects; and any and all amounts due by the Seller to
any governmental agency or entity with respect to the Employee Plans have been
timely and fully paid. The Seller has not terminated any Employee Plan, which is
an employee benefit plan under Section 3(3) of ERISA.
(d) Except as set forth in Schedule 4.8,
all Employee Plans, if any, are now, and since February 3, 1998 have been,
established, maintained and operated in accordance, in all material respects,
with all applicable laws (including, but not limited to, ERISA and the Code) and
all regulations and interpretations thereunder and in accordance with their plan
documents. To the Selling Parties' knowledge, all communications, if any, with
respect to each Employee Plan by any members of any plan committee, plan
fiduciaries, plan administrators, the Seller or its Board of Directors or
employees, accurately reflect the documents and operations of each such Employee
Plan in all material respects. No Employee Plan is a multiemployer plan within
the meaning of the Code or ERISA, a defined benefit plan within the meaning of
Section 3(35) of ERISA, a plan subject to Section 302 of ERISA or Section 412 of
the Code, or funded through a welfare benefit fund (as defined in Section 419 of
the Code). The Seller has not participated in, maintained, contributed to or
been required to contribute to any employee benefit plan subject to Title IV of
ERISA or any retiree medical or retiree life insurance benefit plan. All
contributions required to be made to or with respect to each Employee Plan and
all costs of administering each Employee Plan have been completely and timely
paid. All reports, forms and other documents required to be filed with any
governmental entity with respect to any Employee Plan have been timely filed and
are accurate. There is and, to the Selling Parties' knowledge, there has been no
actual or threatened or expected litigation or arbitration concerning or
involving any Employee Plan. To the Selling Parties' knowledge, no complaints to
or by any government entity have been filed or have been threatened or are
expected with respect to any Employee Plan. To the Selling Parties' knowledge,
no Employee Plan or any other person has any liability to any plan participant,
beneficiary or other person under any provision of ERISA, the Code or any other
applicable law by reason of any action or failure to act in connection with any
Employee Plan. There has been no breach of fiduciary duty or prohibited
transaction as described in Section 406 of ERISA and Section 4975 of the Code
with respect to any Employee Plan. No Employee Plan provides medical benefits to
one or more former employees (including retirees), other than benefits required
to be provided under Section 4980B of the Code or Sections 601 to 608 of ERISA.
Each welfare benefit plan (as defined in Section 3(2) of ERISA) is, and has
been, in material compliance with the requirements of Code Section 4980B and
Sections 601 to 608 of ERISA. There is no contract, agreement or benefit
arrangement covering any employee of the Seller which individually or
collectively would constitute an "excess parachute payment" under Section 280G
of the Code.
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(e) Except as set forth in Schedule 4.8,
the consummation of the transactions contemplated by this Agreement will not (i)
entitle any individual to severance pay, or (ii) accelerate the time of payment
or vesting, or increase the amount, of compensation that, but for such
transactions, would be due to any individual.
4.9 Licenses and Permits; Compliance With Laws. Schedule 4.9
contains a true and correct list of all governmental licenses, permits,
franchises, authorizations, certificates, rights, privileges and registrations
held by or issued to the Selling Parties which the failure to maintain would
have a Material Adverse Effect on the Purchased Assets (the "Material Licenses
and Permits"). Except as otherwise set forth in Schedule 4.9, the business of
the Selling Parties relating to the Purchased Assets is being, and has been,
conducted in material compliance with all applicable federal, state and local
laws, statutes, ordinances, rules, regulations, orders, decrees and other
requirements of all governmental authorities and other political subdivisions
and agencies thereof having jurisdiction over the Selling Parties, except where
any instances of noncompliance, either individually or in the aggregate, have
not had, and could not be reasonably expected to have, any Material Adverse
Effect on the Purchased Assets.
4.10 Environmental and Safety Matters. Except as set forth in
Schedule 4.10, to the Selling Parties' knowledge, the Seller's use of the
Purchased Assets have complied and are in compliance in all material respects
with all federal, state, local and regional statutes, laws, ordinances, rules,
regulations and orders relating to the protection of human health and safety,
natural resources or the environment, including, but not limited to, air
pollution, water pollution, noise control, on-site or off-site hazardous
substance discharge, disposal or recovery, toxic or hazardous substances,
training, information and warning provisions relating to toxic or hazardous
substances, or employee safety, and no notice of violation of any such statutes,
laws, ordinances, rules, regulations and orders with respect thereto and no
notice of the violation, cancellation or revocation of any permit, license or
other authorization relating thereto, has been received, nor is any such notice
pending or threatened. Except as set forth in Schedule 4.10, to the Selling
Parties' knowledge, no underground or above-ground storage tanks or surface
impoundments are located on any of the Real Properties. Except as set forth on
Schedule 4.10 and in compliance with applicable statutes, laws, ordinances,
rules, regulations, orders, licenses and permits, to the Selling Parties'
knowledge, since February 3, 1998 there has been no generation, use, treatment,
storage, transfer, disposal, release or threatened release, in, at, under, or on
any of the Real Properties of toxic or hazardous substances, except for the
existence of toxic or hazardous substances or any generation, use, treatment,
storage, transfer, disposal, or release thereof that set forth in Schedule 4.10;
and, except as otherwise set forth in Schedule 4.10, to the Selling Parties'
knowledge, there are not now, and at Closing there will not be, any toxic or
hazardous substances on, in or under any of the Real Properties except in
compliance with all applicable laws, regulations, ordinances and permits
relating to environmental protection or the protection of health and safety.
Except as otherwise set forth on Schedule 4.10, (i) neither Selling Party has
received any notice or claim to the effect that either Selling Party is or may
be or become liable to any governmental authority or private party as a result
of the release, or threatened release, of any toxic or hazardous substances in
connection with the operations of the Seller; and (ii) to the Selling Parties'
knowledge, none of such operations is the subject of any federal, state or local
investigation evaluating whether any remedial action is needed to respond to a
release or a threatened release of any toxic or hazardous substances at any of
the Real Properties. For the purposes of this Section 4.10, "toxic or hazardous
substances" shall include any material, substance or waste that, because of its
quantity, concentration or physical or chemical characteristics, is at any time
deemed under any federal, state, local or regional statute, law, ordinance,
regulation or order, or by any governmental agency pursuant thereto, to pose a
present or potential hazard to human health or safety or the environment,
including, but not limited to, (i) any
10
material, waste or substance which is defined as a "hazardous substance"
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 (42 U.S.C. 9601 et seq.), as amended from time to time
("CERCLA"), and its related state and local counterparts; (ii) asbestos and
asbestos containing materials and polychlorinated biphenyls; and (iii) any
petroleum hydrocarbon, including oil, gasoline (refined and unrefined) and their
respective constituents and any wastes associated therewith.
4.11 Litigation. Except as set forth in Schedule 4.11 attached
hereto, there is no pending or threatened action, suit, arbitration proceeding,
charge, complaint, allegation, investigation, inquiry or other proceeding or
claim before any court or governmental or administrative body or agency or other
entity against, relating to or affecting the Purchased Assets or the
transactions contemplated by this Agreement, nor is either Selling Party aware
of any facts or circumstances which could reasonably lead to or provide the
basis for any such action, suit, arbitration proceeding, investigation or
inquiry that, if brought or adversely determined against either Selling Party,
could reasonably be expected to have a Material Adverse Effect on the Purchased
Assets. Except as set forth in Schedule 4.11, there is not in effect any order,
judgment or decree of any court or governmental or administrative body or agency
enjoining, barring, suspending, prohibiting or otherwise limiting either Selling
Party, or any employee or agent of either Selling Party, in its capacity as
such, from using, selling or transferring the Purchased Assets as contemplated
herein.
4.12 Taxes and Tax Returns.
(a) Except as set forth on Schedule 4.12: (i)
each Selling Party has duly and timely filed all Tax Returns (as hereinafter
defined) relating to the Purchased Assets which are required by law to be filed
by it and has duly and timely paid all Taxes (as hereafter defined) due or
claimed to be due from it (whether or not shown on any Tax Return), and there
are no assessments or claims for payment of Taxes relating to the Purchased
Assets now pending or threatened, or any audit of the records of the Seller
being made or threatened by, any taxing authority; (ii) each Tax Return relating
to the Purchased Assets previously filed is, or to be filed in the future
relating to the Purchased Assets for any period up to the Closing Date shall be,
correct and complete in all respects; and (iii) neither Selling Party is
currently the beneficiary of any extension of time within which to file any Tax
Return relating to the Purchased Assets. Except as set forth in Schedule 4.12,
each Selling Party has properly withheld and paid, or accrued for payment, when
due, to appropriate state and/or federal authorities, all sales and use taxes
relating to the Purchased Assets, if any, and all amounts required to be
withheld from payments made to its employees, independent contractors, creditors
or other third parties and has also paid all employment taxes as required under
applicable laws.
11
(b) For purposes of this Agreement, the term
"Tax" or "Taxes" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security, unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
(c) For purposes of this Agreement, the term
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement (including, but not limited to, information
returns or reports related to back-up withholding and any payments to third
parties) relating to Taxes with respect to the Purchased Assets, including any
schedule or attachment thereto, and including any amendment thereof.
4.13 Brokers and Finders. Except as disclosed on Schedule
4.13, neither Selling Party has engaged or authorized any broker, finder,
investment banker or other third party to act on behalf of either Selling Party,
directly or indirectly, as a broker, finder, investment banker or in any other
like capacity in connection with this Agreement or the transactions contemplated
hereby, or has consented to or acquiesced in anyone so acting, and neither
Selling Party knows of no claim for compensation from any such broker, finder,
investment banker or other third party for so acting or of any basis for such a
claim.
4.14 Disclosure. None of the representations or warranties of
the Selling Parties contained in this Agreement or the Schedules and Exhibits
hereto, or in any certificate furnished or to be furnished pursuant hereto,
contains any statement of a material fact that was untrue when made or omits to
state any material fact necessary to make the statements of fact contained
herein or therein not misleading in any material respect.
4.15 Knowledge. For purposes of determining under this Section
4 whether either Selling Party has knowledge or knows of any facts, events,
conditions or circumstances relating to the subject matter of the
representations and warranties contained in this Section 4, each Selling Party
shall be deemed to have knowledge of the facts, events, conditions and
circumstances actually known on or before the date hereof by any of the
officers, directors, employees or agents of such Selling Party.
4.16 Disclosure Schedules. Any exception set forth in any of
the Disclosure Schedules furnished hereunder by the Selling Parties shall be
deemed to modify only the representations or warranties contained in the section
of this Section 4 to which such Disclosure Schedule relates, unless there is a
cross-reference made in any other of the Disclosure Schedules to such exception
or such exception expressly identifies representation and warranties in other
sections of this Section 4 which it modifies or to which it relates, in which
case such exception shall modify such other representations and warranties as
well.
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4.17 Ambex Termination. The Selling Parties represent and
warrant that all rights and licenses of Ambex Venture Group, LLC and Ambex
Technologies, Inc. in and to the Intellectual Property Assets, including without
limitation those arising under the Asset Purchase Agreement dated October 1,
1997 between Ambex Technologies, Inc., Seller, and ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
and ▇▇▇▇▇ ▇▇▇▇▇▇▇ and under the Royalty Agreement dated April 21, 1998 between
Seller's Parent and Sellers are terminated, and Seller's Parent further
undertakes and agrees to obtain a general release in favor of Seller's Parent
and Buyer and Buyer's Parent from Ambex Technologies, Inc. and Ambex Venture
Group, LLC to that effect within 20 days of the Closing.
5. Representations and Warranties of Buyer.
Buyer hereby represents and warrants to the Selling Parties as follows:
5.1 Authority; Necessary Actions; Binding Effect. The Buyer
possesses full corporate power and authority to execute and deliver, and to
perform its obligations under this Agreement and to carry out the transactions
and agreements contemplated hereby, and this Agreement has been duly executed
and delivered by the Buyer. The Buyer and its Board of Directors has taken all
corporate action necessary to authorize the execution and delivery of, and the
performance of its obligations under this Agreement, and the transactions and
agreements contemplated hereby. This Agreement constitutes a valid obligation of
the Buyer that is legally binding on and enforceable against the Buyer in
accordance with its terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, moratorium or other similar laws affecting creditors'
rights, and (ii) general principles of equity relating to the availability of
equitable remedies (regardless of whether such Agreement is sought to be
enforced in a proceeding at law or in equity).
5.2 Organization and Good Standing; Corporate Matters. The
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of Colorado, and is duly authorized or qualified to
do business as a foreign corporation in each other jurisdiction in which the
character of the properties owned by it or the nature of the business it
conducts makes such authorization or qualification necessary and where the
failure to be so authorized or qualified would have a material adverse effect on
the Buyer.
5.3 No Conflicts. Neither the execution and delivery of this
Agreement by the Buyer, the performance by the Buyer of its obligations
hereunder, the execution and delivery by the Buyer of any agreement required to
be entered into pursuant to this Agreement, nor the consummation of the
transactions contemplated hereby, will result in any of the following: (a) a
default or an event that, with notice or lapse of time, or both, would
constitute a default, breach or violation of (i) any provision of the Articles
of Incorporation or Bylaws of Buyer, or (ii) any lease, license, franchise,
promissory note, contract, agreement, commitment, indenture, mortgage, deed of
trust, security or pledge agreement, or other agreement, instrument or
13
arrangement to which Buyer is a party and which is material to Buyer, considered
together with all of Buyer's subsidiaries as a whole (a "Material Buyer
Contract"); (b) the termination of any Material Buyer Contract or the
acceleration of the maturity of any indebtedness or other monetary obligation of
Buyer that is material in amount when considered in relation to Buyer and its
subsidiaries taken as a whole; or (c) a violation or breach of any writ,
injunction or decree of any court or governmental instrumentality applicable to
the Buyer or by which any of its properties is bound or any laws or regulations
applicable to Buyer, where the violation would have a material adverse effect on
Buyer considered together with all of its subsidiaries, as a whole.
5.4 Brokers and Finders. Buyer has not engaged or authorized
any broker, finder, investment banker or other third party to act on behalf of
Buyer, directly or indirectly, as a broker, finder, investment banker or in any
other like capacity in connection with this Agreement or the transactions
contemplated hereby, or has consented to or acquiesced in anyone so acting, and
the Buyer does not know of any claim for compensation from any such broker,
finder, investment banker or other third party for so acting or of any basis for
such a claim.
5.5 Disclosure. None of the representations or warranties of
Buyer contained herein or in any certificate furnished or to be furnished
pursuant hereto, contains any statement of a material fact that was untrue when
made or omits to state any material fact necessary to make the statements of
fact contained herein or therein not misleading in any material respect.
5.6 Consents and Approvals. No consent, approval, order or
authorization of, or registration, declaration or filing with, any person or
entity or any court, administrative agency or commission or other governmental
authority or instrumentality is required by or with respect to the Buyer in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.
6. Tax Matters.
6.1 Allocation of Purchase Price. The Selling Parties and
Buyer agree that Schedule 6.1 accurately reflects the parties' allocation of the
Purchase Price among the Purchased Assets. Buyer and the Selling Parties shall
use the asset values determined from such allocation for purposes of all reports
and returns with respect to Taxes, including IRS Form 8594 or any equivalent
statement.
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6.2 Liability for Taxes and Related Matters.
(a) Selling Parties' Indemnification of Buyer
and Buyer's Parent. The Selling Parties shall be jointly and severally liable to
and shall indemnify Buyer and Buyer's Parent for all Taxes relating to the
Purchased Assets imposed on Buyer or Buyer's Parent for any taxable period prior
to the Closing Date, except any Taxes imposed on the Selling Parties by any
governmental authority, including the State of California, as a result of
holding the Closing in California. The Selling Parties shall also jointly and
severally indemnify, defend and hold harmless Buyer and Buyer's Parent from all
costs and expenses incurred by Buyer or Buyer's Parent (including reasonable
attorneys' fees and expenses) in connection with any liability to, or claim by,
any taxing authority, for Taxes for which the Selling Parties are required to
indemnify Buyer or Buyer's Parent under this Section 6.2(a).
(b) Tax Returns. The Selling Parties shall file
when due all Tax Returns relating to the Purchased Assets that are required to
be filed by or with respect to the Selling Parties.
(c) Contest Provisions. Buyer shall promptly
notify the Selling Parties in writing upon receipt by Buyer of notice of any
pending or threatened federal, state, local or foreign income or franchise tax
audits or assessments which may materially affect the tax liabilities of the
Seller for which the Selling Parties would be required to indemnify Buyer or
Buyer's Parent pursuant to Section 6.2(a) provided that failure to comply with
this provision shall not affect Buyer or Buyer's Parent's right to
indemnification hereunder. Each Selling Party shall have the sole right to
represent such Selling Party's interests in any tax audit or administrative or
court proceeding, and to employ counsel of its choice at its expense.
Notwithstanding the foregoing, neither Selling Party shall be entitled to
settle, either administratively or after the commencement of litigation, any
claim for Taxes which would adversely affect the liability for Taxes of Buyer or
Buyer's Parent or either Selling Party for any period after the Closing Date to
any extent (including, but not limited to, the imposition of income tax
deficiencies, the reduction of asset basis or cost adjustments, the lengthening
of any amortization or depreciation periods, the denial of amortization or
depreciation deductions, or the reduction of loss or credit carryforwards)
without the prior written consent of Buyer and Buyer's Parent. Such consent
shall not be unreasonably withheld, and shall not be necessary to the extent
that the Selling Parties have indemnified Buyer and Buyer's Parent against the
effects of any such settlement.
6.3 Assistance and Cooperation. After the Closing Date, each
of the Selling Parties and the Buyer and Buyer's Parent shall:
(a) assist (and cause their respective
affiliates to assist) the other party in preparing any Tax Returns relating to
the Purchased Assets or reports where such assistance is appropriate;
(b) cooperate fully in preparing for any audits of, or
disputes with taxing authorities regarding, any Tax Returns of the Seller
relating to the Purchased Assets;
(c) make available to the other and to any taxing authority as
reasonably requested all information, records, and documents relating to Taxes
of each Selling Party relating to the Purchased Assets;
15
(d) provide timely notice to the other in writing of any
pending or threatened tax audits or assessments of each Selling Party relating
to the Purchased Assets for taxable periods for which the other may have a
liability under this Section 6, provided, that failure to comply with this
provision shall not affect the other party's rights to indemnification
hereunder; and
(e) furnish the other with copies of all correspondence
received from any taxing authority in connection with Tax audit or information
request with respect to any such taxable period relating to the Purchased
Assets.
6.4 Survival of Obligations. The obligations of the parties
set forth in this Section 6 shall be unconditional and absolute and shall remain
in effect without limitation as to time.
7. Obligations Pending and Following the Closing.
7.1 Reasonable Access. Prior to the Closing, each Selling
Party shall afford to Buyer, its counsel, accountants, investment bankers and
lenders (and their respective accounting and legal and other authorized
representatives), reasonable access during normal business hours to all
properties, personnel and information of such Selling Party relating to the
Purchased Assets to enable Buyer to determine that the transactions contemplated
hereby can be consummated in accordance with applicable statutes and regulations
and to verify the accuracy of the representations and warranties made herein;
provided, that such investigation shall be conducted in a manner which does not
unreasonably interfere with the operation of either Selling Party's business.
Without limiting the generality of the foregoing, each Selling Party shall
furnish or cause to be furnished to Buyer and its representatives such
information, data and reports concerning the Purchased Assets as Buyer or any
such representative shall reasonably request. No information or knowledge
obtained in any investigation pursuant to this Section 7.1 shall affect or be
deemed to modify any representation or warranty contained in this Agreement or
in any certificates delivered by the Selling Parties at the Closing.
7.2 Conduct of Business. Except as disclosed on Schedule 7.2,
unless Buyer gives its prior written consent for actions to be taken to the
contrary, from the date of this Agreement and until the Closing or termination
of this Agreement, whichever first occurs, each Selling Party shall operate and
conduct its business relating to the Purchased Assets and the Real Properties
diligently and only in the ordinary course of business consistent with past
practices. Without limiting the generality of the foregoing:
(a) Relationships. Seller shall use its
reasonable best efforts to keep available the services of its officers,
directors and employees and to maintain satisfactory relationships with all
vendors, suppliers, distributors, sales representatives, customers, agents,
consultants and others having commercially beneficial relationships with it,
commensurate with the requirements of its business;
(b) Compensation and Benefits. Other than as
disclosed on Schedule 7.2, Seller shall not increase the compensation or
benefits of any employee, independent contractor or agent adopt or amend any
commission plan or arrangement or any
16
Employee Plan of any type, not make, pay, award or grant any bonus or incentive
or deferred compensation, and not lend or advance any sum or extend to credit to
any employee, director to stockholder or any of its respective affiliates,
except that, without obtaining Buyer's prior written consent, the Seller may be
permitted to increase the regular salaries or wages of non-management employees
in the ordinary course of business and consistent with past practices, provided
that such increases do not average more than 4%;
(c) Lawsuits and Claims. The Selling Parties
shall promptly notify Buyer of all lawsuits, claims, proceedings or
investigations that are, or which any officers of the Selling Parties have
reason to believe may be, threatened, brought, asserted or commenced against
either of the Selling Parties or any of its respective officers or directors,
and which could have a Material Adverse Effect on the Purchased Assets or the
transactions contemplated hereby;
(d) Sales of or Liens on Purchased Assets.
The Selling Parties shall not sell or otherwise dispose, or enter into an
agreement for the sale or other disposition of any of the Purchased Assets,
except for sales of inventory and obsolete equipment in the ordinary course of
business and consistent with past practices, and not permit or allow, or enter
into any agreements providing for or permitting, any of the Purchased Assets to
be subjected to any Lien;
(e) Condition of Assets. The Selling Parties
shall maintain in good working order and condition, ordinary wear and tear
excepted, all of the Purchased Assets;
(f) Agreements and Transactions. The Selling
Parties shall observe and perform all terms, conditions, covenants and
obligations contained in, and take all actions necessary or appropriate to
preserve the rights of the Seller in and to the Purchased Assets; and not take
any action which would cause a breach or violation of or default under any
Material Contract relating to the Purchased Assets and promptly notify Buyer in
writing of the occurrence of any such breach or default;
(g) Consents; Compliance with Laws. The Selling
Parties shall use their best efforts to obtain as soon as practicable and
maintain all consents, releases, assignments or approvals of third parties,
governmental and other persons or entities, in form and substance reasonably
satisfactory to Buyer, the absence or loss of which would cause the Selling
Parties to be in non-compliance with Section 8.3 or otherwise have a Material
Adverse Effect on the Purchased Assets or otherwise impair Selling Parties'
ability to deliver all right, title and interest in the Purchased Assets as
required under Section 1.1 above; and not take any action which would result in
a violation of or the noncompliance with any Material Contract or any laws or
regulations applicable to or any permits or licenses or contractual rights held
by either Selling Party where such violation or non-compliance would or is
reasonably likely to have a Material Adverse Effect on the Purchased Assets, or
which would adversely affect the obtaining of third-party consents or approvals
for or otherwise adversely affect the ability of the parties to consummate the
transactions contemplated by this Agreement; and cooperate with Buyer and render
to Buyer such assistance as Buyer may reasonably request in obtaining such
consents and approvals;
17
(h) Significant Transactions. Except as set
forth on Schedule 7.2, neither Selling Party shall: (i) merge or consolidate
with or into a third party or reorganize; (ii) approve or commence any
proceedings for its dissolution or liquidation; or (iii) enter into any
agreement or commitment to do any of the foregoing; or
(i) Other. Neither Selling Party shall enter
into any agreement or commitment to take any action that would violate any of
the covenants set forth in this Section 7.2.
7.3 License Agreement. Buyer shall execute and deliver to
Seller's Parent, a license agreement in substantially the form attached hereto
as Exhibit A (the "License Agreement").
7.4 Employee Matters.
(a) Subject to Section 2(b) hereof, Buyer agrees
to extend an offer of employment to some or all of Seller's employees employed
at the Boulder Facility, as listed on Schedule 4.8 hereof, after the Closing
Date on an at-will basis, in accordance with Buyer's Parent's general employment
and compensation policies.
(b) ▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇▇ shall each execute and deliver to Buyer an employment agreement with the
Buyer in substantially the forms attached hereto as Exhibit B-1, Exhibit B-2 and
Exhibit B-3, respectively (collectively, the "Employment Agreements").
(c) For a period of three (3) years after the
Closing, neither Selling Party shall directly or indirectly, without the prior
written consent of the Buyer, recruit, offer employment, employ, engage as a
consultant, hire or entice away or in any other manner persuade or attempt to
persuade any of the foregoing employees described in Section 7.4(a) (with
respect to employees offered employment by Buyer) and Section 7.4(b) to leave
their employment with Buyer unless such person has been terminated by Buyer.
7.5 Leases. Subject to Section 1.2 hereof, Seller shall cause
the Leases to be assigned to Buyer on the date of the Closing, and Buyer agrees
to assume such Leases effective as of the Closing Date.
7.6 Certain Covenants of the Selling Parties; No Solicitation.
Except for the sale of the Purchased Assets to Buyer, from and after the date
hereof and continuing until the termination of this Agreement or the
consummation of the sale of the Purchased Assets to Buyer hereunder, whichever
first occurs, the Selling Parties shall not sell, transfer, pledge or otherwise
dispose of any of the Purchased Assets now outstanding or enter into any
agreements which would obligate either Selling Party to sell, or entitle any
person or entity to acquire, any of such Purchased Assets, or any interest
therein or rights thereunder, whether absolute or contingent. Each Selling Party
agrees that
18
it will not, directly or indirectly through any of its respective officers,
directors, employees, representatives or agents, (i) solicit, initiate or
encourage any inquiries or proposals (from any person or entity other than
Buyer) that constitute, or could reasonably be expected to lead to, or accept,
any proposal or offer for a merger, consolidation, reorganization, business
combination, sale of substantial assets, sale of shares of capital stock
(including, without limitation, by way of a tender offer), or the issuance of
any new securities of the either Selling Party or any other transaction or
series of transactions which could cause or result in a change of control of or
any material change in either Selling Party or the Purchased Assets, or which
could interfere in any manner, directly or indirectly, with the consummation of
the transactions contemplated by this Agreement (any of the foregoing inquiries
or proposals being referred to in this Agreement as an "Acquisition Proposal"),
(ii) engage in negotiations or discussions concerning, or provide any non-public
information to any person or entity relating to or which could lead to or
facilitate the making of, any Acquisition Proposal by any person or entity other
than Buyer, or (iii) agree to, approve or recommend any Acquisition Proposal.
Each Selling Party shall notify the Buyer immediately (and no later than 24
hours) after receipt by such Selling Party (or by any of its advisors) of any
written bona fide Acquisition Proposal or any written request for nonpublic
information or for access to the properties, books or records of either Selling
Party. Such notice to Buyer shall be made orally and in writing and shall
indicate in reasonable detail the identity of the person or entity making such
Proposal or request and the terms and conditions of such proposal, inquiry or
contact.
7.7 Environmental Assessments. Buyer shall have the right to
obtain, at Buyer's expense and from environmental consultants selected by Buyer,
environmental assessments of any of the Real Properties (the "Environmental
Assessments") for the purpose of determining whether there exists any toxic or
hazardous substances (as such terms are defined in Section 4.10 above) on, about
or underneath the Real Properties, or migrating or threatening to migrate from
any of the Real Properties, or any condition, circumstance or activity which
constitutes a violation of or noncompliance with any Environmental Law (as
defined below) which, in the reasonable judgment of Buyer, based on the results
of or any recommendations from its environmental consultants, is required to be
remedied or corrected (a "Hazardous Condition") and which is attributable to the
operations of the Seller on or after, or to any Hazardous Condition on, about or
underneath or migrating from any such Real Property which neither existed nor
was originated prior to, inception. For purposes of this Section 7.7,
"Environmental Law" shall mean any federal, state or local law, order, rule or
regulation relating to the discharge, remediation, removal, manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of toxic or hazardous substances. Buyer's failure to obtain an
Environmental Assessment will not relieve Selling Parties of any warranty,
obligation, liability or responsibility under this Agreement.
7.8 Waiver of Bulk Sales. To the extent that the
provisions of Article 6 of Title 4 of the Colorado Revised Statutes may apply to
the transactions contemplated hereby, the parties agree to waive the notice and
other requirements thereunder. Such waiver shall not reduce or affect the
Selling Parties' indemnification obligations under Section 13 hereof.
19
7.9 Intellectual Property Assignment Matters.
(a) Within ten (10) business days of the Closing
Date, the Selling Parties shall execute and deliver to the Buyer any and all
patent, trademark and copyright assignments required for filing in the U.S.
Patent and Trademark Office, the U.S. Copyright Office, or in individual states,
to effect the transfer and assignment of each of the patents, trademarks and
copyrights listed in Schedule 4.6(a). Such assignments shall, without
limitation, and with respect to patent rights, assign the entire right, title
and interest throughout the world in and to the inventions in the AdaptiveRAID
Products and technology (except with respect to the License Agreement as set
forth in Section 7.3) and the applications for patent relating thereto, and in
all Letters Patent of the United States which may be granted thereon and all
reissues and extensions thereof, and all rights of priority under International
Conventions and applications for Letters Patent which may hereafter be filed for
said inventions in any country or countries foreign to the United States, and
all Letters Patent which may be granted for said inventions in any country or
countries foreign to the United States and all extensions, renewals and reissues
thereof.
(b) Within ten (10) days of the Closing Date,
the Selling Parties shall, at their own expense, execute and file any documents
or declarations needed to correct the assignment of U.S. Patent Nos. 5,657,468.
(c) The Selling Parties covenant and agree to
cooperate with and support, in the form of information, employee time, execution
of declarations, the prosecution and enforcement of any patent applications,
reissue applications, continuation applications, reexaminations related to the
patents and patent applications listed in Schedule 4.6(a) hereto, and to
communicate with the Buyer, its successors, legal representatives and assigns,
as to any facts known to the Selling Parties respecting such patents and patent
applications, and to testify in any legal proceeding, sign all lawful papers,
execute all divisional, continuing and reissue applications, make all rightful
oaths and generally do everything reasonably possible to aid the Buyer, its
successors, legal representatives and assigns, to obtain and enforce proper
patent protection for such patents and patent applications in all countries.
7.10 Further Assurances. Each party hereto shall execute and
deliver, both before and after the Closing, such instruments and take such other
actions as the other party or parties, as the case may be, may reasonably
request in order to carry out the intent of this Agreement or to better evidence
or effectuate the transactions contemplated herein, provided that, with respect
to any such request, the requesting party bears the reasonable costs of
preparing, executing and delivering such instruments or the taking of such
actions, unless the other party is obligated, under any other terms or
provisions of this Agreement, to execute and deliver such documents or to take
any such action.
7.11 Notice of Breach. Each party to this Agreement will
immediately give notice to the other parties of the occurrence of any event, or
the failure of any event to occur, that results in or constitutes a breach by it
of any representation or warranty or a failure by it to comply with or fulfill
any covenant, condition or agreement contained herein.
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7.12 Trademark. For a period of one hundred and eighty (180)
days following the Closing Date, the Selling Parties shall have a non-exclusive
license to use the AdaptiveRAID trademark described on Schedule 4.6 of this
Agreement.
8. Conditions to Buyer's Obligations.
The obligations of Buyer to consummate the transactions
contemplated herein shall be subject to the satisfaction or waiver, on or before
the Closing Date, of each of the following conditions:
8.1 Accuracy of Representations and Warranties. All of the
representations and warranties of the Selling Parties contained herein shall be
true and correct as of the date when made and shall be true and correct as of
the Closing Date with the same force and effect as though such representations
and warranties were made at and as of the Closing Date.
8.2 Due Diligence. The Buyer, its officers, directors,
employees, accountants, attorneys, representatives, advisors and/or agents shall
have completed to their satisfaction, a due diligence review of the Selling
Parties' respective business and financial condition pursuant to Section 7.1.
8.3 Termination of Certain Retained Liabilities. The Selling
Parties shall cause each of the persons and entities identified in Section 2(a)
hereof, to execute and deliver a waiver and release or such other instrument or
document, in a form reasonably acceptable to Buyer, whereby such person or
entity (i) acknowledges the complete discharge, waiver and release, without
cost, liability, payment, obligation to or diminution of the Purchased Assets,
of any and all obligations or royalties or other liabilities of the Selling
Parties or any of its predecessors in interest to such person or entity; (ii)
acknowledges and agrees that all rights, title and interests in and to the
Purchased Assets, in whatever media or form, shall upon consummation of this
Agreement become the exclusive property of the Buyer; (iii) unconditionally and
irrevocably transfers, conveys and assigns to the Selling Parties all of such
person or entity's current and hereafter acquired rights, title and interests in
and to the Purchased Assets; and (iv) agrees to take all actions and execute all
documents, as the Buyer may reasonably request, to effectuate the
acknowledgement of ownership and the vesting of complete and exclusive ownership
of the Purchased Assets in the Buyer. Such waiver and release shall not be
amended or modified without the consent of the Buyer.
8.4 Performance. The Selling Parties shall have performed and
complied with all agreements, obligations and conditions required by this
Agreement to be performed or complied with by them on or prior to the Closing
Date, and all actions which the Selling Parties have been required to cause to
be taken by the Selling Parties at or prior to the Closing, as provided in this
Agreement, shall have been taken by them in accordance with the terms of this
Agreement.
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8.5 Adverse Changes. From February 3, 1998, no material
adverse change shall have occurred and no event shall have taken place that
would, or could reasonably be expected to have a Material Adverse Effect on the
Purchased Assets.
8.6 No Governmental Proceeding or Litigation. No suit, action,
investigation, inquiry or administrative or other proceeding by any governmental
body or other person or entity shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby.
There shall be no pending or threatened litigation, or asserted or unasserted
claims, assessments, or other loss contingencies, which could have a Material
Adverse Effect on the Purchased Assets other than as disclosed in the Disclosure
Schedules delivered pursuant hereto as of the date of this Agreement.
8.7 Certificates. Buyer shall have received the following:
(a) Good Standing Certificate, dated as of a
recent date, with respect to each Selling Party from (i) the Secretary of State
or other appropriate state agencies of its respective state of incorporation,
and (ii) the Secretaries of State or other appropriate state agencies of each
other jurisdiction in which the Seller is engaged in business activities that
would require qualification under the laws of such state; and
(b) Certificates signed by the respective
executive officer of each Selling Party, dated as of the Closing Date,
certifying that (i) all representations and warranties of the Selling Parties
were true and correct when made and remain true and correct in all material
respects as of the Closing Date; (ii) all of the respective covenants,
agreements, obligations and conditions of the Selling Parties, and the actions
required to have been performed or complied with under or pursuant to this
Agreement as of or prior to the Closing have been fully performed or complied
with, unless waived in writing by Buyer; and (iii) all of the conditions to the
obligations of Buyer under this Agreement required to be satisfied by any of the
Selling Parties by the Closing Date have been satisfied and fulfilled or have
been waived in writing by Buyer.
8.8 Consents. All consents, authorizations, permits or
approvals from third parties, governmental and other, required to permit the
parties to consummate the transactions contemplated hereby, other than the
consent of the lessors under the Equipment Leases, shall have been obtained,
without the imposition of any burdensome conditions on the Selling Parties or
Buyer, and shall not have been revoked or withdrawn.
8.9 Employment Obligations. The Seller shall have paid
and terminated all of the employment agreements and commitments of the Seller
arising prior to the Closing, including any such agreements and commitments with
each of the employees listed on Schedule 4.8 and with Messrs. Hall, ▇▇▇▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇, and any commitments for parachute payments or other amounts payable
as a result of the transactions contemplated hereunder (collectively, the
"Employment Obligations") which are as set forth on Schedule 4.8. Any and all
remaining Employment Obligations not listed on Schedule 4.8 or paid and
terminated on or prior to the Closing shall be paid or otherwise fully
discharged by the Seller at no cost, liability, payment, obligation to or
diminution of any of the Purchased Assets.
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8.10 Employment Agreements. Each of Messrs. Hall,
▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ shall have executed and delivered to Buyer the Employment
Agreements.
8.11 Opinion of Counsel. Buyer shall have received an opinion,
dated the Closing Date, of Akerman, Senterfitt & ▇▇▇▇▇▇, P.A., substantially in
the form of Exhibit C hereto.
8.12 Additional Instruments. Buyer shall have received such
other or additional instruments, consents, endorsements and documents as Buyer
reasonably deems to be necessary to enable the transactions contemplated by this
Agreement to be consummated as provided in this Agreement. All other proceedings
in connection with this Agreement and the transactions contemplated hereby, and
all documents and instruments incident to such transactions, shall be reasonably
satisfactory in form and substance to Buyer and its counsel.
8.13 Results of Environmental Assessments. Buyer shall be
reasonably satisfied with the results of the Environmental Assessments conducted
pursuant to Section 7.7 relating to the presence on, about or underneath the
Real Properties of Hazardous Substances that were not present at such Real
Properties prior to, and the Seller's compliance with Environmental Laws since
February 3, 1998.
8.14 License Agreement with Seek Systems, Inc. Buyer and Seek
Systems, Inc., shall have entered into a license agreement in a form acceptable
to Buyer.
9. Conditions to the Selling Parties' Obligations.
The obligations of the Selling Parties to consummate the
transactions contemplated herein shall be subject to the satisfaction or waiver,
on or before the Closing Date, of each of the following conditions:
9.1 Accuracy of Representations and Warranties. All of the
representations and warranties of Buyer contained herein shall be true and
correct as of the date when made and shall be true and correct as of the Closing
Date with the same force and effect as though such representations and
warranties were made at and as of the Closing.
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9.2 Performance. Buyer shall have performed and complied with
all agreements, obligations and conditions required by this Agreement to be
performed by or complied with on or prior to the Closing Date.
9.3 No Governmental Proceeding or Litigation. No suit, action,
investigation, inquiry or administrative or other proceeding by any governmental
body or other person or entity shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby.
9.4 Certificates. The Selling Parties shall have received the
following:
(a) A Good Standing Certificate of Buyer as of a
recent date from the Secretary of State of the State of Colorado; and
(b) A certificate signed by the Chief Executive
Officer and Chief Financial Officer of Buyer, dated as of the Closing Date,
certifying that (i) all representations and warranties of Buyer were true and
correct when made and remain, in all material respects, true and correct as of
the Closing; (ii) all of the covenants, agreements, obligations and conditions
of Buyer required to have been performed or complied with by Buyer as of or
prior to the Closing have been fully performed or complied with, unless waived
in writing by the Seller; and (iii) all of the conditions to the Selling
Parties' obligations under this Agreement required to be satisfied by the
Closing Date by Buyer have been satisfied and fulfilled or waived in writing by
the Selling Parties.
9.5 Consents. All consents, releases, authorizations, permits
or approvals from third parties, governmental and other persons or entities,
required to enable the parties to consummate the transactions as contemplated
hereby, other than the consent of the lessors under the Equipment Leases,
including all requirements under Section 7.2(g) above, shall have been obtained,
without the imposition of any burdensome conditions on the Selling Parties or
Buyer, and shall not have been revoked or withdrawn.
9.6 License Agreement. Buyer and Seller's Parent shall
have executed the License Agreement.
9.7 Opinion of Counsel. Seller's Parent shall have received an
opinion, dated the Closing Date, of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇,
substantially in the form of Exhibit D hereto.
9.8 Additional Instruments. The Selling Parties shall have
received certified copies of resolutions duly adopted by the Board of Directors
of Buyer approving this Agreement and authorizing the transactions contemplated
hereby, and such other or additional instruments, consents, endorsements and
documents as the Selling Parties reasonably deems to be necessary to enable the
transactions contemplated by this Agreement to be consummated as provided in
this Agreement. All other proceedings in connection with this Agreement and the
transactions contemplated hereby, and all documents and instruments incident to
such transactions, shall be reasonably satisfactory in form and substance to the
Selling Parties and their counsel.
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10. Closing.
10.1 Closing; Closing Date. The consummation of the purchase
and sale of the Purchased Assets (the "Closing") shall take place at the offices
of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 10:00 A.M. on January __, 2000, or at such
other place, date and time as Buyer and the Selling Parties may mutually agree
(the "Closing Date").
10.2 Closing Deliveries. In connection with and at the
time of the Closing:
(a) By the Selling Parties. The Selling Parties
shall deliver or cause to be delivered to Buyer the following:
(i) A ▇▇▇▇ of Sale and Assumption
Agreement in the form of Exhibit E hereto (the "▇▇▇▇ of Sale") duly executed by
the Selling Parties; and
(ii) Each of the certificates, documents,
instruments and evidences required to be delivered to Buyer pursuant to Section
7 and Section 8 above;
(b) By Buyer. Buyer shall deliver to the Selling
Parties the following:
(i) Wire transfer of funds to the bank
account specified by the Seller in an amount equal to the Purchase Price;
(ii) The Lease Assignment duly executed
by Buyer evidencing the assumption of the Real Property Leases; and
(iii) Each of the certificates, documents,
instruments and evidences required to be delivered by Buyer pursuant to Section
7 and Section 9 above.
11. Termination and Abandonment.
11.1 Methods of Termination. This Agreement may be terminated
and the purchase and sale of the Purchased Assets herein contemplated may be
abandoned at any time but not later than the Closing Date:
(a) By mutual written consent of the Selling
Parties and Buyer; or
(b) By any party, if the Closing has not
occurred by December 31, 1999; provided, that the party so terminating is not in
breach of any of its material obligations under this Agreement.
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11.2 Procedure Upon Termination. In the event of termination
and abandonment by Buyer or by the Selling Parties, or both, pursuant to Section
11.1 hereof, written notice thereof shall forthwith be given to the other party
or parties. Upon termination, the purchase and sale of the Purchased Assets
shall be abandoned, without further action by Buyer or the Selling Parties. If
this Agreement is terminated as provided herein:
(a) Each party will redeliver all documents,
workpapers and other material of any other party relating to the transactions
contemplated hereby, whether so obtained before or after the execution hereof,
to the party furnishing the same;
(b) The obligations of confidentiality set forth
in Section 14 hereof shall continue despite such termination; and
(c) The parties shall be relieved of any
obligation to sell or purchase the Purchased Assets, but none of the parties
shall be relieved of any liability for any material breach or default under this
Agreement.
12. Survival of Covenants, Representations and Warranties.
All of the representations and warranties set forth in this
Agreement or in any certificates delivered pursuant hereto, and all covenants
which by their terms require performance or compliance following the Closing,
shall remain in full force and effect and shall survive the Closing until (i) in
the case of the representations and warranties, the expiration of the applicable
periods following the Closing Date set forth in Section 13.4 hereof, regardless
of any investigation, verification or approval by any party hereto or by anyone
or on behalf of any party hereto, and (ii) in the case of any such covenants,
until they have been fully performed and no further performance is required with
respect thereto pursuant to this Agreement, unless the party for whose benefit
such covenant, representation or warranty was made waives the same in writing.
13. Indemnification.
13.1 Indemnification by the Selling Parties. The Selling
Parties shall jointly and severally indemnify, hold harmless and defend Buyer,
Buyer's Parent and their respective directors, officers, shareholders,
employees, agents and successors and assigns, (collectively, all of the
foregoing, the "Buyer indemnified parties" or, individually, a "Buyer
indemnified party") from and against any and all "Damages" (as hereinafter
defined) that arise from or are in connection with:
(a) Any breach of or inaccuracy in any of the
representations or warranties of the Selling Parties contained in Section 4 of
this Agreement or in any of the Disclosure Schedules or any certificates
delivered hereunder by or on behalf of such person or entity relating to such
representations or warranties;
26
(b) Any breach or default by the Selling Parties
of their covenants or agreements contained in this Agreement; and
(c) The existence prior to the Closing Date of
any toxic or hazardous substances or materials upon, about or beneath the Real
Properties or migrating or threatening to migrate from any of the Real
Properties or the violation of applicable environmental laws or regulations
pertaining to the Real Properties, or any real properties at which the Seller
previously conducted any operations and whether or not the existence of such
toxic or hazardous substances or materials or the existence or occurrence of any
such violations was disclosed to Buyer; unless the existence of such toxic or
hazardous substances or materials arose or occurred or the violation of laws or
regulations took place prior to inception.
13.2 Indemnification by the Buyer. The Buyer shall indemnify,
hold harmless and defend the Selling Parties and their successors and assigns
(collectively, all of the foregoing, the "Seller indemnified parties" or,
individually, a "Seller indemnified party") from and against any and all Damages
that arise from or are in connection with:
(a) Any breach of or inaccuracy in any of the
representations or warranties of any of such Buyer contained in Section 5 of
this Agreement or in any of the certificates delivered hereunder by or on behalf
of the Buyer pursuant to such representations or warranties; and
(b) Subject to the limitations in Section 13.4
below, any breach or default by the Buyer of its covenants or agreements
contained in this Agreement.
(c) Any Taxes imposed on the Selling Parties by
any governmental authority of the State of California as a result of holding the
Closing in California.
13.3 Damages. "Damages," as used in this Section 13, shall
mean: (i) demands, claims, actions, suits, investigations and legal or other
proceedings brought against any indemnified party or parties, and any judgments
or assessments, fines or penalties rendered therein or any settlements thereof,
and (ii) all liabilities, damages, losses, Taxes, assessments, costs and
expenses (including, without limitation, reasonable attorneys' and accountants'
fees and expenses) incurred by any indemnified party or parties, to the extent
not reimbursed or paid for by insurance, whether or not they have arisen from or
were incurred in or as a result of any demand, claim, action, suit, assessment
or other proceeding or any settlement or judgment.
13.4 Limitations; Nature of Liability.
(a) Time. No claim for indemnification under
this Section 13 may be made after the second anniversary of the Closing Date,
except that claims for indemnification from the Selling Parties may be made by
the Buyer or Buyer's Parent at any time after the Closing and prior to the
expiration of the applicable statute of limitations with respect to Damages
arising from any breach of any of the representations and warranties of the
Selling Parties (and indemnification therefor) contained in Section 4.6
(Property of the Seller), Section 4.10 (Environmental Matters), and Section 4.12
(Taxes), and from any breach or default by the Selling Parties of their covenant
and agreement contained in Section 8.3 (Termination of Certain Retained
Liabilities).
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(b) Exclusivity of Tax Indemnification. No
claim for indemnification from the Selling Parties under this Section 13 may be
made by the Buyer or Buyer's Parent with respect to breaches of representations,
warranties, covenants and agreements set forth in Section 6, as to which the
indemnification provisions set forth in Section 6 shall govern.
(c) Threshold Amount. Notwithstanding any
contrary provision of this Agreement (other than Section 13.4(e)), neither the
Selling Parties nor the Buyer shall have any obligation to indemnify any of the
Selling Parties or Buyer indemnified parties, respectively, that would otherwise
be entitled to indemnity under Sections 13.1 or 13.2 unless and until the
indemnified parties have incurred or suffered Damages in an aggregate amount in
excess of Fifty Thousand Dollars ($50,000) (the "Threshold"), whereupon the
party or parties from whom indemnity may be sought therefor under this Section
13 (the "indemnifying party") shall become obligated to indemnify the
indemnified parties for all Damages they have incurred, including the amount of
the Threshold, but subject to the Indemnification Ceilings hereinafter set forth
in Section 13.4(d).
(d) Ceiling Amounts; Nature of Liability.
Notwithstanding any contrary provision of this Agreement (other than Section
13.4(e)), the aggregate liability for indemnification under Section 13.1 of the
Selling Parties and under Section 13.2 of the Buyer shall in no event exceed the
Purchase Price (the "Indemnification Ceiling").
(e) Exceptions and Additions to Threshold and
Indemnification Ceilings. For purposes of determining whether the Threshold has
been exceeded or whether an Indemnification Ceiling has been reached, any
Damages incurred by Buyer, the Selling Parties or any of the other indemnified
parties shall be aggregated (but without duplication) as if they were a single
party. Notwithstanding any provisions of this Section 13 to the contrary, (i) no
Damages arising from any breach of the representations or warranties of the
Selling Parties contained in Section 4.3, Section 4.12 or Section 6 or from any
breach of any of the covenants of the Selling Parties referenced in Section
13.4(a) shall be limited by or subject to the Threshold set forth in Section
13.4(c) or any of the Indemnification Ceilings that are referenced in Section
13.3(d), and (ii) Damages arising from any breach of the covenants of the Buyer
contained in Section 3, relating to payment of the Purchase Price, shall be
further limited to the actual amounts unpaid plus the interest rate set forth in
Section 13.7 hereof.
13.5 Notice of Claims. Whenever any claim shall arise for
indemnification hereunder, the indemnified party shall promptly notify the
indemnifying party of the claim and, when known, the facts constituting the
basis for such claim; provided that the indemnified party's failure to give such
notice shall not affect any rights or remedies of such indemnified party
hereunder with respect to indemnification for Damages except to the extent that
the indemnifying party is materially prejudiced thereby. In the event of any
claim for indemnification hereunder resulting from or in connection with any
claim or legal proceeding by a third party, the notice to the indemnifying party
shall specify, if known, the amount or any estimate of the amount of the
liability arising therefrom. Neither the indemnified party nor any indemnifying
party shall settle or compromise any claim by a third party for which the
indemnified party is entitled to indemnification hereunder, without the prior
written consent of the other party (which shall not be unreasonably withheld),
unless suit shall have been instituted against the indemnified party and the
indemnifying party shall not have taken control of such suit after notification
thereof as provided in Section 13.6 of this Agreement.
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13.6 Third Party Claims. In connection with any claim giving
rise to indemnity hereunder that results or may result from or arises or may
arise out of any claim or legal proceeding by a person who is not a party to
this Agreement, the indemnifying party at its sole cost and expense may, upon
written notice to the indemnified party, assume the defense of any such claim or
legal proceeding if, within fifteen (15) days of receipt of notice of the claim
or proceeding, it elects in writing to do so, and thereafter diligently conducts
the defense thereof with counsel reasonably acceptable to the indemnified party.
If the indemnifying party has so assumed the defense of any such claim or legal
proceeding, the indemnified party shall be entitled to participate in (but not
control) the defense of any such action, with its counsel and at its own
expense. If the indemnifying party does not assume or fails to conduct in a
diligent manner the defense of any such claim or litigation resulting therefrom
with counsel reasonably acceptable to the indemnified party, then (i) the
indemnified party may defend against such claim or litigation, in such manner as
it may deem appropriate, including, but not limited to, settling such claim or
litigation, after giving notice of the same to the indemnifying party, on such
terms as the indemnified party may deem appropriate, (ii) the indemnifying party
shall pay the costs and expenses (including the reasonable fees and cost of the
attorneys and accountants for the indemnified parties) incurred in the defense
of such claim or other proceeding as and when the same are incurred, and (iii)
the indemnifying party shall be entitled to participate in (but not control) the
defense of such claim or proceeding, with its counsel and at its own expense. If
the indemnifying party thereafter seeks to question the manner in which the
indemnified party defended such third-party claim or proceeding or the amount or
nature of any such settlement, the indemnifying party shall have the burden to
prove, by a preponderance of the evidence, that the indemnified party did not
defend or settle such third-party claim or proceeding in a reasonably prudent
manner. Each party agrees to cooperate fully with the other, such cooperation to
include, without limitation, attendance at depositions and the provision of
relevant documents as may be reasonably requested by the indemnifying party;
provided that the indemnifying party will hold the indemnified party harmless
from all of its expenses, including reasonable and actual attorneys' fees, as
and when incurred in connection with such cooperation by the indemnified party.
13.7 Indemnification Procedures. Upon receipt of a notice of
claim for indemnification (a "Notice of Claim"), the indemnifying parties shall
have fifteen (15) business days to contest their indemnification obligation with
respect to such claim, or the amount thereof, by written notice to the
indemnified party (a "Contest Notice"); provided, however, that if, at the time
a Notice of Claim is submitted to the indemnifying parties the amount of the
Damages in respect thereof cannot yet be determined, such fifteen (15) day
period shall not commence until a
29
further written notice (a "Notice of Liability") has been sent or delivered by
the indemnified party to the indemnifying parties setting forth the amount of
the Damages incurred by the indemnified parties in respect of the
indemnification claims that were the subject of the earlier Notice of Claim,
even if the amount of such Damages is not determined until after the expiration
of any applicable limitations period set forth in Section 13.4 and the inability
to determine the amount of such Damages prior to the expiration of any such
applicable limitations period shall not relieve the indemnifying parties of
their indemnification obligations with respect to any such claims. Any Contest
Notice shall specify the reasons or bases for the objection of the indemnifying
party to the claim, and if the objection relates to the amount of the Damages
asserted, the amount, if any, which indemnifying parties believe is due the
indemnified party or parties. If no such Contest Notice is given within such
15-day period, the obligation of the indemnifying parties to pay to the
indemnified parties the amount of the Damages set forth in the Notice of Claim,
or subsequent Notice of Liability, shall be deemed established and accepted by
the indemnifying parties; provided, however, that if the actual Damages later
prove to be greater or less than that set forth in the Notice of Claim or Notice
of Liability, the indemnifying parties shall be responsible for the actual
Damages incurred (subject to any applicable limitations set forth in Section
13.4 above). If, on the other hand, the indemnifying parties contest a Notice of
Claim or Notice of Liability (as the case may be) within such 15-day period, the
indemnified and indemnifying parties shall thereafter attempt in good faith to
resolve their dispute by agreement. If they are unable to so resolve their
dispute within the immediately succeeding thirty (30) days, such dispute shall
be resolved by binding arbitration, as provided in Section 17.8 below. The award
of the arbitrator shall be final and binding on the parties and may be enforced
in any court of competent jurisdiction. Upon final determination of the amount
of the Damages that is the subject of an indemnification claim (whether such
determination is the result of indemnifying parties' acceptance of, or failure
to contest, a Notice of Claim or Notice of Liability, or as a result of
resolution of any dispute with respect thereto by agreement of the parties or
binding arbitration), such amount shall be payable, in cash, by the indemnifying
parties to the indemnified party or parties who have been determined to be
entitled thereto within five (5) days of such final determination of the amount
of the Damages due by the indemnifying parties. Notwithstanding anything to the
contrary contained elsewhere in this Section 13, if the indemnifying parties are
contesting only the amount of any Damages, then as a condition precedent to the
effectiveness of any Contest Notice, they shall pay to the indemnified parties,
concurrently with the delivery of such Contest Notice, the portion of the
Damages which they are not contesting. Any amount that becomes due hereunder and
is not paid when due shall bear interest at a rate of eight percent (8%) per
annum until paid.
13.8 Subrogation. In the event that an indemnifying party pays
all or any portion of a third party claim or demand concerning which the
indemnified party submits a claim for indemnification pursuant to this Section
13, the indemnifying party shall be subrogated to any and all defenses, claims
or other matters which the indemnified party asserted or could have asserted
against the third party making such claim or demand. The indemnified party shall
execute and deliver to the indemnifying party (and at the indemnifying party's
expense) such documents as may be reasonably necessary to establish by way of
subrogation the ability of the indemnifying party to assert such defenses,
claims or other matters against any third party making such claim or demands.
30
13.9 Remedies. The indemnification rights and remedies set
forth in this Section 13 shall be the sole and exclusive rights and remedies of
the parties hereto with respect to any Damages incurred by any such parties for
which indemnification is provided to such parties under this Section 13, with
the following express exceptions: (i) in the event of the occurrence of any of
the events (listed in subsections (a) through (c) of Section 13.1 hereof) giving
rise to an indemnification claim of the Buyer and Buyer's Parent, the Buyer and
Buyer's Parent shall, in addition to the indemnification rights and remedies set
forth in this Section 13, have the absolute right to terminate the License
Agreement; and (ii) if the Selling Parties fail to perform their covenant to
sell the Purchased Assets to the Buyer, Buyer shall be entitled to obtain
specific performance of such covenant, and injunctive relief against any breach
or threatened breach thereof, in any court of competent jurisdiction, as the
parties acknowledge and agree that the acquisition by Buyer of all of the
Purchased Assets represents a unique business opportunity for Buyer, for which
no monetary remedy would be adequate.
13.10 No Benefit to Third Parties. None of the limitations
contained in this Section 13 on the rights of the indemnified parties or on the
obligations or liabilities of the parties hereto is intended or shall be
construed to confer or give, nor shall they confer or give, to any person,
corporation or other entity, other than the parties hereto and their respective
heirs, executors, representatives, successors and permitted assigns, any legal
or equitable or other right, remedy or benefit, nor shall they be construed to
alter or diminish any rights of the parties hereto or any of the obligations of
any person, corporation or other entity, under any agreement that may exist
between the parties hereto on the one hand, and any such other person,
corporation or other entity, on the other hand, as the provisions of this
Section 13 are intended to be and shall be for the sole and exclusive benefit of
the parties hereto and their respective heirs, executors, representatives,
successors and permitted assigns, and for the benefit of no other person,
corporation or other entity.
14. Confidentiality.
Each party acknowledges that it may have access to various
items of proprietary and confidential information of the other in the course of
investigations and negotiations prior to Closing. Each party agrees that any
such confidential information received from the other party shall be kept
confidential and shall not be used for any purpose other than to facilitate the
arrangement of financing for and the consummation of the transactions
contemplated herein. The release of information to Buyer's insurers for risk
assessment purposes, shall not constitute a breach of this Section 14.
Confidential information shall include any business or other information which
is delivered by one party to the other, unless such information (i) is already
public knowledge or (ii) becomes public knowledge through no fault, action or
inaction of the receiving party, or (iii) was known by the receiving party, or
any of its directors, officers, employees, representatives, agents or advisors
prior to the disclosure of such information by the disclosing party to the
receiving party. No party hereto, nor its respective officers, directors,
employees, accountants, attorneys, or agents shall intentionally disclose the
existence or nature of, or any of the terms and conditions relating to, the
transaction referred to herein, to any third person, specifically including, but
not limited to, the employees of the Seller; provided, however, that such
information may be disclosed (i) with the consent of the other parties hereto,
(ii) in applications or requests required to be made to obtain licenses,
permits, approvals or consents needed to consummate the transactions
contemplated herein, (iii) to the professional advisors of each party hereto,
(iv) pursuant to Section 17.7 or (v) pursuant to court order or subpoena. The
restrictions contained in this Section 14 that are applicable to Buyer shall
terminate at the Closing.
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15. Expenses.
Each of the parties shall pay all costs and expenses incurred
or to be incurred by it in negotiating and preparing this Agreement and in
closing and carrying out the transactions contemplated by this Agreement,
including without limitation, the fees and expenses of their respective counsel,
accountants and consultants and none of the Purchased Assets shall be reduced or
diminished by any such costs or expenses incurred by the Selling Parties. Seller
shall pay all sales taxes arising in connection with or out of the purchase of
the Purchased Assets by Buyer from the Selling Parties based solely upon the
allocation of the Purchase Price as set forth in Schedule 6.1 attached hereto,
and, all other Taxes imposed on the Selling Parties arising in connection with
or out of the transactions contemplated by this Agreement, except any Taxes
imposed on the Selling Parties by any governmental authority in the State of
California as a result of holding the Closing in California.
16. Notices.
All notices, requests, demands, and other communications
hereunder shall be in writing and shall be deemed to have been duly served or
delivered (i) upon actual physical delivery when delivered in person, or (ii) if
sent by facsimile to the facsimile number of such party set forth hereinafter,
upon receipt of confirmation of the transmission thereof to that number,
provided that the sender thereof mails a copy of such notice, request, demand or
other communication by the business day next succeeding the date such facsimile
was transmitted, or, (iii) if mailed, seventy-two (72) hours after being
deposited in the United States Mail, provided it is sent by certified mail,
return receipt requested, postage prepaid, and addressed as follows:
(a) If to the Seller or Seller's Parent:
Borg Adaptive Technologies, Inc.
c/o nStor Corporation, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: H. ▇▇▇▇▇ ▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Email: ______________
with copies to:
Akerman, Senterfitt & Edison, P.A.
Las Olas Centre, Suite 950
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
32
(b) If to Buyer or Buyer's Parent, to:
QLogic Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇.▇. ▇▇▇▇▇, Chief Executive
Officer
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇_▇▇▇▇▇@▇▇▇.▇▇▇
with copies to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇
Any party hereto may from time to time, by written notice to the other party
given in the manner hereinabove set forth, designate a different address
facsimile number or email address, which shall be substituted for the one
specified above for such party.
17. Miscellaneous.
17.1 Binding Effect. Subject to the provisions of Section 17.9
below, this Agreement shall be binding upon and inure to the benefit of the
respective heirs, executors, representatives, successors and assigns of the
parties hereto.
17.2 Counterparts. This Agreement may be executed in any
number of separate counterparts, each of which shall be deemed to be an original
and all of which together shall be deemed to be one and the same instrument.
17.3 Headings. The subject headings of the sections and
subsections of this Agreement are included for purposes of convenience only and
shall not affect the construction or interpretation of any of its provisions.
17.4 Waivers. Any party to this Agreement may waive any right
it may have hereunder or any breach or default hereunder by any other party
hereto; provided that no such waiver will be effective against the waiving party
unless it is in writing and specifically refers to this Agreement. No waiver
will be deemed to be a waiver of any subsequent or other right, breach or
default of the same or similar nature.
17.5 Entire Agreement. This Agreement, including the Schedules
and Exhibits and other documents referred to herein which form a part hereof,
embodies the entire agreement and understanding of the parties hereto with
respect to the subject matter hereof, and supersedes all prior or
contemporaneous agreements or understandings (whether written or oral) among the
parties, in respect to the subject matter contained herein. This Agreement may
not be modified, amended or terminated except by written agreement specifically
referring to this Agreement signed by the Buyer, Buyer's Parent and the Selling
Parties.
33
17.6 Governing Law. This Agreement is deemed to have been made
in the State of California, and shall be governed by and construed in accordance
with the laws of, the State of California for contracts made and to be performed
in that State.
17.7 Public Communications. The parties will cooperate
with each other, if necessary, with respect to the making of a public
communications release relating to this Agreement. Except as may be required by
applicable law, neither the Buyer or Buyer's Parent nor the Selling Parties
shall issue any press releases or other public communications relating to this
Agreement or the transactions contemplated hereunder without the prior written
consent of the other party. In the event that any such press release or other
public communication shall be required by applicable law, each party shall first
consult in good faith with the other party with respect to the form and
substance of such release or communication.
17.8 Arbitration. All claims, controversies, differences or
disputes between or among any of the parties hereto arising from or relating to
this Agreement shall be determined solely and exclusively by arbitration in
accordance with the rules of commercial arbitration then in effect of the
American Arbitration Association, or any successors hereto ("AAA"), in Orange
County, California, if proceedings are commenced by the Selling Parties, and in
Boulder, Colorado, if proceedings are commenced by the Buyer, unless the parties
otherwise agree in writing. Each of the parties consents to venue for such
arbitrations in Orange County, California, if proceedings are commenced by the
Selling Parties, and in Boulder, Colorado, if proceedings are commenced by the
Buyer, and to service of process by certified or registered mail. Upon
commencement of any arbitration pursuant hereto, the parties shall jointly
select an arbitrator. In the event the parties fail to agree upon an arbitrator
within twenty (20) days, then each party shall select an arbitrator and such
arbitrators shall then select a third arbitrator to serve as the sole
arbitrator; provided that if either party, in such event, fails to select an
arbitrator within seven (7) days, such arbitrator shall be selected by the AAA
upon application of either party. Judgment upon the award of the agreed upon
arbitrator or the so chosen third arbitrator, as the case may be, shall be
binding and shall be entered into by a court of competent jurisdiction. The
parties agree to abide by any decision rendered in any such arbitration as final
and binding and waive the right to submit the dispute to a public tribunal for a
jury or nonjury trial.
17.9 Assignment. Neither the Buyer, Buyer's Parent nor the
Selling Parties may assign this Agreement, or assign their rights or delegate
their duties hereunder, without the prior written consent of the other party.
17.10 Severability. Any provision of this Agreement which is
illegal, invalid or unenforceable shall be ineffective to the extent of such
illegality, invalidity or unenforceability, without affecting in any way the
remaining provisions hereof.
34
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
BUYER: QLOGIC ACQUISITION CORPORATION,
a Colorado corporation
By: /s/ ▇.▇. ▇▇▇▇▇
_______________________________
Its: President
BUYER'S PARENT: QLOGIC CORPORATION,
a Delaware corporation
By: /s/ ▇.▇. ▇▇▇▇▇
_______________________
▇.▇. ▇▇▇▇▇, Chief Executive Officer
SELLER: BORG ADAPTIVE TECHNOLOGIES, INC.
a Colorado corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
________________________
Its: Vice President
SELLER'S PARENT: nSTOR CORPORATION, INC,
a Delaware corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
_______________________
Its: Vice President
35
INDEX OF EXHIBITS AND SCHEDULES
Exhibits
Exhibit A License Agreement
Exhibit B Employment Agreements
Exhibit C Form of Opinion of Counsel to the Selling Parties
Exhibit D Form of Opinion of Counsel to Buyer
Exhibit E ▇▇▇▇ of Sale and Assumption Agreement
36
Schedules
Schedule 4.2 Organization and Good Standing
Schedule 4.3 Conflicts
Schedule 4.4 Consents and Approvals
Schedule 4.5 Absence of Certain Changes
Schedule 4.6(a) Intellectual Property Assets
Schedule 4.6(b) Equipment
Schedule 4.6(c) Real Property
Schedule 4.7 Contracts and Agreements
Schedule 4.8 Employees; Labor Matters and Employee Plans
Schedule 4.9 Licenses and Permits; Compliance with Laws
Schedule 4.10 Environmental and Safety Matters
Schedule 4.11 Litigation
Schedule 4.12 Taxes and Tax Returns
Schedule 4.13 Brokers and Finders
Schedule 6.1 Allocation of Purchase Price
Schedule 7.2 Conduct of Business
1
Exhibit 2.2
QLOGIC ACQUISITION CORPORATION
SOFTWARE LICENSE AGREEMENT
This agreement (the "Agreement") is entered into as of January 10, 2000
(the "Effective Date") by and between QLogic Acquisition Corporation, with
offices at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("QLogic") and, nStor
Corporation, Inc., a Delaware corporation, with offices located at ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("nStor").
This Agreement is being entered into pursuant to that certain Asset
Purchase Agreement of even date herewith among the parties hereto (the "Asset
Purchase Agreement").
This Agreement concerns the licensing of the object code and source
code to the Adaptive RAID Technology (defined below) purchased by QLogic from
nStor and Borg Adaptive Technologies, Inc., a wholly-owned subsidiary of nStor
("Borg") under the Asset Purchase Agreement.
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS
"Adaptive Raid Technology" is the software in the files listed on
Attachment 1 hereto (and all prior versions thereof), as such software exists on
the Effective Date.
"Modifications" means modifications to the Software, including the
Source Code, which are developed by nStor, but does not include any part of the
Software.
"Modified Software" means Software that includes Modifications.
"nStor's Products" means enclosures capable of supporting a minimum of
four (4) disk drives, either internally or externally.
"Object Code" means object code, or computer programs assembled or
compiled in magnetic or electronic binary form on software media, which are
readable and usable by machines, but not generally readable by humans without
reverse-assembly, reverse-compiling, or reverse engineering.
2
"Software" means the Adaptive Raid Technology in both Source Code and
Object Code form, unless either form is expressly indicated.
"Source Code" means source code, or computer programs in a higher-level
programming language which is intelligible to trained programmers and may be
translated to Object Code for operation on computer equipment through the
process of compiling.
2. LICENSE GRANT
(a) QLogic grants nStor a non-exclusive, non-transferable, worldwide
license during the term hereof to:
(i) use and compile the Software in Object Code and Source Code
form, and to develop Modifications; and
(ii)distribute and market the Software (in Object Code form only)
and the Modified Software (in Object Code form only) and to sublicense the right
to use the Software (in Object Code form only) and the Modified Software (in
Object Code form only); provided, that such Object Code versions of the Software
and Modified Software may only be sublicensed, distributed and marketed in
conjunction with nStor's Products. Neither nStor nor any third party shall have
the right to sublicense, distribute or market the Software or Modified Software
as a stand alone product or item or to separately itemize the Software on any
price list or invoice.
(b) QLogic reserves all rights not expressly granted herein. Without
limiting the generality of the foregoing, no right or license is granted or
implied under any patents other than US Patents 5,657,468 and 5,875,456 and
those which claim priority from said patents; nor is any right or license
granted or implied under any derivative works of the copyright rights in the
Software which works are created by or on behalf of QLogic after the Effective
Date of this Agreement. nStor shall be solely responsible for payment of any tax
or other charge imposed by any relevant authorities relating to this license.
3. TITLE
(a) QLogic retains sole and exclusive ownership of and title to the
Software and any modifications thereof created by or on behalf of QLogic. Except
for the license granted hereunder, nothing in this Agreement shall be construed
as transferring to nStor or any other party any rights, title or interest in the
Software or any portions or modifications or enhancements thereof created by or
on behalf of QLogic, or as conferring any license or other right, by
implication, or estoppel or otherwise, under any patent, patent application,
trade secret, trademark or copyright. nStor hereby agrees not to contest
QLogic's ownership rights with respect to the Software.
3
(b) nStor hereby retains sole and exclusive ownership, right, title and
interest to the Modifications and nothing in this Agreement shall be construed
as transferring to QLogic any rights, title or interest in and to such
Modifications, including, but not limited to, any implied or express license to
the Modifications.
(c) The parties hereby agree to enter into a source code escrow
agreement as soon as practical after the Effective Date (but not later than 30
days after the Effective Date) with a mutually agreeable escrow agent to hold
the Source Code version of the Software as it exists on the Effective Date as
described on Attachment 1 for the purpose of maintaining a record of the content
of such Source Code on the Effective Date. Such escrow agreement shall permit
both parties access to such Source Code but not to modify the version held by
the escrow agent. The costs of such escrow shall be borne by the parties
equally.
4. CONFIDENTIALITY
nStor acknowledges that the Software contains confidential information
and trade secrets of QLogic. Except as otherwise permitted in writing by QLogic,
nStor agrees not to disclose the Software or any of the specifications, methods
or concepts utilized therein to anyone, except to its employees with a need to
know, and not to use the Software, except for the purposes set forth herein.
nStor shall take reasonable care to protect and keep secure the Software from
unauthorized use or disclosure, and all related materials derived therefrom,
including but not limited to, flow charts, logic diagrams and listings whether
in machine or human readable form and all improvements, modifications or updates
thereof provided to or created by nStor. Each copy of the Software reproduced by
nStor shall include QLogic's company name and all of the QLogic proprietary
rights notices provided by QLogic. The obligations set forth in this Section 4
shall apply to the Modified Software, but shall not apply to the Modifications.
5. REPRODUCTION
nStor may make a reasonable number of copies of the Software and
Modified Software and documentation for its internal use. nStor shall license,
sublicense, distribute and market the Software the Software and Modified
Software with and subject to a written end user license agreement. QLogic shall
have the right to approve the form of such end user license agreement prior to
any such license, sublicense, distribution and marketing of the Software, which
shall not be unreasonably withheld or delayed. Once QLogic approves such form,
nStor may use such form until it makes material changes to such form, in which
case nStor shall again obtain QLogic's approval in the manner set forth in the
foregoing sentence.
6. SUPPORT
For a period of ninety (90) days following the Effective Date, QLogic
shall provide nStor with a reasonable amount of on-site technical support and,
for a period of one hundred eighty
4
days (180) days following the Effective Date, a reasonable amount of telephone
technical support, for the Software, in each case at no additional charge.
QLogic shall be under no obligation to provide support of any kind for the
Modified Software. nStor may obtain additional technical support and maintenance
under separate agreement with QLogic. During the one (1) year period following
the Effective Date, if QLogic makes any upgrades to the Software generally
available to its customers at no additional charge, then QLogic shall make such
upgrades available to nStor at no additional charge. QLogic may make any other
upgrades available to nStor on terms and conditions mutually agreeable to both
parties.
7. AUDITS
nStor agrees to keep accurate records that enable QLogic to confirm
nStor's compliance with this Agreement, including without limitation, records
relating to the number of copies of the Software and Modified Software which
have been reproduced and shipped by nStor and the identity of the purchasers,
distributors, retailers, end users, value added resellers, licensees and
sublicensees thereof. During the term of this Agreement and for a period of two
(2) years after the expiration or termination of this Agreement, QLogic may
audit such records to verify nStor's compliance with this Agreement. QLogic
shall provide reasonable prior written notice of such audit which shall be
conducted during normal working hours. Any audit shall be conducted by an
independent third party and paid for by QLogic unless the audit reveals any
material breach of this Agreement, in which case, nStor agrees to pay for the
cost of such audit. The results of such audit shall be disclosed to QLogic and
QLogic shall not further disclose such results except (a) to its accountants,
attorneys or other advisors with a need to know, and/or (b) as reasonably
necessary to enforce its rights under this Agreement.
8. COPYRIGHT, TRADEMARK AND PATENT
The Software is protected under U.S. and international law. nStor shall
not remove or modify any patent, copyright, trademark, tradename or other
proprietary rights notices on the Software, Modified Software or other materials
provided by QLogic (embedded in the Software and/or on the media). QLogic hereby
grants nStor the right to use and reproduce the QLogic trademarks and tradenames
provided by QLogic hereunder for the purposes expressly set forth herein, but
for no other purpose.
9. TERMINATION
(a) This Agreement and the licenses granted hereunder shall become
effective upon the Effective Date, and shall continue without fixed expiration
date, until terminated as provided herein. nStor may terminate this license for
convenience at any time by providing thirty (30) days prior written notice to
QLogic.
5
(b) Upon termination for any reason, nStor shall cease all reproduction
and distribution of the Software and Modified Software, return to QLogic or
destroy all existing copies of the Software and Modified Software, together with
all related documentation and materials, and destroy any archive copies of the
Software and Modified Software. Within ten (10) days of termination, nStor shall
provide QLogic with a written statement, signed by an authorized representative
of nStor, attesting that the foregoing requirement has been met. Termination
hereof shall not affect the validity of previously granted end user licenses by
nStor.
(c) Unless nStor obtains QLogic's prior written waiver of this Section
9(c), this Agreement shall terminate automatically, without notice, (i) if nStor
breaches any provision of this Agreement, and such breach is not cured within
thirty (30) days of QLogic's written notice of such breach; (ii) upon the
institution by or against nStor of insolvency, receivership or bankruptcy
proceedings or any other proceedings for the settlement of its debts and such
proceeding is not dismissed within sixty (60) days of its being filed; (iii)
upon nStor making an assignment for the benefit of creditors; (iv) upon nStor's
dissolution or liquidation; (v) upon nStor's attempt to assign this Agreement in
contravention hereof; or (vi) upon a Change in Control (defined below) of nStor
or the parent company of nStor.
(d) After the date that is three (3) years from the Effective Date:
(i) Sections 9(c)(ii)-(iii) shall expire;
(ii)prior to any Change in Control, nStor shall give QLogic
fifteen (15) days prior written notice to the effectiveness thereof, identifying
the acquiring party(ies) sufficiently such that QLogic may determine whether a
direct competitor is or is among the acquiring party(ies); and
(iii) Section 9(c)(vi) shall not apply unless a direct competitor
of QLogic is or is among the acquiring party(ies). A person or entity shall only
be a "direct competitor of QLogic" if such person or entity is a direct
competitor of QLogic as of the Effective Date.
(e) A "Change in Control" of a company shall mean (i) the acquisition,
directly or indirectly, by any person or group (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended) of the beneficial
ownership of securities of such company possessing more than fifty percent (50%)
of the total combined voting power of all outstanding securities of such
company; (ii) a merger or consolidation in which such company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the state of incorporation; (iii) a reverse merger in which such company
is the surviving entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of such company's outstanding
securities are transferred to or acquired by a person or persons different from
the persons holding those securities immediately prior to such merger; (iv) the
sale, transfer
6
or other disposition of all or substantially all of the assets of such company;
or (v) a complete liquidation or dissolution of such company.
10. LIMITED WARRANTY
Subject to the accuracy of nStor's representations and warranties under
the Asset Purchase Agreement, QLogic warrants that it has the right to grant the
license in this Agreement and that the physical media containing the Software
will be free of defects in materials and workmanship for a period of ninety (90)
days from the date of shipment from QLogic, unless such physical media has been
provided by nStor. QLogic shall not be deemed in breach of the foregoing
warranties for any infringement resulting from any action or inaction by nStor
while the Software was owned by nStor or its predecessors. QLogic's entire
liability and nStor's exclusive remedy shall be either repair or replacement of
the media, provided nStor notifies QLogic's Customer Service Department within
the warranty period for assistance and/or a Returned Materials Authorization
number. QLogic will not accept any returns without a Returned Materials
Authorization number. The Limited Warranty does not apply to media that has been
altered, abused, or misapplied. QLogic makes no representation or warranty with
respect to any specifications, bug, error, omission, or defect in the Software.
QLogic disclaims all other warranties, express or implied, including but not
limited to the implied warranties of NON-INFRINGEMENT, merchantability AND
fitness for a particular purpose.
11. GENERAL
(a) Limitation of Liability; Indemnification.
(i) In no event shall QLogic be liable for any loss of data or for
any indirect, special, consequential, or incidental damages, including without
limitation, lost profits or damage to data arising out of the use or inability
to use the Software or Modified Software, even if QLogic has been advised of the
possibility of such damages. QLogic 's entire liability under this Agreement for
any damages to nStor or any third party (including but not limited to liability
for patent, copyright, or trademark infringement) regardless of the form of
action or theory of liability (including, without limitation, actions in
contract, warranty, negligence or products liability) shall not exceed $10,000.
(ii)nStor shall defend, indemnify and hold QLogic harmless from
and against any claims or losses (including, without limitation, reasonable
attorneys' fees) arising out of any statements, actions, products or services of
nStor, except to the extent such claim or loss arises out of a breach of this
Agreement by QLogic. The foregoing obligation is conditioned upon prompt notice
thereof by QLogic and reasonable cooperation by QLogic at nStor's expense in the
defense of any such claim.
7
(b) Export. Regardless of any disclosure made by nStor to QLogic of an
ultimate destination of the Software, Modified Software and/or QLogic 's
technical data, nStor will not export or reexport either directly or indirectly,
any technical data, Software, Modified Software, documentation or system
incorporating such Software or Modified Software without obtaining prior written
authorization from the U.S. Department of Commerce or any other agency or
department of the United States Government, as required.
(c) Interpretation. If any portion hereof is found to be void or
unenforceable, the remaining provisions of this Agreement shall remain in full
force and effect. No failure or delay by either party in exercising any right,
power or remedy under this Agreement shall operate as a waiver of the right,
power or remedy. No waiver, amendment, or modification of this Agreement shall
be effective unless in writing and signed by both parties. This Agreement
constitutes the entire agreement between the parties with respect to the subject
matter hereof.
(d) Assignment. This Agreement and the license granted hereunder may
not be assigned, sublicensed or otherwise transferred by nStor without the prior
written consent of QLogic. QLogic may assign this Agreement in whole or in part
without nStor's consent. This Agreement shall be binding upon and inure to the
benefit of the parties' respective successors and assigns, as permitted by this
Agreement. After the date that is three (3) years from the Effective Date:
(i) this Section 11(d) shall not apply unless a direct competitor
of QLogic is the assignee. A "direct competitor of QLogic" shall have the same
meaning as in Section 9; and
(ii) prior to any assignment, nStor shall give QLogic fifteen (15)
days prior written notice to the effectiveness thereof, identifying the
assignee.
(e) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, county of Orange. QLogic
shall be entitled to recover its attorney fees in any action to enforce its
rights. The United Nations convention on the International Sale of Goods will
not apply to this Agreement.
(f) Government Rights. The Software and supporting documentation are
provided with RESTRICTED RIGHTS. Use, duplication, or disclosure by the
Government is subject to the restrictions as set forth in subparagraph (c) of
the Commercial Computer Software-Restricted Rights clause at FAR 52.227-19.
(g) Survival. Provisions 3, 4, 7, 9, 10 and 11 will survive
termination, expiration or cancellation of this Agreement.
(h) No Third-Party Beneficiaries. This Agreement is for the sole
benefit of the parties hereto and their permitted assigns and nothing herein
expressed or implied shall give or be construed to give to any person or entity,
other than the parties hereto and such permitted assigns, any legal or equitable
rights hereunder.
8
(i) Notices. Any and all notices permitted or required to be given
hereunder shall be deemed duly given: (i) upon actual delivery, if delivery is
by hand; (ii) upon the third business day after delivery into the United States
mail if the postage is properly prepaid and delivery is by first class,
registered, or certified (return receipt requested) mail; or (iii) upon receipt
of facsimile transmission with confirmation of receipt, so long as the original
is then sent by overnight delivery or first class mail. Each such notice shall
be sent to the respective party at the address and to the attention of the
person indicated below or to any other address or persons that the respective
parties may designate from time to time.
(j) Security Interest. nStor hereby grants to QLogic a security
interest in the intellectual property rights and the license thereunder which is
the subject of this Agreement, which security interest will be subordinate and
junior to any security interests or liens granted to nStor's institutional
lender or lenders pursuant to the terms of its credit facility with such lender
or lenders, and further agrees to execute such agreements or instruments which
QLogic, in its sole discretion, deems necessary to record and perfect its
security interest therein.
[signature page follows]
9
ACCEPTED AND AGREED TO FOR:
nSTOR CORPORATION, INC. QLOGIC ACQUISITION CORPORATION
BY: /s/ ▇▇▇▇ ▇▇▇▇▇▇ BY: /s/ ▇.▇. ▇▇▇▇▇
NAME: ▇▇▇▇ ▇▇▇▇▇▇ NAME: ▇.▇. ▇▇▇▇▇
TITLE: Vice President TITLE: Chief Executive Officer