Exhibit 1
MASTER ASSET PURCHASE AGREEMENT
between
SYMMETRICOM, INC.
and
HEWLETT-PACKARD COMPANY
dated August 30, 1999
TABLE OF CONTENTS
Page
----
ARTICLE I. SALE OF ASSETS...................................................................................... 1
Section 1.1 Purchase and Sale of Assets............................................................. 1
Section 1.2 Excluded Assets......................................................................... 3
Section 1.3 Assumption of Liabilities............................................................... 4
Section 1.4 Liabilities Not Being Assumed........................................................... 4
Section 1.5 Consideration........................................................................... 5
Section 1.6 Allocation of Purchase Price............................................................ 5
Section 1.7 Payment of Sales and Related Taxes...................................................... 6
Section 1.8 Schedules Update........................................................................ 6
ARTICLE II. CLOSING............................................................................................ 6
Section 2.1 Closing................................................................................. 6
Section 2.2 Seller's Deliveries at Closing.......................................................... 6
Section 2.3 Buyer's Deliveries at the Closing....................................................... 6
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER.......................................................... 6
Section 3.1 Authority and Binding Effect............................................................ 6
Section 3.2 Organization and Standing............................................................... 7
Section 3.3 CommSync Business Financial Information................................................. 7
Section 3.4 Absence of Certain Changes.............................................................. 8
Section 3.5 The Purchased Assets.................................................................... 8
Section 3.6 The Assigned Contracts and Other Agreements............................................. 9
Section 3.7 Intellectual Property................................................................... 9
Section 3.8 Conflicts............................................................................... 11
Section 3.9 Customers and Suppliers................................................................. 11
Section 3.10 Product Warranties and Liabilities...................................................... 12
Section 3.11 Insurance............................................................................... 12
Section 3.12 Compliance with Law/Permits............................................................. 12
Section 3.13 Taxes and Tax Returns................................................................... 13
Section 3.14 Litigation and Proceedings.............................................................. 13
Section 3.15 No Broker............................................................................... 13
Section 3.16 Environmental Protection................................................................ 13
Section 3.17 ▇▇▇▇▇▇ Reports.......................................................................... 14
Section 3.18 Year 2000 Compliance.................................................................... 14
Section 3.19 Representations and Warranties.......................................................... 14
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER............................................................ 15
Section 4.1 Organization and Authority.............................................................. 15
Section 4.2 Corporate Action........................................................................ 15
Section 4.3 No Violation or Breach.................................................................. 15
Section 4.4 No Broker............................................................................... 15
TABLE OF CONTENTS
(continued)
Page
----
Section 4.5 Buyer Acknowledgements.................................................................. 15
Section 4.6 Capital Resources....................................................................... 16
ARTICLE V. ADDITIONAL AGREEMENTS............................................................................... 16
Section 5.1 Access to Information................................................................... 16
Section 5.2 Publicity and Advertising............................................................... 16
Section 5.3 Consents................................................................................ 16
Section 5.4 Expenses................................................................................ 17
Section 5.5 Confidentiality......................................................................... 17
Section 5.6 Employee Matters........................................................................ 17
Section 5.7 FTO Transfer............................................................................ 17
Section 5.8 Insurance............................................................................... 17
Section 5.9 Regulatory and Other Authorizations..................................................... 18
Section 5.10 Shipment of Purchased Assets............................................................ 18
Section 5.11 Transition Planning..................................................................... 18
Section 5.12 Customer Notification................................................................... 19
Section 5.13 Supplier Notification................................................................... 19
Section 5.14 [INTENTIONALLY OMITTED]................................................................. 19
Section 5.15 Additional Assigned Contracts........................................................... 19
Section 5.16 Delivery of Additional Instruments on the Closing Date.................................. 19
Section 5.17 Buyer Selection of Capital Assets and Equipment......................................... 19
Section 5.18 Inventory Valuation..................................................................... 20
ARTICLE VI. CONDUCT OF BUSINESS................................................................................ 20
Section 6.1 Conduct of Business..................................................................... 20
ARTICLE VII. CONDITIONS TO OBLIGATION TO CLOSE................................................................. 21
Section 7.1 Conditions to Obligations of Each Party to Close........................................ 21
Section 7.2 Additional Conditions to Obligations of the Seller...................................... 21
Section 7.3 Additional Conditions to Obligations of the Buyer....................................... 22
ARTICLE VIII. INDEMNIFICATION.................................................................................. 23
Section 8.1 Survival of Representations and Warranties.............................................. 23
Section 8.2 Indemnification by Buyer................................................................ 23
Section 8.3 Indemnification by Seller............................................................... 23
Section 8.4 Procedure for Indemnification........................................................... 25
ARTICLE IX. TERMINATION........................................................................................ 26
Section 9.1 Termination............................................................................. 26
Section 9.2 Effect of Termination................................................................... 26
TABLE OF CONTENTS
(continued)
Page
----
ARTICLE X. POST-CLOSING OBLIGATIONS............................................................................ 26
Section 10.1 [INTENTIONALLY OMITTED]................................................................. 27
Section 10.2 Non-Competition......................................................................... 27
Section 10.3 SEC Financial Statements................................................................ 27
Section 10.4 Repairs at Seller's Request............................................................. 27
Section 10.5 Provision of CommSync Products to Seller................................................ 27
Section 10.6 Product Relabeling...................................................................... 28
ARTICLE XI. GENERAL............................................................................................ 28
Section 11.1 Integrated Agreement; Amendments........................................................ 28
Section 11.2 Interpretation.......................................................................... 28
Section 11.3 Waiver.................................................................................. 28
Section 11.4 Other Remedies; Specific Performance.................................................... 28
Section 11.5 Notices................................................................................. 28
Section 11.6 Counterparts............................................................................ 29
Section 11.7 No Transfer or Assignment............................................................... 29
Section 11.8 Absence of Third Party Beneficiary Rights............................................... 30
Section 11.9 Mutual Drafting......................................................................... 30
Section 11.10 Severability............................................................................ 30
Section 11.11 Governing Law........................................................................... 30
Section 11.12 Venue................................................................................... 30
ARTICLE XII. DEFINITIONS....................................................................................... 30
SCHEDULES
A-1 CommSync Products
1.1(a)(1) Capital Assets - Manufacturing
1.1(a)(2) Selected Capital Assets
1.1(b)(1) Expensed Equipment - Manufacturing
1.1(b)(2) Selected Expensed Equipment
1.1(c) Licenses
1.1(d) Supply Contracts
1.1(e) Customer Contracts
1.1(f) Technical Documentation
1.1(h) Inventory
1.3(b) Field Service Contracts
1.4(i) Warranty Obligations
1.6 Purchase Price Allocation
3.3 CommSync Business Financial Information
3.4 Absence of Certain Changes
3.5(a) The Purchased Assets
3.5(e) Exclusive Assets Used in the CommSync Business
3.7(c) Third Party Copyrightable Material
3.9 Customers and Suppliers
3.10(a) Warranties
3.10(b) Actual Warranty Expenses
3.10(c) Product Warranties and Liabilities
3.17 ▇▇▇▇▇▇ Reports
5.7 FTO
5.12 Customer Notification
5.13 Supplier Notification
EXHIBITS
A Intellectual Property Agreement
B Supply Agreement
C Interim Supply Agreement
D Transition Services Agreement
E Employee Transfer Agreement
F Form of WSGR Legal Opinion
G SEC Letter
MASTER ASSET PURCHASE AGREEMENT
THIS MASTER ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as
of August 30, 1999, by and between Hewlett-Packard Company, a Delaware
corporation ("Seller"), and Symmetricom, Inc., a California corporation
("Buyer").
WHEREAS, Seller engages in the development, manufacture, service and
distribution of those certain communications synchronization products listed on
Schedule A-1 hereto (collectively, the "CommSync Products"), including Global
Positioning System ("GPS") timing modules and network synchronization supply
units. For purposes of this Agreement, the term "CommSync Business" shall refer
to those operations of Seller involved in the development, manufacturing,
servicing and distribution of CommSync Products.
WHEREAS, Seller desires to sell and Buyer desires to purchase certain
tangible and intangible assets related to the CommSync Business.
WHEREAS, in connection with this Agreement, Seller and Buyer desire to
enter into certain ancillary agreements, including an Intellectual Property
Agreement, substantially in the form attached as Exhibit A (the "Intellectual
Property Agreement"), a Supply Agreement, substantially in the form attached as
Exhibit B (the "Supply Agreement"), an Interim Supply Agreement, substantially
in the form attached as Exhibit C (the "Interim Supply Agreement"), a Transition
Services Agreement, substantially in the form attached as Exhibit D (the
"Transition Services Agreement"), and the Employee Transfer Agreement set forth
as Exhibit E (the "Employee Transfer Agreement," and together with the
Intellectual Property Agreement, the Supply Agreement, the Interim Supply
Agreement, and the Transition Services Agreement, the "Related Agreements"). The
transactions contemplated by this Agreement and the Related Agreements are
collectively referred to herein as the "Transaction."
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties agree as follows:
ARTICLE I. SALE OF ASSETS
Section 1.1 Purchase and Sale of Assets. Subject to the terms and
---------------------------
conditions of this Agreement, at the Closing, Seller shall sell, transfer,
convey and assign, and Buyer shall purchase, all of but no more than the
following assets and properties (collectively, the "Purchased Assets"):
(a) The capital assets which are set forth on Schedule 1.1(a)(1) and that
portion of the capital assets set forth on Schedule 1.1(a)(2) which are
identified in writing by Buyer pursuant to the terms of Section 5.17 hereof
(cumulatively, the "Capital Assets");
(b) The personal information technology equipment used in the CommSync
Business and the production and engineering equipment used in the network
synchronization production engineering and production, including the custom test
board fixtures and related test fixtures and programs for printed circuit
assemblies that are listed on the bills of materials for the CommSync Products
being purchased hereunder, which are and only to the extent as set forth on
Schedule 1.1(b)(1) and that portion of the equipment set forth on Schedule
1.1(b)(2) which is identified in writing by Buyer pursuant to the terms of
Section 5.17 hereof (cumulatively, the "Expensed Equipment");
(c) All licenses, permits, authorizations, orders, registrations,
certificates, variances, approvals, consents and franchises and supporting lab
test results for these items used by Seller in connection with the Purchased
Assets, which are and only to the extent as set forth on Schedule 1.1(c);
(d) All of Seller's rights, benefits and obligations in, to and under the
contracts and purchase orders which are set forth on Schedule 1.1(d) relating to
the purchase, lease or license of supplies and parts used in the production of
the CommSync Products;
(e) Subject to Section 5.15 below, all of Seller's rights, benefits and
obligations in, to and under the contracts, licenses and purchase orders for the
sale of CommSync Products set forth on Schedule 1.1(e) (together with those
contracts and purchase orders set forth on Schedule 1.1(d) and those contracts
or agreements assigned to Buyer pursuant to Section 5.15 hereof, the "Assigned
Contracts");
(f) All of Seller's technical and descriptive materials relating to the
CommSync Products, which technical and descriptive materials are referenced on
Schedule 1.1(f), provided that Seller shall be entitled to keep copies of all
such materials and shall be entitled to keep the originals of any lab notebooks;
(g) A copy of all relevant information in the possession of Seller's Santa
▇▇▇▇▇ Division factory or as otherwise commercially reasonably accessible
concerning Seller's customers, clients, vendors, catalogs, promotions and
marketing data directly related to and only as pertains to the development,
manufacture, service and sale of the CommSync Products;
(h) All raw materials, work-in-process, and finished goods, including
factory and field demo equipment relating to the CommSync Business which are and
only to the extent as set forth on the final Schedule 1.1(h) delivered to Buyer
pursuant to Section 5.18 (the "Inventory");
(i) Copies of all ordinary and customary records in support of the
financial statements and the ongoing business related to the operation of the
CommSync Business including order, shipment, material, standard cost, warranty,
manufacturing, departmental expense reports prepared by Seller for the two year
period ending on the Closing Date or as otherwise requested by Buyer and
commercially reasonably accessible to Seller;
-2-
(j) Any cause of action, claim, suit, proceeding, judgment or demand of
any nature, of or held by Seller against any third parties directly arising out
of the CommSync Business and directly related to the sale of CommSync Products
except for claims arising from those product defects referred to in Section
1.4(i); provided, however, that Seller shall retain all rights of
indemnification, reimbursement and contribution arising out of any cause of
action, claim, suit, proceeding, judgment or demand against Seller; and
(k) All goodwill directly and exclusively associated with the CommSync
Business and the Purchased Assets to the extent such may be transferred by
Seller.
In addition to the Purchased Assets transferred hereunder, Seller is
assigning to Buyer certain intellectual property pursuant to and in accordance
with the terms of the Intellectual Property Agreement.
Section 1.2 Excluded Assets. Notwithstanding anything contained in
---------------
Section 1.1, Buyer expressly understands and agrees that the following assets
and properties of Seller (the "Excluded Assets") shall be excluded from the
Purchased Assets:
(a) All of Seller's cash and cash equivalents on hand and in banks
relating to the CommSync Business;
(b) All accounts, notes and other receivables of or relating to the
CommSync Business;
(c) All intellectual property licensed (but not assigned) to Buyer
pursuant to the terms of the Intellectual Property Agreement and all
intellectual property rights which Seller is unable to license to Buyer, if any,
which rights will be dealt with as provided in the Intellectual Property
Agreement;
(d) Any and all capital assets and equipment not otherwise listed on
Schedules 1.1(a)(1), 1.1(a)(2), 1.1(b)(1), and 1.1(b)(2), including but not
limited to Seller's information technology hardware and production equipment
used in the manufacture of GPS timing products in Seoul, Korea;
(e) Seller's finished goods inventory shipped from Seller's manufacturing
docks, in transit and not yet recorded as legal revenue by Seller ("Pipeline
Inventory");
(f) Any inventory, finished goods or other assets sold or otherwise
disposed of in the ordinary course of the operation of the CommSync Business and
not in violation of any provisions of this Agreement during the period from the
date hereof until the Closing Date;
(g) Land, buildings, and any equipment (including office furnishings)
associated with Seller's facilities and not otherwise conveyed per Section 1.1;
(h) Any Federal, state and local income and franchise tax credits,
prepaid taxes and tax refund claims; and
-3-
(i) Any and all other assets not specifically described in Section 1.1 of
this Agreement.
Section 1.3 Assumption of Liabilities. Buyer does not assume and hereby
-------------------------
expressly disclaims any and all liabilities of Seller, if any, relating in any
manner to the Purchased Assets or the CommSync Business, except that Buyer shall
assume at the time of Closing and shall pay, discharge or perform when due the
following debts, obligations, contracts and liabilities of Seller arising out of
or relating to the ownership or operation of the Purchased Assets or the conduct
of the CommSync Business (the "Assumed Liabilities"):
(a) All liabilities and obligations of Seller arising from and after the
Closing Date under the Assigned Contracts;
(b) Any and all Warranty obligations of Seller, whether arising before or
after Closing, resulting from or pertaining to the CommSync Products or the
CommSync Business which shall include customary return to factory warranty
repairs, but excluding: (i) Warranty obligations in connection with those
programs described in Schedule 1.4(i); (ii) those obligations arising under any
Rejected Contracts (as such term is defined in Section 5.15 hereof), if any; and
(iii) obligations under any Seller field service contracts, including those set
forth on Schedule 1.3(b);
(c) Accept for return from customers CommSync Products required to be
accepted following use under environmental laws of the European Economic Union
and any other jurisdiction as applicable; and
(d) The FTO Obligation (as defined in Section 5.7).
Section 1.4 Liabilities Not Being Assumed. Except for the Assumed
-----------------------------
Liabilities, Seller agrees that Buyer shall not be obligated to assume or
perform and is not assuming or performing any liability or obligation of Seller,
whether known or unknown, fixed or contingent, certain or uncertain, and
regardless of when such liabilities or obligations may arise or may have arisen
or when they are or were asserted (the "Retained Liabilities"), and Seller shall
remain responsible for all Retained Liabilities, which shall include, without
limitation, any and all of the following obligations or liabilities of Seller:
(a) Except as provided for under this Agreement or the Related Agreements,
any compensation or benefits payable to present or past employees of Seller,
including without limitation, any liabilities arising under any employee pension
or profit sharing plan or other employee benefit plan and any of Seller's
obligations for vacation, holiday or sick pay that arise prior to the Closing
Date;
(b) Subject to Section 1.7 below, all federal, state, local, foreign or
other taxes of Seller (i) that have arisen prior to the Closing Date, and (ii)
for which Seller is or, at any time hereafter, may become liable; provided,
however, that the Retained Liabilities shall not include any taxes arising out
of the conduct of Buyer, on or after the Closing date, of the CommSync Business;
provided, further, that Buyer shall bear no liability for taxes arising from the
sale of any Pipeline Inventory;
-4-
(c) Any encumbrance on any of the Purchased Assets arising prior to the
Closing Date and all obligations and liabilities secured thereby (an
"Encumbrance");
(d) All obligations of Seller, either for borrowed money or incurred prior
to the Closing in connection with the purchase, lease or acquisition of any of
the Purchased Assets;
(e) Any accrued liabilities (other than liabilities expressly assumed by
Buyer pursuant to Section 1.3), accounts payable or notes payable of Seller;
(f) Any claims, demands, actions, suits or legal proceedings that have
been asserted or threatened prior to the Closing Date against Seller, the
CommSync Business or the Purchased Assets;
(g) Executory obligations of Seller arising after the Closing Date other
than those provided for in Section 1.3(a) herein or as otherwise provided in
this Agreement;
(h) Any obligations incurred by Seller prior to the Closing Date under any
employment, consulting or non-competition agreement, whether oral or written,
and any liabilities or obligations arising out of the termination by Seller of
any of its employees in anticipation or as a consequence of the Transaction; and
(i) Seller's Warranty obligations under those programs described on
Schedule 1.4(i).
Section 1.5 Consideration. In consideration for the Purchased Assets, the
-------------
covenant not to compete, and Seller's entering into the Related Agreements,
Buyer will pay to Seller at the Closing an amount equal to (a) Eighteen Million
Dollars ($18,000,000), plus (b) the Inventory Value (as defined in Section 5.18
below), plus (c) the lesser of $558,000 or the Fixed Capital Assets and
Equipment Value for the Capital Assets and Expensed Equipment set forth on
Schedules 1.1(a)(1) and 1.1(b)(1), plus (d) the greater of $200,000 or the
Selected Capital Asset and Equipment Value (as defined in Section 5.17 below),
less (e) Three Hundred Thousand Dollars ($300,000) in consideration of the
Warranties assumed by Buyer pursuant to Section 1.3(b), less (f) the amount
equal to the FTO Obligation (as defined in Schedule 5.7) (in the aggregate, the
"Purchase Price"). For purposes of this Section 1.5, the "Fixed Capital Assets
and Equipment Value" shall be equal to the aggregate of the prices for Capital
Assets and Expensed Equipment set forth on Schedules 1.1(a)(1) and 1.1(b)(1), as
updated pursuant to Section 1.8.
Section 1.6 Allocation of Purchase Price. The Purchase Price shall be
----------------------------
allocated among the Purchased Assets, the covenant not to compete and the other
agreements in the manner set forth on Schedule 1.6 which shall be agreed upon by
the parties prior to Closing and attached hereto (the "Purchase Price
Allocation"). Such allocation may be amended or modified at any time within 60
days after the Closing Date as shall be agreed upon in writing by Buyer and
Seller. Each of Buyer and Seller, when reporting the Transaction on their tax
returns, shall allocate the Purchase Price paid or received, as the case may be,
in a manner that is consistent with the Purchase Price Allocation to be set
forth on Schedule 1.6 hereto. Additionally, each of the parties shall comply
with and furnish
-5-
the information required by Section 1060 of the Internal Revenue Code of 1986,
as amended (the "Code") and any regulations thereunder.
Section 1.7 Payment of Sales and Related Taxes. Except as otherwise
----------------------------------
provided in the Related Agreements, all sales, use, value-added, gross receipts,
excise, registration, stamp duty, transfer or other similar taxes or
governmental fees ("Transfer Taxes") imposed or levied by reason of, in
connection with or attributable to this Agreement and the Transaction shall be
shared equally by Buyer and Seller. The parties shall cooperate with each other
to the extent reasonably requested and legally permitted to minimize any
Transfer Taxes. For purposes of calculating the Transfer Taxes to be shared
pursuant to the preceding sentence, Buyer and Seller agree to cooperate in
making an allocation of the Purchase Price among the Purchased Assets and also
to cooperate in determining which of such assets are subject to tax.
Section 1.8 Schedules Update. Not less than five (5) days prior to
----------------
Closing, Seller may update, through addition only, Schedules 1.1(a)(1),
1.1(a)(2), 1.1(b)(1), 1.1(b)(2) and 1.1(c) and Seller shall deliver such updated
schedules to Buyer at the Closing; thereafter, if any of the schedules are so
updated, such updated schedules shall constitute the definitive Schedules
1.1(a)(1), 1.1(a)(2), 1.1(b)(1), 1.1(b)(2) and 1.1(c). In addition, Seller shall
update, through addition only, Schedules 1.1(d) and 1.1(e) pursuant to the terms
of Section 5.15, and shall deliver the final Schedule 1.1(h) pursuant to the
terms of Section 5.18.
ARTICLE II. CLOSING
Section 2.1 Closing. The closing of the transactions contemplated by this
-------
Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, commencing
at 10:00 a.m. local time on the third business day following the satisfaction or
waiver of all conditions to the obligations of the parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the respective parties will take at the closing itself) or such other date as
the parties may mutually determine (the "Closing Date").
Section 2.2 Seller's Deliveries at Closing. At the Closing, Seller shall
------------------------------
deliver to Buyer (i) the Related Agreements, and (ii) subject to Section 5.11,
within a reasonable time and manner to be agreed upon between Buyer and Seller,
the Purchased Assets.
Section 2.3 Buyer's Deliveries at the Closing. At the Closing, Buyer
---------------------------------
shall deliver to Seller (i) the Purchase Price by wire transfer of federal funds
and (ii) the Related Agreements.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER
Pursuant to the execution of this Agreement, Seller hereby represents and
warrants to Buyer that on the date hereof:
Section 3.1 Authority and Binding Effect.
----------------------------
-6-
(a) Seller has the full corporate power and corporate authority to execute
and deliver this Agreement and the Related Agreements. This Agreement and the
Related Agreements and the consummation by Seller of its obligations contained
herein and therein have been duly authorized by all necessary corporate actions
of Seller, and such agreements have been duly executed and delivered by Seller.
(b) This Agreement is a valid and binding agreement of Seller, enforceable
against Seller in accordance with its terms, and upon execution and delivery
each of the Related Agreements will be a valid and binding agreement of Seller,
and will be enforceable against it in accordance with its terms, in each case
except as enforceability of the obligations of Seller hereunder and thereunder
may be limited by (i) bankruptcy, insolvency, moratorium or other similar laws
affecting creditors' rights generally, and (ii) general principles of equity
relating to the availability of equitable remedies (whether such agreements are
sought to be enforced in a proceeding at law or a proceeding in equity).
(c) Other than Seller's filing under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), it is not necessary for
Seller to take any action or to obtain any approval, consent or release by or
from any third person, governmental or other, to enable Seller to enter into or
perform its obligations under this Agreement or any of the Related Agreements.
Section 3.2 Organization and Standing.
-------------------------
(a) Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and Seller is qualified to do
business in each jurisdiction where it conducts the CommSync Business, in which
the character of the properties owned by it in connection with the CommSync
Business or the nature of the CommSync Business makes such authorization
necessary, other than such jurisdictions where the failure to be so qualified
would not have a Material Adverse Effect on the CommSync Business.
(b) Seller has the requisite corporate power and authority to conduct the
CommSync Business as now conducted and to own or lease (as the case may be) the
Purchased Assets, and to use such Purchased Assets in the conduct of the
CommSync Business.
Section 3.3 CommSync Business Financial Information. Schedule 3.3 sets
---------------------------------------
forth the unaudited profit and loss statements for the CommSync Business for the
years ended October 31, 1998, and October 31, 1997, and the nine (9) months
ended July 31, 1999 (the "CommSync Business Financial Information") and such
statements (a) have been compiled from and are in accordance with Seller's books
and records for the CommSync Business, and (b) fairly present in all material
respects the directly allocable assets, liabilities, revenues and expenses of
the CommSync Business as of the respective dates and for the periods then ended
in accordance with Seller's accounting and financial policies, which comply with
generally accepted accounting principles ("GAAP"). The CommSync Business
Financial Information also includes certain internal management allocations,
which reflect management's judgment as to the proper apportionment of shared
Seller assets, liabilities and expenses to the CommSync Business; provided,
however, such allocations are not representative of the assets, liabilities and
expenses necessary to operate the
-7-
CommSync Business on a standalone basis; provided further that the CommSync
Business has never been operated on a standalone basis and Seller makes no
representations or warranties as to whether such allocations are the same as
would result had the CommSync Business had been operated on a standalone basis.
Section 3.4 Absence of Certain Changes. From July 31, 1999, to the date
--------------------------
hereof, Seller has conducted the CommSync Business only in the ordinary course
consistent with past practice and, further, there has not been:
(a) Any default or breach, or anticipated default or breach under, or any
amendment, termination or revocation of or, to Seller's Knowledge, any
threatened termination or revocation of, any of the Assigned Contracts;
(b) Any actual or, to Seller's Knowledge, threatened amendment,
termination or revocation of any license, permit or franchise required for the
continued operation by Seller of any material portion of the CommSync Business;
(c) Any sale, transfer, or other disposition of, or the incurrence or
imposition of any Encumbrance resulting in an obligation in excess of Ten
Thousand Dollars ($10,000) on or affecting, any of the Purchased Assets except
(i) licenses, sales or utilization of inventory and obsolete equipment in the
ordinary course of the CommSync Business and consistent with past practices of
Seller, and (ii) Encumbrances for current taxes not yet due and payable;
(d) Any damage, destruction or loss, whether or not covered by insurance,
of any of the Purchased Assets in an amount that exceeds Fifty Thousand Dollars
($50,000);
(e) Any entry or violation of any judgment, order, writ or decree that has
had or is reasonably likely to have a Material Adverse Effect on the CommSync
Business; or
(f) Any occurrence of any other event or circumstance which has had or is
reasonably likely to have a Material Adverse Effect on the CommSync Business.
Section 3.5 The Purchased Assets.
--------------------
(a) Capital Equipment. Except as disclosed on Schedule 3.5(a), each item
-----------------
of the Capital Assets and Expensed Equipment is in good working order and
condition, ordinary wear and tear excepted, has been properly maintained and to
Seller's Knowledge does not require more than regularly scheduled maintenance in
the ordinary course, consistent with Seller's established maintenance policies,
to keep it in good operating condition.
(b) No Leases of Material Tangible Personal Property. Seller does not
------------------------------------------------
lease any material tangible personal property that is included in the Purchased
Assets.
(c) Inventories. All of the Inventory set forth on Schedule 1.1(h) is of a
-----------
quality usable and saleable in the ordinary course of the CommSync Business,
except for obsolete items, damaged
-8-
items and materials at below standard quality, which, in the aggregate are not
material in amount or have been written off or written down to net realizable
value or for which Seller has taken a reserve on Seller's financial statements.
(d) Title to Purchased Assets. Seller has, and on the Closing Date will
-------------------------
convey and transfer to Buyer, good and valid title to all of the Purchased
Assets, free and clear of all Encumbrances of any nature whatsoever. All of the
Purchased Assets are in the exclusive possession and control of Seller, and
Seller has the unencumbered right to use, and to sell to Buyer in accordance
with the terms and provisions of this Agreement, all of the Purchased Assets
free of the rights and claims of others.
(e) Assets Used in CommSync Business. Except as set forth on Schedule
--------------------------------
3.5(e), the Purchased Assets and Seller IP Rights include substantially all of
the assets used exclusively in the CommSync Business and certain additional
assets not used exclusively in the CommSync Business. For purposes of making
the representations in this Section 3.5(e) only, the Purchased Assets shall be
deemed to include all of the capital assets and equipment set forth on Schedules
1.1(a)(2) and 1.1(b)(2). In addition, for purposes of this Section 3.5(e), to
the extent Seller shall update Schedules 1.1(a)(1), 1.1(a)(2), 1.1(b)(1),
1.1(b)(2), 1.1(c), 1.1(d), 1.1(e), 1.1(f), or 1.1(h) prior to Closing, such
updated Schedules shall be deemed made and delivered as of the date this
representation and warranty is made by Seller. Seller expressly disclaims any
representation or warranty as to the sufficiency of the Seller human resources
that Buyer is hiring or intends to hire in connection with the Transaction.
Section 3.6 The Assigned Contracts and Other Agreements. Schedules 1.1(d)
-------------------------------------------
and (e) contain an accurate and complete list of the Assigned Contracts other
than Assigned Contracts assigned to Buyer after the date hereof pursuant to the
terms of Section 5.15 hereof. Seller has furnished to Buyer accurate and
complete copies of the Assigned Contracts other than Assigned Contracts assigned
to Buyer after the date hereof pursuant to the terms of Section 5.15 hereof.
Each of the Assigned Contracts is a valid and binding obligation of Seller and,
to Seller's knowledge, the other parties thereto, enforceable in accordance with
its terms, except as 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. There have not been
any defaults by Seller or, to Seller's Knowledge, defaults or any claims of
default or claims of nonenforceability by the other party or parties under or
with respect to any of the Assigned Contracts which, individually or in the
aggregate, would have a Material Adverse Effect on the CommSync Business, and
there are no facts or conditions to Seller's Knowledge that have occurred or
that are anticipated to occur which, with the passage of time or the giving of
notice, would constitute a default by Seller, or to Seller's Knowledge, by the
other party or parties under any of the Assigned Contracts, both in such a
manner as would have a Material Adverse Effect on the CommSync Business.
Section 3.7 Intellectual Property.
---------------------
(a) Seller owns all right, title and interest in and to all patents,
patent applications, invention disclosures, copyrights, trademarks, trademark
applications, trade secrets, know-how,
-9-
intellectual property and rights thereto which are transferred or licensed to
Buyer pursuant to this Agreement or the Intellectual Property Agreement
pertaining to the CommSync Products, including the Proprietary Materials
(collectively, the "Intellectual Property Rights") (including without limitation
any distribution rights and royalty rights).
(b) Seller has the right to make use, sell or otherwise dispose of
CommSync Products, and has the exclusive right to license or to bring actions
for infringement of, all Intellectual Property Rights.
(c) Seller has copyrights in all material copyrightable material used in
connection with or embodied in the CommSync Products or in the licensed
Intellectual Property Rights except such copyrightable material owned by third
parties that is used in CommSync Products and listed on Schedule 3.7(c) whether
or not registered with the U.S. Copyright Office. Consummation of the
transactions contemplated hereby will not alter or impair the validity of any
such copyrights.
(d) No claims have been asserted against Seller by any person challenging
Seller's use or distribution (including manufacture, marketing or sale) of any
CommSync Product, or Seller's licensing of Intellectual Property Rights or
challenging or questioning the validity or effectiveness of any license or
agreement relating thereto. To Seller's Knowledge, no claim of the type
specified in this Section 3.7(d) has been threatened.
(e) The execution, delivery and performance of this Agreement and the
transactions contemplated hereby will not (i) breach, violate or conflict with
any instrument, agreement or other right governing any of the Intellectual
Property Rights or portion thereof, (ii) cause the forfeiture or termination, or
give rise to a right of forfeiture or termination, of any Intellectual Property
Rights or portion thereof, (iii) in any way impair the right of Buyer to use
(including distribute, manufacture, market, sell or otherwise dispose of
CommSync Products) or license any Intellectual Property Rights or portion
thereof, or (iv) to Seller's Knowledge, give rise to any third party having the
right to bring any action for infringement of any intellectual property of the
third party.
(f) To Seller's Knowledge, as of the date of this Agreement, the operation
by Seller of the CommSync Business (including distribution, manufacture,
marketing, license or sale of CommSync Products) does not violate, and has not
violated, any right of any third party, including, without limitation,
infringement of or misappropriation of intellectual property.
(g) To Seller's Knowledge, no un-licensed third party is violating,
infringing, or misappropriating any Intellectual Property Right.
(h) To Seller's Knowledge, no party to any contract, commitment or
restriction relating to any Intellectual Property Right intends to cancel,
withdraw, modify or amend such contract as of the date hereof.
(i) Seller has not knowingly taken any action to impair the value of its
data or Intellectual Property Rights.
-10-
(j) (i) Seller has not expressly granted any right to manufacture,
reproduce, distribute, sell, sublicense, market or exploit any of the Seller IP
Rights (as such term is defined in the Intellectual Property Agreement) or any
adaptations, translations, or derivative works based on the Seller IP Rights, or
any portion thereof, to any Named Competitors (as such term is defined in the
Intellectual Property Agreement); (ii) Seller has no agreements, contracts or
commitments that expressly provide for the manufacture, reproduction,
distribution, sale, sublicensing, marketing, development, exploitation or supply
by Seller of any Seller IP Right or any adaptation, translation, or derivative
work based on the Seller IP Rights, or any portion thereof or otherwise material
to the CommSync Business to any Named Competitors; (iii) Seller has not
expressly granted to any Named Competitors any exclusive or non-exclusive rights
with respect to any of the Seller IP Rights; and (iv) Seller has not expressly
granted to any Named Competitors any right to market any product utilizing any
Seller IP Rights.
Section 3.8 Conflicts. Neither the execution and delivery of, nor the
---------
consummation of the transactions contemplated by, this Agreement or the Related
Agreements will or is reasonably likely to result in any of the following:
(a) A default or an event that, with notice or lapse of time, or both,
would be a default, breach or violation of the Seller's certificate of
incorporation, bylaws or other governing instruments of Seller, or any Assigned
Contract;
(b) The right to terminate any Assigned Contract;
(c) The creation or imposition of any Encumbrance on any of the
Purchased Assets; or
(d) The violation or breach of any writ, injunction or decree that is
applicable to or binding on any of the Purchased Assets or the CommSync
Business.
(e) To Seller's Knowledge, a loss or adverse modification of any
license, franchise, permit or other authorization or right (contractual or
other) to operate the CommSync Business or to own any of the Purchased Assets,
granted or otherwise held by Seller or used in the CommSync Business, which loss
or adverse modification would have a Material Adverse Effect on the CommSync
Business.
Section 3.9 Customers and Suppliers. Schedule 3.9 contains a correct list
-----------------------
of (a) the ten (10) largest customers of each of the network synchronization,
and GPS businesses, in terms of the shipments from the conduct of each such
business for the twelve-month period ended October 31, 1998, and the nine-month
period ended July 31, 1999, showing the approximate aggregate dollar amount of
revenues from each such customer during such periods and the nature of the
products licensed or sold; and (b) the twenty (20) largest suppliers of Seller
in terms of purchases made by Seller in connection with the CommSync Business
during the nine-month period ended July 31, 1999, showing the approximate
aggregate dollar amounts of purchases by Seller from each such supplier during
such period. Except as disclosed on Schedule 3.9 to Seller's Knowledge, none of
the customers or suppliers listed in Schedule 3.9 intends to cease doing
business with the CommSync
-11-
Business or has notified or otherwise threatened that it intends to cease doing
business with the CommSync Business.
Section 3.10 Product Warranties and Liabilities.
----------------------------------
(a) Other than warranties set forth in the Assigned Contracts and Proposed
Contracts and any obligations arising under the field service contracts set
forth on Schedule 1.3(b), Schedule 3.10(a) sets forth all Warranties still in
effect, given or made by Seller relating to the CommSync Products. To Seller's
Knowledge, (a) no CommSync Products have been shipped by Seller in a condition
that Seller reasonably expects such Products to be returned by the customers,
and (b) there is no intention on the part of any customer to return any material
amount of CommSync Products, except returns made in the ordinary course of the
business and consistent with the Warranties and which, in any event, are not,
and are not expected to become, material in amount.
(b) To Seller's Knowledge, there is no fact or the occurrence of any event
which might reasonably form the basis of any present or future successful claim
against Seller, whether or not fully covered by insurance, for liability on
account of negligence or product liability or on account of any Warranties which
would have, individually or in the aggregate, a Material Adverse Effect on the
CommSync Business. Set forth in Schedule 3.10(b) is a summary of the actual
Warranty expenses incurred by Seller with regards to claims made against Seller
in the nine-month period ended July 31, 1999 with respect to Warranties or
product returns for all products sold by Seller in the conduct of the CommSync
Business other than with respect to those items set forth on Schedule 1.4(i).
(c) Except as set forth on Schedule 3.10(c) and with respect to the
defects with respect to those products described in Section 1.4(i), to Seller's
Knowledge there are no Product Defects in or of any current CommSync Products.
Section 3.11 Insurance. Seller has reasonably self-insured (based on
---------
standard industry practice) or reasonably insured with third party insurers the
Purchased Assets against loss or damage with all risk coverage on a replacement
cost basis.
Section 3.12 Compliance with Law/Permits.
---------------------------
(a) Seller is in compliance with all, and is not in violation of any,
laws, ordinances, orders, decrees, rules or regulations of any governmental
agency or authority, the violation of or noncompliance with which has or is
reasonably likely to have a Material Adverse Effect on the CommSync Business.
No unresolved (i) charges of violations of laws or regulations relating to the
CommSync Business have been made or, to Seller's Knowledge, threatened, (ii)
proceedings or investigations relating to the CommSync Business are pending or,
to Seller's Knowledge, have been threatened, or (iii) citations or notices of
deficiency have been issued or, to Seller's Knowledge, have been threatened,
against Seller relating to or arising out of the CommSync Business by any
governmental authorities, each of which has had or is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on the CommSync
Business; and, to Seller's Knowledge, there are no facts or circumstances upon
which Seller believes any such charges, proceedings,
-12-
investigations, or citations or deficiency notices, reasonably may be
instituted, issued or brought hereafter.
(b) All of the governmental licenses, permits, authorizations, franchises
or certificates or rights (contractual or other) directly related to and
required for the operation of the CommSync Business that are held by Seller
(collectively, "Licenses and Permits") are in full force and effect at the date
hereof. There is no other license, permit, authorization, franchise, certificate
or right to operate the absence of which has had, or is reasonably likely to
have, a Material Adverse Effect on the CommSync Business. Seller is in
compliance with the conditions and requirements imposed by or in connection with
such Licenses and Permits. Seller has not received any notice, and to Seller's
Knowledge there is no reason to believe, that any governmental authority intends
to cancel, terminate or modify any of such Licenses or Permits or that there are
valid grounds for any such cancellation, termination or modification.
Section 3.13 Taxes and Tax Returns. 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 Section 59A of
the Code), 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. Other than Transfer Taxes arising
from the sale and purchase of the Purchased Assets, Buyer shall have no
liability or obligation whatsoever, and shall not incur any loss, expense or
cost, and none of the Purchased Assets, or any assets of Buyer, shall be
subjected to any Encumbrance, by reason of any Taxes arising out of (x) the
CommSync Business as conducted by Seller prior to the consummation of the sale
hereunder of the Purchased Assets to Buyer, or (y) any other operations or
activities of Seller whether conducted prior to the date hereof or hereafter.
Section 3.14 Litigation and Proceedings. There is no action, suit,
--------------------------
proceeding or investigation, or any counter or cross-claim in an action brought
by or on behalf of Seller, whether at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or before any arbitrator of any kind, that is pending or,
to Seller's Knowledge, threatened, against Seller, which (i) is reasonably
likely to affect adversely Seller's ability to perform its obligations under
this Agreement or the Related Agreements or complete any of the transactions
contemplated hereby or thereby, or (ii) to Seller's Knowledge, is reasonably
likely to have a Material Adverse Effect on the CommSync Business.
Section 3.15 No Broker. Seller has not retained or used the services of
---------
an agent, finder or broker in connection with the Transaction.
Section 3.16 Environmental Protection. With respect to the CommSync
------------------------
Business, Seller: (a) is in compliance, in all material respects, with any and
all Environmental Laws; (b) has not received any notice of any alleged
Environmental Claim which has not heretofore been cured or for which there is
any remaining material liability; (c) has not disposed of, emitted, discharged,
handled, stored, transported, used or released any Hazardous Materials, arranged
for the disposal, discharge,
-13-
storage or release of any Hazardous Materials, or exposed any employee or other
individual to any Hazardous Materials so as to give rise to any liability which,
in the aggregate, would result in a Material Adverse Effect; and (d) is not
aware of the presence of Hazardous Materials in, on, or under any properties
owned, leased or used at any time for the operation of the CommSync Business so
as to give rise to any liability which would, in the aggregate, result in a
Material Adverse Effect on the CommSync Business.
Section 3.17 ▇▇▇▇▇▇ Reports. The "▇▇▇▇▇▇" reports which Seller has
--------------
supplied to Buyer as to products in production or that have been released within
one year prior to the date hereof, were, when written, to Seller's Knowledge,
reasonable estimates as to manufacturing costs and yields used in the ordinary
course of Seller's business.
Section 3.18 Year 2000 Compliance. All CommSync Products shipped prior to
--------------------
the Closing Date and under warranty as of the date hereof will accurately
process date data (including, but not limited to, calculating, comparing and
sequencing) from, into, and between the twentieth and the twenty-first
centuries, and the years 1999 and 2000, including leap year calculations, the
week 1023 to week 1024 rollover period and the September 9, 1999 to September
10, 1999 rollover period, when used in accordance with the Product documentation
provided by Seller (including any instructions for installing patches or
upgrades), provided that all other items (e.g., hardware, software, and
firmware) not supplied by Seller, used in combination with such CommSync
Products properly exchange date data with such Products. Notwithstanding the
foregoing, Seller's Year 2000 warranty will not extend to any operating failures
of the GPS system beyond Seller's control.
Any patches or upgrades that are in existence as of the Closing Date will
be provided to Buyer as part of the Purchased Assets.
Seller represents and warrants that all Final Test Systems constituting
part of the Purchased Assets can be (or may be modified, with no material impact
to the user, to be) used prior to, during, and after the calendar year 2000 and
that such manufacturing assets will operate during each such time period without
error relating to date data, specifically including any error relating to, or
the product of, date data which represents or references different centuries or
more than a century ("Y2K Compliant") except to the extent such inability to use
and process such date data would not give rise to any liability that would
reasonably be expected to have a Material Adverse Effect on the Commsync
Business. Seller represents and warrants that no other manufacturing assets that
are part of the Purchased Assets are not Y2K Compliant where the failure to be
Y2K Compliant would have a material impact on Seller's ability to manufacture
CommSync Products in Seller's ordinary course of business as currently
conducted.
Section 3.19 Representations and Warranties. The representations and
------------------------------
warranties of Seller contained in this Article III, and the disclosures on the
Schedules attached hereto with respect thereto, do not contain any statement of
a material fact that was untrue when made or to Seller's Knowledge omit any
information necessary to make any such representation or warranty together with
the disclosure pertaining thereto, true and correct in all material respects.
-14-
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
Section 4.1 Organization and Authority. Buyer is duly incorporated and
--------------------------
organized and is validly existing as a corporation under the laws of the State
of California. Buyer has the corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby.
Section 4.2 Corporate Action. All corporate action necessary to be taken
----------------
by Buyer to authorize the execution, delivery and performance of this Agreement
and any instruments and agreements contemplated herein has been, or prior to the
Closing Date will have been, duly and validly taken. Subject to the terms and
conditions hereof, each of this Agreement and the other agreements contemplated
hereby to which Buyer will be a party constitutes or, in the case of such other
agreements will, when executed and delivered at the Closing constitute, the
valid and binding obligation of Buyer, enforceable in accordance with its terms
except as such enforceability may be limited by bankruptcy, insolvency, other
laws affecting creditors' rights generally and general equitable principles. The
execution, delivery and performance of this Agreement, and the other agreements
contemplated hereby (including the Related Agreements) by Buyer does not and
will not violate or result in any default under any provision of Buyer's charter
or bylaws or any default under or, except as would not materially impair Buyer's
ability to perform its obligations pursuant to this Agreement and the Related
Agreements result in the termination of, or accelerate the performance required
by or cause the acceleration of the maturity of any liability or obligation
pursuant to, any material commitment, agreement, indenture, license, or other
obligation to which Buyer is a party or any law or permit applicable to it.
Section 4.3 No Violation or Breach. The performance of this Agreement by
----------------------
Buyer is not in violation of any law, statute, local ordinance, state or federal
regulations, court order or administrative order or ruling, or of any loan
document's conditions or restrictions, in effect for financing, whether secured
or unsecured.
Section 4.4 No Broker. No broker, finder or other third party has any
---------
right to a commission or other fee as the result of action by or on behalf of
Buyer in connection with this Agreement.
Section 4.5 Buyer Acknowledgements. Buyer acknowledges and agrees that it
----------------------
(i) has made its own inquiry and investigation into, and, based thereon, has
formed an independent judgment concerning the Purchased Assets and the CommSync
Business; and (ii) has been furnished with or given adequate access to such
representatives of Seller, and books, records and other information about the
Purchased Assets and the CommSync Business as it has requested; provided that
nothing in this Section 4.5 shall serve to eliminate or minimize Seller's
representations and warranties set forth in Article III.
-15-
Section 4.6 Capital Resources. Buyer has sufficient capital resources to
-----------------
pay the Purchase Price and to consummate all of the transactions contemplated
under this Agreement and the Related Agreements.
ARTICLE V. ADDITIONAL AGREEMENTS
Section 5.1 Access to Information. Seller shall provide Buyer and its
---------------------
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Closing to (a) all of the Sellers'
properties, books, contracts, commitments and records, (b) all other information
concerning the CommSync Business, including properties and personnel of the
CommSync Business as Buyer may reasonably request and (c) all employees of the
CommSync Business. Buyer shall provide Seller with copies of such information as
Seller may reasonably request. No information or knowledge obtained in any
investigation pursuant to this Section 5.1 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the transactions contemplated by this
Agreement.
Section 5.2 Publicity and Advertising.
-------------------------
(a) Press Release. Immediately following the execution hereof, the
-------------
parties will issue a press release, which shall be positive in tone in
addressing the matters set forth below, announcing the Agreement subject to
prior approval in writing by both parties. The intent of this announcement is
to advise customers and suppliers of the CommSync Business that:
(i) Seller is selling the CommSync Business to Buyer; and
(ii) Buyer will provide sales, service and support, and the parties
will provide appropriate ongoing warranty and post-warranty service, relating to
the CommSync Business.
(b) No Other Press Release. No press release or other public announcement
----------------------
related to this Agreement or the Transaction will be issued by either party
hereto without the prior approval of the other party, except that a party may
make such public disclosure which it believes in good faith to be required by
law (in which case such party will give the other party reasonable opportunity
to review the proposed disclosure and will use best efforts to accommodate such
reviewing party's comments; provided, that, in no event shall either party refer
to this Agreement or the Transaction as involving a wireless communications
business, other than a reasonable description of the CommSync Business as
involving synchronization and timing for wireless communications, without the
express written consent of the other party).
(c) Advertising by Buyer. Buyer reserves the right to run advertisements
--------------------
to notify customers of the Transaction provided that Seller has approved in
writing the description of the Transaction, which approval shall not be
unreasonably withheld.
Section 5.3 Consents. Seller and Buyer shall use their respective
--------
commercially reasonable efforts to obtain the consents, waivers and approvals
under any of the Assigned Contracts
-16-
as may be required in connection with the Transaction so as to assign all
rights, obligations and benefits thereunder to Buyer.
Section 5.4 Expenses. Whether or not the Transaction is consummated, each
--------
party to this Agreement will pay all costs and expenses incurred by it in
negotiating and preparing this Agreement and, except as set forth herein, in
closing and carrying out the transactions contemplated hereby.
Section 5.5 Confidentiality. Buyer and Seller each agree that the
---------------
information obtained in any investigation conducted in conjunction with the
negotiation and effectuation of the Transaction, including any information
pursuant to Section 5.1 hereof shall be governed by the terms of the
Confidential Disclosure Agreement dated April 27, 1999 between Seller and Buyer.
Section 5.6 Employee Matters.
-----------------
(a) For each Seller employee hired by Buyer pursuant to the Transaction,
Seller agrees to use its commercially reasonable best efforts to facilitate
individual rollovers of the affected employees' account balances from the
Seller's 401(k) Plan to Buyer's 401(k) Plan, such rollovers to include, at the
election of each affected employee any plan loans currently outstanding under
the Seller's 401(k) Plan. Buyer agrees to accept such rollovers and also agrees
to provide, in a timely manner, the Buyer's 401(k) Plan standard rollover form
(which shall be reasonably acceptable to Seller) to each affected employee
electing to rollover his or her account balance into Buyer's 401(k) Plan.
(b) Seller hereby represents and warrants that such distributions from
Seller's 401(k) Plan are in compliance with Code Section 401(k)(10)(A)(ii), and
that Seller's 401(k) Plan, at the time of distribution, is intended to be tax-
qualified under Code Sections 401(a) and 501(a).
(c) Nothing in this Section 5.6 is intended to or shall be construed to
require Buyer to retain any of the affected employees, after they enter into
Buyer's employ, except in accordance with Buyer's generally applicable
employment policies and procedures or any separate agreement entered into by
Buyer with any such employee, or to prevent Buyer from changing its compensation
programs and benefit plans, in its lawful discretion, for its employees
(including the affected employees) generally.
Section 5.7 FTO Transfer. Buyer shall permit each Seller employee who
------------
accepts an employment offer from Buyer (each, a "Transferring Employee") to
transfer to Buyer on the commencement of such employment up to a maximum of
eighty (80) hours of accrued flexible time-off ("FTO") with Seller. Seller shall
deliver to Buyer prior to Closing a Schedule 5.7 which shall list each
Transferring Employee and the FTO of such Transferring Employee (the aggregate
of each Transferring Employee's FTO being the "FTO Obligation").
Section 5.8 Insurance. Through the Closing Date, Seller will continue to
---------
maintain insurance policies providing insurance coverage for the CommSync
Business and the Purchased
-17-
Assets substantially of the kinds, in the amounts and against the risks as
insured as of the date hereof for the CommSync Business and the risks covered.
Section 5.9 Regulatory and Other Authorizations.
-----------------------------------
(a) Subject to the terms and conditions provided in this Agreement, each
of the parties hereto shall use commercially reasonable efforts to take
promptly, or cause to be taken, all actions, and to do promptly, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
hereby, to obtain all necessary waivers, consents and approvals and to effect
all necessary registrations and filings and to remove any injunctions or other
impediments or delays, legal or otherwise, in order to consummate and make
effective the transactions contemplated by this Agreement for the purpose of
securing to the parties hereto the benefits contemplated by this Agreement. The
parties each shall promptly (a) supply the other with any information which may
be required in order to effectuate any filings with the United States Federal
Trade Commission (the "FTC") or the Antitrust Division of the United States
Department of Justice ("DOJ"), and (b) supply any additional information which
reasonably may be required by the FTC or DOJ or the competition or merger
control authorities of any other jurisdiction and which the parties may
reasonably deem appropriate.
(b) Buyer and Seller shall share equally the filing fees with respect to
the Notification and Reports Forms relating to the transactions contemplated
herein as required by the HSR Act.
Section 5.10 Shipment of Purchased Assets. Buyer and Seller shall share
----------------------------
equally the costs and expenses relating to: (i) the preparation of the Purchased
Assets for shipment (including, without limitation, any cleaning of the
Equipment); (ii) packaging the Purchased Assets for shipment; and (iii) shipment
of the Purchased Assets from the relevant facilities of Seller to either Buyer's
San Jose, California facility or another facility as designated by Buyer. Where
a facility other than San Jose, California, is designated by Buyer, Buyer will
pay the full amount of the difference between the quoted costs to ship to San
Jose, California and the actual costs to ship to the facility Buyer designated.
Section 5.11 Transition Planning. During the period between the signing
-------------------
of this Agreement and Closing, a transition manager (each, a "Transition
Manager") appointed by each of Buyer and Seller shall jointly create plans for
the transition of the CommSync Business from Seller to Buyer following the
Closing, including but not limited to the following:
(a) MIS support, data collection and delivery;
(b) the transfer of Purchased Assets; and
(c) product transition, manufacturing, research and development.
For purposes of this Section 5.11, the Seller Transition Manager shall initially
be ▇▇▇▇ ▇▇▇▇▇, and the Buyer Transition Manager shall initially be ▇▇▇▇
▇▇▇▇▇▇▇▇▇.
-18-
Section 5.12 Customer Notification. Within ten (10) days of the date
---------------------
hereof, Seller shall have notified the key customers of the CommSync Business as
determined in accordance with Schedule 5.12 of the contemplated Transaction and
appropriate representatives of Buyer and Seller shall have taken the steps set
forth in Schedule 5.12.
Section 5.13 Supplier Notification. Within fifteen (15) days of the date
---------------------
hereof, Seller shall have notified the key suppliers of the CommSync Business as
determined in accordance with Schedule 5.13 of the contemplated Transaction and
appropriate representatives of Buyer and Seller shall have taken the steps set
forth in Schedule 5.13.
Section 5.14 [INTENTIONALLY OMITTED].
Section 5.15 Additional Assigned Contracts. After the date hereof Seller
-----------------------------
shall use commercially reasonable efforts to identify and furnish to Buyer
copies of all additional contracts or agreements that, if known to Senior
Management prior to the date hereof, would have been included in the Assigned
Contracts ("Proposed Contracts"). Buyer shall have the right to review all
Proposed Contracts identified by Seller and may, through the exercise of good
faith, decline to assume any such Proposed Contract (the Proposed Contracts
which Buyer declines to assume being referred to herein as "Rejected
Contracts"). Each Proposed Contract that is not rejected in writing by Buyer
prior to the eleventh (11/th/) business day after which Seller has provided such
Proposed Contract shall be deemed to be and shall immediately become an Assigned
Contract for all purposes of this Agreement, and Schedules 1.1(d) and (e) shall
be amended as appropriate to reflect such additional Assigned Contract.
Section 5.16 Delivery of Additional Instruments on the Closing Date.
------------------------------------------------------
Seller agrees to deliver, or cause to be delivered to Buyer, the following
documents and instruments and its counsel, (i) a ▇▇▇▇ of sale, duly executed by
Seller, the form of which shall be subject to mutual agreement among the
parties, (ii) a good standing certificate, dated as of the date that is not more
than ten (10) days prior to the Closing Date from the Secretary of State of
Delaware, for Seller; and (iii) such other documents and instruments as the
parties shall mutually agree are necessary to effectuate the transactions
contemplated hereby.
Section 5.17 Buyer Selection of Capital Assets and Equipment. Not less
-----------------------------------------------
than three (3) days prior to the Closing, Buyer shall deliver to Seller its
written selection of those capital assets on Schedule 1.1(a)(2) and that
equipment on Schedule 1.1(b)(2) that it will purchase pursuant to this
Agreement. Buyer shall be entitled to purchase all or any portion of the capital
assets listed on Schedule 1.1(a)(2) and equipment listed on Schedule 1.1(b)(2)
at the prices therein listed; provided, however, that Buyer shall only be
entitled to purchase such capital assets and equipment in accordance with the
following limitations:
(a) In selecting any item of capital assets listed on Schedule 1.1(a)(2)
and/or equipment listed on Schedule 1.1(b)(2), Buyer must first select such item
from the group of items of the same model number that are among the suite of
test equipment or other assets or equipment that the Transferring Employees have
assembled and collected and use in the ordinary course of their work (the
"Collective Suite").
-19-
(b) Once Buyer has purchased all of the items of the same model number
that are included in the Collective Suite, then Buyer may purchase any and all
items of such model number that are included on Schedule 1.1(a)(2) or Schedule
1.1(b)(2), as the case may be, but are not items that were added to such
schedules after the date hereof pursuant to the terms of Section 1.8 of this
Agreement.
(c) Once Buyer has purchased all of the items of the same model number
that are included in the Collective Suite and all other items of the same model
number that are listed on Schedule 1.1(a)(2) or Schedule 1.1(b)(2) as of the
date hereof, then Buyer shall be entitled to purchase items of such same model
number that were added to such schedules after the date hereof pursuant to the
terms of Section 1.8 of this Agreement.
(d) In the event that Seller shall add to either Schedule 1.1(a)(2) or
Schedule 1.1(b)(2) any item of a model number that was not included on the
original schedule delivered on the date hereof (a "Unique Item"), then Buyer
shall not be obligated to comply with the requirements of paragraphs (a) and (b)
of this Section 5.17 prior to purchasing such Unique Item.
(e) The aggregate purchase price for all items purchased by Buyer that are
among those items added to Schedule 1.1(a)(2) or Schedule 1.1(b)(2) after the
date hereof pursuant to the terms of Section 1.8 of this Agreement shall be not
greater than sixty-eight thousand dollars ($68,000).
(f) The aggregate of the prices set forth on Schedules 1.1(a)(2) and
1.1(b)(2) with respect to the capital assets and equipment that are included on
the original schedules as of the date hereof and that are selected by Buyer
pursuant to this Section 5.17, together with the aggregate purchase price for
those items that are added to the schedules (as determined pursuant to Section
5.17(e) above) shall be referred to herein as the "Selected Capital Asset and
Equipment Value."
Section 5.18 Inventory Valuation. Not less than three (3) days prior to
-------------------
Closing, Seller shall deliver to Buyer a final Schedule 1.1(h) which shall
include the raw materials, work-in-process, and finished goods, including
factory and field demo equipment relating to the CommSync Business to be sold to
Buyer pursuant to this Agreement. The final Schedule 1.1(h) shall include a
valuation of such raw materials, work-in-process and finished goods inventory,
net of reserves for excess and obsolescence calculated in accordance with GAAP
as of the date three (3) days prior to Closing (the "Inventory Value"). Buyer
shall purchase all items listed on the final Schedule 1.1(h) at a price equal to
Inventory Value; provided, that the maximum amount that Buyer shall be required
to pay for all field demo equipment shall not exceed $440,000.
ARTICLE VI. CONDUCT OF BUSINESS
Section 6.1 Conduct of Business. Except as otherwise contemplated by this
-------------------
Agreement from the date hereof to the Closing, Seller shall conduct the CommSync
Business only in the ordinary course and consistent with past practice and, in
any event, in a manner which is not inconsistent with the consummation of the
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, except as contemplated by this Agreement from the date
-20-
hereof to the Closing, Seller shall not, without the prior written consent of
Buyer, which shall not be unreasonably withheld or delayed, with respect to the
CommSync Business or the Purchased Assets:
(a) Except in the ordinary course of the CommSync Business, permit or
allow any of the Purchased Assets to be subject to any material Encumbrance;
(b) Sell, transfer or otherwise dispose of any of the Purchased Assets in
one or more transactions except sales of inventory or finished goods in the
ordinary course of the CommSync Business or pursuant to a transfer from Hewlett-
Packard Company to Agilent Technologies, Inc. of all or any portion of the
CommSync Business;
(c) Terminate or amend in any material respect any Assigned Contract to
which it is a party except for the assignment of the Assigned Contracts to
Agilent Technologies, Inc. from Hewlett-Packard Company;
(d) Intentionally omit to do any act, or permit any act or omission to
act, which causes a breach of any Assigned Contract; or
(e) Agree in writing to do any of the foregoing.
ARTICLE VII. CONDITIONS TO OBLIGATION TO CLOSE
Section 7.1 Conditions to Obligations of Each Party to Close. The
------------------------------------------------
respective obligations of each party to this Agreement to effect the Transaction
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) No Injunctions or Restraints; Illegality. No temporary restraining
----------------------------------------
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Transaction shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the foregoing
be pending; nor shall there be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Transaction, which makes the consummation of the Transaction illegal.
(b) No Order; HSR Act. No governmental agency or authority shall have
-----------------
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of making
the Transaction illegal or otherwise prohibiting consummation of the
Transaction. All waiting periods under the HSR Act relating to the transactions
contemplated hereby shall have expired or been terminated.
Section 7.2 Additional Conditions to Obligations of the Seller. The
--------------------------------------------------
obligation of the Seller to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing of the following conditions, which may be waived, in
writing, exclusively by the Seller:
-21-
(a) Representations and Warranties. The representations and warranties
------------------------------
made by Buyer in this Agreement shall have been true and correct when made
except where breaches or inaccuracies of the representations and warranties made
by Buyer have not had a Material Adverse Effect on Buyer, and Seller shall have
received a certificate with respect to the foregoing signed on behalf of Buyer
by an authorized officer of Buyer.
(b) Performance of Obligations. Buyer shall have performed and complied in
--------------------------
all material respects with all covenants required by this Agreement to have been
performed prior to Closing, and Seller shall have received a certificate to such
effect signed on behalf of Buyer by an authorized officer of Buyer.
(c) Related Agreements. The Transition Services Agreement, the Supply
------------------
Agreement, the Interim Supply Agreement and the Intellectual Property Agreement
shall each have been executed and delivered by Buyer and shall each be legally
binding on Buyer.
(d) SEC Concurrence Regarding Financial Statements. Buyer shall have
----------------------------------------------
received an affirmative response to its letter to the Securities and Exchange
Commission (the "SEC") dated August 12, 1999 attached hereto as Exhibit G (the
---------
"SEC Letter") and thereby the SEC shall have confirmed that, in satisfaction of
Buyer's obligations with respect to the Transaction as required under Form 8-K
of the Securities Exchange Act of 1934, as amended ("Form 8-K") and Rule 3-05
of Regulation S-X ("Rule 3-05"), the SEC will not require Buyer to deliver
financial statements that are substantively different from the financial
statements described in the paragraphs numbered 1 and 2 in the SEC Letter.
Section 7.3 Additional Conditions to Obligations of the Buyer. The
-------------------------------------------------
obligation of the Buyer to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing of each of the following conditions, any of which may be
waived, in writing, exclusively by the Buyer:
(a) Representations and Warranties. The representations and warranties
------------------------------
made by Seller in this Agreement shall have been true and correct when made
except where breaches or inaccuracies of the representations and warranties made
by Seller have not had a Material Adverse Effect on the CommSync Business, and
Buyer shall have received a certificate with respect to the foregoing signed on
behalf of Seller by an authorized officer of Seller.
(b) Absence of Litigation. There shall be (i) no pending or overtly
---------------------
threatened litigation (other than litigation which is determined by the parties
in good faith, after consulting with their respective attorneys, to be without
legal or factual substance or merit) that has enjoined or is reasonably likely
to enjoin the consummation of any of the transactions contemplated by this
Agreement; and (ii) no order that has been issued by any court or governmental
agency having jurisdiction that materially restrains or prohibits the
consummation of the purchase and sale of the Purchased Assets hereunder and no
proceedings which are reasonably likely to result in the issuance of such an
order shall have been instituted and shall be pending.
-22-
(c) Performance of Obligations. Seller shall have performed and complied
--------------------------
in all material respects with all covenants required by this Agreement to have
been performed prior to Closing, and Buyer shall have received a certificate to
such effect signed on behalf of Seller by an authorized officer of Seller.
(d) Legal Opinion. Buyer shall have received a legal opinion, in
-------------
substantially the form attached hereto as Exhibit F, of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇, counsel to Seller.
(e) No Force Majeure. Following the date of this Agreement, there shall
----------------
not have occurred a Force Majeure that has had a Material Adverse Effect on the
CommSync Business; provided, that this Section 7.3(e) shall not be a condition
to Buyer's obligations under this Agreement if, in the event of such a Force
Majeure, Seller shall have agreed in writing to pay to Buyer an amount equal to
the actual economic damages incurred as a result of such Force Majeure, not to
exceed $2,500,000. If, in conjunction with the Closing, Seller so agrees to
compensate Buyer, the determination of actual economic damages shall be made by
a "Big Five" accounting firm mutually acceptable to Buyer and Seller within
ninety (90) days of Closing.
(f) Related Agreements. The Transition Services Agreement, the Supply
------------------
Agreement, the Interim Supply Agreement and the Intellectual Property Agreement
shall each have been executed and delivered by Seller and shall each be legally
binding on Seller.
ARTICLE VIII. INDEMNIFICATION
Section 8.1 Survival of Representations and Warranties. The
------------------------------------------
representations and warranties of Buyer and Seller set forth in this Agreement
shall survive for a period ending at the close of business on the date eighteen
(18) months after the Closing Date; provided, however,
(a) any breach of warranty resulting from fraud by the warranting party
shall not expire; and
(b) any claims which arise and are properly asserted within the time limit
permitted in this Section 8.1 shall survive until resolved in accordance with
this Article VIII.
Section 8.2 Indemnification by Buyer. Buyer agrees to indemnify and hold
------------------------
Seller, its affiliates and subsidiaries harmless from and against any and all
lawsuits, damages, claims, awards, settlements, costs and expenses incident
thereto, including without limitation reasonable attorneys' fees, arising from
any injury or alleged injury or damage or alleged damage to the person, property
or business of anyone ("Damages") arising from or in connection with (i) Buyer's
Breach of the representations and warranties set forth in Article IV of this
Agreement; and (ii) the breach of any covenant, agreement or obligation of Buyer
contained in this Agreement or any of the Related Agreements.
Section 8.3 Indemnification by Seller.
-------------------------
-23-
(a) Seller agrees to indemnify and hold Buyer, its affiliates and
subsidiaries harmless from and against any and all Damages arising from or in
connection with:
(i) (A) Seller's breach of the representations and warranties set
forth in Article III of this Agreement; (B) the breach of any covenant,
agreement or obligation of Seller contained in this Agreement or any of the
Related Agreements; (C) operation of the CommSync Business by Seller at any time
prior to the Closing except to the extent a liability is expressly assumed by
Buyer; (D) ownership or use of Excluded Assets by Seller, whether before or
after Closing; and (E) any liabilities of Seller not expressly assumed by Buyer;
provided, that, notwithstanding anything in this Agreement to the contrary, the
aggregate amount for which Seller shall be liable to Buyer, its affiliates and
subsidiaries for claims relating to matters addressed under this Section
8.3(a)(i) shall be Four Million Dollars ($4,000,000); and
(ii) Buyer's contractual obligation as enforced by the third party
beneficiary of such obligation to repair or replace (to the extent necessary and
required by the respective warranty obligation) a CommSync Product sold and
shipped by Seller prior to Closing (including, without limitation, products
listed on Schedule 3.10(c)) with a Product Defect; provided, that,
notwithstanding anything in this Agreement to the contrary, the aggregate amount
for which Seller shall be liable to Buyer, its affiliates and subsidiaries for
claims relating to matters addressed under this Section 8.3(a)(ii) shall be Ten
Million Dollars ($10,000,000); provided further, that in lieu of indemnifying
Buyer for Damages under this Section 8.3(a)(ii), Seller may, at its option,
perform such repair or replacement and thereby relieve itself of any
indemnification obligation under this Section 8.3 with respect to the particular
defect at issue, in which event Buyer agrees to provide products or services to
Seller at one hundred five percent (105%) of cost.
In the event that Seller may be obligated to indemnify Buyer under both
subsections (i) and (ii) of this Section 8.3(a) with respect to a claim for
indemnification, its obligations under subsection (ii) shall be controlling and
Seller shall not be obligated to indemnify Buyer with respect to that item of
repair pursuant to the terms of subsection (i) and, in any event, for an amount
greater than actual damages suffered by Buyer. Those limitations provided in
Section 8.3(a)(i) and (ii) shall operate exclusively and independently of each
other with respect to determining Seller's aggregate obligation to Buyer for
indemnification.
(b) The indemnification obligations contained in Section 8.3(a)(ii) shall
survive for the term of the applicable contractual warranty periods existing as
of the date hereof.
(c) Notwithstanding any provision of this Agreement to the contrary,
Seller shall have no obligation to indemnify Buyer under Section 8.3(a)(i) or
(ii) or to pay damages in respect of contract or other claims arising under this
Agreement or the Related Agreements unless Buyer shall have suffered Damages in
an aggregate amount in excess of Two Hundred Thousand Dollars ($200,000) (the
"Basket Amount"), except with respect to (i) claims arising from fraud, (ii)
claims on account of those programs described on Schedule 1.4(i), and (iii)
claims arising from the determination of the Inventory Value, which shall be
indemnified from the first dollar. Once the aggregate amount of losses under
Section 8.3(a)(i) or Section 8.3(a)(ii) exceeds the Basket Amount, Buyer shall
be entitled to recover the full amount of such losses.
-24-
(d) Except as otherwise specifically addressed in any Related Agreement or
in Section 11.4 hereof, Buyer and Seller acknowledge and agree that the
foregoing indemnification provisions shall be the exclusive remedy of Buyer and
Seller with respect to this Agreement and the transactions contemplated hereby.
Section 8.4 Procedure for Indemnification.
-----------------------------
(a) Claims for Indemnification. Upon receipt by a party (the "Indemnifying
--------------------------
Party") at any time of a certificate (an "Officer's Certificate") signed by any
officer of the other party (the "Indemnified Party"): (i) stating that
Indemnified Party has paid, incurred or properly accrued or reasonably
anticipates that it will have to pay, incur or accrue Damages, and (ii)
specifying in reasonable detail the individual items of Damages included in the
amount so stated, the date each such item was paid, incurred or properly
accrued, or the basis for such anticipated liability, and the nature of the
misrepresentation, breach of warranty or covenant or other obligation to which
such item is related, the Indemnifying Party shall, subject to the provisions of
Section 8.3 hereof and this Section 8.4, deliver to Indemnified Party, as
promptly as practicable, cash equal to such Damages.
(b) Objections to Claims. After the expiration of the thirty (30) day
--------------------
period beginning on the date of delivery of the Officer's Certificate, the
Indemnifying Party shall make delivery of the cash in accordance with Section
8.3 hereof; provided, however, that no such payment or delivery need be made if
the Indemnifying Party shall object in a written statement to the claim made in
the Officer's Certificate, and such statement shall have been mailed or
otherwise sent to the Indemnified Party prior to the expiration of such thirty
(30) day period.
(c) Resolution of Conflicts. In case the Indemnifying Party shall object
-----------------------
in writing to any claim or claims made in any Officer's Certificate to recover
Damages within thirty (30) days after delivery of such Officer's Certificate,
the Indemnifying Party and Indemnified Party shall attempt in good faith to
agree upon the rights of the respective parties with respect to each of such
claims. If the Indemnifying Party and Indemnified Party should so agree, a
memorandum setting forth such agreement shall be prepared and signed by
Indemnified Party and the Indemnifying Party. If the Indemnifying Party and
Indemnified Party should not so agree, the dispute shall be addressed in the
manner set forth in Section 8.4(e) below.
(d) Third-Party Claims. In the event Indemnified Party becomes aware of a
------------------
third-party claim which Indemnified Party reasonably believes may result in a
claim for indemnification, Indemnified Party shall notify Indemnifying Party of
such claim, and Indemnified Party shall be entitled, at its expense, to
participate in, but not to determine or conduct, the defense of such claim.
Indemnifying Party shall have the right in its sole discretion to conduct the
defense of and settle any such claim; provided, however, that except with the
consent of the Indemnified Party, no settlement of any such claim with third-
party claimants shall be determinative of the amount of any claim.
(e) Dispute Resolution. Any dispute arising out of or relating to this
------------------
Section 8.4 shall be resolved in accordance with the procedures specified in
this Section 8.4(e), which shall be the sole and exclusive procedure for the
resolution of any such disputes. For any dispute or claim arising out of or
relating to this Section 8.4, or breach hereof, the parties, prior to filing any
claims in a court of
-25-
law or to seeking binding arbitration, shall in good faith first negotiate a
written resolution of such dispute or claim within a period not to exceed
fifteen (15) days from the date of receipt of a party's request for such
negotiation. Such negotiations shall be conducted by managers of each party who
have authorization to resolve any such dispute or claim. In the event the
parties cannot negotiate a written resolution to such dispute or claim during
this fifteen-day negotiation period, and prior to filing any claims in a court
of law or to binding arbitration, the parties shall then submit such dispute or
claim to non-binding mediation with JAMS/ENDISPUTE or its successor. The
mediation may be initiated by the written request of either party to the other
party, shall commence within fifteen (15) days of the receipt of such notice and
shall be conducted in Santa ▇▇▇▇▇ County, California in accordance with such
mediation procedures established by JAMS/ENDISPUTE or its successor, unless
otherwise agreed by the parties. The mediation shall not exceed a period of
thirty (30) days. In the event the parties do not resolve such dispute or claim
as a result of such mediation or in the event such dispute or claim is not
resolved within thirty (30) days of the commencement of the mediation, either
party may seek to resolve the dispute or claim in a court of competent
jurisdiction or seek other legal or equitable resolution. The judgment or decree
of a court shall be deemed final when the time for appeal, if any, shall have
expired and no appeal shall have been taken or when all appeals taken shall have
been finally determined.
ARTICLE IX. TERMINATION
Section 9.1 Termination. This Agreement may be terminated and the
-----------
Transaction abandoned at any time prior to the Closing:
(a) by mutual consent of Seller and Buyer;
(b) by Seller or Buyer if (i) the Closing has not occurred prior to
October 1, 1999; (ii) there shall be a final nonappealable order of a federal or
state court in effect preventing consummation of the Transaction; or (iii) there
shall be any statute, rule, regulation or order enacted, promulgated or issued
or deemed applicable to the Transaction by any governmental entity that would
make consummation of the Transaction illegal; or
(c) by Seller if Buyer receives a negative response to the SEC Letter and
pursuant to such negative response, the SEC would require Buyer, in satisfaction
of its obligations with regard to the Transaction under Form 8-K and Rule 3-05,
to deliver financial statements that are substantively different from the
financial statements described in the paragraphs numbered 1 and 2 in the SEC
Letter.
Section 9.2 Effect of Termination. In the event of termination of this
---------------------
Agreement as provided in Section 9.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Buyer or Seller, or
their respective officers, directors or stockholders, provided that the
provisions of Sections 5.2, 5.4, 5.5, Article XI and this Section 9.2 shall
remain in full force and effect and survive any termination of this Agreement.
ARTICLE X. POST-CLOSING OBLIGATIONS
-26-
Section 10.1 [INTENTIONALLY OMITTED].
Section 10.2 Non-Competition. Except as necessary or required pursuant to
---------------
the terms of this Agreement (e.g. the provision of products or services under
Rejected Contracts or retained field service contracts), or the Supply
Agreement, Interim Supply Agreement or Transition Services Agreement, Seller
agrees not to engage in a Competitive Business for a period of five (5) years
from the Closing Date. As used in this Section 10.2, the term "Competitive
Business" shall mean the business of designing, manufacturing or sale of
synchronization products for communications networks, or any combination of
designing, manufacturing and sale of synchronization products for communications
networks; provided that "Competitive Business" shall not include the design,
manufacture, sale or other distribution of Cesium atomic frequency products or
the design, manufacture, sale or other distribution of any component that may be
incorporated into any other products produced or sold by any third party. For
purposes of this Section 10.2, the term "Seller" shall refer solely to Agilent
Technologies, Inc. and the provisions of this Section 10.2 shall not apply to
Hewlett-Packard Company.
The parties intend that the covenants contained in this Section 10.2 shall
be construed as a series of separate covenants, one for each state in the United
States and one for each foreign country. Except for geographic coverage, each
such separate covenant shall be deemed identical in terms of the covenants
contained in this Section 10.2. If, in any judicial proceedings, a court should
refuse to enforce any of the separate covenants deemed included in this Section
10.2, then the unenforceable covenant shall be deemed eliminated from these
provisions for the purpose of those proceedings to the extent necessary to
permit the remaining separate covenants to be enforced.
Section 10.3 SEC Financial Statements. Within sixty (60) days and seventy
------------------------
(70) days following the Closing Date, Seller will provide to Buyer draft and
final audited financial statements, respectively, for the CommSync Business
prepared in compliance with Regulation S-X and as required to allow Buyer to
satisfy its reporting obligations under the Securities Act of 1933, as amended,
and the Securities Act of 1934.
Section 10.4 Repairs at Seller's Request. In the event that there is an
---------------------------
epidemic or catastrophic failure of any of the CommSync Products following the
Closing and Buyer does not have a legal obligation to repair or replace such
CommSync Products and Seller, for any reason, desires that such repairs or
replacement be performed, at Seller's request Buyer shall perform such repairs
or replacement on Seller's behalf, and Seller shall pay to Buyer one hundred ten
percent (110%) of the cost of such repair or replacement. In addition, with
respect to any warranties existing on or as of the Closing Date and retained by
Seller with respect to CommSync Products and not otherwise addressed in this
Agreement (e.g. warranties with respect to field service contracts), Buyer
agrees to provide to Seller those products and services provided by Buyer which
Seller requires to satisfy any and all of Seller's obligations under such
warranties, for one hundred ten percent (110%) of Buyer's cost for such products
or services.
Section 10.5 Provision of CommSync Products to Seller. In the event that
----------------------------------------
Seller retains any Rejected Contracts, Buyer agrees to provide to Seller, at
Buyer's cost, any and all products or
-27-
services provided by Buyer which Seller requires to satisfy any and all of
Seller's obligations (including any warranty obligations) under the Rejected
Contracts, if any.
Section 10.6 Product Relabeling. Buyer agrees that neither Buyer nor its
------------------
agents or representatives will ship or deliver or cause to be shipped or
delivered any CommSync Products bearing a Hewlett-Packard Company or Agilent
Technologies, Inc. product label after the Closing Date.
ARTICLE XI. GENERAL
Section 11.1 Integrated Agreement; Amendments.
--------------------------------
(a) The recitals, Exhibits and Schedules to this Agreement and the Related
Agreements constitute an integral part of this Agreement and are incorporated
herein by this reference. This Agreement, the Schedules and the Related
Agreements constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior oral and written agreements and
understandings, and all contemporaneous alleged oral agreements or
understandings, between the parties with respect to the transactions
contemplated by this Agreement.
(b) This Agreement may be modified only by a written instrument duly
executed by each party hereto.
Section 11.2 Interpretation. The headings contained in this Agreement are
--------------
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 11.3 Waiver. No breach of any covenant, agreement, warranty or
------
representation shall be deemed waived unless expressly waived in writing by the
party which is entitled to assert such breach. No waiver of any right hereunder
shall operate as a waiver of any other right or of the same or a similar right
on another occasion.
Section 11.4 Other Remedies; Specific Performance. Except as otherwise
------------------------------------
provided herein, any and all remedies herein expressly conferred upon a party
will be deemed cumulative with and not exclusive of any other remedy conferred
hereby, or by law or equity upon such party, and the exercise by a party of any
one remedy will not preclude the exercise of any other remedy. The parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
Section 11.5 Notices. All notices and other communications between the
-------
parties shall be in writing and shall be deemed to have been duly given (a) on
the same day when delivered personally or by courier to the party to whom
addressed or when sent by facsimile, confirmation received, or (b) three (3)
business days after being mailed by registered or certified mail, return receipt
requested,
-28-
prepaid and addressed, at the following addresses, or at such other addresses as
the parties may designate by written notice:
If to Seller, to:
Hewlett-Packard Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇, Business Development Manager
▇▇▇▇▇ ▇▇▇▇, General Manager, Santa ▇▇▇▇▇ Division
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Buyer, to:
Symmetricom, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Executive Officer
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Vice President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
Ferrari, Olsen, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, LLP
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Section 11.6 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be deemed to be an original Agreement, but
all of which, taken together, shall constitute one Agreement.
Section 11.7 No Transfer or Assignment.
-------------------------
(a) Except as otherwise provided in this Section 11.7, this Agreement and
the rights and obligations set forth herein may not be transferred or assigned
by operation of law or otherwise
-29-
without the consent of the other party. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective legal representatives,
successors and permitted assigns.
(b) Notwithstanding the foregoing, Seller or Buyer or their permitted
successive assignees or transferees, may assign or transfer this Agreement or
delegate any rights or obligations hereunder without consent: (a) to any entity
controlled by, or under common control with such party, or their permitted
successive assignees or transferees; (b) in connection with a merger,
reorganization, transfer, sale of assets or product lines, or change of control
or ownership of such party, or their permitted successive assignees or
transferees; or (c) without limitation, with respect to Seller only, to Agilent
Technologies, Inc.
Section 11.8 Absence of Third Party Beneficiary Rights. No provision of
-----------------------------------------
this Agreement is intended, or will be interpreted, to provide to or create for
any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, shareholder, employee or partner of any party
hereto or any other person or entity, and all provisions hereof will be personal
solely between the parties to this Agreement.
Section 11.9 Mutual Drafting. This Agreement is the joint product of
---------------
Buyer and Seller and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of Buyer and Seller and shall not be
construed for or against either hereto.
Section 11.10 Severability. Should any portion or provision of this
------------
Agreement be declared invalid or unenforceable in any jurisdiction, then such
portion or provision shall be deemed to be severable from this Agreement as to
such jurisdiction (but, to the extent permitted by law, not elsewhere) and shall
not affect the remainder hereof.
Section 11.11 Governing Law. This Agreement shall be governed, construed
-------------
and enforced in accordance with the laws of the State of California, without
reference to the conflict of law provisions thereof.
Section 11.12 Venue. Any actions arising from or relating to the
-----
Transaction shall be brought in San Jose, California.
ARTICLE XII. DEFINITIONS
For the purposes of this Agreement, unless the context otherwise requires,
the following terms shall have the respective meanings set forth below and
grammatical variations of such terms shall have corresponding meanings:
"Assigned Contracts" shall have the meaning set forth in Section 1.1(e) of
this Agreement.
"Assumed Liabilities" shall have the meaning set forth in Section 1.3 of
this Agreement.
"Basket Amount" shall have the meaning set forth in Section 8.3(c) of this
Agreement.
-30-
"Capital Assets" shall have the meaning set forth in Section 1.1(a) of this
Agreement.
"Closing" shall have the meaning set forth in Section 2.1 of this
Agreement.
"Closing Date" shall have the meaning set forth in Section 2.1 of this
Agreement.
"Collective Suite" shall have the meaning set forth in Section 5.17 of this
Agreement.
"CommSync Business" shall have the meaning set forth in the recitals to
this Agreement.
"CommSync Business Financial Information" shall have the meaning set forth
in Section 3.3 of this Agreement.
"CommSync Products" shall have the meaning set forth in the recitals to
this Agreement.
"Damages" shall have the meaning set forth in Section 8.2 of this
Agreement.
"DOJ" shall have the meaning set forth in Section 5.9 of this Agreement.
"Encumbrance" shall mean any lien, pledge, charge, claim, restriction on
transfer, mortgage, security interest or other encumbrance of any sort.
"Environmental Claim" shall mean any notice, claim, act, cause of action or
investigation with respect to the CommSync Business alleging potential liability
(including potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from (A)
the presence, or release into the environment, of any Hazardous Materials (as
defined herein) or (B) any violation, or alleged violation, of any Environmental
Laws (as defined herein).
"Environmental Laws" means all federal, state, local and foreign laws and
regulations relating to pollution or protection of human health or the
environment.
"Excluded Assets" shall have the meaning set forth in Section 1.2 of this
Agreement.
"Expensed Equipment" shall have the meaning set forth in Section 1.1(b) of
this Agreement.
"Final Test Systems" shall mean the final test systems used to test
CommSync Products.
"Force Majeure" shall mean a fire, explosion, disaster, flood, strike,
threatened strike, stoppage of work, embargo, act of God or public enemy, acts
of civil or military authorities, civil disturbance or act of war.
"Form 8-K" shall have the meaning set forth in Section 7.2(d) of this
Agreement.
"FTC" shall have the meaning set forth in Section 5.9 of this Agreement.
-31-
"FTO" shall have the meaning set forth in Section 5.7 of this Agreement.
"FTO Obligation" shall have the meaning set forth in Section 5.7 of this
Agreement.
"GAAP" shall have the meaning set forth in Section 3.3 of this Agreement.
"GPS" shall have the meaning set forth in the recitals to this Agreement.
"Hazardous Materials" means chemicals, pollutants, contaminants, wastes,
toxic substances, radioactive and biological materials, asbestos-containing
materials, hazardous substances, petroleum and petroleum products or any
fraction thereof.
"HSR Act" shall have the meaning set forth in Section 3.1(c) of this
Agreement.
"Indemnified Party" shall have the meaning set forth in Section 8.4 of this
Agreement.
"Indemnifying Party" shall have the meaning set forth in Section 8.4 of
this Agreement.
"Intellectual Property Agreement" shall have the meaning set forth in the
recitals to this Agreement.
"Interim Supply Agreement" shall have the meaning set forth in the recitals
to this Agreement.
"Inventory" shall have the meaning set forth in Section 1.1(h) of this
Agreement.
"Inventory Value" shall have the meaning set forth in Section 5.18 of this
Agreement.
"Licenses and Permits" shall have the meaning set forth in Section 3.12(b)
of this Agreement.
"Material Adverse Effect on Buyer" shall mean a change, event, violation,
inaccuracy, circumstance or effect that materially and adversely affects Buyer
taken as a whole, or the ability of Buyer to consummate the transactions which
it is required to consummate hereunder, except as results primarily from (i) the
effect of the public announcement, pendency or consummation of the transactions
contemplated hereby, or (ii) changes in general economic conditions or changes
affecting the industry generally in which Buyer operates (provided that such
changes do not affect Buyer in a disproportionate manner); provided, however,
that with respect to the foregoing clauses (i) and (ii), Seller shall bear the
initial burden of proof of establishing that any such change, event, violation,
inaccuracy, circumstance or effect is not attributable or does not result
primarily from the effect of the public announcement, pendency or consummation
of the transactions contemplated hereby or changes in general economic
conditions or changes affecting the industry generally in which Buyer operates.
"Material Adverse Effect on the CommSync Business" shall mean a change,
event, violation, inaccuracy, circumstance or effect that materially and
adversely affects the CommSync
-32-
Business taken as a whole, or the ability of Seller to consummate the
transactions which it is required to consummate hereunder, except as results
primarily from (i) the effect of the public announcement, pendency or
consummation of the transactions contemplated hereby, or (ii) changes in general
economic conditions or changes affecting the industry generally in which the
CommSync Business is operated (provided that such changes do not affect the
CommSync Business in a disproportionate manner); provided, however, that with
respect to the foregoing clauses (i) and (ii), Buyer shall bear the initial
burden of proof of establishing that any such change, event, violation,
inaccuracy, circumstance or effect is not attributable or does not result
primarily from the effect of the public announcement, pendency or consummation
of the transactions contemplated hereby or changes in general economic
conditions or changes affecting the industry generally in which the CommSync
Business is operated.
"Officer's Certificate" shall have the meaning set forth in Section 8.4(a)
of this Agreement.
"Pipeline Inventory" shall have the meaning set forth in Section 1.2(e) of
this Agreement.
"Product Defect" shall mean any and all defects in a CommSync Product
(including defects resulting from a product's failure to be Y2K Compliant) that
result in an annualized failure rate of fifteen percent (15%) or greater for
that particular product. For purposes of this definition, failure will be
defined as non-compliance with product specifications which result in failure of
the product and because of which the customer requires Buyer to repair or
replace the applicable product pursuant to the applicable warranty. Annualized
failure rate will be calculated based on the number of confirmed failures under
warranty of the given product sold by Seller prior to the Closing Date, divided
by the total population of units of a given product under warranty that were
sold prior to the Closing Date. The number of confirmed failures of a given
product will be annualized based on data obtained for each six-month period
following the Closing Date.
"Proposed Contracts" shall have the meaning set forth in Section 5.15 of
this Agreement.
"Proprietary Materials" shall mean all rights of Seller in and to the
computer programs, product designs, manufacturing processes, technical
documentation, trade secrets and know how related to the CommSync Business,
other than the intellectual property described in Section 1.2(c) herein.
"Purchase Price" shall have the meaning set forth in Section 1.5 of this
Agreement.
"Purchase Price Allocation" shall have the meaning set forth in Section 1.6
of this Agreement.
"Purchased Assets" shall have the meaning set forth in Section 1.1 of this
Agreement.
"Rejected Contracts" shall have the meaning set forth in Section 5.15 of
this Agreement.
"Related Agreements" shall have the meaning set forth in the recitals to
this Agreement.
-33-
"Retained Liabilities" shall have the meaning set forth in Section 1.4 of
this Agreement.
"Rule 3-05" shall have the meaning set forth in Section 7.2(d).
"SEC" shall have the meaning set forth in Section 7.2(d).
"SEC Letter" shall have the meaning set forth in Section 7.2(d).
"Selected Capital Asset and Equipment Value" shall have the meaning set
forth in Section 5.17 of this Agreement.
"Seller" shall mean, subject to Section 10.2, Hewlett-Packard Company, a
Delaware corporation, except that upon the effective time of the split-off of
Agilent Technologies, Inc., a Delaware corporation, from Hewlett-Packard
Company, Seller shall be deemed to be Agilent Technologies, Inc. and shall not
include Hewlett-Packard Company for all purposes of this Agreement.
"Seller's Knowledge" shall mean the actual knowledge of the following
employees or agents of Seller:
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ Dropping ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
"Senior Management" shall mean ▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇▇.
"Supply Agreement" shall have the meaning set forth in the recitals to this
Agreement.
"Tax" and "Taxes" shall have the meaning set forth in Section 3.13 of this
Agreement.
"Transaction" shall have the meaning set forth in the recitals to this
Agreement.
"Transfer Taxes" shall have the meaning set forth in Section 1.7 of this
Agreement.
"Transferring Employee" shall have the meaning set forth in Section 5.7 of
this Agreement.
"Transition Manager" shall have the meaning set forth in Section 5.11 of
this Agreement.
-34-
"Transition Services Agreement" shall have the meaning set forth in the
recitals to this Agreement.
"Unique Item" shall have the meaning set forth in Section 5.17(d) of this
Agreement.
"Warranty or Warranties" shall mean any and all obligations to service,
repair, replace, credit or refund based upon or arising out of express and
implied warranties made by Seller in connection with the sale of CommSync
Products.
* * * * * * *
-35-
IN WITNESS WHEREOF, this Master Asset Purchase Agreement is hereby executed
by a duly authorized representative of each party as of the date first written
above.
HEWLETT-PACKARD COMPANY SYMMETRICOM, INC.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------ --------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President, Electronic Products Chief Executive Officer and
and Solutions Chief Financial Officer