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EXHIBIT 2.1
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ASSET PURCHASE AGREEMENT
by and between
CIDCO Communications, LLC,
a Delaware limited liability company;
on the one hand
and
CIDCO Incorporated,
a Delaware corporation;
on the other hand.
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Dated as of September 14, 2000
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
September 14, 2000, by and between CIDCO Communications, LLC, a Delaware limited
liability company ("Purchaser") on the one hand, and CIDCO Incorporated, a
Delaware corporation ("Seller") on the other hand.
RECITALS
A. Seller is engaged in the business of providing telephony products and
services through Regional ▇▇▇▇ Operating Companies and independent telephone
operating companies to end users (excluding the Excluded Assets, as defined
below, the "Telephony Business").
B. Seller desires to sell to Purchaser and Purchaser desires to acquire
from Seller substantially all of the assets, and Seller desires Purchaser to
assume and Purchaser desires to assume certain specified liabilities, related to
the Telephony Business, in accordance with the terms hereof (the "Transaction").
NOW, THEREFORE, in consideration of the representations, warranties and
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
set forth or referenced below:
1.1 "Acquisition" shall mean any transaction or series of transactions
involving:
(a) any merger, consolidation, share exchange, business
combination, issuance of securities, acquisition of securities, tender offer,
exchange offer or other similar transaction (i) in which Seller is a constituent
corporation, (ii) in which a Person or "group" (as defined in the Exchange Act
and the rules promulgated thereunder) of Persons directly or indirectly acquires
beneficial or record ownership of securities representing more than 50% of the
outstanding securities of any class of voting securities of Seller, or (iii) in
which Seller issues securities representing more than 50% of the outstanding
securities of any class of voting securities of Seller;
(b) any sale (other than in the ordinary course of business),
lease (other than in the ordinary course of business), exchange, transfer (other
than in the ordinary course of business), license (other than nonexclusive
licenses in the ordinary course of business), acquisition or disposition (other
than in the ordinary course of business) of any business or businesses or assets
that constitute or account for 50% or more of the consolidated net revenues, net
income or assets of Seller; or
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(c) any liquidation or dissolution of Seller.
1.2 "Acquisition Proposal" shall mean any offer, proposal, inquiry or
indication of interest (other than an offer, proposal, inquiry or indication of
interest by Purchaser) contemplating or otherwise relating to any Acquisition.
1.3 "Affiliate" shall mean a Person that directly or indirectly, through
one or more intermediaries, is controlled by, or is under common control with
another Person.
1.4 "Assumed Contracts" shall mean only those Contracts listed on
Schedule 4.9 which rights and obligations Seller will assign and Purchaser will
assume as of the Closing Date, as such schedule may be updated through the
Closing Date, subject to Purchaser's consent (not to be unreasonably withheld)
to include Contracts entered into in the ordinary course of business or
otherwise as agreed between the parties.
1.5 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
1.6 "Confidentiality Agreement" shall have the meaning set forth in
Section 8.1.
1.7 "Contracts" shall mean all those contracts and arrangements relating
to the Telephony Business listed on Schedule 4.9.
1.8 "Encumbrances" shall mean any and all restrictions on or conditions
to transfer or assignment, claims, liabilities, liens, pledges, mortgages,
restrictions, and encumbrances of any kind, whether accrued, absolute,
contingent or otherwise affecting the Assets.
1.9 "Excluded Assets" shall mean the following assets of Seller as of
the Closing: (a) all cash and cash equivalents, (b) all bank accounts, (c) all
accounts receivable, (d) Intellectual Property other than the Transferred
Intellectual Property, (e) all assets used in or related to Seller's business of
designing, manufacturing, marketing and selling Internet appliances and
providing related services (the "Mailstation Business"), (f) prepaid assets and
(g) such other assets, rights or properties of Seller not expressly included in
the Assets.
1.10 "GAAP" shall mean generally accepted accounting principles, as in
effect in the United States from time to time, as supplemented by Regulation S-X
as promulgated by the United States Securities and Exchange Commission, as in
effect from time to time, consistently applied.
1.11 "Governmental Entity" shall mean any court, or any federal, state,
municipal, provincial or other governmental authority, department, commission,
board, service, agency, political subdivision or other instrumentality.
1.12 "Intangibles" shall mean guarantees, rights, warranties, defenses
and claims, choses in action, causes of action, demands, rights of recovery,
suits, covenants not to compete and other rights in favor of Seller relating to
the Assets, the Assumed Liabilities or the Telephony Business, excluding
Intellectual Property.
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1.13 "Inventory" shall mean the inventory, including consumables, parts
(including retainable parts), materials, and spares, wherever located, owned,
primarily employed or held for sale to customers in the conduct of the Telephony
Business, as identified on Schedule 1.13, as the same may be updated or revised
by Seller as of the Closing Date.
1.14 "Knowledge" or "Known" shall mean the current actual knowledge of
any of the officers or directors of a Person.
1.15 "Laws or Decrees" shall mean all applicable federal, state,
provincial and local laws, ordinances, rules, statutes, regulations and all
orders, writs, injunctions, awards, judgments or decrees.
1.16 "Liability" shall mean any direct or indirect liability,
indebtedness, obligation, guarantee or endorsement, whether known or unknown,
whether accrued or unaccrued, whether absolute or contingent, whether due or to
become due, or whether liquidated or unliquidated.
1.17 "Material Adverse Change" shall mean any change (i) that is or is
reasonably likely to be materially adverse to the Assets, the Assumed
Liabilities, or the results of operations or financial condition of the
Telephony Business or (ii) that materially impairs the ability of Purchaser to
perform its obligations hereunder or to consummate the Transaction, provided,
however, that (a) any failure by Seller to meet published revenue or earnings
projections; or (b) any change, event or effect attributable or relating to
conditions affecting Seller's industry, the U.S. economy as a whole or the
foreign economy in locations where Seller has material operations or sales shall
not constitute a Material Adverse Change.
1.18 "Material Adverse Effect" shall mean any effect (i) that is or is
reasonably likely to be materially adverse to the Assets, the Assumed
Liabilities, or the results of operations or financial condition of the
Telephony Business or (ii) that materially impairs the ability of Purchaser to
perform its obligations hereunder or to consummater the Transaction, provided,
however, that (a) any failure by Seller to meet published revenue or earnings
projections; or (b) any change, event or effect attributable or relating to
conditions affecting Seller's industry, the U.S. economy as a whole or the
foreign economy in locations where Seller has material operations or sales shall
not constitute a Material Adverse Effect.
1.19 "Permits" shall mean any and all licenses, permits, authorizations,
certificates, franchises, variances, waivers, consents and other approvals from
any Governmental Entity relating to the Telephony Business, the Assets or the
Assumed Liabilities. Schedule 1.19 contains a complete list of Permits held by
Seller relating to the Telephony Business, the date of expiration of each such
Permit, and whether each such Permit is transferable.
1.20 "Permitted Encumbrances" shall mean (a) easements, covenants,
rights-of-way or other similar restrictions and imperfections of title, (b)
liens for taxes not yet due and payable, and (c) liens described in Schedule
1.20.
1.21 "Person" shall mean an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a Governmental Entity.
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1.22 "Proxy Statement" shall mean the proxy statement/prospectus to be
sent to Seller's stockholders in connection with the Seller Stockholder's
Meeting.
1.23 "Tangible Assets" shall mean the tangible assets, equipment and
other fixed assets, including all tooling, aids, manuals, schematics,
diagnostics and machinery listed on Schedule 1.23.
1.24 "Tax" shall mean any federal, provincial, territorial, local, or
foreign income, profits, gross receipts, capital gains taxes, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental, customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, business license, occupation,
value added, goods and service, alternative or add-on minimum, estimated, or
other tax or governmental charge of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not, relating to the Assets or
the Telephony Business.
1.25 "Tax Return" shall mean any return, declaration, report, estimates,
claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof, covering or relating to the Assets or the Telephony Business.
1.26 "Telephony Business Records" shall mean any and all books, records,
files, drawings, documentation, data or information that have been or now are
used in or with respect to, in connection with or otherwise relating to the
Telephony Business, the Assets or the Assumed Liabilities.
1.27 "Transferred Intellectual Property" shall mean the Trademarks,
Patents and Copyrights listed on Schedule 1.27 and all Trade Secrets currently
used in the Telephony Business and as described on Schedule 1.27.
THE FOLLOWING TERMS ARE DEFINED ELSEWHERE IN THE AGREEMENT:
TERM SECTION WHERE DEFINED
Additional Inventory Payment 2.7(a)
Adverse Consequences 10.7(a)
Agreement Preamble
Allocation Schedule 2.9
Ancillary Agreements 4.2
Assets 2.2
Assumed Liabilities 2.4
Assumption Agreement 9.2(e)(iv)
Cash Payment 2.6
Closing 3.1
Closing Date 3.1
Competition 10.4
Copyrights 4.8(a)(iii)
Derivative Work 10.6(c)
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DOJ 8.2(b)
Damages 11.1(b)
Exchange Act 4.6
Excluded Liabilities 2.5
Former Seller Employees 10.10
FTC 8.2(b)
HSR Act 4.3
HSR Filings 8.2(b)
Indemnification Claim 11.2(a)
Indemnified Person 11.1(b)
Intellectual Property 4.8
Issued Patents 4.8(a)(i)
JAMS Article XII
License 10.6(a)
Mailstation Business 1.9
Marks 10.6(b)
Officer's Certificate 11.2
Patents 4.8(a)(ii)
Patent Applications 4.8(a)(ii)
Patent Claim 10.7
Patent Losses 10.7
Property Taxes 10.3(b)
Prospective New Purchaser Employees 10.1(a)
Purchaser Preamble
Purchaser Compliance Certificate 9.2(a)
Purchaser Financial Statements 5.6
Required Seller Stockholder Vote 4.2
Royalty Payments 2.7(b)
Royalty Periods 2.7(b)(i)
SCPA 4.8(g)
Seller Preamble
Seller Compliance Certificate 9.3(a)
Seller Employee Plans 10.1(b)(iii)
Seller Financial Statement 4.6
Seller SEC Documents 4.6
Seller Stockholder Proposal 6.5(b)
Seller Stockholders' Meeting 6.4(b)
Seller's Cost 2.7(a)(i)
Survival Period 14.1
Telephony Business Recital A
Telephony Products 4.8(c)
Term of the Non-compete 10.6(a)
Third Party Claim 11.2(d)
Third Party Intellectual Property 4.8(d)
Threshold Inventory Sales 2.7(a)(i)
Trademarks 4.8(a)(iv)
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Trade Secrets 4.8(a)(v)
Transaction Recital B
Transaction Taxes 10.3(a)
Warranty and Merchandise Exchange
Amount 2.8
Warranty and Merchandise Exchange
Schedule 2.8(a)
Warranty Obligations 2.4
ARTICLE II
PURCHASE AND SALE OF ASSETS;
ASSUMPTION OF LIABILITIES
2.1 Purchase and Sale of Assets; Assumption of Assumed Liabilities; and
Technology License.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, effective as of the Closing Date:
(i) Seller agrees to sell, assign, transfer, convey and
deliver to Purchaser at the Closing, and Purchaser agrees to purchase from
Seller, all of Seller's right, title and interest in and to the Assets;
(ii) Seller agrees to assign to Purchaser, and Purchaser
agrees to assume from Seller, the Assumed Liabilities;
(iii) Seller agrees to assign to Purchaser, and Purchaser
shall assume from Seller, all of Seller's rights and obligations under the
Assumed Contracts, subject to the obtaining of all necessary consents by the
other parties thereto; and
(iv) Purchaser agrees to grant to Seller the License
pursuant to the terms of Section 10.6 hereof.
(b) In connection with the Transaction, on the Closing Date,
Seller shall take any and all actions that may be required, or reasonably
requested by Purchaser, to transfer good title to all of the Assets to
Purchaser. Seller shall deliver possession of all of the Assets to Purchaser on
the Closing Date at the location and by such means as are reasonably designated
by Purchaser, and Seller shall further deliver to Purchaser proper assignments,
bills of sale, conveyances and other instruments of sale and/or transfer in
forms reasonably satisfactory to Purchaser in order to convey to Purchaser good
title to the Assets.
2.2 Assets. As used in this Agreement, the term "Assets" means,
collectively, all right, title and interest, in and to the following:
(a) Assumed Contracts. All rights and benefits of Seller in
existence on the Closing Date or arising from and after the Closing Date under
the Assumed Contracts;
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(b) Telephony Business Records. All Telephony Business Records;
provided, however, that Seller shall be permitted to retain one copy thereof;
(c) Intangibles. All Intangibles;
(d) Inventory. All Inventory;
(e) Permits. All Permits to the extent transferable by Seller;
(f) Tangible Assets. All Tangible Assets; and
(g) Transferred Intellectual Property. All Transferred
Intellectual Property.
2.3 Excluded Assets. Notwithstanding anything herein to the contrary,
Seller shall retain all of its right, title and interest in and to, and
Purchaser shall not acquire any interest in, the Excluded Assets.
2.4 Assumption of Liabilities. Subject to and upon the terms and
conditions of this Agreement, effective as of the Closing Date, Purchaser agrees
to assume from Seller and to thereafter pay, perform and/or otherwise discharge
in a timely manner:
(a) Liabilities arising from and after the Closing Date under the
Assumed Contracts, other than (i) Liabilities performed or paid, or required
under any Assumed Contracts to have been performed or paid, prior to the Closing
Date, (ii) Liabilities arising from any breach or default of any Assumed
Contract to the extent occurring (or arising from facts and/or activities
occurring) prior to the Closing Date or (iii) Liabilities arising from any tort,
infringement or violation of law by Seller that occurred (or arose from facts
occurring) prior to the Closing Date (the "Assumed Liabilities"); and
(b) Any obligations of Seller under the Assumed Contracts to
provide product warranty repair or merchandise exchange services to those
Persons who purchased Telephony Products prior to the Closing Date.
2.5 Liabilities Not Assumed. Except as expressly set forth in Section
2.4 above, Purchaser shall not assume or become liable or obligated in any way,
and Seller shall retain and remain solely liable for and obligated to discharge
all debts, expenses, contracts, agreements, commitments, obligations, claims,
suits and other liabilities of Seller of any nature whatsoever, whether or not
related to the Telephony Business or the Assets, whether known or unknown,
accrued or not accrued, fixed or contingent, current or arising hereafter,
including, without limitation, any of the following (collectively referred to
herein as "Excluded Liabilities"):
(a) Any Liability arising out of or as a result of any legal or
equitable action or judicial or administrative proceeding initiated at any time
to the extent arising out of facts occurring prior to the Closing Date;
(b) Any Liability of Seller for unpaid Taxes (with respect to the
Telephony Business, the Assets, or Seller's employees or otherwise), any
Liability of Seller for Taxes arising in connection with the consummation of the
Transaction (including any income Taxes)
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arising because Seller is transferring the Assets or any Liability of Seller for
the unpaid Taxes of any Person other than Seller, or a transferee or successor
of Seller, by contract or otherwise;
(c) Any Liabilities related to or arising from any breach or
default by Seller, whether before or after the Closing Date, of any Contract or
related to or arising from any tort, infringement or violation of Laws or
Decrees by Seller, in each case to the extent occurring or arising from facts
occurring on or prior to the Closing Date;
(d) Any Liability of Seller incurred in connection with or under
this Agreement (including, without limitation, with respect to any of Seller's
representations, warranties, agreement or covenants hereunder) relating to the
execution or performance of this Agreement and the transactions contemplated
herein;
(e) Any Liability of Seller under any Seller Employee Plans with
respect to any obligation of Seller to contribute or to make payments to or
provide benefits on behalf of Seller's employees;
(f) Any fees or expenses incurred by Seller hereunder with
respect to Seller's engagement of its counsel, or any investment banker,
appraiser or accounting firm engaged to perform services hereunder; and
(g) any Liability of Seller not related to the Telephony
Business.
2.6 Purchase Price. In consideration of the purchase of the Assets,
Purchaser shall assume the Assumed Liabilities pursuant to Section 2.4, enter
into the License under Section 10.6, pay to Seller the sum of Five Million
Dollars ($5,000,000) (the "Cash Payment"), payable in cash at the Closing by
wire transfer to an account designated by Seller and be obligated to make the
post-closing payments required under Section 2.7 hereunder.
2.7 Post Closing Payments.
(a) Additional Inventory Payments.
(i) After Purchaser has sold Inventory with associated
Seller's Cost equal in the aggregate to $3,500,000 (as such amount may be
adjusted in accordance with Section 2.8) (the "Threshold Inventory Sales"),
Purchaser shall thereafter be obligated to pay Seller, commencing with the
calendar month in which the Threshold Inventory Sales were achieved, a cash
payment equal to the aggregate Seller's Cost with respect to any additional
Inventory sold by Purchaser (net of product returned for credit and excluding
inventory described in Section 2.7(a)(ii)) beyond the Inventory representing the
Threshold Inventory Sales (the "Additional Inventory Payments"). "Seller's Cost"
shall be based on Seller's Costs of the Inventory as set forth on Schedule 1.13.
(ii) In the event Purchaser sells any Inventory at less
than Seller's Cost, Purchaser shall be obligated to pay Seller 80% of the gross
proceeds to Purchaser from the sale of such Inventory. Purchaser shall not be
entitled to sell the Inventory below Seller's Cost without Seller's approval,
such approval not to be unreasonably withheld; provided that with
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respect to sales of Inventory listed on Schedule 2.7, Purchaser shall be
entitled to sell such Inventory below Seller's Cost without Seller's prior
approval.
(iii) Additional Inventory Payments shall be made to
Seller by Purchaser by wire transfer to an account designated by Seller on or
before the 15th day after the close of each calendar month commencing with the
calendar month in which the Threshold Inventory Sales were achieved. Inventory
shall be deemed to have been sold in the month in which Purchaser recognizes
revenue in accordance with GAAP for such sales; provided, however, that in the
event any Inventory is subject to a consignment arrangement, such Inventory
shall not be deemed to be sold under this Section until such time as Purchaser
is paid pursuant to the terms of the consignment arrangement. Purchaser shall
deliver to Seller 15 days after the end of each calendar month a written report
itemizing the Inventory sold in such calendar month.
(b) Royalty Payments.
(i) Purchaser shall pay Seller a quarterly royalty on
revenues (the "Royalty Payments") recognized in accordance with GAAP by
Purchaser from the Telephony Business, including revenues from the Telephony
Products and future products derived from the Transferred Intellectual Property,
but excluding any revenues from sales of Inventory below Seller's Cost pursuant
to Section 2.7(a)(ii) for which Seller shall receive 80% of the gross proceeds
of such sales in lieu of Royalty Payments, as set forth below:
Royalty Period Royalty Percentage
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During the 1st four successive 4%
calendar quarters, and any interim
portion of a quarter, following the
Closing
During the 2nd four successive 3%
calendar quarters following the
Closing
During the 3rd four successive 2%
calendar quarters following the
Closing
During the 4th four successive 1%
calendar quarters following the
Closing
(ii) Royalty Payments shall be made on or before the 30th
day following the end of each quarter during the Royalty Periods (as described
in the table set forth in subparagraph 2.7(b)(i) above), in cash by wire
transfer to an account designated by Seller. Purchaser shall deliver to Seller
within 30 days following the end of each calendar quarter a written report
itemizing the revenues recognized by Purchaser for which a royalty is due under
this Section 2.7(b).
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2.8 Warranty and Merchandise Exchange Schedule. In consideration of
Purchaser's assumption of the warranty repair and merchandise exchange
obligations under the Assumed Contracts, as described in Section 2.4(b),
Purchaser shall be entitled to receive an adjustment to Threshold Inventory
Sales (the "Warranty and Merchandise Exchange Amount"). Within thirty (30) days
after the Closing Date, Seller will prepare and deliver to Purchaser a warranty
adjustment schedule (the "Warranty and Merchandise Exchange Schedule") prepared
in accordance with the adjustment formula and methodology set forth on Schedule
2.8 hereto, which will detail the Warranty and Merchandise Exchange Amount, and
which will be accompanied by appropriate work papers, invoices and such other
supporting documentation as may be necessary for Purchaser to review the
Warranty and Merchandise Exchange Amount. Based on the Warranty and Merchandise
Exchange Amount, Purchaser shall be entitled to claim a credit against the
Threshold Inventory Sales. To the extent the Warranty and Merchandise Exchange
Amount is a positive number, the Threshold Inventory Sales amount shall be
adjusted upward on a dollar-for-dollar basis up to the net book value of the
Inventory (as provided in the Allocation Schedule). In the event the Warranty
and Merchandise Exchange Amount exceeds Purchaser's actual sales of Inventory
(i.e., Purchaser does not reach the Threshold Inventory Sales within 48 months
after the Closing Date), Purchaser shall be entitled to credit such remaining
amounts against Purchaser's Royalty Payments to Seller.
2.9 Inspection Rights. In addition to any recordkeeping obligations
specified in Section 2.8 above, Purchaser will keep complete and accurate
records in connection with its activities in connection with its sale of the
Inventory and revenues from the Telephony Business. During the term of
Purchaser's obligations under Section 2.7 and for three (3) months following the
termination of those obligations, Purchaser will permit Seller or an auditor
selected by Seller to review such records upon reasonable advance written
notice, solely for the purpose of verifying Purchaser's compliance with the
terms of this Agreement. Any such inspection will be conducted during
Purchaser's regular business hours and, to the extent possible, in a manner that
does not interfere with the ordinary business operations of Purchaser. In the
event that any such inspection finds an underpayment of more than three percent
(3%) of the amounts due to Seller for any month, Purchaser will promptly pay
Seller such underpayment and reimburse Seller for its costs and expenses
incurred in connection with any such inspection.
2.10 Allocation. Seller and Purchaser agree to allocate the purchase
price (including the Assumed Liabilities) among the Assets in accordance with
Schedule 2.9 (the "Allocation Schedule").
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ARTICLE III
THE CLOSING
3.1 The Closing. The consummation of the Transaction will take place at
a closing to be held at the offices of ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich LLP, ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ (the "Closing") on the date 5 business
days after all conditions (other than the respective delivery obligations of the
parties) hereto have been satisfied or waived, or at such other time or date as
may be agreed to by the parties to this Agreement (the "Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as otherwise set forth in the Seller Disclosure Schedule provided
to Purchaser, a copy of which is attached hereto as Schedule IV, the following
representations and warranties are made by Seller as set forth below:
4.1 Organization. Seller is a corporation duly organized, validly
existing and in good standing under the laws of Delaware, and has full power and
authority to carry on its businesses as now conducted. Seller is duly qualified
or licensed to do business as a foreign corporation in each jurisdiction in
which it is required to be so qualified or licensed, except in jurisdictions
which the failure to qualify, in the aggregate, would not have a Material
Adverse Effect on the Telephony Business.
4.2 Authorization. This Agreement and all other agreements in
connection with the Transaction to which Seller is or will be a party (such
other agreements being referred to hereinafter as the "Ancillary Agreements")
have been, or upon their execution and delivery hereunder will have been, duly
and validly executed and delivered by Seller and constitute, or will constitute,
valid and binding agreements of Seller enforceable against Seller in accordance
with their respective terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by general equitable principles or the exercise
of judicial discretion in accordance with such principles. Seller has all
requisite power and authority to execute, and deliver this Agreement and, at the
time of the Closing, will have all requisite power and authority to carry out
the transactions contemplated in this Agreement and the Ancillary Agreements.
All requisite corporate action on the part of Seller has been taken to authorize
the execution and delivery of this Agreement and the Ancillary Agreements,
subject only to the approval of the Transaction and this Agreement by Seller's
stockholders as contemplated by Section 6.4. The affirmative vote of the holders
of a majority of the shares of common stock of Seller outstanding on the record
date for the Seller Stockholders' Meeting called pursuant to Section 6.4 with
regard to Seller Stockholder Proposals (the "Required Seller Stockholder Vote")
is the only vote of the holders of any of Seller's capital stock necessary under
applicable Law to approve this Agreement and the transactions contemplated
hereby.
4.3 No Conflicts; Consents. The execution and the delivery of this
Agreement and the Ancillary Agreements do not, and the consummation of the
transactions contemplated herein and
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therein and compliance with the provisions hereof and thereof will not, conflict
with, result in a breach of, constitute a default (with or without notice or
lapse of time, or both) under or violation of, any provision of the Certificate
of Incorporation or Bylaws of Seller or any material instrument, contract or
understanding to which Seller is a party or by which Seller is bound, or by
which Seller or any of its properties is bound, or any federal, state or local
judgment, writ, decree, order, statute, rule or regulation applicable to Seller.
Except for (i) consents, approvals, authorizations, registrations or filings
under applicable securities laws, (ii) the termination of any waiting period
under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), if applicable, and (iii) such other consents, authorizations,
filings, approvals and registrations required under any other applicable Law or
Decree which, if not obtained or made, would not have a Material Adverse Effect
on Seller and would not prevent or materially alter or delay the Transaction, no
consent of any third party or any Governmental Entity is required to be obtained
on the part of Seller to permit the consummation of the transactions
contemplated in this Agreement or the Ancillary Agreements.
4.4 Title to Assets. Seller has good title to or a valid leasehold
interest in, all of the Assets, free and clear of all Encumbrances except for
Permitted Encumbrances. At the Closing, Seller will sell, convey, assign,
transfer and deliver to Purchaser good title, and all Seller's right, title and
interest, in and to all of the Assets, free and clear of all Encumbrances except
for Permitted Encumbrances. Except as set forth in Schedule 1.23, each Tangible
Asset is, and as of the Closing Date will be, in good operating condition and
good repair, ordinary wear and tear excepted, and is usable in the ordinary
course of the Telephony Business.
4.5 Compliance with Laws and Regulations; Governmental Licenses, Etc.
Seller is in compliance with all applicable Laws or Decrees with respect to or
affecting the Telephony Business, the Assets, or the Assumed Liabilities, except
for such failure to comply as which would not result in a Material Adverse
Effect on the Telephony Business, the Assets or the Assumed Liabilities. Seller
is not subject to any order, injunction or decree issued by any Governmental
Entity which could impair the ability of Seller to consummate the transactions
contemplated herein or which could adversely affect Purchaser's conduct of the
Telephony Business or its use and enjoyment of the Assets or the Transferred
Intellectual Property from and after the Closing Date. Schedule 1.19 contains a
complete list of Permits held by Seller relating to the Telephony Business, the
date of expiration of each such Permit, and whether each such Permit is
transferable.
4.6 SEC Reports; Seller Financial Statements. Seller has made available
to Purchaser through ▇▇▇▇▇ a true and complete copy of each statement, report,
registration statement (with the prospectus in the form filed pursuant to Rule
424(b) of the Securities Act), definitive proxy statement, and other filing
filed with the SEC by Purchaser since December 31, 1998; and, prior to the
Closing, Seller will have made available to Purchaser through ▇▇▇▇▇ true and
complete copies of any additional documents filed with the SEC by Seller prior
to the Closing Date (collectively, the "Seller SEC Documents"). As of their
respective filing dates, the Seller SEC Documents complied in all material
respects with the requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and the Securities Act and none of the Seller SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading, except to the extent corrected by a
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subsequently filed Seller SEC Document prior to the date hereof. The financial
statements of Seller, including the notes thereto, included in the Seller SEC
Documents (the "Seller Financial Statements"), complied as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto as of their respective
dates, and have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent throughout the periods indicated and
consistent with each other (except as may be indicated in the notes thereto or,
in the case of unaudited statements included in Quarterly Reports on Form 10-Qs,
as permitted by Form 10-Q of the SEC). The Seller Financial Statements fairly
present the consolidated financial condition and operating results of Seller and
its subsidiaries at the dates and during the periods indicated therein (subject,
in the case of unaudited statements, to normal, recurring year-end adjustments).
There has been no change in Seller's accounting policies except as described in
the notes to the Seller Financial Statements.
4.7 Absence of Certain Changes or Events. Since March 31, 2000, Seller
has conducted the Telephony Business in the ordinary course consistent with past
practices and, without limiting the generality of the foregoing, has not
suffered any Material Adverse Change in the Assets, the Assumed Liabilities or
the Telephony Business.
4.8 Intellectual Property.
(a) For purposes of this Agreement, "Intellectual Property"
means:
(i) all issued patents, reissued or reexamined patents,
revivals of patents, utility models, certificates of invention, registrations of
patents and extensions thereof, regardless of country or formal name
(collectively, "Issued Patents");
(ii) all published or unpublished nonprovisional and
provisional patent applications, reexamination proceedings, invention
disclosures and records of invention (collectively "Patent Applications" and,
with the Issued Patents, the "Patents");
(iii) all copyrights, copyrightable works, semiconductor
topography and mask work rights, including all rights of authorship, use,
publication, reproduction, distribution, performance transformation, moral
rights and rights of ownership of copyrightable works, semiconductor topography
works and mask works, and all rights to register and obtain renewals and
extensions of registrations, together with all other interests accruing by
reason of international copyright, semiconductor topography and mask work
conventions (collectively, "Copyrights");
(iv) trademarks, registered trademarks, applications for
registration of trademarks, service marks, registered service marks,
applications for registration of service marks, trade names, registered trade
names and applications for registrations of trade names and all goodwill
associated therewith (collectively, "Trademarks"); and
(v) all technology, ideas, inventions, designs,
proprietary information, manufacturing and operating specifications, know-how,
formulae, trade secrets, technical data, computer programs, hardware, software
and processes ("Trade Secrets");
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(b) Seller owns and has good title to, or possesses legally
enforceable rights to use, all Intellectual Property used in the Telephony
Business as currently conducted. To Seller's Knowledge, no Person other than
Seller has any right, claim or interest in or with respect to any Transferred
Intellectual Property. Seller owns the Marks and has the right to license the
Marks to Purchaser as contemplated under Section 10.6. There is no unauthorized
use, disclosure or misappropriation of the Transferred Intellectual Property by
any employee or to Seller's Knowledge, former employee of Seller or to Seller's
knowledge, any of its subsidiaries or by any other third party. Seller has no
Knowledge of any prior art that would invalidate the Patents.
(c) Schedule 1.27 lists all Issued Patents, Patent Applications,
Trademarks, Copyrights and, to Seller's Knowledge, Trade Secrets owned by Seller
and currently used in the Telephony Business, including the jurisdictions in
which each such Issued Patent, Patent Application, Trademark or Copyright has
been issued or registered or in which any such application for such issuance and
registration has been filed. A list of all current products of the Telephony
Business ("Telephony Products") is set forth on Schedule 4.8.
(d) Schedule 4.8 contains an accurate list as of the date of this
Agreement of all licenses, sublicenses and other agreements to which Seller is a
party and pursuant to which Seller is authorized to use in the Telephony
Business any Intellectual Property owned by any third party, excluding "off the
shelf" or other software at an aggregate cost not exceeding $10,000 and widely
available through regular commercial distribution channels on standard terms and
conditions ("Third Party Intellectual Property").
(e) Seller has not entered into any agreement to indemnify any
other person against any charge of infringement of any Transferred Intellectual
Property. There are no royalties, fees or other payments payable by Seller to
any Person by reason of the ownership, use, sale or disposition of the
Transferred Intellectual Property.
(f) Seller is not in breach of any license, sublicense or other
agreement relating to the Transferred Intellectual Property. Neither the
execution, delivery or performance of this Agreement or any Ancillary Agreement
contemplated hereby nor the consummation of the Transaction will contravene,
conflict with or result in an infringement on Purchaser's right to own or use
any Transferred Intellectual Property, including any Third Party Intellectual
Property.
(g) All Patents and registered Trademarks included in the
Transferred Intellectual Property are valid and subsisting. All maintenance and
annual fees have been fully paid and all fees paid during prosecution and after
issuance of any Patent comprising or relating to such item have been paid in the
correct entity status amounts. To Seller's Knowledge, in connection with the
Telephony Business, Seller is not infringing, misappropriating or making
unlawful use of any proprietary asset owned or used by any third party. Seller
has not brought a proceeding alleging infringement of the Transferred
Intellectual Property or breach of any license or agreement involving the
Transferred Intellectual Property against any third party. All semiconductor
topography works and mask works have been registered in the United States
Copyright Office under the Semiconductor Chip Protection Act of 1984 (the
"SCPA") within two (2) years after the first date of Commercial Exploitation, as
that term is defined in the SCPA.
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(h) Seller is not subject to any proceeding or outstanding
decree, order, judgment, or stipulation restricting in any manner the use,
transfer, or licensing thereof by Seller, or which may affect the validity, use
or enforceability of the Transferred Intellectual Property. Seller is not
subject to any agreement which restricts in any material respect the use,
transfer, or licensing by Seller of the Transferred Intellectual Property.
4.9 Contracts and Arrangements.
(a) Schedule 4.9 hereto contains a true and accurate list of all
material contracts, pursuant to which Seller enjoys any right or benefit or
undertakes any obligation related to the Transferred Intellectual Property, the
Assumed Liabilities or the Assets (the "Contracts"). Except for the Contracts,
Seller is not a party to or otherwise bound by the terms of any material
contract, agreement or obligation, written or oral, affecting the Assets, the
Transferred Intellectual Property, or the Assumed Liabilities. Each of the
Assumed Contracts is (assuming due authorization and execution by the other
party or parties thereto) valid, binding and in full force and effect and
enforceable by Seller in accordance with its terms, except as enforcement may be
limited by general equitable principles and the exercise of judicial discretion
in accordance with such principles. Except as set forth on Schedule 4.9 attached
hereto, no consents are necessary for the effective assignment to and assumption
by Purchaser of any of the Assumed Contracts.
(b) To Seller's Knowledge, there are no unresolved claims between
Seller and any of the principal licensors, vendors, suppliers, distributors,
representatives or customers of the Telephony Business, and no event which could
reasonably be expected to result in (i) a material breach of an Assumed
Contract, (ii) a request for a material accommodation or concession in
connection with the sale of services, distributors, representatives or customers
or (iii) a significant impairment of the relationships of the Telephony Business
with its principal licensors, vendors, suppliers, distributors, representatives,
or customers, and none of such persons has advised Seller of its intention to
cease doing business with Purchaser following the Closing Date, whether as a
result of the transactions contemplated hereunder or otherwise.
4.10 Brokers. There is no broker, finder, investment banker or other
person, other than Alliant Partners, whose fees are to be paid by Seller
pursuant to the engagement agreement between Alliant Partners and Seller (a true
and correct copy of which has been provided to Buyer), who would have any valid
claim against any of the parties to this Agreement for a commission or brokerage
fee or payment in connection with this Agreement or the transactions
contemplated herein as a result of any agreement of, or action taken by, Seller.
4.11 Litigation. There is no suit, action, proceeding, claim or
investigation, pending or threatened against Seller, or its properties or
officers or directors, before any Governmental Entity. There is no judgment,
decree or order against Seller or any of its properties.
4.12 Employee Benefits. There are no liens or other claims which affect
or could affect the Telephony Business or the Assets, of any nature, whether at
law or in equity, asserted or unasserted, perfected or unperfected, arising out
of or relating to any employee or the operation, sponsorship or participation in
any employee benefit plan, program, procedure or
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other practice of any kind, whether or not subject to the Employee Retirement
Insurance Security Act of 1974.
4.13 Product Liability. To Seller's Knowledge, Seller has no Liability
arising out of any injury to individuals or property as a result of the
ownership, possession, or use of any Telephony Products manufactured, sold,
leased, or delivered by Seller.
4.14 Disclosure. The representations and warranties contained in this
Article IV do not contain any untrue statement of fact or omit to state any fact
necessary in order to make the statements and information contained in this
Article IV not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Except as otherwise set forth in the Purchaser Disclosure Schedule
provided to Seller, a copy of which is attached as Schedule V, and Purchaser
hereby represents and warrants to Seller that:
5.1 Organization and Good Standing. Purchaser is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware and has full power and authority to carry on its
businesses as now conducted. Purchaser is duly qualified or licensed to do
business as a foreign corporation in each jurisdiction in which it is required
to be so qualified or licensed, except in such jurisdictions in which failure to
be so qualified or licensed would not have a Material Adverse Effect on
Purchaser.
5.2 Power, Authorization and Validity. Purchaser has the right, power,
legal capacity and authority to enter into and perform its respective
obligations under this Agreement and the Ancillary Agreements. The execution and
delivery of this Agreement and the Ancillary Agreements have been duly and
validly approved and authorized by the board of directors of Purchaser. No
authorization or approval, governmental or otherwise, is necessary in order to
enable Purchaser to enter into and to perform the terms of this Agreement or the
Ancillary Agreements. This Agreement is and the Ancillary Agreements, when
executed and delivered by Purchaser shall be, the valid and binding obligations
of Purchaser, enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally or by general
equitable principles or the exercise of judicial discretion in accordance with
such principles.
5.3 No Violation of Existing Agreements. Neither the execution and
delivery of this Agreement or any of the Ancillary Agreements, nor the
consummation of the transactions contemplated herein or therein will conflict
with, or result in a material breach or violation of, or constitute a default
(with or without notice, lapse of time or both) or give any party any right to
terminate, accelerate or cancel any provision of Purchaser's charter documents
as currently in effect, any material instrument, contract or understanding to
which Purchaser is a party or by which Purchaser is bound, or by which Purchaser
or any of its properties is bound, or any federal, state or local judgment,
writ, decree, order, statute, rule or regulation applicable to Purchaser. Except
for (i) consents, approvals, authorizations, registrations or filings under
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applicable securities laws, (ii) the termination of any waiting period under the
HSR Act, if applicable, and (iii) such other consents, authorizations, filings,
approvals and registrations required under any other applicable Law or Decree
which, if not obtained or made, would not have a Material Adverse Effect on
Purchaser, no consent of any third party or any Governmental Entity is required
to be obtained on the part of Purchaser to permit the consummation of the
transactions contemplated in this Agreement or the Ancillary Agreements.
5.4 Litigation. There is no suit, action, proceeding, claim or
investigation, pending or threatened against Purchaser before any Governmental
Entity which questions or challenges the validity of this Agreement or any of
the Ancillary Agreements, or any of the transactions contemplated herein or
therein.
5.5 Brokers. There is no broker, finder, investment banker or other
person whose fees are to be paid by Purchaser, who would have any valid claim
against Seller for a commission or brokerage fee or payment in connection with
this Agreement or the transactions contemplated herein as a result of any
agreement of, or action taken by Purchaser.
5.6 Purchaser's Cash Payment. Purchaser has, or will have as of the
Closing Date, adequate financial resources to consummate the transactions
contemplated herein and to deliver to Seller the Cash Payment.
5.7 Disclosure. The representations and warranties contained in this
Article V do not contain any untrue statement of fact or omit to state any fact
necessary in order to make the statements and information contained in this
Article V not misleading.
ARTICLE VI
PRE-CLOSING COVENANTS OF SELLER
6.1 Conduct of Telephony Business. During the period on and from the
date of this Agreement through and including the Closing Date, Seller will
conduct the Telephony Business in the ordinary course consistent with past
practices and will use its reasonable commercial efforts to retain Seller's
employees employed in the Telephony Business, protect and preserve the Assets
and the Transferred Intellectual Property, and maintain and preserve intact
Seller's relationships with its consultants, independent contractors, licensors,
suppliers, vendors, representatives, distributors and other customers and all
others with whom it deals, all in accordance with the ordinary course of
business. Seller shall promptly notify Purchaser in writing of any event
occurring subsequent to the date of this Agreement that would render any
representation or warranty of Seller contained in this Agreement, if made on or
as of the date of that event or the Closing Date, inaccurate to the extent that
the condition set forth in Section 9.3(a) shall not be satisfied.
6.2 Access to Information. Until the Closing, Seller will allow
Purchaser and its agents reasonable access upon reasonable notice and during
normal working hours to the Telephony Business Records and facilities relating
to the Assets, the Assumed Liabilities and the Telephony Business. Until the
Closing, Seller shall cause its accountants to cooperate with Purchaser and
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its agents in making available all relevant financial information requested with
respect to the Assets, the Assumed Liabilities and the Telephony Business.
6.3 Satisfaction of Conditions Precedent. Seller will use its reasonable
commercial efforts to satisfy or cause to be satisfied all the conditions
precedent to the Closing hereunder, and to cause the transactions contemplated
herein to be consummated, and, without limiting the generality of the foregoing,
to obtain all consents and authorizations of third parties and to make all
filings with, and give all notices to, third parties, which may be necessary or
reasonably required on its part in order to effect the transactions contemplated
herein.
6.4 No Solicitation; Seller Stockholders' Meeting.
(a) Except as contemplated under the terms of this Agreement,
Seller shall not (i) solicit any Acquisition Proposal or take any action that
could reasonably be expected to lead to an Acquisition Proposal, (ii) furnish
any information regarding Seller to any Person in connection with an Acquisition
Proposal, or (iii) approve, endorse or recommend any Acquisition Proposal;
provided, however, that prior to the adoption of this Agreement by the Required
Seller Stockholder Vote, this Section 6.4(a) shall not prohibit Seller from
furnishing nonpublic information regarding Seller to, or entering into
discussions with, any Person in response to an Acquisition Proposal or
approving, endorsing or recommending an Acquisition Proposal if the board of
directors of Seller concludes in good faith, after having taken into account the
advice of its outside legal counsel, that failure to take such action would be
inconsistent with its fiduciary obligations to Seller's stockholders under
applicable Law.
(b) Seller shall take such actions as it reasonably deems
necessary to call, give notice of and hold a meeting of the holders of Seller's
common stock (the "Seller Stockholders' Meeting") to vote on a proposal to
approve this Agreement and the Transaction (the "Seller Stockholder Proposal").
Seller will, through its board of directors, recommend to its shareholders
approval of the Seller Stockholder Proposal, subject to the board's fiduciary
duties. The Seller Stockholders' Meeting shall be held as promptly as
practicable following the date hereof. Seller shall ensure that all proxies
solicited in connection with Seller Stockholders' Meeting are solicited in
compliance with all applicable legal requirements. As promptly as practicable
after the date of this Agreement, Seller shall prepare and cause to be filed
with the SEC the Proxy Statement. Seller shall use its best efforts to cause the
Proxy Statement to comply with the rules and regulations promulgated by the SEC
and to respond promptly to any comments of the SEC or its staff. Seller will use
its best efforts to cause the Proxy Statement to be mailed to Seller's
stockholders as promptly as practicable. Purchaser shall promptly furnish to
Seller all information concerning Purchaser that may be required or reasonably
requested in connection with any action contemplated by this Agreement. The
Proxy Statement, at the date mailed to Seller's stockholders and at the time of
the Seller Stockholders' Meeting, will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
in light of the circumstances under which they are made. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act.
6.5 Foreign Telephony Products. Seller shall use best efforts to grant
or cause to be granted to Purchaser, prior to the Closing, an exclusive,
royalty-free license to manufacture and sell certain foreign telephony products
(as described on Schedule 6.5 hereto), in a territory
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comprised of South America, Central America, and the Caribbean, which license
shall become an Assumed Contract and shall be in substantially the form of
Exhibit E hereto.
6.6 Bulk Sales. Purchaser acknowledges and agrees that Seller will not
comply with the provisions of any bulk transaction laws of any jurisdiction in
connection with the Transaction. Accordingly, Purchaser hereby waives compliance
with applicable bulk transfer or similar laws, if any, applicable to the
transactions contemplated in this Agreement.
6.7 WARN Act. Seller shall use its reasonable commercial efforts to
comply with the notice requirements of the Worker Adjustment and Retraining
Notification Act, 29 U.S.C.A. Section 2101 et seq.
ARTICLE VII
PRE-CLOSING COVENANTS OF PURCHASER
7.1 Advise of Changes. Purchaser will promptly notify Seller in writing
of any event occurring subsequent to the date of this Agreement that would
render any representation or warranty of Purchaser contained in this Agreement,
if made on or as of the date of that event or the Closing Date, untrue or
inaccurate to the extent that the condition set forth in Section 9.2(a) shall
not be satisfied.
7.2 Satisfaction of Conditions Precedent. Purchaser will use its
reasonable commercial efforts to satisfy or cause to be satisfied all the
conditions precedent to the Closing hereunder, and to cause the transactions
contemplated herein to be consummated, and, without limiting the generality of
the foregoing, to obtain all consents and authorizations of third parties and to
make all filings with, and give all notices to, third parties which may be
necessary or reasonably required on its part in order to effect the transactions
contemplated herein.
ARTICLE VIII
MUTUAL COVENANTS
8.1 Confidentiality and Publicity. The parties acknowledge that Seller
and Purchaser have previously executed a non-disclosure agreement dated July 28,
2000, as amended (the "Confidentiality Agreement"), which Confidentiality
Agreement is hereby incorporated herein by reference and shall continue in full
force and effect in accordance with its terms. Unless otherwise permitted by
this Agreement, Seller and Purchaser shall consult with each other before
issuing any press release or otherwise making any public statement or making any
other public (or non-confidential) disclosure (whether or not in response to an
inquiry) regarding the terms of this Agreement and the transactions contemplated
hereby, and neither shall issue any such press release or make any such
statement or disclosure without the prior approval of the other (which approval
shall not be unreasonably withheld), except as may be required by law or by
obligations pursuant to any listing agreement with any national securities
exchange or with the National Association of Securities Dealers.
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8.2 Regulatory Filings; Consents; Reasonable Efforts.
(a) Regulatory Filings. Subject to the terms and conditions of
this Agreement, each of Seller and Purchaser shall use its respective reasonable
commercial efforts to (i) make all necessary filings with respect to the
Transaction and this Agreement under the Securities Act, the Exchange Act and
applicable blue sky or similar securities laws and obtain required approvals and
clearances with respect thereto and supply all additional information requested
in connection therewith, (ii) make appropriate filings with federal, state,
provincial or local governmental bodies or applicable foreign governmental
agencies and obtain required approvals and clearances with respect thereto and
supply all additional information requested in connection therewith, (iii)
obtain all consents, waivers, approvals, authorizations and orders required in
connection with the authorization, execution and delivery of this Agreement and
the Ancillary Agreements and the consummation of the Transaction and (iv) take,
or cause to be taken, all appropriate action, and do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective the
transactions contemplated in this Agreement as promptly as practicable.
(b) HSR Filings. As promptly as practicable after the execution
of this Agreement, each of Seller and Purchaser shall make (or shall cause its
respective "ultimate parent entities" as defined under the HSR Act to make) any
and all required governmental filings required under the HSR Act ("HSR
Filings"), with respect to the transactions contemplated under this Agreement
and the Ancillary Agreements, and shall use its respective best efforts to
respond promptly to all inquiries or requests for additional information or
documentation from the Department of Justice ("DOJ"), the Federal Trade
commission ("FTC") or any other Governmental Entity, as applicable. Each of
Seller and Purchaser shall use its respective best efforts to resolve such
objections, if any, as DOJ, FTC or any other Governmental Entity, as applicable,
may assert under applicable antitrust laws with respect to the Transaction;
provided, however, that (i) neither Seller nor Purchaser shall be required
hereunder to divest itself of any assets, properties or businesses and (ii)
neither Seller nor Purchaser shall be required to consent to any modification or
amendment of this Agreement. In the event an action is instituted by DOJ, FTC or
any other Governmental Entity challenging the Transaction as violative of
applicable antitrust laws or an investigation is commenced, each of Purchaser
and Seller will use its respective best efforts to resolve such action or
investigation. Each of Seller and Purchaser, as applicable, will notify the
other of all correspondence, filings or communications between such party and
its representatives, on the one hand, and DOJ and/or FTC, or any other
Governmental Entity, on the other hand, with respect to this Agreement, the
Ancillary Agreements and the transactions contemplated herein and therein. Each
of Seller and Purchaser, as applicable, will furnish the other party with such
necessary information and reasonable assistance as such other party may request
in connection with the preparation of the HSR Filings. Each of Purchaser and
Seller shall, from time to time and on a reasonably timely basis, advise the
other, or its designated representatives, in reasonable detail of the status and
progress of Purchaser's or Seller's, as applicable, HSR Filings.
8.3 Further Assurances. Prior to and following the Closing, each party
to this Agreement agrees to cooperate fully with the other party and to execute
such further instruments, documents and agreements, and to give such further
written assurances, as may be reasonably requested by any other party to better
evidence and reflect the transactions described herein and the Ancillary
Agreements and contemplated herein and therein and to carry into effect the
intent and purposes
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of this Agreement. Prior to and after the Closing Date, Seller shall reasonably
cooperate with Purchaser in attempting to obtain the agreement of parties to the
Assumed Contracts necessary for Purchaser's enjoyment of the Assets or the
Transferred Intellectual Property or Purchaser's conduct of the Telephony
Business following the Closing Date to extend the benefits and obligations of
such Assumed Contracts to Purchaser. Seller shall, from time to time, at the
request of Purchaser, and without further consideration, execute and deliver
such instruments of transfer, conveyance and assignment in addition to those
delivered pursuant to Sections 2.1 and 9.3 hereof, and take such other actions,
as may be necessary to assign, transfer, convey and vest in Purchaser, and to
put Purchaser in possession of, the Assets, including but not limited to
obtaining any and all required consents of third parties which Seller has not
obtained as of the Closing Date. Purchaser shall, from time to time at the
request of Seller, and without further consideration, execute and deliver such
instruments of assumption, and take such other action, as may be reasonably
necessary to effectively confirm the assumption by Purchaser of the Assumed
Liabilities.
ARTICLE IX
CONDITIONS TO CLOSING
9.1 Conditions to Each Party's Obligations. The respective obligations
of each party to this Agreement to effect the transactions to be performed by
such party at the Closing are, at the option of such party, subject to the
satisfaction at or prior to the Closing of the following conditions:
(a) No Orders. No order shall have been entered, and not vacated,
by a court or administrative agency of competent jurisdiction, in any action or
proceeding which enjoins, restrains or prohibits the Transaction or the
consummation of any other transaction contemplated herein.
(b) Permits, Authorizations and Approvals. All permits,
authorizations, approvals and orders required to be obtained under all
applicable Laws or Decrees in connection with the transactions contemplated
herein, including but not limited to any applicable consent or termination of
any applicable waiting period under any Law shall have been obtained and shall
be in full force and effect at the Closing Date.
(c) No Litigation. There shall be no litigation pending or
threatened by any Governmental Entity in which (i) an injunction is or may be
sought against the transactions contemplated herein or (ii) relief is or may be
sought against any party hereto as a result of this Agreement and in which, in
the good faith judgment of the board of directors of either Purchaser or Seller
(relying on the advice of their respective legal counsel), such Governmental
Entity has the probability of prevailing and such relief would have a Material
Adverse Effect upon such party.
(d) Stockholder Approval. The Seller Stockholder Proposals shall
be approved by the stockholders of Seller by the requisite vote under applicable
Law and Seller's Certificate of Incorporation.
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9.2 Conditions to Obligations of Seller. The obligations of Seller to
effect the transactions to be performed by it at the Closing are, at the option
of Seller, subject to the satisfaction at or prior to the Closing of the
following additional conditions:
(a) Representations and Warranties. The representations and
warranties of Purchaser set forth in ARTICLE V hereof shall be true and correct
on and as of the Closing Date with the same force and effect as if such
representations and warranties had been made at the Closing, except for such
inaccuracies which individually or in the aggregate do not constitute a Material
Adverse Effect, and Purchaser shall have delivered to Seller a certificate (the
"Purchaser Compliance Certificate") to such effect dated as of the Closing Date
and signed by the President of Purchaser.
(b) Performance. All of the terms, covenants and conditions of
this Agreement to be complied with and performed by Purchaser, at or prior to
the Closing shall have been duly complied with and performed except for such
breaches or failure to perform which individually or in the aggregate do not
constitute a Material Adverse Effect, and Purchaser shall have delivered to
Seller the Purchaser Compliance Certificate to such effect.
(c) Purchase Price. Purchaser shall have delivered the Cash
Payment to Seller in accordance with Section 2.6 hereof.
(d) Ancillary Agreements. Purchaser shall have executed and
delivered to Seller each of the Ancillary Agreements.
(e) Purchaser's Closing Deliverables. At the Closing, Purchaser
will deliver to Seller the following items:
(i) the Cash Payment;
(ii) the Purchaser Compliance Certificate in accordance
with Section 9.2(a) and (b) hereof;
(iii) copies of each of the Ancillary Agreements executed
by Purchaser;
(iv) an agreement confirming the assumption by Purchaser
of the Assumed Liabilities (the "Assumption Agreement");
(v) a certificate, signed by the Secretary of Purchaser
certifying as to and accuracy of, and attaching copies of, Purchaser's charter
documents and all board of directors resolutions adopted in connection with the
Transaction; and
(vi) all other documents required to be delivered to
Seller under this Agreement.
(f) Opinion of Counsel. Seller shall have received from counsel
to Purchaser an opinion letter in form and substance as set forth in Exhibit B
hereto, addressed to Seller, and dated as of the Closing Date.
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9.3 Conditions to Obligations of Purchaser. The obligations of
Purchaser to effect the transactions to be performed by it at the Closing are,
at the option of Purchaser, subject to the satisfaction at or prior to the
Closing of the following additional conditions:
(a) Representations and Warranties. All the representations and
warranties of Seller set forth in ARTICLE IV hereof shall be true and correct on
and as of the Closing Date with the same force and effect as if such
representations and warranties had been made at the Closing, except for such
inaccuracies which individually or in the aggregate do not constitute a Material
Adverse Effect and Seller shall have delivered to Purchaser a certificate (the
"Seller Compliance Certificate") to such effect dated as of the Closing Date and
signed by the President of Seller.
(b) Performance. All of the terms, covenants and conditions of
this Agreement to be complied with and performed by Seller at or prior to the
Closing shall have been duly complied with and performed except for such
breaches or failures to perform which individually or in the aggregate do not
constitute a Material Adverse Effect, and Seller shall have delivered to
Purchaser the Seller Compliance Certificate to such effect.
(c) Required Consents. Any required consents from third parties
to the Assumed Contracts and other instruments required to allow the
consummation of the Transaction and the other transactions contemplated herein
shall have been obtained, except for such consents the failure to obtain such
would not result in a Material Adverse Effect and evidence thereof satisfactory
to Purchaser shall have been delivered to Purchaser.
(d) Material Adverse Change. There shall have been no Material
Adverse Change relating to the Assumed Liabilities, the Assets or the Telephony
Business.
(e) Key Employee. ▇▇▇ ▇▇▇▇▇ shall have accepted an offer of
employment with Purchaser.
(f) Seller's Closing Deliverables. At the Closing, Seller will
deliver to Purchaser the following items:
(i) a ▇▇▇▇ of sale, intellectual property assignments,
assignments and assumptions of contracts and such other good and sufficient
instruments of conveyance, assignment and transfer, in form and substance
reasonably satisfactory to counsel to Purchaser as shall be legally sufficient
to vest in Purchaser good title to the Assets (including the Assumed Contracts
and Transferred Intellectual Property);
(ii) the Telephony Business Records;
(iii) the Seller Compliance Certificate in accordance with
Section 9.3(a) and (b) hereof;
(iv) all required consents from third parties to the
Assumed Contracts in accordance with Section 9.3(c) hereof;
(v) executed copies of each of the Ancillary Agreements;
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(vi) a certificate, signed by the Secretary of Seller,
certifying as to the truth and accuracy of, and attaching copies of, Seller's
charter documents and board of directors and shareholder resolutions adopted in
connection with the Transaction; and
(vii) all other documents required to be delivered to
Purchaser under the provisions of this Agreement.
(g) Opinion of Counsel. Purchaser shall have received from
counsel to Seller an opinion letter in form and substance as set forth in
Exhibit A attached hereto, addressed to Purchaser, and dated as of the Closing
Date.
ARTICLE X
POST-CLOSING MATTERS
10.1 Employees.
(a) Employment Offer and Employment Terms and Conditions. An
offer of employment shall be made by Purchaser to any or all of those Seller
employees listed on Schedule 10.1 ("Prospective New Purchaser Employees") at the
sole discretion of Purchaser. The parties hereby acknowledge that Purchaser is
not under any obligation to employ any current or future employee of Seller.
(b) Seller's Obligations and Liabilities.
(i) Seller shall be solely responsible for filing all tax
returns with respect to its employment of any Seller employee through the
Closing Date.
(ii) Seller shall be solely liable for and obligated to
pay any liabilities with respect to Seller's termination of employment of any
employee on or before the Closing Date.
(iii) Seller shall be responsible for any liability for
claims filed with respect to any employee of Seller eligible for coverage,
reimbursement and/or benefits under the terms of any Seller Employee Plan.
Additionally, Seller shall be responsible for any liability for accrued benefits
with respect to any Prospective New Purchaser Employee who, as a result of
employment with Seller on or before the Closing Date, was a participant in any
of Seller's Employee Plan. As used herein, "Seller Employee Plans" shall mean,
collectively, any bonus, stock option, stock purchase, incentive, deferred
compensation, supplemental retirement, severance, pension, profit-sharing,
retirement, health, welfare, insurance, or other benefit plans and agreements
for the benefit of current or former employees of Seller.
10.2 Access to Telephony Business Records. From and after the Closing
Date, each party shall afford the other access to all pre-Closing Telephony
Business Records and other information acquired or retained by it pursuant
hereto, including data processing information, upon reasonable notice during
ordinary business hours for all reasonable business purposes, and each party
shall permit the other party to make copies of any such records and retain
possession of such copies. Each of Purchaser and Seller shall use reasonable
care to maintain the
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confidentiality of the Telephony Business Records in the possession of such
party pursuant to the terms and subject to the conditions set forth in the
Confidentiality Agreement.
10.3 Tax Liability.
(a) Except as set forth herein, Seller shall pay all Taxes
arising from or relating to the transactions contemplated in this Agreement (the
"Transaction Taxes"). If a resale certificate, resale purchase exemption
certificate, production machinery and equipment exemption certificate or other
certificate or document of exemption is required to reduce or eliminate the
Transaction Taxes, Purchaser will promptly furnish such certificate or document
to Seller or Purchaser will cooperate with Seller to allow Seller to obtain such
reduction or exemption from Transaction Taxes.
(b) All ad valorem, property (whether real or personal) and
similar taxes ("Property Taxes") with respect to the Assets for any tax period
in which the Closing Date occurs shall be prorated between Purchaser and Seller,
with Seller economically responsible for the Property Taxes for the portion of
the tax year prior to and including the Closing Date. Seller shall be
responsible for the preparation and filing of any tax returns or reports related
to the Assets that are required to be filed on or before the Closing Date.
Seller shall be responsible for all taxes imposed on or with respect to the
Assets that are attributable to any whole or partial taxable period ending on or
before the Closing Date. Purchaser, with the cooperation of Seller, shall be
responsible for the preparation and filing of all tax returns or reports related
to the Assets.
10.4 Covenant Not to Compete. For a period of 48 months, from and after
the Closing Date (the "Term of the Non-Compete"), Seller will not, directly or
indirectly, engage in, own, manage, operate, finance, control, or participate in
the ownership, management, operation or control of the sale of telephony
equipment (not including Internet appliances) worldwide (and for purposes of
this Agreement, any of such activities shall constitute "Competition" and shall
be deemed "Competitive"). Notwithstanding the foregoing restriction, Seller may
engage in sales of Internet appliances and services incident to its Mailstation
Business worldwide, and purchase or otherwise acquire shares of Purchaser
without limitation, except for restrictions under applicable securities laws,
and may purchase or acquire up to (but not more than) five percent (5%) of any
class of securities of any enterprise which is engaged in Competition (but
without otherwise participating in the activities of such enterprise) if (i)
such securities are listed on any national or regional securities exchange or
have been registered under Section 12(g) of the Securities Exchange Act of 1934
or on any foreign securities exchange or (ii) such securities are issued in a
private venture capital round of financing. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this Section 10.4
is invalid or unenforceable, the parties hereto agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope or duration of the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed. In the event of an Acquisition
of Seller after the Closing by a person engaged in Competition, this Section
10.4 shall terminate and be of no further force and effect.
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10.5 Inventory Sales. Purchaser shall use its reasonable commercial
efforts, at Purchaser's expense, to distribute, market and sell the Inventory,
for Seller's account, for 48 months following the Closing Date. With respect to
any proposed sales of Inventory below Seller's Cost, to the extent Seller's
consent is required pursuant to Section 2.7(a)(ii), Seller agrees that such
consent will not be unreasonably withheld. As security for Purchaser's
Additional Inventory Payment obligations to Seller, Purchaser will grant to
Seller a security interest in the Inventory at the Closing pursuant to a
security agreement, a form of which is attached hereto as Exhibit C. Purchaser
agrees to pay, and to hold Seller harmless from, any sales, use, excise, import
or export or similar tax or duty, resulting from the sale of the Inventory, as
well as the collection on withholding thereof, including penalties or interest,
as well as any costs associated with the collection or withholding thereof, and
all license fees and similar fees levied upon sales of such Inventory. Purchaser
will be responsible for all support and fulfillment obligations resulting from
the sale of Inventory. Purchaser will conspicuously inform (including in such
manner as Seller may reasonably designate) all customers that they must direct
to Purchaser all support and maintenance inquiries concerning any of the
Inventory.
10.6 License Agreement.
(a) Effective as of the Closing Date, Purchaser agrees to grant a
license (the "License") to Seller of certain Transferred Intellectual Property
pursuant to the terms of a license agreement, substantially in the form of
attached Exhibit D.
(b) License to the Marks. Effective as of the Closing Date,
Seller agrees to grant to Purchaser an exclusive, nontransferable, royalty-free,
perpetual license to use solely in the manner specified below, the trademarks
and service marks (the "Marks") listed in Schedule 10.6 in connection with
Purchaser's operation of the Telephony Business following Closing. Purchaser
shall solely use the Marks in connection with Purchaser's post-Closing operation
of the Telephony Business and shall not use the Marks in respect of any other
goods or services unless otherwise agreed to by Seller in writing. Seller
reserves for itself all other uses of the Marks including use in the Mailstation
Business. In addition:
(i) Quality Control. The nature and quality of the
products and services supplied in connection with Purchaser's use of the Marks
shall conform to the standards set by Seller. In the event that Purchaser's use
of the Marks do not comply with Seller's quality standards, Purchaser shall
modify its use of the Marks and shall submit corrected specimens of use to
Seller within thirty (30) days of notice by Seller.
(ii) Certain Acknowledgments. Purchaser agrees that it
will not do anything inconsistent with the limited license set forth in this
Section 10.6(b). Purchaser agrees that the use of the Marks by Purchaser shall
inure to the benefit of and be solely on behalf of Seller. Purchaser
acknowledges that its utilization of the Marks as provided herein will not
create or confer any right, title or interest in any other trademark or service
▇▇▇▇ of Seller or the Marks as a combination with other works.
(iii) Restrictions on Use. Purchaser agrees that it will
not adopt or use as part or all of any corporate name, trade name, trademark,
service ▇▇▇▇ or certification ▇▇▇▇, any trademark or other ▇▇▇▇ confusingly
similar to the Marks except to the extent permitted
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under this Section 10.6(b). Purchaser shall use the Marks so that it creates a
separate and distinct impression from any other trademark that may be used by
Purchaser. Purchaser agrees that it will not contest any Seller registration or
application for any of the Marks. Purchaser shall comply with all applicable
laws and regulations pertaining to the proper use and designation of the Marks.
(iv) No Registration. Purchaser agrees not to apply to
register the Marks, or any works or combination of words containing the Marks or
any confusingly similar designation.
(v) Infringement. Seller shall have the sole and exclusive
right to commence or prosecute any claims or suits for infringement or any other
cause of action or claim for relief for unauthorized use of the Marks provided,
however, that if Seller does not institute an infringement suit within ninety
(90) days after written request from Purchaser, Purchaser may, at its expense,
institute and prosecute such suit in the name of Seller.
(vi) Formalities. Purchaser shall assist Seller in
complying with the formalities of local law (if applicable), including but not
limited to, the execution of any application for registration as a registered
user, the execution of additional license agreements suitable for recording with
appropriate authorities, of providing proof of use of the Marks on any other
applicable documents. Purchaser shall pay the expense of complying with such
formalities.
10.7 Patent Indemnification. Notwithstanding anything to the contrary in
this Agreement, and subject to the limitations set forth in this Section 10.7,
Seller shall at its expense, defend, indemnify, and hold Purchaser harmless from
and against any and all losses, costs, damages, Liabilities and expenses arising
from claims, demands, actions, causes of action, including, without limitation,
legal fees (collectively, "Patent Losses"), arising from Purchaser's sale of
Telephony Products or derivatives thereof post-Closing, to the extent such
Patent Losses are incurred by Purchaser as a result of the patent infringement
claim identified on Schedule 10.7 (the "Patent Claim"); provided, however,
Seller's obligation to indemnify Purchaser shall be limited to the extent such
Patent Losses arise from the Telephony Products and follow-on products sold to
Purchaser under the terms of this Agreement and; further, provided, Seller shall
not be obligated to indemnify Purchaser for any Patent Losses which constitute
royalty fees payable for Purchaser's sale of the Telephony Products or follow-on
products post-Closing up to $0.40 per unit of Telephony Product ("Future Patent
Royalty Fees"). Seller shall be obligated to indemnify Purchaser for any Patent
Losses which constitute royalty fees payable for Purchaser's sale of the
Telephony Products or follow-on products post-Closing to the extent such royalty
fees exceed $0.40 per unit of Telephony Product. In the case of a lump sum
settlement of the Patent Claim which includes a settlement of Future Patent
Royalty Fees, the parties to this Agreement will make a good faith estimate of
the settlement amount attributable to the Future Patent Royalty Fees, including
in such calculation a good faith estimate of the number of units of Telephony
Product that will be sold by Purchaser from the Closing Date until the
expiration of the U.S. Patent upon which the Patent Claim is based. Purchaser
shall reimburse Seller for the portion of the lump sum settlement amount
allocated by the parties to the Future Patent Royalty Fees.
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Purchaser acknowledges and agrees that Seller will have sole and
complete control of the defense, prosecution and settlement of the Patent Claim.
Nothing in this Section 10.7 or elsewhere in this Agreement shall be construed
as (i) granting to Purchaser the right to engage in settlement discussions or
negotiations on behalf of Seller or with respect to the Patent Claim or (ii)
creating indemnification obligations on the part of Seller other than those
expressly set forth in this Section 10.7. Purchaser shall fully cooperate with
Seller, at Seller's expense, in the defense, prosecution and settlement of the
Patent Claim. Seller's indemnification obligations under this Section 10.7 apply
solely to the Patent Claim and are separate and distinct from any claims
Purchaser may have under Article XI for Seller's breach of representations and
warranties.
10.8 Notice to Vendors. Seller shall, as soon as practicable following
the Closing Date, send to each vendor who is a party to an Assumed Contract a
written notice of the assignment to Purchaser of Seller's obligation under such
Assumed Contract, which notice shall request such vendor's agreement to look
solely to Purchaser for payment or performance of such Assumed Contract and to
release Seller from all obligations thereunder.
10.9 Collection of Accounts Receivable. To the extent Purchaser receives
any payment after the Closing from a customer on account of accounts receivable
arising from the Telephony Business prior to the Closing, all such payments
shall inure to the benefit of Seller, and shall be remitted promptly by
Purchaser to Seller.
10.10 Distribution from Seller's 401(k) Plan. To the extent that
Purchaser hires individuals who were employed by Seller as of the Closing Date
("Former Seller Employees"), Seller hereby agrees that it shall cause the
accounts, if any, of such Former Seller Employees in Seller's 401(k) Plan to be
distributed as provided by Code Section 401(k)(10)(A)(ii).
ARTICLE XI
INDEMNIFICATION
11.1 Indemnification.
(a) The representations and warranties of the parties hereto
shall survive the Closing and continue in full force and effect until the first
anniversary of the Closing Date (the "Survival Period").
(b) Subject to the limitations set forth in this Article XI,
Seller will indemnify, defend and hold harmless Purchaser and its officers,
directors, agents, and employees (each an "Indemnified Person") from and against
any and all losses, costs, damages, liabilities and expenses arising from
claims, demands, actions, causes of action, including, without limitation,
reasonable legal fees arising out of any misrepresentation or breach of or
default in connection with any of the representations or warranties made by
Seller under Article IV of this Agreement (collectively, "Damages"). Indemnified
Persons shall act in good faith and in a commercially reasonable manner to
mitigate any Damages they may suffer. Notwithstanding anything herein to the
contrary, Seller's obligations to indemnify Purchaser for any Patent Losses
shall be governed exclusively by Section 10.7.
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(c) No claim for Damages shall be made under this Article XI
unless (i) Seller receives written notice of such claim (as provided in Section
11.2) during the applicable Survival Period, and (ii) the aggregate of Damages
shall exceed $250,000 and then only to the extent such amount is exceeded.
Notwithstanding the foregoing, Seller's aggregate indemnification obligations
under this Article XI, and excluding Seller's obligations under Section 10.7,
shall not exceed $1,000,000. The Indemnified Persons' sole and exclusive remedy
against Seller for Damages shall be indemnification under this Article XI;
provided, however, that nothing contained in this Section 11.1(c) shall limit
any remedy at law or equity to which Purchaser may be entitled against Seller
for fraud or intentional misrepresentation.
11.2 Procedures for Indemnification.
(a) Upon receipt by Seller on or before expiration of the
Survival Period of a certificate signed by any officer of Purchaser (an
"Officer's Certificate") stating that with respect to the indemnification
obligations of Seller set forth in this Article XI, Damages exist and specifying
in reasonable detail the individual items of such Damages included in the amount
so stated, the date each such item was paid, or properly accrued or arose, and
the nature of the misrepresentation or breach of warranty, to which such item is
related (attaching relevant documentation) (an "Indemnification Claim"),
Purchaser shall, subject to the provisions of this Article XI, pay such Damages
pursuant to Section 11.2(c), provided, however, Seller shall have a period of
thirty (30) days following delivery of the Officer's Certificate in which to
object to Purchaser's claim for indemnification, by delivery of a written notice
of such objection to Purchaser specifying in reasonable detail the basis for the
objections, and provided further that in the event the Indemnification Claim
involves a Third Party Claim (as defined below) then the procedures in Section
11.2(d) shall be observed by all parties. Failure to timely so object shall
constitute a final and binding acceptance of the Indemnification Claim by
Seller.
(b) If an objection is timely delivered by Seller and the dispute
is not resolved within twenty (20) business days from the delivery of such
objection, such dispute shall be resolved in accordance with the provisions of
Article XIII hereof.
(c) Subject to Section 11.1(c), upon determination of the amount
of an Indemnification Claim, whether by (i) an agreement between the Indemnified
Person and Seller, (ii) an arbitration award or (iii) a final judgment (after
expiration of all periods for appeal of such judgment) or other final
nonappealable order, Seller shall pay the amount of such Indemnification Claim
by (x) authorizing Purchaser to offset the amount of such Indemnification Claim
against Additional Inventory Payments or Royalty Payments (as determined by
Seller), or (y) wire transfer of immediately available funds within ten (10)
days of the date such amount is determined.
(d) Should any claim be made, or suit or proceeding (including,
without limitation, a binding arbitration or an audit by any taxing authority)
be instituted against an Indemnified Person which, if prosecuted successfully,
would be a matter for which Indemnified Person is entitled to indemnification
under this Agreement (a "Third Party Claim"), the obligations and liabilities of
the parties hereunder with respect to such Third Party Claim shall be subject to
the following terms and conditions:
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(i) The Indemnified Person shall give Seller written
notice of any such claim promptly after receipt by Indemnified Person of notice
thereof. Any delay in giving notice hereunder which does not materially
prejudice Seller, shall not affect Indemnified Person rights to indemnification
hereunder. Seller may, at its option, (x) undertake control of the defense
thereof by counsel of its own choosing, or (y) decline to assume control of but
participate in the defense thereof. If Seller assumes control of the defense
thereof, an Indemnified Person may participate in the defense through its own
counsel at its own expense. If Seller declines to control but elects to
participate in the defense thereof, the Indemnified Person may control the
defense and have its expenses promptly reimbursed by Seller. The assumption of
the defense of any Third Party Claim by Seller shall be an acknowledgment by
Seller that such Third Party Claim is subject to indemnification under the
provisions of this Article XI and that such provisions are binding on Seller.
If, however, Seller fails or refuses to undertake the defense of such Third
Party Claim within twenty (20) days after written notice of such claim has been
delivered to Seller by an Indemnified Person, such Indemnified Person shall have
the right to undertake the defense, compromise and, subject to Section 11.2,
settlement of such Third Party Claim with counsel of its own choosing. In the
circumstances described in the preceding sentence, Indemnified Person shall,
promptly upon its assumption of the defense of such Third Party Claim, make an
Indemnification Claim as specified in Section 11.2 which shall be deemed an
Indemnification Claim that is not a Third Party Claim for the purposes of the
procedures set forth herein. Failure of an Indemnified Person to furnish written
notice to Seller of a Third Party Claim shall not release Seller from Seller's
obligations hereunder, except to the extent Seller is prejudiced by such
failure.
(ii) Seller and Indemnified Persons shall cooperate with
each other in all reasonable respects in connection with the defense of any
Third Party Claim, including making available records relating to such claim and
furnishing employees of the Indemnified Person as may be reasonably necessary
for the preparation of the defense of any such Third Party Claim or for
testimony as witness in any proceeding relating to such claim.
(e) Unless Seller has failed to fulfill its obligations under
this Article XI, no settlement by an Indemnified Person of a Third Party Claim
shall be made without the prior written consent by or on behalf of Seller, which
consent shall not be unreasonably withheld or delayed. If Seller has assumed the
defense of a Third Party Claim as contemplated by Section 11.2(d), Seller may
settle such Third Party Claim so long as terms includes full release of all
claims against the Indemnified Person.
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ARTICLE XII
TERMINATION OF AGREEMENT
12.1 Termination. This Agreement may be terminated prior to the Closing
(whether before or after approval of this Agreement by Seller's stockholders):
(a) by mutual written consent of Purchaser and Seller;
(b) by either Purchaser or Seller if the Closing shall not have
occurred by December 31, 2000 (unless the failure to consummate the Transaction
is attributable to a failure on the part of the party seeking to terminate this
Agreement to perform any material obligation required to be performed by such
party at or prior to the Closing);
(c) by either Purchaser or Seller if a court of competent
jurisdiction or other Governmental Entity shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other action,
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Transaction;
(d) by either Purchaser or Seller if (i) Seller Stockholders'
Meeting (including any adjournments and postponements thereof) shall have been
held and completed and Seller's stockholders shall have taken a final vote on a
proposal to adopt this Agreement, and (ii) the Seller Stockholder Proposals
Agreement shall not have been adopted at such meeting by the Required Seller
Stockholder Vote including at any adjournment or postponement thereof);
provided, however, that a party shall not be permitted to terminate this
Agreement pursuant to this Section 11.1(d) if the failure to obtain such
stockholder approval is attributable to a failure on the part of such party to
perform any material obligation required to be performed by such party at or
prior to the Closing;
(e) by Purchaser if (i) any of Seller's representations and
warranties contained in this Agreement shall be inaccurate as of the date of
this Agreement, or shall have become inaccurate as of a date subsequent to the
date of this Agreement (as if made on such subsequent date), such that the
condition set forth in Section 9.3(a) would not be satisfied, or (ii) any of
Seller's covenants contained in this Agreement shall have been breached such
that the condition set forth in Section 9.3(b) would not be satisfied; provided,
however, that if an inaccuracy in Seller's representations and warranties or a
breach of a covenant by Seller is curable by Seller and Seller is continuing to
exercise all reasonable efforts to cure such inaccuracy or breach, then
Purchaser may not terminate this Agreement under this Section 11.1(e) until 30
days after notice of such inaccuracy or breach and such inaccuracy or breach
remains uncured at the end of such 30 day notice period; or
(f) by Seller if (i) any of Purchaser's representations and
warranties contained in this Agreement shall be inaccurate as of the date of
this Agreement, or shall have become inaccurate as of a date subsequent to the
date of this Agreement (as if made on such subsequent date), such that the
condition set forth in Section 9.2(a) would not be satisfied, or (ii) if any of
Purchaser's covenants contained in this Agreement shall have been breached such
that the condition set forth in Section 9.2(b) would not be satisfied; provided,
however, that if an
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inaccuracy in Purchaser's representations and warranties or a breach of a
covenant by Purchaser is curable by Purchaser and Purchaser is continuing to
exercise all reasonable efforts to cure such inaccuracy or breach, then Seller
may not terminate this Agreement under this Section 12.1(f) until 30 days after
notice of such inaccuracy or breach and such inaccuracy or breach remains
uncured at the end of such 30 day notice period.
(g) by Seller or Purchaser, if Seller, in accordance with Section
6.4, shall have entered into a definitive acquisition agreement for an
Acquisition or an Acquisition shall have occurred; provided, however, Purchaser
shall not have the right to terminate this Agreement if (i) Seller's ability to
consummate the Transaction has not been adversely affected by such Acquisition,
(ii) the definitive agreement expressly acknowledges this Agreement and Seller's
performance hereunder, and (iii) Seller continues to perform its obligations
under this Agreement.
12.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 12.1, this Agreement shall be of no further
force or effect; provided, however, that (i) this Section 12.2, Section 12.3 and
ARTICLE XIII shall survive the termination of this Agreement and shall remain in
full force and effect, and (ii) the termination of this Agreement shall not
relieve any party from any liability for any willful breach of any
representation, warranty or covenant contained in this Agreement.
12.3 Expenses; Termination Fees. Except as provided in Section 10.7, all
fees and expenses incurred in connection with this Agreement and the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses, whether or not the Transaction is consummated.
ARTICLE XIII
RESOLUTION OF CONFLICTS AND ARBITRATION
Either party hereto may, by written notice to the other, demand
arbitration of any dispute arising in connection with this Agreement unless the
amount of the damages is at issue in pending litigation with a third party, in
which event arbitration shall not be commenced until such amount is ascertained
or both parties agree to arbitration; and in either such event the matter shall
be settled by arbitration conducted by one arbitrator. Purchaser and Seller
shall agree on the arbitrator, provided that if Purchaser and Seller cannot
agree on such arbitrator, either Purchaser or Seller can request that Judicial
Arbitration and Mediation Services ("JAMS") select the arbitrator. The
arbitrator shall set a limited time period and establish procedures designed to
reduce the cost and time for discovery while allowing the parties an
opportunity, adequate in the sole judgment of the arbitrator, to discover
relevant information from the opposing parties about the subject matter of the
dispute. The arbitrator shall rule upon motions to compel or limit discovery and
shall have the authority to impose sanctions, including attorneys' fees and
costs, to the same extent as a court of competent law or equity, should the
arbitrator determine that discovery was sought without substantial justification
or that discovery was refused or objected to without substantial justification.
The decision of the arbitrator shall be written, shall be in accordance with
applicable law and with this Agreement, and shall be supported by written
findings of fact and conclusion of law which shall set forth the basis for the
decision of the
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arbitrator. Judgment upon any award rendered by the arbitrator may be entered in
any court having jurisdiction. Any such arbitration shall be held in Santa ▇▇▇▇▇
County, California under the commercial rules then in effect of the American
Arbitration Association.
ARTICLE XIV
GENERAL
14.1 Governing Law and Jurisdiction. It is the intention of the parties
hereto that the internal laws of the State of California (irrespective of its
choice of law principles) shall govern the validity of this Agreement, the
construction of its terms, and the interpretation and enforcement of the rights
and duties of the parties hereto.
14.2 Assignment; Binding upon Successors and Assigns. None of the
parties hereto may assign any of its rights or obligations hereunder without the
prior written consent of the other party, which consent shall not be
unreasonably withheld. This Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective permitted successors and
assigns.
14.3 Severability. If any provision of this Agreement, or the
application thereof, shall for any reason and to any extent be held to be
invalid or unenforceable, the remainder of this Agreement and the application of
such provision to other persons or circumstances shall be interpreted so as best
to reasonably effect the intent of the parties hereto. The parties further agree
to replace such invalid or unenforceable provision of this Agreement with a
valid and enforceable provision which will achieve, to the extent possible, the
economic, business and other purposes of the invalid or unenforceable provision.
14.4 Entire Agreement. This Agreement, the exhibits and schedules
hereto, the certificates referenced herein, the exhibits thereto, the Ancillary
Agreements and the Confidentiality Agreement constitute the entire understanding
and agreement of the parties hereto with respect to the subject matter hereof
and thereof and supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied, written or oral,
between the parties with respect hereto and thereto.
14.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument.
14.6 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party shall be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law on such party,
and the exercise of any one remedy shall not preclude the exercise of any other.
14.7 Amendment and Waivers. Any term or provision of this Agreement may
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof for default in payment of
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any amount due hereunder or default in the performance hereof shall not be
deemed to constitute a waiver of any other default or any succeeding breach or
default.
14.8 Notices. All notices and other communications hereunder will be in
writing and will be deemed given (a) upon receipt if delivered personally (or if
mailed by registered or certified mail), (b) the day after dispatch if sent by
overnight courier, (c) upon dispatch if transmitted by telecopier or other means
of facsimile transmission (and confirmed by a copy delivered in accordance with
clause (a) or (b)), properly addressed to the parties at the following
addresses:
Seller: CIDCO Incorporated
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a required copy to:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Purchaser: CIDCO Communications, LLC
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a required copy to: Baker, Donelson, Bearman & ▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Either party may change its address for such communications by giving
notice thereof to the other party in conformity with this Section 14.8.
14.9 Construction and Interpretation of Agreement.
(a) This Agreement has been negotiated by the parties hereto and
their respective attorneys, and the language hereof shall not be construed for
or against either party by reason of its having drafted such language.
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(b) The titles and headings herein are for reference purposes
only and shall not in any manner limit the construction of this Agreement, which
shall be considered as a whole.
(c) As used in this Agreement, any reference to any state of
facts, event, change or effect being "material" with respect to any entity means
a state of facts that is material to the current condition (financial or
otherwise), properties, assets, liabilities, business or operations of such
entity. Whenever the term "enforceable in accordance with its terms" or like
expression is used in this Agreement, it is understood that excepted therefrom
are any limitations on enforceability under applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting the
enforcement of creditor's rights.
14.10 No Joint Venture. Nothing contained in this Agreement shall be
deemed or construed as creating a joint venture or partnership between any of
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party shall have
the power to control the activities and operations of any other and their status
is, and at all times, will continue to be, that of independent contractors with
respect to each other. No party shall have any power or authority to bind or
commit any other. No party shall hold itself out as having any authority or
relationship in contravention of this Section.
14.11 Absence of Third Party Beneficiary Rights. No provisions of this
Agreement are intended, nor shall be interpreted, to provide or create any third
party beneficiary rights or any other rights of any kind in any client,
customer, Affiliate, shareholder, partner of any party hereto or any other
person or entity unless specifically provided otherwise herein, and, except as
so provided, all provisions hereof shall be personal solely between the parties
to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the respective dates set forth next to their signatures below.
Executed on September __, 2000
CIDCO Communications, LLC,
a Delaware limited liability company
By:
-------------------------------------
Title:
----------------------------------
Executed on September __, 2000
CIDCO Incorporated,
a Delaware corporation
By:
-------------------------------------
Title:
----------------------------------
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SCHEDULES AND EXHIBITS
Schedules
---------
Schedule 1.13 Inventory
Schedule 1.19 Permits
Schedule 1.20 Permitted Encumbrances
Schedule 1.23 Tangible Assets
Schedule 1.27 Transferred Intellectual Property
Schedule 2.7 Inventory Not Requiring Consent
Schedule 2.8 Warranty and Merchandise Exchange Methodology
Schedule 2.9 Allocation Schedule
Schedule IV Seller Disclosure Schedule
Schedule V Purchaser Disclosure Schedule
Schedule 4.8 Intellectual Property; Telephony Products
Schedule 4.9 Assumed Contracts
Schedule 6.5 Foreign Telephony Products
Schedule 10.1 Prospective New Purchaser Employees
Schedule 10.4 Officer's Subject to Non-Competition
Schedule 10.6 Marks
Schedule 10.7 Patent Claim
Exhibits
Exhibit A Opinion of Seller's Counsel
Exhibit B Opinion of Purchaser's Counsel
Exhibit C Security Agreement
Exhibit D License Agreement
Exhibit E Foreign Telephony Product License Agreement
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.......................................................................1
1.1 "Acquisition".................................................................1
1.2 "Acquisition Proposal"........................................................2
1.3 "Affiliate"...................................................................2
1.4 "Assumed Contracts"...........................................................2
1.5 "Code"........................................................................2
1.6 "Confidentiality Agreement"...................................................2
1.7 "Contracts"...................................................................2
1.8 "Encumbrances"................................................................2
1.9 "Excluded Assets".............................................................2
1.10 "GAAP"........................................................................2
1.11 "Governmental Entity".........................................................2
1.12 "Intangibles".................................................................2
1.13 "Inventory"...................................................................3
1.14 "Knowledge" or "Known"........................................................3
1.15 "Laws or Decrees".............................................................3
1.16 "Liability"...................................................................3
1.17 "Material Adverse Change".....................................................3
1.18 "Material Adverse Effect".....................................................3
1.19 "Permits"....................................................................3
1.20 "Permitted Encumbrances"......................................................3
1.21 "Person"......................................................................3
1.22 "Proxy Statement".............................................................4
1.23 "Tangible Assets".............................................................4
1.24 "Tax".........................................................................4
1.25 "Tax Return"..................................................................4
1.26 "Telephony Business Records"..................................................4
1.27 "Transferred Intellectual Property"...........................................4
ARTICLE II PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES...........................6
2.1 Purchase and Sale of Assets; Assumption of Assumed Liabilities; and
Technology License............................................................6
2.2 Assets........................................................................6
2.3 Excluded Assets...............................................................7
2.4 Assumption of Liabilities.....................................................7
2.5 Liabilities Not Assumed.......................................................7
2.6 Purchase Price................................................................8
2.7 Post Closing Payments.........................................................8
2.8 Warranty Adjustment Schedule.................................................10
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TABLE OF CONTENTS
(continued)
Page
2.9 Inspection Rights............................................................10
2.10 Allocation...................................................................10
ARTICLE III THE CLOSING....................................................................11
3.1 The Closing..................................................................11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER........................................11
4.1 Organization.................................................................11
4.2 Authorization................................................................11
4.3 No Conflicts; Consents.......................................................11
4.4 Title to Assets..............................................................12
4.5 Compliance with Laws and Regulations; Governmental Licenses, Etc.............12
4.6 SEC Reports; Seller Financial Statements.....................................12
4.7 Absence of Certain Changes or Events.........................................13
4.8 Intellectual Property........................................................13
4.9 Contracts and Arrangements...................................................15
4.10 Brokers......................................................................15
4.11 Litigation...................................................................15
4.12 Employee Benefits............................................................15
4.13 Product Liability............................................................16
4.14 Disclosure...................................................................16
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER......................................16
5.1 Organization and Good Standing...............................................16
5.2 Power, Authorization and Validity............................................16
5.3 No Violation of Existing Agreements..........................................16
5.4 Litigation...................................................................17
5.5 Brokers......................................................................17
5.6 Purchaser's Cash Payment.....................................................17
5.7 Disclosure...................................................................17
ARTICLE VI PRE-CLOSING COVENANTS OF SELLER.................................................17
6.1 Conduct of Telephony Business................................................17
6.2 Access to Information........................................................17
6.3 Satisfaction of Conditions Precedent.........................................18
6.4 No Solicitation; Seller Stockholders' Meeting................................18
6.5 Foreign Telephony Products...................................................18
6.6 Bulk Sales...................................................................19
6.7 WARN Act.....................................................................19
ARTICLE VII PRE-CLOSING COVENANTS OF PURCHASER.............................................19
7.1 Advice of Changes............................................................19
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TABLE OF CONTENTS
(continued)
Page
7.2 Satisfaction of Conditions Precedent.........................................19
ARTICLE VIII MUTUAL COVENANTS..............................................................19
8.1 Confidentiality and Publicity................................................19
8.2 Regulatory Filings; Consents; Reasonable Efforts.............................20
8.3 Further Assurances...........................................................20
ARTICLE IX CONDITIONS TO CLOSING...........................................................21
9.1 Conditions to Each Party's Obligations.......................................21
9.2 Conditions to Obligations of Seller..........................................22
9.3 Conditions to Obligations of Purchaser.......................................23
ARTICLE X POST-CLOSING MATTERS.............................................................24
10.1 Employees....................................................................24
10.2 Access to Telephony Business Records.........................................24
10.3 Tax Liability................................................................25
10.4 Covenant Not to Compete......................................................25
10.5 Inventory Sales..............................................................26
10.6 License Agreement............................................................26
10.7 Patent Indemnification.......................................................27
10.8 Notice to Vendors............................................................28
10.9 Collection of Accounts Receivable............................................28
10.10 Distribution from Seller's 401(k) Plan.......................................28
ARTICLE XI INDEMNIFICATION.................................................................28
11.1 Indemnification..............................................................28
11.2 Procedures for Indemnification...............................................29
ARTICLE XII TERMINATION OF AGREEMENT.......................................................31
12.1 Termination..................................................................31
12.2 Effect of Termination........................................................32
12.3 Expenses; Termination Fees...................................................32
ARTICLE XIII RESOLUTION OF CONFLICTS AND ARBITRATION.......................................32
ARTICLE XIV GENERAL........................................................................33
14.1 Governing Law and Jurisdiction...............................................33
14.2 Assignment; Binding upon Successors and Assigns..............................33
14.3 Severability.................................................................33
14.4 Entire Agreement.............................................................33
14.5 Counterparts.................................................................33
14.6 Other Remedies...............................................................33
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TABLE OF CONTENTS
(continued)
Page
14.7 Amendment and Waivers........................................................33
14.8 Notices......................................................................33
14.9 Construction and Interpretation of Agreement.................................34
14.10 No Joint Venture.............................................................35
14.11 Absence of Third Party Beneficiary Rights....................................35