EXHIBIT 4.30
------------
ASSET PURCHASE AGREEMENT
by and among
EXFO ELECTRO OPTICAL ENGINEERING Inc.,
EXFO GNUBI PRODUCTS GROUP Inc.,
GNUBI COMMUNICATIONS, L.P.,
GNUBI COMMUNICATIONS general partner, llc,
GNUBI COMMUNICATIONS limited partner, llc,
GNUBI COMMUNICATIONS, INC.,
VOTING TRUST CREATED BY
THE IRREVOCABLE VOTING TRUST AGREEMENT AMONG ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Dated September 5, 2002
TABLE OF CONTENTS
ARTICLE I Definitions and Usage............................................1
1.1 Definitions......................................................1
1.2 Usage...........................................................11
ARTICLE II Sale and Transfer of Assets; Closing............................12
2.1 Assets to be Sold...............................................12
2.2 Excluded Assets.................................................13
2.3 Consideration...................................................13
2.4 Liabilities.....................................................14
2.5 Adjustments to Purchase Price for Ad Valorem Taxes..............16
2.6 Allocation......................................................16
2.7 Closing.........................................................16
2.8 Closing Obligations.............................................16
ARTICLE III Representations and Warranties of Selling Parties...............18
3.1 Organization, Good Standing; Authority; Enforceability..........19
3.2 No Conflict.....................................................19
3.3 Financial Statements............................................19
3.4 Books and Records...............................................20
3.5 Sufficiency of Assets...........................................20
3.6 Title to Assets; Encumbrances...................................20
3.7 Inventories.....................................................21
3.8 Product Warranties..............................................21
3.9 Condition of Facilities; Personal Property......................21
3.10 No Undisclosed Liabilities......................................21
3.11 Taxes...........................................................21
3.12 No Material Adverse Change......................................22
3.13 Employee Benefits...............................................22
3.14 Compliance With Legal Requirements; Governmental
Authorizations and Consents..................................23
3.15 Legal Proceedings; Orders.......................................24
3.16 Absence of Certain Changes and Events...........................24
3.17 Contracts; No Defaults..........................................25
3.18 Insurance.......................................................26
3.19 Environmental Matters...........................................26
3.20 Employees.......................................................26
3.21 Intellectual Property Rights....................................27
3.22 Ownership; Relationships With Related Persons...................29
3.23 Brokers, Finders or Financial Advisors..........................30
3.24 Securities Law Matters..........................................30
3.25 Solvency........................................................31
3.26 Capital Expenditures............................................31
3.27 Foreign Corrupt Practices Act...................................31
3.28 Budget..........................................................32
3.29 Accounts Receivable.............................................32
3.30 Disclosure......................................................32
ARTICLE IV Representations and Warranties of Buyer and Buyer Parent........33
4.1 Organization, Good Standing and Qualifications..................33
4.2 Authority; No Conflict..........................................33
4.3 Authorization for Buyer Shares..................................34
4.4 Canadian Documents..............................................34
i
4.5 Brokers, Finders or Financial Advisors..........................34
ARTICLE V Pre-Closing Covenants of the Parties............................34
5.1 Conduct of Business by Seller...................................34
5.2 Public Announcements............................................36
5.3 Non-Solicitation; Non-Negotiation...............................36
5.4 Access to Information, Due Diligence Investigation;
Confidentiality..............................................36
5.5 Best Efforts....................................................36
5.6 Covenants of Parties............................................37
5.7 Notification....................................................37
5.8 Required Approvals..............................................37
5.9 Demonstration Units.............................................37
5.10 Change of Name..................................................37
5.11 Interim Financial Statements....................................38
5.12 Payment of Liabilities..........................................38
5.13 Termination of Employee Plans...................................38
5.14 Loan to Seller..................................................38
5.15 Patent Application Due Diligence................................38
ARTICLE VI Conditions Precedent to Buyer's Obligation to Close.............38
6.1 Accuracy of Representations.....................................39
6.2 Selling Parties' Performance....................................39
6.3 Consents........................................................39
6.4 Additional Documents............................................39
6.5 No Proceedings..................................................40
6.6 No Conflict.....................................................40
6.7 Employment Agreements...........................................40
6.8 Lock-up Agreement...............................................40
6.9 Governmental Authorizations.....................................40
6.10 Securities Regulatory Approvals.................................40
6.11 Release of Sublease Agreement...................................40
6.12 Arrangement With the Frost National Bank........................41
ARTICLE VII Conditions Precedent to Seller's Obligation to Close.........41
7.1 Accuracy of Representations.....................................42
7.2 Buyer and Buyer Parent's Performance............................42
7.3 No Proceeding...................................................42
7.4 Additional Documents............................................42
ARTICLE VIII Termination.....................................................43
8.1 Termination Events..............................................43
8.2 Effect of Termination...........................................43
ARTICLE IX Additional Covenants............................................44
9.1 Payment of All Taxes Resulting from Sale of
Assets by Seller.............................................44
9.2 Payment of Other Retained Liabilities...........................44
9.3 Removing Excluded Assets........................................44
9.4 Reports and Returns.............................................44
9.5 Assistance in Proceedings.......................................44
9.6 Noncompetition; Nonsolicitation; Nondisparagement...............44
9.7 Customer and Other Business Relationships.......................46
9.8 Employees and Employee Benefits.................................46
9.9 Further Assurances..............................................47
9.10 Retention of and Access to Records..............................47
9.11 Distribution of Buyer Shares....................................48
9.12 Operation of Buyer..............................................48
ii
ARTICLE X Indemnification; Remedies.......................................48
10.1 Survival........................................................48
10.2 Indemnification and Reimbursement by Selling Parties............49
10.3 Tax Indemnification.............................................49
10.4 Indemnification and Reimbursement by Buyer......................50
10.5 Limitations On Amount--Selling Parties..........................50
10.6 Limitations On Amount--Buyer and Buyer Parent...................50
10.7 Time Limitations................................................51
10.8 Right of Setoff.................................................51
10.9 Third-Party Claims..............................................51
10.10 Other Claims....................................................53
10.11 Indemnification in Case of Strict Liability
or Indemnitee Negligence.....................................53
ARTICLE XI Confidentiality.................................................53
11.1 Definition of Confidential Information..........................53
11.2 Restricted Use of Confidential Information......................54
11.3 Exceptions......................................................54
11.4 Legal Proceedings...............................................55
11.5 Return or Destruction of Confidential Information...............55
11.6 Attorney-Client Privilege.......................................55
ARTICLE XII General Provisions..............................................56
12.1 Entire Agreement; Amendments....................................56
12.2 Notices.........................................................56
12.3 Amendments; Waivers.............................................58
12.4 Headings........................................................58
12.5 Successors and Assigns..........................................58
12.6 No Third Party Beneficiaries....................................59
12.7 Governing Law; Consent to Jurisdiction..........................59
12.8 Execution.......................................................59
12.9 Severability....................................................59
12.10 Interpretation..................................................59
12.11 Expenses........................................................59
12.12 Specific Performance............................................60
12.13 Time of the Essence.............................................60
iii
PARTS TO DISCLOSURE LETTER
Part 2.1(a) Tangible Personal Property
Part 2.1(d) Governmental Authorizations
Part 2.1(f) Intangible Rights and Property; Intellectual Property
Rights; Going Concern Value; Goodwill; Telephone,
Telecopy and Email Addresses and Listings
Part 2.1(h) Claims Against Third Parties Relating to the Assets
Part 2.1(i) Deposits and Prepaid Expenses
Part 2.2(d) Claims for Refunds and Rights to Offset
Part 2.2(j) Excluded Assets
Part 2.4(a)(i) Assumed Contracts
Part 2.4(a)(iv) Assumed Research and Development Liabilities
Part 2.4(a)(v) Other Assumed Liabilities
Part 2.4(b)(v) Retained Lease Liabilities
Part 3.2 Conflicts
Part 3.3 Financial Statements
Part 3.5 Excluded Assets
Part 3.6(b) Permitted Encumbrances
Part 3.7 Obsolete or Below Standard Inventory
Part 3.8 Product Warranties
Part 3.9 Facilities
Part 3.12 Material Adverse Changes
Part 3.13 Employee Plans
Part 3.14(b) Governmental Authorizations
Part 3.14(c) Consents from Governmental Bodies
Part 3.15 Legal Proceedings/Orders
Part 3.16 Absence of Certain Changes or Events
Part 3.17 Seller Contracts
Part 3.18 Insurance Policies
Part 3.19 Environmental Matters
Part 3.20 Employees
Part 3.21(a) Scheduled Intellectual Property Rights
Part 3.21(b) Intellectual Property Rights Encumbrances
iv
Part 3.21(c) Intellectual Property Rights of Selling or Third
Parties used by Seller
Part 3.21(e) Licenses of Intellectual Property Rights
Part 3.21(k) Infringement of Intellectual Property Rights
Part 3.22(a) Ownership; Relationships with Related Persons
Part 3.22(b) Selling Parties' Relationships with Seller
Part 3.23 Brokers, Finders or Financial Advisors
Part 3.25 Creditors
Part 3.26 Capital Expenditures
Part 3.27(b) Foreign Corrupt Practices Act
Part 3.27(e) Contracts with Prohibited Countries
Part 3.29 Accounts Receivable
Part 5.9 Demonstration Units Held by Related Persons
EXHIBITS
Exhibit A Disclosure Letter
Exhibit 2.6 Allocation of Purchase Price
Exhibit 2.8(a)(i) Form of ▇▇▇▇ of Sale
Exhibit 2.8(a)(ii) Form of Assignment and Assumption Agreement
Exhibit 2.8(a)(vi) Form of Employment Agreements
Exhibit 2.8(a)(vii) Form of Lock-Up Agreement
Exhibit 5.14(a) Form of Note Payable to Buyer
Exhibit 5.14(b) Form of Guaranty
Exhibit 6.4(a) Form of Seller's Counsel Opinion
Exhibit 6.7 Form of Nondisclosure Agreement
Exhibit 7.4 Form of Buyer's Counsel Opinion
Exhibit 9.11 Ultimate Beneficial Owners of Seller Parent
Exhibit 9.12 Covered Employees
v
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("AGREEMENT") is dated September 5, 2002,
by and among EXFO Electro Optical Engineering Inc., a Canadian corporation
("BUYER PARENT"); EXFO Gnubi Products Group Inc., a Delaware corporation
("BUYER") and indirect wholly owned subsidiary of Buyer Parent; gnubi
communications, Inc., a Delaware corporation, on behalf of itself and its
predecessors ("SELLER Parent"); gnubi communications, L.P., a Delaware limited
partnership, on behalf of itself and its predecessors ("SELLER"), and indirect
wholly owned subsidiary of Seller Parent; gnubi communications general partner,
LLC, a Delaware limited liability company ("GENERAL PARTNER"), and wholly owned
subsidiary of Seller Parent and sole general partner of Seller; gnubi
communications limited partner, LLC, a Delaware limited liability company
("LIMITED PARTNER"), and wholly owned subsidiary of Seller Parent and sole
limited partner of Seller; ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, a resident of Richardson, Texas
("JRS"); ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, a resident of Carrollton, Texas ("DE"); and that
certain voting trust created by that certain Irrevocable Voting Trust Agreement
made and entered into as of April 12, 2002 between and among ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ and JRS, a voting trust ("VOTING TRUST") (JRS, DE and
Voting Trust are referred to herein as "FOUNDERS"). Seller, Seller Parent,
General Partner, Limited Partner and Founders are sometimes referred to herein
as "SELLING PARTIES".
RECITALS
Founders own one million four hundred thirty thousand (1,430,000)
shares of the common stock, par value $.01 per share, of Seller Parent, which
constitute 69.75% of the issued and outstanding shares of capital stock of
Seller Parent. Seller desires to sell, and Buyer desires to purchase, the Assets
of Seller for the consideration and on the terms set forth in this Agreement.
The parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS AND USAGE
1.1 DEFINITIONS
For purposes of the Agreement, the following terms and variations
thereof have the meanings specified or referred to in this SECTION 1.1:
"ACTIVE EMPLOYEE"--as defined in SECTION 9.8(A).
"AGREEMENT"--as defined in the first paragraph to this agreement.
"ANNUAL BUYER REVENUES"--the revenues during the period beginning on
the Closing Date and ending on the first anniversary of the Closing Date
calculated in accordance with GAAP (i) from the sale by Buyer or any of its
Related Persons to any Person that is not a Related Person of Buyer of products
designed and shipped by Buyer and (ii) from the licensing of products by Buyer.
"ANNUAL BUYER REVENUES STATEMENT"--as defined in SECTION 2.3(C).
"APPURTENANCES"--all privileges, rights, easements, hereditaments and
appurtenances belonging to or for the benefit of the Land, including all
easements appurtenant to and for the benefit of any Land (a "DOMINANT PARCEL")
for, and as the primary means of access between, the Dominant Parcel and a
public right of way, or for any other use upon which lawful use of the Dominant
Parcel for the purposes for which
1
it is presently being used is dependent, and all rights existing in and to any
streets, alleys, passages and other rights-of-way included thereon or adjacent
thereto (before or after vacation thereof) and underneath any such streets.
"ASSETS"--as defined in SECTION 2.1.
"ASSIGNMENT AND ASSUMPTION AGREEMENT"--as defined in SECTION
2.8(A)(III).
"ASSUMED LIABILITIES"--as defined in SECTION 2.4(A).
"AUDITED FINANCIAL STATEMENTS"--as defined in SECTION 3.3.
"AUDITED BALANCE SHEET"--as defined in SECTION 3.3.
"▇▇▇▇ OF SALE"--as defined in SECTION 2.8(A)(I).
"BREACH"--any breach of, or any inaccuracy in, any representation or
warranty or any breach of, or failure to perform or comply with, any covenant or
obligation, in or of the Agreement or any other Contract, or any event which
with the passing of time or the giving of notice, or both, would constitute such
a breach, inaccuracy or failure.
"BUSINESS"--as defined in SECTION 9.6(A).
"BUSINESS DAY"--any day other than (a) Saturday or Sunday or (b) any
other day on which state or federal banks in New York are permitted or required
to be closed.
"BUYER"--as defined in the first paragraph of the Agreement.
"BUYER CONTACT"--as defined in SECTION 11.2.
"BUYER INDEMNIFIED PERSONS"--as defined in SECTION 10.2.
"BUYER PARENT"--as defined in the first paragraph of the Agreement.
"BUYER SHARES"--as defined in SECTION 2.3(A).
"CANADIAN DOCUMENTS"--as defined in SECTION 4.4.
"CASH CONSIDERATION"--as defined in SECTION 2.3(A).
"CERCLA"--the United States Comprehensive Environmental Response,
Compensation and Liability Act of 1980.
"CLOSING"--as defined in SECTION 2.7.
"CLOSING DATE"--the date on which the Closing actually takes place.
"CLOSING PRICE"--the average closing price per share of Buyer Parent
Subordinate Voting Shares for the ten trading days ending on the third day
preceding the Closing, as reported by the Nasdaq National Market.
2
"COBRA"--Section 4980B of the Code (as well as its predecessor
provision, Section 162(k) of the Code) and Sections 601 through 608, inclusive,
of ERISA.
"CODE"--the Internal Revenue Code of 1986.
"COMPETING BUSINESS"--as defined in SECTION 3.22(B).
"CONFIDENTIAL INFORMATION"--as defined in SECTION 3.21(J).
"CONSENT"--any approval, consent, ratification, waiver or other
authorization.
"CONTEMPLATED TRANSACTIONS"--all of the transactions contemplated by
the Agreement.
"CONTRACT"--any agreement, contract, Lease, consensual obligation,
promise, commitment or undertaking (whether written or oral and whether express
or implied), whether or not legally binding.
"COVERED EMPLOYEE"--as defined in SECTION 9.12.
"COVERED EMPLOYEE PERCENTAGE"--a fraction, the numerator of which is
the number of Covered Employees terminated in a particular Termination Event on
or before the first anniversary of the Closing Date, and the denominator of
which is twenty (20).
"DAMAGES"--as defined in SECTION 10.2.
"DISCLOSURE LETTER"--the disclosure letter delivered by Seller and
Founders to Buyer concurrently with the execution and delivery of the Agreement.
"EARN-OUT AMOUNT"--subject to reduction as set forth in SECTION 9.12,
an amount equal to the sum of the following: (a) 12.5% of the first $6,000,000
of Annual Buyer Revenues, if any, plus (b) 40% of the amount, if any, of Annual
Buyer Revenues between $6,000,000 and $8,000,000, plus (c) 20% of the amount, if
any, of Annual Buyer Revenues between $8,000,000 and $15,000,000.
"EFFECTIVE TIME"--the time at which the Closing is consummated.
"EMPLOYEE PLANS"--as defined in SECTION 3.13(A).
"EMPLOYMENT AGREEMENTS"--as defined in SECTION 2.8(A)(VIII).
"EMPLOYMENT LOSS"--as defined in SECTION 10.2(H).
"ENCUMBRANCE"--any charge, claim, community or other marital property
interest, condition, equitable interest, lien, option, pledge, security
interest, mortgage, right of way, easement, encroachment, servitude, right of
first option, right of first refusal or similar restriction, including any
restriction on use, voting (in the case of any security or equity interest),
transfer, receipt of income or exercise of any other attribute of ownership.
"ENVIRONMENT"--soil, surface waters, groundwaters, land, stream
sediments, surface or subsurface strata, ambient air and any environmental
medium.
3
"ENVIRONMENTAL LAW"--all federal, state or municipal statutes,
regulations order or rules, and any policies or guidelines of any governmental
or regulatory body or agency, relating to the Environment, the transportation of
dangerous goods and occupational health and safety.
"ENVIRONMENTAL, HEALTH AND SAFETY LIABILITIES"--any cost, damages,
expense, liability, obligation or other responsibility arising from or under any
Environmental Law or Occupational Safety and Health Law, including those
consisting of or relating to:
(a) any environmental, health or safety matter or condition
(including on-site or off-site contamination, occupational safety and health and
regulation of any chemical substance or product);
(b) any fine, penalty, judgment, award, settlement, legal or
administrative proceeding, damages, loss, claim, demand or response, remedial or
inspection cost or expense arising under any Environmental Law or Occupational
Safety and Health Law;
(c) financial responsibility under any Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any cleanup, removal, containment or other remediation or response
actions ("Cleanup") required by any Environmental Law or Occupational Safety and
Health Law (whether or not such Cleanup has been required or requested by any
Governmental Body or any other Person) and for any natural resource damages; or
(d) any other compliance, corrective or remedial measure required
under any Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial" and "response action" include the types of
activities covered by CERCLA.
"ENVIRONMENTAL PERMITS"--any and all federal, state and foreign
governmental permits, licenses and other authorizations and approvals issued by
or provided to, as the case may be, any government, governmental or regulatory
body or agency pursuant to an Environmental Law.
"ERISA"--means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE"--as defined in SECTION 3.13(I).
"EXCHANGE ACT"--the Securities Exchange Act of 1934.
"EXCLUDED ASSETS"--as defined in SECTION 2.2.
"FACILITIES"--any real property, leasehold or other interest in real
property currently owned, possessed, leased or operated by Seller, including the
Tangible Personal Property used or operated by Seller at the respective
locations of the Real Property specified in SECTION 3.9.
"FINANCIAL STATEMENTS"--as defined in SECTION 3.3.
"FOUNDERS"--as defined in the first paragraph of the Agreement.
"GAAP"--generally accepted accounting principles for financial
reporting in the United States, applied on a basis consistent with the basis on
which the Audited Balance Sheet and the other financial statements referred to
in SECTION 3.3 were prepared.
"GNUBI AG"--as defined in SECTION 3.22(A).
4
"GOVERNING DOCUMENTS"--with respect to any particular entity, (a) if a
corporation, the articles or certificate of incorporation and the bylaws; (b) if
a general partnership, the partnership agreement and any statement of
partnership; (c) if a limited partnership, the limited partnership agreement and
the certificate of limited partnership; (d) if a limited liability company, the
articles of organization and operating agreement; (e) if another type of Person,
any other charter or similar document adopted or filed in connection with the
creation, formation or organization of the Person; (f) all equityholders'
agreements, voting agreements, voting trust agreements, joint venture
agreements, registration rights agreements or other agreements or documents
relating to the organization, management or operation of any Person or relating
to the rights, duties and obligations of the equityholders of any Person; and
(g) any amendment or supplement to any of the foregoing.
"GOVERNMENTAL AUTHORIZATION"--any Consent, license, registration or
permit issued, granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Legal Requirement.
"GOVERNMENTAL BODY"--any:
(a) nation, state, county, city, town, borough, village, district
or other jurisdiction;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature
(including any agency, branch, department, board, commission, court, tribunal or
other entity exercising governmental or quasi-governmental powers);
(d) multinational organization or body;
(e) body exercising, or entitled or purporting to exercise, any
administrative, executive, judicial, legislative, police, regulatory or taxing
authority or power; or
(f) official of any of the foregoing.
"GROUND LEASE"--any long-term lease of land in which most of the rights
and benefits comprising ownership of the land and the improvements thereon or to
be constructed thereon, if any, are transferred to the tenant for the term
thereof.
"GROUND LEASE PROPERTY"--any land, improvements and appurtenances
subject to a Ground Lease in favor of Seller.
"GUARANTY"--as defined in SECTION 5.14.
"HAZARDOUS ACTIVITY"--the distribution, generation, handling,
importing, management, processing, manufacturing, production, refinement,
Release, storage, transfer, transportation, treatment or use (including any
withdrawal or other use of groundwater) of Hazardous Material in, on, under,
about, from or in connection with any of the Facilities or any part thereof and
any other act, business, operation or thing that materially increases the
danger, or risk of material danger, or poses an unreasonable risk of harm, to
persons or property on or off the Facilities.
"HAZARDOUS MATERIAL"--any substance, material or waste which is
regulated by any Governmental Body, including any material, substance or waste
which is defined as a "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste," "restricted hazardous waste,"
5
"contaminant," "toxic waste" or "toxic substance" under any provision of
Environmental Law, and including petroleum, petroleum products, asbestos,
asbestos-containing material, mold occurring in the interior of a building or
other improvement constituting part of the Facilities, urea formaldehyde and
polychlorinated biphenyls.
"HAZARDOUS SUBSTANCE"--any substance or material which is regulated
under any Environmental Law, including any substance defined under Environmental
Law to be "hazardous," "toxic," "deleterious," "caustic," "dangerous," a
"contaminant," a "dangerous good," a "waste," a "source of contamination" or a
"pollutant."
"HIRED ACTIVE EMPLOYEE"--as defined in SECTION 9.8(B)(I).
"IMPROVEMENTS"--all buildings, structures, fixtures and improvements
located on the Land or included in the Assets, including those under
construction.
"INDEMNIFIED PERSON"--as defined in SECTION 10.9(A).
"INDEMNIFYING PERSON"--as defined in SECTION 10.9(A).
"INDEPENDENT ACCOUNTING FIRM"--as defined in SECTION 2.3(C).
"INTELLECTUAL PROPERTY RIGHTS"--as defined in SECTION 3.21(A).
"INTERIM BALANCE SHEET"--as defined in SECTION 3.3.
"INTERIM FINANCIAL STATEMENTS"--as defined in SECTION 3.3.
"INVENTORIES"--all inventories of Seller, wherever located, including
all finished goods, work in process, raw materials, spare parts and all other
materials and supplies to be used or consumed by Seller in the production of
finished goods.
"IRS"--the United States Internal Revenue Service and, to the extent
relevant, the United States Department of the Treasury.
"KNOWLEDGE"--an individual will be deemed to have Knowledge of a
particular fact or other matter if:
(a) that individual is actually aware of that fact or matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of that fact or matter in the course of assessing the
accuracy of any representation or warranty contained in the Agreement.
A Person (other than an individual) will be deemed to have Knowledge of
a particular fact or other matter if any individual who is serving, or who has
at any time served, as a director, officer, partner, executor or trustee of that
Person (or in any similar capacity) has, or at any time had, Knowledge of that
fact or other matter (as set forth in (a) and (b) above), and any such
individual (and any individual party to the Agreement) will be deemed to have
conducted a reasonably comprehensive investigation regarding the accuracy of the
representations and warranties made herein.
"LAND"--all parcels and tracts of land in which Seller has an ownership
interest.
6
"LEASE"--any Real Property Lease or any lease or rental agreement,
license, right to use or installment and conditional sale agreement to which
Seller is a party and any other Seller Contract pertaining to the leasing or use
of any Tangible Personal Property.
"LEGAL REQUIREMENT"--any federal, state, local, municipal, foreign,
international, multinational or other constitution, law, ordinance, principle of
common law, code, regulation, statute or treaty.
"LIABILITY"--with respect to any Person, any liability or obligation of
such Person of any kind, character or description, whether known or unknown,
absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated
or unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise, whether
arising in contract or tort, in strict liability or otherwise and whether or not
the same is required to be accrued on the financial statements of such Person.
"LOCK-UP AGREEMENT"--the Lock-Up Agreement to be entered into at the
Closing among Buyer, Buyer Parent and the Selling Parties.
"MATERIAL ADVERSE EFFECT"--with respect to any Person or group of
Persons means any event, change or effect that is reasonably likely to be
materially adverse to the financial condition, properties, assets, liabilities,
business, operations, results of operations or prospects of such Person or group
of Persons, as the case may be, but shall not include any effect or change
occurring as a result of general economic or financial conditions affecting the
U.S. economy as a whole that do not individually or in the aggregate have a
disproportionate effect on such Person relative to other similarly situated
companies in such Person's industry.
"NOTE"--defined in SECTION 5.14.
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, including the Occupational Safety and Health Act, and any
program, whether governmental or private (such as those promulgated or sponsored
by industry associations and insurance companies), designed to provide safe and
healthful working conditions.
"ORDER"--any order, injunction, judgment, decree, ruling, assessment or
arbitration award of any Governmental Body or arbitrator.
"ORDINARY COURSE OF BUSINESS"--an action taken by a Person will be
deemed to have been taken in the Ordinary Course of Business only if that
action:
(a) is consistent in nature, scope and magnitude with the past
practices of such Person and is taken in the ordinary course of the normal,
day-to-day operations of such Person; and
(b) does not require authorization by the board of directors,
board of managers, shareholders, limited partners or members of such Person (or
by any Person or group of Persons exercising similar authority).
"PART"--a part or section of the Disclosure Letter.
"PATENT APPLICATION"--as defined in SECTION 5.15.
"PATENT RECIPIENTS"--as defined in SECTION 5.15.
7
"PERMITTED ENCUMBRANCES"--as defined in SECTION 3.6(B).
"PERSON"--an individual, partnership, corporation, business trust,
limited liability company, limited liability partnership, joint stock company,
trust, unincorporated association, joint venture or other entity or a
Governmental Body.
"PROCEEDING"--any action, mediation, arbitration, audit, hearing,
investigation, litigation or suit (whether civil, criminal, administrative,
judicial, injunctive, declaratory or pertaining to a subpoena or investigative,
whether formal or informal, whether public or private) commenced, brought,
conducted or heard by or before, or otherwise involving, any Governmental Body
or arbitrator.
"PURCHASE PRICE"--as defined in SECTION 2.3(A).
"REAL PROPERTY"--the Land and Improvements and all Appurtenances
thereto and any Ground Lease Property.
"REAL PROPERTY LEASE"--any Ground Lease or Space Lease.
"RECORD"--information that is inscribed on a tangible medium or that is
stored in an electronic or other medium and is retrievable in perceivable form.
"RELATED PERSON"--With respect to a particular individual:
(a) each other member of such individual's Family (as defined
below);
(b) any Person that is directly or indirectly controlled by any
one or more members of such individual's Family;
(c) any Person in which members of such individual's Family hold
(individually or in the aggregate) a Material Interest (as defined below); and
(d) any Person with respect to which one or more members of such
individual's Family serves as a director, officer, partner, executor or trustee
(or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly
or indirectly controlled by or is directly or indirectly under common control
with such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner,
executor or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest; and
(e) any Person with respect to which such specified Person serves
as a general partner or a trustee (or in a similar capacity).
For purposes of this definition, (a) "control" (including "controlling,"
"controlled by," and "under common control with") means the possession, direct
or indirect, of the power to direct or cause the direction of the
8
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise, and shall be construed as such term is
used in the rules promulgated under the Securities Act; (b) the "Family" of an
individual includes (i) the individual, (ii) the individual's spouse, (iii) any
other natural person who is related to the individual or the individual's spouse
within the second degree and (iv) any other natural person who resides with such
individual; and (c) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act) of voting securities
or other voting interests representing at least ten percent (10%) of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least ten percent (10%) of the outstanding equity
securities or equity interests in a Person.
"RELEASE"--any release, spill, emission, leaking, pumping, pouring,
dumping, emptying, injection, deposit, disposal, discharge, dispersal, leaching
or migration on or into the Environment or out of any property.
"REMAINING TERM PERCENTAGE"--a fraction, the numerator of which is the
number of days remaining until the first anniversary of the Closing Date, and
the denominator of which is 365.
"REMEDIAL ACTION"--all actions, including any capital expenditures,
required or voluntarily undertaken (a) to clean up, remove, treat or in any
other way address any Hazardous Material or other substance; (b) to prevent the
Release or Threat of Release or to minimize the further Release of any Hazardous
Material or other substance so it does not migrate or endanger or threaten to
endanger public health or welfare or the Environment; (c) to perform
pre-remedial studies and investigations or post-remedial monitoring and care; or
(d) to bring all Facilities and the operations conducted thereon into compliance
with Environmental Laws and environmental Governmental Authorizations.
"REPRESENTATIVE"--with respect to a particular Person, any director,
officer, manager, employee, agent, consultant, advisor, accountant, financial
advisor, legal counsel or other representative of that Person.
"RETAINED LIABILITIES"--as defined in SECTION 2.4(B).
"SCHEDULED INTELLECTUAL PROPERTY RIGHTS"--as defined in SECTION
3.21(A).
"SECURITIES ACT"--the Securities Act of 1933, as amended.
"SELLER"--as defined in the first paragraph of the Agreement.
"SELLER CONTACT"--as defined in SECTION 11.2(A).
"SELLER CONTRACT"--any Contract (a) under which Seller has or may
acquire any rights or benefits; (b) under which Seller has or may become subject
to any obligation or liability; or (c) by which Seller or any of the assets
owned or used by Seller is or may become bound.
"SELLER PARENT"--as defined in the first paragraph of the Agreement.
"SELLING PARTIES"--as defined in the first paragraph of the Agreement.
"SPACE LEASE"--any lease or rental agreement pertaining to the
occupancy of any improved space on any Land.
"SUBSIDIARY"--with respect to any Person, any corporation or other
Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors
9
or similar governing body, or otherwise having the power to direct the business
and policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred), are held by the owner or one or more of its subsidiaries.
"TANGIBLE PERSONAL PROPERTY"--all machinery, equipment, tools,
furniture, office equipment, computer hardware, supplies, materials, vehicles
and other items of tangible personal property of every kind owned or leased by
Seller (wherever located and whether or not carried on Seller's books), together
with any express or implied warranty by the manufacturers or sellers or lessors
of any item or component part thereof and all maintenance records and other
documents relating thereto.
"TAX"--any income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, property, environmental, windfall
profit, customs, vehicle, airplane, boat, vessel or other title or registration,
capital stock, franchise, employees' income withholding, foreign or domestic
withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer, value added, alternative, add-on minimum and
other tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever
and any interest, penalty, addition or additional amount thereon imposed,
assessed or collected by or under the authority of any Governmental Body or
payable under any tax-sharing agreement or any other Contract.
"TAX CLAIMS"--as defined in SECTION 10.3.
"TAX LOSSES"--as defined in SECTION 10.3.
"TAX RETURN"--any return (including any information return), report,
statement, schedule, notice, form, declaration, claim for refund or other
document or information filed with or submitted to, or required to be filed with
or submitted to, any Governmental Body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Legal
Requirement relating to any Tax.
"TERMINATION EVENT"--as defined in SECTION 9.12.
"THIRD PARTY"--a Person that is not a party to the Agreement.
"THIRD-PARTY CLAIM"--any claim against any Indemnified Person by a
Third Party, whether or not involving a Proceeding and whether arising in tort,
in contract, under strict liability or otherwise.
"THREAT OF RELEASE"--a reasonable likelihood of a Release of a
Hazardous Material not later than four years after the Closing Date that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"TRANSACTION AGREEMENTS"--the Agreement, the Lock-Up Agreement, the
▇▇▇▇ of Sale, the Assignment and Assumption Agreement, the Employment
Agreements, the Note and the Guaranty.
"ULTIMATE BENEFICIAL OWNER" -- defined in SECTION 9.11.
"VOTING TRUST"--as defined in the first paragraph of this Agreement.
"WAIVED BREACHES"--as defined in Section 5.7.
"WARN ACT"--defined in SECTION 3.20(B).
10
1.2 USAGE
(a) INTERPRETATION. In the Agreement, unless a clear contrary
intention appears:
(i) the singular number includes the plural number and
vice versa;
(ii) reference to any Person includes such Person's
successors and assigns but, if applicable, only if such successors and
assigns are not prohibited by the Agreement, and reference to a Person
in a particular capacity excludes such Person in any other capacity or
individually;
(iii) reference to any gender includes each other gender;
(iv) reference to any agreement, document or instrument
means such agreement, document or instrument as amended or modified and
in effect from time to time in accordance with the terms thereof;
(v) reference to any Legal Requirement means such Legal
Requirement as amended, modified, codified, replaced or reenacted, in
whole or in part, and in effect from time to time, including rules and
regulations promulgated thereunder, and reference to any section or
other provision of any Legal Requirement means that provision of such
Legal Requirement from time to time in effect and constituting the
substantive amendment, modification, codification, replacement or
reenactment of such section or other provision;
(vi) "hereunder," "hereof," "hereto," and words of similar
import shall be deemed references to the Agreement as a whole and not
to any particular Article, Section or other provision hereof;
(vii) "including" (and with correlative meaning "include")
means including without limiting the generality of any description
preceding such term;
(viii) "or" is used in the inclusive sense of "and/or";
(ix) with respect to the determination of any period of
time, "from" means "from and including" and "to" means "to but
excluding"; and
(x) references to documents, instruments or agreements
shall be deemed to refer as well to all addenda, exhibits, schedules or
amendments thereto.
(B) ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted and all
accounting determinations hereunder shall be made in accordance with GAAP.
(C) LEGAL REPRESENTATION OF THE PARTIES. The Agreement was
negotiated by the parties with the benefit of legal representation, and any rule
of construction or interpretation otherwise requiring the Agreement to be
construed or interpreted against any party shall not apply to any construction
or interpretation hereof.
11
ARTICLE II
SALE AND TRANSFER OF ASSETS; CLOSING
2.1 ASSETS TO BE SOLD
Upon the terms and subject to the conditions set forth in the
Agreement, at the Closing, but effective as of the Effective Time, Seller shall
sell, convey, assign, transfer and deliver to Buyer, and Buyer shall purchase
and acquire from Seller, free and clear of any Encumbrances other than Permitted
Encumbrances, all of Seller's right, title and interest in and to all of
Seller's property and assets, real, personal or mixed, tangible and intangible,
of every kind and description, wherever located, including the following (but
excluding the Excluded Assets):
(a) all Tangible Personal Property, including those items
described in Part 2.1(a);
(b) all Inventories;
(c) all Seller Contracts listed in Part 2.4(a)(i) and all Seller
Contracts assumed by Buyer under SECTION 2.4(A)(II);
(d) all Governmental Authorizations and all pending applications
therefor or renewals thereof, in each case to the extent transferable to Buyer,
including those listed in Part 2.1(d);
(e) all data and Records related to the operations of Seller,
including client and customer lists and Records, referral sources, research and
development reports and Records, production reports and Records, service and
warranty Records, equipment logs, operating guides and manuals, financial and
accounting Records, creative materials, advertising materials, promotional
materials, studies, reports, correspondence and other similar documents and
Records and, subject to Legal Requirements, copies of all personnel Records and
other Records described in SECTION 2.2(F);
(f) all of the intangible rights and property of Seller,
Intellectual Property Rights, going concern value, goodwill, telephone, telecopy
and e-mail addresses and listings and those items listed in Part 2.1(f);
(g) all insurance benefits, including rights and proceeds, arising
from or relating to the Assets or the Assumed Liabilities prior to the Effective
Time, unless expended in accordance with this Agreement;
(h) all claims of Seller against Third Parties relating to the
Assets, whether ▇▇▇▇▇▇ or inchoate, known or unknown, contingent or
noncontingent, including all such claims listed in Part 2.1(h); and
(i) all rights of Seller relating to deposits and prepaid expenses
listed in Part 2.2(i), claims for refunds and rights to offset in respect
thereof that are not listed in Part 2.2(d) or not referenced in SECTION 2.2(G)
and that are not excluded under SECTION 2.2(J).
All of the property and assets to be transferred to Buyer hereunder are
herein referred to collectively as the "ASSETS."
Notwithstanding the foregoing, the transfer of the Assets pursuant to
the Agreement shall not include the assumption of any Liability related to the
Assets unless Buyer expressly assumes that Liability pursuant to SECTION 2.4(A).
12
2.2 EXCLUDED ASSETS
Notwithstanding anything to the contrary contained in SECTION 2.1 or
elsewhere in the Agreement, the following assets of Seller (collectively, the
"EXCLUDED ASSETS") are not part of the sale and purchase contemplated hereunder,
are excluded from the Assets and shall remain the property of Seller after the
Closing:
(a) all cash, cash equivalents and short-term marketable
investments;
(b) all Accounts Receivable;
(c) all minute books and other organizational records;
(d) those rights relating to deposits and prepaid expenses and
claims for refunds, including refunds on prepaid insurance, and rights to offset
in respect thereof listed in Part 2.2(d);
(e) all of the Seller Contracts not listed in Part 2.4(a)(i);
(f) all personnel Records and other Records that Seller is
required under any Legal Requirement to retain in its possession;
(g) all claims for refund of Taxes and other governmental charges
of whatever nature;
(h) all rights in connection with and assets of the Employee
Plans;
(i) all rights of Seller under the Transaction Agreements;
(j) the property and assets expressly designated in Part 2.2(j) as
Excluded Assets; and
(k) all stock in Gnubi AG and in gnubi communications Canada, Inc.
2.3 CONSIDERATION
(a) PURCHASE PRICE. The total consideration to be paid by Buyer
for the Assets (the "PURCHASE PRICE") shall consist of the following: (i)
$1,780,205 payable in cash at the Closing (the "CASH CONSIDERATION"), (ii) that
number of Buyer Parent Subordinate Voting Shares equal to $2,500,000 divided by
the Closing Price (the "BUYER SHARES"), which shall be held by Buyer as provided
below in this SECTION 2.3 pursuant to the terms of the Lock-Up Agreement, and
(iii) the Earn-Out Amount, which shall be paid as provided below. If prior to
the Closing, there is any stock dividend or stock split or reclassification of
the outstanding Buyer Parent Subordinate Voting Shares, then in such event any
and all new, substituted, or additional securities to which Seller would have
been entitled by reason of their ownership of the Buyer Shares had the Closing
occurred prior to such event shall be considered Buyer Shares for the purposes
of the Agreement and the consideration to be received by Seller shall be
adjusted accordingly. No fraction of a share of Buyer Parent Subordinate Voting
Shares shall be issued, and each fractional share thereof shall be rounded up to
the nearest whole number.
(b) LOCK-UP. The Buyer Shares will be held by Buyer pursuant to
the Lock-Up Agreement until released in accordance with the terms of the Lock-Up
Agreement. The provisions of the Lock-Up Agreement shall govern in the event of
any conflict between the Lock-Up Agreement and this SECTION 2.3.
13
(c) CALCULATION AND PAYMENT OF EARN-OUT AMOUNT. On or before sixty
(60) days after the first anniversary of the Closing Date, Buyer shall deliver
to Seller a statement setting forth in reasonable detail its calculation of
Annual Buyer Revenues and the Earn-out Amount based on such Annual Buyer
Revenues (the "ANNUAL BUYER REVENUES STATEMENT"). If Seller disputes Buyer's
Annual Buyer Revenues Statement, Seller shall notify Buyer of its objections
within sixty (60) days after delivery of the Annual Buyer Revenues Statement and
shall set forth in reasonable detail in such notice the reason for Seller's
objections. If Seller fails to deliver such notice within such time period, (i)
Seller shall be deemed to have accepted the Annual Buyer Revenues Statement and
shall not be entitled to dispute such Annual Buyer Revenues Statement and (ii)
Buyer shall pay the Earn-out Amount reflected on the Annual Buyer Revenues
Statement to Buyer as provided below within the earlier of ten (10) days after
the end of the objection period or notification from Seller that it does not
object to the Annual Buyer Revenues Statement. If Seller delivers such notice,
Buyer and Seller shall endeavor in good faith to resolve their dispute over the
Annual Buyer Revenues Statement within sixty (60) days after Buyer's receipt of
Seller's notice. If they are unable to do so within such 60-day period, the
dispute shall be submitted to an audit partner experienced in the business
conducted by Buyer of an independent nationally-recognized accounting firm in
the United States as shall be mutually acceptable to Sellers and Buyer (an
"INDEPENDENT ACCOUNTING FIRM") who shall act as an expert and not as an
arbitrator, and who shall resolve the dispute within 10 days. The decision of
the Independent Accounting Firm as to the Annual Buyer Revenues Statement shall
be final and binding upon the Buyer and Seller, except to the extent of any
merely computational errors present on the face of the Annual Buyer Revenues
Statement which, once corrected, shall be final and binding upon Buyer and
Seller. One-half of the expenses of the Independent Accounting Firm shall be
borne by Seller, and the remaining one-half of such expenses shall be borne by
Buyer. Seller and Buyer shall cooperate with each other in the determination of
the Annual Buyer Revenues Statement, including without limitation, allowing
Seller and the Independent Accounting Firm full access to the books and records
of Buyer. Any party shall make any payment required to comply with such decision
within ten (10) days after such decision is reached. Payment of any Earn-out
Amount shall be made by check to Seller at the address set forth in SECTION
12.2, or at such other place in the United States of America as Seller shall
designate to Buyer in writing, or by wire transfer to an account designated by
Seller in writing. If any payment of any Earn-out Amount is due on a day which
is not a Business Day, such payment shall be due on the next succeeding Business
Day.
2.4 LIABILITIES
(a) ASSUMED LIABILITIES. On the Closing Date, but effective as of
the Effective Time, Buyer shall assume and agree to discharge only the following
Liabilities of Seller (the "ASSUMED LIABILITIES"):
(i) any Liability arising after the Effective Time under
the Seller Contracts described in Part 2.4(a)(i) (other than any
Liability arising under the Seller Contracts listed on Part 2.4(a)(i)
arising out of or relating to a Breach that occurred prior to the
Effective Time);
(ii) any Liability of Seller arising after the Effective
Time under any Seller Contract that is entered into by Seller after the
date hereof in accordance with the provisions of the Agreement that
Buyer expressly assumes at its sole discretion (other than any
Liability arising out of or relating to a Breach that occurred prior to
the Effective Time);
(iii) any Liability to Seller's customers under product or
service warranties up to, but not exceeding, $15,000 in the aggregate
(inclusive of labor charges at the standard rates used by Buyer);
(iv) any Liability up to, but not exceeding, $150,000 in
the aggregate for the payment of materials and services used in
Seller's research and development projects pursuant to the purchase
orders specifically set forth on Part 2.4(a)(iv); and
14
(v) any Liability of Seller described in Part 2.4(a)(v).
(b) RETAINED LIABILITIES. The Retained Liabilities shall remain
the sole responsibility of and shall be retained, paid, performed and discharged
solely by Seller. "RETAINED LIABILITIES" shall mean every Liability of the
Selling Parties other than the Assumed Liabilities, including:
(i) any trade account payable incurred by Seller that
remains unpaid other than those set forth on Part 2.4(a)(iv);
(ii) any Liability arising out of or relating to products
of Seller to the extent manufactured or sold prior to the Effective
Time other than as provided in SECTION 2.4(A)(III);
(iii) any Liability under any Contract assumed by Buyer
pursuant to SECTION 2.4(A) that arises after the Effective Time but
that arises out of or relates to any Breach that occurred prior to the
Effective Time;
(iv) any Liability for Taxes which are attributable or
relating to (A) the Assets or the business or the ownership of Seller
for any periods ending on or before the Effective Time, (B) any Taxes
that will arise as a result of the Contemplated Transactions, and (C)
any deferred Taxes of any nature;
(v) any Liability under any Contract not assumed by
Buyer, including (1) any Liability arising out of or relating to
Seller's indebtedness not assumed by Buyer under SECTION 2.4(A), or any
security interest related thereto and (2) the Leases set forth on Part
2.4(b)(v);
(vi) any Liability to Seller's customers under product or
service warranties other than as provided in SECTION 2.4(A)(III);
(vii) any Environmental, Health and Safety Liabilities
arising out of or relating to the operation of Seller's business or
Seller's leasing, ownership or operation of real property;
(viii) any Liability under the Employee Plans or relating to
payroll, vacation, sick leave, workers' compensation, unemployment
benefits, pension benefits, employee stock option or profit-sharing
plans, health care plans or benefits or any other employee plans or
benefits of any kind for Seller's employees or former employees or
both;
(ix) any Liability under any employment, severance,
retention or termination agreement with any employee of Seller or any
of its Related Persons;
(x) any Liability arising out of or relating to any
employee grievance to the extent relating to or arising out of events
or occurrences prior to the Effective Time, whether or not the affected
employees are hired by Buyer;
(xi) any Liability of Seller to any Related Person of
Seller or any member, partner or stockholder of Selling Parties;
(xii) any Liability to indemnify, reimburse or advance
amounts to any Related Person or Representative of Seller;
(xiii) any Liability to distribute assets, rights or
properties to either General Partner or Limited Partner, or otherwise
apply all or any part of the consideration received hereunder;
15
(xiv) any Liability arising out of any Proceeding pending
as of the Effective Time;
(xv) any Liability arising out of any Proceeding commenced
after the Effective Time and to the extent arising out of or relating
to any occurrence or event happening prior to the Effective Time;
(xvi) any Liability arising out of or resulting from
Seller's compliance or noncompliance with any Legal Requirement or
Order of any Governmental Body;
(xvii) any Liability of Seller under the Agreement or any
other document executed in connection with the Contemplated
Transactions; and
(xviii) any Liability of Seller based upon Seller's acts or
omissions occurring after the Effective Time.
2.5 ADJUSTMENTS TO PURCHASE PRICE FOR AD VALOREM TAXES
Ad valorem real and tangible personal property taxes with respect to
the Assets for the calendar year in which the Closing occurs shall be prorated
between Seller and Buyer as of the Closing Date on the basis of no applicable
discount. If the amount of such taxes with respect to any of the Assets for the
calendar year in which the Closing occurs has not been determined as of the
Closing Date, then the taxes with respect to such Assets for the preceding
calendar year, on the basis of no applicable discount, shall be used to
calculate such prorations, with known changes in valuation or millage applied.
The prorated taxes shall be an adjustment to the Cash Consideration to be paid
at the Closing. If the actual amount of any such taxes varies by more than one
thousand dollars ($1,000.00) from estimates used at the Closing to prorate such
taxes, then the parties shall re-prorate such taxes within ten (10) days
following request by either party based on the actual amount of the tax ▇▇▇▇.
2.6 ALLOCATION
The Purchase Price shall be allocated in accordance with EXHIBIT 2.6.
After the Closing, the parties shall make consistent use of the allocation and
fair market value specified in EXHIBIT 2.6 for all Tax purposes and in all
filings, declarations and reports with the IRS in respect thereof, including the
reports required to be filed under Section 1060 of the Code. In any Proceeding
related to the determination of any Tax, neither Buyer nor Seller or Founders
shall contend or represent that such allocation is not a correct allocation.
2.7 CLOSING
The purchase and sale provided for in the Agreement (the "CLOSING")
will take place at the offices of ▇▇▇▇▇▇ and ▇▇▇▇▇, LLP, ▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, commencing at 10:00 a.m. (Richardson time)
on September 30, 2002 or at such other time or other place as the parties hereto
agree. Subject to the provisions of Article 8, failure to consummate the
purchase and sale provided for in the Agreement on the date and time and at the
place determined pursuant to this SECTION 2.7 will not result in the termination
of the Agreement and will not relieve any party of any obligation under the
Agreement. In such a situation, the Closing will occur as soon as practicable,
subject to Article 8.
2.8 CLOSING OBLIGATIONS
In addition to any other documents to be delivered under other
provisions of the Agreement, at the Closing:
16
(a) Selling Parties shall deliver to Buyer, together with funds
sufficient to pay all Taxes necessary for the transfer, filing or recording
thereof:
(i) a ▇▇▇▇ of sale for all of the Assets in the form of
EXHIBIT 2.8(A)(I) (the "▇▇▇▇ OF SALE") executed by Seller;
(ii) an assignment and assumption agreement for Buyer's
assumption of the Assumed Liabilities in the form of EXHIBIT 2.8(A)(II)
(the "ASSIGNMENT AND ASSUMPTION AGREEMENT") executed by Seller;
(iii) assignments of all Intellectual Property Rights and
other intangible personal property, together with and separate
assignments of all registered trademarks, patents and copyrights in a
form reasonably satisfactory to Buyer and executed by Seller;
(iv) such other deeds, bills of sale, assignments,
certificates of title, documents and other instruments of transfer and
conveyance as may reasonably be requested by Buyer, each in form and
substance reasonably satisfactory to Buyer and executed by Seller;
(v) releases from all Encumbrances on the Assets, in a
form reasonably satisfactory to Buyer;
(vi) employment agreements in the form of EXHIBIT
2.8(A)(VI), executed by JRS and DE (the "EMPLOYMENT AGREEMENTS");
(vii) the Lock-Up Agreement in the form of EXHIBIT
2.8(A)(VII), executed by the Selling Parties;
(viii) a Termination Agreement for any intercompany
agreements in a form reasonably satisfactory to Buyer and executed by
Seller and Gnubi AG or gnubi communications Canada, Inc.;
(ix) a certificate executed by Selling Parties as to the
accuracy of their representations and warranties as of the date of the
Agreement and as of the Closing in accordance with SECTION 6.1 and as
to their compliance with and performance of their covenants and
obligations to be performed or complied with at or before the Closing
in accordance with SECTION 6.2;
(x) a certificate of the Secretary of the General Partner
certifying, as complete and accurate as of the Closing, attached copies
of the Governing Documents of Seller, General Partner and Limited
Partner, certifying and attaching all requisite resolutions or actions
of the General Partner and the Limited Partner approving the execution
and delivery of the Agreement and the consummation of the Contemplated
Transactions and certifying to the incumbency and signatures of the
officers of the General Partner and the Limited Partner executing the
Agreement and any other document relating to the Contemplated
Transactions;
(xi) a certificate of the Secretary of Seller Parent
certifying, as complete and accurate as of the Closing, attached copies
of the Governing Documents of Seller, certifying and attaching all
requisite resolutions or actions of Seller Parent approving the
execution and delivery of the Agreement and the consummation of the
Contemplated Transactions and certifying to the incumbency and
signatures of the officers of Seller Parent executing the Agreement and
any other document relating to the Contemplated Transactions; and
(xii) a certificate of no Tax due issued for the Seller by
the Texas Comptroller.
17
(b) Buyer shall deliver to Selling Parties:
(i) the Cash Consideration by wire transfer to an account
specified by Seller in a writing delivered to Buyer at least five (5)
Business Days prior to the Closing Date;
(ii) the Lock-Up Agreement executed by Buyer;
(iii) the Assignment and Assumption Agreement executed by
Buyer;
(iv) the Employment Agreements, executed by Buyer;
(v) a certificate executed by Buyer as to the accuracy of
its representations and warranties as of the date of the Agreement and
as of the Closing in accordance with SECTION 7.1 and as to its
compliance with and performance of its covenants and obligations to be
performed or complied with at or before the Closing in accordance with
SECTION 7.2;
(vi) a certificate of the Secretary of Buyer certifying,
as complete and accurate as of the Closing, attached copies of the
Governing Documents of Buyer and certifying and attaching all requisite
resolutions or actions of Buyer's board of directors approving the
execution and delivery of the Agreement and the consummation of the
Contemplated Transactions and certifying to the incumbency and
signatures of the officers of Buyer executing the Agreement and any
other document relating to the Contemplated Transactions; and
(vii) a certificate evidencing the Buyer Shares, which
Seller shall at Closing return to the custody of Buyer to be held
pursuant to the terms of the Lock Up Agreement.
(c) Buyer Parent shall deliver to Selling Parties:
(i) a certificate executed by Buyer Parent as to the
accuracy of its representations and warranties as of the date of the
Agreement and as of the Closing in accordance with SECTION 7.1 and as
to its compliance with and performance of its covenants and obligations
to be performed or complied with at or before the Closing in accordance
with SECTION 7.2; and
(ii) a certificate of the Secretary of Buyer Parent
certifying, as complete and accurate as of the Closing, attached copies
of the Governing Documents of Buyer Parent and certifying and attaching
all requisite resolutions or actions of Buyer Parent's board of
directors approving the execution and delivery of the Agreement and the
consummation of the Contemplated Transactions and certifying to the
incumbency and signatures of the officers of Buyer Parent executing the
Agreement and any other document relating to the Contemplated
Transactions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES
The Selling Parties jointly and severally represent and warrant to
Buyer and Buyer Parent that the following representations and warranties are
correct and complete as of the date hereof except as set forth in the disclosure
schedule attached hereto as EXHIBIT A (the "DISCLOSURE LETTER"). Nothing in the
Disclosure Letter shall be deemed adequate to disclose an exception to a
representation or warranty made herein, however, unless the Disclosure Letter
identifies the exception with reasonably sufficient detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless
18
the representation or warranty has to do with the existence of the document or
other item itself). The Disclosure Letter will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this Article.
3.1 ORGANIZATION, GOOD STANDING; AUTHORITY; ENFORCEABILITY
(a) Seller is a limited partnership duly organized, validly
existing and in good standing in the State of Delaware. Each of the Limited
Partner and the General Partner is a limited liability company duly organized,
validly existing and in good standing in the State of Delaware. Seller Parent is
a corporation duly incorporated, validly existing and in good standing in the
State of Delaware. Each of Seller, Limited Partner, General Partner and Seller
Parent has delivered true and correct copies of its Governing Documents to
Buyer. Each of the Selling Parties has the requisite power and authority: (a) to
carry on its business as currently conducted; (b) to own and use the properties
owned and used by it; and (c) to execute and deliver the Transaction Agreements
and consummate the Contemplated Transactions. Each of the Selling Parties is
duly qualified to do business and in good standing in each jurisdiction where
the nature of its business or the ownership or leasing of its properties makes
such qualification necessary, except where the failure to be so qualified or in
good standing could not reasonably be expected to have a Material Adverse Effect
on such Selling Party. No Selling Party is in violation of any of the provisions
of its Governing Documents. Seller has no Subsidiary and does not own any shares
of capital stock or other securities of any other Person.
(b) The execution and delivery by each of the Selling Parties of
the Transaction Agreements and the consummation by the Selling Parties of the
Contemplated Transactions have been duly and validly authorized by all necessary
action on the part of the Selling Parties, and no other proceedings on the part
of the Selling Parties are necessary to authorize the Transaction Agreements or
to consummate the Contemplated Transactions. The Agreement has been, and the
other Transaction Agreements when executed by the Selling Parties will be, duly
and validly executed and delivered by each of the Selling Parties, and, assuming
each of the Transaction Agreements constitutes a valid and binding obligation of
Buyer and Buyer Parent, the Agreement constitutes, and each of the other
Transaction Agreements when executed by the Selling Parties will constitute, a
valid and binding agreement of each of the Selling Parties enforceable against
them in accordance with its terms, subject, however, as to enforcement, to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditor's rights
and to general principles of equity, regardless of whether such enforceability
is considered in equity or at law.
3.2 NO CONFLICT
Except as set forth on Part 3.2, the execution and delivery of the
Transaction Agreements do not, and the consummation of the Contemplated
Transactions will not, conflict with, or result in any violation of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation, or result
in the creation of any Encumbrance upon any of the properties or assets of any
of the Selling Parties pursuant to, any provision of: (i) the Governing
Documents of such Selling Party; or (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to the Selling Party or its
properties or assets.
3.3 FINANCIAL STATEMENTS
Attached as Part 3.3 are (a) complete and correct copies of Seller
Parent's audited consolidated balance sheet as of December 31, 2001 (the
"AUDITED BALANCE SHEET"), and the related consolidated statements of income
(loss), stockholders' equity (deficit) and cash flows (together with the
auditors' report thereon) for the year ended December 31, 2001, together with
notes to such financial statements; (b)
19
complete and correct copies of Seller Parent's predecessor's audited
consolidated balance sheet as of December 31, 2000, and the related consolidated
statements of income (loss), stockholders' equity (deficit) and cash flows
(together with the auditors' report thereon) for the year ended December 31,
2000, together with notes to such financial statements (collectively, the
"AUDITED FINANCIAL STATEMENTS"); and (c) complete and correct copies of Seller
Parent's reviewed, interim consolidated balance sheet and notes to the balance
sheet as of July 31, 2002 (the "INTERIM BALANCE Sheet"), and the related
statements of income (loss), stockholders' equity (deficit) and cash flows
(together with the review report thereon) for the seven-month period ended July
31, 2002, certified by the chief financial officer of Seller Parent (the
"INTERIM FINANCIAL STATEMENTS"). The Audited Financial Statements and Interim
Financial Statements are herein collectively referred to as the "FINANCIAL
STATEMENTS". The Financial Statements are in accordance with the books and
records of Seller Parent and have been prepared in accordance with GAAP
consistently applied throughout the periods covered thereby and present fairly
in all material respects, as of their respective dates, the consolidated
financial condition and results of operations of Seller Parent (subject, in the
case of Interim Financial Statements, to normal, recurring year-end adjustments
that may be required upon audit that would not be material, either individually
or in the aggregate). Any pro-forma or provisional financial statement or
financial information provided to the Buyer prior to the Closing were prepared
in accordance with the same accounting standards that were used to prepare the
Financial Statements. All of the Assets are reflected on the Interim Balance
Sheet.
3.4 BOOKS AND RECORDS
The books of account and other financial Records of Seller, all of
which have been made available to Buyer, are complete and correct and represent
actual, bona fide transactions and have been maintained in accordance with sound
business practices and the requirements of Section 13(b)(2) of the Exchange Act
(regardless of whether Seller is subject to that Section or not), including the
maintenance of an adequate system of internal controls. The minute books and
organizational records of Seller, all of which have been made available to
Buyer, contain accurate and complete Records of all meetings held, and action
taken, and no meeting has been held for which minutes have not been prepared or
are not contained in such organizational books.
3.5 SUFFICIENCY OF ASSETS
Except as set forth in Part 3.5, the Assets (a) constitute all of the
assets, tangible and intangible, of any nature whatsoever, necessary to operate
Seller's business in the manner presently operated by Seller; and (b) include
all of the operating assets of Seller. Except as set forth on Part 3.5, no
Related Person of Seller owns any asset necessary to conduct Seller's business
as presently conducted.
3.6 TITLE TO ASSETS; ENCUMBRANCES
(a) Seller has good and marketable title to, or a valid leasehold
interest in, all the Assets set forth on the Interim Balance Sheet free and
clear of all Encumbrances except for (a) assets no longer used or useful in the
conduct of the business or disposed of in the Ordinary Course of Business since
the date of the Interim Balance Sheet; (b) Encumbrances specifically identified
in the Financial Statements; and (c) Encumbrances for current Taxes not yet due
and payable. Seller has a valid leasehold, license or other interest in all
other assets used by it in its business.
(b) Each of the Selling Parties warrants to Buyer that, at the
time of Closing, all Assets shall be free and clear of all Encumbrances other
than those identified on Part 3.6(b) as permitted Encumbrances ("PERMITTED
ENCUMBRANCES").
20
3.7 INVENTORIES
All items included in the Inventories consist of a quality and quantity
usable and, with respect to finished goods, saleable, in the Ordinary Course of
Business of Seller except for obsolete items and items of below-standard
quality, all of which have been written off or written down to net realizable
value as set forth in Part 3.7. Seller is not in possession of any inventory not
owned by Seller, including goods already sold. All of the Inventories have been
valued at net realizable value at its weighted average cost. Inventories now on
hand that were purchased after the date of the Interim Balance Sheet were
purchased in the Ordinary Course of Business of Seller at a cost not exceeding
market prices prevailing at the time of purchase. Work-in-process Inventories
are now valued, and will be valued on the Closing Date, according to GAAP.
3.8 PRODUCT WARRANTIES
Each product manufactured, sold, leased, or delivered by Seller has
been in material conformity with all applicable contractual commitments and all
warranties, and Seller has no Liability for replacement or repair thereof or
other damages in connection therewith arising out of products manufactured,
sold, leased or delivered, except as set forth in Part 3.8. Except as set forth
in Part 3.8, no product manufactured, sold, leased, or delivered by Seller is
subject to any express guaranty, warranty, or other indemnity made Seller.
Seller has no Liability arising out of any injury to individuals or property as
a result of the ownership, possession, or use of any product manufactured, sold,
leased, or delivered by Seller, except as set forth in Part 3.8.
3.9 CONDITION OF FACILITIES; PERSONAL PROPERTY
Seller does not own any real property. Part 3.9 contains an accurate
description (by location, name of lessor, date of lease and term expiry date) of
all Real Property Leases included within the Assets (collectively, the
"FACILITIES"). Except as set forth on Part 3.9, the Facilities are not subject
to any Encumbrances, encroachments, building or use restrictions, exceptions,
reservations or limitations, except those which do not, taken as a whole, result
in a Material Adverse Effect on Seller or which prevent any continued use
thereof in the usual and normal conduct of Seller's business. There are no
pending or, to the Knowledge of any Selling Party, threatened condemnation
proceedings relating to any of the Facilities. All of the Tangible Personal
Property owned or used by Seller is in good operating condition and repair,
except for ordinary wear and tear, and are usable in the Ordinary Course of
Business of Seller and free from latent and patent defects. No item of Tangible
Personal Property is in need of repair or replacement other than as part of
routine maintenance in the Ordinary Course of Business of Seller. Except as
disclosed in Part 3.9, at Closing all Tangible Personal Property used in
Seller's business will be at the Facilities.
3.10 NO UNDISCLOSED LIABILITIES
Seller does not have any Liability except for: (a) liabilities for
which fully funded reserves are specifically identified in the Interim Balance
Sheet; and (b) liabilities of a short-term nature which have arisen in the
Ordinary Course of Business of Seller since the date of the Interim Balance
Sheet.
3.11 TAXES
Each of the Selling Parties has timely filed all Tax Returns required
to be filed by it, or requests for extensions to file such Tax Returns have been
timely filed and granted and have not expired, and all such filed Tax Returns
are complete and accurate in all respects. Each of the Selling Parties has paid
all Taxes required to be paid by it. The most recent financial statements
contained in the Financial Statements reflect an adequate reserve for all Taxes
payable by Selling Parties for all taxable periods and portions thereof accrued
through the date of such financial statements. No deficiencies for any Taxes
have been proposed,
21
asserted or assessed against any Selling Party that are not adequately reserved
for on the Financial Statements in accordance with GAAP. There is no pending
dispute with any taxing authority relating to any of Selling Parties' Tax
Returns and there is no tax audit, assessment or reassessment of any Tax Return
of any Selling Party pending or currently in process. All Taxes that each
Selling Party is or was required by law to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Body. There are no Encumbrances for Taxes upon any of the assets of
any Selling Party, except Encumbrances for current Taxes not yet due and
payable. Consummation of the Contemplated Transactions will not result in the
imposition or creation of any Taxes or Encumbrances on the Assets, except for
Taxes that shall remain the Liability of Seller.
3.12 NO MATERIAL ADVERSE CHANGE
Except as set forth on Part 3.12, since the date of the Audited Balance
Sheet, Seller has conducted its business only in the Ordinary Course of Business
and (a) there has not occurred any events or changes that have had, or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Seller; (b) there has not been any change in the accounting
principles, policies, practices or procedures of Seller or their application to
Seller; and (c) Seller has not taken any action or omitted to take any action
that would have been prohibited under SECTION 5.1.
3.13 EMPLOYEE BENEFITS
(a) Part 3.13 lists all employee benefit plans (as defined in
Section 3(3) of ERISA) and collective bargaining, employment or severance
agreements or other similar arrangements which Seller sponsors, maintains, or to
which contributions are made, for the benefit of employees of Seller or any
Subsidiary, including, without limitation, any profit-sharing, deferred
compensation, bonus, stock option, stock purchase, stock appreciation, or other
equity-based compensation, pension, retainer, consulting, retirement, severance,
change in control, health, medical, dental or other welfare plan, agreement or
arrangement, and any plan, agreement or arrangement providing for "fringe
benefits." The plans, agreements and arrangements described in this SECTION 3.13
are referred to herein as the "EMPLOYEE Plans."
(b) Seller has delivered or made available to Buyer true and
complete copies of all documents, trust agreements, summary plan descriptions,
and any other instrument under which an Employee Plan is established or operated
or summary descriptions of any such Employee Plan not otherwise in writing.
(c) Each Employee Plan has been administered in accordance with
its terms. Each Employee Plan has been established and administered in
accordance with all applicable laws.
(d) All reports, returns and similar documents with respect to
each Employee Plan required to be filed with any Governmental Body or
distributed to any participant of each Employee Plan have been duly and timely
filed or distributed.
(e) No actions, suits, disputes or claims (other than routine
claims for benefits in the ordinary course) are pending or, to the Knowledge of
any Selling Party, threatened with respect to any Employee Plan. No audits,
inquiries, reviews, proceedings, claims, or demands are pending with any
Governmental Body with respect to any Employee Plan.
(f) No Employee Plan provides for or continues medical or health
benefits, or life insurance or other death benefits (through insurance or
otherwise) for any employee or any dependent or beneficiary of any employee
after such employee's retirement or other termination of employment except as
required by applicable law (e.g. COBRA), and there has been no communication to
any employee that could reasonably be expected to promise or guarantee any such
benefits.
22
(g) Except as set forth in the Employee Plans, the Contemplated
Transactions will not entitle any individual to severance pay, and will not
accelerate the time of payment or vesting, or increase the amount of
compensation due to any individual.
(h) With respect to any Employee Plan, all required or
discretionary (in accordance with historical practices) payments, premiums,
contributions, reimbursements, or accruals for all periods ending prior to or as
of the Closing shall have been made or properly accrued on the current balance
sheets or will be properly accrued on the books and records of Seller as of the
Closing Date. None of the Employee Plans has any unfunded liabilities which are
not reflected on the current balance sheet or the books and records of Seller.
(i) No Employee Plan of Seller and no Employee Plan of any of
Seller's ERISA Affiliates is or has been subject to Title IV of ERISA or Section
412 of the Code, and neither Seller nor any of its ERISA Affiliates has at any
time contributed to or had any obligation to contribute to or has any liability
(contingent or otherwise) to any "multiemployer plan," as that term is defined
in Section 3(37) of ERISA. "ERISA AFFILIATE" means any trade or business
(whether or not incorporated) that is as of the date of the Agreement, or at any
time within six (6) years preceding the date hereof would have been, treated as
a "single employer" with Seller under Section 414(b), (c), (m) or (o) of the
Code.
(j) Except for any formal written qualification requirement with
respect to which the remedial amendment period set forth in Section 401(b) of
the Code, and any regulations, rulings or other IRS releases thereunder, has not
expired, each Employee Plan that is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the IRS
and is so qualified in form and operation under Section 401(a) of the Code.
(k) Seller has delivered or made available to Buyer each updated
determination letter for Employee Plan that is intended to be qualified under
Section 401(a) of the Code.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS AND CONSENTS
(a) Seller is and at all times since January 1, 1997 has been in
compliance with all applicable statutes, laws, ordinances, regulations, rules,
judgments, decrees and orders of any Governmental Body applicable to its
business or operations. Seller has not received any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding (i) any actual alleged, possible or potential violation of, or
failure to comply with, any Legal Requirement or (ii) any actual, alleged,
possible or potential obligation on the part of Seller to undertake, or to bear
all or any portion of the cost of, any remedial action of any nature.
(b) Part 3.14(b) contains a complete and accurate list of each
Governmental Authorization that is held by Seller or that otherwise relates to
Seller's business or the Assets. Each Governmental Authorization listed or
required to be listed in Part 3.14(b) is valid and in full force and effect.
Except as set forth in Part 3.14(b):
(i) Seller is, and at all times since January 1, 1997,
has been, in full compliance with all of the terms and requirements of
each Governmental Authorization identified or required to be identified
in Part 3.14(b);
(ii) to the Knowledge of any Selling Party, no event has
occurred or circumstance exists that may (with or without notice or
lapse of time) (A) constitute or result directly or indirectly in a
violation of or a failure to comply with any term or requirement of any
Governmental Authorization listed or required to be listed in Part
3.14(b) or (B) result directly or indirectly in the revocation,
23
withdrawal, suspension, cancellation or termination of, or any
modification to, any Governmental Authorization listed or required to
be listed in Part 3.14(b);
(iii) Seller has not received, at any time since January 1,
1997, any notice or other communication (whether oral or written) from
any Governmental Body or any other Person regarding (A) any actual,
alleged, possible or potential violation of or failure to comply with
any term or requirement of any Governmental Authorization or (B) any
actual, proposed, possible or potential revocation, withdrawal,
suspension, cancellation, termination of or modification to any
Governmental Authorization; and
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be
listed in Part 3.14(b) have been duly filed on a timely basis with the
appropriate Governmental Bodies, and all other filings required to have
been made with respect to such Governmental Authorizations have been
duly made on a timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.14(b) collectively
constitute all of the Governmental Authorizations necessary to permit Seller to
lawfully conduct and operate its business in the manner in which it currently
conducts and operates such business and to permit Seller to own and use its
assets in the manner in which it currently owns and uses such assets.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Body or any other
Person, is required by or with respect to any of the Selling Parties in
connection with the execution and delivery of the Transaction Agreements by the
Selling Parties or consummation by the Selling Parties of the Contemplated
Transactions, except for those listed in Part 3.14(c).
3.15 LEGAL PROCEEDINGS; ORDERS
Except as set forth on Part 3.15, there is no action, suit or
proceeding, governmental or otherwise, pending or, to the Knowledge of any
Selling Party, overtly threatened against Seller or any of its properties or
business. Except as set forth on Part 3.15, there is no judgment, decree,
injunction, rule or order of any Governmental Body outstanding against Seller,
its business or any of the Assets. To the Knowledge of each Selling Party, no
event has occurred or circumstance exists that is reasonably likely to give rise
to or serve as a basis for the commencement of any such action, suit or
proceeding. There are no actions, suits or proceedings listed or required to be
listed in Part 3.15 that could have a Material Adverse Effect on Seller or a
material adverse effect upon the Assets.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth on Part 3.16, since the date of the Audited Balance
Sheet, Seller has conducted its business only in the Ordinary Course of Business
and there has not been any:
(a) amendment to the Governing Documents of Selling Parties;
(b) payment (except in the Ordinary Course of Business) or
increase by Seller of any bonuses, salaries or other compensation to any officer
or employee or entry into any employment, severance or similar Contract with any
officer or employee;
(c) adoption of, amendment to or increase in the payments to or
benefits under, any Employee Plan;
24
(d) damage to or destruction or loss of any Asset, whether or not
covered by insurance;
(e) entry into, termination of or receipt of notice of termination
of (i) any license, distributorship, dealer, sales representative, joint
venture, credit or similar Contract to which Seller is a party, or (ii) any
Contract or transaction involving a total remaining commitment by Seller of at
least $50,000;
(f) sale (other than sales of Inventories in the Ordinary Course
of Business), lease, license or other disposition of any Asset or property of
Seller (including the Intellectual Property Rights) or the creation of any
Encumbrance on any Asset;
(g) cancellation or waiver of any claims or rights with a value to
Seller in excess of $50,000;
(h) indication by any customer or supplier of an intention to
discontinue or change the terms of its relationship with Seller;
(i) change in the accounting methods used by Seller; or
(j) Contract by Seller to do any of the foregoing.
3.17 CONTRACTS; NO DEFAULTS
Part 3.17 sets forth a list of:
(a) each Contract of Seller which requires total payments to or by
Seller of at least $50,000;
(b) each Contract of Seller which has a remaining term longer than
one (1) year, which requires total payments to or by Seller of at least $25,000
during the remaining term and which is not terminable on thirty (30) or fewer
days' notice without penalty;
(c) each Contract to which Seller is a party or by which any of
its assets are bound relating to indebtedness for borrowed money, including
capital leases and security agreements relating thereto;
(d) each lease of real property by Seller;
(e) any collective bargaining agreement, union agreement,
employment agreement, consulting agreement, management service agreement or
substantially similar type of contract or agreement to which Seller is a party;
(f) any consent decree and other judgment, decree or order,
settlement agreement or other agreement limiting the ability of Seller to
compete in any line of business or with any Person in any geographic areas;
(g) each written warranty, guaranty and/or other similar
undertaking with respect to contractual performance extended by Seller;
(h) any joint venture agreement or other contract, agreement or
commitment to which Seller is a party involving a sharing of profits or
expenses; and
25
(i) any outstanding loan or advance by Seller to, or investment by
Seller in, any Person, or any agreement, contract, commitment or understanding
relating to the making of any such loan, advance or investment.
All of the contracts, agreements, leases, licenses, arrangements,
commitments and documents listed on Part 3.17 (collectively, the "SELLER
CONTRACTS") are valid obligations of Seller and are binding and in full force
and effect in accordance with their terms and conditions. There is no existing
default thereunder or breach thereof by Seller or, to Seller's Knowledge, by any
other party thereto, or any conditions which, with the passage of time or the
giving of notice or both, might reasonably constitute such a default by Seller,
or by any other party to a Seller Contract. There are no pending or, to the
Knowledge of any Selling Party, threatened disputes with respect to the Seller
Contracts.
3.18 INSURANCE
Part 3.18 sets forth a list of all policies of fire, extended coverage,
liability and all other kinds of insurance held by Seller in connection with the
conduct of its business and operations (other than policies relating to Employee
Plans). Such policies are in full force and effect and Seller is not in default
with respect to its obligations under any of such insurance policies. Seller
maintains the type and amount of insurance which Seller believes is adequate in
coverage and amount to insure fully against the risks to which Seller and its
employees, business, properties and other assets would reasonably be expected to
be exposed in the operation of their respective business.
3.19 ENVIRONMENTAL MATTERS
Except as disclosed in Part 3.19:
(a) the business of Seller is and has been operated in compliance
with Environmental Law. Seller has not received any notice of non-compliance
with or of any Liability under any Environmental Law;
(b) Seller has not Released or caused or permitted to be Released,
any Hazardous Substances on, to or from the Facilities, or in connection with
the operation of Seller's businesses, except in compliance with Environmental
Law;
(c) Seller has not permitted the Facilities to be used for any
Hazardous Activity;
(d) Seller has obtained all Environmental Permits necessary for
the lawful operation of the business, except where the failure to have any such
Environmental Permit would not have a Material Adverse Effect on Seller;
(e) there are no claims, actions, proceedings or demands against
or involving Seller either in progress, pending or, to the Knowledge of any
Selling Party, threatened which allege the existence against Seller or the
Facilities of any Environmental, Health and Safety Liabilities; and
(f) copies of all environmental reports or audits performed or
prepared since its inception within the possession of Seller with respect to the
Facilities have been provided to Buyer.
3.20 EMPLOYEES
(a) Part 3.20 sets forth (i) the names, the rate of compensation
(and the portions thereof attributable to salary and bonuses, respectively) and
location of all current employees of Seller and (2) the names of all former
employees of Seller who are currently covered under any Employee Plan pursuant
to
26
COBRA. To Seller's Knowledge, no key employee or group of employees has any
plans to terminate employment with Seller. Seller is not a party to or bound by
any collective bargaining agreement, nor has it experienced any strikes,
grievances, claims of unfair labor practices or other collective bargaining
disputes. No organizational effort has been made or threatened, either currently
or within the past two years, by or on behalf of any labor union or trade union
with respect to employees of Seller. Seller has complied in all respects with
all Legal Requirements relating to employment practices, terms and conditions of
employment, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining and other requirements, the payment of
social security and similar Taxes and occupational safety and health. Seller is
not liable for the payment of any Taxes, fines, penalties, or other amounts,
however designated, for failure to comply with any of the foregoing Legal
Requirements.
(b) Since the enactment of the Worker Adjustment and Retraining
Notification Act of 1988 ("WARN ACT"), Seller has not effectuated (i) a "plant
closing" (as defined in the WARN Act) affecting any site of employment or one or
more facilities or operating units within any site of employment or facility of
Seller; or (ii) a mass layoff (as defined in the WARN Act) affecting any site of
employment or facility of Seller; nor has Seller been affected by any
transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar state or local law. Seller will not
take any action prior to the Closing which could result in any obligation or
liability being imposed on Seller under the WARN Act, and Seller shall be
responsible for giving any and all notices, to the extent required, and
complying with the provisions of the WARN Act in connection with the
transactions governed by this Agreement for any "employment losses" that occur
prior to Closing.
3.21 INTELLECTUAL PROPERTY RIGHTS
(a) Part 3.21(a) sets forth all of the Scheduled Intellectual
Property Rights owned or used by Seller in the operation of the Business
including, all application and registration dates and numbers, the name and all
parties to any agreements, and other information reasonably required to identify
such Scheduled Intellectual Property Rights. "SCHEDULED INTELLECTUAL PROPERTY
RIGHTS" means domestic and foreign patents (including design registrations and
other government grants of rights to inventions), patent applications, patent
licenses from Third Parties, know-how licenses from Third Parties, trade names,
material unregistered trademarks, trademark registrations and applications,
material unregistered service marks, service ▇▇▇▇ registrations and
applications, trademark licenses from Third Parties, material unregistered
copyrights (including, software), copyright registrations and applications
(including, mask work registrations), copyright licenses from Third Parties
(including, software licenses), and domain names. "INTELLECTUAL PROPERTY RIGHTS"
means Scheduled Intellectual Property Rights, concepts, ideas, discoveries,
designs, research, processes, procedures, techniques, methods, mask works,
inventions, unregistered trademarks, unregistered service marks, unregistered
copyrights, trade secrets, know-how, confidential information and other
proprietary rights.
(b) Except as set forth in Part 3.21(b), Seller owns or has the
right to use pursuant to an appropriate agreement, free and clear of all
Encumbrances and payment obligations, all Intellectual Property Rights necessary
for the operation of Seller's business as presently conducted, as contemplated
in the performance of existing contracts, and as described in Seller's current
business plan.
(c) Part 3.21(c) identifies each item of Intellectual Property
Rights that any Selling Party (other than Seller) or Third Party owns and that
Seller uses. Except as set forth in Part 3.21(c), in respect of each such item
of used Intellectual Property Rights:
(i) the agreement covering the item is legal, valid,
binding, enforceable and in full force and effect;
27
(ii) the agreement is freely transferable to Buyer without
any consent or payments of any kind;
(iii) following the consummation of the Contemplated
Transactions, the agreement will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms to those
prior to the Closing Date; and
(iv) no party to the agreement is in breach or default in
any material respect, no Contemplated Transaction will result in a
breach or default in any material respect, and no event has occurred,
nor will the Contemplated Transactions cause an occurrence, which with
notice or lapse of time would constitute a material breach or default
or permit termination, modification or acceleration thereunder.
(d) No Intellectual Property Rights used by Seller are owned by
any Selling Party (other than Seller), or any Related Person of a Selling Party.
(e) Except as set forth in Part 3.21(e), Seller has not granted
any licenses of or other rights to use any Intellectual Property Rights to any
Third Party.
(f) All software used, sold or licensed by Seller is free from any
material defect, performs materially in conformance with its documentation, and
does not contain any code or mechanism that could be used to interfere with the
operation of the software. All software owned by Seller contains both object
code and source code and has sufficient documentation to enable an individual
reasonably skilled in its associated programming language to modify and maintain
it.
(g) Seller owns the domain names set forth in Part 3.21(a).
(h) There are no past due, unpaid required maintenance fees,
annuities or other governmental fees on the Intellectual Property Rights owned
by Seller, and all patents and issued trademark, service ▇▇▇▇ and copyright
registrations included in such Intellectual Property Rights are valid and
subsisting.
(i) Each officer, employee, consultant and independent contractor
of Seller has executed an agreement which includes an obligation to assign to
Seller all rights to Intellectual Property Rights originated or invented by such
officer, employee, consultant or independent contractor during the course of
such person's relationship with Seller.
(j) Seller has taken all commercially reasonable actions to
protect and preserve the confidentiality of all trade secrets and confidential
information (including all source code for software owned by Seller) included in
the Intellectual Property Rights used by Seller in the operation of its business
("CONFIDENTIAL INFORMATION"). No Confidential Information material to the
business of Seller as currently operated has been disclosed or authorized to be
disclosed to any Third Party, other than pursuant to a non-disclosure agreement
that protects Seller's proprietary interests in and to such Confidential
Information or under circumstances in which the Third Party is under a legal
duty not to disclose such Confidential Information.
(k) Infringement.
(i) Except as set forth in Part 3.21(k), no Selling Party
has interfered with, infringed upon, misappropriated or otherwise come
into conflict with any Intellectual Property Rights of any Third Party,
including through the manufacture, marketing, licensing or sale of its
products and services, and no
28
Selling Party has received any charge, complaint, claim or notice
alleging any such interference, infringement, misappropriation or
violation.
(ii) Except as set forth in Part 3.21(k), no Person other
than a Selling Party has, to the Knowledge of any Selling Party,
interfered with, infringed upon, misappropriated or otherwise come into
conflict with any Intellectual Property Rights of Seller, General
Partner, Limited Partner or Seller Parent.
(iii) Except as set forth in Part 3.21(k), Seller has not
entered into any agreement to indemnify any other Person against any
charge of infringement of any Intellectual Property Right.
3.22 OWNERSHIP; RELATIONSHIPS WITH RELATED PERSONS
(a) The General Partner is the sole general partner of Seller, and
the Limited Partner is the sole limited partner of Seller. The sole asset of the
General Partner is its general partnership interest in Seller, and the only
business that General Partner is or has engaged in is the holding of its general
partnership interest in Seller. The sole asset of the Limited Partner is its
limited partnership interest in Seller, and the only business that Limited
Partner is or has engaged in is the holding of its limited partnership interest
in Seller. Seller Parent is the sole member of each of General Partner and
Limited Partner. The sole assets of Seller Parent are its membership interests
in General Partner and Limited Partner and its 100% equity ownership of Gnubi
Communications, Ltd., a Swiss Aktiengesellschaft ("GNUBI AG") and of gnubi
communications Canada, Inc., a Nova Scotia corporation, and the only business
that Seller Parent is or has engaged in is the holding of its membership
interests in General Partner and Limited Partner. Except as set forth on Part
3.22(a), none of General Partner, Limited Partner or Seller Parent has any
Liabilities. The authorized equity securities of Seller Parent consist of
fifteen million (15,000,000) shares of capital stock, of which 5,000,000 of such
authorized shares are Preferred Stock, 5,000,000 of such authorized shares are
Class A Common Stock and 5,000,000 of such authorized shares are Class B Common
Stock, in each case with a par value per share of $.01 per share. Of such
authorized shares, two million fifty thousand and one (2,050,001) shares are
issued and outstanding and owned by the Persons and in the amounts set forth on
Part 3.22(a). Except as set forth on Part 3.22(a), the Persons listed on Part
3.22(a) are and will be on the Closing Date the record and beneficial owners and
holders of all of the shares of Seller Parent free and clear of all
Encumbrances. Except as set forth on Part 3.22(a), there are no Contracts
relating to the issuance, sale or transfer of any equity interests or other
interests of any of the Selling Parties. None of the outstanding equity
interests of any of the Selling Parties was issued in violation of the
Securities Act or any other Legal Requirement.
(b) Except as set forth on Part 3.22(b), none of the Selling
Parties except for Seller nor any Related Person of any of them has, or since
January 1, 2001, has had, any interest in any property (whether real, personal
or mixed and whether tangible or intangible) used in or pertaining to Seller's
business. None of the Selling Parties nor any Related Person of any of them
owns, or since January 1, 2001, has owned, of record or as a beneficial owner,
an equity interest or any other financial or profit interest in any Person that
has (i) had business dealings or a material financial interest in any
transaction with Seller other than business dealings or transactions disclosed
in Part 3.22(b), each of which has been conducted in the Ordinary Course of
Business with Seller at substantially prevailing market prices and on
substantially prevailing market terms; (ii) engaged in competition with Seller
with respect to any line of the products or services of Seller (a "COMPETING
BUSINESS") in any market presently served by Seller, except for ownership of
less than one percent (1%) of the outstanding capital stock of any Competing
Business that is publicly traded on any recognized exchange or in the
over-the-counter market; or (iii) received any loan or other advance from
Seller. Except as set forth in Part 3.22(b), none of the Selling Parties nor any
Related Person of any of them is a party to any Contract with, or has any claim
or right against, Seller.
29
3.23 BROKERS, FINDERS OR FINANCIAL ADVISORS
Except as set forth on Part 3.23, no broker, investment banker,
financial advisor or other person, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by the Agreement based upon arrangements made by or on
behalf of any of the Selling Parties.
3.24 SECURITIES LAW MATTERS
(a) Seller alone, or its representative, has such knowledge and
experience in financial and business matters and such experience in evaluating
and investing in companies such as Buyer Parent as to be capable of evaluating
the merits and risks of an investment in the Buyer Shares. Seller has the
financial ability to bear the economic risk of its investment in the Buyer
Shares being acquired hereunder, has adequate means for providing for its
current needs and contingencies and has no need for liquidity with respect to
its investment in Buyer Parent. Seller is an "accredited investor" as such term
is defined in Rule 501(a) of the Securities Act.
(b) Seller is acquiring the Buyer Shares for its own account, for
investment purposes only, and not with the view to, or for resale in connection
with, any distribution thereof. Seller understands that the Buyer Shares have
not been distributed pursuant to a prospectus in Canada pursuant to applicable
legislation and have not been registered under the Securities Act, or under the
securities laws of various states of the United States or under the securities
laws of Canada, by reason of a specified exemption from the registration
provisions thereunder which depends upon, among other things, the bona fide
nature of Seller's investment intent as expressed herein. Seller acknowledges
that its representations and warranties contained herein are being relied upon
by Buyer Parent as a basis for the exemption of the issuance of the Buyer Shares
hereunder from the registration requirements of the Securities Act and any
applicable state securities laws.
(c) Seller acknowledges that the Buyer Shares must be held
indefinitely until they are subsequently registered under the Securities Act and
under applicable state securities laws or an exemption from such registration is
available and that Buyer and Buyer Parent have no obligation whatsoever to
register the Buyer Shares. Seller has been advised or is aware of the provisions
of Rule 144 promulgated under the Securities Act which permits limited resale of
the securities purchased in a private placement subject to the satisfaction of
certain conditions including, among other things, the availability of certain
current public information about Buyer Parent and compliance with applicable
requirements regarding the holding period and the amount of securities to be
sold and the manner of sale. Seller understands that only Buyer Parent can take
action to register the Buyer Shares.
(d) Seller acknowledges that the Buyer Shares must also be held in
accordance with applicable securities laws in Canada and Seller undertakes not
to sell, transfer or assign the Buyer Shares in contravention of the applicable
laws in force in Canada.
(e) Seller or its representative has had an opportunity to discuss
the Buyer Parent's business, management, financial affairs and acquisition plans
with its management, to review the Buyer Parent's facilities, and to obtain such
additional information concerning Seller's investment in the Buyer Shares in
order for Seller to evaluate its merits and risks, and Seller has determined
that the Buyer Shares are a suitable investment for Seller and that at this ▇▇▇▇
▇▇▇▇▇▇ could bear a complete loss of its investment.
(f) Seller is aware that no U.S. or Canada federal, state,
provincial or other agency has passed upon or made any finding or determination
concerning the fairness of the Contemplated Transactions or the adequacy of the
disclosure of the exhibits and schedules hereto or thereto.
30
(g) Seller understands that all certificates for the Buyer Shares
issued to Seller shall bear a legend in substantially the following form and
including such legend as may be required under Canadian securities laws:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF WITHOUT SUCH REGISTRATION OR THE DELIVERY TO THE ISSUER OF AN
OPINION OF COUNSEL, OR SUCH OTHER DOCUMENTATION REASONABLY SATISFACTORY
TO THE ISSUER, THAT SUCH DISPOSITION WILL NOT REQUIRE REGISTRATION OF
SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS."
(h) Seller understands that the Buyer Shares will not be
registered at the time of their issuance under the Securities Act for the reason
that the sale provided for in the Agreement is exempt pursuant to Section 4(2)
of the Securities Act and that the reliance of the Buyer Parent on such
exemption is predicated in part on Seller's representations set forth herein.
Seller further understands that the Buyer Shares will not be distributed
pursuant to a prospectus in Canada at the time of their issuance for the reason
that the sale provided for in the Agreement is exempt under applicable Canadian
securities laws.
3.25 SOLVENCY
Immediately after giving effect to the consummation of the Contemplated
Transactions: (i) Seller will be able to pay its Liabilities as they become due;
(ii) Seller will have assets (calculated at fair market value) that exceed its
Liabilities; and (iii) taking into account all pending and threatened
litigation, final judgments against Seller in actions for money damages are not
reasonably anticipated to be rendered at a time when, or in amounts such that,
Seller will be unable to satisfy any such judgments promptly in accordance with
their terms (taking into account the maximum probable amount of such judgments
in any such actions and the earliest reasonable time at which such judgments
might be rendered) as well as all other obligations of Seller. Seller will
receive reasonably equivalent value for the Assets in connection with the
Contemplated Transactions. Set forth on Part 3.25 is a list of Seller's
creditors as of the date of this Agreement and the amounts owed to such
creditors.
3.26 CAPITAL EXPENDITURES
Part 3.26 sets forth all of the completed and planned capital
expenditures of Seller.
3.27 FOREIGN CORRUPT PRACTICES ACT
(a) None of the Selling Parties nor any of their respective
Representatives have, to obtain or retain business, directly or indirectly
offered, paid or promised to pay, or authorized the payment of, any money or
other thing of value to:
(i) any person who is an official, officer, agent,
employee or representative of any Governmental Body or of any existing
or prospective customer (whether government owned or nongovernment
owned);
(ii) any political party or official thereof;
(iii) any candidate for political or political party
office; or
31
(iv) any other individual or entity;
while knowing or having reason to believe that all or any portion of such money
or thing of value would be offered, given, or promised, directly or indirectly,
to any such official, officer, agent, employee, representative, political party,
political party official, candidate, individual, or any entity affiliated with
such customer, political party or official or political office, in contravention
of the Foreign Corrupt Practices Act or any Legal Requirement.
(b) Except as set forth in Part 3.27(b), Seller has made all
payments to Third Parties by check mailed to such Third Parties' principal place
of business or by wire transfer to a bank located in the same jurisdiction as
such party's principal place of business.
(c) Each transaction is properly and accurately recorded on the
books and Records of Seller, and each document upon which entries in Seller's
books and Records are based is complete and accurate in all respects. Seller
maintains a system of internal accounting controls adequate to insure that
Seller maintains no off-the-books accounts and that Seller's assets are used
only in accordance with Seller's management directives.
(d) Seller has at all times been in compliance with all Legal
Requirements relating to export control and trade embargoes. No product sold or
service provided by Seller during the last five (5) years has been, directly or
indirectly, sold to or performed on behalf of any person or entity of Cuba,
Iraq, Iran, Libya North Korea, Sudan or Syria.
(e) Except as set forth in Part 3.27(e), Seller has not violated
the antiboycott prohibitions contained in 50 U.S.C. sect. 2401 et seq. or taken
any action that can be penalized under Section 999 of the Code. Except as set
forth in Part 3.27(e), during the last five (5) years, Seller has not been a
party to, is not a beneficiary under and has not performed any service or sold
any product under any Seller Contract under which a product has been sold to
customers in Bahrain, Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, Qatar, Saudi
Arabia, Sudan, Syria, United Arab Emirates or the Republic of Yemen.
3.28 BUDGET
The break-even budget with sales of $6,000,000 delivered by or on
behalf of the Selling Parties to Buyer was prepared in good faith based on and
using assumptions that the Selling Parties believe to be reasonable.
3.29 ACCOUNTS RECEIVABLE
Seller has at all times collected its accounts receivable in full
without any setoff within ninety (90) days after the day on which it first
became due and payable other than the accounts listed on Part 3.29.
3.30 DISCLOSURE
Each of the Selling Parties has made or caused to be made such inquiry
as a prudent individual could be expected to make with respect to each of the
representations, warranties and statements contained in the Agreement and in
each of the parts, certificates, documents and other writings referred to herein
or furnished to Buyer and Buyer Parent hereunder, and none of the same contains
any untrue statement of a material fact or omits a material fact necessary to
make the statements contained therein not misleading, and all such statements,
taken as a whole, together with the Transaction Agreements, do not contain any
untrue statement of a material fact or omit a material fact necessary to make
the statements contained herein and therein not misleading. Save and except for
those matters disclosed herein, there are not any facts which
32
should reasonably be made known to Buyer and Buyer Parent relating to the
Selling Parties not herein disclosed, which might be reasonably expected to
materially diminish Buyer's and Buyer Parent's appreciation of the worth or
profitability of Seller, or which, if known by Buyer and Buyer Parent, might be
reasonably expected to deter Buyer and Buyer Parent from completing the
Contemplated Transactions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND BUYER PARENT
Buyer and Buyer Parent hereby represent and warrant to the Selling
Parties, as of the date hereof as follows:
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATIONS
Each of Buyer and Buyer Parent is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, with the requisite corporate power and authority to own and use
its properties and assets and to carry on its business as currently conducted.
4.2 AUTHORITY; NO CONFLICT
(a) Each of Buyer and Buyer Parent has the requisite corporate
power and authority to enter into and to consummate the Contemplated
Transactions and otherwise to carry out their obligations hereunder. The
execution and delivery of the Transaction Agreements by Buyer and Buyer Parent
and the consummation by each of them of the Contemplated Transactions have been
duly authorized by all necessary action on the part of Buyer and Buyer Parent
and no further action is required by Buyer or Buyer Parent, subject to
regulatory approval under applicable securities laws and regulations. The
Agreement has been, and the other Transaction Agreements will be when executed
by Buyer and Buyer Parent (to the extent each is a party), duly executed by
Buyer and Buyer Parent and, assuming each of the Transaction Agreements
constitutes a valid and binding obligation of the Selling Parties, the Agreement
constitutes, and each of the other Transaction Agreements when executed by Buyer
and Buyer Parent (to the extent each is party) will constitute, a valid and
binding agreement of Buyer and Buyer Parent enforceable against them in
accordance with their respective terms, subject, however, as to enforcement, to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general principles of equity, regardless of whether such enforceability
is considered in equity or at law.
(b) Subject to regulatory approval under applicable securities
laws and regulations, including those of any stock exchanges, the execution and
delivery of the Transaction Agreements do not, and the consummation of the
Contemplated Transactions and compliance with the provisions of the Transaction
Agreements will not, conflict with, or result in any violation of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to loss
of a material benefit under, or result in the creation of any Encumbrance upon
any of the properties or assets of Buyer or Buyer Parent pursuant to, any
provision of: (a) the Certificate of Incorporation or bylaws of Buyer or Buyer
Parent; (b) any loan or credit agreement, note, bond, mortgage, indenture, lease
or other agreement, instrument, permit, concession, franchise or license
applicable to Buyer or Buyer Parent or their respective properties or assets; or
(c) subject to the governmental filings and other matters referred to in SECTION
4.3(B), any statute, law, rule, regulation, judgment, order or decree applicable
to Buyer or Buyer Parent or their respective properties or assets, other than
with respect to any of the matters described in this SECTION 4.3(B), any such
conflicts, violations, defaults, rights or Encumbrances that individually or in
the aggregate would not reasonably be expected to have a Material Adverse Effect
on Buyer or Buyer Parent, as the case may be, or prevent or materially delay the
consummation of any of the Contemplated Transactions.
33
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Body is required by
or with respect to Buyer or Buyer Parent in connection with the execution and
delivery of the Agreement by Buyer or Buyer Parent or the consummation by Buyer
or Buyer Parent of the Contemplated Transactions, except for: (i) approval for
the listing of the Buyer Shares on The Toronto Stock Exchange and for a
quotation on the Nasdaq National Market; (ii) such filings, consents, approvals,
orders, registrations and declarations as may be necessary as a result of the
issuance of the Buyer Shares, including any orders pursuant to any applicable
securities law or any facts or circumstances relating solely to Buyer Parent;
and (iii) such other consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect or prevent or materially delay the consummation of any of the
Contemplated Transactions.
4.3 AUTHORIZATION FOR BUYER SHARES
Buyer Parent has taken all necessary action to issue the Buyer Shares.
The Buyer Shares have been duly authorized and, when issued and delivered in
accordance with the terms of the Agreement, will be validly issued, fully paid
and nonassessable and free and clear of all Encumbrances (other than
restrictions on transfer imposed by applicable securities laws and the Lock-Up
Agreement) and will not be issued in violation of any preemptive rights, rights
of first refusal or similar rights.
4.4 CANADIAN DOCUMENTS
The Selling Parties have been made aware by Buyer Parent of the
location of each statement and report, as may be required to have been filed as
of the date hereof under Canadian securities laws (the "CANADIAN DOCUMENTS"). As
of their respective filing dates, the Canadian Documents complied in all
material respects with the requirements of the securities laws in force in
Canada, and none of the Canadian Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
in which they were made, not misleading, except to the extent corrected by a
subsequently filed Canadian Document.
4.5 BROKERS, FINDERS OR FINANCIAL ADVISORS
No broker, investment banker, financial advisor or other person, is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by the Agreement
based upon arrangements made by or on behalf of any of Buyer.
ARTICLE V
PRE-CLOSING COVENANTS OF THE PARTIES
5.1 CONDUCT OF BUSINESS BY SELLER
Except to the extent consented to in writing by Buyer or as expressly
permitted or contemplated by the Agreement, during the period from the date of
the Agreement to the Closing, Seller shall carry on its business in the Ordinary
Course of Business and, to the extent consistent therewith, use best efforts to
preserve intact its current business organizations, keep available the services
of its current employees and preserve its relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with it. Without limiting the generality of the foregoing, without
Buyer's written consent during the period from the date of the Agreement to the
Closing, none of the Selling Parties shall:
(a) amend its Governing Documents;
34
(b) acquire or agree to acquire (i) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture, association
or other business organization or division thereof; or (ii) any assets that are
material, individually or in the aggregate, to Seller, except purchases in the
Ordinary Course of Business;
(c) sell, lease, license, mortgage or otherwise encumber or
subject to any Encumbrances (other than Permitted Encumbrances pursuant to its
existing indebtedness) or otherwise dispose of any of its properties or assets,
except in the Ordinary Course of Business;
(d) incur any indebtedness for borrowed money (except to Buyer) or
guarantee any such indebtedness of another person, guarantee any debt securities
of another person, except for borrowings under its existing credit facilities
for working capital purposes, in an aggregate amount of less than $100,000, the
endorsement of checks in the Ordinary Course of Business and the extension of
credit to customers in the Ordinary Course of Business; or (ii) make any loans,
advances or capital contributions to, or investments in, any other Person;
(e) except for the items currently contracted for by Seller, make
or agree to make any new capital expenditure or expenditures which,
individually, is in excess of $10,000 or, in the aggregate, are in excess of
$50,000;
(f) make any material Tax election or settle or compromise any
material income Tax liability;
(g) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued or contingent, asserted or unasserted) relating
to the Assets, the business of the Seller or the Assumed Liabilities, without
the prior written consent of Buyer, other than the payment, discharge or
satisfaction, in the Ordinary Course of Business or in accordance with their
terms, of Liabilities reflected or reserved against in, or contemplated by, the
most recent consolidated financial statements (or the notes thereto) included in
the Financial Statements or incurred in the Ordinary Course of Business;
(h) modify, amend or terminate any material Seller Contract, or
waive, release or assign any material rights or claims;
(i) except as required to comply with applicable law, (i) adopt,
enter into or amend any Employee Plan; (ii) increase in any manner the
compensation or fringe benefits of, or pay any bonus to, any employee of Seller;
or (iii) terminate, amend, modify, or grant any awards under, any Employee Plan;
(j) other than as required by law or GAAP, make any change to its
accounting policies or procedures;
(k) maintain the Assets in a state of repair and condition that
complies with Legal Requirements and is consistent with the requirements and
Seller's Ordinary Course of Business;
(l) comply with all Legal Requirements and contractual obligations
applicable to the operation of Seller's business;
(m) except as mutually agreed upon by Seller and Buyer, materially
change Seller's existing employment conditions, hire new employees or terminate
current Seller employees; or
(n) authorize any of, or commit or agree to take any of, the
foregoing actions.
35
5.2 PUBLIC ANNOUNCEMENTS
From the date of the Agreement until the earlier of the Closing or the
termination of the Agreement, no Selling Party will issue or cause the
publication of any press release or other public announcement with respect to
the Agreement or the Contemplated Transactions without the prior consent of
Buyer, which consent shall not be unreasonably withheld; PROVIDED, HOWEVER,
that: (a) nothing herein will prohibit either party from issuing or causing
publication of any such press release or public announcement to the extent that
such party's counsel reasonably determines such action to be required by law, or
the regulations of any Governmental Body or the exchanges or markets on which
Buyer Parent shares are traded, in which case the party making such
determination will, to the greatest extent practicable in light of the
circumstances, use best efforts to allow the other party reasonable time to
comment on such release or announcement in advance of its issuance; and (b)
Buyer and Selling Parties may disclose the Agreement and the Contemplated
Transactions to Third Parties in connection with securing consents of such Third
Parties and in connection with any Legal Requirements. To the extent feasible,
prior to the Closing, all press releases or other announcements or notices
regarding the Contemplated Transactions shall be made solely by Buyer.
5.3 NON-SOLICITATION; NON-NEGOTIATION
Each of the Selling Parties agrees that, it will not, and it will use
its best efforts to cause its Representatives, agents or employees acting on its
behalf, not to, after the execution of the Agreement until the earlier of (a)
the termination of the Agreement; or (b) the Closing, directly or indirectly,
solicit, encourage, initiate, negotiate or discuss with, or provide any
nonpublic information to, any Third Party or permit the consummation of any
acquisition proposal relating to or affecting Seller, or any direct or indirect
interests in Seller, whether by exchange offer, purchase of assets other than in
the Ordinary Course of Business or stock, business combination, merger or other
transaction, and that Selling Parties will promptly advise Buyer of the terms of
any communications they may receive relating to any such acquisition proposal.
5.4 ACCESS TO INFORMATION, DUE DILIGENCE INVESTIGATION;
CONFIDENTIALITY
The Selling Parties shall afford to Buyer and the Representatives of
Buyer access during the period prior to the Closing, to such of the properties,
books, Contracts, Records and employees as Buyer may reasonably request for the
purpose of conducting a full and complete due diligence investigation of all
aspects of Seller, including, without limitation, financial, legal and
accounting and, during such period, Selling Parties shall furnish as promptly as
possible to Buyer and its Representatives all information concerning Seller and
its business, properties and personnel as Buyer may request. Buyer shall make
all commercially reasonable efforts to minimize disruption to the business of
Seller which may result from the requests for data and information hereunder.
All requests for access and information shall be coordinated through senior
executives of the parties to be designated. Any investigation by Buyer shall not
affect the representations and warranties of any of the Selling Parties.
5.5 BEST EFFORTS
Subject to the terms and conditions herein, each of the parties hereto
agrees to use best efforts to take, or cause to be taken, all action, and to do,
or cause to be done as promptly as practicable, all things necessary, proper and
advisable under applicable laws and regulations to consummate and make effective
the Contemplated Transactions, including without limitation, fulfillment of the
conditions to Closing set forth herein. If at any time after the Closing any
further action is necessary or desirable to carry out the purposes of the
Agreement or the Contemplated Transactions, including, without limitation, the
execution of additional instruments, Buyer and the Selling Parties shall take
all such necessary action.
36
5.6 COVENANTS OF PARTIES
From the date of the Agreement until the earlier of the Closing or the
termination of the Agreement, no party shall take any action, except in every
case as may be required by applicable law, that would or is intended to result
in: (a) any of its representations and warranties set forth in the Agreement
that are qualified as to materiality being or becoming untrue; (b) any of such
representations and warranties that are not so qualified becoming untrue in any
manner having a Material Adverse Effect on such Party; (c) any of the conditions
set forth in the Agreement not being satisfied or in a violation of any
provision of the Agreement; or (d) adversely affecting the ability of any of
them to obtain any of the Consents or approvals required from any Governmental
Body as a condition to Closing.
5.7 NOTIFICATION
Between the date of the Agreement and the Closing, Selling Parties
shall promptly notify Buyer in writing if any of them becomes aware of (a) any
fact or condition that causes or constitutes a Breach of any of Selling Parties'
representations and warranties made as of the date of the Agreement; or (b) the
occurrence after the date of the Agreement of any fact or condition that would
be reasonably likely to (except as expressly contemplated by this Agreement)
cause or constitute a Breach of any such representation or warranty had that
representation or warranty been made as of the time of the occurrence of such
fact or condition. Should any such fact or condition require any change to the
Disclosure Letter, Seller shall promptly deliver to Buyer a supplement to the
Disclosure Letter specifying such change. If Selling Parties timely furnish
Buyer with a supplement to the Disclosure Letter under clause (b) of this
SECTION 5.7, then Buyer has the option, by delivering written notice to Selling
Parties of either (i) waiving the Breaches identified in such supplement to the
Disclosure Letter (the "WAIVED BREACHES"), in which event the Disclosure Letter
shall be deemed amended to reflect such exceptions to the representations and
warranties and the subject matter thereof, or (ii) terminating this Agreement as
provided in SECTION 8.1(A), whereupon the Selling Parties, Buyer and Buyer
Parent shall have no further obligations to each other with respect to any
Liability of Selling Parties for any such Waived Breaches, notwithstanding
SECTION 8.2. Except as set forth in the immediately preceding sentence, such
delivery of a supplement to the Disclosure Letter shall not affect any rights of
Buyer under Article 8 and Article 10. During the same period, Selling Parties
also shall promptly notify Buyer of the occurrence of any Breach of any covenant
to Buyer in this Article 5 or of the occurrence of any event that may make the
satisfaction of the conditions in Article 6 impossible or unlikely.
5.8 REQUIRED APPROVALS
As promptly as practicable after the date of the Agreement, Buyer shall
make, or cause to be made, all filings required by Legal Requirements to be made
by it to consummate the Contemplated Transactions. Buyer also shall cooperate,
and cause its Related Persons to cooperate, with Seller (a) with respect to all
filings Seller shall be required by Legal Requirements to make; and (b) in
obtaining all Consents identified in Part 3.14(c).
5.9 DEMONSTRATION UNITS
Selling Parties shall enter into an agreement with Buyer, in form and
substance reasonably satisfactory to Buyer, to sell to Buyer or its designee
contemporaneously with the Closing at a total price of $10,000 all demonstration
units identified in Part 5.9 held by Related Persons of Seller.
5.10 CHANGE OF NAME
On or before the Closing Date, Seller, General Partner, Limited Partner
and Seller Parent shall (a) amend their Governing Documents and take all other
actions necessary to change such parties' names to
37
ones sufficiently dissimilar to such parties' present names, in Buyer's
judgment, to avoid confusion; and (b) take all actions requested by Buyer to
enable Buyer to change its name to Seller's present name.
5.11 INTERIM FINANCIAL STATEMENTS
Until the Closing Date, Seller shall deliver to Buyer within fifteen
(15) days after the end of each month complete and correct copies of the
Seller's unaudited balance sheet and the related statements of loss, deficit and
cash flows for such month prepared in a manner and containing information
consistent with Seller's current practices and certified by Seller's chief
financial officer as to compliance with SECTION 3.3.
5.12 PAYMENT OF LIABILITIES
Seller shall pay or otherwise satisfy in the Ordinary Course of
Business all of its Liabilities and obligations.
5.13 TERMINATION OF EMPLOYEE PLANS
Prior to the date of Closing, Seller will take all actions necessary to
terminate Seller's Employee Plans effective as of the date immediately prior to
the date of Closing. On or prior to the Closing Date, Seller will deliver to
Buyer a copy of all notifications given to employees and their spouses and
dependants within the four-year period preceding the Closing Date of their
rights under Section 601 et seq. of ERISA, Section 4980B of the Code, Section
9801 et seq. of the Code, and under all other applicable federal and state laws
regulating the notice requirements of Group Health Plans (as defined in Section
607(1) of ERISA).
5.14 LOAN TO SELLER
If the Closing occurs, at the Closing, if requested by Seller, Buyer
shall lend Seller the principal sum of $587,000 pursuant to the promissory note
in the form of EXHIBIT 5.14(A) (the "NOTE") executed by Seller; provided that
the Selling Parties other than Seller and the Founders execute a Guaranty of
performance and payment in the form of EXHIBIT 5.14(B) (the "GUARANTY").
5.15 PATENT APPLICATION DUE DILIGENCE
Subject to that Confidentiality Agreement dated September 4, 2002 by
and among the Seller and ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ of
Buyer Parent (the "PATENT RECIPIENTS"), the Selling Parties have provided to the
Patent Recipients that certain OC-192 Patent Application covering method and
system for framing bits (the "PATENT APPLICATION") and other evidence in the
form and substance reasonably acceptable to the Patent Recipients, in order to
perform a due diligence review to assess and evaluate the Patent Application.
Buyer shall cause the Patent Recipients to notify Seller and Buyer in writing on
or before September 15, 2002, after they have received the complete Patent
Application under this SECTION 5.15 whether or not the Patent Recipients are
satisfied with their due diligence review of the Patent Application.
ARTICLE VI
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Assets and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
38
6.1 ACCURACY OF REPRESENTATIONS
(a) All of Selling Parties' representations and warranties in the
Agreement (considered collectively), and each of these representations and
warranties (considered individually), shall have been accurate in all material
respects as of the date of the Agreement, and shall be accurate in all material
respects as of the time of the Closing as if then made, without giving effect to
any supplement to the Disclosure Letter (unless the Breaches dislcosed in any
such supplement have been waived by Buyer in accordance with Section 5.7).
(b) Each of the representations and warranties in SECTIONS 3.1(B)
and 3.3 and each of the representations and warranties in the Agreement that
contains an express materiality qualification, shall have been accurate in all
respects as of the date of the Agreement, and shall be accurate in all respects
as of the time of the Closing as if then made, without giving effect to any
supplement to the Disclosure Letter (unless the Breaches dislcosed in any such
supplement have been waived by Buyer in accordance with Section 5.7).
6.2 SELLING PARTIES' PERFORMANCE
All of the covenants and obligations that Selling Parties are required
to perform or to comply with pursuant to the Agreement at or prior to the
Closing (considered collectively), and each of these covenants and obligations
(considered individually), shall have been duly performed and complied with.
6.3 CONSENTS
Each of the Consents identified in Part 3.14(c) shall have been
obtained and shall be in full force and effect.
6.4 ADDITIONAL DOCUMENTS
Selling Parties shall have caused the documents and instruments
required by SECTION 2.8(A) and the following documents to be delivered (or
tendered subject only to the Closing) to Buyer:
(a) An opinion of ▇▇▇▇▇▇ and Stone, L.L.P., dated the Closing
Date, in the form of EXHIBIT 6.4(A);
(b) The Certificate of Limited Partnership, Agreement of Limited
Partnership and all amendments thereto of Seller, duly certified as of a recent
date by the Secretary of State of Delaware;
(c) Certificates dated as of a date not earlier than the fifth
Business Day prior to the Closing as to the good standing of Seller and payment
of all applicable state Taxes by Seller, executed by the appropriate officials
of the State of Delaware and each jurisdiction in which Seller is licensed or
qualified to do business as specified in Part 3.1(a); and
(d) Such other documents as Buyer may reasonably request for the
purpose of:
(i) evidencing the accuracy of any of Selling Parties'
representations and warranties;
(ii) evidencing the performance by Selling Parties of, or
the compliance by Selling Parties with, any covenant or obligation
required to be performed or complied with by Selling Parties;
(iii) evidencing the satisfaction of any condition referred
to in this Article 6; or
39
(iv) otherwise facilitating the consummation or
performance of any of the Contemplated Transactions.
(e) Releases of all Seller employees from non-disclosure and other
similar agreements they may have entered into with any of the Seller Parties or
their predecessors.
6.5 NO PROCEEDINGS
Since the date of the Agreement, there shall not have been commenced or
threatened against Buyer, or against any Related Person of Buyer, any Proceeding
(a) involving any challenge to, or seeking Damages or other relief in connection
with, any of the Contemplated Transactions; or (b) that may have the effect of
preventing, delaying, making illegal, imposing limitations or conditions on or
otherwise interfering with any of the Contemplated Transactions.
6.6 NO CONFLICT
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), contravene or conflict with or result in a violation of or cause Buyer or
any Related Person of Buyer to suffer any adverse consequence under (a) any
applicable Legal Requirement or Order; or (b) any Legal Requirement or Order
that has been published, introduced or otherwise proposed by or before any
Governmental Body.
6.7 EMPLOYMENT AGREEMENTS
Each of the Founders shall have duly executed and delivered to Buyer
the Employment Agreements. Ninety percent (90%) of Seller employees as of the
date of this Agreement who are offered employment by Buyer shall have accepted
Buyer's offer for employment, and each such accepting employee shall have
delivered to Buyer a non-disclosure agreement in the form attached hereto as
EXHIBIT 6.7.
6.8 LOCK-UP AGREEMENT
Selling Parties shall have entered into the Lock-Up Agreement.
6.9 GOVERNMENTAL AUTHORIZATIONS
Buyer shall have received such Governmental Authorizations as are
necessary or desirable to allow Buyer to consummate the Contemplated
Transactions and to operate the Assets from and after the Closing.
6.10 SECURITIES REGULATORY APPROVALS
The regulatory approvals required under United States and Canadian
securities laws and under the bylaws, regulations or policies of the United
States and Canadian securities regulatory authorities and stock exchanges.
6.11 RELEASE OF SUBLEASE AGREEMENT
Seller shall have delivered to Buyer a binding agreement in form and
substance satisfactory to Buyer and duly executed by CISCO Systems, Inc. that
terminates that certain Sublease Agreement between gnubi communications, Inc.
and CISCO Systems, Inc. dated as of July 27, 2001 and that releases the Selling
Parties from all Liabilities thereunder.
40
6.12 ARRANGEMENT WITH THE FROST NATIONAL BANK
Buyer, Selling Parties and The Frost National Bank shall have entered
into a mutually agreeable agreement providing for the following in connection
with the Contemplated Transactions:
(a) Buyer shall have a first priority security interest in the
Buyer Shares securing payment of the indemnification obligations of the Selling
Parties under this Agreement, and Buyer shall retain control of the Buyer
Shares;
(b) The Frost National Bank shall have a second priority security
interest in the Buyer Shares, subordinate to the security interest of Buyer, and
shall not be able to foreclose upon any Buyer Shares unless and until the Buyer
Shares are released to Seller under the Lock-Up Agreement;
(c) Buyer shall have a second priority security interest in the
Selling Parties' right to all Tax refunds, subordinate to the interest of The
Frost National Bank (to the extent that the amount of Seller's indebtedness to
The Frost National Bank does not increase other than as a result of the accrual
of interest, costs, reasonable attorneys' fees and all other expenses pursuant
to the terms of the loan documents between the Selling Parties and The Frost
National Bank), and securing payment of the Note;
(d) Buyer shall not exercise its right to set off amounts due
under the Note against payment of the Earn-out Amount unless and until all
indebtedness owed to The Frost National Bank is paid in full (to the extent that
the amount of Seller's indebtedness to The Frost National Bank does not increase
other than as a result of the accrual of interest, costs, reasonable attorneys'
fees and all other expenses pursuant to the terms of the loan documents between
the Selling Parties and The Frost National Bank);
(e) Buyer may set off at any time claims under Article 10 of this
Agreement against the Buyer Shares held under the Lock-Up Agreement;
(f) Seller shall not make any payments on the Note unless and
until the indebtedness owed to The Frost National Bank is paid in full (to the
extent that the amount of Seller's indebtedness to The Frost National Bank does
not increase other than as a result of the accrual of interest, costs,
reasonable attorneys' fees and all other expenses pursuant to the terms of the
loan documents between the Selling Parties and The Frost National Bank);
(g) the Guaranty shall be subordinate (to the extent that the
amount of Seller's indebtedness to The Frost National Bank does not increase
other than as a result of the accrual of interest, costs, reasonable attorneys'
fees and all other expenses pursuant to the terms of the loan documents between
the Selling Parties and The Frost National Bank) to the guaranties of the
indebtedness to The Frost National Bank signed by Seller Parent, JRS, General
Partner and Limited Partner; and
(h) to the extent that the provisions of this SECTION 6.12
conflict with any other provision of this Agreement, the provisions of this
SECTION 6.12 will control.
ARTICLE VII
CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
Seller's obligation to sell the Assets and to take the other actions
required to be taken by Seller at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Seller in whole or in part):
41
7.1 ACCURACY OF REPRESENTATIONS
(a) All of Buyer and Buyer Parent's representations and warranties
in the Agreement (considered collectively), and each of these representations
and warranties (considered individually), shall have been accurate in all
material respects as of the date of the Agreement, and shall be accurate in all
material respects as of the time of the Closing as if then made.
(b) Each of the representations and warranties in SECTION 4.2(A)
and each of the representations and warranties in the Agreement that contains an
express materiality qualification, shall have been accurate in all respects as
of the date of the Agreement, and shall be accurate in all respects as of the
time of the Closing as if then made.
7.2 BUYER AND BUYER PARENT'S PERFORMANCE
All of the covenants and obligations that Buyer and Buyer Parent is
required to perform or to comply with pursuant to the Agreement at or prior to
the Closing (considered collectively), and each of these covenants and
obligations (considered individually), shall have been performed and complied
with in all material respects.
7.3 NO PROCEEDINGS
Since the date of the Agreement there shall not have been commenced or
threatened against Selling Parties or against any Related Person of Selling
Parties, any Proceeding (a) involving any challenge to, or seeking Damages or
other relief in connection with, any of the Contemplated Transactions or (b)
that may have the effect of preventing, delaying, making illegal, imposing
limitations or conditions on or otherwise interfering with any of the
Contemplated Transactions.
7.4 ADDITIONAL DOCUMENTS
Buyer shall have caused to be delivered to Selling Parties an opinion
in the form of EXHIBIT 7.4, which opinions may be divided between ▇▇▇▇▇▇ and
▇▇▇▇▇, LLP, and in-house counsel to Buyer Parent, and the documents and
instruments required by SECTION 2.8(B) and such other documents as Seller may
reasonably request for the purpose of:
(a) evidencing the accuracy of any of Buyer's or Buyer Parent's
representations and warranties;
(b) evidencing the performance by Buyer or Buyer Parent of, or the
compliance by Buyer or Buyer Parent with, any covenant or obligation required to
be performed or complied with by Buyer or Buyer Parent;
(c) evidencing the satisfaction of any condition referred to in
this Article 7; or
(d) otherwise facilitating the consummation or performance of any
of the Contemplated Transactions.
42
ARTICLE VIII
TERMINATION
8.1 TERMINATION EVENTS
By notice given prior to or at the Closing, subject to SECTION 8.2, the
Agreement may be terminated as follows:
(a) by Buyer, if a material Breach of any provision of the
Agreement has been committed by any of the Selling Parties;
(b) by Seller, if a material Breach of any provision of the
Agreement has been committed by Buyer or Buyer Parent;
(c) by Buyer, if any condition in Article 6 has not been satisfied
as of September 30, 2002 or such later date as the parties may mutually agree,
or if satisfaction of such a condition by such date is or becomes impossible
(other than through the failure of Buyer to comply with its obligations under
the Agreement);
(d) by Seller, if any condition in Article 7 has not been
satisfied as of September 30, 2002 or such later date as the parties may
mutually agree, or if satisfaction of such a condition by such date is or
becomes impossible (other than through the failure of Selling Parties to comply
with their obligations under the Agreement);
(e) by mutual written consent of Buyer and Seller;
(f) by Buyer, if the Closing has not occurred on or before October
31, 2002, or such later date as the parties may agree upon, unless the Buyer is
in material Breach of the Agreement;
(g) by Seller, if the Closing has not occurred on or before
October 31, 2002, or such later date as the parties may agree upon, unless the
Selling Parties are in material Breach of the Agreement; or
(h) by Buyer, on or before September 15, 2002, if the results of
the due diligence review of the Patent Application are not satisfactory to the
Patent Recipients in their sole discretion.
8.2 EFFECT OF TERMINATION
Each party's right of termination under SECTION 8.1 is in addition to
any other rights it may have under the Agreement or otherwise, and the exercise
of such right of termination will not be an election of remedies. If the
Agreement is terminated pursuant to SECTION 8.1, all obligations of the parties
under the Agreement will terminate, except that the obligations of the parties
in this SECTION 8.2 and Articles 11 and 12 (except for those in SECTION 12.12)
will survive; PROVIDED, HOWEVER, that the termination of this Agreement shall
not relieve any party for the consequences of such party's Breach of this
Agreement.
43
ARTICLE IX
ADDITIONAL COVENANTS
9.1 PAYMENT OF ALL TAXES RESULTING FROM SALE OF ASSETS BY SELLER
Selling Parties shall pay in a timely manner all Taxes resulting from
or payable in connection with the sale of the Assets pursuant to the Agreement,
regardless of the Person on whom such Taxes are imposed by Legal Requirements.
9.2 PAYMENT OF OTHER RETAINED LIABILITIES
In addition to payment of Taxes pursuant to SECTION 9.1, Selling
Parties shall pay, or make adequate provision for the payment, in full all of
the Retained Liabilities and other Liabilities of Seller under the Agreement.
Selling Parties shall pay all indebtedness owing to The Frost National Bank
promptly after receipt by Seller of any tax refund, to the extent of the tax
refund.
9.3 REMOVING EXCLUDED ASSETS
On or before the Closing Date, Selling Parties shall remove all
Excluded Assets from all Facilities and other Real Property to be occupied by
Buyer. Such removal shall be done in such manner as to avoid any damage to the
Facilities and other properties to be occupied by Buyer and any disruption of
the business operations to be conducted by Buyer after the Closing. Any damage
to the Assets or to the Facilities resulting from such removal shall be paid by
Selling Parties at the Closing. Should Selling Parties fail to remove the
Excluded Assets as required by this Section, Buyer shall have the right, but not
the obligation, (a) to remove the Excluded Assets at Selling Parties' sole cost
and expense; (b) to store the Excluded Assets and to charge Selling Parties all
storage costs associated therewith; (c) to treat the Excluded Assets as
unclaimed and to proceed to dispose of the same under the laws governing
unclaimed property; or (d) to exercise any other right or remedy conferred by
the Agreement or otherwise available at law or in equity. Selling Parties shall
promptly reimburse Buyer for all costs and expenses incurred by Buyer in
connection with any Excluded Assets not removed by Selling Parties on or before
the Closing Date.
9.4 REPORTS AND RETURNS
Seller shall promptly after the Closing prepare and file all reports
and returns required by Legal Requirements relating to the business of Seller as
conducted using the Assets, to and including the Effective Time.
9.5 ASSISTANCE IN PROCEEDINGS
The parties to this Agreement will cooperate with each other and their
respective counsel in the contest or defense of, and make available its
personnel and provide any testimony and access to its books and Records in
connection with, any Proceeding involving or relating to (a) any Contemplated
Transaction; or (b) any action, activity, circumstance, condition, conduct,
event, fact, failure to act, incident, occurrence, plan, practice, situation,
status or transaction on or before the Closing Date involving Seller or its
business or Founders.
9.6 NONCOMPETITION; NONSOLICITATION; NONDISPARAGEMENT
(a) NONCOMPETITION. None of the Selling Parties shall, for a
period of three (3) years from the Closing Date, within Canada, the United
States, the European Union and in any other country in which
44
Buyer or Seller presently conducts or may conduct business, engage in any
business which develops, manufactures and sells high-performance test,
measurement and automation instruments that are used in a variety of
applications in the telecommunications and data communications networking
industries and includes any other technologies and/or applications which are
directly competitive with the business of the Seller or Buyer as the business of
the Seller and Buyer may change from time to time (the "Business") in the future
(or in the case of the Founders, as such Business is conducted during their
respective terms of employment with Seller and Buyer), without the prior written
consent of Buyer, directly or indirectly, in any manner whatsoever, including,
without limitation, either individually or in partnership or jointly or in
conjunction with any other person, as employee, principal, agent, shareholder or
in any other manner whatsoever, carry on or be engaged in or be concerned with
or lend money to, guarantee the debts or obligations of, or permit their names
to be used or employed by any person or entity engaged or concerned with or
interested in the Business.
(b) NONSOLICITATION. For a period of three (3) years after the
Closing Date, none of the Selling Parties shall, directly or indirectly:
(i) solicit the business of any Person who is or was a
customer of Seller as of the Closing or during the year preceding the
Closing if the solicitation is not made, directly or indirectly, by a
Person who is engaged, or intends to engage, in whole or in part in a
business similar to the Business;
(ii) cause, induce or attempt to cause or induce any
customer, supplier, licensee, licensor, franchisee, employee,
consultant or other business relation of Buyer to cease doing business
with Buyer, to deal with any competitor of Buyer or in any way
interfere with its relationship with Buyer;
(iii) cause, induce or attempt to cause or induce any
customer, supplier, licensee, licensor, franchisee, employee,
consultant or other business relation of Seller on the Closing Date or
within the year preceding the Closing Date to cease doing business with
Buyer, to deal with any competitor of Buyer or in any way interfere
with its relationship with Buyer; or
(iv) hire, retain or attempt to hire or retain any
employee or independent contractor of Buyer or in any way interfere
with the relationship between Buyer and any of its employees or
independent contractors.
(c) NONDISPARAGEMENT. After the Closing Date, none of the Selling
Parties will disparage Buyer, Buyer Parent or any of their respective
shareholders, directors, officers, employees or agents.
(d) MODIFICATION OF COVENANT. If a court or tribunal of competent
jurisdiction determines that any term or provision contained in SECTION 9.6(A)
through (C) is invalid or unenforceable, then the parties agree that the court
or tribunal will have the power to reduce the scope, duration or geographic area
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. This SECTION 9.6 will be enforceable
as so modified after the expiration of the time within which the judgment may be
appealed. This SECTION 9.6 is reasonable and necessary to protect and preserve
Buyer's legitimate business interests and the value of the Assets and to prevent
any unfair advantage conferred on Selling Parties.
45
9.7 CUSTOMER AND OTHER BUSINESS RELATIONSHIPS
After the Closing, Selling Parties will cooperate with Buyer in its
efforts to continue and maintain for the benefit of Buyer those business
relationships of Selling Parties existing prior to the Closing and relating to
the business to be operated by Buyer after the Closing, including relationships
with lessors, employees, regulatory authorities, licensors, customers, suppliers
and others, and Selling Parties will satisfy the Retained Liabilities in a
manner that is not detrimental to any of such relationships. Selling Parties
will refer to Buyer all inquiries relating to such business. No Selling Party
nor any of their respective employees or agents shall take any action that would
tend to diminish the value of the Assets after the Closing or that would
interfere with the business of Buyer and Buyer Parent to be engaged in after the
Closing, including disparaging the name or business of Buyer or Buyer Parent.
9.8 EMPLOYEES AND EMPLOYEE BENEFITS
(a) INFORMATION ON ACTIVE EMPLOYEES
For the purpose of this Agreement, the term "ACTIVE EMPLOYEES" shall
mean all employees employed on the Closing Date by Seller for its business who
are set forth on Part 3.20.
(b) EMPLOYMENT OF ACTIVE EMPLOYEES BY BUYER
(i) Buyer may make an offer of employment to any Active
Employee, whose acceptance of such offer will be effective on the
Closing Date (the "HIRED ACTIVE EMPLOYEES"). Subject to Legal
Requirements, Buyer will have reasonable access to the Facilities and
personnel Records (including performance appraisals, disciplinary
actions and grievances) of Seller for the purpose of preparing for and
conducting employment interviews with all Active Employees and will
conduct the interviews as expeditiously as possible prior to the
Closing Date. Access will be provided by Seller upon reasonable prior
notice during normal business hours. Effective immediately before the
Closing, Seller will terminate the employment of all of the Active
Employees.
(ii) No Selling Party or their Related Persons shall
solicit the continued employment of any Active Employee (unless and
until Buyer has informed Seller in writing that the particular Active
Employee will not receive any employment offer from Buyer) or the
employment of any Hired Active Employee after the Closing.
(iii) It is understood and agreed that (A) Buyer's
expressed intention to extend offers of employment as set forth in this
section shall not constitute any Contract or understanding (expressed
or implied) of any obligation on the part of Buyer to a post-Closing
employment relationship of any fixed term or duration or upon any terms
or conditions other than those that Buyer may establish pursuant to
individual offers of employment; and (B) employment offered by Buyer is
"at will" and may be terminated by Buyer or by an employee at any time
for any reason (subject to any written commitments to the contrary made
by Buyer or an employee and Legal Requirements). Nothing in this
Agreement shall be deemed to prevent or restrict in any way the right
of Buyer to terminate, reassign, promote or demote any of the Hired
Active Employees after the Closing or to change adversely or favorably
the title, powers, duties, responsibilities, functions, locations,
salaries, other compensation or terms or conditions of employment of
such employees.
46
(c) SALARIES AND BENEFITS
(i) Seller shall be responsible for the payment of all
wages and other remuneration due to Active Employees with respect to
their services as employees of Seller through the close of business on
the Closing Date, including pro rata bonus payments and all vacation
pay earned prior to the Closing Date. Seller shall be solely liable for
any severance payment required to be made to its employees due to the
Contemplated Transactions.
(ii) Seller shall be liable for any claims made or
incurred by Active Employees and their beneficiaries through the
Closing Date under the Employee Plans. For purposes of the immediately
preceding sentence, a charge will be deemed incurred, in the case of
hospital, medical or dental benefits, when the services that are the
subject of the charge are performed and, in the case of other benefits
(such as disability or life insurance), when an event has occurred or
when a condition has been diagnosed that entitles the employee to the
benefit.
(d) GENERAL EMPLOYEE PROVISIONS
(i) Seller shall give any notices required by Legal
Requirements and take whatever other actions with respect to the plans,
programs and policies described in this SECTION 9.8 as may be necessary
to carry out the arrangements described in this SECTION 9.8.
(ii) If any of the arrangements described in this SECTION
9.8 are determined by the IRS or other Governmental Body to be
prohibited by law, Seller and Buyer shall modify such arrangements to
as closely as possible reflect their expressed intent and retain the
allocation of economic benefits and burdens to the parties contemplated
herein in a manner that is not prohibited by law.
(iii) Seller shall provide Buyer with completed I-9 forms
and attachments with respect to all Hired Active Employees, except for
such employees as Seller certifies in writing to Buyer are exempt from
such requirement.
(iv) Buyer shall not have any responsibility, liability or
obligation, whether to Active Employees, former employees, their
beneficiaries or to any other Person, with respect to any employee
benefit plans, practices, programs or arrangements (including the
establishment, operation or termination thereof and the notification
and provision of COBRA coverage extension) maintained by Seller.
9.9 FURTHER ASSURANCES
The parties shall cooperate reasonably with each other and with their
respective Representatives in connection with any steps required to be taken as
part of their respective obligations under the Agreement, and shall (a) furnish
upon request to each other such further information; (b) execute and deliver to
each other such other documents; and (c) do such other acts and things, all as
the other party may reasonably request for the purpose of carrying out the
intent of the Agreement and the Contemplated Transactions; provided, that,
neither Buyer nor Buyer Parent shall be required to dispose of or make any
material change to its business to comply with SECTION 9.9.
9.10 RETENTION OF AND ACCESS TO RECORDS
After the Closing Date, Buyer shall retain for a period consistent with
Buyer's record-retention policies and practices those Records of Seller
delivered to Buyer. Buyer also shall provide Selling Parties
47
and their Representatives reasonable access thereto, during normal business
hours and on at least three days' prior written notice, to enable them to
prepare financial statements or tax returns or deal with tax audits or third
party claims. After the Closing Date, Selling Parties shall provide Buyer and
its Representatives reasonable access to Records that are Excluded Assets,
during normal business hours and on at least three days' prior written notice,
for any reasonable business purpose specified by Buyer in such notice.
9.11 DISTRIBUTION OF BUYER SHARES
After the Closing, if Seller desires to distribute the Buyer Shares,
subject to the Lock Up Agreement, to the ultimate beneficial owners of Seller
Parent set forth on EXHIBIT 9.11 (the "ULTIMATE BENEFICIAL OWNERS"), then,
subject to all Legal Requirements and at the expense of Seller, Buyer and Buyer
Parent shall use commercially reasonable efforts to assist Seller in effecting
the transfer of the Buyer Shares into the names of the Ultimate Beneficial
Owners in the percentages set forth on EXHIBIT 9.11; provided, that such Buyer
Shares must be distributed to the Ultimate Beneficial Owners pro rata according
to their respective ownership interest in Seller Parent and no Ultimate
Beneficial Owner may furnish any consideration for the Buyer Shares that are
distributed; provided, further, that each of the Ultimate Beneficial Owners must
deliver an executed investment representation letter in a form reasonably
satisfactory to Buyer, must agree in writing to be bound by the Lock Up
Agreement as if the Ultimate Beneficial Owner were a party thereto and must
appoint Seller in writing as the Ultimate Beneficial Owner's representative for
all purposes under the Lock Up Agreement.
9.12 OPERATION OF BUYER
From the Closing Date until 120 days after the Closing Date, Buyer
shall not terminate the employment of any of the twenty (20) individuals whose
name is set forth on Part 9.12 (the "COVERED EMPLOYEES"), except for just cause.
If Buyer terminates the employment of an aggregate of four (4) or more of the
Covered Employees without just cause on or before the first anniversary of the
Closing Date (the termination of the fourth Covered Employee and any additional
termination of a Covered Employee thereafter being a "TERMINATION EVENT"), the
Earn Out Amount shall be adjusted with respect to each Termination Event by
reducing each dollar threshold within the definition of "EARN OUT AMOUNT" by an
amount equal to the product of (x) the subject dollar threshold, multiplied by
(y) the Covered Employee Percentage, multiplied by (z) the Remaining Term
Percentage.
ARTICLE X
INDEMNIFICATION; REMEDIES
10.1 SURVIVAL
All representations, warranties, covenants and obligations in this
Agreement, the Disclosure Letter, any supplement to the Disclosure Letter, the
certificates delivered pursuant to SECTION 2.8 and any other certificate or
document delivered pursuant to this Agreement shall survive the Closing and the
consummation of the Contemplated Transactions, subject to SECTION 10.7. The
right to indemnification, reimbursement or other remedy based upon such
representations, warranties, covenants and obligations shall not be affected by
any investigation (including any environmental investigation or assessment)
conducted with respect to, or any Knowledge acquired (or capable of being
acquired) at any time, whether before or after the execution and delivery of
this Agreement or the Closing Date, with respect to the accuracy or inaccuracy
of or compliance with any such representation, warranty, covenant or obligation.
The waiver of any condition based upon the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, reimbursement or other
remedy based upon such representations, warranties, covenants and obligations.
48
10.2 INDEMNIFICATION AND REIMBURSEMENT BY SELLING PARTIES
Each Selling Party, jointly and severally, will indemnify and hold
harmless Buyer and Buyer Parent, and their respective Representatives,
Subsidiaries and Related Persons (collectively, the "BUYER INDEMNIFIED
PERSONS"), and will reimburse the Buyer Indemnified Persons for any loss,
liability (including the STRICT LIABILITY of any Buyer Indemnified Person),
claim, damage, expense (including costs of investigation and defense and
reasonable attorneys' fees and expenses) or diminution of value, whether or not
involving a Third-Party Claim (collectively, "DAMAGES"), arising from or in
connection with:
(a) any Breach of any representation or warranty made by any
Selling Party in (i) this Agreement (without giving effect to any supplement to
the Disclosure Letter, unless such Breach disclosed in such supplement has been
waived by Buyer in accordance with SECTION 5.7) or the other Transaction
Agreements, (ii) the Disclosure Letter, (iii) any supplement to the Disclosure
Letter, (iv) the certificates delivered pursuant to SECTION 2.8 (for this
purpose, each such certificate will be deemed to have stated that Seller
Parties' representations and warranties in the Agreement fulfill the
requirements of SECTION 7.1 as of the Closing Date as if made on the Closing
Date without giving effect to any supplement to the Disclosure Letter, unless
such Breach disclosed in such supplement has been waived by Buyer in accordance
with SECTION 5.7), (v) any transfer instrument or (vi) any other certificate,
document, agreement, writing or instrument delivered by any Selling Party
pursuant to the Agreement;
(b) any Breach of any covenant or obligation of any Selling Party
in the Agreement, the other Transaction Agreements or in any other certificate,
document, agreement, writing or instrument delivered by any Selling Party
pursuant to the Agreement;
(c) any Liability arising out of the ownership or operation of the
Assets prior to the Effective Time other than the Assumed Liabilities;
(d) any brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding made, or alleged to have been
made, by any Person with any Selling Party (or any Person acting on their
behalf) in connection with any of the Contemplated Transactions;
(e) any product or component thereof manufactured by or shipped,
or any services provided by, any Selling Party, in whole or in part, prior to
the Closing Date other than as provided in SECTION 2.4(A)(III);
(f) any matter disclosed in Parts 3.15 of the Disclosure Letter;
(g) any noncompliance with any fraudulent transfer law in respect
of the Contemplated Transactions;
(h) any liability under the WARN Act or any similar state or local
Legal Requirement that may result from an "EMPLOYMENT LOSS", as defined by 29
U.S.C. sect. 2101(a)(6), caused by any action of Selling Parties prior to the
Closing or by Buyer's decision not to hire previous employees of Seller;
(i) any Employee Plan established or maintained by Seller or any
Related Person; or
(j) any Retained Liabilities.
10.3 TAX INDEMNIFICATION
Selling Parties agree, jointly and severally, to indemnify and hold
harmless the Buyer Indemnified Persons against any Losses incurred or paid by a
Buyer Indemnified Party, which arise as a result of (i) any
49
liability for any Taxes imposed on Seller pursuant to federal, state, local or
foreign law; and (ii) any breach of the representations or warranties made by
Selling Parties in SECTION 3.11 (all such Losses being "TAX LOSSES"). Any
indemnity payments to or from Selling Parties or to or from Buyer pursuant to
the Agreement, whether under this SECTION 10.3 or otherwise, shall be treated by
Buyer and Selling Parties as purchase price adjustments for all tax purposes.
All indemnification obligations set forth in this SECTION 10.3 shall be treated
as "TAX CLAIMS" for purposes of this Agreement.
10.4 INDEMNIFICATION AND REIMBURSEMENT BY BUYER
Buyer and Buyer Parent, jointly and severally, will indemnify and hold
harmless Selling Parties, and will reimburse Selling Parties, for any Damages
arising from or in connection with:
(a) any Breach of any representation or warranty made by Buyer or
Buyer Parent in this Agreement, the other Transaction Agreements or in any
certificate, document, writing or instrument delivered by Buyer or Buyer Parent
pursuant to the Agreement;
(b) any Breach of any covenant or obligation of Buyer or Buyer
Parent in this Agreement, the other Transaction Agreements or in any other
certificate, document, writing or instrument delivered by Buyer pursuant to the
Agreement;
(c) any brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding made, or alleged to have been
made, by any Person with Buyer or Buyer Parent (or any Person acting on their
behalf) in connection with any of the Contemplated Transactions;
(d) any Liability arising out of the ownership or operation of the
Assets after the Effective Time other than the Retained Liabilities; or
(e) any Assumed Liabilities.
10.5 LIMITATIONS ON AMOUNT--SELLING PARTIES
The Selling Parties shall have no liability (for indemnification or
otherwise) with respect to claims under SECTION 10.2(A) until the total of all
Damages with respect to such matters exceeds forty thousand dollars ($40,000),
in which event Selling Parties shall become liable for the full amount of all
claims on a dollar for dollar basis, up to a maximum amount equal to fifty
percent (50%) of the Purchase Price (the Purchase Price being calculated for
this purpose as if the Annual Buyer Revenues equal or exceed $15,000,000 and
without regard to any reduction of the Earn-out Amount pursuant to SECTION
9.12). However, this SECTION 10.5 will not apply to claims under Section 10.2(B)
through (J) or to matters arising in respect of SECTIONS 3.6, 3.11, 3.19, 3.22,
3.23, 3.24, or 3.25 or to any Breach of any Selling Party's representations and
warranties of which any Selling Party had Knowledge at any time prior to the
date on which such representation and warranty is made, and Selling Parties will
be jointly and severally liable for all Damages with respect to such Breaches.
In determining the amount of any Damages for which Buyer Indemnified Persons may
seek indemnification under SECTION 10.2(A), any materiality standard or
qualification shall be disregarded.
10.6 LIMITATIONS ON AMOUNT--BUYER AND BUYER PARENT
Buyer and Buyer Parent shall have no liability (for indemnification or
otherwise) with respect to claims under SECTION 10.4(A) until the total of all
Damages with respect to such matters exceeds forty thousand dollars ($40,000) in
which event Buyer and Buyer Parent shall become liable for the full amount of
all claims on a dollar for dollar basis, up to a maximum amount equal to fifty
percent (50%) of the
50
Purchase Price (the Purchase Price being calculated for this purpose as if the
Annual Buyer Revenues equal or exceed $15,000,000 and without regard to any
reduction of the Earn-out Amount pursuant to SECTION 9.12). However, this
SECTION 10.6 will not apply to claims under SECTION 10.4(B) through (D) or to
any Breach of any of Buyer's or Buyer Parent's representations and warranties of
which Buyer had Knowledge at any time prior to the date on which such
representation and warranty is made or any intentional Breach by Buyer of any
covenant or obligation, and Buyer and Buyer Parent will be liable for all
Damages with respect to such Breaches. In determining the amount of any Damages
for which Selling Parties may seek indemnification under SECTION 10.4(A), any
materiality standard or qualification shall be disregarded.
10.7 TIME LIMITATIONS
(a) If the Closing occurs, Selling Parties will have liability
(for indemnification or otherwise) with respect to any Breach of (i) a covenant
or obligation to be performed or complied with prior to the Closing Date (other
than those in SECTIONS 2.1 AND 2.4(B) and Articles 9 and 11, as to which a claim
may be made at any time) or (ii) a representation or warranty (other than those
in SECTIONS 3.1, 3.6, 3.11, 3.13, 3.19, 3.21, 3.22, 3.23 AND 3.24, as to which a
claim may be made at any time), only if on or before the date which is the third
anniversary of the Closing Date, Buyer notifies Selling Parties of a claim
specifying the factual basis of the claim in reasonable detail to the extent
then known by Buyer.
(b) If the Closing occurs, Buyer and Buyer Parent will have
liability (for indemnification or otherwise) with respect to any Breach of (i) a
covenant or obligation to be performed or complied with prior to the Closing
Date (other than those in SECTIONS 2.1 and 2.4(A) and Article 11, as to which a
claim may be made at any time); or (ii) a representation or warranty (other than
that set forth in SECTION 4.2(A), as to which a claim may be made at any time)
only if on or before the date which is the third anniversary of the Closing
Date, Selling Parties notify Buyer of a claim specifying the factual basis of
the claim in reasonable detail to the extent then known by Selling Parties.
10.8 RIGHT OF SETOFF
Except as prohibited by Section 6.12, upon notice to Selling Parties
specifying in reasonable detail the basis therefor, Buyer may set off any amount
to which it may be entitled under this Article 10 or under the Note against
amounts otherwise payable under this Agreement and may give notice of a claim
under the Lock-Up Agreement. Neither the exercise of nor the failure to exercise
such right of setoff or to give a notice of a claim will constitute an election
of remedies or limit Buyer in any manner in the enforcement of any other
remedies that may be available to it. With respect to claims under Article 10,
Buyer shall be entitled to set off such claim against amounts due to Seller
under SECTION 2.3(C) only to the extent that such claim exceeds the Value (as
defined in the Lock-Up Agreement) of the Buyer Shares then held by Buyer under
the Lock-Up Agreement.
10.9 THIRD-PARTY CLAIMS
(a) Promptly after receipt by a Person entitled to indemnity under
SECTION 10.2, 10.3 OR 10.4 (an "INDEMNIFIED PERSON") of notice of the assertion
of a Third-Party Claim against it, such Indemnified Person shall give notice to
the Person obligated to indemnify under such Section (an "INDEMNIFYING PERSON")
of the assertion of such Third-Party Claim, provided that the failure to notify
the Indemnifying Person will not relieve the Indemnifying Person of any
liability that it may have to any Indemnified Person, except to the extent that
the Indemnifying Person demonstrates that the defense of such Third-Party Claim
is prejudiced by the Indemnified Person's failure to give such notice.
(b) If an Indemnified Person gives notice to the Indemnifying
Person pursuant to SECTION 10.9(A) of the assertion of a Third-Party Claim, the
Indemnifying Person shall be entitled to
51
participate in the defense of such Third-Party Claim and, to the extent that it
wishes (unless (i) the Indemnifying Person is also a Person against whom the
Third-Party Claim is made and the Indemnified Person determines in good faith
that joint representation would be inappropriate; or (ii) the Indemnifying
Person fails to provide reasonable assurance to the Indemnified Person of its
financial capacity to defend such Third-Party Claim and provide indemnification
with respect to such Third-Party Claim), to assume the defense of such
Third-Party Claim with counsel satisfactory to the Indemnified Person. After
notice from the Indemnifying Person to the Indemnified Person of its election to
assume the defense of such Third-Party Claim, the Indemnifying Person shall not,
so long as it diligently conducts such defense, be liable to the Indemnified
Person under this Article 10 for any fees of other counsel or any other expenses
with respect to the defense of such Third-Party Claim, in each case subsequently
incurred by the Indemnified Person in connection with the defense of such
Third-Party Claim, other than reasonable costs of investigation. If the
Indemnifying Person assumes the defense of a Third-Party Claim, (i) such
assumption will conclusively establish for purposes of the Agreement that the
claims made in that Third-Party Claim are within the scope of and subject to
indemnification; and (ii) no compromise or settlement of such Third-Party Claims
may be effected by the Indemnifying Person without the Indemnified Person's
Consent unless (A) there is no finding or admission of any violation of Legal
Requirement or any violation of the rights of any Person; (B) the sole relief
provided is monetary damages that are paid in full by the Indemnifying Person;
and (C) the Indemnified Person shall have no liability with respect to any
compromise or settlement of such Third-Party Claims effected without its
Consent. If notice is given to an Indemnifying Person of the assertion of any
Third-Party Claim and the Indemnifying Person does not, within ten (10) days
after the Indemnified Person's notice is given, give notice to the Indemnified
Person of its election to assume the defense of such Third-Party Claim, the
Indemnifying Person will be bound by any determination made in such Third-Party
Claim or any compromise or settlement effected by the Indemnified Person.
(c) Notwithstanding the foregoing, if an Indemnified Person
determines in good faith that there is a reasonable probability that a
Third-Party Claim may adversely affect it or its Related Persons other than as a
result of monetary damages for which it would be entitled to indemnification
under this Agreement, the Indemnified Person may, by notice to the Indemnifying
Person, assume the exclusive right to defend, compromise or settle such
Third-Party Claim, but the Indemnifying Person will not be bound by any
determination of any Third-Party Claim so defended for the purposes of the
Agreement or any compromise or settlement effected without its Consent (which
may not be unreasonably withheld).
(d) Notwithstanding the provisions of SECTION 12.7, the parties to
this Agreement hereby consent to the nonexclusive jurisdiction of any court in
which a Proceeding in respect of a Third-Party Claim is brought against any
Indemnified Person for purposes of any claim that an Indemnified Person may have
under the Agreement with respect to such Proceeding or the matters alleged
therein and agree that process may be served on the parties to this Agreement
with respect to such a claim anywhere in the world.
(e) With respect to any Third-Party Claim subject to
indemnification under this Article 10: (i) both the Indemnified Person and the
Indemnifying Person, as the case may be, shall keep the other Person fully
informed of the status of such Third-Party Claim and any related Proceedings at
all stages thereof where such Person is not represented by its own counsel; and
(ii) the parties agree (each at its own expense) to render to each other such
assistance as they may reasonably require of each other and to cooperate in good
faith with each other in order to ensure the proper and adequate defense of any
Third-Party Claim.
(f) With respect to any Third-Party Claim subject to
indemnification under this Article 10, the parties agree to cooperate in such a
manner as to preserve in full (to the extent possible) the confidentiality of
all Confidential Information and the attorney-client and work-product
privileges. In connection therewith, each party agrees that: (i) it will use its
best efforts, in respect of any Third-Party Claim in which it has assumed or
participated in the defense, to avoid production of Confidential Information
(consistent with applicable law and rules of procedure); and (ii) all
communications between any party hereto and counsel
52
responsible for or participating in the defense of any Third-Party Claim shall,
to the extent possible, be made so as to preserve any applicable attorney-client
or work-product privilege.
10.10 OTHER CLAIMS
A claim for indemnification for any matter not involving a Third-Party
Claim may be asserted by notice to the party from whom indemnification is sought
and shall be paid promptly after such notice except to the extent that the claim
has been satisfied pursuant to SECTION 10.8.
10.11 INDEMNIFICATION IN CASE OF STRICT LIABILITY OR
INDEMNITEE NEGLIGENCE
THE INDEMNIFICATION PROVISIONS IN THIS ARTICLE 10 SHALL BE ENFORCEABLE
REGARDLESS OF WHETHER THE LIABILITY IS BASED UPON PAST, PRESENT OR FUTURE ACTS,
CLAIMS OR LEGAL REQUIREMENTS (INCLUDING ANY PAST, PRESENT OR FUTURE BULK SALES
LAW, ENVIRONMENTAL LAW, FRAUDULENT TRANSFER ACT, OCCUPATIONAL SAFETY AND HEALTH
LAW OR PRODUCTS LIABILITY, SECURITIES OR OTHER LEGAL REQUIREMENT) AND REGARDLESS
OF WHETHER ANY PERSON (INCLUDING THE PERSON FROM WHOM INDEMNIFICATION IS SOUGHT)
ALLEGES OR PROVES THE SOLE, CONCURRENT, CONTRIBUTORY OR COMPARATIVE NEGLIGENCE
OF THE PERSON SEEKING INDEMNIFICATION OR THE SOLE OR CONCURRENT STRICT LIABILITY
IMPOSED UPON THE PERSON SEEKING INDEMNIFICATION.
ARTICLE XI
CONFIDENTIALITY
11.1 DEFINITION OF CONFIDENTIAL INFORMATION
(a) As used in this Article 11, the term "CONFIDENTIAL
INFORMATION" includes any and all of the following information of Selling
Parties, Buyer or Buyer Parent that has been or may hereafter be disclosed in
any form, whether in writing, orally, electronically or otherwise, or otherwise
made available by observation, inspection or otherwise by either party (Buyer
and Buyer Parent on the one hand or Selling Parties, collectively, on the other
hand) or its Representatives (collectively, a "DISCLOSING PARTY") to the other
party or its Representatives (collectively, a "RECEIVING PARTY"):
(i) all information that is a trade secret under
applicable trade secret or other law;
(ii) all information concerning product specifications,
data, know-how, formulae, compositions, processes, designs, sketches,
schematics, data sheets, work product, techniques, programs,
photographs, graphs, drawings, samples, inventions and ideas, past,
current and planned research and development, current and planned
manufacturing or distribution methods and processes, customer lists,
current and anticipated customer requirements, price lists, market
studies, business plans, computer hardware and computer software and
database technologies, systems, structures and architectures;
(iii) all information concerning the business and affairs
of the Disclosing Party (which includes historical and current
financial statements, financial projections and budgets, tax returns
and accountants' materials, historical, current and projected sales,
capital spending budgets and plans, business plans, strategic plans,
marketing and advertising plans, publications, client, customer and
supplier lists and files, contracts, the names and backgrounds of key
personnel and personnel training techniques and materials, however
documented), and all information obtained from review
53
of the Disclosing Party's documents or property or discussions with the
Disclosing Party regardless of the form of the communication; and
(iv) all notes, analyses, compilations, studies, summaries
and other material prepared by the Receiving Party to the extent
containing or based, in whole or in part, upon any information included
in the foregoing.
(b) Any trade secrets of a Disclosing Party shall also be entitled
to all of the protections and benefits under applicable trade secret law and any
other applicable law. If any information that a Disclosing Party deems to be a
trade secret is found by a court of competent jurisdiction not to be a trade
secret for purposes of this Article 11, such information shall still be
considered Confidential Information of that Disclosing Party for purposes of
this Article 11 to the extent included within the definition. In the case of
trade secrets, each of Buyer, Buyer Parent or any Selling Party hereby waives
any requirement that the other party submit proof of the economic value of any
trade secret or post a bond or other security.
11.2 RESTRICTED USE OF CONFIDENTIAL INFORMATION
(a) Each Receiving Party acknowledges the confidential and
proprietary nature of the Confidential Information of the Disclosing Party and
agrees that such Confidential Information (i) shall be kept confidential by the
Receiving Party; (ii) shall not be used for any reason or purpose other than to
evaluate and consummate the Contemplated Transactions; and (iii) without
limiting the foregoing, shall not be disclosed by the Receiving Party to any
Person, except in each case as otherwise expressly permitted by the terms of the
Agreement or with the prior written consent of an authorized representative of
Seller with respect to Confidential Information of Selling Parties (each, a
"SELLER CONTACT") or an authorized representative of Buyer with respect to
Confidential Information of Buyer or Buyer Parent (each, a "BUYER CONTACT").
Each of Buyer, Buyer Parent and any Selling Party shall disclose the
Confidential Information of the other party only to its Representatives who
require such material for the purpose of evaluating the Contemplated
Transactions and are informed by Buyer, Buyer Parent or any Selling Party, as
the case may be, of the obligations of this Article 11 with respect to such
information. Each of Buyer, Buyer Parent and any Selling Party shall (i) enforce
the terms of this Article 11 as to its respective Representatives; (ii) take
such action to the extent necessary to cause its Representatives to comply with
the terms and conditions of this Article 11; and (iii) be responsible and liable
for any breach of the provisions of this Article 11 by it or its
Representatives.
(b) Unless and until the Agreement is terminated, Selling Parties
shall maintain as confidential any Confidential Information (including for this
purpose any information of any Selling Party of the type referred to in SECTIONS
11.1(A)(I), (II) and (III), whether or not disclosed to Buyer or Buyer Parent)
of any Selling Party relating to any of the Assets or the Assumed Liabilities.
Notwithstanding the preceding sentence, Seller may use any Confidential
Information of Seller before the Closing in the Ordinary Course of Business in
connection with the transactions permitted by SECTION 5.1.
(c) From and after the Closing, the provisions of SECTION 11.2(A)
above shall not apply to or restrict in any manner Buyer or Buyer Parent's use
of any Confidential Information of Selling Parties relating to any of the Assets
or the Assumed Liabilities.
11.3 EXCEPTIONS
SECTIONS 11.2(A) and (B) do not apply to that part of the Confidential
Information of a Disclosing Party that a Receiving Party demonstrates (a) was,
is or becomes generally available to the public other than as a result of a
breach of this Article 11 or the Confidentiality Agreement by the Receiving
Party or its Representatives; (b) was or is developed by the Receiving Party
independently of and without reference to
54
any Confidential Information of the Disclosing Party; or (c) was, is or becomes
available to the Receiving Party on a nonconfidential basis from a Third Party
not bound by a confidentiality agreement or any legal, fiduciary or other
obligation restricting disclosure. No Selling Party shall disclose any
Confidential Information of any Selling Party relating to any of the Assets or
the Assumed Liabilities in reliance on the exceptions in clauses (b) or (c)
above.
11.4 LEGAL PROCEEDINGS
If a Receiving Party becomes compelled in any Proceeding or is
requested by a Governmental Body having regulatory jurisdiction over the
Contemplated Transactions to make any disclosure that is prohibited or otherwise
constrained by this Article 11, that Receiving Party shall provide the
Disclosing Party with prompt notice of such compulsion or request so that it may
seek an appropriate protective order or other appropriate remedy or waive
compliance with the provisions of this Article 11. In the absence of a
protective order or other remedy, the Receiving Party may disclose that portion
(and only that portion) of the Confidential Information of the Disclosing Party
that, based upon advice of the Receiving Party's counsel, the Receiving Party is
legally compelled to disclose or that has been requested by such Governmental
Body, provided, however, that the Receiving Party shall use reasonable efforts
to obtain reliable assurance that confidential treatment will be accorded by any
Person to whom any Confidential Information is so disclosed. The provisions of
this SECTION 11.4 do not apply to any Proceedings between the parties to the
Agreement.
11.5 RETURN OR DESTRUCTION OF CONFIDENTIAL INFORMATION
If this Agreement is terminated, each Receiving Party shall (a) destroy
all Confidential Information of the Disclosing Party prepared or generated by
the Receiving Party without retaining a copy of any such material; (b) promptly
deliver to the Disclosing Party all other Confidential Information of the
Disclosing Party, together with all copies thereof, in the possession, custody
or control of the Receiving Party or, alternatively, with the written consent of
a Seller Contact or a Buyer Contact (whichever represents the Disclosing Party)
destroy all such Confidential Information; and (c) certify all such destruction
in writing to the Disclosing Party, PROVIDED, HOWEVER, that the Receiving Party
may retain a list that contains general descriptions of the information it has
returned or destroyed to facilitate the resolution of any controversies after
the Disclosing Party's Confidential Information is returned.
11.6 ATTORNEY-CLIENT PRIVILEGE
The Disclosing Party is not waiving, and will not be deemed to have
waived or diminished, any of its attorney work product protections,
attorney-client privileges or similar protections and privileges as a result of
disclosing its Confidential Information (including Confidential Information
related to pending or threatened litigation) to the Receiving Party, regardless
of whether the Disclosing Party has asserted, or is or may be entitled to
assert, such privileges and protections. The parties (a) share a common legal
and commercial interest in all of the Disclosing Party's Confidential
Information that is subject to such privileges and protections; (b) are or may
become joint defendants in Proceedings to which the Disclosing Party's
Confidential Information covered by such protections and privileges relates; (c)
intend that such privileges and protections remain intact should either party
become subject to any actual or threatened Proceeding to which the Disclosing
Party's Confidential Information covered by such protections and privileges
relates; and (d) intend that after the Closing the Receiving Party shall have
the right to assert such protections and privileges. No Receiving Party shall
admit, claim or contend, in Proceedings involving either party or otherwise,
that any Disclosing Party waived any of its attorney work-product protections,
attorney-client privileges or similar protections and privileges with respect to
any information, documents or other material not disclosed to a Receiving Party
due to the Disclosing Party disclosing its Confidential
55
Information (including Confidential Information related to pending or threatened
litigation) to the Receiving Party.
ARTICLE XII
GENERAL PROVISIONS
12.1 ENTIRE AGREEMENT; AMENDMENTS
The Agreement, together with the Exhibits and Parts hereto, contain the
entire understanding of the parties with respect to the subject matter hereof
and supersedes all prior agreements and understandings, oral or written, with
respect to such matters, which the parties acknowledge have been merged into the
Agreement and the Exhibits and Parts hereto.
12.2 NOTICES
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed effectively given: (a) upon personal
delivery to the party to be notified; (b) when sent by confirmed facsimile if
sent during normal business hours of the recipient; if not, then on the next
Business Day; (c) three (3) Business Days after having been sent by registered
or certified mail, return receipt requested, postage prepaid; or (d) two (2)
Business Days after deposit with recognized overnight courier, specifying next
day delivery, with written verification of receipt. The address for all notices,
requests, consents and other communications hereunder to the parties to the
Agreement shall be delivered or sent to the following:
Selling Parties:
gnubi communications, L.P.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With a copy (which shall not constitute notice) to:
▇▇▇▇▇▇ and Stone, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
56
Until The Frost National Bank has been paid in full, to:
The Frost National Bank
▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Buyer:
EXFO Gnubi Products Group Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
Attention: President
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 418-683-2170
With a copy (which shall not constitute notice) to:
▇▇▇▇▇▇ and ▇▇▇▇▇, LLP
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 972-680-7551
With a copy to Buyer Parent:
EXFO Electro Optical Engineering Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
Attention: President
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
57
With a copy (which shall not constitute notice) to:
▇▇▇▇▇▇ and ▇▇▇▇▇, LLP
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 972-680-7551
If to JRS or Voting Trust:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
If to DE:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
12.3 AMENDMENTS; WAIVERS
No provision of the Agreement may be waived or amended except in a
written instrument signed, in the case of an amendment, by each party to the
Agreement, or, in the case of a waiver, by the party against whom enforcement of
any such waiver is sought. No waiver of any default with respect to any
provision, condition or requirement of the Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter. The rights and remedies of the parties to this Agreement are
cumulative and not alternative.
12.4 HEADINGS
The headings herein are for convenience only, do not constitute a part
of the Agreement and shall not be deemed to limit or affect any of the
provisions hereof.
12.5 SUCCESSORS AND ASSIGNS
The Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. No Selling Party may assign
the Agreement or any rights or obligations hereunder without the prior written
consent of Buyer and Buyer Parent. Neither Buyer nor Buyer Parent may assign the
Agreement or any of the rights or obligations hereunder without the prior
written consent of Selling Parties.
58
12.6 NO THIRD PARTY BENEFICIARIES
The Agreement is intended for the benefit of the parties hereto and
their respective successors and permitted assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other Person.
12.7 GOVERNING LAW; CONSENT TO JURISDICTION
The Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Texas without regard to the principles
of conflicts of law thereof. Each party hereby irrevocably consents to the
jurisdiction of the courts located in the State of Texas, to adjudicate any
dispute arising pursuant to the Agreement or the transactions contemplated
hereby, and waives any objections thereto.
Any Proceeding arising out of or relating to the Agreement or any
Contemplated Transaction may be brought in the courts of the State of Texas,
County of Dallas; and each of the parties irrevocably submits to the exclusive
jurisdiction of each such court in any such Proceeding, waives any objection it
may now or hereafter have to venue or to convenience of forum, agrees that all
claims in respect of the Proceeding shall be heard and determined only in any
such court and agrees not to bring any Proceeding arising out of or relating to
the Agreement or any Contemplated Transaction in any other court. The parties
agree that either or both of them may file a copy of this paragraph with any
court as written evidence of the knowing, voluntary and bargained agreement
between the parties irrevocably to waive any objections to venue or to
convenience of forum.
12.8 EXECUTION
The Agreement may be executed in two or more counterparts, all of which
when taken together shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature page were an original
thereof.
12.9 SEVERABILITY
In case any one or more of the provisions of the Agreement shall be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of the Agreement shall not in any way be affected
or impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision which shall be a reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in the Agreement.
12.10 INTERPRETATION
The section headings in the Agreement are for convenience of reference
only and shall not be deemed to alter or affect the meaning or interpretation of
any provision hereof. All currency amounts herein are expressed in United States
dollars.
12.11 EXPENSES
Except as otherwise provided in the Agreement, each party to the
Agreement will bear its respective fees and expenses incurred in connection with
the preparation, negotiation, execution and performance of the Agreement and the
Contemplated Transactions, including all fees and expense of its
Representatives. If
59
the Agreement is terminated, the obligation of each party to pay its own fees
and expenses will be subject to any rights of such party arising from a Breach
of the Agreement by another party.
12.12 SPECIFIC PERFORMANCE
Each party hereto acknowledges and agrees that the other parties hereto
would be irreparably damaged if any of the provisions of this Agreement are not
performed in accordance with their specific terms and that any Breach of this
Agreement by a party hereto could not be adequately compensated in all cases by
monetary damages alone. Accordingly, in addition to any other right or remedy to
which a party hereto may be entitled, at law or in equity, it shall be entitled
to enforce any provision of this Agreement by a decree of specific performance
and to temporary, preliminary and permanent injunctive relief to prevent
Breaches or threatened Breaches of any of the provisions of this Agreement,
without posting any bond or other undertaking.
12.13 TIME OF THE ESSENCE
With regard to all dates and time periods set forth or referred to in
this Agreement, time is of the essence.
60
IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
SELLER:
GNUBI COMMUNICATIONS, L.P.
By: GENERAL PARTNER, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and CEO
GENERAL PARTNER:
GNUBI COMMUNICATIONS GENERAL PARTNER, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name:
Title:
LIMITED PARTNER:
GNUBI COMMUNICATIONS LIMITED PARTNER, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Manager
SELLER PARENT:
GNUBI COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name:
Title:
FOUNDERS:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
VOTING TRUST
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Trustee
BUYER:
EXFO GNUBI PRODUCTS GROUP INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chairman of the Board
BUYER PARENT:
EXFO ELECTRO OPTICAL
ENGINEERING INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President and CEO