EXHIBIT 2
ASSET PURCHASE AGREEMENT
DATED AS OF NOVEMBER 22, 1997
BY AND BETWEEN
CREATIVE TECHNOLOGY LTD.
AND
OPTI INC.
TABLE OF CONTENTS
PAGE
Article I. - Definitions..................................................... 1
1.1. Defined Terms................................................. 1
1.2. Other Defined Terms........................................... 5
Article II. - Purchase and Sale of Assets.................................... 6
2.1. Transfer of Assets............................................ 6
2.2 Issuance of Warrants.......................................... 6
2.3. Purchase Price................................................ 7
2.4. Certain Chip Inventories and Related Assets and Liabilities... 7
Article III. - Closing....................................................... 7
3.1. Closing....................................................... 7
3.2. Deliveries at Closing......................................... 7
Article IV. - Representations and Warranties of Seller....................... 8
4.1. Organization.................................................. 8
4.2. Authorization................................................. 9
4.3 Capitalization................................................ 9
4.4. Brokers....................................................... 9
4.5. Assumed Contracts............................................. 9
4.6. Litigation, Proceedings and Applicable Law.................... 9
4.7. No Conflict or Violation...................................... 10
4.8. Securities Laws; Consents and Approvals....................... 10
4.9. Intellectual Property......................................... 10
4.10 Financial Information......................................... 12
4.11. Absence of Certain Changes.................................... 12
4.12. Assets Generally.............................................. 12
4.13. Major and Assumed Contracts................................... 13
4.14. Warranties and Indemnities.................................... 14
4.15. Inventories................................................... 14
4.16. Licenses and Permits.......................................... 15
4.17. Employees..................................................... 15
4.18. Employee Benefit and Compensation Plans....................... 16
4.19. Taxes......................................................... 17
4.20. Compliance with Law........................................... 17
4.21. Products...................................................... 17
4.22. Product Liability............................................. 17
4.23. Defaults...................................................... 17
4.24. No Fraudulent Conveyance...................................... 18
4.25. Insurance..................................................... 18
4.26. PCI Chip...................................................... 18
Article V. - Representations and Warranties of Buyer......................... 18
5.1. Organization of Buyer......................................... 18
-i-
5.2. Authorization................................................. 18
5.3. Brokers....................................................... 19
5.4. Litigation, Proceedings and Applicable Law.................... 19
5.5. No Conflict or Violation...................................... 19
5.6. Consents and Approvals........................................ 19
Article VI. - Certain Covenants.............................................. 19
6.1. Covenants of Both Parties..................................... 19
6.2. Seller's Covenants............................................ 20
6.3. Employment Matters............................................ 21
6.4. Update of Disclosure Schedules................................ 23
6.5. Noncompetition................................................ 23
6.6 Payment of Equipment Leases................................... 24
Article VII. - Conditions to Seller's Obligations............................ 24
7.1. Representations, Warranties and Covenants..................... 24
7.2. No Governmental Proceedings or Litigation..................... 24
7.3. Certificates.................................................. 24
7.4. Corporate Documents........................................... 24
7.5. Opinion of Counsel............................................ 24
7.6. Ancillary Agreements.......................................... 25
Article VIII. - Conditions to Buyer's Obligations............................ 25
8.1. Representations, Warranties and Covenants..................... 25
8.2. Consents...................................................... 25
8.3. No Governmental Proceedings or Litigation..................... 25
8.4. Certificates.................................................. 25
8.5. Corporate Documents........................................... 25
8.6. No Material Adverse Change.................................... 25
8.7. Opinion of Counsel............................................ 26
8.8. Ancillary Agreements.......................................... 26
Article IX. - Actions by Parties After the Closing........................... 26
9.1. Books and Records............................................. 26
9.2. [ * ]......................................................... 26
9.3. Indemnification............................................... 26
9.4. Dispute Resolution Procedures................................. 29
9.5. Supply of Backend Services by Seller.......................... 30
Article X. - Miscellaneous................................................... 30
10.1. Termination................................................... 30
10.2. Assignment.................................................... 31
10.3. Notices....................................................... 31
10.4. Choice of Law................................................. 32
10.5. Entire Agreement; Amendments and Waivers...................... 32
10.6. Multiple Counterparts......................................... 33
10.7. Expenses...................................................... 33
[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
-ii-
10.8. Invalidity.................................................... 33
10.9. Titles........................................................ 33
10.10. Publicity..................................................... 33
10.11. Confidential Information...................................... 34
-iii-
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is made and entered into
---------
as of November 22, 1997, by and between OPTi Inc., a California corporation
("Seller") and Creative Technology Ltd., a corporation organized under the laws
--------
of Singapore ("Buyer").
-----
RECITALS
--------
1. A portion of Seller's business relates to audio chip design,
manufacture, sale and distribution (the "Business").
--------
2. Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, certain assets and assume certain liabilities related to the Business,
pursuant to the terms and subject to the conditions set forth herein.
AGREEMENT
---------
In consideration of the above Recitals and the representations, warranties
and covenants contained herein, the adequacy of which is hereby acknowledged,
Seller and Buyer mutually agree as follows:
ARTICLE I.
DEFINITIONS
-----------
1.1. DEFINED TERMS. As used herein, the terms below shall have the
-------------
following meanings:
"Action" shall mean any action, claim, suit, arbitration, inquiry,
------
subpoena, discovery request, proceeding or investigation, or threat thereof, by
or before any court or grand jury, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal related to,
arising out of, or resulting from Seller's (i) operation of the Business, (ii)
use of the Assets, (iii) actions pursuant to the Assumed Contracts or (iv)
obligations under the Assumed Liabilities.
"Affiliate" shall mean, with respect to any Person, any other Person
---------
directly or indirectly controlling, controlled by or under common control with
such Person and any member, general partner, director, officer or employee of
such Person. For purposes of this definition of Affiliate, "control" shall mean
-------
the power of one or more Persons to direct the affairs of the Person controlled
by reason of ownership of voting stock, contract or otherwise.
"Ancillary Agreements" shall mean the Warrant and the Intellectual
--------------------
Property License Agreement.
"Assets" shall mean all of the right, title, and interest that Seller
------
possesses in and to the properties, assets and rights of any kind, whether
tangible or intangible, real or personal (other than the Excluded Assets) that
comprise or are necessary for the operation of the Business,
1
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED TO THE OMITTED PORTIONS.
including, without limitation, the Contract Rights, Recovery Rights, the
Personal Property, the Intangibles, the Books and Records, the Intellectual
Property (subject to the Intellectual Property License Agreement) and, to the
extent transferable, the Permits.
"Assumed Contracts" shall mean those Contracts which relate primarily
-----------------
or exclusively to the Business or the Assets and for which Buyer shall be
responsible after the Effective Time, and any amendment to or modification of an
Assumed Contract. The Assumed Contracts are listed on Schedule 1.1(a) to this
---------------
Agreement.
"Assumed Liabilities" shall mean (i) those liabilities incurred by the
-------------------
Business following the Effective Time and (ii) the liabilities listed on
Schedule 1.1(b); provided, however, that the term Assumed Liabilities shall not
---------------
include any liabilities incurred by the Business prior to the Effective Time
other than liabilities of Seller arising out of the Assumed Contracts (to the
extent such liabilities do not arise from Seller's breach of or default under
such Assumed Contracts), including, without limitation, liabilities for
infringement of intellectual property rights prior to the Effective Time,
liabilities for violations of federal and state laws, liabilities for taxes and
employee-related liabilities.
"Backend Services" shall mean Seller's backend services relating to
----------------
the Business, which include (i) foundry and technology services, namely design
and layout services, CAD engineering, product engineering which includes yield
enhancement, reliability and quality assurance, foundry engineering for process
technology and assembly engineering for product packaging and (ii) operations,
including test engineering, material handling, production control, purchasing
and MIS services.
"Books and Records" shall mean all material records (or complete
-----------------
copies thereof), including computerized books and records, owned by Seller that
relate primarily or exclusively to the Assets or the Business following the
Closing, including engineering information, sales and promotional literature,
manuals and data, lists of customers and suppliers, employment records of
Employees who accept employment with Buyer and all such books and records
relating to the purchase of materials, supplies and services for the Business,
and any files relating to any Action in respect of any Assumed Contract or
Assumed Liability, but specifically excluding corporate minute and stock books
and excluding the foregoing books and records relating to the Excluded
Liabilities.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
----
the rules and regulations thereunder.
"Contract Rights" shall mean all rights that Seller possesses under
---------------
sales orders in process, utility and lease deposits, prepaid items and expenses
and rights under Assumed Contracts.
"Contracts" shall mean any and all contracts, agreements,
---------
arrangements, leases, mortgages, bonds, notes and other instruments and
obligations, whether or not in writing.
2
"Damages" shall mean any and all costs, losses, damages, liabilities,
-------
demands, claims, suits, actions, judgments, causes of action, assessments or
expenses, including interest, penalties, fines and attorneys' fees incident
thereto, incurred in connection with any Claim, and any and all amounts paid in
settlement of any Claim.
"Excluded Assets" shall mean the assets listed on Schedule 1.1(c)
--------------- ---------------
which will not be transferred or conveyed to Buyer hereunder, but instead will
be retained by Seller.
"Excluded Liabilities" shall mean all of the debts, contracts,
--------------------
agreements, commitments, obligations and other liabilities of Seller or the
Business, other than the Assumed Liabilities, of any nature whatsoever, whether
known or unknown, accrued or not accrued, fixed or contingent.
"Exercise All Rights" shall mean to exercise or practice any and all
-------------------
rights now or hereafter provided by law (by treaty, statute, common law or
otherwise) anywhere in the world to inventors, authors, creators and/or owners
of intellectual or intangible property; including, without limitation, the right
to make, use, disclose, sell, offer to sell, distribute, import, rent, lease,
lend, reproduce, prepare derivative works of and otherwise modify, perform and
display (whether publicly or otherwise), broadcast, transmit, use and/or
otherwise exploit such intellectual or intangible property and/or any product,
component or service embodying, relating to or subject to such intellectual or
intangible property; and the right to assign, transfer, license and/or
sublicense (with the right to sublicense further) any of the foregoing, and the
right to have and/or authorize others do any of the foregoing.
"Finished Goods" shall mean each of the products listed on Schedule
-------------- --------
1.1(d) to the extent that each is in commercially salable form as of the
------
Closing.
"GAAP" shall mean United States generally accepted accounting
----
principles, as in effect from time to time, and set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of comparable
stature and authority within the accounting profession), or in such other
statements by such entity as may be in general use by significant segments of
the United States accounting profession, which are applicable to the facts and
circumstances on the date of determination.
"Intangibles" shall mean all goodwill associated with the Business or
-----------
the Assets, together with the right to represent to third parties that Buyer is
the successor to the Business.
"Intellectual Property" shall mean all copyrights, copyright
---------------------
registrations, proprietary processes, trade secrets, license rights,
specifications, technical manuals and data, drawings, inventions, designs,
patents, patent applications, mask works, tradenames, trademarks, service marks,
product information and data, know-how and development work-in-progress,
customer lists, software, business and marketing plans and other intellectual or
intangible property that comprises or is necessary to the Business, whether
pending, applied for or issued, whether filed in the United States or in other
countries, including, without limitation, the items
3
listed in Schedules 1.1(e) and Schedule 4.9(b) attached hereto, together with
---------------- ---------------
all associated goodwill; all things authored, discovered, developed, made,
perfected, improved, designed, engineered, acquired, produced, conceived or
first reduced to practice by Seller or any of its employees or agents that are
embodied in, derived from or relate to the Business, in any stage of
development, including, without limitation, modifications, enhancements,
designs, concepts, techniques, methods, ideas, flow charts, coding sheets, notes
and all other information relating to the Business; any and all design and code
documentation, methodologies, processes, trade secrets, copyrights, design
information, product information, technology, formulae, routines, engineering
specifications, technical manuals and data, drawings, inventions, know-how,
techniques, engineering work papers, notes, development work-in-process, and
other proprietary information and materials of any kind relating to, used in, or
derived from the Assets; and any computer software program and associated
licenses used in connection with the Business.
"Intellectual Property License Agreement" shall mean the Intellectual
---------------------------------------
Property License Agreement in substantially the form attached as Exhibit B to
---------
this Agreement.
"Inventory" shall mean all raw materials, work-in-process, Finished
---------
Goods, supplies and other inventories of the Business.
"Knowledge" shall mean a party's actual knowledge.
---------
"Legal Requirements" shall mean any and all applicable (i) federal,
------------------
state and local laws, ordinances and regulations and (ii) judgments, orders,
writs, injunctions and decrees.
"Outside Date" shall mean November 30, 1997.
------------
"Permits" shall mean all permits, authorizations, consents and
-------
approvals of any court, or any federal, state, municipal or other governmental
authority, department, commission, board, agency or other instrumentality
(domestic or foreign) affecting or materially relating to the Business,
including, without limitation, the items listed on Schedule 1.1(f).
---------------
"Person" shall mean any person or entity, whether an individual,
------
trustee, corporation, general partnership, limited partnership, trust,
unincorporated organization, limited liability company, business association,
firm, joint venture, or governmental agency or authority.
"Personal Property" shall mean all tangible personal property and
-----------------
leases of, and other interests in tangible personal property, that comprises or
is necessary to the Business, including, without limitation, the items listed on
Schedule 1.1(g).
---------------
"PCI Products" shall mean Seller's audio chipset currently under
------------
development, as is more fully described on Exhibit C hereto.
---------
"Recovery Rights" shall mean all rights, claims, credits, causes of
---------------
action or rights of set-off that Seller possesses against third parties relating
to the Assets, including, without limitation, unliquidated rights under
warranties.
4
"Representative" shall mean, with respect to any Person, any officer,
--------------
director, principal, attorney, employee or other agent of such Person.
"Taxes" shall mean all taxes, however denominated, including any
-----
interest, penalties or other additions to tax that may become payable in respect
thereof, (i) imposed by any federal, territorial, state, local or foreign
government or any agency or political subdivision of any such government, for
which Buyer could become liable as successor to or transferee of the Business or
the Assets or which could become a charge against or lien on the Assets, which
taxes shall include, without limiting the generality of the foregoing, all sales
and use taxes, ad valorem taxes, excise taxes, business license taxes,
occupation taxes, real and personal property taxes, stamp taxes, environmental
taxes, real property gains taxes, transfer taxes, payroll and employee
withholding taxes, unemployment insurance contributions, social security taxes
and other governmental charges, and other obligations of the same or of a
similar nature to any of the foregoing, which are required to be paid, withheld
or collected, or (ii) any liability for amounts referred to in (i) as a result
of any obligations to indemnify another person.
"Unaudited Financial Statements" shall mean a schedule of assets and
------------------------------
their value and a schedule of revenues, gross margin and direct expenses
prepared by Seller at and as of October 31, 1997, setting forth the financial
condition and results of operations of the Business at and as of such date.
"Warrant" shall mean the Warrant described in Section 2.2 and in
-------
substantially the form attached as Exhibit A to this Agreement.
---------
1.2. OTHER DEFINED TERMS.
-------------------
(a) The following terms shall have the meanings defined for such terms
in the Sections set forth below:
Term Section
---- -----------
Business Recitals
Claim 9.5(c)
Claim Notice 9.5(c)
Closing 3.1
COBRA 4.17(b)
Confidentiality Agreement 4.16(a)
Distribution Agreement 4.12(b)
Effective Time 3.1
Employees 6.3
End-User Licenses 4.12(h)
Indemnified Party 9.5(c)
Indemnifying Party 9.5(c)
Material Adverse Effect 4.4
Non-Disclosure Agreement 10.5
Notice Date 9.5(c)
5
Purchase Price 2.3
Restricted Business 6.5(a)
Seller Disclosure Schedule Preamble to Article IV
Third Party Claim 9.5(c)
(b) For purposes of this Agreement, (i) "including" shall mean
"including, but not limited to," "including, without limitation," and other
phrases of similar import and (ii) "hereof;" "herein," and "hereunder," and
words of similar import, refer to this Agreement as a whole (including the
Exhibits and Schedules to this Agreement) and not to any particular Section or
Article hereof.
ARTICLE II.
PURCHASE AND SALE OF ASSETS
---------------------------
2.1. TRANSFER OF ASSETS.
------------------
(a) Pursuant to the terms and subject to the conditions of this
Agreement, in exchange for the consideration set forth in Section 2.3 below, at
the Closing, Seller agrees to sell, convey, transfer, assign and deliver to
Buyer, and Buyer agrees to purchase from Seller, the Assets and to assume,
without limitation, all obligations of Seller under or with respect to the
Assumed Liabilities.
(b) To the extent, if any, that Seller owns or has any right or
interest in Intellectual Property that cannot be, or for any reason
(notwithstanding Section 2.1(a)) is not, assigned to Buyer, Seller agrees to
grant to Buyer at the Closing a worldwide, royalty-free, fully paid up,
perpetual, irrevocable, transferable, sublicensable, exclusive license to
Exercise All Rights in and to such Intellectual Property to the extent that the
Seller has a legal right to grant such a license.
(c) In addition, in anticipation of the possibility, if any, that
(notwithstanding Sections 2.1(a) and (b)) Seller or any assignee of Seller may
have any right or interest in any Intellectual Property, Seller agrees to grant
to Buyer at the Closing a worldwide, royalty-free, fully paid up, perpetual,
irrevocable, transferable, sublicensable, non-exclusive license to Exercise All
Rights in and to such Intellectual Property to the extent that the Seller has a
legal right to grant such a license.
(d) To the extent, if any, that Buyer purchases or obtains, as a
result of this Agreement, any right or interest in trade secrets that are
currently used in or may in the future be necessary for the continued operation
of the Backend Business, as permitted and contemplated by this Agreement, Buyer
agrees to grant to Seller at the Closing a worldwide, royalty-free, fully paid
up, perpetual, irrevocable, transferable, non-exclusive license to Exercise All
Rights in and to such trade secrets, to the extent that the Buyer has a legal
right to grant such a license.
2.2 ISSUANCE OF WARRANT. Subject to the terms and conditions hereof, at
-------------------
the Closing (as is defined in Section 3.1 below), Seller shall issue to the
Buyer a warrant to purchase up to
6
200,000 shares of Common Stock of Seller at an exercise price of $10.00 per
share pursuant to the terms and conditions set forth in the Warrant, in the form
attached hereto as Exhibit B (the "Warrant"). The shares of Common Stock
issuable upon exercise of the Warrant are collectively referred to herein as the
"Common Shares".
2.3. PURCHASE PRICE. In consideration of the transfer of the Assets and
--------------
issuance of the Warrant, at the Closing, Buyer shall pay to the order of Seller
an amount equal to Fourteen Million Dollars ($14,000,000) (the "Purchase Price")
--------------
by wire transfer of immediately available funds.
2.4 CERTAIN CHIP INVENTORIES AND RELATED ASSETS AND LIABILITIES. Buyer
-----------------------------------------------------------
shall purchase from Seller [*], as indicated on Schedule 1.1(d), all of
---------------
Seller's inventory of Seller's "933" chips pursuant to the Buyer's standard
form of purchase order in the form attached hereto as part of Schedule
--------
2.4, shall assume Seller's obligations with respect to the purchase of such
---
chips from TriTech as set forth in the agreements of Seller with TriTech being
assumed by Buyer hereunder, and shall assume Seller's existing commitments to
customers to supply such chips. Buyer shall further assume Seller's obligations
under purchase orders issued by Seller for [*] silicon wafers for Seller's 935
chip, which call for a purchase price of [*] per wafer.
ARTICLE III.
CLOSING
-------
3.1. CLOSING. The closing of the transactions contemplated herein (the
-------
"Closing") shall be held at 10:00 a.m. California time on the business day
--------
following the satisfaction or waiver of the last of the conditions to Closing as
set forth in Articles VII and VIII at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP,
755 Page ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, unless the parties hereto
otherwise agree to any earlier or subsequent time or date of closing; provided,
--------
however, that in no event will the Closing be extended to a date later than the
-------
Outside Date without the parties' mutual written consent, and the transactions
contemplated herein shall be effective as of 12:01 a.m. (California time) on the
day (whether or not a business day) of the Closing (the "Effective Time").
--------------
Results of operations of the portion of the Business comprised of the Assets,
subject to the Assumed Liabilities, through the accounting period at 11:59 p.m.
(California time) on the day prior to the Closing (whether or not a business
day) shall be included in the consolidated results of operations of Seller; and,
after such time, operations for such portion of the Business shall be conducted
and the results thereof shall be for the account of Buyer.
3.2. DELIVERIES AT CLOSING. At the Closing the following items shall be
---------------------
delivered by the parties:
(a) BY BUYER. Buyer shall deliver an amount equal to the Purchase
--------
Price in immediately available funds as provided in Section 2.3 and the
following shall be delivered to Seller:
(i) the certificates described in Section 7.3;
7
(ii) an executed counterpart of an agreement whereby Seller
shall assign its rights under the Assumed Contracts to Buyer and Buyer shall
assume Seller's obligations under such Assumed Contracts, in customary form
reasonably acceptable to Buyer and Seller;
(iii) an executed counterpart of the Intellectual Property
License Agreement;
(iv) the opinion of counsel to Buyer described in Section 7.5;
and
(v) such other documents and instruments as are reasonably
necessary to consummate the transactions contemplated hereby and by the
Ancillary Agreements.
(b) BY SELLER. The following shall be delivered to Buyer:
---------
(i) one or more Bills of Sale, in customary form and reasonably
acceptable to Buyer and Seller, sufficient to convey the Assets to Buyer;
(ii) the certificates described in Section 8.4;
(iii) an executed counterpart of the Assignment and Assumption
Agreement;
(iv) an executed Warrant;
(v) an executed counterpart of the Intellectual Property
License Agreement;
(vi) the opinion of counsel to Seller described in Section 8.7;
and
(vii) such other documents and instruments as are reasonably
necessary to consummate the transactions contemplated hereby and by the
Ancillary Agreements.
The Books and Records shall be deemed delivered by Seller at the Closing.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Except as described with reasonable particularity in the Seller Disclosure
Schedule (which shall cross-reference to the particular section below to which
such description applies) delivered by Seller to Buyer prior to the execution of
this Agreement, as such Seller Disclosure Schedule may be updated and/or amended
pursuant to Section 6.4 hereof (the "Seller Disclosure Schedule"), Seller
--------------------------
represents and warrants to Buyer that:
4.1. ORGANIZATION. Seller is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of California and has
full corporate power and
8
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted. Seller is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its business makes such qualification or licensing necessary, except for
failures to be so qualified or licensed and in good standing that would not,
individually or in the aggregate, affect the Business in a materially adverse
manner.
4.2. AUTHORIZATION. Seller has all necessary corporate power and
-------------
authority and has taken all corporate action necessary to enter into this
Agreement and each Ancillary Agreement to which it is a party, to consummate the
transactions contemplated hereby and thereby and to perform its obligations
hereunder and thereunder. This Agreement and each Ancillary Agreement to which
it is a party has been duly executed and delivered by Seller and is a valid and
binding obligation of Seller, enforceable against it in accordance with its
respective terms subject to the effect of applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting the
rights of creditors generally and limitations imposed by equitable principles,
whether considered in a proceeding at law or in equity, and the discretion of
the court before which any proceeding therefor may be brought. The Common
Shares issuable upon exercise of the Warrant have been duly reserved for
issuance and, upon issuance in accordance with the terms of the Warrant, will be
validly and duly issued, fully paid and nonassessable and will be free of any
liens or encumbrances; provided, however, that such Warrant and the Common
Shares may be subject to restrictions on transfer under applicable state or
federal securities laws as set forth herein or otherwise required by such laws
at the time a transfer is proposed.
4.3 CAPITALIZATION. As of October 31, 1997, the authorized capital
--------------
stock of the Seller will consist of 50,000,000 shares of Common Stock, of which
13,038,000 are issued and outstanding, and 5,000,000 shares of Preferred Stock,
none of which is issued and outstanding. Except for options to purchase Common
Stock of the Seller held by employees and consultants of the Seller, there are
no outstanding options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from the Seller of any
shares of its capital stock.
4.4. BROKERS. All negotiations relating to this Agreement and the
-------
transactions contemplated hereby have been conducted without the intervention of
any person or entity acting on behalf of Seller in such a manner as to give rise
to any valid claim against Buyer for any broker's or finder's commission, fee or
similar compensation.
4.5. ASSUMED CONTRACTS. Seller has delivered to Buyer complete copies
-----------------
of the Assumed Contracts. All Assumed Contracts are in full force and effect,
and Seller is not in default under any Assumed Contract to which Seller is a
party in such manner as could have a change or effect that is materially adverse
to the condition (financial or otherwise), properties, assets, liabilities or
operations of the Business (a "Material Adverse Effect").
4.6. LITIGATION, PROCEEDINGS AND APPLICABLE LAW. There are no Actions,
------------------------------------------
suits, investigations or proceedings, at law or in equity or before or by any
governmental authority or
9
instrumentality or before any arbitrator of any kind, pending or, to Seller's
knowledge, threatened (a) against Seller which, if determined adversely against
Seller, would have a Material Adverse Effect or (b) seeking to delay or enjoin
the consummation of the transactions contemplated hereby. To the knowledge of
Seller, there are no outstanding orders, decrees or stipulations issued by any
federal, state, local or foreign, judicial or administrative authority in any
proceeding to which Seller is or was a party relating to the Assets or the
Business.
4.7. NO CONFLICT OR VIOLATION. Neither the execution and delivery of
------------------------
this Agreement or any Ancillary Agreement to which Seller is a party nor the
consummation of the transactions contemplated hereby or thereby will result in
(i) a violation of or a conflict with any provision of the Articles of
Incorporation or Bylaws of Seller, (ii) a material breach or termination of, or
a material default under, any term or provision of any Assumed Contract or other
contract to which Seller is a party or an event which, with notice, lapse of
time, or both, would result in any such material breach, such termination or
such material default, or (iii) a material violation by Seller of any Legal
Requirement or an event which, with notice, lapse of time or both, would result
in such a material violation.
4.8. SECURITIES LAWS; CONSENTS AND APPROVALS. Except as would not have
---------------------------------------
a Material Adverse Effect, no consent, waiver, approval or authorization of or
by, or declaration, filing or registration with, any governmental or regulatory
authority is required to be made or obtained by Seller in connection with the
execution, delivery and performance of this Agreement or any Ancillary Agreement
to which Seller is a party and the consummation of the transactions contemplated
hereby or thereby, including the issuance of the Warrant and the Common Shares
to be issued and sold upon exercise thereof pursuant to the terms of such
Warrant, or the consummation of any other transaction contemplated hereby or
thereby, except, if required, qualifications or filings under the Securities Act
of 1933, as amended (the "Securities Act"), and applicable state securities laws
which qualifications or filings, if required, will be obtained or made and will
be effective within the time periods required by law. The issuance of the
Warrant and the Common Shares upon exercise thereof as provided in this
Agreement and the Warrant are and will be exempt from the registration and
prospectus delivery requirements of the Securities Act and have been registered
or qualified, or will be registered or qualified in a timely manner (or are
exempt from registration or qualification) under all applicable state
registration or qualification requirements.
4.9. INTELLECTUAL PROPERTY.
---------------------
(a) Seller owns, or is licensed or otherwise entitled to exercise, all
rights to all Intellectual Property without any conflict or infringement of the
intellectual property rights of others. All source code included within the
Intellectual Property constitutes a trade secret of Seller and is not part of
the public knowledge or literature, and Seller has taken reasonable action to
protect such source code as a trade secret. In addition, Seller has taken
reasonable steps (including, without limitation, entering into Confidentiality
Agreements with all officers and employees of and consultants involved in the
Business as conducted by Seller) to maintain the secrecy and confidentiality of
and its proprietary rights in, all Intellectual Property.
10
(b) Schedule 4.9(b) lists (i) all patents and patent applications and
---------------
all registered copyrights, trade names, trademarks, service marks and other
company, product or service identifiers included in the Intellectual Property,
and specifies the jurisdictions in which each of the foregoing has been
registered, including the respective registration numbers, and/or any
application for any such registration has been filed; (ii) other than "shrink-
wrap," nonexclusive, transferable end-user licenses entered into in the ordinary
course of business, all licenses, sublicenses and other agreements as to which
Seller is a party and pursuant to which Seller or any other Person is authorized
to use any Intellectual Property; and (iii) all licenses under which Seller is
or may be obligated to make royalty or other payments. Copies of all licenses,
sublicenses and other agreements identified pursuant to clauses (ii) and (iii)
above have been delivered by Seller to Buyer.
(c) Seller is not in violation in any material respect of any license,
sublicense or agreement described in Schedule 4.9(b). As a result of the
---------------
execution and delivery of this Agreement or any Ancillary Agreement to which
Seller is a party or the performance of Seller's obligations hereunder or
thereunder, neither Seller nor Buyer be in violation in any material respect of
any license, sublicense or agreement described in Schedule 4.9(b) or Schedule
--------------- --------
4.12.
----
(d) Seller is the owner or a nonexclusive or exclusive licensee of,
with all necessary right, title and interest in and to (free and clear of any
liens, encumbrances or security interests) all non-public domain Intellectual
Property and has rights to the use, sale, license or disposal thereof in
connection with the services or products in respect of which the Intellectual
Property is being used in the Business. Except as expressly set forth in
Schedule 4.9(b), no other Person has any rights with respect to any of the
---------------
Intellectual Property other than Intellectual Property which Seller has licensed
from a third party.
(e) No claims with respect to the Intellectual Property have been
asserted to Seller, or, to Seller's knowledge, are threatened by any person, and
Seller knows of no claims (i) to the effect that Seller infringes any copyright,
patent, trade secret, or other intellectual property right of any third party or
violates any license or agreement with any third party, (ii) contesting the
right of Seller to use, sell, license or dispose of any Intellectual Property,
or (iii) challenging the ownership, validity or effectiveness of any of the
Intellectual Property.
(f) To the knowledge of Seller, all trademarks, service marks, and
other company, product or service identifiers held by Seller are valid and
subsisting worldwide.
(g) To the knowledge of Seller, there has not been and there is not
now any unauthorized use, infringement or misappropriation of any of the
Intellectual Property by any third party, including, without limitation, any
service provider of Seller. Seller has not been sued or, to Seller's knowledge,
charged as a defendant in any claim, suit, action or proceeding that involves a
claim of infringement of any patents, trademarks, service marks, copyrights or
other intellectual property rights that comprise or are necessary to the
Business. Seller does not have any infringement liability with respect to any
patent, trademark, service ▇▇▇▇, copyright or other intellectual property right
of any third party.
11
(h) No Intellectual Property is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting in any material manner
the licensing thereof by Seller. Seller has not entered into any agreement to
indemnify any other person against any charge of infringement of any
Intellectual Property, except in the ordinary course of business. Seller has
not entered into any agreement granting any third party the right to bring
infringement actions with respect to, or otherwise to enforce rights with
respect to, any Intellectual Property. Seller has the exclusive right to file,
prosecute and maintain all applications and registrations with respect to the
Intellectual Property developed or owned by Seller.
(i) No person has a license to use or the right to acquire a license
to use any future version of any Seller product based on the Intellectual
Property or any Seller product based on the Intellectual Property that is under
development, and no agreement to which Seller is a party will restrict Buyer
from charging customers for any such new version or product, except that
agreements for the support or maintenance of Seller products based on the
Intellectual Property entered into in the ordinary course of business may
obligate Seller, or may obligate Buyer after the Effective Time, to provide
certain improvement(s), enhancement(s), change(s) in functionality or other
alteration(s) in the performance of Seller's products. Schedule 4.9(b)
---------------
separately identifies each exclusive arrangement between Seller and any third
party to use, license, sublicense, sell or distribute any Intellectual Property
or any Seller products based on the Intellectual Property.
(j) Notwithstanding the foregoing, Seller has no liability for
indemnification relating to any Intellectual Property issue associated with
technology or designed supplied by Tritech. Buyer's exclusive remedy in such
cases shall be its rights under its assumption of the Seller's agreements with
Tritech.
4.10. FINANCIAL INFORMATION. Seller has delivered to Buyer the
---------------------
Unaudited Financial Statements, a copy of which is set forth in the Seller
Disclosure Schedule. The Unaudited Financial Statements have been prepared
consistently for all periods presented, and revenues presented in the Unaudited
Financial Statements have been recognized in accordance with GAAP, consistently
applied; provided, however, that the income statement has not been prepared in
accordance with GAAP. The Unaudited Financial Statements present fairly the
financial condition and operating results of the Business as of the dates and
during the periods indicated therein, subject to normal year-end adjustments,
which will not be material in amount or significance.
4.11. ABSENCE OF CERTAIN CHANGES. Since June 30, 1997, Seller has
--------------------------
conducted the Business in the ordinary course consistent with past practice and
there has not been any material adverse change in the condition (financial or
otherwise) of the Business, taken as a whole.
4.12. ASSETS GENERALLY.
----------------
(a) The Assets include all properties, tangible and intangible,
currently used by Seller in operating the Business.
12
(b) Seller holds good and marketable title, license to or leasehold
interest in all of the Assets and has the complete and unrestricted power and
the unqualified right to sell, assign and deliver the Assets to Buyer. Upon
consummation of the transactions contemplated by this Agreement, Buyer will
acquire good and marketable title, license or leasehold interest to the Assets
free and clear of any encumbrances and there exists no restriction on the use or
transfer of the Assets, except as may be assumed hereunder by Buyer as an
Assumed Liability. No Person other than Seller has any right or interest in the
Assets, including the right to grant interests in the Assets to third parties,
except for Assets licensed or leased from third parties which are set forth in
the Seller Disclosure Schedule and identified as such.
(c) Except as set forth in Schedule 4.12, none of the Assets that
-------------
constitute tangible personal property is held under any lease, security
agreement, conditional sales contract, lien, or other title retention or
security arrangement.
(d) Except as provided in this Agreement, to the knowledge of Seller,
no restrictions will exist on Buyer's right to engage in the Business, nor will
any such restrictions be imposed on Buyer as a consequence of the transactions
contemplated by this Agreement or by any Ancillary Agreement.
4.13. MAJOR AND ASSUMED CONTRACTS. Except as set forth in Schedule
--------------------------- --------
4.13, Seller is not a party to or subject to:
----
(a) Any employment or consulting contract or other written arrangement
with any Employee relating to the Business;
(b) Any original equipment manufacturer agreement, distribution
agreement, volume or quantity purchase agreement or other similar agreement
relating to the Business (each a "Distribution Agreement"), or joint marketing,
----------------------
joint development or joint venture contract or arrangement or any other
agreement relating primarily or exclusively to the Business that has involved or
is reasonably expected to involve a sharing of profits with other persons or
provides for payments of more than $50,000 per annum;
(c) Any lease for real or personal property used primarily or
exclusively in the Business involving payments of more than $50,000 per annum;
(d) Any instrument evidencing or related in any way to indebtedness
for borrowed money which results in an encumbrance on any Asset;
(e) Any material agreement of product indemnification in connection
with the Business;
(f) Any agreement, contract or commitment relating to capital
expenditures by Seller primarily or exclusively for the Business involving
payments by Seller of more than $50,000 per annum;
13
(g) Any agreement, contract or commitment relating to the license or
disposition by Seller of any Assets other than agreements for the sale of
Inventory in the normal course of business;
(h) Any agreement providing for minimum payment or resale obligations,
ongoing support or research and development obligations, or warranty obligations
on the part of Seller primarily or exclusively in connection with the Business;
except warranty obligations entered into in the conduct of the Business in the
ordinary course;
(i) Any sole or limited source supplier agreements (written or oral)
primarily or exclusively with respect to the Business; or
(j) Any existing original equipment manufacturer agreement,
distribution agreement, volume purchase agreement, or other similar agreement
relating primarily or exclusively to the Business pursuant to which Seller has
granted or received most favored customer provisions or exclusive marketing
rights related to any product, group of products or geographic territory.
To the knowledge of Seller, each Assumed Contract is valid and binding
on Seller, (ii) is in full force and effect, and (iii) has not been breached by
Seller or, to Seller's knowledge, any other party thereto in any material
manner. To Seller's knowledge, no party to any such Contract, agreement or
instrument intends to cancel, withdraw, modify or amend such Contract, agreement
or arrangement.
Except as set forth on Schedule 4.13, Seller has not granted any third
-------------
party the right to supply any products or services of the Business to any other
third party. No agreement for supply of the products or services of the
Business by Seller obligates Seller, and no agreement would obligate Buyer after
the Effective Time, to provide any change in specification of such products or
services or to provide new products or services. No agreement pursuant to which
Seller has licensed the use of any products included as an Asset to any third
party obligates Seller to provide any change in specification in the performance
of such products or to provide new products or services.
After the Closing, Buyer will not be prevented by any act of Seller from
changing prices charged to existing or future customers of any products or
services related to the Business, other than pursuant to obligations to fill
backlog., if any, transferred to and assumed by Buyer on the Closing Date..
4.14. WARRANTIES AND INDEMNITIES. The Seller Disclosure Schedule
--------------------------
indicates all warranty and indemnity claims currently pending against Seller
relating to the Business.
4.15. INVENTORY. The Inventory consists, and at the Closing will
---------
consist, of items of a quality useable or salable in the ordinary and usual
course of business. The value at which the Inventory is carried on the
unaudited balance sheet included in the Unaudited Financial
14
Statements reflects an inventory valuation policy that is in accordance with
GAAP, consistently applied.
4.16. LICENSES AND PERMITS. Seller holds all Permits and licenses of,
--------------------
and has made all filings with, or notifications to, all governmental authorities
pursuant to applicable requirements of all federal, state, local and foreign
laws, ordinances, governmental rules or regulations applicable to the Business,
including, but not limited to, all such laws, ordinances, governmental rules or
regulations relating to registration of the products of the Business (at their
current level of development and use) and certification of the facilities of the
Business, except as would not have a Material Adverse Effect. The Business is
in compliance with all federal, state, local and foreign laws, ordinances,
governmental rules and regulations relating to the products manufactured by the
Business or otherwise related to the Business, and Seller has no knowledge of
any consents, approvals, authorizations, registrations, certifications, permits,
filings or notifications that are invalid or have been or are being suspended,
canceled, revoked or questioned, except as would not have a Material Adverse
Effect. There is no investigation or inquiry to which Seller is a party or, to
Seller's knowledge, pending or threatened, relating to the Business and its
compliance with applicable foreign, state or local laws, ordinances,
governmental rules or regulations. Each such consent, approval, registration,
certification, authorization, permit or license which is transferable shall be
transferred to Buyer in accordance with the terms of this Agreement.
4.17. EMPLOYEES.
---------
(a) All current employees, officers and directors of Seller who have
had access to the Assets or who have worked in the Business are parties to a
written agreement (a "Confidentiality Agreement"), under which each such person
-------------------------
or entity (i) is or was obligated to disclose and transfer to Seller, without
the receipt by such person of any additional value therefor (other than normal
salary or fees for consulting services), all inventions, developments and
discoveries which, during the period of employment with or performance of
services for Seller, he or she makes or made or conceives or conceived of either
solely or jointly with others, that relate to any subject matter with which his
or her work for Seller may be or was concerned, or relate or related to or are
or were connected with the Business, products or projects of Seller, or involve
or involved the use of the time, material or facilities of Seller, and (ii) is
obligated to maintain the confidentiality of proprietary information of Seller.
To the knowledge of Seller, none of Seller's employees, consultants, officers or
directors is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would conflict with
their respective obligation to promote the interests of Seller with regard to
the Business or the Assets or that would conflict with the Business or the
Assets. Neither the execution nor the delivery of this Agreement or any of the
Ancillary Agreements to which Seller is a party, nor the carrying on of the
Business by its employees and consultants, will conflict with or result in a
breach of the terms, conditions or provisions of, or constitute a default under,
any Contract under which the Seller is now obligated. To Seller's knowledge,
none of Seller's Employees (as defined in Section 6.3(a) below) intends to
refuse to accept employment with Buyer or to terminate employment with Buyer
immediately following the Closing. To Seller's knowledge,
15
none of the employees or consultants of Seller who will be a party to any of the
Ancillary Agreements plans to breach such Ancillary Agreement. It is currently
not necessary for Seller to utilize in the Business any inventions of any of
such persons or entities (or people it currently intends to hire) made or owned
prior to their employment by or affiliation with Seller, nor is it or will it be
necessary to utilize any other assets or rights of any such persons or entities
(or people it currently intends to hire) made or owned prior to their employment
with or engagement by Seller, in violation of any registered patents, trade
names, trademarks or copyrights or any other limitations or restrictions to
which any such persons or entity is a party or to which any of such assets or
rights may be subject. To Seller's knowledge, none of Seller's employees,
consultants, officers, directors or shareholders that has had knowledge or
access to information relating to the Assets or the Business has taken, removed
or made use of any proprietary documentation, manuals, products, materials, or
any other tangible item from his or her previous employer which has resulted in
Seller's access to or use of such proprietary items in the Assets, and Seller
will not gain access to or make use of any such proprietary items in the
Business, except to the extent that any such activities would not have a
Material Adverse Effect.
(b) Except for the Confidentiality Agreements, there are no written or
oral contracts of employment between Seller and any Employee.
4.18. EMPLOYEE BENEFIT AND COMPENSATION PLANS.
---------------------------------------
(a) Buyer will incur no liability with respect to, or on account of,
and Seller will retain any liability for, and on account of, any employee
benefit plan of Seller, any of its Affiliates or any predecessor employer of any
current, retired, former or inactive employee of Seller, any of its Affiliates
or any predecessor employer, including, but not limited to, liabilities Seller
may have to such employees under all employee benefit plans, incentive
compensation plans, bonus plans, pension and retirement plans, vacation,
sabbatical programs, profit-sharing plans (including any profit-sharing plan
with a cash-or-deferred arrangement) share purchase and option plans, savings
and similar plans, medical, dental, travel, accident, life, disability and other
insurance and other plans or arrangements, whether written or oral and whether
"qualified" or "non-qualified," or to any employee as a result of termination of
employment by Seller as contemplated by this Agreement.
(b) Seller has complied with, and will comply through the Closing
with, all applicable notice and continuation requirements of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") and the
-----
regulations thereunder.
(c) Seller, in its conduct of the Business, has complied in all
respects, and will comply through the Closing, with all applicable laws
respecting employment and employment practices, safety and training, terms and
conditions of employment and wage and hour laws, except where the failure of
such compliance would not individually or in the aggregate have a Material
Adverse Effect.
(d) Immediately after the Closing, Buyer will have no obligation to
maintain or to provide post-retirement health or medical benefits for current,
retired, former or inactive employees of Seller under any employee benefit plan
or employee agreement.
16
4.19. TAXES. All Taxes relating to the Assets have been or will be
-----
paid by Seller for all periods (or portions thereof) prior to and including the
Effective Time. Seller and any other Person required to file returns or reports
of Taxes relating to the Assets has duly and timely filed (or will file prior to
the Effective Time) all returns and reports of Taxes relating to the Assets
required to be filed prior to such date, and all such returns and reports are
true, correct, and complete. There are no liens for Taxes on any of the Assets.
Seller has complied with all record keeping and tax reporting obligations
relating to income and employment taxes due with respect to compensation paid to
employees or independent contractors providing services to the Business. Seller
is not a "foreign person" within the meaning of Section 1445(f)(3) of the Code.
There are no pending or, to Seller's knowledge, threatened proceedings with
respect to Taxes relating to the Assets, and there are no outstanding waivers or
extensions of statutes of limitations with respect to assessments of Taxes
relating to the Assets. No agreement or arrangement regarding compensation of
any employee providing services to the Business provides for any payments which
could result in a nondeductible expense to Buyer pursuant to Section 280G of the
Code or an excise tax to the recipient of such payment pursuant to Section 4999
of the Code.
4.20. COMPLIANCE WITH LAW. The operation of the Business has been
-------------------
conducted in accordance with all applicable laws, regulations and other
requirements of governmental entities having jurisdiction over the same, except
as would not have a Material Adverse Effect.
4.21. PRODUCTS. Each of the products and services produced, sold or
--------
provided by Seller in connection with the Business is, and at all times has
been, in compliance in all material respects with all applicable federal, state,
local and foreign laws and regulations. Each of such products operates in
compliance with Seller's specifications for such products, true and complete
copies of which have been delivered to Buyer by Seller (other than the PCI
Products for which a bug list is attached hereto as Schedule 4.20) and in a
substantially error-free manner, subject to ordinary bugs and other defects
which do not materially, individually or in the aggregate, affect the ability of
Buyer to exploit such products for purposes of operating the Business, and each
of such products contains or contained warnings, presented in a reasonably
prominent manner, in accordance with applicable laws and industry practice as in
effect when sold with respect to its contents and use. Seller makes no
representation as to the performance, capability or functionality of the PCI
Products.
4.22. PRODUCT LIABILITY. There are no claims, actions, suits,
-----------------
inquiries, proceedings or investigations pending by or against Seller, or
threatened by or against Seller relating to any products of the Business and
containing allegations that such products are defective or were improperly
designed or manufactured or improperly labeled or otherwise improperly described
for use.
4.23. DEFAULTS. Seller is not in default under or with respect to any
--------
judgment, order, writ, injunction or decree of any court or any governmental
entity which would have a Material Adverse Effect. There does not exist any
default by Seller or, to the knowledge of Seller, by any other Person, or event
that, with notice or lapse of time, or both, would constitute a default under
17
any Contract entered into by Seller as part of the operations of the Business
which would have a Material Adverse Effect, and no notices of breach thereof
have been received by Seller.
4.24. NO FRAUDULENT CONVEYANCE. Seller is not now insolvent and will
------------------------
not be rendered insolvent by the sale, transfer and assignment of the Assets
pursuant to the terms of this Agreement. Seller is not entering into this
Agreement or any of the Ancillary Agreements to which Seller is a party with the
intent to defraud, delay or hinder its creditors, and the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements to
which Seller is a party will not have any such effect. The transactions
contemplated by this Agreement or any Ancillary Agreements to which Seller is a
party will not constitute a fraudulent conveyance, or otherwise give rise to any
right of any creditor of Seller to any of the Assets after the Closing.
4.25. INSURANCE. The Seller Disclosure Schedule lists all insurance
---------
policies and fidelity bonds covering the Assets or relating primarily or
exclusively to the Business. There is no claim by Seller relating to the Assets
pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies and bonds.
All premiums due and payable under all such policies and bonds have been paid
and Seller is otherwise in material compliance with the terms of such policies
and bonds (or other policies and bonds providing substantially similar insurance
coverage).
4.26. PCI CHIP. To the best of Seller's knowledge, the current status
--------
of Seller's PCI chip is set forth in Exhibit E to this Agreement. Except for
such current belief, Seller makes no representation as to the performance,
capability or functionality of the PCI Products.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to Seller as follows:
5.1. ORGANIZATION OF BUYER. Buyer is a corporation duly organized,
---------------------
validly existing and in good standing under the laws of Singapore and has full
corporate power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted.
5.2. AUTHORIZATION. Buyer has all necessary corporate power and
-------------
authority and has taken all corporate action necessary to enter into this
Agreement and each Ancillary Agreement to which it is a party, to consummate the
transactions contemplated hereby and thereby and to perform its obligations
hereunder and thereunder. This Agreement and each Ancillary Agreement to which
it is a party has been duly executed and delivered by Buyer and is a valid and
binding obligation of Buyer, enforceable against it in accordance with its terms
subject to the effect of applicable bankruptcy, insolvency, reorganization,
moratorium, and other similar laws relating to or affecting the rights of
creditors generally and limitations imposed by equitable principles, whether
considered in a proceeding at law or in equity, and the discretion of the court
before which any proceeding therefor may be brought.
18
5.3. BROKERS. All negotiations relating to this Agreement and the
-------
transactions contemplated hereby have been conducted without the intervention of
any person or entity acting on behalf of Buyer in such a manner as to give rise
to any valid claim against Seller for any broker's or finder's commission, fee
or similar compensation.
5.4. LITIGATION, PROCEEDINGS AND APPLICABLE LAW. There are no actions,
------------------------------------------
suits, investigations or proceedings, at law or in equity or before or by any
governmental authority or instrumentality or before any arbitrator of any kind,
pending or, to Buyer's knowledge, threatened (a) against Buyer which, if
determined adversely against Buyer, would materially adversely affect Buyer's
ability to operate the Assets or the Business or (b) seeking to delay or enjoin
the consummation of the transactions contemplated hereby. There are no
outstanding orders, decrees or stipulations issued by any federal, state, local
or, to Buyer's knowledge, foreign, judicial or administrative authority in any
proceeding to which Buyer is or was a party which would materially adversely
affect Buyer's ability to operate the Assets.
5.5. NO CONFLICT OR VIOLATION. Neither the execution and delivery of
------------------------
this Agreement or any Ancillary Agreement to which Buyer is a party nor the
consummation of the transactions contemplated hereby or thereby will result in
(i) a violation of or a conflict with any provision of the Articles of
Association of Buyer or (ii) a violation by Buyer of any Legal Requirement or an
event which, with notice, lapse of time or both, would result in such a
violation.
5.6. CONSENTS AND APPROVALS. Except as contemplated in Section 6.1(d),
----------------------
no consent, waiver, approval or authorization of or by, or declaration, filing
or registration with, any governmental or regulatory authority is required to be
made or obtained by Buyer in connection with the execution, delivery and
performance of this Agreement or any Ancillary Agreement to which Buyer is a
party and the consummation of the transactions contemplated hereby or thereby.
ARTICLE VI.
CERTAIN COVENANTS
-----------------
6.1. COVENANTS OF BOTH PARTIES. Buyer, on the one hand, and Seller, on
-------------------------
the other hand, each covenant to the other that:
(a) NOTICE. Each party shall give prompt written notice to the other
------
party if an event occurs which makes it reasonably likely that a condition to
the Closing set forth in Article VII or Article VIII will not be satisfied as of
the Closing; provided, however, that the giving of any such notice shall not
excuse such party's performance hereunder.
(b) FURTHER ASSURANCES. Both before and after the Closing, each party
------------------
will cooperate in good faith with the other and will take all appropriate action
and execute any documents, instruments or conveyances of any kind which may be
reasonably necessary or advisable to carry out any of the transactions
contemplated hereunder. From and after the Effective Time, Seller will promptly
refer all inquiries with respect to the ownership of the Assets to Buyer and
execute such documents as Buyer may reasonably request from time to time
19
to evidence transfer of the Assets to Buyer, and Buyer will execute such
documents as Seller may reasonably request from time to time to evidence
assumption of the Assumed Liabilities.
(c) ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
----------------------------
allocated among the Assets as provided in a schedule prepared by Buyer within
twenty (20) business days after the Closing Date, submitted to Seller, and
approved by Seller, such approval to be not unreasonably withheld (the
"Allocation Schedule"). The Allocation Schedule shall be for purposes of
complying with the requirements of Section 1060 of the Code and regulations
thereunder. Buyer and Seller each agree to prepare and file on a timely basis
with the Internal Revenue Service (and applicable state Tax authorities)
substantially identical initial and supplemental Internal Revenue Service Forms
8594 "Asset Acquisition Statements Under Section 1060" consistent with the
Allocation Schedule (and corresponding state Tax forms). If any Tax authority
challenges such allocation, the party receiving notice of such challenge shall
give the other party prompt written notice thereof, and the parties shall
cooperate in order to preserve the effectiveness of such allocation.
6.2. SELLER'S COVENANTS. Seller covenants to Buyer that:
------------------
(a) ACCESS BY BUYER. Seller shall allow Buyer and its
---------------
Representatives, at Buyer's own expense, during regular business hours to
inspect the Assets and to inspect the Books and Records, including information
with respect to current costs, prices, financial information (including
inventory, fixed assets and accruals) and promotional and marketing information
and such other matters as Buyer may reasonably request. All such information
shall be provided to Buyer in such form as such information may presently exist
or be readily available.
(b) SELLER'S CONDUCT OF THE BUSINESS PRIOR TO CLOSING. During the
-------------------------------------------------
period from the date of this Agreement until the Closing, Seller will conduct
the Business in its ordinary and usual course, consistent with past practice,
and will use all reasonable efforts to preserve intact all rights, privileges,
franchises and other authority of the Business, to retain the Employees, and to
maintain favorable relationships with licensors, licensees, suppliers,
contractors, distributors, customers and others having relationships with the
Business. Seller shall promptly notify Buyer of any event or occurrence or
emergency not in the ordinary course of business, and any material event
involving the Business or the Assets.
(c) BEST EFFORTS. Seller shall use its reasonable best efforts (i) to
------------
cause to be fulfilled and satisfied all of the conditions to the Closing set
forth in Article VIII below, (ii) to cause to be performed all of the matters
required of it at the Closing and (iii) to cause the Assumed Contracts to be
assigned to Buyer.
(d) CONSENTS. As soon as practicable following the date hereof,
--------
Seller shall commence all reasonable action required hereunder to obtain all
applicable Permits, consents, approvals and agreements of, and to give all
notices and make all filings with, any third parties and governmental
authorities as may be necessary to authorize, approve or permit the full and
complete sale, conveyance, assignment or transfer of the Assets and the
Business.
20
(e) COOPERATION AND TRANSITION ASSISTANCE. Seller shall use its
-------------------------------------
reasonable best efforts to facilitate the transition of customers, customer
support services, and development, marketing and sales functions related to the
Business from Seller to Buyer.
(f) NO-SHOP. Seller agrees that, during the Exclusive Negotiation
-------
Period, it shall not, directly or indirectly through any officer, director,
Affiliate, agent or Representative of Seller or otherwise, solicit, initiate,
entertain or encourage any proposal or offer from any third party relating to
any acquisition of the Assets or the Business, the merger or consolidation of
Seller with or into any other corporation or corporations, the dissolution of
Seller or the acquisition of any equity interests in Seller (each, an
"Acquisition"). During the Exclusive Negotiation Period, neither Seller nor any
-----------
of its directors, officers, Affiliates, agents or Representatives shall (i)
solicit, initiate, entertain, encourage or participate in any negotiations or
discussions with respect to any Acquisition, (ii) disclose any information not
customarily disclosed to any person concerning the Business or the Assets or
afford to any person or entity access to the properties, Books and Records of
the Business or (iii) cooperate with any person to make any proposal with
respect to an Acquisition. In the event that during the Exclusive Negotiation
Period Seller shall receive any offer or other indication of interest from any
third party relating to any Acquisition, Seller shall promptly notify Buyer in
writing, and shall in such notice set forth in reasonable detail the identity of
the third party, the terms and conditions of any proposal and any other
information requested of it by the third party, and shall keep Buyer informed as
to the status thereof.
(g) TAXES. Buyer shall be responsible for paying, shall promptly
-----
discharge when due, and shall reimburse, indemnify and hold harmless Seller
from, any sales or use, transfer, real property gains, excise, stamp, or other
similar Taxes arising from, imposed on or attributable to the transactions
contemplated by this Agreement. To the extent commercially reasonable, Seller
shall cooperate with Buyer to minimize such Taxes.
6.3. EMPLOYMENT MATTERS.
------------------
(a) EMPLOYEES. Seller shall make available to Buyer a list of all
---------
employees, consultants and independent contractors of Seller who work in or
support the Business and are necessary for Buyer to operate the Business (the
"Business Personnel"). Seller shall use its reasonable efforts to permit the
-------------------
Business Personnel to be available to interview with Buyer concerning
prospective employment with Buyer and, at Buyer's option, Buyer shall be
permitted to make offers of employment, or a consulting or independent
contracting relationship, to such persons at any time and from time to time
prior to the Closing, to commence effective as of the Closing. The Business
Personnel to whom such offers shall have been made (the "Employees") shall be
---------
identified by Buyer on Schedule 6.3(a) hereto (which Schedule may be amended
---------------
from time to time until the Closing by written notice from Buyer to Seller).
Buyer may, in Buyer's sole discretion, negotiate a compensation (salary and
benefits) package with each Employee. Buyer shall grant options to purchase
shares of the capital stock of Buyer to Employees who accept offers of
employment with Buyer in such amounts and on such terms as Buyer, in its sole
discretion, may determine. Seller shall cooperate with and use its best efforts
to assist Buyer in its efforts to secure satisfactory employment arrangements
with the Employees; provided that
21
any existing employment agreement by and between Seller and any Employee who
accepts Buyer's offer of employment shall terminate and be of no further force
and effect as of the Effective Time, except that Seller shall continue in force
Seller's existing health insurance coverage for such Employees through November
30, 1997. All employees of Seller, other than those Employees who accept Buyer's
offers of employment, shall, in Seller's sole discretion, remain employees of
Seller following the Closing (or Seller shall bear the responsibility for all
severance or termination arrangements and/or compensation relating to such
persons).
(b) NO OBLIGATIONS. Buyer shall not assume any obligations to
--------------
Seller's Employees nor shall Buyer assume any liabilities of Seller regarding
its Employees, including any obligations or liabilities for employee termination
by Seller or other restructuring costs of Seller incurred as a result of the
transactions contemplated by this Agreement.
(e) NO THIRD PARTY BENEFICIARY RIGHTS. Nothing contained in this
---------------------------------
Agreement shall confer upon any Employees any right with respect to employment
or continuance of employment by Buyer, nor shall anything herein interfere with
the right of Buyer to terminate the employment of any of the Employees who
accept offers of employment with Buyer at any time, with or without cause,
subject to the provisions of any employment agreement with Buyer. No provision
of this Agreement shall create any third party beneficiary rights in any
Employee, or any beneficiary or dependents thereof, with respect to the
compensation, terms and conditions of employment and benefits that may be
provided to any Employee by Buyer or under any benefit plan which Buyer may
maintain.
(f) NONSOLICITATION. During the Exclusive Negotiation Period and for
---------------
a period of two years following the Closing, Seller and its officers, directors,
employees, agents, Affiliates and Representatives agree that they shall take no
action, formal or informal, direct or indirect, to solicit the employment of any
Employee who accepts an offer of employment with Buyer or any other employee,
consultant or independent contractor of Buyer or to solicit, entice, induce or
encourage any Employee or any other employee, consultant or independent
contractor of Buyer to terminate his, her or its relationship with Buyer in
order to become an employee, consultant or independent contractor of or to a
Person other than Buyer. During the Exclusive Negotiation Period and for a
period of two years following the Closing, Buyer and its officers, directors,
employees, agents, Affiliates and Representatives agree that they shall take no
action, formal or informal, direct or indirect, to solicit the employment of any
employee, consultant or independent contractor of Seller who is not an Employee
who accepts Buyer's offer of employment or to solicit, entice, induce or
encourage any employee, consultant or independent contractor of Seller who is
not an Employee who accepts Buyer's offer of employment to terminate his, her or
its relationship with Buyer in order to become an employee, consultant or
independent contractor of or to a Person other than Seller.
(g) VISA TRANSITION ASSISTANCE. At the request of Buyer, Seller shall
--------------------------
continue to employ such of the Employees who have accepted Buyer's offer of
employment as may have an H-1 visa status for the shorter of (i) one hundred
twenty (120 days) or (ii) the date such Employees shall have had their H-1 visa
sponsor transferred to Buyer. Buyer shall
22
reimburse Seller for its out-of-pocket expenses in continuing such employment
upon receipt of a ▇▇▇▇ from Seller in a form reasonably acceptable to Buyer.
6.4. UPDATE OF DISCLOSURE SCHEDULES. At or prior to the Closing, Seller
------------------------------
shall deliver to Buyer updated Schedules 1.1(d) - 1.1 (g) and the Seller
--------------------------
Disclosure Schedule to reflect changes to the operations or condition of the
Business between the date hereof and the Closing. Such updated Schedules shall
include an acknowledgment that the Business was operated during such period in
accordance with Section 6.2(b).
6.5. NONCOMPETITION.
--------------
(a) As an inducement to and in consideration for Buyer entering into
this Agreement, Seller undertakes that for a minimum of six years following the
Closing neither it nor any Affiliate of it will participate, assist or otherwise
be directly or indirectly involved or concerned, financially or otherwise, as a
member, shareholder, unitholder, director, consultant, adviser, contractor,
principal, manager, beneficiary, partner, associate, trustee, financier or
otherwise in any business or activity which is the same as or substantially
similar to the Business or any material part of it (a "Restricted Business").
-------------------
Buyer and Seller agree, however, that (i) Seller may engage in the business
opportunities which do not constitute the PC audio business, (ii) Seller may re-
enter the audio business three years following the Closing and (iii) Seller may
provide support to all audio products previously shipped by it on or before the
Closing Date and any inventories of audio products existing on the Closing Date
and sold by it after the Closing Date. Notwithstanding the foregoing, Seller
may own, directly or indirectly (i) up to 4.9% of any class of securities traded
on a national or foreign securities exchange or listed on the Nasdaq National
Market of any entity which engages in the Restricted Business and (ii) in the
case of Tripath Technology, up to 15% of any class of its securities without
limitation, and a greater percentage provided that Tripath's activities remain
no more competitive with the Business than they are on the Closing Date.
(b) If any particular prohibition or restriction contained in clause
(a) of this Section 6.5 is judged by a court of competent jurisdiction to be
unenforceable, but would be judged enforceable by a court of competent
jurisdiction if that particular prohibition or restriction was deleted or
reduced, then the prohibitions or restrictions contained in clause (a) of this
Section 6.5 shall apply with that particular prohibition or restriction deleted
or reduced by the minimum amount necessary.
(c) Seller acknowledges that:
(i) the prohibitions and restrictions contained in clause (a) of
this Section 6.5 are reasonable and necessary; and
(ii) Seller has received valuable consideration for agreeing to
the covenants in clause (a) of this Section 6.5.
(d) Seller and Buyer acknowledge and agree that it will be difficult
to compute the amount of damage or loss to Buyer if Seller violates any of its
agreements under this
23
Section 6.5, that Buyer will be without an adequate legal remedy if Seller
violates the provisions of this Section 6.5, and that any such violation may
cause substantial irreparable injury and damage to Buyer not fully compensable
by monetary damages. Therefore, Seller and Buyer agree that in the event of any
violation by Seller of this Section 6.5, Buyer shall be entitled (i) to recover
from Seller monetary damages, (ii) to obtain specific performance, injunctive or
other equitable relief, of either a preliminary or permanent type, and (iii) to
seek any and all other available rights or remedies at law or in equity which
may be exercised concurrently with the rights granted hereunder.
6.6 PAYMENT OF EQUIPMENT LEASES. On or prior to the Closing Date,
---------------------------
Seller shall purchase all of its equipment currently subject to equipment leases
with third parties, to the extent such equipment is to be transferred to Buyer
as a part of the Assets and Seller shall deliver clear title to such equipment
to Buyer at the Closing.
ARTICLE VII.
CONDITIONS TO SELLER'S OBLIGATIONS'
----------------------------------
The obligations of Seller to consummate the transactions contemplated by
this Agreement are subject to the satisfaction of or waiver by Seller, on or
prior to the Closing, of each of the following conditions:
7.1. REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and
-----------------------------------------
warranties of Buyer contained in this Agreement are and as of the Closing shall
be true and correct in all material respects, and Buyer shall have performed in
all material respects all agreements and covenants required hereby to be
performed by it prior to or at the Closing.
7.2. NO GOVERNMENTAL PROCEEDINGS OR LITIGATION. No suit, action or
-----------------------------------------
other legal or administrative proceeding by any governmental authority or any
other party or entity shall have been instituted and remain unresolved which
questions the validity or legality of the transactions contemplated hereby.
7.3. CERTIFICATES. Buyer shall furnish Seller with such certificates of
------------
its officers and others to evidence compliance with the foregoing conditions set
forth in this Article VII as may be reasonably requested by Seller.
7.4. CORPORATE DOCUMENTS. Seller shall have received from Buyer
-------------------
resolutions adopted by the board of directors of Buyer approving this Agreement
and the Ancillary Agreements to which Buyer is a party and the transactions
contemplated hereby and thereby, certified as true and correct by Buyer's
corporate secretary or assistant secretary.
7.5. OPINION OF COUNSEL. Seller shall have received the opinion of
------------------
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel to Buyer, in a form reasonably satisfactory to
Seller.
24
7.6. ANCILLARY AGREEMENTS. Each of the Ancillary Agreements shall have
--------------------
been duly and validly executed and delivered by the parties thereto and such
agreements shall remain in full force and effect.
ARTICLE VIII.
CONDITIONS TO BUYER'S OBLIGATIONS'
---------------------------------
The obligations of Buyer to consummate the transactions contemplated by
this Agreement are subject to the satisfaction of or waiver by Buyer, on or
prior to the Closing, of each of the following conditions:
8.1. REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and
-----------------------------------------
warranties of Seller contained in this Agreement are and as of the Closing shall
be true and correct in all material respects, and Seller shall have performed in
all material respects all agreements and covenants required hereby to be
performed by it prior to or at the Closing.
8.2. CONSENTS. All consents, waivers, approvals and authorizations of
--------
or by, and declarations, filings and registrations with, governmental or
regulatory authorities and other parties or entities identified on Schedule 8.2
------------
and required in connection with the transfer by Seller of the Assets to Buyer as
contemplated hereby, including any and all consents required to transfer the
Assumed Contracts to Buyer on the terms and conditions provided to Seller,
without change as a result of the transfer to Buyer, shall have been obtained or
made.
8.3. NO GOVERNMENTAL PROCEEDINGS OR LITIGATION. No suit, action or
-----------------------------------------
other legal or administrative proceeding by any governmental authority or any
other party or entity shall have been instituted and remain unresolved which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected to materially and adversely affect the right
or ability of Buyer to own, operate or possess the Assets after the Effective
Time. There shall have been no material litigation filed or threatened by a
third party which would impair the Buyer's ability to exploit the Intellectual
Property in a commercially reasonable manner.
8.4. CERTIFICATES. Seller shall furnish Buyer with such certificates of
------------
Sellers' officers and others to evidence compliance with the foregoing
conditions set forth in this Article VIII as may be reasonably requested by
Buyer.
8.5. CORPORATE DOCUMENTS. Buyer shall have received from Seller
-------------------
resolutions adopted by the board of directors of Seller and, if necessary, by
the shareholders of Seller, approving this Agreement and the Ancillary
Agreements to which Seller is a party and the transactions contemplated hereby
and thereby, certified as true and correct by Seller's corporate secretary or
assistant secretary.
8.6. NO MATERIAL ADVERSE CHANGE. There shall not have occurred any
--------------------------
event that would have a Material Adverse Effect from the date of this Agreement
to the Closing.
25
8.7. OPINION OF COUNSEL. Buyer shall have received from Seller the
------------------
opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to Seller, in a form
reasonably satisfactory to Buyer.
8.8. ANCILLARY AGREEMENTS. To the extent the Seller is required as a
--------------------
signatory, each of the Ancillary Agreements shall have been duly and validly
executed and delivered by the parties thereto and such agreements shall remain
in full force and effect as against the Seller.
ARTICLE IX.
ACTIONS BY PARTIES AFTER THE CLOSING
------------------------------------
9.1. BOOKS AND RECORDS. From and after the Closing, each party agrees
-----------------
that it will cooperate with and make available to the other party and its
Representatives, subject to Section 10.11, during normal business hours upon
prior written request specifying the need therefor, all Books and Records,
information and employees (without substantial disruption of employment)
relating to the Assets retained and remaining in existence after the Closing
which are reasonably necessary or useful in connection with any tax inquiry,
audit, investigation or dispute, any litigation or investigation or any other
reasonable business purpose. The party requesting any such Books and Records,
information or employees shall bear all of the out-of-pocket costs and expenses
(including attorneys' fees, but excluding reimbursement for salaries and
employee benefits) reasonably incurred in connection with providing such Books
and Records, information or employees.
9.2. [*]
9.3. INDEMNIFICATION.
---------------
(a) BY SELLER. From and after the Effective Time and subject to the
---------
limitations set forth below, Seller shall indemnify, save and hold harmless
Buyer and its Affiliates, and their respective Representatives, from and against
and in any respect of any and all Damages caused by, arising out of, asserted
against, resulting from or incurred or suffered by Buyer or any of its
Affiliates or Representatives in connection with, directly or indirectly, (i)
any misrepresentation or breach of any representation or warranty by Seller in
or pursuant to this Agreement or any Ancillary Agreement to which Seller is a
party, (ii) the non-fulfillment of any covenant or agreement made by Seller in
or pursuant to this Agreement or any Ancillary Agreement to which Seller is a
party, (iii) the Excluded Liabilities, (iv) the Excluded Assets, (v) any
allegation or claim relating to the use, sale, licensing or development of the
Intellectual Property or Finished Goods (except for any such allegation or claim
resulting from any changes, modifications and/or improvements thereto made other
than by or for Seller), whether such allegation or claim relates to a Finished
Good or
26
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED TO THE OMITTED PORTIONS.
Intellectual Property on a stand-alone basis or in combination with other
components or intellectual property, including, but not limited to, claims of
breach or threat of breach of a third party's trade secrets or violation of a
third party's copyrights, or claims based on a failure by Seller to disclose an
intellectual property risk or other exception to Seller's representations and
warranties known to Seller, (vi) claims of fraud, or (vii) any liability arising
out of the pending or threatened claims set forth in Section 4.5 of Seller's
Disclosure Schedule.
(b) BY BUYER. From and after the Effective Time and subject to the
--------
limitations set forth below, Buyer shall indemnify and save and hold harmless
Seller and its Affiliates, and their respective Representatives, from and
against and in any respect of any and all Damages caused by, arising out of,
asserted against, resulting from or incurred or suffered by Seller or any of its
Affiliates or Representatives in connection with, directly or indirectly, (i)
any misrepresentation or breach of any representation or warranty by Buyer in
this Agreement or any Ancillary Agreement to which Buyer is a party, (ii) the
non-fulfillment of any covenant or agreement made by Buyer in or pursuant to
this Agreement or any Ancillary Agreement to which Buyer is a party, (iii) any
of the Assumed Liabilities and (iv) except for intellectual property claims to
which Buyer is entitled to indemnification, the ownership or use of the Assets
from and after the Effective Time to the extent such Damages arise out of
transactions, events or inaction of Buyer occurring on or after the Effective
Time.
(c) NOTICE OF AND DEFENSE OF CLAIMS.
-------------------------------
(i) For the purpose of this Article IX, the term "Indemnifying
------------
Party" when used in connection with a particular Claim shall mean the party
-----
having an indemnification obligation pursuant to this Article IX, and the term
"Indemnified Party" when used in connection with a particular Claim shall mean
-----------------
the persons having the right to be indemnified pursuant to this Article IX. Each
party agrees that as promptly as practical under the circumstances after it
becomes aware of facts or circumstances giving rise to a claim by it for
indemnification pursuant to this Article IX (a "Claim"), including the filing of
-----
any lawsuit or enforcement action by any third party (a "Third Party Claim"),
-----------------
such party will provide notice thereof in writing (a "Claim Notice") to the
------------
Indemnifying Party with respect to such Claim specifying in reasonable detail
the nature and specific basis to the extent then known by the Indemnified Party
for such Claim and, to the extent feasible, the estimated amount of Damages
attributable thereto; provided, however, that the failure of any Indemnified
-------- -------
Party to give timely notice shall not affect its rights to indemnification
hereunder except to the extent that the Indemnifying Party demonstrates Damage,
including inability to assert rights, defenses or counterclaims, caused by such
failure.
(ii) With respect to Third Party Claims, after such notice the
Indemnifying Party shall be entitled, if it so elects, to defend the Indemnified
Party against the Third Party Claim with counsel selected by the Indemnified
Party and reasonably acceptable to the Indemnifying Party so long as (A) the
Indemnifying Party notifies the Indemnified Party in writing to the effect that
the Indemnifying Party will indemnify the Indemnified Party from and against the
Damages caused by the Third Party Claim and (B) the Indemnifying Party conducts
the defense of the Third Party Claim actively and diligently. The Indemnified
Party shall cooperate in all reasonable respects with the Indemnifying Party and
such attorneys in the investigation, trial and defense of any lawsuit or action
27
with respect to any such Third Party Claim and any appeal arising therefrom,
including the filing in the Indemnified Party's name of appropriate cross claims
and counterclaims. The Indemnified Party may, at its own cost, participate in
any investigation, trial and defense of such Third Party Claim controlled by the
Indemnifying Party and any appeal arising therefrom; provided however, that the
Indemnifying Party shall bear such cost if representation of both parties by the
same counsel would be inappropriate due to actual or potential conflicts of
interest. If the Indemnified Party joins in any such Third Party Claim, the
Indemnifying Party shall have full authority to determine all action to be taken
with respect thereto; provided, however, that the Indemnifying Party will not
-------- -------
(y) consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim or (z) be liable for any settlement of any such
Third Party Claim without, in each instance, the Indemnified Party's express
written consent, which shall not be unreasonably withheld.
(iii) If the Indemnifying Party shall object to any Claim
pursuant to this Agreement, the Indemnifying Party shall give written notice of
such objection to the Indemnified Party within 30 days after the date the Claim
Notice is given to the Indemnifying Party (the "Notice Date"). If the
-----------
Indemnifying Party does not give notice of an objection within 30 days after the
Notice Date, or shall have agreed within such 30 day period that such Claim
should be paid, the Indemnifying Party shall promptly cause to be transferred to
the Indemnified Party an amount equal to the Damages attributable to such Claim
(or such lesser or greater amount agreed in writing by the Indemnified Party and
the Indemnifying Party).
(iv) In case the Indemnifying Party shall object in writing to
any claim or claims by the Indemnified Party, the Indemnifying Party and the
Indemnified Party shall attempt in good faith to agree upon the rights of the
respective parties with respect to each of such claims. If the Indemnifying
Party and the Indemnified Party should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties and the Indemnifying
Party shall pay to the Indemnified Party such agreed upon amount. If no such
agreement can be reached after good faith negotiation, either the Indemnified
Party or the Indemnifying Party may, by written notice to the other, invoke the
dispute resolution procedures set forth in Section 9.4 hereof.
(v) Payments by an Indemnified Party of amounts for which such
Indemnified Party is indemnified hereunder shall not be a condition precedent to
recovery. Seller's obligation to indemnify Buyer, and Buyer's obligation to
indemnify Seller, shall not limit any other rights, including without limitation
rights of contribution, which either party may have under statute or common law.
(d) LIMITATION ON REPRESENTATIONS AND WARRANTIES. The representations
--------------------------------------------
and warranties of Seller contained in Article IV and the representations and
warranties of Buyer contained in Article V shall survive the Closing and
terminate three years after the Closing; provided, however, that the
representations and warranties of Seller relating to Taxes shall survive until
30 days after the expiration of all applicable statutes of limitations. No
action can be brought with respect to any breach of any representation or
warranty on the part of either party under this Agreement, including under the
provisions of Section 9.5(a) and 9.5(b), unless a Claim Notice specifying the
breach of the representation and warranty forming the basis of such Claim has
been
28
delivered to the party alleged to have breached such representation and
warranty prior to the termination date, if any, of such representation and
warranty described above.
(e) LIMITATION ON INDEMNIFICATION. Notwithstanding any other
-----------------------------
provision of this Agreement to the contrary, Buyer acknowledges and agrees that,
with the exception of taxes, the maximum aggregate liability of Seller to Buyer
or any of its Affiliates or Representatives, regardless of whether Buyer seeks
indemnification pursuant to this Section 9.3, regardless of the form of action,
whether in contract or tort, including negligence, and regardless of whether or
not Seller is notified of the possibility of damages to Buyer or any other third
party, shall not exceed: (a) $1,000,000 for any and all Damages under Section
9.3(a) arising out of or resulting from, directly or indirectly, claims that any
of the Assets (including, without limitation, the Intellectual Property), or any
future product of Buyer incorporating the Assets or any Finished Good, infringes
a patent that was issued to a third party prior to the Effective Time; provided,
however, that with respect to the Yukon Core Logic Seller shall have no
liability for patent infringement to the extent that the Yukon Core Logic is not
used in a manner recommended for use by Seller as is more fully described in
Attachment D-2 to the Intellectual Property License Agreement; (b) $14,000,000
for any and all Damages under Section 9.3(a) arising out of or relating from,
directly or indirectly, claims that any of the Assets (including, without
limitation, the Intellectual Property), or any future product of Buyer
incorporating the Assets or any Finished Good, infringes a copyright or trade
secret of a third party; and (c) $1,000,000 for any and all Damages arising
under Section 9.3(a)(i) other than Damages which are the subject to the
limitations described in clauses (a), (b) and (c) of this sentence above or
arising out of any breach of Sections 4.2, 4.3, 4.4 and 4.14 of this Agreement.
In the cases of clauses (a), (b)or (c) of the preceding sentence of this
subsection 9.3(c), the limitations on liability are conditioned upon there being
an absence of actual fraud by Seller. Further, in either cases (a), (b),or (c)
of this subsection 9.3(e), Buyer shall not receive any funds from Seller unless
the aggregate obligation of Seller exceeds $200,000; provided, however, that if
-------- -------
the aggregate obligation of the Seller exceeds $200,000, Buyer shall be entitled
to receive the entire aggregate obligation including the $200,000.
(f) NO PERSONAL LIABILITY. No individual Representative of any party
---------------------
shall be personally liable for any Damages under the provisions of this Section
9.3 or any other provision of this Agreement. Nothing herein shall relieve any
party of any liability to make any payment expressly required to be made by such
party pursuant to this Agreement.
9.4. DISPUTE RESOLUTION PROCEDURES. All disputes arising in connection
-----------------------------
with this Agreement or the grounds for termination thereof shall be resolved as
follows: The senior management of both parties shall meet to attempt to resolve
such disputes. If the disputes cannot be resolved by the senior management,
either party may make a written demand for formal dispute resolution and specify
therein the scope of the dispute. Within 30 days after such written
notification, the parties agree to meet for one day with an impartial mediator
and consider dispute resolution alternatives other than litigation. If an
alternative method of dispute resolution is not agreed upon within 30 days after
the one-day mediation, either party may begin litigation proceedings. In the
event of litigation, the prevailing party shall be entitled to recover its
reasonable attorneys' fees and expenses.
29
9.5 SUPPLY OF BACKEND SERVICES BY SELLER. During the one (1) year
------------------------------------
period following the Closing, (i) Buyer shall purchase from Seller, and Seller
shall provide to Buyer, no less than Seven Hundred Fifty Thousand Dollars
(US$750,000) of Backend Services, and up to an additional Seven Hundred Fifty
Thousand Dollars ($US750,000) of Backend Services to the extent so requested by
Buyer in writing on or before January 31, 1998, and (ii) Seller shall make
commercially reasonable efforts to meet any additional needs of Buyer for
Backend Services, all in accordance with the rates and other terms and
conditions set forth in Exhibit 9.5. Thereafter, Seller shall make commercially
reasonable efforts to meet Buyer's needs for Backend Services for so long as
Seller shall continue to own a business providing such Backend Services, at
then-prevailing market rates. Notwithstanding anything in this Agreement to the
contrary, in the event that Seller shall breach its support obligations for the
one (1) year period following the Closing as set forth herein by either
providing a higher priority to the provision of Backend Services to Seller or
another third party than to providing such Backend Services to Buyer, or
willfully failing to provide such Backend Services, then Seller shall be liable
to Buyer for Buyer's actual contract damages for such breach, together with any
consequential damages incurred by Buyer as a result of such breach. Seller's
liability to Buyer pursuant to this Section 9.5 shall not in any event exceed
the sum of Two Million Dollars (US$2,000,000) plus any attorneys' fees that may
be awarded to Buyer pursuant to Section 9.4.
ARTICLE X.
MISCELLANEOUS
-------------
10.1. TERMINATION. This Agreement and the transactions contemplated
-----------
hereby may be terminated or abandoned at any time prior to the Closing:
(a) by the mutual written agreement of Buyer and Seller;
(b) by written notice from either Buyer to Seller or from Seller to
Buyer if the Closing shall not have occurred on or prior to the Outside Date;
(c) by any party if a final nonappealable judgment has been entered
against such party or any of its Affiliates restraining, prohibiting, or
declaring illegal the consummation of this Agreement or the transactions
contemplated hereby;
(d) by Buyer if there is:
(i) a material breach of any representation or warranty set forth
in Article IV or any covenant or agreement to be complied with or performed by
Seller pursuant to the terms of this Agreement, Buyer has notified Seller of the
material breach, and the material breach has continued without cure for a period
of 20 days after the notice of the material breach; or
(ii) the failure of a condition set forth in Article VIII to be
satisfied (and such condition is not waived in writing by Buyer) on the Closing
(unless the failure results primarily from Buyer itself breaching any
representation, warranty, or covenant contained in this Agreement);
(e) by Seller if there is:
30
(i) a material breach of any representation or warranty set forth
in Article V or any covenant or agreement to be complied with or performed by
Buyer pursuant to the terms of this Agreement, Seller has notified Buyer of the
material breach, and the material breach has continued without cure for a period
of 15 days after the notice of the material breach; or
(ii) the failure of a condition set forth in Article VII to be
satisfied (and such condition is not waived in writing by Seller) on or prior to
the Closing (unless the failure results primarily from Seller itself breaching
any representation, warranty, or covenant contained in this Agreement).
Notwithstanding the above, a party shall not be allowed to exercise any right of
termination pursuant to this Section 10.1 if the event giving rise to the
termination right shall be due to the failure of such party seeking to terminate
this Agreement to perform or observe in any material respect any of the
covenants or agreements set forth to be performed or observed by such party. If
this Agreement is terminated as permitted under this Section 10.1, such
termination shall be without liability of or to any party to this Agreement, or
any Representative of such party; provided, however, if such termination shall
-------- -------
result from the willful failure of any party to fulfill a condition to the
performance of any other party or from a material and willful breach by any
party of this Agreement, then such party shall be fully liable for any and all
damages sustained or incurred by the other party or parties in connection with
such failure or breach.
10.2. ASSIGNMENT. Prior to the Effective Time, neither this Agreement
----------
nor any of the rights or obligations hereunder may be assigned by Buyer without
the prior written consent of Seller or by Seller without the prior written
consent of Buyer; provided, however, that Buyer shall have the right to assign
-------- -------
its rights under this Agreement, including the right to acquire the Assets and
the Business, to any of its wholly owned Affiliates; provided, further, however,
-------- ------- -------
that any such assignment shall not relieve in any manner whatsoever Buyer of any
of its obligations hereunder. Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, and no other person shall have any right, benefit or
obligation hereunder.
10.3. NOTICES. Unless otherwise provided herein, any notice, request,
-------
instruction or other document to be given hereunder by either party to the other
shall be in writing and delivered by telecopy or other facsimile (with receipt
acknowledged), delivered personally or mailed by certified mail, postage
prepaid, return receipt requested (such mailed notice to be effective on the
date such receipt is acknowledged or refused), as follows:
If to Seller, addressed to:
OPTi Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
31
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, a P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇ ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Buyer, addressed to:
Creative Technology Ltd.
31 International Business Park
Creative Resource
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Attn.: Ng Keh Long and
Attn: Legal Department
Fax: ▇▇▇ ▇▇ ▇▇▇-▇▇▇▇
With a copy to:
Creative Labs, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇ ▇▇▇▇▇▇▇▇, Vice President and General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a further copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other place and with such other copies as either party may designate
as to itself by written notice to the other.
10.4. CHOICE OF LAW. This Agreement shall be governed and
-------------
construed in accordance with the laws of the State of California without regard
to its choice of law principles. For purposes of any dispute or controversy
arising under this Agreement or the transactions contemplated hereby, the
parties mutually consent to the exclusive jurisdiction of the courts of the
State of California and the federal ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ of
California, and agree that any and all process directed to any of them in any
such litigation may be served outside the State of California with the same
force and effect as if service had been made within the State of California.
The parties further agree that venue for litigation arising under this Agreement
or from the transactions contemplated hereby shall be exclusively in the
Northern District of California or its counterpart state court.
10.5. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement,
----------------------------------------
together with all exhibits and schedules hereto, and that certain Mutual
Confidentiality and ▇▇▇-▇▇▇▇▇▇▇▇▇▇
▇▇
Agreement dated March 4, 1997 (the "Non-Disclosure Agreement") between Seller
------------------------
and Buyer constitute the entire agreement among the parties pertaining to the
subject matter hereof and supersede all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the parties. No
supplement, modification or waiver of this Agreement shall be binding unless
executed in writing by the party to be bound thereby. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
10.6. MULTIPLE COUNTERPARTS. This Agreement may be executed in one or
---------------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Facsimile signature
pages shall be considered originals.
10.7. EXPENSES. Except as otherwise specified in this
--------
Agreement, each party hereto shall pay its own legal, accounting, investment
banking and other professional services, and out-of-pocket and other expenses
incident to this Agreement and to any action taken by such party in preparation
for carrying this Agreement into effect.
10.8. INVALIDITY. In the event that any one or more of the
----------
provisions contained in this Agreement or in any other instrument referred to
herein shall, for any reason, be held to be invalid, illegal or unenforceable in
any respect, then to the maximum extent permitted by law, such provision or
provisions shall be judicially reformed consistent with the parties' intentions
so as to be valid, legal and enforceable to the maximum extent possible and such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement or any other such instrument.
10.9. TITLES. The titles, captions or headings of the
------
Articles and Sections herein are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or interpretation of
this Agreement.
10.10. PUBLICITY. Seller and Buyer agree to keep the terms
---------
of this Agreement and the transactions contemplated by this Agreement strictly
secret and confidential until such time as Seller and Buyer mutually agree that
a public announcement shall be made; provided, however, that if in the written
opinion of legal counsel for either Seller or Buyer, public disclosure of this
Agreement or the terms of the transactions contemplated by this Agreement is
required under the federal securities laws, the consent of the other party shall
not be required, but the party proposing to make such a disclosure shall give
the other party not less than 24 hours notice prior to such disclosure, and
shall include any comments proposed by the other party, not to be unreasonably
withheld. Seller and Buyer shall consult with each other and use all reasonable
efforts to agree on the content and manner of any disclosure permitted or
required under this
33
Section 10.10. The provisions of this Section 10.10 shall survive any
termination of this Agreement.
10.11. CONFIDENTIAL INFORMATION. This Agreement and its terms,
------------------------
including the Purchase Price, shall be deemed "confidential information" for
purposes of the Non-Disclosure Agreement and treated accordingly. The Non-
Disclosure Agreement shall survive any termination of this Agreement in
accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their respective behalf, by their respective officers thereunto
duly authorized, in multiple originals, all as of the day and year first above
written.
OPTI INC.,
a California corporation
By:
--------------------------------------
Name:
----------------------------------
Title:
---------------------------------
CREATIVE TECHNOLOGY LTD.,
a Singapore corporation
By:
--------------------------------------
Name:
----------------------------------
Title:
---------------------------------
34