EXHIBIT 10.36
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▇▇▇▇ OF SALE AND ASSIGNMENT AGREEMENT
by and between
CONEXANT SYSTEMS, INC.
and
OAK TECHNOLOGY, INC.
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Dated as of January 19, 2000
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS .............................................................5
ARTICLE II PURCHASE AND SALE OF SHARES AND ASSETS.................................13
Section 2.1. Purchase and Sale of Shares and Assets............................13
ARTICLE III PURCHASE PRICE .......................................................13
Section 3.1. Purchase Price ...................................................13
Section 3.2. Allocation of Cash Consideration..................................14
ARTICLE IV DELIVERIES AND TRANSFER TAXES..........................................15
Section 4.1. Deliveries of Seller..............................................15
Section 4.2. Deliveries of Buyer ..............................................16
Section 4.3. Transfer Taxes ...................................................16
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER................................16
Section 5.1. Organization .....................................................16
Section 5.2. Authority ........................................................17
Section 5.3. No Breach ........................................................17
Section 5.4. Capitalization ...................................................18
Section 5.5. Title to Stock ...................................................18
Section 5.6. Equity Interests .................................................18
Section 5.7. Liabilities ......................................................18
Section 5.8. Taxes ............................................................19
Section 5.9. Intellectual Property Matters.....................................21
Section 5.10. Assets and Properties............................................23
Section 5.11. Contracts .......................................................24
Section 5.12. Litigation ......................................................27
Section 5.13. Environmental Matters............................................27
Section 5.14. Governmental Approvals...........................................28
Section 5.15. Compliance With Applicable Law...................................28
Section 5.16. Licenses ........................................................29
Section 5.17. Employee Matters ................................................29
Section 5.18. Absence of Material Adverse Effect and Certain Events............31
Section 5.19. Sufficiency of Assets............................................34
Section 5.20. Financial Information............................................34
Section 5.21. Insurance .......................................................35
Section 5.22. Bank Accounts; Powers of Attorney................................35
Section 5.23. No Material Misstatement or Omission.............................35
Section 5.24. No Brokers ......................................................36
Section 5.25. Investment Intent ...............................................36
Section 5.26. Independent Investigation........................................36
Section 5.27. Knowledgeable Investor...........................................36
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER................................37
Section 6.1. Organization .....................................................37
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Section 6.2. Authority; Binding Obligation.....................................37
Section 6.3. No Breach ........................................................38
Section 6.4. Governmental Approvals............................................38
Section 6.5. No Brokers .......................................................38
Section 6.6. Investment Intent ................................................38
Section 6.7. Buyer Stock ......................................................38
Section 6.8. Buyer SEC Documents ..............................................38
ARTICLE VII COVENANTS ............................................................39
Section 7.1. Covenants of Seller ..............................................39
Section 7.2. Interim Use of Seller's Trademarks,
Trade Names and Corporate Symbols.....................42
Section 7.3. Insurance ........................................................43
Section 7.4. Public Announcements..............................................44
Section 7.5. Further Assurances ...............................................44
Section 7.6. Confidential Information..........................................44
Section 7.7. Certain Liabilities of the Company................................46
ARTICLE VIII EMPLOYMENT MATTERS ..................................................46
Section 8.1. Continuation of Employment........................................46
Section 8.2. Retention Payments ...............................................47
Section 8.3. Welfare Plans ....................................................47
ARTICLE IX TRANSITION MATTERS ....................................................47
Section 9.1. Transition Matters ...............................................47
ARTICLE X REGISTRATION RIGHTS ....................................................48
Section 10.1. Registration Rights..............................................48
ARTICLE XI SURVIVAL ..............................................................48
Section 11.1. Survival ........................................................48
ARTICLE XII INDEMNIFICATION ......................................................49
Section 12.1. Indemnification by Seller........................................49
Section 12.2. Indemnification by Buyer.........................................50
Section 12.3. Procedures for Indemnification...................................51
Section 12.4. Certain Rights and Limitations...................................53
Section 12.5. Termination of Indemnification Obligations.......................53
ARTICLE XIII TAX MATTERS .........................................................54
Section 13.1. Preparation and Filing of Tax Returns............................54
Section 13.2. Payment of Taxes ................................................54
Section 13.3. Tax Sharing Agreements...........................................54
Section 13.4. Refunds .........................................................55
Section 13.5. Tax Cooperation .................................................55
Section 13.6. Tax Indemnification..............................................55
Section 13.7. Timing Adjustments ..............................................56
Section 13.8. Tax Contests ....................................................56
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ARTICLE XIV RESTRICTIVE COVENANT ..................................................57
Section 14.1. Non-compete .....................................................57
Section 14.2. Remedies ........................................................58
Section 14.3. Severability ....................................................58
Section 14.4. Non-exclusivity .................................................58
ARTICLE XV GENERAL PROVISIONS ....................................................58
Section 15.1. Assignment ......................................................58
Section 15.2. Parties in Interest..............................................59
Section 15.3. Amendment .......................................................59
Section 15.4. Waiver; Remedies ................................................59
Section 15.5. Effect of Investigation..........................................59
Section 15.6. Fees and Expenses ...............................................59
Section 15.7. Notices .........................................................59
Section 15.8. Captions; Currency ..............................................60
Section 15.9. Entire Agreement ................................................61
Section 15.10. Severability ...................................................61
Section 15.11. Dispute Resolution..............................................61
Section 15.12. Schedules; Disclosure...........................................62
Section 15.13. Governing Law ..................................................62
Section 15.14. Counterparts ...................................................62
Section 15.15. Specific Performance............................................62
Section 15.16. Construction; Interpretation....................................63
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SCHEDULES
Schedule 1.1 - Certain Assumed Liabilities
Schedule 1.2 - Excluded Intellectual Property
Schedule 5.1 - Foreign Qualifications
Schedule 5.3 - Breach
Schedule 5.8(a) - Tax Returns
Schedule 5.8(j) - Tax Correspondence
Schedule 5.8(o) - Tax Audit Matters
Schedule 5.9(a) - Certain Intellectual Property
Schedule 5.9(b) - Commitments Relating to Intellectual Property
Schedule 5.9(c) - Intellectual Property Matters
Schedule 5.10(a) - Certain Assets
Schedule 5.10(c) - Leased Premises
Schedule 5.10(f) - Leased Premises Matters
Schedule 5.11(a) - Contracts
Schedule 5.11(b) - Certain Payments
Schedule 5.11(c) - Contract Matters
Schedule 5.11(d) - Change of Control Provisions
Schedule 5.12(a) - Litigation
Schedule 5.13 - Environmental Matters
Schedule 5.14 - Seller and Company Governmental Approvals
Schedule 5.15(a) - Compliance With Laws
Schedule 5.16 - Licenses
Schedule 5.17(a) - Employee Matters
Schedule 5.17(b) - Plans
Schedule 5.17(c) - Employee Agreements
Schedule 5.17(d) - Employee Information
Schedule 5.18(a) - Material Adverse Effect
Schedule 5.18(b) - Material Events
Schedule 5.20(a) - Financial Information
Schedule 5.21(a) - Insurance Policies
Schedule 5.22 - Bank Accounts and Powers of Attorney
Schedule 6.4 - Buyer Governmental Approvals
Schedule 7.1(j) - CAD Licenses
Schedule 8.1(a) - Continued Employees
Schedule 8.1(b) - Special Bonus Payments
Schedule 9.1 - Transition Matters
Schedule 10.1 - Registration Rights
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▇▇▇▇ OF SALE AND ASSIGNMENT AGREEMENT
▇▇▇▇ OF SALE AND ASSIGNMENT AGREEMENT, dated as of January 19,
2000, by and between CONEXANT SYSTEMS, INC., a Delaware corporation ("BUYER"),
and OAK TECHNOLOGY, INC., a Delaware corporation ("SELLER").
W I T N E S S E T H :
WHEREAS, Seller is the record and beneficial owner of all the
issued and outstanding shares of capital stock of Oak Technology Ltd., a
corporation incorporated under the laws of England and Wales (registration
number 3510958) (the "COMPANY"), consisting of two ordinary shares, L1 par
value (The "SHARES");
WHEREAS, Buyer desires to purchase from Seller, and Seller
desires to sell to Buyer, the Shares and the Business Intellectual Property (as
defined below) upon the terms and subject to the conditions set forth herein;
and
WHEREAS, Seller and Buyer intend that the sale of the Shares
pursuant to this Agreement is intended to qualify as a tax free reorganization
under Section 368(a) of the Code;
NOW, THEREFORE, in consideration of the premises and of the
mutual representations, warranties, covenants and agreements hereinafter
contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms shall have
the following meanings (such meanings to be equally applicable to both the
singular and the plural forms of the terms defined):
"ACTION" means any legal, administrative, governmental or
regulatory proceeding or other action, suit, proceeding, claim, arbitration,
mediation, alternative dispute resolution procedure, inquiry or investigation by
or before any arbitrator, mediator, court or other Governmental Entity.
"ACTUAL U.K. STAMP TAX AMOUNT" shall have the meaning set
forth in Section 4.3.
"AFFILIATE" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common control
with such Person. For purposes of the immediately preceding sentence, the term
"control" (including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the
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power to direct or cause the direction of the management and policies of such
Person, whether through ownership of voting securities, by contract or
otherwise.
"AGREEMENT" means this ▇▇▇▇ of Sale and Assignment Agreement,
as the same may be amended, modified or supplemented from time to time in
accordance with its terms.
"ALLOCATION SCHEDULE" shall have the meaning set forth in
Section 3.2.
"ASSUMED LIABILITIES" means those Liabilities of the Company
(i) to perform obligations required to be performed after the date hereof under
those provisions of Commitments of the Company set forth on Schedule 5.9(b),
Schedule 5.11(a) or Schedule 5.17(c) (which shall not include any accounts or
other amounts payable existing as of the date hereof) and (ii) set forth on
Schedule 1.1 (up to the amounts set forth thereon).
"AUTHORIZED EMPLOYEES" shall have the meaning set forth in
Section 7.1(k).
"BUSINESS" means the business and operations of the Company at
any time on or prior to the date hereof, including (i) researching, developing,
designing, engineering, selling and supporting algorithms and silicon devices
utilizing OFDM and VSB demodulator technology for use in Digital Terrestrial
Communications, including those having applications for use with the European
Digital Video Broadcasting Project, DVB and American Television Standards
committee standards and (ii) all activities of the Company related to the
foregoing. For purposes of this definition, "Digital Terrestrial Communications"
means free-to-air broadcast transmission for the delivery of information and
entertainment content to a metropolitan area.
"BUSINESS INTELLECTUAL PROPERTY" means all Intellectual
Property owned by Seller or any of its Affiliates or by the Company that has
been, or is being, used in or developed by the Company at any time on or prior
to the date hereof, including all Intellectual Property owned by Seller pursuant
to the Intercompany Service Agreement between Seller and the Company; PROVIDED,
HOWEVER, that the Business Intellectual Property shall not include the
Intellectual Property set forth on Schedule 1.2.
"BUYER" shall have the meaning set forth in the preamble to
this Agreement.
"BUYER GROUP" shall have the meaning set forth in Section
12.1.
"BUYER SEC DOCUMENTS" shall have the meaning set forth in
Section 5.26.
"BUYER STOCK" shall have the meaning set forth in Section
3.1(a).
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"CASH CONSIDERATION" shall have the meaning set forth in
Section 3.1(b).
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended to the date hereof.
"CLAIMS MADE POLICIES" shall have the meaning set forth in
Section 7.3(a).
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
"COMMITMENT" means, with respect to any Person, any Contract
(a) to which such Person is a party, (b) under which such Person has any rights,
(c) under which such Person has any Liability or (d) by which such Person, or
any of the assets or properties owned or used by such Person, is bound.
"COMPANY" shall have the meaning set forth in the recitals to
this Agreement.
"COMPANY FINANCIAL STATEMENTS" shall have the meaning set
forth in Section 5.20(a).
"CONFIDENTIALITY AGREEMENT" means the Confidentiality
Agreement dated September 13, 1999 by and between Buyer and Seller.
"CONSENTS" means consents, waivers, approvals, requirements,
allowances, novations, authorizations, declarations, filings, registrations and
notifications.
"CONTINUED EMPLOYEES" shall have the meaning set forth in
Section 8.1(a).
"CONTRACTS" means all agreements, understandings, contracts,
obligations, binding commitments, arrangements, promises and understandings
(whether written or oral and whether express or implied), including all
Intellectual Property and other license agreements, manufacturing agreements,
supply agreements, purchase orders, sales orders, distributor agreements, sales
representation agreements, warranty agreements, indemnity agreements, service
agreements, employment and consulting agreements, guarantees, credit agreements,
notes, mortgages, security agreements, financing leases, leases (including
Leases), comfort letters, foreign currency forward exchange contracts, foreign
currency option and other derivative contracts, letters of credit,
confidentiality agreements, joint venture agreements, partnership agreements,
powers of attorney, memoranda of understanding and letters of intent, including,
in each case, all amendments, modifications and supplements thereto and waivers
and consents thereunder.
"DAMAGES" means any and all losses, liabilities, claims,
damages, deficiencies, fines, payments, Liens (other than Permitted Liens),
costs and expenses, whether known or unknown,
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asserted or unasserted, fixed, absolute or contingent, matured or unmatured,
accrued or unaccrued, liquidated or unliquidated or due or to become due, and
whenever or however arising and whether or not resulting from Third Party
Claims (including the costs and expenses of any and all Actions or other
legal matters; all amounts paid in connection with any demands, assessments,
judgments, settlements and compromises relating thereto; interest and
penalties with respect thereto; and costs and expenses, including attorneys',
accountants' and other experts' reasonable fees and expenses, incurred in
investigating, preparing for or defending against any such Actions or other
legal matters or in asserting, preserving or enforcing an Indemnitee's rights
hereunder).
"DATABASE" shall have the meaning set forth in Section 7.1(k).
"DATABASE INFORMATION" shall have the meaning set forth in
Section 7.1(k).
"ENVIRONMENTAL LAWS" means any and all applicable Laws and
Licenses issued, promulgated or entered into by any Governmental Entity relating
to the environment, the protection or preservation of human health or safety,
including the health and safety of employees, the preservation or reclamation of
natural resources, or the treatment, storage, disposal, management, Release or
threatened Release of Hazardous Materials, in each case as in effect on the date
hereof and as may be issued, promulgated or amended from time to time.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ESTIMATED U.K. STAMP TAX AMOUNT" means U.S.$100,000.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles in the
United States of America.
"GOVERNMENTAL ENTITY" means, in any jurisdiction, any (i)
federal, state, local, foreign or international government, (ii) court, arbitral
or other tribunal, (iii) governmental or quasi-governmental authority of any
nature (including any political subdivision, instrumentality, branch,
department, official or entity) or (iv) agency, commission, authority or body
exercising, or entitled to exercise, any administrative, executive, judicial,
legislative, police, regulatory or taxing authority or power of any nature.
"HAZARDOUS MATERIALS" means those materials, substances or
wastes that are regulated by, or form the basis of liability under, any
Environmental Law, including PCBs, pollutants, solid wastes, explosive or
regulated radioactive materials or substances, hazardous or toxic materials,
substances, wastes or chemicals, petroleum (including crude oil or any fraction
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thereof) or petroleum distillates, asbestos or asbestos containing materials.
"INDEMNIFYING PARTY" shall have the meaning set forth in
Section 12.3(a).
"INDEMNITEE" means any member of the Buyer Group or the Seller
Group who or which may seek indemnification under this Agreement.
"INCOME TAXES" means all Taxes based upon, measured by, or
calculated with respect to (a) net income or profits (including any capital
gains, minimum taxes and any Taxes on items of tax preference, but not including
sales, use, real property gains, real or personal property, gross or net
receipts, transfer or other similar Taxes) or (b) multiple bases (including
corporate franchise, doing business or occupation Taxes) if one or more of the
bases upon which such Tax may be based upon, measured by, or calculated with
respect to is described in clause (a) of this definition.
"INSURANCE POLICIES" shall have the meaning set forth in
Section 5.21(a).
"INTELLECTUAL PROPERTY" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents (including utility and design patents,
industrial designs and utility models), patent applications and patent and
invention disclosures, and all other rights of inventorship, worldwide, together
with all reissuances, continuations, continuations-in-part, divisions,
revisions, supplementary protection certificates, extensions and re-examinations
thereof; (b) all registered and unregistered trademarks, service marks, trade
names, trade dress and logos, worldwide, and registrations and applications for
registration thereof; (c) all copyrights in copyrightable works, and all other
rights of authorship, worldwide, and all applications, registrations and
renewals in connection therewith; (d) all mask works and semiconductor chip
rights, worldwide, and all applications, registrations and renewals in
connection therewith; (e) all trade secrets and confidential business and
technical information (including ideas, research and development, know-how,
formulas, technology, compositions, manufacturing and production processes and
techniques, technical data, engineering, production and other designs, plans,
drawings, engineering notebooks, industrial models, software, specifications,
financial, marketing and business data, pricing and cost information, business
and marketing plans and customer and supplier lists and information); (f) all
computer and electronic data, data processing programs, documentation and
software, both source code and object code (including flow charts, diagrams,
descriptive texts and programs, computer print-outs, underlying tapes, computer
databases and similar items), computer applications and operating programs; (g)
all rights to ▇▇▇ for and remedies against past, present and future
infringements of any or all of the foregoing and rights of priority and
protection of interests therein under the Laws of
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any jurisdiction worldwide; (h) all copies and tangible embodiments of any or
all of the foregoing (in whatever form or medium, including electronic
media); and (i) all other proprietary rights relating to any or all of the
foregoing.
"IRS" means the Internal Revenue Service.
"KNOWLEDGE", with respect to Seller, shall have the meaning
set forth in Section 15.16(b).
"LAWS" means all laws, statutes, constitutions, treaties,
rules, regulations, policies, standards, directives, ordinances, codes,
judgments, rulings, orders, writs, decrees, stipulations, injunctions and
determinations of all Governmental Entities.
"LEASED PREMISES" shall have the meaning set forth in Section
5.10(c).
"LEASES" means all leases, subleases, licenses and rights to
occupy or use with respect to real property, including, in each case, all
amendments, modifications and supplements thereto and waivers and consents
thereunder.
"LIABILITY" means any and all claims, debts, liabilities,
obligations and commitments of whatever nature, whether known or unknown,
asserted or unasserted, fixed, absolute or contingent, matured or unmatured,
accrued or unaccrued, liquidated or unliquidated or due or to become due, and
whenever or however arising (including those arising out of any Contract or
tort, whether based on negligence, strict liability or otherwise) and whether or
not the same would be required by GAAP to be reflected as a liability in
financial statements or disclosed in the notes thereto.
"LICENSES" means all Consents, licenses, permits,
certificates, variances, exemptions, franchises and other approvals issued,
granted, given, required or otherwise made available by any Governmental Entity.
"LIEN" means any charge, "adverse claim" (as defined in
Section 8-102(a)(1) of the Uniform Commercial Code) or other claim, equitable
interest, lien, encumbrance, option, proxy, pledge, security interest, mortgage,
right of first refusal, right of first offer, retention of title agreement,
defect of title or restriction on use, voting, transfer, receipt of income or
exercise of any other attribute of ownership.
"LIMITED USE PURPOSES" shall have the meaning set forth in
Section 7.1(k).
"MARKET PRICE" shall have the meaning set forth in Section
3.1(c).
"MATERIAL ADVERSE EFFECT" means any circumstance, condition,
change, effect or development that, individually or in the aggregate, is, or is
reasonably likely to be, materially
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adverse to (a) the business, condition (financial or otherwise), operations,
results of operations, assets or liabilities of the Company, (b) the Business
or the Business Intellectual Property or (c) the ability of Seller or the
Company to consummate the Transaction.
"OCCURRENCE BASIS POLICIES" has the meaning set forth in
Section 7.3(a).
"PENSION SCHEME" means the Company's Group Personal Pension
Plan with Skandia Life.
"PERMITTED LIENS" means Liens for (a) Taxes, assessments and
other governmental charges, if such Taxes, assessments or charges shall not be
due and delinquent; (b) Liens in respect of pledges or deposits under workers'
compensation laws; and (c) inchoate workmen's, repairmen's or other similar
Liens arising or incurred in the ordinary course of business consistent with
past practices in respect of obligations which are not overdue, minor title
defects and recorded easements, which workmen's, repairmen's or other similar
Liens, minor title defects and recorded easements do not, individually or in the
aggregate, impair the continued use, occupancy, value or marketability of title
of the property to which they relate or the Company, assuming that the property
is used on substantially the same basis as such property is currently being used
by Seller or the Company.
"PERSON" means any individual, firm, partnership, joint
venture, trust, corporation, limited liability entity, unincorporated
organization, estate or other entity (including a Governmental Entity).
"PLANS" shall have the meaning set forth in Section 5.17(b).
"REAL PROPERTY" shall have the meaning set forth in Section
5.13.
"RELEASE" shall have the meaning set forth in Section 101(22)
of CERCLA.
"REPRESENTATIVES" means, with respect to any Person, such
Person's Affiliates, directors, officers, employees, agents, consultants,
advisors and other representatives, including legal counsel, accountants and
financial advisors.
"SEC" means the U.S. Securities and Exchange Commission.
"SECURITIES ACT" means the U.S. Securities Act of 1933, as
amended.
"SELLER" shall have the meaning set forth in the preamble to
this Agreement.
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"SELLER CONFIDENTIAL INFORMATION" shall have the meaning set
forth in Section 7.6(c).
"SELLER GROUP" shall have the meaning set forth in Section
12.2.
"SELLER IP COMMITMENTS" means all Commitments of Seller
relating to Business Intellectual Property.
"SHARES" shall have the meaning set forth in the recitals to
this Agreement.
"STOCK CONSIDERATION" shall have the meaning set forth in
Section 3.1(a).
"STRADDLE PERIOD" shall have the meaning set forth in Section
13.4.
"TAX CLAIM" shall have the meaning set forth in Section
13.8(a).
"TAX RETURNS" shall have the meaning set forth in Section
5.8(a).
"TAXES" means all taxes, charges, duties, fees, levies or
other assessments, including corporation tax, advance corporation tax, the
charge under Section 419 of the Taxes ▇▇▇ ▇▇▇▇, income tax, capital gains tax,
the charge under Section 601(2) of the Taxes ▇▇▇ ▇▇▇▇, value added tax, excise
duties, property, sales, use, gross receipts, recording, insurance profits,
license, withholding, payroll, employment, net worth, transfer, social security,
environmental, occupation and franchise taxes, the charge to tax under Schedule
9A of the Value Added Tax ▇▇▇ ▇▇▇▇, customs and other import duties, inheritance
tax, stamp duty, stamp duty reserve tax, capital duties, national insurance
contributions, local authority council taxes, petroleum revenue tax, foreign
taxation and duties, amounts payable in consideration for the surrender of group
relief or advance corporation tax or refunds pursuant to Section 102 of the
Finance ▇▇▇ ▇▇▇▇ and any payment whatsoever which the Company may be or become
bound to make to any Person as a result of the operation of any enactment
relating to any such taxes or duties imposed by any Governmental Entity and all
penalties, charges, interest and additions relating to any of the foregoing or
resulting from a failure to comply with the provisions of any enactment relating
to taxation.
"TAXES ACT 1988" means the Income and Corporation Taxes ▇▇▇
▇▇▇▇.
"THIRD PARTY CLAIM" shall have the meaning set forth in
Section 12.3(a).
"TRANSACTION" means the transactions contemplated by the
Transaction Documents.
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"TRANSACTION DOCUMENTS" means this Agreement, agreements
entered into by the Company with certain employees of the Company in respect of
the Transaction and all other instruments, certificates and documents delivered
or required to be delivered by Seller, Buyer or the Company pursuant to this
Agreement.
"UK GAAP" means generally accepted accounting principles in
the United Kingdom.
"VALUE ADDED TAX" means value added tax as provided for in the
Value Added Tax ▇▇▇ ▇▇▇▇ and legislation supplemental thereto or replacing,
modifying or consolidating it; references to income or profits or gains earned,
accrued or received shall include income or profits or gains treated as earned,
accrued or received for the purposes of any legislation.
ARTICLE II
PURCHASE AND SALE OF SHARES AND ASSETS
Section 2.1. PURCHASE AND SALE OF SHARES AND ASSETS.
(a) Subject to the terms of this Agreement and in reliance on
the covenants, representations and warranties contained herein, Seller hereby
sells, conveys, transfers, assigns and delivers (with full title guaranty
according to the laws of England and Wales) to Buyer, and Buyer hereby purchases
and acquires from Seller, the Shares, free and clear of all Liens.
(b) Subject to the terms of this Agreement and in reliance on
the covenants, representations and warranties contained herein, Seller hereby
sells, conveys, transfers, assigns and delivers to Buyer, and Buyer hereby
purchases and acquires from Seller, all of Seller's right, title and interest in
and to all Business Intellectual Property, free and clear of all Liens (other
than Permitted Liens).
ARTICLE III
PURCHASE PRICE
Section 3.1. PURCHASE PRICE.
(a) Subject to the terms set forth herein, in consideration
for the sale, assignment, conveyance, transfer and delivery of the Shares, Buyer
will, within three business days after the execution and delivery hereof,
deliver to Seller a stock certificate duly registered in the name of Seller
representing that number of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock, par value $1 per share, of Buyer ("BUYER
STOCK"), equal to the quotient, rounded to the nearest whole share, of (x)
Twenty Million dollars
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(U.S.$20,000,000) divided by (y) the Market Price (as defined below) of Buyer
Stock (the "STOCK CONSIDERATION"). The parties acknowledge that the Stock
Consideration will equal 293,794 shares of Buyer Stock. Such stock
certificate will bear a legend substantially in the form of the following:
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE (A) HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE STATE SECURITIES LAWS AND MUST BE REGISTERED UNDER SAID
ACT AND LAWS OR DISPOSED OF PURSUANT TO AN EXEMPTION FROM SUCH
REGISTRATION AND (B) MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED, GIFTED, ENCUMBERED OR OTHERWISE DISPOSED OF PRIOR TO THE
FIRST ANNIVERSARY OF JANUARY 19, 2000."
(b) Subject to the terms set forth herein, in consideration
for the sale, assignment, conveyance, transfer and delivery of the Business
Intellectual Property, Buyer is, concurrently with the execution and delivery
hereof, paying to Seller, by wire transfer of immediately available U.S. Dollars
to the bank account heretofore designated by Seller to Buyer, Five Million
dollars (U.S.$5,000,000) (the "CASH CONSIDERATION"), less the Estimated U.K.
Stamp Tax Amount.
(c) The "MARKET PRICE" of Buyer Stock means $68.075, which is
the average of the daily closing sale prices per share of Buyer Stock as
reported by the NASDAQ Stock Market (as published in The ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Edition) for the five consecutive full NASDAQ trading days
immediately preceding the first full NASDAQ trading day prior to the date
hereof.
(d) SECURITIES ACT EXEMPTION. The issuance of Buyer Stock
pursuant to this Agreement is intended to be exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) thereunder and from
applicable state securities laws. Each of Seller and Buyer hereby agrees to take
all reasonable actions and to execute all necessary documents to qualify the
issuance of Buyer Stock for such exemptions.
Section 3.2. ALLOCATION OF CASH CONSIDERATION. Buyer will, not
later than 180 days after the date hereof, prepare and deliver to Seller a
schedule (the "ALLOCATION SCHEDULE") allocating the Cash Consideration among the
Business Intellectual Property and the covenant not to compete contained in
Article XIV in accordance with Treas. Reg. 1.1060-1T (or any comparable
provisions of state or local tax law) or any successor provision. Seller will
have the right to raise reasonable objections to the Allocation Schedule within
10 days after its receipt thereof, in which event Seller and Buyer will
negotiate in good faith to resolve such objections. Except to the extent
otherwise required by applicable Laws, Buyer and Seller will make all tax
returns, reports, forms, declarations, claims and other statements in a manner
consistent with the Allocation Schedule and will not make
14
any inconsistent statement or adjustment on any returns or during the course
of any IRS or other Tax audit.
ARTICLE IV
DELIVERIES AND TRANSFER TAXES
Section 4.1. DELIVERIES OF SELLER. Seller is, concurrently
with the execution and delivery hereof, delivering to Buyer the following:
(i) share certificates representing the Shares
accompanied by duly executed stock transfer forms in favor of Buyer and
powers of attorney in respect of the right attached to the Shares (in
either case, if requested by Buyer, with signatures thereon duly
guaranteed) and any other documents that are necessary to transfer to
Buyer good and marketable title to the Shares, free and clear of any
Liens;
(ii) written resignations of all directors of the
Company and such officers of the Company as were specified by Buyer to
Seller on or before the date hereof (including acknowledgments of such
directors and officers that they have no claims outstanding for
compensation (other than regularly scheduled compensation payments owed
to such Persons who are employees) or otherwise or for any payment
under the U.K. Employment Rights Act 1996);
(iii) the minute books, ledgers and stock transfer
books of the Company;
(iv) such other instruments of assignment, conveyance
and transfer as shall reasonably be requested by Buyer to effect or
evidence the sale, assignment, conveyance, transfer and delivery of the
Business Intellectual Property to Buyer, free and clear of any Liens
(other than Permitted Liens);
(v) evidence of a meeting of the Board of Directors
of the Company held prior to the date hereof at which (A) the transfer
of the Shares to Buyer or its designee was approved, (B) the
resignations referred to in Section 4.1(ii) were accepted and (C) such
Persons as were designated by Buyer were appointed as directors and
officers of the Company effective as of the date hereof; and
(vi) all other instruments, agreements and documents
required to be delivered by Seller at or prior to the date hereof
pursuant to this Agreement.
15
Section 4.2. DELIVERIES OF BUYER. Buyer is, concurrently with
the execution and delivery hereof, delivering to Seller the following:
(i) the Cash Consideration, less the Estimated U.K.
Stamp Tax Amount, required by Section 3.1(b); and
(ii) all other instruments, agreements and documents
required to be delivered by Buyer at or prior to the date hereof
pursuant to this Agreement.
Within three business days after the execution and delivery hereof, Buyer will
deliver to Seller the Stock Consideration required by Section 3.1(a).
Section 4.3. TRANSFER TAXES. All applicable sales and transfer
Taxes (including any stock transfer or stamp Taxes due as a result of the sale
of the Shares and Taxes, if any, imposed upon the transfer of real and personal
property) and filing, recording, registration, stamp, documentary and other
Taxes and fees payable in connection with the Transaction will be the
responsibility of and be paid by Seller. Notwithstanding the foregoing, the
parties acknowledge that the Estimated U.K. Stamp Tax Amount has been deducted
from the Cash Consideration and that Buyer will be responsible for the actual
payment of U.K. stamp taxes payable in connection with the registration of the
transfer of the Shares and patent applications included in Business Intellectual
Property from Seller to Buyer (the actual amount of such U.K. stamp taxes paid
by Buyer is referred to herein as the "ACTUAL U.K. STAMP TAX AMOUNT"); provided,
however, that (i) if the Actual U.K. Stamp Tax Amount is less than the Estimated
U.K. Stamp Tax Amount, Buyer will pay Seller on demand the amount by which the
Actual U.K. Stamp Tax Amount is less than the Estimated U.K. Stamp Tax Amount
and (ii) if the Actual U.K. Stamp Tax Amount is greater than the Estimated U.K.
Stamp Tax Amount, Seller will pay Buyer on demand the amount by which the Actual
U.K. Stamp Tax Amount exceeds the Estimated U.K. Stamp Tax Amount. Within two
business days after Seller's payment of the Actual U.K. Stamp Tax Amount, Buyer
will provide Seller with written confirmation of the date of payment and the
amount thereof. All payments made by Buyer in connection with this Agreement are
exclusive of any value added or similar Taxes which may be imposed from time to
time, which Taxes shall be paid by Seller.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
Section 5.1. ORGANIZATION. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company is a corporation duly organized, validly existing and in
good standing under the laws of England and Wales. Each of Seller and the
Company has all
16
requisite power and authority, corporate or otherwise, to own, lease and
operate its assets and properties (in the case of the Company) and the
Business Intellectual Property (in the case of Seller) and to carry on the
Business as presently conducted. Each of Seller and the Company is duly
qualified to transact business and in good standing as a foreign corporation
in each jurisdiction in which the ownership, leasing or holding of its
properties (in the case of the Company) or the Business Intellectual Property
(in the case of Seller) or the conduct or nature of its business (in the case
of Seller, as it relates to the Business) makes such qualification necessary,
except where the failure to be so qualified would not have, individually or
in the aggregate, a Material Adverse Effect. Set forth on Schedule 5.1 is a
list of the jurisdictions (other than England and Wales) in which the Company
is qualified to transact business. True and complete copies of the memorandum
and articles of association (or similar governance documents), corporate
minute books, stock certificate books and stock transfer books, in each case
as amended through the date hereof, of the Company have previously been
delivered or made available to Buyer.
Section 5.2. AUTHORITY. Seller has all requisite power and
authority, corporate or otherwise, to execute and deliver each Transaction
Document delivered by Seller and to perform all of its obligations hereunder and
thereunder. The Company has all requisite power and authority, corporate or
otherwise, to perform the transactions contemplated by each Transaction Document
to be performed by it. The execution, delivery and performance by Seller of each
Transaction Document delivered by Seller and the consummation by Seller of the
Transaction have been duly authorized by all necessary and proper action on the
part of Seller. The consummation by the Company of the Transaction has been duly
authorized by all necessary and proper action on the part of the Company. This
Agreement and each other Transaction Document delivered by Seller has been duly
executed and delivered by Seller and constitutes the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting the
enforcement of creditors' rights in general and by general principles of equity.
Section 5.3. NO BREACH. Except as set forth on Schedule 5.3,
none of the execution, delivery or performance by Seller of any Transaction
Document or the consummation by Seller of the Transaction, with or without the
giving of notice or the lapse of time or both, does or will result in the
creation of any Lien upon any of the Business Intellectual Property or any of
the assets or properties of the Company (except for Permitted Liens) or any Lien
upon the Shares, or conflict with, or result in a breach or violation of or a
default under, or give rise to a right of amendment, termination, cancellation
or acceleration of any obligation or to a loss of a benefit under (i) the
Articles of Incorporation or By-laws (or similar governance document) of Seller
or the memorandum and articles of association (or similar governance documents)
of the Company, (ii) any Seller IP
17
Commitment or any Commitment of the Company, (iii) any other Commitment of
Seller or any of its Affiliates or (iv) any Law or License or other
requirement to which Seller or the Company or their respective properties or
assets is subject, except, in the case of items (iii) and (iv) above only,
for those which would not have, individually or in the aggregate, a Material
Adverse Effect.
Section 5.4. CAPITALIZATION. The authorized capital stock of
the Company consists solely of 1,000 ordinary shares, (pound)1 par value, of
which only the Shares are issued and outstanding. Except for the ShaRes, no
shares of capital stock or other securities of the Company are issued, reserved
for issuance or outstanding. Seller has good, valid and marketable title to, and
is the record and beneficial owner of, the Shares, free and clear of any Liens.
The Shares are duly authorized, validly issued, fully paid and non-assessable
and were not issued in violation of, and are not subject to, any preemptive
rights. There are no bonds, debentures, notes or other indebtedness of any type
whatsoever of the Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
any shareholders of the Company may vote. There are no outstanding options,
warrants, calls, demands, stock appreciation rights, Contracts or other rights
of any nature (other than this Agreement) to purchase, obtain or acquire or
otherwise relating to, or any outstanding securities or obligations convertible
into or exchangeable for, or any voting agreements with respect to, any shares
of capital stock of the Company or any other securities of the Company. None of
the Company, Seller or any of their Affiliates is obligated, pursuant to any
securities, options, warrants, calls, demands, Contracts (other than this
Agreement) or other rights of any nature or otherwise, now or in the future,
contingently or otherwise, to issue, deliver, sell, purchase or redeem any
capital stock of the Company, any other securities of the Company or any
interest in or assets of the Company or the Business (including the Business
Intellectual Property) to or from any Person or to issue, deliver, sell,
purchase or redeem any stock appreciation rights or other Contracts of the
Company relating to any capital stock or other securities of the Company to or
from any Person.
Section 5.5. TITLE TO STOCK. Seller is hereby transferring to
Buyer, and Buyer is hereby acquiring, good, valid and marketable title to the
Shares, free and clear of any Liens.
Section 5.6. EQUITY INTERESTS. Except for the ownership of the
Shares by Seller, neither Seller (with respect to the Business) nor the Company
owns any capital stock or other equity interest in any corporation, partnership,
limited liability entity or other entity.
Section 5.7. LIABILITIES. Except for Assumed Liabilities,
neither Seller (with respect to the Business) nor the Company has any material
Liabilities of any nature.
18
Section 5.8. TAXES.
(a) Except as set forth on Schedule 5.8(a), all federal,
state, local and foreign Tax returns, reports, declarations, statements and
other documents ("TAX RETURNS") required to be filed by or on behalf of the
Company or Seller or any predecessor corporation of any of them, or any
consolidated, combined, affiliated or unitary group of which the Company or
Seller is or has ever been a member (in the case of Seller, with respect to (or
which include) the Business or the Business Intellectual Property) have been
timely filed with the appropriate tax authorities or requests for extensions
have been timely filed and any such extensions have been granted and have not
expired.
(b) Each such Tax Return was complete and correct in all
material respects.
(c) All Taxes with respect to taxable periods or portions
thereof covered by such Tax Returns and all other Taxes (without regard to
whether a Tax Return was or is required) for which the Company or Seller (with
respect to (or which relate to) the Business or the Business Intellectual
Property) is otherwise liable that are due and payable have been paid and to the
extent the liabilities for such Taxes are not due, adequate reserves have been
established on the balance sheet of the Company dated as of January 18, 2000 in
accordance with GAAP.
(d) The Company has timely withheld proper and accurate
amounts from its employees, customers, shareholders and others from whom it is
or was required to withhold Taxes in compliance with all applicable Laws and has
timely paid all such withheld amounts to the appropriate taxing authorities.
(e) All Taxes due with respect to any completed and settled
audit, examination or deficiency Action with any taxing authority for which the
Company or Seller (with respect to (or which relate to) the Business or the
Business Intellectual Property) is liable have been paid in full.
(f) To the knowledge of Seller, there is no audit,
examination, deficiency or refund Action pending with respect to any Taxes for
which the Company or Seller (with respect to (or which relate to) the Business
or the Business Intellectual Property) is or might otherwise be liable and no
taxing authority has given written notice of the commencement of any audit,
examination or deficiency Action with respect to any such Taxes. No issue has
arisen in any examination of the Company or Seller (with respect to (or which
relates to) the Business or the Business Intellectual Property) by any taxing
authority that, if raised with respect to the same or substantially similar
facts arising in any other Tax period not so examined, would result in a
deficiency for such other period, if upheld.
(g) The Company is and always has been resident in the United
Kingdom for Tax purposes and is not and never has been
19
resident for Tax purposes in any jurisdiction other than the United Kingdom.
(h) The United Kingdom is the only country other than the
United States whose Tax authorities seek to charge Tax on the world-wide profits
or gains of the Company.
(i) The Company has at no time been a member of a group for
the purposes of Part X, Chapter IV of the Taxes ▇▇▇ ▇▇▇▇.
(j) Except as set forth on Schedule 5.8(j), there has been no
correspondence or communication to date between the Company and the Inland
Revenue regarding the Tax affairs of the Company.
(k) To the knowledge of Seller, the Company does not own any
property (other than property constituting intangibles or goodwill) which would
produce income from United States sources if sold or otherwise disposed of
outside the United States, and the Company is not engaged in a trade or business
within the United States.
(l) The Company is not a "passive foreign investment company",
within the meaning of Section 1297(a) of the Code.
(m) No Liens for Taxes exist with respect to any of the assets
or properties of the Company or the Business Intellectual Property.
(n) There has not been a change in ownership of the Company
within the meaning of Section 769 of the Taxes Act 1988 in the period commencing
three years before the date hereof, or in respect of any accounting period
commencing prior to that date the corporation tax computations for which have
yet to be agreed under Section 54 of the Taxes Management ▇▇▇ ▇▇▇▇.
(o) Schedule 5.8(o) contains full details of all dispensations
obtained by the Company and all details of any visit from the Audit Office of
the Inland Revenue within the last six years including full details of any
settlement made pursuant thereto.
(p) The Company has not made any payment to or provided any
benefit for any officer or employee or ex-officer or ex-employee of the Company
which is not allowable as a deduction in calculating the profits of the Company
for taxation purposes.
(q) Any payment made to or for the direct or indirect benefit
of any Person who is or might be regarded by any taxation authority as an
employee of the Company is made to such Person direct and is not made to any
company or other entity associated with that Person.
(r) The Company is not and never has been either a contractor
or a sub-contractor for the purposes of Chapter IV, Part XIII of the Taxes ▇▇▇
▇▇▇▇.
20
(s) The Company has paid all national insurance contributions
(or similar contributions in any other jurisdiction) for which it is liable and
has kept proper books and records relating to the same and has not been a party
to any scheme or arrangement to avoid any liability to account for primary or
secondary national insurance contributions (or similar contributions in any
other jurisdiction).
(t) The Company has duly paid or has procured to be paid all
stamp duty on documents to which it is a party and under which it acquired any
right or property or in which it is interested and which are liable to stamp
duty.
(u) The Company has made all returns and paid all stamp duty
reserve tax in respect of any transaction in securities to which it has been a
party or in respect of which it is liable to account for stamp duty reserve tax.
(v) The Company has complied with all statutory provisions and
regulations relating to Value Added Tax and has duly paid or provided for all
amounts of Value Added Tax for which the Company is liable.
Section 5.9. INTELLECTUAL PROPERTY MATTERS.
(a) Set forth on Schedule 5.9(a) are all patents, patent
applications, patent and invention disclosures awaiting filing, mask work and
copyright applications and registrations, and trademarks and trademark
applications and registrations which constitute Business Intellectual Property
and the entity that owns such Business Intellectual Property.
(b) Set forth on Schedule 5.9(b) are all Commitments of Seller
and the Company relating to Business Intellectual Property, including the
distribution or license of, or royalty payments with respect to, Business
Intellectual Property, whether as licensor or licensee, and all Seller IP
Commitments.
(c) Except as set forth on Schedule 5.9(c):
(i) The Company or Seller owns all right, title and
interest in and to (or, in the case of Business Intellectual Property
subject to license agreements in favor of the Company or Seller set
forth on Schedule 5.9(b), has the legal right to use) all of the
Business Intellectual Property, free and clear of any Liens (other than
Permitted Liens) and free from any requirement of any past, present or
future payments (other than maintenance and similar payments), charges
or fees or conditions, rights or restrictions;
(ii) no Business Intellectual Property or any
product, process or material developed, manufactured, produced or used
by the Company, is alleged to infringe upon or, to the knowledge of
Seller, infringes upon any Intellectual Property or other rights owned
or held by any other Person;
21
(iii) the rights of the Company and Seller in and to
all Business Intellectual Property are valid and enforceable and no
Business Intellectual Property is subject to any outstanding Lien
(other than a Permitted Lien), judgment, ruling, order, writ, decree,
stipulation, injunction or determination by or with any Governmental
Entity, nor is there (or has there been) pending or (to the knowledge
of Seller) threatened, any claim, Action or other proceeding relating
to any Business Intellectual Property (including any interference,
reissue, reexamination or opposition proceeding or proceeding
contesting the rights of the Company or Seller to any Business
Intellectual Property or the ownership, use, enforceability or validity
of any Business Intellectual Property);
(iv) to the knowledge of Seller, there is no
infringement or misappropriation of any Business Intellectual Property
by any Person;
(v) there are no Contracts between Seller or the
Company, on the one hand, and any other Person, on the other hand,
which may have been terminated or expired prior to the date hereof and
under which Seller or the Company has granted rights or licenses in any
Business Intellectual Property to such other Persons or granted an
option to acquire such rights or licenses, which rights or licenses or
the option to acquire the same survived such termination or expiration;
(vi) neither Seller nor the Company has covenanted or
agreed with any Person not to ▇▇▇ or otherwise enforce any legal rights
with respect to any Business Intellectual Property;
(vii) all Business Intellectual Property (other than
Business Intellectual Property subject to license agreements in favor
of Seller or the Company set forth on Schedule 5.9(b)) was developed
entirely by employees of the Company during the time they were
employees of the Company; and
(viii) all of the Business Intellectual Property is in
compliance with all applicable Laws (including payment of filing,
examination, and maintenance fees and proofs of working or use).
(d) Each of Seller and the Company has taken all reasonable
steps (including measures to protect secrecy and confidentiality) to protect its
right, title and interest in and to all Business Intellectual Property. All
employees, agents, consultants and other representatives of Seller or the
Company who have access to confidential or proprietary information of Seller or
the Company included in the Business Intellectual Property have a legal
obligation of confidentiality to Seller or the Company with respect to such
information. All employees of Seller and Affiliates of Seller related to the
Business and all employees of the Company have duly executed and delivered
22
agreements with Seller or the Company pertaining to the assignment, without
additional consideration, to Seller or the Company of all inventions,
discoveries and ideas, whether or not patented or patentable, conceived or
reduced to practice during the course of their employment by Seller or its
Affiliates or by the Company.
(e) The documentation relating to the Business Intellectual
Property is current, accurate, and sufficient in detail and content to identify
and explain all technical information included in the Business Intellectual
Property.
(f) The Business Intellectual Property constitutes all
Intellectual Property rights necessary to conduct fully the Business as
currently conducted.
Section 5.10. ASSETS AND PROPERTIES.
(a) The Company has (i) good and marketable title to all of
its assets and properties (whether real, personal or mixed, or tangible or
intangible) which it purports to own (including all assets and properties
recorded on the balance sheet of the Company dated as of January 18, 2000,
including cash, and those assets set forth on Schedule 5.10(a)) and (ii) valid
leasehold interests in all of its assets and properties which it purports to
lease, in each case (with respect to both clause (i) and (ii) above), free and
clear of any Liens, other than Permitted Liens. Seller or the Company has good,
valid and marketable title to all of the Business Intellectual Property, free
and clear of all Liens, other than Permitted Liens. The delivery by Seller of
this Agreement hereby transfers to Buyer good, valid and marketable title to the
Business Intellectual Property, free and clear of all Liens, other than
Permitted Liens.
(b) The Company does not own and has not previously owned any
real property.
(c) Schedule 5.10(c) contains a complete and accurate list of
all real estate leased, subleased or occupied by the Company pursuant to a Lease
(the "LEASED PREMISES"), indicating the ownership, street address and use of
each of the Leased Premises (and prior uses to the extent known to the Company)
and including a brief description of the Company's rental obligations under each
Lease pertaining thereto, its expiration date and renewal terms and whether
there is any requirement of a Consent by the lessor thereunder or any other
Person (including any mortgagee, trustee, bondholder or lessor under any
▇▇▇▇▇▇▇▇▇) in connection with the execution, delivery or performance of any
Transaction Document or the consummation of the Transaction. There are no
subleases or other Leases through which the Company has granted any interest in
any of the Leased Premises, or any portion thereof, to any Person.
(d) The Company is not in breach of any of the terms of the
Leases relating to any Leased Premises or any agreement for their grant or of
the Rent Deposit Deed relating to any
23
Leased Premises. All rents and other incomes reserved by such Leases and
owing at the date hereof have been paid at least up to and including the date
hereof. No notices have been received or served by the Company under the
Leases relating to any Leased Premises or any agreement for their grant or
any Rent Deposit Deed relating to any Leased Premises. There has not been and
there is not anticipated any call for payment under any Rent Deposit Deed
relating to any Leased Premises.
(e) The Company (and no other Person) is in actual occupancy
of each of the Leased Premises and the Company enjoys peaceful and undisturbed
possession thereof. There are no restrictions imposed by any Lease or other
Contract or by Law which preclude or restrict the ability to use the Leased
Premises for the purposes for which they are currently being used.
(f) All improvements on the Leased Premises were constructed
in compliance with all applicable Laws (including building, planning and zoning
Laws) and Licenses affecting such Leased Premises. To the knowledge of Seller,
no improvements on the Leased Premises and none of the current uses or
conditions thereof violate any applicable deed restrictions or other applicable
covenants, restrictions, agreements, site plan approvals or variances or the
certificate of occupancy for each of the improvements on the Leased Premises.
Except as set forth on Schedule 5.10(f), all improvements on the Leased Premises
are wholly within the boundaries of the real property covered by the Lease
relating thereto, and do not encroach upon the property of, or otherwise
conflict with the property rights of, any other Person.
(g) To the knowledge of Seller, all existing water, sewer,
steam, gas, electricity, telephone and other utilities and services required for
the use, occupancy, operation and maintenance of the Leased Premises are
adequate for the conduct of the Business as it has been and is conducted.
(h) There are no pending or (to the knowledge of Seller)
threatened Actions (including condemnation Actions) affecting any Leased
Premises.
Section 5.11. CONTRACTS.
(a) Schedule 5.11(a) lists all Commitments of the Company or
of Seller (with respect to the Business) (other than those set forth on Schedule
5.9(b), Schedule 5.17(b) or Schedule 5.17(c)), including:
(i) all Leases and Commitments relating to the lease
(whether as lessor or lessee) of personal property;
(ii) all Commitments for the purchase or sale of
inventories, materials, commodities, supplies, products, spare parts or
other property or for the furnishing or receipt of services;
24
(iii) all Commitments concerning a partnership, joint
venture, joint development or other cooperation arrangement;
(iv) all Commitments providing for management
services or for the services of independent contractors or consultants
(or similar arrangements);
(v) all Commitments relating in whole or in part to
Intellectual Property not set forth on Schedule 5.9(b);
(vi) all Commitments relating to or evidencing
indebtedness of the Company (or the creation, incurrence, assumption,
securing or guarantee thereof);
(vii) all Commitments under which (A) any Person has
directly or indirectly guaranteed any indebtedness or other Liabilities
of the Company or (B) the Company has directly or indirectly guaranteed
any indebtedness or other Liabilities of any Person;
(viii) all Commitments under which the Company has
directly or indirectly made any advance, loan, extension of credit or
capital contribution to, or other investment in, any Person, including
employees, or which involve a sharing of profits, losses, costs or
Liabilities by the Company with any other Person;
(ix) all Commitments providing for or granting a Lien
(other than a Permitted Lien) upon any assets or properties of the
Company;
(x) all Commitments between or among the Company, on
the one hand, and any Affiliate, officer, director or employee of the
Company or any Affiliate of any thereof, on the other hand;
(xi) all Commitments with any broker, distributor,
dealer, sales representative, supplier or manufacturer;
(xii) all Commitments providing for or containing
confidentiality and non-disclosure obligations;
(xiii) all Commitments for the purchase or sale of any
business, corporation, partnership, joint venture, association or other
business organization or any division, assets, operating unit or
product line thereof;
(xiv) all Commitments which limit or purport to limit
the ability of the Company to compete in any line of business or with
any Person or in any geographic area or which limit or purport to limit
or restrict the ability of the Company with respect to the development,
manufacture, marketing, sale or distribution of, or other rights with
respect to, any products or services;
25
(xv) all foreign currency forward exchange Contracts,
foreign currency option and other derivative Contracts and letters of
credit;
(xvi) all Commitments with any Governmental Entity;
and
(xvii) all Commitments containing any restrictions with
respect to payment of dividends or any other distributions in respect
of the capital stock of the Company.
(b) All Commitments of the Company and all Seller IP
Commitments were entered into in the ordinary course of business consistent with
past practices. Each Commitment of the Company and each Seller IP Commitment is
in full force and effect and is legal, valid, binding and enforceable in
accordance with its terms. Except as set forth on Schedule 5.11(b), none of the
Commitments of the Company or Seller IP Commitments requires any payments or the
performance of any obligations other than payments or the performance of any
obligations in the ordinary course of business consistent with past practice.
(c) Except as set forth on Schedule 5.11(c), each of Seller
and the Company (and, to the knowledge of Seller, each of the other party or
parties thereto), has performed all obligations required to be performed by it
under each Commitment of the Company and each Seller IP Commitment. Except as
set forth on Schedule 5.11(c), no event has occurred or circumstance exists with
respect to Seller or the Company or, to the knowledge of Seller, with respect to
any other Person that (with or without lapse of time or the giving of notice or
both) may contravene, conflict with or result in a violation or breach of or
give Seller or the Company or any other Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity of, or to cancel,
terminate or modify, any Commitment of the Company or Seller IP Commitment. No
party to any Commitment of the Company or Seller IP Commitment has repudiated or
terminated any Commitment of the Company or Seller IP Commitment and Seller has
no reason to believe that any other party or parties to any Commitment of the
Company or Seller IP Commitment intends to exercise any right of cancellation,
termination or non-renewal thereof. Seller has heretofore delivered to Buyer
true and complete copies of all Commitments of the Company and Seller IP
Commitments.
(d) Except as set forth on Schedule 5.11(d), (i) there are no
"change of control" or similar provisions or any obligations arising under any
Commitment of the Company (other than immaterial Commitments which can be
readily replaced by the Company without expense in excess of $10,000 in the
aggregate on substantially similar terms) or Seller IP Commitment which are
created, accelerated or triggered by the execution, delivery or performance of
any Transaction Document or the consummation of the Transaction and (ii) none of
the execution, delivery or performance of any Transaction Document or
consummation of the Transaction will, under the terms, conditions or provisions
of
26
any Commitment of the Company or Seller IP Commitment (A) require any Consent
of, with or to any Person, (B) result in any increase in any payment or change
in any term, (C) give rise to any right of amendment, termination, cancellation
or acceleration of any right or obligation or to a loss of benefit or (D) grant
any repayment or repurchase rights to any Person.
Section 5.12. LITIGATION.
(a) Except as set forth on Schedule 5.12(a) or Schedule
5.9(c), (i) no judgment, ruling, order, writ, decree, stipulation, injunction or
determination by or with any arbitrator, court or other Governmental Entity to
which Seller or the Company or any Affiliate of any thereof is party or by which
Seller or the Company or any Affiliate of either thereof or any assets of any
thereof is bound, and which relates to or affects the Company, the Business, the
assets, properties, Liabilities or employees of the Company, the Business
Intellectual Property, any Transaction Document or the Transaction is in effect
and (ii) none of Seller, the Company or any Affiliates of either thereof is
party to or engaged in or, to the knowledge of Seller, threatened with any
Action which relates to or affects the Company, the Business, the assets,
properties, Liabilities or employees of the Company, the Business Intellectual
Property, any Transaction Document or the Transaction, and, to the knowledge of
Seller, no event has occurred and no condition exists which could reasonably be
expected to result in any such Action.
(b) Neither Seller nor the Company is in default under or with
respect to any judgment, ruling, order, writ, decree, stipulation, injunction or
determination of the type described in Section 5.12(a)(i).
(c) No order has been made, petition presented or resolution
passed for the winding-up of the Company and no meeting has been convened for
the purposes of winding-up of the Company. No steps have been taken for the
appointment of an administrator or receiver (including an administrative
receiver) of all or any part of the Company's assets. The Company has not made
or proposed any arrangement or composition with its creditors or any class of
its creditors. The Company is not insolvent, and is not unable to pay its debts
within the meaning of the insolvency legislation applicable to the Company and
has not stopped paying its debts as they fall due.
(d) None of the Actions set forth on Schedule 5.12(a) or
Schedule 5.9(c), if adversely determined, will have a Material Adverse Effect.
Section 5.13. ENVIRONMENTAL MATTERS. To the knowledge of
Seller, except as disclosed on Schedule 5.13, none of the Leased Premises and no
real property previously owned, leased or operated by the Company or any
predecessor of the Company ("REAL PROPERTY") has been used at any time: (i) as a
site for the storage, except as authorized under applicable prior or existing
Environmental Laws, or disposal of any Hazardous Material or (ii) so as to cause
a violation of or to give rise to a removal,
27
restoration or reimbursement Liability under any prior or existing
Environmental Law. Except as disclosed on Schedule 5.13, the Company does not
have any Liability under any applicable prior or existing Environmental Law
or under any Commitment with respect to or as a result of (A) the presence,
discharge, generation, treatment, storage, handling, removal, disposal,
transportation or Release of any Hazardous Material at, onto or from any Real
Property, (B) the disposition of such removed Hazardous Materials at any
other locations, (C) the Release, threatened Release or presence of Hazardous
Materials at any location or (D) the discontinuance, sale or transfer of
operations of any business conducted at any Real Property. The Company is in
compliance in all material respects with, and has at all times complied with,
all prior or existing Environmental Laws related to or affecting the Company,
including in connection with the acquisition, storage, handling,
transportation, processing, use or disposal of any goods or materials,
whether as raw materials, work-in-process, finished goods or otherwise.
Except as disclosed on Schedule 5.13, to the knowledge of Seller no
underground tanks, asbestos containing materials, lead-based paint or
polychlorinated biphenyls are, or have at any time been, present at any Real
Property.
Section 5.14. GOVERNMENTAL APPROVALS. Except as set forth on
Schedule 5.14, no material Consent or order of, with or to any Governmental
Entity is required to be obtained or made by or with respect to Seller or the
Company in connection with the execution, delivery and performance by Seller of
any Transaction Document or the consummation by Seller or the Company of the
Transaction.
Section 5.15. COMPLIANCE WITH APPLICABLE LAW.
(a) Except as set forth on Schedule 5.15(a), (i) each of
Seller (with respect to the Business and the Business Intellectual Property),
and the Company is in compliance in all material respects and has complied in
all material respects with all Laws applicable to the Company, the Business and
the Business Intellectual Property, including all Laws relating to the
exportation of goods and services and export compliance and control, (ii) no
claims or complaints from any Governmental Entities or other Persons have been
asserted or received by Seller, the Company or any Affiliate of either thereof
related to or affecting the Company, the Business or the Business Intellectual
Property and, to the knowledge of Seller, no claims or complaints are
threatened, alleging that Seller, the Company or any Affiliate of either thereof
is in violation of any Laws or Licenses applicable to the Company, the Business
or the Business Intellectual Property and (iii) no investigation, inquiry, or
review by any Governmental Entity with respect to the Company, the Business or
the Business Intellectual Property is pending or, to the knowledge of Seller,
threatened, nor has any Governmental Entity indicated an intention to conduct
any such investigation, inquiry or review.
(b) None of Seller (with respect to the Company, the Business
or the Business Intellectual Property) or the Company or
28
any Affiliate of either thereof, nor to the knowledge of Seller any director,
officer, agent, employee or other Person associated with or acting on behalf
of any of Seller (with respect to the Company, the Business or the Business
Intellectual Property) or the Company or any Affiliate of either thereof has,
directly or indirectly, used any corporate funds for any unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, made any unlawful payment to any Governmental Entity or
governmental, administrative or regulatory official or employee or to any
political party or campaign from corporate funds or made any bribe,
unrecorded rebate, payoff, influence payment, kickback or other unlawful
payment.
Section 5.16. LICENSES. Schedule 5.16 contains a complete and
accurate list of all Licenses that are held by Seller (with respect to the
Company, the Business or the Business Intellectual Property) or the Company or
that otherwise relate to the Business or any assets owned or used by the
Company. The Licenses listed on Schedule 5.16 constitute all the Licenses that
are necessary for Seller and the Company to operate the Business and to own and
use the Company's assets and the Business Intellectual Property in compliance
with all Laws applicable to such operation, ownership and use. All Licenses
listed on Schedule 5.16 are validly held by the Company or Seller and are in
full force and effect. Except as set forth on Schedule 5.16, no Licenses listed
on Schedule 5.16 will be subject to suspension, modification, revocation,
cancellation, termination or nonrenewal as a result of the execution, delivery
or performance of any Transaction Document or the consummation of the
Transaction. Each of Seller and the Company has complied in all material
respects with all of the terms and requirements of the Licenses listed on
Schedule 5.16.
Section 5.17. EMPLOYEE MATTERS.
(a) The Company is not a party to any Contracts regarding
collective bargaining or other Contracts with or to any labor or trade union or
association representing any employee of the Company, nor does any labor or
trade union or collective bargaining agent represent any employee of the
Company. No Contracts regarding collective bargaining have been requested by, or
are under discussion between management of the Company (or any management group
or association of which the Company is a member or otherwise a participant) and,
any group of employees of the Company, nor are there any representation
proceedings or petitions seeking a representation proceeding presently pending
against the Company, nor are there any other current activities known to Seller
to organize any employees of the Company into a collective bargaining unit.
There is no unfair labor practice charge or complaint pending or, to the
knowledge of Seller, threatened against the Company. Except as set forth on
Schedule 5.17(a), there has never been any labor strike, slow-down, work
stoppage, arbitration, grievance or other work-related dispute involving the
Company or otherwise related to the Business, and no such dispute is now pending
or, to the knowledge of Seller, threatened against the Company.
29
(b) Schedule 5.17(b) sets forth a complete and accurate list
of each pension, retirement, savings, profit sharing, deferred compensation,
medical, vision, dental, hospitalization, prescription drug and other health
plan, cafeteria, flexible benefits, short-term and long-term disability,
accident and life insurance plan, bonus, stock option, stock purchase, stock
appreciation, incentive and special compensation and other plan and each other
employee benefit plan, program or Commitment to which the Company or any
Affiliate thereof contributes or is required to contribute, or which the Company
or any Affiliate thereof sponsors, maintains or administers or which is
otherwise applicable to employees or categories of employees, officers or
consultants of the Company, whether written or oral and whether direct or
indirect (hereinafter referred to collectively as the "PLANS").
(c) Schedule 5.17(c) sets forth a complete and accurate list
of each employment or engagement, termination, retention and severance
Commitment and policy (whether written or oral) with or for the benefit of, or
otherwise relating to, any employees or officers of the Company. All such
Commitments and policies are valid and enforceable, and neither the Company nor,
to the knowledge of Seller, any employee, officer or consultant is in default in
any material respect under the provisions thereof. Except as separately set
forth on Schedule 5.17(c), none of the execution, delivery or performance of any
Transaction Document or the consummation of the Transaction will result in any
obligation to pay any employees, officers or consultants of the Company
severance pay or termination, retention or other benefits.
(d) Schedule 5.17(d) contains a complete and accurate list of
the following information (as of December 15, 1999) for each employee and
officer of the Company, including each employee and officer on leave of absence,
layoff or disability status: job title; current compensation paid or payable and
any change in compensation since November 1, 1998; vacation accrued; and service
credited for purposes of vesting and eligibility to participate under any Plans.
(e) The Company has never employed or retained any employees,
consultants or independent contractors to provide services to the Company
outside of the United Kingdom and the Company has never maintained, contributed
to or incurred any Liability under any employee benefit plan, arrangement,
program or Commitment that is or was subject to ERISA.
(f) To the knowledge of Seller, every Person who has at any
time had the right to join, or apply to join, the Pension Scheme has been
properly advised of that right. No employee of the Company has been excluded
from membership of the Pension Scheme or from any of the benefits thereunder in
contravention of Article 119 of the Treaty of Rome, the ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ or
other applicable laws or requirements or the provisions of the Pension Scheme or
otherwise.
30
(g) The Company's contributions to the Pension Scheme are not
paid in arrears and all contributions and other amounts which have fallen due
for payment by the Company have been paid punctually. To the knowledge of
Seller, no fee, charge or expense relating to or in connection with the Pension
Scheme has been incurred but not paid.
(h) The Company has observed and performed those provisions of
the Pension Scheme which apply to it and has not been subject to any
investigation or determination by the Pensions Ombudsman or the Occupational
Pensions Advisory Service.
(i) All documentation and records in respect of the Pension
Scheme are up to date and complete and accurate in all material respects.
(j) The Pension Scheme is an exempt approved scheme (within
the meaning of Section 592(1) of the Income and Corporation Taxes Act 1988), has
properly and punctually accounted to the UK Inland Revenue for all and any tax
for which the Pension Scheme is liable or accountable and has at all times
complied with and been administered in accordance with all applicable laws,
regulations and requirements.
(k) On the date hereof, Seller shall deliver to Buyer any
personnel files, records, correspondence and documents relating to all persons
employed by Seller or the Company who are to become Continued Employees.
(l) No employee of the Company has given notice terminating
his or her contract of employment or is under notice or will be entitled to give
notice as a result of the provisions of this Agreement.
(m) No person previously employed by the Company has now or
may have a right to return to work or a right to be reinstated or re-engaged by
the Company under the Employment Rights ▇▇▇ ▇▇▇▇.
(n) The Company has at all relevant times complied in all
material respects with all its obligations under statute and otherwise
concerning the health and safety at work of its employees, and there are no
claims pending or, to the knowledge of Seller, capable of arising or threatened
by any party in respect of any accident or injury which are not fully covered by
insurance of the Company in respect of any accident or injury.
Section 5.18. ABSENCE OF MATERIAL ADVERSE EFFECT AND CERTAIN
EVENTS.
(a) Except as set forth on Schedule 5.18(a), no conditions,
circumstances or state of facts exist, and there have not been any events,
occurrences, changes, developments or circumstances, which, individually or in
the aggregate, have had or could reasonably be expected to have a Material
Adverse Effect.
(b) Except as set forth on Schedule 5.18(b), neither the
Company nor Seller (with respect to the Business) has:
31
(i) suffered damages, destruction or casualty losses
(whether or not covered by insurance) in excess of $100,000 in the
aggregate;
(ii) made any capital expenditure or series of
capital expenditures in excess of $100,000 in the aggregate;
(iii) since January 1, 1999, made any change in the
rate of compensation, commission, bonus or other direct or indirect
remuneration payable or to become payable to any of their respective
directors, officers, employees or agents, or agreed or promised (orally
or otherwise) to pay, conditionally or otherwise, any bonus or extra
compensation or other employee benefit to any of such directors,
officers, employees or agents;
(iv) (A) entered into any employment or consulting
agreement with or for the benefit of any Person referred to in
subparagraph (iii) above; (B) paid any pension, retirement allowance or
other employee benefit not required by any Plan, agreement or
arrangement to any Person referred to in subparagraph (iii) above or
(C) since January 1, 1999 agreed or promised (orally or otherwise) to
pay (conditionally or otherwise) or otherwise committed itself
(conditionally or otherwise) to any additional pension, profit sharing,
bonus, incentive, deferred compensation, stock purchase, stock option,
stock appreciation, group insurance, vacation pay, severance pay,
retirement or other employee benefit plan, agreement or arrangement, or
changed the terms of any existing Plan or employee agreement or
arrangement;
(v) sold, assigned, leased or transferred any of its
assets or properties (other than the sale of inventory and immaterial
assets in the ordinary course of business);
(vi) incurred, assumed or created any indebtedness or
other material Liabilities;
(vii) subjected any of its assets or properties to any
Lien or permitted any of its assets or properties to be subjected to
any Lien, other than Permitted Liens;
(viii) made any change in its accounting methods,
policies, practices or principles;
(ix) waived or released any rights or claims of
material value, including rights or claims under any Commitment or
relating to Business Intellectual Property, or waived or released any
rights or claims against any Affiliate, director, officer or employee
of the Company or any Affiliate of any thereof;
(x) sold, transferred or permitted to lapse, any
Business Intellectual Property;
32
(xi) acquired or agreed to acquire by merging or
consolidating with, or by purchasing a substantial portion of the
capital stock or assets of, or by any other manner, any business or any
corporation, partnership, joint venture, association or other business
organization or Person, or division, operating unit or product line
thereof;
(xii) other than the creation and issuance of the
Shares, issued, delivered, pledged or otherwise encumbered, sold or
disposed of any shares of its capital stock or other securities, or
created, issued, delivered, pledged or otherwise encumbered, sold or
disposed of any securities convertible into, or rights with respect to,
or options or warrants to purchase or rights to subscribe to, any
shares of its capital stock or other securities;
(xiii) split, combined or reclassified any of its
shares of capital stock or issued or authorized the issuance of any
other securities in respect of, in lieu of or in substitution for any
of its shares of capital stock;
(xiv) declared, set aside, paid or made any dividend
or other distribution with respect to any of its shares of capital
stock, or otherwise made any payments to any of its shareholders in
their capacity as such, or redeemed, repurchased or otherwise acquired
any shares of its capital stock or other securities or any rights,
options or warrants to acquire any such shares or other securities;
(xv) amended its memorandum and articles of
association (or other similar governance documents);
(xvi) revalued any of its assets;
(xvii) made any tax election, changed any annual tax
accounting period, amended any tax return, settled or compromised any
income tax liability, entered into any closing agreement, settled any
tax claim or assessment, surrendered any right to claim a tax refund or
failed to make the payments or consent to any extension or waiver of
the limitations period applicable to any tax claim or assessment;
(xviii) (A) entered into any transaction with any
Affiliate, director, officer or employee of the Company or any
Affiliate of any thereof or (B) made, directly or indirectly, any
payments or transferred, directly or indirectly, any funds or other
property to or on behalf of any Affiliate, director, officer or
employee of the Company or any Affiliate of any thereof (other than (1)
regularly scheduled cash compensation payments and payments under
existing employee benefit plans listed on Schedule 5.17(b) to such
Persons who are employees of the Company and (2) reimbursements of
employees' ordinary and necessary business expenses incurred in
connection with their employment);
33
(xix) purchased any real property or, other than
Leases set forth in Schedule 5.11(a) and other Leases of immaterial
personal property which are no longer in effect, entered into any
Lease;
(xx) settled or compromised any Action;
(xxi) suffered any other occurrence, event, incident,
action, failure to act or transaction which has had a Material Adverse
Effect or which could reasonably be expected to have a Material Adverse
Effect; or
(xxii) entered into any agreement or commitment (other
than the Transaction Documents) out of the ordinary course of business
or to take any of the types of action described in subclauses (i)
through (xxi) of this Section 5.18(b).
Section 5.19. SUFFICIENCY OF ASSETS. The assets and properties
of the Company and the Business Intellectual Property constitute (a) all of the
material assets and rights that are used in the operation of the Business as it
is being conducted as of the date hereof and (b) other than tools and equipment
owned or licensed by Seller relating to selling, marketing, layout,
manufacturing, assembling and packaging services provided by Seller on behalf of
the Company, all the property, real and personal, tangible and intangible,
necessary for the Company to conduct the Business after the date hereof as it is
being conducted as of the date hereof.
Section 5.20. FINANCIAL INFORMATION.
(a) Set forth on Schedule 5.20(a) are (i) the statutory
accounts of the Company as of and for the year ended June 30, 1999, (ii) the
balance sheet of the Company as of September 30, 1999 and the related profit and
loss account and statements of stockholders' equity and cash flows of the
Company for the three months ended September 30, 1999 and (iii) the balance
sheet of the Company as of January 18, 2000 (collectively, with the notes
thereto, the "COMPANY FINANCIAL STATEMENTS"). The Company Financial Statements
are true, fair and accurate and have been prepared from and in accordance with
the books, accounts and financial records of the Company (which are maintained
in accordance with UK GAAP) and are in accordance with UK GAAP consistently
applied. The Company Financial Statements present fairly in all material
respects, in conformity with UK GAAP applied on a consistent basis, the
financial position of the Company as of the dates set forth therein and the
profits and losses and cash flows for the periods set forth therein.
(b) The computer programs, software and firmware used in the
operations of the Company (including critical business systems, facilities, shop
floor controls and the flow of goods and services which the Company provides to
or procures from third parties) or in products sold by the Company can be
modified or replaced without expense in excess of U.S.$20,000 in the aggregate
to allow them correctly to recognize, calculate, sort,
34
store, display and/or process dates outside of the range of 1900-1999,
including the years 2000 and beyond, and correctly to recognize that the year
2000 is a leap year, and such operations will not be materially interrupted
or delayed due to phenomena related to "year 2000".
Section 5.21. INSURANCE.
(a) Schedule 5.21(a) sets forth a complete and accurate list
of all current insurance policies and surety bonds which the Company or Seller
maintain with respect to the Company, its assets and Liabilities, the Business
Intellectual Property, the Business or employees, officers or directors of the
Company ("INSURANCE POLICIES"). Seller has previously delivered to Buyer true
and complete copies of all current Insurance Policies.
(b) The Insurance Policies: (i) are in full force and effect;
(ii) insure the Company in reasonably sufficient amounts against all risks
usually insured against by Persons operating similar businesses or properties in
the localities where such businesses or properties are located and (iii) are
sufficient for compliance with all requirements of Law and Commitments. Each of
the Company and Seller is current in all premiums or other payments due under
each Insurance Policy and has otherwise performed in all material respects all
of its respective obligations thereunder. Each of the Company and Seller has
given timely notice to the insurer under each Insurance Policy of all claims
that may be insured thereby. No Insurance Policy provides for any retrospective
premium adjustment or other experienced-based liability on the part of the
Company.
Section 5.22. BANK ACCOUNTS; POWERS OF ATTORNEY. Schedule 5.22
sets forth a complete and accurate list of: (a) all bank accounts, investment
accounts, lock boxes and safe deposit boxes maintained by or on behalf of the
Company, including the location and account numbers of all such accounts, lock
boxes and safe deposit boxes, (b) the names of all Persons authorized to take
action with respect to such accounts, safe deposit boxes and lock boxes or who
have access thereto and (c) the names of all Persons holding general or special
powers of attorney from the Company, and a summary statement of the terms
thereof.
Section 5.23. NO MATERIAL MISSTATEMENT OR OMISSION. None of
the Transaction Documents (including any schedule or exhibit thereto) or any
other document furnished by Seller or the Company in connection therewith or
with the Transaction contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained in such
Transaction Document or other document not misleading. The financial projections
relating to the Company delivered to Buyer have been made in good faith and were
based upon reasonable assumptions, and neither Seller nor the Company is aware
of any fact or set of circumstances (other than facts communicated by Buyer)
that would lead it to believe that such projections are incorrect or misleading
in any material respect.
35
Section 5.24. NO BROKERS. Except for Intellectual Capital
Advisors (whose fees will be paid by Seller), there is no investment banker,
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of Seller, the Company or any of their Affiliates who is or
might be entitled to any fee, commission or payment in connection with the
negotiation, preparation, execution or delivery of any Transaction Document or
the consummation of the Transaction, nor is there any basis for any such fee,
commission or payment to be claimed by any Person against the Company.
Section 5.25. INVESTMENT INTENT. Seller is acquiring the Buyer
Stock pursuant to this Agreement for its own account for investment purposes
only and not with a view to, or for sale or resale in connection with, any
public distribution thereof or with any present intention of selling,
distributing or otherwise disposing of any of such shares.
Section 5.26. INDEPENDENT INVESTIGATION. Seller acknowledges
that it has carefully examined the following filings of Buyer made with the SEC:
(a) the Information Statement of Buyer dated December 2, 1998 included in
Buyer's Registration Statement on Form 10 (File No. 000-24923), (b) the
Company's Registration Statement on Form S-3 (Registration No. 333-82399) with
respect to Buyer's 4-1/4% Convertible Subordinated Notes due May 1, 2006, (c)
Buyer's Annual Report on Form 10-K for the fiscal year ended September 30, 1999
and (d) the Proxy Statement of Buyer in connection with the 2000 Annual Meeting
of Shareowners of Buyer (collectively, the "BUYER SEC DOCUMENTS"). Seller
acknowledges that Buyer has made available to Seller all documents and
information that it has requested relating to Buyer and has had an opportunity
to ask executive officers of Buyer such questions as Seller considered necessary
or appropriate with respect to the Buyer Stock and Buyer, and that Buyer has
provided Seller with answers to any such questions. In evaluating the
suitability of the acquisition of Buyer Stock hereunder, Seller has conducted
its own investigation and has not relied upon any information (whether written
or oral) other than the documents referred to in the first sentence of this
Section 5.26. Seller acknowledges that none of Buyer or its Affiliates or any
other Person has made any representations or warranties, express or implied,
relating to Buyer Stock, other than as expressly set forth in this Agreement.
Seller acknowledges that it has consulted its own legal and financial advisors
with respect to its investment in the Buyer Stock and the risks associated with
that investment to the extent it believes is necessary or appropriate and that
it has received all information that it believes is necessary or appropriate in
connection with its receipt of the Buyer Stock in connection with the
Transaction.
Section 5.27. KNOWLEDGEABLE INVESTOR. Seller is aware that the
shares of Buyer Stock to be issued to Seller pursuant to this Agreement have not
been registered under the Securities Act or any applicable state securities
laws, and agrees that the Buyer Stock will not be offered or sold in the absence
of registration under the Securities Act and any applicable state securities
laws or, in the opinion of counsel reasonably
36
acceptable to Buyer, an exemption from the registration requirements of the
Securities Act and any applicable state securities laws. Seller will not
transfer any shares of Buyer Stock in violation of the provisions of any
applicable federal or state securities laws. In this connection, Seller
represents that it is familiar with SEC Rule 144 promulgated pursuant to the
Securities Act, as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act. Seller understands
that the offering and sale of the Buyer Stock is intended to be exempt from
registration under the Securities Act, by virtue of Section 4(2) of the
Securities Act and, if applicable, the provisions of Regulation D promulgated
thereunder, based, in part, upon the representations, warranties and
agreements contained in this Agreement and Buyer may rely on such
representations, warranties and agreements in connection therewith. Seller
represents that by reason of its business and financial experience, and the
business and financial experience of those persons, if any, retained by it to
advise it with respect to its investment in the Buyer Stock, Seller together
with such advisors have knowledge, sophistication and experience in business
and financial matters as to be capable of evaluating the merits and risk of
the prospective investment. Seller's financial condition and investments are
such that it is in a financial position to hold the Buyer Stock for an
indefinite period of time and to bear the economic risk of its investment in
the Buyer Stock, and Seller represents that it is an "accredited investor"
within the meaning of Rule 501(a) of the Securities Act.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
Section 6.1. ORGANIZATION. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
Section 6.2. AUTHORITY; BINDING OBLIGATION. Buyer has all
requisite power and authority, corporate or otherwise, to execute and deliver
each Transaction Document delivered by Buyer and to perform all of its
obligations hereunder and thereunder. The execution, delivery and performance by
Buyer of each Transaction Document delivered by Buyer and the consummation by
Buyer of the Transaction have been duly authorized by all necessary and proper
action on the part of Buyer. This Agreement and each other Transaction Document
delivered by Buyer has been duly executed and delivered by Buyer and constitutes
the legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or affecting the enforcement of creditors' rights in general and by general
principles of equity.
37
Section 6.3. NO BREACH. None of the execution, delivery or
performance by Buyer of any Transaction Document or the consummation by Buyer of
the Transaction does or will, with or without the giving of notice or the lapse
of time or both, conflict with, or result in a breach or violation of or a
default under, or give rise to a right of amendment, termination, cancellation
or acceleration of any right or obligation or to a loss of a benefit under (a)
the Restated Certificate of Incorporation or By-Laws of Buyer, (b) any Contract
to which Buyer is a party or by which any of its properties or assets are bound
or (c) any Law or License or other requirement to which Buyer or its properties
or assets are subject, except, in the case of items (b) and (c) above only, for
those which would not have, individually or in the aggregate, a material adverse
effect on the ability of Buyer to consummate the Transaction.
Section 6.4. GOVERNMENTAL APPROVALS. Except as set forth on
Schedule 6.4, no material Consent or order of, with or to any Governmental
Entity is required to be obtained or made by or with respect to Buyer in
connection with the execution, delivery and performance by Buyer of any
Transaction Documents or the consummation by Buyer of the Transaction, other
than those which, if not obtained, would not have, individually or in the
aggregate, a material adverse effect on the ability of Buyer to consummate the
Transaction.
Section 6.5. NO BROKERS. There is no investment banker,
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of Buyer who is or might be entitled to any fee, commission or
payment in connection with the negotiation, preparation, execution or delivery
of any Transaction Document or the consummation of the Transaction, nor is there
any basis for any such fee, commission or payment to be claimed by any Person
against Buyer.
Section 6.6. INVESTMENT INTENT. Buyer is purchasing the Shares
for investment for its own account and not with a view to, or for sale in
connection with, any distribution thereof.
Section 6.7. BUYER STOCK. Upon issuance thereof pursuant to
Section 3.1(a), the Buyer Stock to be issued to Seller pursuant to this
Agreement will be duly authorized, validly issued, fully paid and
non-assessable.
Section 6.8. BUYER SEC DOCUMENTS. As of their respective
dates, the Buyer SEC Documents complied in all material respects with the
requirements of the Exchange Act or the Securities Act (as applicable). As of
their respective dates, none of the SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading, except to the extent
corrected by a subsequently filed document with the SEC. As of the date hereof,
none of the Buyer SEC Documents are required to be amended pursuant to the
Securities Act or the Exchange Act or the rules promulgated thereunder (it being
understood that Buyer may have disclosed by means of a press release certain
events that may be deemed material, but which would not necessitate
38
such an amendment). Buyer has filed all reports required to be filed pursuant
to Regulation 13A under the Exchange Act between September 30, 1999 and the
date hereof (it being understood that Buyer may have disclosed by means of a
press release certain events that may be deemed material, but which would not
necessitate such a report).
ARTICLE VII
COVENANTS
Section 7.1. COVENANTS OF SELLER.
(a) CONSENTS. Promptly after the date of this Agreement,
Seller will (at the sole expense of Seller) obtain all Consents and orders of
all Persons required to be obtained in connection with the execution, delivery
and performance by Seller of the Transaction Documents and the consummation of
the Transaction (other than Consents with respect to those Licenses set forth on
Schedule 5.16 which are marked "Consent Not Required").
(b) BOOKS AND RECORDS. Prior to the date hereof, Seller has
caused all books and records belonging or relating to the Company to be in the
possession of the Company.
(c) CERTAIN PAYMENTS. Seller has caused (i) all Affiliates,
employees, directors and officers of the Company and all Affiliates of any
thereof to pay in full to the Company all amounts owed by such Persons to the
Company on, and any time prior to, the date hereof, including all amounts due
under the Intercompany Service Agreement between Seller and the Company, and
(ii) the Company to be fully and irrevocably released from all guarantees of
indebtedness or other Liabilities of or relating to any Affiliates, employees,
directors and officers of the Company or any Affiliate of any thereof.
(d) INTERCOMPANY ARRANGEMENTS. Effective immediately prior to
the execution and delivery of this Agreement (but after payment of all amounts
pursuant to Section 7.1(c)), all intercompany and intracompany accounts or
Contracts between the Company, on the one hand, and Seller or any Affiliate of
Seller, on the other hand, are hereby canceled without any payment or further
liability to any party thereunder (other than liability for amounts required to
be paid under Section 7.1(c)), it being understood that all intercompany
accounts payable owed by the Company have been canceled without any payments
being made in respect thereof at any time on or prior to the date hereof.
(e) POWER OF ATTORNEY WITH RESPECT TO BUSINESS INTELLECTUAL
PROPERTY. Effective as of the date hereof, Seller hereby constitutes and
appoints Buyer the true and lawful attorney of Seller, with full power of
substitution, in the name and on behalf of Seller but for the benefit of and at
the sole cost and expense of Buyer, to institute and prosecute all
39
proceedings that Buyer may deem proper in order to collect, assert or enforce
any claim, right or title of any kind in or to the Business Intellectual
Property, or to defend or compromise any Action in respect of any of the
Business Intellectual Property, and to take all such action in relation
thereto as Buyer shall deem advisable. Seller acknowledges that such powers
will be coupled with an interest and will not be revocable by Seller for any
reason. Buyer will retain for its own account any amount collected as a
result of any action taken pursuant to the foregoing powers.
(f) NON-SOLICITATION OF EMPLOYEES. For a period of two years
from and after the date hereof, without the prior written consent of Buyer,
Seller will not, and will cause its Affiliates not to, solicit, hire or retain
as an employee, independent contractor or consultant any Person employed by the
Company on the date hereof and will not, and will cause its Affiliates not to,
during such period, induce or attempt to induce any such employee to terminate
his or her employment with the Company or Buyer by resignation, retirement or
otherwise.
(g) RESTRICTIONS ON TRANSFER OF BUYER STOCK. For a period of
one year beginning on the date hereof, Seller agrees that it will not transfer,
sell, assign, pledge, hypothecate, gift, encumber or otherwise dispose of the
shares of Buyer Stock received by Seller pursuant to this Agreement (unless a
registration statement with respect to the sale of such Buyer Stock is declared
effective under the Securities Act by the SEC pursuant to Section 10.1).
Certificates representing such shares of Buyer Stock will bear a legend
substantially in the form described in Section 3.1(a). Buyer shall instruct its
stock transfer agent that the stock transfer records of Buyer should bear the
notation that transfers of such shares of Buyer Stock registered in the name of
Seller shall not be registered until the first anniversary of the date hereof
(unless Buyer instructs such transfer agent that a registration statement with
respect to the sale of such Buyer Stock has been declared effective under the
Securities Act by the SEC pursuant to Section 10.1).
(h) MEMBERSHIP ORGANIZATIONS. Within 15 days after the date
hereof, Seller will (at no cost to Buyer or the Company) cause the Company to
have a right to use Seller's JEDEC manufacturer's identification on the
Company's OTI-7000/7 products until the Company's first mask change or metal
change with respect to such products after the date hereof. Buyer hereby agrees
to indemnify Seller for any Damages to the extent arising solely out of Buyer's
use of Seller's JEDEC manufacturer's identification on the Company's OTI-700/7
products after the date hereof, other than Damages which are or relate to
Damages indemnifiable by Seller pursuant to Section 12.1(c).
(i) HARDWARE TRANSFERS. Effective as of the date hereof,
Seller hereby (at no cost to Buyer or the Company) transfers and assigns to the
Company ownership of the following hardware currently located in the Company's
offices: (i) Fireberd BER tester and (ii) HP noise and interface test set.
40
(j) LICENSES. Seller will, by the date that is fifteen days
after the date hereof (at Seller's sole expense), (i) cause ownership of all
software, CAD, technology and other licenses used by the Company prior to the
date hereof which are not owned by the Company (including those set forth on
Schedule 7.1(j) which are not owned by the Company) to be transferred to the
Company (and obtain all Consents required in connection therewith) and (ii) make
all payments required in connection with the foregoing. Buyer will use its
reasonable efforts to cooperate with Seller to minimize payments to third
parties under such licenses in cases where Buyer has similar existing licenses
with such third parties (it being understood that such efforts of Buyer shall
not include any requirement to make any payments or grant any financial or other
accommodations).
(k) ACCESS TO PRODUCT DATABASES. Following the date hereof
until December 31, 2000, Seller will (at no cost to Buyer or the Company, other
than as set forth in the last sentence of this Section 7.1(k)) provide up to 14
employees of Buyer and the Company identified to Seller ("AUTHORIZED EMPLOYEES")
with full access to and the full right to use, for the limited purposes of
design and layout of 7000, 7002 and 7007 chipsets and to make, use, sell and
offer for sale products based thereon ("Limited Use Purposes"), the following
models and databases ("DATABASES") resident on Seller's internal network: (i)
0.35u (TSMC sptm) Mentor RAM models and layout used in the Company's OTI-7007/7
products, including Apollo data and phantom and GDSII, (ii) 0.35u (TSMC sptm)
oak 3iii standard cell library, including documentation, verilog, syn files,
Apollo layout views and ATPG and (iii) 0.35u (TSMC sptm) pad library and delay
cells, documentation, verilog, syn files, Apollo layout views and ATPG. The
contents of the Databases shall hereinafter be referred to as "DATABASE
INFORMATION". Nothing in this Section 7.1(k) shall be construed to convey any
intellectual property rights in the Databases or Database Information to Buyer,
other than a limited license to access and use the Databases and Database
Information for the Limited Use Purpose (including making, using, selling and
offering for sale products as provided above). No right is granted pursuant to
this Section 7.1(k) to access or use any information on Seller's internal
network other than the Databases and Database Information, and Buyer shall use
its reasonable best efforts to (i) prevent the Authorized Employees or any other
of its or the Company's personnel from accessing any such information, and (ii)
cause the Authorized Employees to comply with Seller's written network security
procedures which are delivered to Buyer. No license is granted by Seller to
Buyer or the Company to reproduce or distribute the Database Information. All
Databases and Database Information are trade secrets of Seller or its licensors
and Seller Confidential Information for purposes of Section 7.6. Seller reserves
the right to alter or modify any Database Information at any time (so long as
some alterations or modifications are done for valid business purposes relating
to development of Seller's products) and Seller makes no representations or
warranties with regards to the Database Information, its accuracy, completeness
or suitability for Buyer's or the Company's purposes. Promptly after December
31, 2000, or at such earlier time that the Company ceases using the Database
Information, Buyer will return to Seller, or certify to Seller the destruction
of, all copies of the Databases and Database Information in Buyer's and the
Company's possession, including without limitation all electronic copies. The
Company will pay to Seller a charge of $100 per hour for any assistance of
Seller's engineering personnel which Buyer or the Company requests Seller to
provide in connection with rights granted under this Section 7.1(k).
41
(l) LICENSE OF CERTAIN EXCLUDED INTELLECTUAL PROPERTY. Seller
hereby grants to Buyer and the Company a fully paid-up, royalty-free,
world-wide, irrevocable, non-exclusive, assignable license, with the right to
sublicense, under all Intellectual Property described in Item Nos. 1, 2, 3, 4,
5, 6 and 10 of Schedule 1.2 (and all Intellectual Property rights relating
thereto) to make, have made, use, import, sell or otherwise dispose of products
of the Business or any derivatives of or improvements to such products, or to
practice any process in connection therewith and to use, disclose, perform
(internally and externally), display, copy, distribute and make derivative works
of any commercial or technical information relating thereto. Seller will, within
10 days after the date hereof, supply to Buyer and the Company (at no cost to
Buyer or the Company) copies of all information or materials relating to such
Intellectual Property licensed hereunder.
Section 7.2. INTERIM USE OF SELLER'S TRADEMARKS, TRADE NAMES
AND CORPORATE SYMBOLS. From and after the date hereof, except as permitted in
this Section 7.2, Buyer will not use or have any rights to the name "Oak" or any
derivatives thereof, or any corporate symbol or logo related thereto. However,
Buyer may utilize without obligation to pay royalties to Seller the trademark or
trade name "Oak", derivatives thereof or any corporate symbol or logo related
thereto or any thereof in connection with stationery, supplies, labels,
catalogs, inventory, work-in-process, displays and the name of the Company after
the date hereof, subject to the terms and conditions of this Section 7.2. Buyer
hereby agrees to indemnify Seller for any Damages to the extent arising solely
out of the use by the Company of the trademark or trade name "Oak" pursuant to
this Section 7.2 after the date hereof, other than Damages which are or relate
to Damages indemnifiable by Seller pursuant to Section 12.1(c).
(a) All documents within the following categories may be used
for the duration of the periods following the date hereof indicated below or
until the supply is exhausted, whichever is the first to occur:
42
MAXIMUM PERIOD
OF PERMITTED USE
FOLLOWING THE
CATEGORY OF DOCUMENTS DATE HEREOF
--------------------- ----------------
A. Stationery 4 months
B. Invoices, purchase orders, debit
and credit memos and other similar
documents of a transactional nature 4 months
C. Business cards 4 months
D. Other outside forms such as packing materials
lists, labels, packing
and cartons, etc. 4 months
E. Forms for internal use only 9 months
F. Product literature 9 months
(b) Products in finished goods inventory and work-in-process
(to the extent the same bears any such trademark at the date hereof or has any
such trademark applied to it in the ordinary course of business within four
months following the date hereof) may be disposed of by Buyer following the date
hereof without re-marking.
(c) Within two months following the date hereof, Buyer will
cause to be removed from display at all facilities constituting assets of the
Company all signs displaying the trademark or trade name "Oak".
(d) Within four months following the date hereof, Buyer will
change or cause to be changed the name of the Company in order that the word
"Oak" shall be deleted therefrom.
Section 7.3. INSURANCE.
(a) RIGHTS IN INSURANCE POLICIES. Buyer will have the right to
(i) assert claims (and Seller will use reasonable best efforts to assist Buyer
in asserting claims) with respect to the Business under insurance policies of
Seller and its Affiliates which are "occurrence basis" policies ("OCCURRENCE
BASIS POLICIES") arising out of insured incidents occurring from the date
coverage thereunder first commenced until the date hereof to the extent that the
terms and conditions of any such Occurrence Basis Policies so allow and (ii)
continue to prosecute claims with respect to the Business properly asserted with
the insurance carrier on or prior to the date hereof (and Seller will use
reasonable best efforts to assist Buyer in connection therewith) under insurance
policies of Seller and its Affiliates which are on a "claims made" basis
("CLAIMS MADE POLICIES") arising out of insured incidents occurring from the
date coverage thereunder first commenced until and including the date hereof to
the extent that the terms and conditions of any such Claims Made Policies so
allow. Buyer shall reimburse Seller for all of its reasonable
43
out-of-pocket expenses in connection with the foregoing. All recoveries in
respect of such claims shall be for the account of Buyer.
(b) SELLER ACTIONS. Seller will not, and will cause its
Affiliates not to, amend, commute, terminate, buy-out, extinguish liability
under or otherwise modify any Occurrence Basis Policies or Claims Made Policies
under which Buyer has rights to assert claims pursuant to Section 7.3(a) in a
manner that would adversely affect any such rights of Buyer.
Section 7.4. PUBLIC ANNOUNCEMENTS. No press release or
announcement concerning the transactions contemplated hereby will be issued by
Seller or the Company without the prior consent of Buyer or by Buyer without the
prior consent of Seller, except as such release or announcement may be required
by law, rule or regulation, in which case the Person required to make the
release or announcement will allow the Person whose consent would otherwise be
required reasonable time to comment on such release or announcement in advance
of such issuance. Notwithstanding the foregoing, in no event will any press
release or announcement concerning the transactions contemplated hereby be
issued by Seller or Buyer prior to 1:35 p.m. (California time) on January 19,
2000.
Section 7.5. FURTHER ASSURANCES. From time to time, as and
when requested by either party to this Agreement, the other party will execute
and deliver, or cause to be executed and delivered, all such documents and
instruments and will take, or cause to be taken, all such reasonable actions, as
such other party may reasonably deem necessary or desirable to evidence or make
effective the transactions contemplated hereby.
Section 7.6. CONFIDENTIAL INFORMATION.
(a) From and after the date hereof, Seller will, and will use
its reasonable best efforts to cause each of its Affiliates and its and their
Representatives to (i) maintain in strict confidence any and all non-public or
proprietary information concerning the Company and the Business (including
non-public or proprietary information relating to products, designs, inventions,
research, trade secrets, personnel and financial matters) and (ii) refrain from
using any and all such information for its own benefit or to compete with or
otherwise to the detriment of Buyer or its Affiliates (including the Company) or
the Business. It is understood that Seller shall have no liability hereunder
with respect to information that (i) is in or, through no fault of Seller or any
of their Representatives, comes into the public domain or (ii) Seller is legally
required to disclose (subject to the terms of Section 7.6(b) below).
(b) In the event that Seller or any of its Affiliates or its
or their Representatives are required by Law to disclose any such non-public or
proprietary information, Seller will promptly notify Buyer in writing so that
Buyer may seek a protective order and/or other motion to prevent or limit the
44
production or disclosure of such information. If such motion has been denied,
then the Person required to disclose such information may disclose only such
portions of such information which (i) in the opinion of Seller's legal counsel
is required by Law to be disclosed (PROVIDED that the Person required to
disclose such information will use all reasonable efforts to preserve the
confidentiality of the remainder of such information) or (ii) Buyer consents in
writing to having disclosed. Seller will not, and will not permit any of its
Affiliates or its or their Representatives to, oppose any motion for
confidentiality brought by Buyer or the Company. Seller will continue to be
bound by its obligations pursuant to this Section 7.6 for any information that
is not required to be disclosed, or that has been afforded protective treatment,
pursuant to such motion.
(c) "SELLER CONFIDENTIAL INFORMATION" means all non-public or
proprietary information relating to Seller's business (including non-public or
proprietary information relating to products, designs, inventions, research,
trade secrets, personnel, and financial matters) obtained by Buyer from Seller
from information resident on Seller's internal network as a result of Buyer's or
the Company's access to Seller's internal network pursuant to Section 7.1(k) or
the services to be performed pursuant to Section 9.1, including the Databases
and Database Information. Notwithstanding the foregoing, Seller Confidential
Information will not include any information (i) which is public knowledge or
becomes public knowledge without fault of Buyer, the Company or any of their
Representatives, or (ii) which Buyer is legally obligated to disclose (subject
to the terms of Section 7.6 (e) below). Buyer agrees to hold and use Seller
Confidential Information in confidence and to use its reasonable best efforts to
prevent unauthorized disclosure by Buyer of any Seller Confidential Information,
including, without limitation, precautions at least as great as the methods
Buyer uses to prevent disclosure of its own proprietary and confidential
information of equal importance. Buyer agrees to disclose Seller Confidential
Information only to its employees having a need-to-know for purposes of
performing their responsibilities and only after such persons receiving Seller
Confidential Information have entered into confidentiality agreements with Buyer
containing confidentiality obligations substantially similar to Buyer's
confidentiality obligations under this Section 7.6(c) (and containing no rights
for employees to use residuals of such Seller Confidential Information).
(d) No right, license, title or interest is granted, directly
or indirectly by Seller in or to any Seller Confidential Information or any
other property as a result of conveying Seller Confidential Information to
Buyer, except the limited license granted in Section 7.1(k) and any other
license or other rights as may be mutually and expressly agreed upon between
Buyer and Seller by a written agreement.
45
(e) In the event that Buyer or any of its Affiliates or its or
their Representatives are required by Law to disclose any Seller Confidential
Information, Buyer will promptly notify Seller in writing so that Seller may
seek a protective order and/or other motion to prevent or limit the production
or disclosure of such Seller Confidential Information. If such motion has been
denied, then the Person required to disclose such information may disclose only
such portions of Seller Confidential Information which (i) in the opinion of
Buyer's legal counsel is required by Law to be disclosed (PROVIDED that the
Person required to disclose such information will use all reasonable efforts to
preserve the confidentiality of the remainder of Seller Confidential
Information) or (ii) Seller consents in writing to having disclosed. Buyer will
not, and will not permit any of its Affiliates or its or their Representatives
to, oppose any motion for confidentiality brought by Seller. Buyer will continue
to be bound by its obligations pursuant to this Section 7.6 for any information
that is not required to be disclosed, or that has been afforded protective
treatment, pursuant to such motion.
Section 7.7. CERTAIN LIABILITIES OF THE COMPANY. Seller will
pay when due all Liabilities of the Company described in Section 12.1(c) (other
than Assumed Liabilities); provided that Buyer or the Company may, at their
option, pay any such Liabilities, in which event Seller will reimburse Buyer or
the Company for all such amounts paid within three days after Buyer or the
Company submits a request therefor to Seller.
ARTICLE VIII
EMPLOYMENT MATTERS
Section 8.1. CONTINUATION OF EMPLOYMENT.
(a) Buyer will cause the Company to continue to employ,
commencing as of the date hereof, each of the employees listed on Schedule
8.1(a) who are employed by the Company (but excluding those who are on long-term
disability) immediately prior to the date hereof; PROVIDED, HOWEVER, that
nothing contained in this Section 8.1 is intended to confer upon any Continued
Employee any right to continued employment after evaluation by Buyer and the
Company of their employment needs after the date hereof. The employees who
continue in such employment with the Company are herein referred to as
"CONTINUED EMPLOYEES". Buyer will cause the Company to provide to each Continued
Employee employment and a salary or wage level comparable to the salary and wage
level applicable to such Continued Employee immediately prior to the date
hereof; PROVIDED, HOWEVER, that after the date hereof, Buyer expressly reserves
the right to, or cause the Company to, modify any salary or wage level of any
Continued Employee and to, or cause the Company to, amend, modify or terminate
any employee benefit plan or program for or for the benefit of Continued
Employees in accordance with the terms thereof and applicable law.
46
(b) On or prior to January 21, 2000, Seller will pay special
cash bonuses to Continued Employees in those individual amounts set forth on
Schedule 8.1(b). Such bonuses will be in addition to (and not in lieu of) all
bonuses and other amounts otherwise payable to Continued Employees, including
those under retention plans and policies of Seller and the Company.
Section 8.2. RETENTION PAYMENTS. Seller will be solely
responsible for, and will pay, perform and discharge when due, all Liabilities
relating to employees of Seller or the Company in respect of any payments
arising under any and all retention plans and policies of Seller or the Company
in effect at or prior to the date hereof. Without limiting the foregoing, on or
prior to January 21, 2000, Seller will pay retention bonuses to Continued
Employees in the amounts set forth in Item 2 of Schedule 5.17(c).
Section 8.3. WELFARE PLANS. Seller or the welfare benefit
plans of Seller will remain liable for, and pay, perform and discharge when due,
all Liabilities relating to Continued Employees and former employees of the
Company in respect of claims covered by the welfare benefit plans of Seller with
respect to medical (including vision care and prescription drugs),
hospitalization and dental services rendered or expenses incurred on or prior to
the date hereof (whether such claims are submitted prior to, on or after the
date hereof). Buyer, the Company or the welfare benefit plans of Buyer or the
Company will be liable for, and pay, perform and discharge when due, all
Liabilities relating to Continued Employees in respect of claims covered by the
welfare benefit plans of Buyer or the Company with respect to medical (including
vision care and prescription drugs), hospitalization and dental services
rendered or expenses incurred after the date hereof. Seller or welfare benefit
plans of Seller will remain liable for, and pay, perform and discharge when due,
all Liabilities relating to Continued Employees and former employees of the
Company in respect of claims covered by welfare benefit plans of Seller with
respect to all other employee welfare benefits (including, without limitation,
travel, accident and short- and long-term disability) arising out of injuries,
accidents, events, actions, occurrences or conditions occurring or existing at
or prior to the date hereof (whether such claims are submitted prior to, on or
after the date hereof).
ARTICLE IX
TRANSITION MATTERS
Section 9.1. TRANSITION MATTERS. Seller will provide Buyer and
the Company (for the applicable periods following the date hereof set forth on
Schedule 9.1) with the support services described on Schedule 9.1. Seller will
use the same degree of care in providing such services as it uses in providing
such services for its own businesses. Buyer will pay Seller for all of Seller's
actual costs (which, when specified on Schedule 9.1, shall be limited to the
amounts set forth thereon), including
47
taxes and other out-of-pocket expenses, actually incurred by Seller in
connection with the services described on Schedule 9.1. Invoices for expenses
payable pursuant to this Section 9.1 shall be rendered monthly and shall be
due and payable within 30 days after the date of receipt of such invoice,
without discount, at the address set forth in such invoice. Buyer will have
the option, at any time or from time to time, to terminate or suspend the
performance of any services described on Schedule 9.1 by providing notice
thereof to Seller, but Buyer will remain liable for all costs payable
pursuant to this Section 9.1 for such services through the date of such
termination or suspension thereof.
ARTICLE X
REGISTRATION RIGHTS
Section 10.1. REGISTRATION RIGHTS. Buyer hereby agrees to
provide Seller with the registration rights set forth on Schedule 10.1 with
respect to the Buyer Stock. Seller hereby agrees to be bound by all obligations
and agreements with respect to such registration rights applicable to Seller set
forth on Schedule 10.1.
ARTICLE XI
SURVIVAL
Section 11.1. SURVIVAL. The respective representations and
warranties of each of Seller and Buyer contained in this Agreement (other than
Seller's representations and warranties with respect to capitalization contained
in Section 5.4, title contained in Section 5.5 and Section 5.10, Taxes contained
in Section 5.8, environmental matters contained in Section 5.13 and brokers
contained in Section 5.24 and Buyer's representations and warranties with
respect to brokers contained in Section 6.5 and Buyer Stock contained in Section
6.7) will survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and will continue in full
force and effect until eighteen months after the date hereof and then terminate
and expire with respect to any theretofore unasserted claims arising out of or
otherwise in respect of any falsity, breach or inaccuracy of such
representations and warranties. Seller's representations and warranties with
respect to Taxes contained in Section 5.8 and environmental matters contained in
Section 5.13 and Seller's and Buyer's representations and warranties with
respect to brokers contained in Section 5.24 and Section 6.5, respectively, will
survive the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby until all applicable statutes of limitation
(including any extensions thereof) have expired and then expire with respect to
any theretofore unasserted claims arising out of or otherwise in respect of any
falsity, breach or inaccuracy of such representations and warranties. Seller's
representations and
48
warranties with respect to capitalization contained in Section 5.4 and title
contained in Section 5.5 and Section 5.10 and Buyer's representations and
warranties with respect to Buyer Stock contained in Section 6.7 will survive
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby without time limitation.
ARTICLE XII
INDEMNIFICATION
Section 12.1. INDEMNIFICATION BY SELLER. Seller shall
indemnify, defend and hold harmless Buyer and its Affiliates (including the
Company) and their respective employees, directors, officers and Representatives
(collectively, the "BUYER GROUP") from and against, and pay or reimburse, as the
case may be, the Buyer Group for, any and all Damages, as incurred, suffered by
Buyer or any other member of the Buyer Group directly or indirectly based upon,
arising out of or otherwise in any way relating to or in respect of:
(a) any falsity, breach or inaccuracy of any
representation or warranty made by Seller herein on the date of this
Agreement;
(b) any breach or violation of any covenant or
agreement of Seller contained in any Transaction Document;
(c) all Liabilities of the Company and all
Liabilities of Seller and its Affiliates based upon, arising out of or
otherwise relating to the conduct of the Business or the operation of
the Company on or prior to the date hereof (other than Liabilities of
the Company that are included in the definition of Assumed
Liabilities), including any Liabilities based upon, arising out of or
otherwise relating to any events, actions, occurrences, omissions,
circumstances or conditions whatsoever occurring or existing on or
prior to the date hereof, whether asserted prior to, on or after the
date hereof including:
(1) all Liabilities based upon, arising out
of or otherwise relating to any pending or threatened or
future Action with respect to any events, actions,
occurrences, omissions, circumstances or conditions occurring
or existing on or prior to the date hereof (whether asserted
prior to, on or after the date hereof), other than Actions
based on the Company's failure to pay or perform any Assumed
Liabilities;
(2) all Liabilities based upon, arising out
of or otherwise relating to any tort, breach or violation of
or non-compliance with any Commitment of Seller or the
Company, infringement, violation of Law or regulatory
non-compliance (whether civil or criminal) occurring or
existing on or prior to the date
49
hereof, including such circumstances or conditions that may
continue to exist after the date hereof (whether such
liabilities are asserted prior to, on or after the date
hereof);
(3) all Liabilities under Environmental Laws
or otherwise relating to environmental matters based upon,
arising out of or otherwise relating to events, actions,
occurrences, omissions, circumstances or conditions occurring
or existing on or prior to the date hereof, including such
circumstances or conditions that may continue to exist after
the date hereof (whether such liabilities are asserted prior
to, on or after the date hereof);
(4) all Liabilities in respect of employees,
former employees, officers or consultants of the Company
relating to events, actions, occurrences, omissions,
circumstances or conditions occurring or existing on or prior
to the date hereof;
(5) all Liabilities based upon, arising out
of or otherwise relating to all incentive arrangements with
employees or other Persons relating to the sale or other
disposition of the Company, the Business or Business
Intellectual Property;
(6) all Liabilities for and relating to any
indebtedness for borrowed money;
(7) all Liabilities for and relating to the
guarantee of any indebtedness or obligation of any Person; and
(8) all Liabilities under Commitments not
set forth on Schedule 5.9(b), Schedule 5.11(a), Schedule
5.17(b) or Schedule 5.17(c) which pursuant to this Agreement
are required to be set forth thereon; or
(d) all Liabilities of the Company, Seller or any of
its Affiliates under the Indemnification Agreement effective as of
February 2, 1998 by and between Seller and ▇▇▇▇▇ ▇▇▇▇▇▇▇, as such
agreement may be amended.
Section 12.2. INDEMNIFICATION BY BUYER. Buyer shall indemnify,
defend and hold harmless Seller and its Affiliates and their respective
employees, directors, officers and Representatives (collectively, the "SELLER
GROUP") from and against, and pay or reimburse, as the case may be, the Seller
Group for, any and all Damages, as incurred, suffered by Seller or any other
member of the Seller Group directly or indirectly based upon, arising out of or
otherwise in any way relating to or in respect of:
(a) any falsity, breach or inaccuracy of any
representation or warranty made by Buyer in any Transaction Document on
the date of this Agreement;
50
(b) any breach or violation of any covenant or
agreement of Buyer contained in any Transaction Document; or
(c) the Assumed Liabilities.
Section 12.3. PROCEDURES FOR INDEMNIFICATION.
(a) If a claim or demand is made against an Indemnitee, or an
Indemnitee shall otherwise learn of an assertion, by any Person who is not a
party to this Agreement (and who is not an Affiliate of a party to this
Agreement) (a "THIRD PARTY CLAIM") as to which a party (the "INDEMNIFYING
PARTY") may be obligated to provide indemnification pursuant to this Agreement,
such Indemnitee will notify the Indemnifying Party in writing, and in reasonable
detail, of the Third Party Claim reasonably promptly after becoming aware of
such Third Party Claim; PROVIDED, HOWEVER, that failure to give any such
notification will not affect the indemnification provided hereunder except to
the extent the Indemnifying Party shall have demonstrated that it has been
actually prejudiced as a result of such failure.
(b) If a Third Party Claim is made against an Indemnitee and
the Indemnifying Party unconditionally and irrevocably acknowledges in writing
its obligation to indemnify the Indemnitee therefor, the Indemnifying Party will
be entitled to assume the defense thereof (at the expense of the Indemnifying
Party) with counsel selected by the Indemnifying Party and reasonably
satisfactory to the Indemnitee. Should the Indemnifying Party so elect to assume
the defense of a Third Party Claim, the Indemnifying Party will not be liable to
the Indemnitee for any legal or other expenses subsequently incurred by the
Indemnitee in connection with the defense thereof as long as the Indemnifying
Party diligently conducts such defense; provided that, if (i) in any
Indemnitee's reasonable judgment a conflict of interest exists in respect of
such claim or (ii) any Indemnifying Party fails to provide reasonable assurance
to the Indemnitee (upon request of the Indemnitee) of such Indemnifying Party's
financial capacity to defend such Third Party Claim and provide indemnification
with respect thereto, such Indemnitee will have the right to employ separate
counsel to represent such Indemnitee and in that event the reasonable fees and
expenses of such separate counsel will be paid by such Indemnifying Party. If
the Indemnifying Party assumes the defense of any such Third Party Claim, each
Indemnitee will have the right to participate in the defense thereof and to
employ counsel, at its own expense, separate from the counsel employed by the
Indemnifying Party. The Indemnifying Party will be liable for the fees and
expenses of counsel employed by the Indemnitee for any period during which the
Indemnifying Party has failed to assume the defense thereof or if it does not
expressly elect to assume the defense thereof (including the acknowledgment by
each Indemnifying Party of its indemnification obligation as aforesaid). If the
Indemnifying Party assumes the defense of any such Third Party Claim, the
Indemnifying Party will promptly supply to the Indemnitee copies of all
correspondence and documents relating to or in connection with such Third Party
Claim and keep the Indemnitee fully
51
informed of all developments relating to or in connection with such Third
Party Claim (including, without limitation, providing to the Indemnitee on
request updates and summaries as to the status thereof). If the Indemnifying
Party chooses to defend a Third Party Claim, all the Indemnitees will
reasonably cooperate with the Indemnifying Party in the defense thereof (such
cooperation to be at the expense, including reasonable legal fees and
expenses, of the Indemnifying Party).
(c) No Indemnifying Party will consent to any settlement,
compromise or discharge (including the consent to entry of any judgment) of any
Third Party Claim without the Indemnitee's prior written consent; PROVIDED, that
if the Indemnifying Party unconditionally and irrevocably acknowledges in
writing its obligation to indemnify the Indemnitee for a Third Party Claim, the
Indemnitee will agree to any settlement, compromise or discharge of such Third
Party Claim which the Indemnifying Party may recommend and which by its terms
obligates the Indemnifying Party to pay the full amount of Damages in connection
with such Third Party Claim and unconditionally and irrevocably releases the
Indemnitee (pursuant to a release which is reasonably satisfactory to the
Indemnitee) completely from all Liability in connection with such Third Party
Claim, PROVIDED, HOWEVER, that the Indemnitee may refuse to agree to any such
settlement, compromise or discharge (x) that provides for injunctive or other
nonmonetary relief affecting the Indemnitee or (y) that, in the reasonable
opinion of the Indemnitee, would otherwise adversely affect the Indemnitee. If
the Indemnifying Party unconditionally and irrevocably acknowledges in writing
its obligation to indemnify the Indemnitee for a Third Party Claim, the
Indemnitee will not (unless required by law) admit any liability with respect
to, or settle, compromise or discharge, such Third Party Claim without the
Indemnifying Party's prior written consent (which consent will not be
unreasonably withheld).
(d) Any claim on account of Damages which does not involve a
Third Party Claim shall be asserted by written notice given by the Indemnitee to
the Indemnifying Party from whom such indemnification is sought. The failure by
any Indemnitee so to notify the Indemnifying Party will not relieve the
Indemnifying Party from any liability which it may have to such Indemnitee under
this Agreement, except to the extent that the Indemnifying Party shall have
demonstrated that it has been actually prejudiced as a result of such failure.
Any notice pursuant to this Section 12.3(d) will contain a statement, in
prominent and conspicuous type, that if the Indemnifying Party does not dispute
its liability to the Indemnitee with respect to the claim made in such notice by
notice to the Indemnitee prior to the expiration of a 60-calendar-day period
following the Indemnifying Party's receipt of notice of such claim, the claim
will be conclusively deemed a liability of the Indemnifying Party. If the
Indemnifying Party does not notify the Indemnitee prior to the expiration of a
60-calendar-day period following its receipt of such notice that the
Indemnifying Party disputes its liability to the Indemnitee under this
Agreement, such claim specified by the Indemnitee in such notice will be
conclusively deemed a liability
52
of the Indemnifying Party under this Agreement and the Indemnifying Party shall
pay the amount of such liability to the Indemnitee on demand or, in the case of
any notice in which the amount of the claim (or any portion thereof) is
estimated, on such later date when the amount of such claim (or such portion
thereof) becomes finally determined. If the Indemnifying Party has timely
disputed its liability with respect to such claim, as provided above, the
Indemnifying Party and the Indemnitee will proceed in good faith to negotiate a
resolution of such dispute and, if not resolved through negotiations by the
60th day after notice of such claim was given to the Indemnifying Party, the
Indemnifying Party and the Indemnitee will resolve such dispute in accordance
with the provisions of Section 15.11.
Section 12.4. CERTAIN RIGHTS AND LIMITATIONS.
(a) No loss, Liability, damage or deficiency shall constitute
Damages to any party to the extent of any insurance proceeds actually received
by such party with respect to such loss, Liability, damage or deficiency (after
deducting reasonable costs and expenses incurred in connection with recovery of
such proceeds).
(b) No monetary amount shall be payable by Seller to any
member of the Buyer Group with respect to the indemnification of any claims
pursuant to Section 12.1(a) until the aggregate amount of Damages actually
incurred by the Buyer Group with respect to such claims exceeds $350,000 in the
aggregate, in which event Seller shall be responsible for the full amount of
such Damages.
(c) No monetary amount shall be payable by Buyer to any member
of the Seller Group with respect to the indemnification of any claims pursuant
to Section 12.2(a) until the aggregate amount of Damages actually incurred by
the Seller Group with respect to such claims exceeds $350,000 in the aggregate,
in which event Buyer shall be responsible for the full amount of such Damages.
(d) No monetary amount shall be payable by Seller to any
member of the Buyer Group with respect to the indemnification of any claims
pursuant to Section 12.1(a) after the aggregate amount of Damages actually paid
to members of the Buyer Group by Seller with respect to such claims shall equal
U.S.$25,000,000.
(e) No monetary amount shall be payable by Buyer to any member
of the Seller Group with respect to the indemnification of any claims pursuant
to Section 12.2(a) after the aggregate amount of Damages actually paid to
members of the Seller Group by Buyer with respect to such claims shall equal
U.S.$20,000,000.
Section 12.5. TERMINATION OF INDEMNIFICATION OBLIGATIONS. The
obligations of each party to indemnify, defend and hold harmless Indemnitees (i)
pursuant to Sections 12.1(a) and 12.2(a), shall terminate when the applicable
representation or warranty expires pursuant to Article XI, (ii) pursuant to
53
Sections 12.1(b) and 12.2(b), shall terminate upon expiration of all applicable
statutes of limitation (giving effect to any extensions thereof) and (iii)
pursuant to Sections 12.1(c), 12.1(d) and 12.2(c), shall continue without time
limitation and shall not terminate at any time; PROVIDED, HOWEVER, that as to
clauses (i) and (ii) above, such obligations to indemnify, defend and hold
harmless shall not terminate with respect to any individual item as to which the
Indemnitee shall have, before the expiration of the applicable period, made a
claim by delivering a notice (stating in reasonable detail the basis of such
claim) to the Indemnifying Party.
ARTICLE XIII
TAX MATTERS
Section 13.1. PREPARATION AND FILING OF TAX RETURNS. Seller
will prepare and timely file or will cause to be prepared and timely filed all
appropriate Federal, state, provincial, local and foreign Tax Returns with
respect to the Business and the Company and its assets or activities that are
(a) required to be filed on or before the date hereof or (b) relate to a taxable
period ending on or before the date hereof. Buyer will prepare or cause to be
prepared and will timely file or cause to be timely filed all other Tax Returns
required of Buyer and its Subsidiaries and Affiliates with respect to the
Company, or in respect of its assets or activities. Any such Tax Returns that
include periods ending on or before the date hereof or that include the
activities with respect to the Business or the Company prior to the date hereof
will, insofar as they relate to the Business or the Company, be on a basis
consistent with the last previous such Tax Returns filed with respect to the
Business or the Company, unless Seller or Buyer, as the case may be, concludes
that there is no reasonable basis for such position. Neither Buyer nor the
Company will file any amended Tax Returns for any periods for or in respect of
the Company with respect to which Buyer is not obligated to prepare or cause to
be prepared the original such Tax Returns pursuant to this Section 13.1 without
the prior written consent of Seller (which consent will not be unreasonably
withheld).
Section 13.2. PAYMENT OF TAXES. From and after the date
hereof: (a) Seller will pay or cause to be paid all Taxes with respect to Tax
Returns which Seller is obligated to prepare and file or cause to be prepared
and filed pursuant to Section 13.1 and (b) Buyer will pay or cause to be paid
all Taxes shown as due with respect to Tax Returns which Buyer is obligated to
prepare and file or cause to be prepared and filed pursuant to Section 13.1.
Section 13.3. TAX SHARING AGREEMENTS. On the date hereof, all
Tax sharing agreements and arrangements between (a) the Company, on the one side
and (b) Seller or any of its Subsidiaries or Affiliates (other than the
Company), on the other side, will be terminated and have no further effect for
any
54
taxable year or period (whether a past, present or future year or period),
and no additional payments will be made thereunder on or after the date
hereof in respect of a redetermination of Tax liabilities or otherwise.
Section 13.4. REFUNDS. Seller will be entitled to retain,
or receive prompt payment from Buyer or any of its Affiliates (including the
Company) of any refund or credit arising with respect to the Business or the
Company relating to Taxes with respect to any Tax period ending on or before
the date hereof. Buyer and the Company will be entitled to retain, or receive
prompt payment from Seller of, any refund or credit with respect to Taxes
with respect to any taxable period beginning after the date hereof relating
to the Company or the Business. Buyer and Seller will equitably apportion any
refund or credit with respect to Taxes with respect to any taxable period
that includes (but does not end on) the date hereof (a "STRADDLE PERIOD").
Section 13.5. TAX COOPERATION. From and after the Effective
Time, each of Buyer and Seller will provide the other party with such
information and records and make such of its Representatives available as may
reasonably be requested by such other party in connection with the preparation
of any Tax Return or any audit or other proceeding that relates to the Business
or the Company. Buyer will prepare or cause the Company to prepare, within 90
days after the date hereof, in a manner consistent with past practice, the Tax
work paper preparation package or packages necessary to enable Seller to prepare
Tax Returns Seller is obligated to prepare or cause to be prepared.
Section 13.6. TAX INDEMNIFICATION.
(a) Seller will indemnify, defend and hold the Buyer Group
harmless from and against all Liability for Taxes with respect to the Business
and the Company for any taxable period that ends on or before the date hereof
and the portion of any Straddle Period ending on the date hereof.
(b) Buyer will indemnify, defend and hold the Seller Group
harmless from and against, except to the extent Seller is otherwise required to
indemnify Buyer for such Tax pursuant to Section 13.6(a), all Liability for
Taxes of the Company for any taxable period ending after the date hereof,
including the portion of any Straddle Period following the date hereof.
(c) The obligations of each party to indemnify, defend and
hold harmless the other party and other Persons, pursuant to Sections 13.6(a)
and 13.6(b), will terminate upon the expiration of all applicable statutes of
limitations (giving effect to any extensions thereof), PROVIDED, HOWEVER, that
such obligations to indemnify, defend and hold harmless will not terminate with
respect to any individual item as to which an Indemnified Party shall have,
before the expiration of the applicable period, previously made a claim by
delivering a notice (stating in reasonable detail the basis of such claim) to
the applicable Indemnifying Party.
55
(d) In the case of any Straddle Period, (i) the periodic Taxes
of the Company and the Business that are not based on income or receipts (E.G.,
property Taxes) for the portion of any Straddle Period ending on the date hereof
will be computed based on the ratio of the number of days in such portion of the
Straddle Period and the number of days in the entire taxable period, and (ii)
Taxes of the Company for the portion of any Straddle Period ending on the date
hereof (other than the Taxes described in Section 13.6(d)(i)) shall be computed
as if such taxable period ended as of the close of business on the date hereof,
and, in the case of any Income Taxes of the Company attributable to the
ownership by the Company of any equity interest in any partnership or other
"flowthrough" entity (other than the Company), as if a taxable period of such
partnership or other "flowthrough" entity ended as of the close of business on
the date hereof.
(e) Any indemnity payment required to be made pursuant to this
Section 13.6 will be paid within 30 days after the Indemnified Party makes
written demand upon the Indemnifying Party, but in no case earlier than five
business days prior to the date on which the relevant Taxes are required to be
paid (or would be required to be paid if no such Taxes are due) to the relevant
taxing authority (including estimated Tax payments).
Section 13.7. TIMING ADJUSTMENTS. In the event that a final
determination (which shall include the execution of a Form 870-AD or successor
form) results in a timing difference (E.G., an acceleration of income or delay
of deductions) that would increase Seller's liability for Taxes pursuant to
Article XII or this Article XIII or results in a timing difference (E.G., an
acceleration of deductions or delay of income) that would increase Buyer's
liability for Taxes pursuant to Article XII or this Article XIII, Buyer or
Seller, as the case may be, will promptly make payments to Seller or Buyer as
and when Buyer or Seller, as the case may be, actually realizes any Tax benefits
as a result of such timing difference (or under such other method for
determining the present value of any such anticipated Tax benefits as agreed to
by the parties). In determining the amount of any such Tax benefit, Buyer or
Seller, as the case may be, will be deemed to be subject to the applicable
Federal, State, local and/or local country Income Taxes at the maximum statutory
rate then in effect.
Section 13.8. TAX CONTESTS.
(a) If a claim is made by any taxing authority which, if
successful, might result in an indemnity payment pursuant to Section 13.6, the
Indemnified Party will promptly notify the Indemnifying Party of such claim (a
"TAX CLAIM"); PROVIDED, HOWEVER, that the failure to give such notice will not
affect the indemnification provided hereunder except to the extent the
Indemnifying Party has actually been prejudiced as a result of such failure.
(b) With respect to any Tax Claim relating to Income Taxes and
relating to a taxable period ending on or before the
56
date hereof, Seller will control all proceedings and may make all decisions
taken in connection with such Tax Claim (including selection of counsel) and,
without limiting the foregoing, may in its sole discretion pursue or forego
any and all administrative appeals, proceedings, hearings and conferences
with any taxing authority with respect thereto, and may, in its sole
discretion, either pay the Tax claimed and ▇▇▇ for a refund where applicable
Law permits such refund suits or contest the Tax Claim in any permissible
manner. Seller will keep Buyer informed in respect of all material aspects of
such Tax Claims.
(c) Except as otherwise provided in Section 13.8(b), Seller
and Buyer will jointly control and participate in all proceedings taken in
connection with any Tax Claim relating to Income Taxes of the Company for any
Straddle Period. Neither Seller nor Buyer will settle any such Tax Claim without
the prior written consent of the other (not to be unreasonably withheld).
(d) Except as otherwise provided in this Section 13.8, Buyer
will control all proceedings and may make all decisions taken in connection with
any Tax Claim (including selection of counsel) and, without limiting the
foregoing, may in its sole discretion pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with any taxing
authority with respect thereto, and may, in its sole discretion, either pay the
Tax claimed and ▇▇▇ for a refund where applicable Law permits such refund suits
or contest the Tax Claim in any permissible manner.
(e) Each of Buyer, the Company and their respective
Affiliates, on the one hand, and Seller and its respective Affiliates, on the
other, will cooperate in contesting any Tax Claim, which cooperation will
include the retention and (upon request) the provision to the requesting party
of records and information which are reasonably relevant to such Tax Claim, and
making employees available on a mutually convenient basis to provide additional
information or explanation of any material provided hereunder or to testify at
proceedings relating to such Tax Claim.
ARTICLE XIV
RESTRICTIVE COVENANT
Section 14.1. NON-COMPETE. Seller covenants and agrees that,
for a period of two years after the date hereof, none of Seller, any Affiliate
of Seller or any Person now or hereafter controlled by Seller will, directly or
indirectly, in any area of the world, enter into, engage in, represent or have
or acquire more than a 5% interest in any business engaged in any form or
manner, directly or indirectly, in competition with the Business (or in
competition with any products of the Company or its Affiliates which are
derivatives of or improvements to products of the Business), including in
researching, development, design, manufacture (including by means of procurement
from third
57
parties components for), integration, maintenance, testing, sale,
installation, certification, modification, repair, servicing or support of
the products of the type being sold or in development by the Business at any
time on or prior to the date hereof or any derivatives of or improvements to
such products; PROVIDED, HOWEVER, that Seller may acquire control of any
business deriving less than 10% of its revenues from such operations so long
as it shall use reasonable best efforts to divest such operations as promptly
as practicable and in any event not later than one year following such
acquisition. This Section 14.1 shall not apply to any activities of any
entity that acquires and controls Seller after the date hereof that are being
conducted at the time of such acquisition.
Section 14.2. REMEDIES. No waiver of any breach of the
covenant contained in Section 14.1 shall be implied from any forbearance or
failure of Buyer to take action thereon.
Section 14.3. SEVERABILITY. Seller and Buyer agree that, if
any provision of this Article XIV should be adjudicated to be invalid or
unenforceable, such provision shall be deemed deleted herefrom with respect, and
only with respect, to the operation of such provision in the particular
jurisdiction in which such adjudication was made; PROVIDED, HOWEVER, that to the
extent any such provision may be valid and enforceable in such jurisdiction by
limitations on the scope of the activities, geographical area or time period
covered, Seller and Buyer agree that such provision instead shall be deemed
limited to the extent, and only to the extent, necessary to make such provision
enforceable to the fullest extent permissible under the laws and public policies
in such jurisdiction.
Section 14.4. NON-EXCLUSIVITY. The covenants contained in this
Article XIV shall be construed and enforced independently of any other provision
of this Agreement or any other understanding or agreement between the parties,
and the existence of any claim or cause of action of Seller against Buyer, of
whatever nature, shall not constitute a defense to the enforcement against
Seller of the covenants contained herein.
ARTICLE XV
GENERAL PROVISIONS
Section 15.1. ASSIGNMENT. Neither party to this Agreement will
convey, assign or otherwise transfer any of its rights or obligations under any
Transaction Document without the prior written consent of the other party,
except that Buyer may (without obtaining any consent, but subject to the last
sentence of this Section 15.1) assign its rights, interests or obligations under
any Transaction Documents, in whole or in part, to any direct or indirect
subsidiary of Buyer or to any successor to all or any portion of its business.
Any conveyance, assignment or transfer requiring the prior written consent of
the other party which is made without such consent will be void AB INITIO. No
58
assignment of this Agreement will relieve the assigning party of its obligations
hereunder.
Section 15.2. PARTIES IN INTEREST. This Agreement is binding
upon and is for the benefit of the parties hereto and their respective
successors and permitted assigns. This Agreement is not made for the benefit of
any Person not a party hereto, and no Person other than the parties hereto or
their respective successors and permitted assigns will acquire or have any
benefit, right, remedy or claim under or by reason of this Agreement, except
that members of the Buyer Group and the Seller Group will be entitled to the
rights to indemnification provided to the Buyer Group and the Seller Group,
respectively, hereunder.
Section 15.3. AMENDMENT. This Agreement may not be amended,
modified or supplemented except by a written agreement executed by Buyer and
Seller.
Section 15.4. WAIVER; REMEDIES. No failure or delay on the
part of either Buyer or Seller in exercising any right, power or privilege under
any Transaction Document will operate as a waiver thereof, nor will any waiver
on the part of either Buyer or Seller of any right, power or privilege under any
Transaction Document operate as a waiver of any other right, power or privilege
under any Transaction Document, nor will any single or partial exercise of any
right, power or privilege thereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege under any
Transaction Document. The rights and remedies herein provided are cumulative and
are not exclusive of any rights or remedies which the parties may otherwise have
at law or in equity.
Section 15.5. EFFECT OF INVESTIGATION. All representations,
warranties, covenants and agreements made by Seller in this Agreement or in any
other Transaction Document shall be unaffected by any investigation made by or
on behalf of Buyer (whether before, on or after the date hereof) or knowledge
obtained (or capable of being obtained) as a result thereof or otherwise. All
representations, warranties, covenants and agreements made by Buyer in this
Agreement or in any other Transaction Document shall be unaffected by any
investigation made by or on behalf of Seller (whether before, on or after the
date hereof) or knowledge obtained (or capable of being obtained) as a result
thereof or otherwise.
Section 15.6. FEES AND EXPENSES. Each of Seller and Buyer will
pay, without right of reimbursement from the other, all of their respective
costs and expenses incident to the performance of their respective obligations
hereunder, including the fees and disbursements of counsel, accountants, experts
and consultants employed by the respective parties in connection with the
Transaction, whether or not the Transaction is consummated.
Section 15.7. NOTICES. All notices, requests, claims, demands
and other communications required or permitted to be given under any Transaction
Document shall be in writing and will be delivered by hand or telecopied or
sent, postage prepaid, by
59
registered, certified or express mail or reputable overnight courier service
and will be deemed given when so delivered by hand or telecopied, or three
business days after being so mailed (one business day in the case of express
mail or overnight courier service). All such notices, requests, claims,
demands and other communications will be addressed as set forth below, or
pursuant to such other instructions as may be designated in writing by the
party to receive such notice in accordance with this Section 15.7:
(a) If to Buyer:
Conexant Systems, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
ATTENTION: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇, Esq.
Senior Vice President,
General Counsel and Secretary
TELECOPY: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
ATTENTION: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
TELECOPY: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Seller:
Oak Technology, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
ATTENTION: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Vice President, General Counsel
and Secretary
TELECOPY: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Morosoli & Maser LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
ATTENTION: ▇▇▇▇▇▇▇ ▇. ▇▇▇, Esq.
TELECOPY: (▇▇▇) ▇▇▇-▇▇▇▇
Section 15.8. CAPTIONS; CURRENCY. The article and section
captions herein and the table of contents hereto are for
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convenience of reference only, do not constitute part of this Agreement and
will not be deemed to limit or otherwise affect any of the provisions hereof.
Unless otherwise specified, all references herein to numbered articles and
sections are to articles and sections of this Agreement and all references
herein to schedules are to schedules to this Agreement. Unless otherwise
specified, all references contained in any Transaction Document, in any
exhibit or schedule referred to therein or in any instrument or document
delivered pursuant thereto to dollars or "$" shall mean United States Dollars.
Section 15.9. ENTIRE AGREEMENT. This Agreement, the other
Transaction Documents and the Confidentiality Agreement collectively constitute
the entire agreement between the parties with respect to the subject matter
hereof and this Agreement, the other Transaction Documents and the
Confidentiality Agreement supersede all prior negotiations, agreements and
understandings of the parties of any nature, whether oral or written, relating
thereto.
Section 15.10. SEVERABILITY. If any provision of any
Transaction Document or the application thereof to any Person or circumstance is
determined by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions thereof, or the application of such
provision to Persons or circumstances other than those as to which it has been
held invalid or unenforceable, shall remain in full force and effect and shall
in no way be affected, impaired or invalidated thereby.
Section 15.11. DISPUTE RESOLUTION.
(a) In the event that any dispute, claim or controversy
(collectively, a "dispute") arises with respect to any provision of this
Agreement or the performance thereof, the designees of the Vice President,
General Counsel and Secretary of Seller and the Senior Vice President, General
Counsel and Secretary of Buyer will attempt a good faith resolution of such
dispute within 30 days (or such longer period as Buyer and Seller may mutually
agree) after either party notifies the other of such dispute. If such dispute is
not resolved within 30 days (or such longer period as Buyer and Seller may
mutually agree) of such notification, such dispute will be referred for
resolution to the Vice President, General Counsel and Secretary of Seller and
the Senior Vice President, General Counsel and Secretary of Buyer.
(b) Should the Vice President, General Counsel and Secretary
of Seller and the Senior Vice President, General Counsel and Secretary of Buyer
be unable to resolve such dispute within 30 days (or such longer period as Buyer
and Seller may mutually agree) following such referral to them, such dispute
shall be submitted by Buyer and Seller to binding arbitration, conducted in
accordance with the then-existing CPR Rules for Non-Administered Arbitration of
Business Disputes, before arbitration panel consisting of three members, none of
whom shall be the same person as the mediator appointed pursuant to the
preceding paragraph. Buyer and Seller shall each select one arbitrator and the
two arbitrators shall jointly select the third arbitrator.
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The arbitration shall be conducted in California and shall be governed by the
United States Arbitration Act, 9 USC ss.ss.1-16, and judgment upon the award
may be entered by any court having jurisdiction thereof. The arbitration
panel shall have case management authority and shall resolve the dispute by a
majority vote of the panel members and render a final award within 90 days
from the commencement of the arbitration action. There shall be no appeal
from the arbitral award, except for fraud committed by any arbitrator in
carrying out his or her duties under the aforesaid rules; otherwise the
parties irrevocably waive their rights to judicial review of any dispute
arising out of or related to this Agreement.
(c) Notwithstanding anything to the contrary contained herein,
each of Seller and Buyer will have the right to pursue judicial remedies in
connection with the seeking of specific performance pursuant to Section 15.15.
Section 15.12. SCHEDULES; DISCLOSURE. All schedules attached
hereto are hereby incorporated in and made a part of this Agreement as if set
forth in full herein. Capitalized terms used in any other Transaction Document
or in the schedules hereto or thereto but not otherwise defined therein will
have the respective meanings assigned to such terms in this Agreement.
Section 15.13. GOVERNING LAW. This Agreement will be governed
by and construed in accordance with the internal laws of the State of Delaware
applicable to contracts made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State, except that the
provisions of Section 2.1(a) as they relate to the procedures for the transfer
of the Shares only will be governed by and construed in accordance with the
internal laws of England and Wales.
Section 15.14. COUNTERPARTS. This Agreement may be executed in
separate counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts will together constitute the same
agreement.
Section 15.15. SPECIFIC PERFORMANCE. In the event of any
actual or threatened default in, or breach of, any of the terms, conditions and
provisions of any Transaction Document, the party or parties who are or are to
be thereby aggrieved will have the right of specific performance and injunctive
relief giving effect to its or their rights under such Transaction Document, in
addition to any and all other rights and remedies at law or in equity, and all
such rights and remedies will be cumulative. The parties agree that any such
breach or threatened breach would cause irreparable injury, that the remedies at
law for any such breach or threatened breach, including monetary damages, are
inadequate compensation for any loss and that any defense in any action for
specific performance that a remedy at law would be adequate is waived.
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Section 15.16. CONSTRUCTION; INTERPRETATION.
(a) The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any Federal, state, local, or
foreign Law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. For the purposes
of this Agreement, (i) words in the singular shall be held to include the plural
and VICE VERSA and words of one gender shall be held to include the other gender
as the context requires, (ii) the terms "hereof", "herein", and "herewith" and
words of similar import shall, unless otherwise stated, be construed to refer to
this Agreement as a whole and not to any particular provision of this Agreement,
(iii) the word "including" and words of similar import when used in this
Agreement shall mean "including, without limitation" and (iv) the word "or"
shall not be exclusive.
(b) For purposes of this Agreement, "KNOWLEDGE" or "aware of"
or a similar phrase with respect to Seller shall mean the knowledge of any
officer or director of the
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Company, including ▇▇▇▇▇ ▇▇▇▇▇▇▇, or of Young ▇. ▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇ or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ if any such Person is actually aware of such fact
or other matter (after review of applicable files in such Person's possession
relating to such fact or other matter).
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the parties hereto as of the date first above written.
CONEXANT SYSTEMS, INC.
By _______________________
Name:
Title:
OAK TECHNOLOGY, INC.
By _______________________
Name:
Title:
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