EXHIBIT 10.5
UNIT PURCHASE AGREEMENT
BY AND AMONG
VIASAT, INC.
AND
THE PARTIES LISTED UNDER THE HEADING "SELLERS"
ON THE SIGNATURE PAGES HERETO
DECEMBER 14, 2001
TABLE OF CONTENTS
1. Definitions................................................................1
2. Purchase and Sale of the Class A Units.....................................6
(a) Basic Transaction...................................................6
(b) Purchase Price......................................................6
(c) The Closing.........................................................6
(d) Deliveries at the Closing...........................................6
(e) Payment of Purchase Price...........................................6
3. Representations and Warranties Concerning the Transaction..................7
(a) Representations and Warranties of the Sellers.......................7
(b) Representations and Warranties of the Buyer.........................8
4. Representations and Warranties Concerning the Target.......................9
(a) Organization, Qualification, and Corporate Power...................10
(b) Capitalization.....................................................10
(c) Noncontravention...................................................11
(d) Brokers' Fees......................................................11
(e) Title to Assets....................................................11
(f) Subsidiaries.......................................................11
(g) Financial Statements...............................................12
(h) Events Subsequent to Most Recent Fiscal Year End...................12
(i) Undisclosed Liabilities............................................14
(j) Legal Compliance...................................................14
(k) Tax Matters........................................................14
(l) Real Property......................................................16
(m) Intellectual Property..............................................17
(n) Tangible Assets....................................................19
(o) Inventory..........................................................19
(p) Contracts..........................................................20
(q) Notes and Accounts Receivable......................................21
(r) Powers of Attorney.................................................21
(s) Insurance..........................................................21
(t) Litigation.........................................................22
(u) Product Warranty...................................................22
(v) Product Liability..................................................22
(w) Employees..........................................................23
(x) Employee Benefits..................................................23
(y) Guaranties.........................................................25
(z) Environment, Health, and Safety....................................25
(aa) Certain Business Relationships with the Target.....................26
(bb) Disclosure.........................................................26
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5. Pre-Closing Covenants.....................................................26
(a) General............................................................26
(b) Notices and Consents...............................................26
(c) Operation of Business..............................................26
(d) Preservation of Business...........................................26
(e) Full Access........................................................26
(f) Notice of Developments.............................................26
(g) Exclusivity........................................................27
(h) Restricted Units...................................................27
(i) Tax Election.......................................................27
(j) Valuation of the Target's Assets for Income Tax Purposes...........27
6. Post-Closing Covenants....................................................27
(a) General............................................................27
(b) Litigation Support.................................................28
(c) Transition.........................................................28
(d) Confidentiality....................................................28
(e) Stock Options......................................................29
(f) Registration of Registrable Shares.................................29
(g) Business Location..................................................31
(h) Employment Matters.................................................31
(i) Intellectual Property..............................................31
7. Conditions to Obligation to Close.........................................32
(a) Conditions to Obligation of the Buyer..............................32
(b) Conditions to Obligation of the Sellers............................33
8. Remedies for Breaches of This Agreement...................................34
(a) Indemnification by the Sellers.....................................34
(b) Limitations on Indemnification by the Sellers......................35
(c) Indemnification by the Buyer.......................................36
(d) Limitation on Indemnification by the Buyer.........................36
(e) Notice; Defense of Claims..........................................36
(f) Security for the Sellers' Indemnification Obligations..............37
(g) Currency Exchange..................................................37
(h) Held Back Consideration Not Exclusive..............................37
9. Tax Matters...............................................................38
(a) Characterization of the Transaction................................38
(b) Tax Periods Ending on or Before the Closing Date...................38
(c) Tax Periods Beginning Before and Ending After the Closing Date.....39
(d) Cooperation on Tax Matters.........................................39
(e) Tax Sharing Agreements.............................................40
(f) Certain Taxes......................................................40
(g) Indemnification Payments...........................................40
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10. Seller Representatives....................................................40
(a) Appointment........................................................40
(b) Election and Replacement...........................................40
(c) Authority..........................................................40
(d) No Liability of the Buyer..........................................41
11. Termination...............................................................41
(a) Termination of Agreement...........................................41
(b) Effect of Termination..............................................42
12. Miscellaneous.............................................................42
(a) Nature of Certain Obligations......................................42
(b) Legend.............................................................42
(c) Press Releases and Public Announcements............................42
(d) No Third-Party Beneficiaries.......................................43
(e) Entire Agreement...................................................43
(f) Succession and Assignment..........................................43
(g) Counterparts.......................................................43
(h) Headings...........................................................43
(i) Notices............................................................43
(j) Governing Law......................................................44
(k) Amendments and Waivers.............................................44
(l) Severability.......................................................45
(m) Expenses...........................................................45
(n) Termination of the Voting Trust Agreement..........................45
(o) Construction.......................................................45
(p) Incorporation of Exhibits, Annexes, and Schedules..................45
(q) Specific Performance...............................................45
(r) Mediation/Arbitration..............................................45
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Schedule 1 -- Option Holder Consideration
Schedule 2 -- Purchase Price Allocation
Exhibits A1-A13 -- Purchase Price Schedule
Exhibit B -- Historical Financial Statements
Exhibit C -- Form of Opinion of Counsel to the Sellers
Exhibit D -- Waiver Letter
Exhibits E1-E2 -- Form of Non-Compete Agreements
Exhibit F -- Form of Escrow Agreement
Exhibit G -- Form of Opinion of Counsel to the Buyer
Annex I -- Exceptions to the Sellers' Representations and Warranties Concerning
the Transaction
Annex II -- Unit Option Holders
Annex III -- Key Employees
Annex IV -- Signatories to Non-Compete Agreement
Disclosure Schedule -- Exceptions to Representations and Warranties Concerning
the Target
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UNIT PURCHASE AGREEMENT
This Unit Purchase Agreement (this "Agreement") entered into as of
December 14, 2001 by and among ViaSat, Inc., a Delaware corporation (the
"Buyer"), and the parties listed under the heading "Sellers" on the signature
pages hereto (collectively, the "Sellers"). The Buyer and the Sellers are
referred to collectively herein as the "Parties."
The Sellers in the aggregate own all of the Class A Units (as defined
below) of U.S. Monolithics, LLC, an Arizona limited liability company (the
"Target").
This Agreement contemplates a transaction in which the Buyer will
purchase from the Sellers, and the Sellers will sell to the Buyer, all of the
outstanding Class A Units of the Target on the terms and conditions set forth
herein.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. Definitions.
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"Adjusted Option" has the meaning set forth in Section 6(e) below.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including arbitration costs, court costs and reasonable attorneys' fees
and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
Section 1504(a) or any similar group defined under a similar provision of state,
local or foreign law.
"Agreement" has the meaning set forth in the preface above.
"Allocation Claim" has the meaning set forth in Section 8(a) below.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Buyer Common Stock" means the common stock, par value $.0001 per share,
of the Buyer.
"Buyer Employee Plans" has the meaning set forth in Section 6(h) below.
"Buyer Indemnified Party" has the meaning set forth in Section 8(a)
below.
"Buyer Plan" has the meaning set forth in Section 6(e) below.
"Class A Units" means the Class A Units of the Target as defined in the
Target's Amended and Restated Operating Agreement (as amended to date).
"Class B Units" means the Class B Units of the Target as defined in the
Target's Amended and Restated Operating Agreement (as amended to date).
"Closing" has the meaning set forth in Section 2(c) below.
"Closing Price" has the meaning set forth in Exhibit A-6 hereof.
"Closing Date" has the meaning set forth in Section 2(c) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the
businesses and affairs of the Target that is not already generally available to
the public.
"Currency Exchange" has the meaning set forth in Section 8(g) below.
"Disclosure Schedule" has the meaning set forth in Section 4 below.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement that is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement that is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement that is an Employee Pension Benefit Plan (including any
Multiemployer Plan), (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program, or (e) any bonus or other incentive compensation
severance, option, equity based compensation, flexible spending, or similar
plan, arrangement or practice.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Environmental Claims" has the meaning set forth in Section 8(a) below.
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and
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all agencies thereof) concerning pollution or protection of the environment,
public health and safety, or employee health and safety, including laws relating
to emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" has the meaning set forth in Section 8(f) below.
"Escrow Agreement" has the meaning set forth in Section 7(a) below.
"Exchange Ratio" means 0.0406.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Statement" has the meaning set forth in Section 4(g) below.
"Fraud Claims" has the meaning set forth in Section 8(a) below.
"GAAP" means United States generally accepted accounting principles as
in effect at a particular time.
"General Claims" has the meaning set forth in Section 8(a) below.
"Held Back Consideration" has the meaning set forth in Section 2(d)
below.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
provisionals, reissuances, continuations, continuations-in-part, divisions,
revisions, extensions, and reexaminations thereof, (b) all trademarks, service
marks, trade dress, logos, brand names, trade names, domain names and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, any and all website content, and all
applications, registrations, and renewals in connection therewith, (d) all mask
works and all applications, registrations, and renewals in connection therewith,
(e) all trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, research records, records of inventions, test information,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all source code and object versions of
computer software (including data and related documentation and excluding any
shrink-wrap licenses accompanying such software), (g)
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all other proprietary rights, and (h) all copies and tangible embodiments
thereof (in whatever form or medium), and any claims or causes of actions
(pending, filed) arising out of or related to any infringement or
misappropriation of any of the foregoing.
"Instrument" has the meaning set forth in Section 10(c) below.
"Knowledge" with respect to any Person means actual knowledge of such
Person and, if such Person is an individual, any fact, matter or circumstance
that an ordinary and prudent business person employed in the same capacity and
in the same type and size of organization as such Person should have known.
"Liability" with respect to any Person means any liability of such
Person (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any liability for
Taxes.
"Loan Agreement" means the Loan Agreement, dated as of September 14,
2001, by and between the Buyer and the Target.
"Most Recent Balance Sheet" means the balance sheet contained within the
Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in Section
4(g) below.
"Most Recent Fiscal Month End" has the meaning set forth in Section 4(g)
below.
"Most Recent Fiscal Year End" has the meaning set forth in Section 4(g)
below.
"NASD" has the meaning set forth in Section 6(f)(iv) below.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Options" means the right granted under the Target Plan to an employee,
consultant or advisor of the Target to purchase Class A Units of the Target.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Ownership Claims" has the meaning set forth in Section 8(a) below.
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Personnel" has the meaning set forth in Section 4(m) below.
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"Prohibited Transaction" means a transaction described in ERISA Section
406 and Code Section 4975(c), to which a statutory, regulatory or administrative
exemption does not apply.
"Purchase Price" has the meaning set forth in Section 2(b) below.
"Registrable Shares" means the shares of Buyer Common Stock identified
on the lines entitled "Registrable Shares" of Exhibits A-1 through A-13 hereto.
"SEC" has the meaning set forth in Section 3(b)(ix) below.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest of any kind.
"Seller Representatives" has the meaning set forth in Section 10(a)
below.
"Sellers" has the meaning set forth in the preface above.
"Subsidiaries" means all Persons in which the Target either owns capital
stock or is a partner or is in some other manner affiliated through an
investment or participation in the equity of such Person.
"Target" has the meaning set forth in the preface above.
"Target Employee" has the meaning set forth in Section 6(h) below.
"Target Plan" means the U.S. Monolithics, LLC 2000 Unit Incentive Plan
(as amended to date).
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, membership interests, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax or similar charge of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
"Tax Claims" has the meaning set forth in Section 8(a) below.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
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2. Purchase and Sale of the Class A Units.
(a) Basic Transaction. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from each of the
Sellers, and each of the Sellers agrees to sell to the Buyer, all of his Class A
Units, free and clear of all Security Interests, for the consideration specified
below in this Section 2.
(b) Purchase Price. The Buyer agrees to pay to each of the
Sellers at the Closing the consideration identified for such Seller on the lines
entitled "Purchase Price" of Exhibits A-1 through A-13 hereto in exchange for
all of such Seller's Class A Units (the aggregate consideration received by all
Sellers, the "Purchase Price").
(c) The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ commencing at
9:00 a.m. local time on the later of (i) January 4, 2002 or (ii) the business
day following the satisfaction or waiver of all conditions to the obligations of
the Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take at the
Closing itself) or such other date as the Buyer and the Seller Representatives
may mutually determine (the "Closing Date").
(d) Deliveries at the Closing. At the Closing, (i) the Sellers
will deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 7(a) below, (ii) the Buyer will deliver to the Sellers
the various certificates, instruments, and documents referred to in Section 7(b)
below, (iii) each of the Sellers will deliver to the Buyer certificates
representing all of his Class A Units, endorsed in blank or accompanied by duly
executed assignment documents, (iv) the Buyer will deliver to each of the
Sellers his portion of the Purchase Price as specified in Section 2(b) above,
and (v) the Buyer will deliver to each of the Option holders set forth on
Schedule 1 hereto the consideration identified opposite such holder's name on
such Schedule. Notwithstanding the foregoing, at the Closing, the Buyer shall
set aside and deposit into escrow in accordance with Section 8(f) the number of
shares of Buyer Common Stock or cash (in U.S. dollars) identified for each
Seller on the lines entitled "Held Back Consideration" of Exhibits A-1 through
A-13 hereto (collectively, the "Held Back Consideration") as security for
Sellers' indemnification obligations under this Agreement.
(e) Payment of Purchase Price. To the extent part of the
consideration to be delivered to a Seller (or an Option holder) by the Buyer is
cash consideration, the Buyer shall pay such cash amount, at Closing, by wire
transfer of immediately available funds to such account or accounts of any such
Seller (or Option holder) as designated in writing by the Seller Representatives
not less than three business days prior to the Closing Date. To the extent part
of the consideration to be delivered to a Seller consists of Buyer Common Stock,
the Buyer shall deliver to such Seller, at Closing, a stock certificate
representing the applicable number of shares of Buyer Common Stock in the name
of such Seller.
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3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Sellers. Each of the
Sellers represents and warrants to the Buyer that the statements contained in
this Section 3(a) are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(a)) with respect to himself or itself, except as set
forth in Annex I attached hereto.
(i) Authorization of Transaction. The Seller has full
power and authority to execute and deliver this Agreement and to
perform his obligations hereunder. This Agreement constitutes
the valid and legally binding obligation of the Seller,
enforceable in accordance with its terms and conditions, except
as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to or affecting creditors' right
generally and subject to the limitations imposed by general
equitable principles. The Seller need not give any notice to,
make any filing with, or obtain any authorization, consent, or
approval of any government, governmental agency or other third
party in order to consummate the transactions contemplated by
this Agreement.
(ii) Noncontravention. Neither the execution and the
delivery of this Agreement nor the consummation of the
transactions contemplated hereby will violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government,
governmental agency, or court to which the Seller is subject.
(iii) Brokers' Fees. The Seller has no Liability or
obligation to pay any fees or commissions to any broker,
advisor, finder, or agent with respect to the transactions
contemplated by this Agreement for which the Buyer could become
liable or obligated.
(iv) Investment. If the Seller is receiving shares of
Buyer Common Stock pursuant to this Agreement, the Seller (A)
understands that the shares of Buyer Common Stock issued
pursuant to this Agreement have not been, and, other than as
contemplated in Section 6(f) below, will not be, registered
under the Securities Act, or under any state securities laws,
and are being offered and sold in reliance upon federal and
state exemptions for transactions not involving any public
offering, (B) is acquiring his portion of the Buyer Common Stock
issued pursuant to this Agreement solely for his own account for
investment purposes, and not with a view to the distribution
thereof, (C) is a sophisticated investor with knowledge and
experience in business and financial matters, (D) has received
certain information concerning the Buyer and has had the
opportunity to obtain additional information as desired in order
to evaluate the merits and the risks inherent in holding Buyer
Common Stock, (E) is able to bear the economic risk and lack of
liquidity inherent in holding Buyer Common Stock, and (F) is an
Accredited Investor.
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(v) Class A Units. The Seller holds of record and owns
beneficially the Class A Units set forth next to his name in
Section 4(b) of the Disclosure Schedule, free and clear of any
restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes, Security
Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. The Seller is not a
party to any option, warrant, purchase right, or other contract
or commitment that could require the Seller to sell, transfer,
or otherwise dispose of any Class A Units (other than this
Agreement). The Seller is not a party to any voting trust,
proxy, or other agreement or understanding with respect to the
voting of any Class A Units. Upon the consummation of the
transactions contemplated hereby, the Buyer will acquire good
and marketable title to all of the Class A Units of the Seller,
free and clear of any restrictions on transfer (other than any
restrictions under the Securities Act and state securities
laws), Taxes, Security Interests, options, warrants, purchase
rights, contracts, commitments, equities, claims, and demands.
(b) Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Sellers that the statements contained in this
Section 3(b) are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(b)).
(i) Organization of the Buyer. The Buyer is a
corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware.
(ii) Authorization of Transaction. The Buyer has full
corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation
of the Buyer, enforceable in accordance with its terms and
conditions, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to or
affecting creditors' right generally and subject to the
limitations imposed by general equitable principles. Other than
filings that may be required pursuant to applicable state
securities laws and Regulation D of the Securities Act, the
Buyer need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government
or governmental agency in order to consummate the transactions
contemplated by this Agreement other than such other notices,
filings, authorizations, consents and approvals the failure to
obtain or make would not have a material adverse effect on the
Sellers.
(iii) Noncontravention. Neither the execution and the
delivery of this Agreement nor the consummation of the
transactions contemplated hereby will violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject or
any provision of its charter or bylaws.
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(iv) Brokers' Fees. The Buyer has no Liability or
obligation to pay any fees or commissions to any broker,
advisor, finder, or agent with respect to the transactions
contemplated by this Agreement for which any Seller could become
liable or obligated.
(v) Investment. The Buyer is not acquiring the Class A
Units with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act.
(vi) Litigation. There are no legal proceedings pending
or, to the Knowledge of the Buyer, threatened that are
reasonably likely to prohibit or restrain the ability of the
Buyer to enter into this Agreement or consummate the
transactions contemplated hereby.
(vii) Issuance of Shares. Upon issuance of the Buyer
Common Stock to the Sellers in accordance with Section 2 above
for the consideration expressed therein, the Buyer Common Stock
will be duly authorized, validly issued, fully paid, and
nonassessable.
(viii) Capitalization of the Buyer. The authorized
capital stock of the Buyer consists of 105,000,000 shares,
100,000,000 of which are classified as Buyer Common Stock and
5,000,000 shares of which are classified as preferred stock, par
value $.0001 per share. As of December 13, 2001, 22,656,335
shares of Buyer Common Stock were issued and outstanding.
(ix) Nasdaq National Market. The Buyer Common Stock is
listed on the Nasdaq National Market and there are no
proceedings to revoke or suspend such listing.
(x) SEC Filings; Reports. Except for correspondence
relating to confidential treatment requests, the Buyer has
heretofore made available to the Sellers the Buyer's Form 10-K
for the year ended March 31, 2001 and each and every filing or
communication with the United States Securities and Exchange
Commission ("SEC") since the date thereof or otherwise modifying
such 10-K. As of its date, except for any information corrected
or superseded by subsequent filings with the SEC, such reports
did not contain any untrue statement of material fact or omit to
state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances
under which they were made, not misleading. The audited
consolidated financial statements of the Buyer and its
subsidiaries, and the certified notes thereto included in the
10-K have been prepared in accordance with GAAP and present
fairly in all material respects the consolidated financial
position of the Buyer and its subsidiaries as of the date
thereof and the results of their consolidated operations and
changes in consolidated financial position for the periods then
ended.
4. Representations and Warranties Concerning the Target. The Sellers
represent and warrant to the Buyer that the statements contained in this Section
4 are correct and complete as of the
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date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this Section 4), except as set forth in the
disclosure schedule delivered by the Sellers to the Buyer on the date hereof
(the "Disclosure Schedule"). The Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 4. Each section of the Disclosure Schedule qualifies the
correspondingly numbered representation and warranty of this Agreement to the
extent specified therein and such other representations and warranties of this
Agreement to the extent a matter in such section is disclosed in such a way as
to make its relevance to the information called for by such other representation
and warranty of this Agreement reasonably apparent.
(a) Organization, Qualification, and Corporate Power. The Target
is a limited liability company duly organized, validly existing, and in good
standing under the laws of the State of Arizona. The Target is duly authorized
to conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required, except where the failure to be so
qualified would not have a material adverse effect on the business, financial
condition, operations, results of operations, or future prospects of the Target.
Section 4(a) of the Disclosure Schedule lists each jurisdiction in which the
Target is qualified or authorized to do business. The Target has full
organizational power and authority and all licenses, permits, and authorizations
necessary to carry on the business in which it is engaged and in which it
presently proposes to engage and to own and use the properties owned and used by
it. Section 4(a) of the Disclosure Schedule lists all such licenses, permits and
authorizations. The Sellers have delivered to the Buyer correct and complete
copies of the articles of organization and operating agreement of the Target
(each as amended to date). The minutes of proceedings of the members and
managers of the Target (containing the records of meetings of the members, the
managers, and any committees of the managers), the records of its members and
the number and class of Class A Units held by its members, and any other records
evidencing equity interests in the Target are correct and complete. The Target
is not in default under or in violation of any provision of its articles of
organization or its operating agreement (each as amended to date).
(b) Capitalization. The equity interests of the Target consists
of 30,000,000 issued and outstanding Class A Units and 16,153,846.15 issued and
outstanding Class B Units. All of the issued and outstanding Class A Units have
been duly authorized, are validly issued, fully paid, and nonassessable, are
held of record by the Sellers as set forth in Section 4(b) of the Disclosure
Schedule and were issued in compliance with all applicable state and federal
securities laws. All of the issued and outstanding Class B Units have been duly
authorized, are validly issued, fully paid, and nonassessable and were issued in
compliance with all applicable state and federal securities laws. Section 4(b)
of the Disclosure Schedule lists all outstanding or authorized Options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require the Target to
issue, sell, or otherwise cause to become outstanding any of its equity
interests. All such issued and outstanding Options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights or other contracts or
commitments were issued in compliance with all applicable state and federal
securities laws. With respect to each issued and outstanding Option, Section
4(b) of the Disclosure Schedule also lists the holder thereof, the number and
type of equity interest of the Target issuable thereunder, the exercise price
therefor, the exercise period, the vesting schedule and the status of the
holders thereof as employees or consultants of the Target. There are no voting
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trusts, proxies, or other agreements or understandings with respect to the
voting of the equity interests of the Target.
(c) Noncontravention. Neither the execution and the delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Target is subject or any provision of
the articles of organization or operating agreement (each as amended to date) of
the Target or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
material agreement, contract, lease, license, instrument, or other arrangement
to which the Target is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition of any Security Interest upon any
of its assets). The Target is not required to give notice to, make any filing
with, or obtain any authorization, consent, or approval of any government,
governmental agency or other third party in order for the Parties to consummate
the transactions contemplated by this Agreement.
(d) Brokers' Fees. The Target does not have any Liability or
obligation to pay any fees or commissions to any broker, advisor, finder, or
agent with respect to the transactions contemplated by this Agreement.
(e) Title to Assets. Except for properties and assets disposed
of in the Ordinary Course of Business since the date of the Most Recent Balance
Sheet, the Target has good and marketable title to, or a valid leasehold
interest in, the properties and assets used by it, located on its premises, or
shown on the Most Recent Balance Sheet or acquired after the date thereof, free
and clear of all Security Interests, other than mechanic's, materialmen's, and
similar liens, liens for Taxes not yet due and payable, and other liens arising
in the Ordinary Course of Business and not incurred in connection with the
borrowing of money.
(f) Subsidiaries. Section 4(f) of the Disclosure Schedule sets
forth all of the Subsidiaries of the Target. All references in this Agreement to
the Target, unless the context indicates otherwise, shall be deemed to mean the
Target and its Subsidiaries. Section 4(f) of the Disclosure Schedule sets forth
for each Subsidiary of the Target: (i) its jurisdiction of incorporation, (ii)
the number of shares of authorized capital stock of each class of its capital
stock, and (iii) the number of issued and outstanding shares of each class of
its capital stock. All of the issued and outstanding shares of capital stock of
each Subsidiary of the Target have been duly authorized and are validly issued,
fully paid, and nonassessable and were issued in compliance with all applicable
state and federal securities laws. The Target holds of record and owns
beneficially all of the outstanding shares of each Subsidiary of the Target,
free and clear of any restrictions on transfer (other than restrictions under
the Securities Act and state securities laws), Taxes, Security Interests,
options, warrants, purchase rights, contracts, commitments, equities, claims,
and demands. There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Target to sell, transfer, or
otherwise dispose of any capital stock of any of its Subsidiaries or that could
require any Subsidiary of the Target to issue, sell, or otherwise cause to
become outstanding any of its own capital stock. There are no outstanding stock
appreciation, phantom stock, profit participation, or similar rights with
respect to any
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Subsidiary of the Target. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of any capital stock of
any Subsidiary of the Target.
(g) Financial Statements. Attached hereto as Exhibit B are the
following financial statements (collectively, the "Financial Statements"): (i)
audited balance sheets and statements of operation, changes in members' equity,
and cash flow as of and for the fiscal years ended December 31, 1999 and
December 31, 2000 (the "Most Recent Fiscal Year End") for the Target; and (ii)
unaudited balance sheets and statements of operation, changes in members'
equity, and cash flow (the "Most Recent Financial Statements") as of and for the
nine months ended September 30, 2001 (the "Most Recent Fiscal Month End") for
the Target. The Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, present fairly the financial condition of the Target as
of such dates and the results of operations of the Target for such periods, are
correct and complete in all material respects, and are consistent with the books
and records of the Target (which books and records are correct and complete in
all material respects); provided, however, that the Most Recent Financial
Statements are subject to normal year-end adjustments (which will not be
material individually or in the aggregate) and lack footnotes and other
presentation items.
(h) Events Subsequent to Most Recent Fiscal Year End. Since the
Most Recent Fiscal Year End, there has not been any material adverse change in
the business, financial condition, operations, results of operations, or future
prospects of the Target. Without limiting the generality of the foregoing, since
that date:
(i) The Target has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible, other than
for a fair consideration in the Ordinary Course of Business;
(ii) The Target has not entered into any agreement,
contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) either involving more than
$25,000 or outside the Ordinary Course of Business;
(iii) No party (including the Target) has accelerated,
terminated, modified, or cancelled any agreement, contract,
lease, or license (or series of related agreements, contracts,
leases, and licenses) involving more than $25,000 to which the
Target is a party or by which it is bound;
(iv) The Target has not imposed any Security Interest
upon any of its assets, tangible or intangible, other than the
Security Interest on its assets in favor of the Buyer,
mechanic's, materialmen's, and similar liens, liens for Taxes
not yet due and payable, and other liens arising in the Ordinary
Course of Business and not incurred in connection with the
borrowing of money;
(v) The Target has not made any capital expenditure (or
series of related capital expenditures) either involving more
than $25,000 or outside the Ordinary Course of Business;
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(vi) The Target has not made any capital investment in,
any loan to, or any acquisition of the securities or assets of,
any other Person (or series of related capital investments,
loans, and acquisitions) either involving more than $25,000 or
outside the Ordinary Course of Business;
(vii) The Target has not issued any note, bond, or other
debt security, other than notes in favor of the Buyer, or
created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving
more than $25,000 singly or $50,000 in the aggregate;
(viii) The Target has not delayed or postponed the
payment of accounts payable and other Liabilities outside the
Ordinary Course of Business;
(ix) The Target has not cancelled, compromised, waived,
or released any right or claim (or series of related rights and
claims) either involving more than $10,000 or outside the
Ordinary Course of Business;
(x) The Target has not granted any license or sublicense
of any rights under or with respect to any Intellectual
Property;
(xi) There has been no change made or authorized in the
articles of organization or the operating agreement of the
Target;
(xii) The Target has not issued, sold, or otherwise
disposed of any of its equity interests, or granted any options,
warrants, or other rights to purchase or obtain (including upon
conversion, exchange, or exercise) any of its equity interests;
(xiii) The Target has not declared, set aside, or paid
any dividend or made any distribution with respect to its equity
interests (whether in cash or in kind) or redeemed, purchased,
or otherwise acquired any of its equity interests;
(xiv) The Target has not experienced any damage,
destruction, or loss (whether or not covered by insurance) to
its property;
(xv) The Target has not made any loan to, or entered
into any other transaction with, any of its managers, officers,
or employees outside the Ordinary Course of Business;
(xvi) The Target has not entered into any employment
contract or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement;
(xvii) The Target has not granted any increase in the
base compensation of any of its managers, officers, or employees
outside the Ordinary Course of Business;
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(xviii) The Target has not adopted, amended, modified,
or terminated any bonus, profit-sharing, incentive, severance,
or other plan, contract, or commitment for the benefit of any of
its managers, officers, or employees (or taken any such action
with respect to any other Employee Benefit Plan);
(xix) The Target has not made any other change in
employment terms for any of its managers, officers, or employees
outside the Ordinary Course of Business;
(xx) The Target has not made or pledged to make any
charitable or other capital contribution outside the Ordinary
Course of Business;
(xxi) There has not been any other material occurrence,
event, incident, action, failure to act, or transaction outside
the Ordinary Course of Business involving the Target, other than
any material occurrence, event or incident relating to the
industry in which the Target operates in general that does not
have a materially disproportionate effect on the Target relative
to most other industry participants; and
(xxii) The Target has not committed to any of the
foregoing.
(i) Undisclosed Liabilities. The Target does not have any
material Liability (and there is no Basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
against it giving rise to any material Liability), except for (i) Liabilities
set forth on the face of the Most Recent Balance Sheet (rather than in any notes
thereto) and (ii) Liabilities that have arisen after the Most Recent Fiscal
Month End in the Ordinary Course of Business (none of which results from, arises
out of, relates to, is in the nature of, or was caused by any breach of
contract, breach of warranty, tort, infringement, or violation of law).
(j) Legal Compliance. The Target (and its respective
predecessors, if any) has complied in all material respects with all applicable
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against it alleging any failure so to comply.
(k) Tax Matters.
(i) Since its inception, the Target has at all times
been properly characterized as a partnership for U.S. federal
and all applicable state income tax purposes.
(ii) The Target has filed all Tax Returns that it was
required to file prior to the Closing Date. All such Tax Returns
were correct and complete in all material respects. All Taxes
owed by the Target (whether or not shown on any Tax Return) and
required to be reflected on Tax Returns due prior to the Closing
Date have been paid.
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(iii) No claim has ever been made by an authority in a
jurisdiction where the Target does not file Tax Returns that it
is or may be subject to taxation by that jurisdiction, and the
jurisdictions in which the Target is subject to taxation is set
forth on Section 4(k) of the Disclosure Schedule.
(iv) There are no Security Interests on any of the
assets of the Target that arose in connection with any failure
(or alleged failure) to pay any Tax.
(v) The Target has withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid
or owing to any employee, independent contractor, creditor,
unitholder, or other third party.
(vi) To the Knowledge of the Sellers, the Target does
not expect any authority to assess any additional Taxes for any
period for which Tax Returns have been filed. There is no
dispute or claim concerning any Tax Liability of the Target
either (A) claimed or raised by any authority in writing or (B)
otherwise, to the Knowledge of the Sellers. Section 4(k) of the
Disclosure Schedule lists all federal, state, local, and foreign
income Tax Returns filed with respect to the Target for Taxable
periods ended on or after December 31, 2000, indicates those Tax
Returns that have been audited, and indicates those Tax Returns
that currently are the subject of audit. The Target has
delivered to the Buyer correct and complete copies of all
federal income Tax Returns, examination reports, and statements
of deficiencies assessed against or agreed to by the Target.
(vii) The Target currently is not the beneficiary of any
extension of time within which to file any Tax Return. The
Target has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency. No power of attorney is outstanding
with respect to any Tax for which the Target may be responsible.
(viii) The Target is not a party to any Tax allocation
or sharing agreement. The Target (A) has not been a member of an
Affiliated Group filing a consolidated federal income Tax Return
or (B) does not have any Liability for the Taxes of any Person
(other than the Target) under Reg. Section 1.1502-6 (or any
similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise. The Target
is not included in a combined, unitary or similar Tax Return.
(ix) The unpaid Taxes of the Target (A) did not, as of
the Most Recent Fiscal Month End, exceed the reserve for Tax
Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax
income) set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) delivered to the Buyer prior
to the signing hereof and (B) do not exceed that reserve as
adjusted for Taxes arising in the Ordinary Course of Business
(e.g., FICA and state employment taxes) and for the passage of
time through the Closing Date in accordance with the past custom
and practice of the Target in filing its Tax Returns. The unpaid
Taxes of the Target (other than Taxes
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required to be reflected on Tax Returns due prior to the Closing
Date) as of the Closing Date do not exceed $30,000.
(l) Real Property.
(i) The Target does not own any real property.
(ii) Section 4(l) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to the
Target. The Sellers have delivered to the Buyer correct and
complete copies of the leases and subleases listed in Section
4(l) of the Disclosure Schedule (as amended to date). With
respect to each lease and sublease listed in Section 4(l) of the
Disclosure Schedule:
(A) the lease or sublease is legal, valid,
binding, enforceable, and in full force and effect;
(B) the lease or sublease will continue to be
legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation
of the transactions contemplated hereby;
(C) neither the Target nor, to the Knowledge of
any of the Sellers, any other party to the lease or
sublease is in breach or default, and no event has
occurred that, with notice or lapse of time, would
constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(D) neither the Target nor, to the Knowledge of
any of the Sellers, any other party to the lease or
sublease has repudiated any provision thereof;
(E) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or
sublease;
(F) with respect to each sublease, the
representations and warranties set forth in subsections
(A) through (E) above are true and correct with respect
to the underlying lease;
(G) the Target has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any
interest in the leasehold or subleasehold;
(H) all facilities leased or subleased
thereunder have received all material approvals of
governmental authorities (including licenses and
permits) required in connection with the operation
thereof and have been operated and maintained in all
material respects in accordance with applicable laws,
rules, and regulations;
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(I) all facilities leased or subleased
thereunder are supplied with utilities and other
services necessary for the operation of said facilities;
and
(J) to the Knowledge of the Sellers, the owner
of the facility leased or subleased has good and
marketable title to the parcel of real property, free
and clear of any Security Interest, easement, covenant,
or other restriction, except for installments of special
easements not yet delinquent and recorded easements,
covenants, and other restrictions that do not impair the
current use, occupancy, or value, or the marketability
of title, of the property subject thereto.
(m) Intellectual Property.
(i) The Target owns or has the right to use, execute,
reproduce, display, perform, modify, enhance, distribute,
prepare derivative works of, and to make, have made, sell,
convey, transfer or assume without payments to any other Person,
all Intellectual Property necessary or desirable for the
operation of the business of the Target as presently conducted
and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Target immediately
prior to the Closing hereunder will be owned or available for
use by the Target on identical terms and conditions immediately
subsequent to the Closing hereunder. The Target has taken all
actions it reasonably believes is required to maintain and
protect each item of Intellectual Property that it owns or uses.
(ii) The Target has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and none of the
Sellers, the managers and officers of the Target has ever
received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation,
or violation (including any claim that the Target must license
or refrain from using any Intellectual Property rights of any
third party). To the Knowledge of any of the Sellers, no third
party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property
rights of the Target.
(iii) Section 4(m)(iii) of the Disclosure Schedule
identifies each patent or registration that has been issued to
the Target with respect to any of its Intellectual Property,
identifies each pending patent application or application for
registration that the Target has made with respect to any of its
Intellectual Property, and identifies each license, agreement,
or other permission that the Target has granted to any third
party with respect to any of its Intellectual Property (together
with any exceptions). The Sellers have delivered to the Buyer
correct and complete copies of all such patents, registrations,
applications, licenses, agreements, and permissions (as amended
to date) and have made available to the Buyer correct and
complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item.
Section 4(m)(iii) of the Disclosure
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Schedule also identifies each trade name or unregistered
trademark used by the Target in connection with its business.
With respect to each item of Intellectual Property required to
be identified in Section 4(m)(iii) of the Disclosure Schedule:
(A) the Target possesses all right, title, and
interest in and to the item, free and clear of any
Security Interest, license, or other restriction;
(B) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is
pending or, to the Knowledge of any of the Sellers, is
threatened that challenges the legality, validity,
enforceability, registrations, use, or ownership of the
item; and
(D) the Target has never agreed to indemnify any
Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the
item.
(iv) Section 4(m)(iv) of the Disclosure Schedule
identifies each item of Intellectual Property that any third
party owns and that the Target uses pursuant to license,
sublicense, agreement, or permission. The Sellers have delivered
to the Buyer correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date).
With respect to each item of Intellectual Property required to
be identified in Section 4(m)(iv) of the Disclosure Schedule:
(A) the license, sublicense, agreement, or
permission covering the item is legal, valid, binding,
enforceable, and in full force and effect;
(B) the license, sublicense, agreement, or
permission will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical
terms following the consummation of the transactions
contemplated hereby (including the assignments and
assumptions referred to in Section 2 above);
(C) neither the Target nor, to the Knowledge of
any of the Sellers, any other party to the license,
sublicense, agreement, or permission is in breach or
default, and no event has occurred that with notice or
lapse of time would constitute a breach or default or
permit termination, modification, or acceleration
thereunder;
(D) neither the Target nor, to the Knowledge of
any of the Sellers, any other party to the license,
sublicense, agreement, or permission has repudiated any
provision thereof;
(E) with respect to each sublicense, the
representations and warranties set forth in subsections
(A) through (D) above are true and correct with respect
to the underlying license;
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(F) the underlying item of Intellectual Property
is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge;
(G) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is
pending or, to the Knowledge of any of the Sellers, is
threatened that challenges the legality, validity, or
enforceability of the underlying item of Intellectual
Property; and
(H) the Target has not granted any sublicense or
similar right with respect to the license, sublicense,
agreement, or permission.
(v) To the Knowledge of any of the Sellers, the Target
will not interfere with, infringe upon, misappropriate, or
otherwise come into conflict with, any Intellectual Property
rights of third parties as a result of the continued operation
of its businesses as presently conducted and as presently
proposed to be conducted.
(vi) All Intellectual Property has been maintained in
confidence in accordance with protection procedures customarily
used in the industry to protect rights of like importance. All
former and current members of management and personnel of the
Target, including all former and current managers, employees,
agents, consultants and independent contractors who have
contributed to or participated in the conception and development
of the Intellectual Property (collectively, "Personnel"), have
executed and delivered to the Target a proprietary information
agreement, copies of which have been previously delivered to the
Buyer. No former or current Personnel has filed, asserted or, to
the Knowledge of any of the Sellers, threatened any claim
against the Target in connection with such Person's involvement
in the conception and development of any Intellectual Property.
To the Knowledge of any of the Sellers, none of the current
employees of the Target has any patents issued or applications
pending for any device, process, design or invention of any kind
now used or needed by the Target in the furtherance of its
business, which patents or applications have not been assigned
to the Target.
(n) Tangible Assets. The Target owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct of its
business as presently conducted and as presently proposed to be conducted. Each
such tangible asset is free from defects (patent and latent), has been
maintained in accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear), and is suitable for the
purposes for which it presently is used and presently is proposed to be used.
(o) Inventory. The inventory of the Target consists of raw
materials and supplies, manufactured and purchased parts, goods in process, and
finished goods, all of which is merchantable and fit for the purpose for which
it was procured or manufactured, and none of which is slow-moving, obsolete,
damaged, or defective, subject only to the reserve for inventory writedown set
forth on the face of the Most Recent Balance Sheet (rather than in any notes
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thereto) as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Target.
(p) Contracts. Section 4(p) of the Disclosure Schedule lists the
following contracts and other agreements to which the Target is a party:
(i) any agreement (or group of related agreements) for
the lease of personal property to or from any Person providing
for lease payments in excess of $25,000 per annum;
(ii) any agreement (or group of related agreements) for
the purchase or sale of raw materials, commodities, supplies,
products, or other personal property, or for the furnishing or
receipt of services, the performance of which will extend over a
period of more than one year, result in a loss to the Target, or
involve consideration in excess of $25,000;
(iii) any agreement concerning a partnership or joint
venture;
(iv) any agreement (or group of related agreements),
other than the Loan Agreement, under which it has created,
incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of 25,000
or under which it has imposed a Security Interest on any of its
assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement with any of the Sellers and their
Affiliates (other than the Target);
(vii) any profit sharing, stock option, stock purchase,
stock appreciation, deferred compensation, severance, or other
plan or arrangement for the benefit of its current or former
managers, officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual
on a full-time, part-time, consulting, or other basis;
(x) any agreement under which it has advanced or loaned
any amount to any of its managers, officers, or employees
outside the Ordinary Course of Business;
(xi) any agreement under which the Target may be
required to pay any royalties, honoraria, fees or other payments
to any Person by reason of the Target's ownership, use, license,
sales or disposition of the Intellectual Property of such
Person;
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(xii) any agreement under which the Target may be
entitled to royalties, honoraria, fees or other payments from
any Person by reason of such Person's ownership, use, license,
sale or disposition of the Intellectual Property of the Target;
(xiii) any agreement under which the consequences of a
default or termination could have a material adverse effect on
the business, financial condition, operations, results of
operations, or future prospects of the Target;
(xiv) any other agreement (or group of related
agreements) the performance of which involves consideration or
payments in excess of $25,000; or
(xv) any amendment or modification in respect of any of
the foregoing.
The Sellers have delivered to the Buyer a correct and complete copy of
each written agreement listed in Section 4(p) of the Disclosure Schedule (as
amended to date) and a written summary setting forth the terms and conditions of
each oral agreement referred to in Section 4(p) of the Disclosure Schedule. With
respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect; (B) the agreement will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby after
receipt of all applicable consents, approvals or notices, which consents,
approvals and notices are set forth in Section 4(p) of the Disclosure Schedule;
(C) neither the Target nor, to the Knowledge of any of the Sellers (or ▇▇▇
▇▇▇▇▇▇▇), any other party is in breach or default, and no event has occurred
that, with notice or lapse of time, would constitute a breach or default, or
permit termination, modification, or acceleration, under the agreement; and (D)
neither the Target nor, to the Knowledge of any of the Sellers (or ▇▇▇ ▇▇▇▇▇▇▇),
any other party has repudiated any provision of the agreement.
(q) Notes and Accounts Receivable. All notes and accounts
receivable of the Target are reflected properly on its books and records, are
valid receivables subject to no setoffs or counterclaims, are current and
collectible, and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts set forth on the
face of the Most Recent Balance Sheet (rather than in any notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Target.
(r) Powers of Attorney. Section 4(r) of the Disclosure Schedule
lists all outstanding powers of attorney executed on behalf of the Target.
(s) Insurance. Section 4(s) of the Disclosure Schedule sets
forth the following information with respect to each insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which the Target has been a party,
a named insured, or otherwise the beneficiary of coverage at any time since its
original date of organization:
(i) the name, address, and telephone number of the
agent;
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(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) the policy number and the period of coverage; and
(iv) a description of any retroactive premium
adjustments or other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal,
valid, binding, enforceable, and in full force and effect; (B) the policy will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (C) neither the Target nor, to the Knowledge of any of the Sellers, any
other party to the policy is in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has occurred that,
with notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration, under the policy; and (D)
neither the Target nor, to the Knowledge of any of the Sellers, any other party
to the policy has repudiated any provision thereof. The Target has been covered
since the original date of its organization by insurance in scope and amount
customary and reasonable for the business in which it has engaged during the
aforementioned period. Section 4(s) of the Disclosure Schedule describes any
self-insurance arrangements affecting the Target.
(t) Litigation. Section 4(t) of the Disclosure Schedule sets
forth each instance in which the Target (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) is a party or, to
the Knowledge of any of the Sellers, is threatened to be made a party to any
action, suit, proceeding, hearing, or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. None of the actions, suits,
proceedings, hearings, and investigations set forth in Section 4(t) of the
Disclosure Schedule could result in any material adverse change in the business,
financial condition, operations, results of operations, or future prospects of
the Target.
(u) Product Warranty. Each product manufactured, sold, leased,
or delivered by the Target has been in conformity in all material respects with
all applicable contractual commitments and all express and implied warranties,
and the Target does not have any Liability (and there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against any of them giving rise to any Liability)
for replacement or repair thereof or other damages in connection therewith,
subject only to the reserve for product warranty claims set forth on the face of
the Most Recent Balance Sheet (rather than in any notes thereto) as adjusted for
the passage of time through the Closing Date in accordance with the past custom
and practice of the Target. No product manufactured, sold, leased, or delivered
by the Target is subject to any guaranty, warranty, or other indemnity beyond
the applicable standard terms and conditions of sale or lease. Section 4(u) of
the Disclosure Schedule includes copies of the standard terms and conditions of
sale or lease for the Target (containing applicable guaranty, warranty, and
indemnity provisions).
(v) Product Liability. The Target does not have any material
Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any material Liability) arising out
-22-
of any injury to individuals or property as a result of the ownership,
possession, or use of any product manufactured, sold, leased, or delivered by
the Target.
(w) Employees. No Seller has current plans to terminate his
employment with the Target. To the Knowledge of any of the Sellers (or ▇▇▇▇▇
▇▇▇▇▇), as of the date of this Agreement, no other manager, executive, employee,
or group of employees has any current plans to terminate employment with the
Target, and as of the Closing Date, no significant group of employees will have
any plans to terminate employment with the Target. The Target is not a party to
or bound by any collective bargaining agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. The Target has not committed any unfair labor practice.
None of the Sellers (or ▇▇▇▇▇ ▇▇▇▇▇) has any Knowledge of any organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to employees of the Target. The Target is not delinquent in
payments to any of its employees for any wages, salaries, commissions, bonuses
or other direct compensation for any services performed for it or amounts
required to be reimbursed to such employees. The Target is in compliance in all
material respects with all applicable laws respecting labor, employment, fair
employment practices, terms and conditions of employment, workers' compensation,
occupational safety, plant closings and wages and hours. The Target has withheld
all amounts required by law or by agreement to be withheld from the wages,
salaries and other payments to employees, and is not liable for any arrears of
wages or any taxes or any penalty for failure to comply with any of the
foregoing. The Target is not liable for any payment to any trust or other fund
or to any governmental authority with respect to unemployment compensation
benefits, social security or other benefits or obligations for employees (other
than routine payments to be made in the normal course of business and consistent
with past practice). There are no material pending claims against the Target
under any workers' compensation plan or policy or for long term disability.
There are no material controversies pending or, to the Knowledge of any of the
Sellers (or ▇▇▇▇▇ ▇▇▇▇▇), threatened between the Target and any of its current
or former employees which have or could reasonably be expected to result in an
Adverse Consequence. To the Knowledge of any of the Sellers (or ▇▇▇▇▇ ▇▇▇▇▇), no
employees are in any material respect in violation of any term of any employment
contract, non-disclosure agreement, noncompetition agreement, or any restrictive
covenant to a former employer relating to the right of any such employee to be
employed by the Target because of the nature of the business conducted or
presently proposed to be conducted by the Target or to the use of trade secrets
or proprietary information of others.
(x) Employee Benefits.
(i) Section 4(x) of the Disclosure Schedule lists each
Employee Benefit Plan that the Target maintains or to which the
Target contributes.
(A) Each such Employee Benefit Plan (and each
related trust, insurance contract, or fund) complies in
form and in operation in all material respects with the
applicable requirements of ERISA, the Code, and other
applicable laws.
(B) All required reports and descriptions
(including Form 5500 Annual Reports, Summary Annual
Reports and Summary Plan
-23-
Descriptions) have been filed or distributed
appropriately with respect to each such Employee Benefit
Plan. The requirements of Part 6 of Subtitle B of Title
I of ERISA and of Code Section 4980B have been met with
respect to each such Employee Benefit Plan that is an
Employee Welfare Benefit Plan.
(C) All contributions (including all employer
contributions and employee salary reduction
contributions) that are due have been paid to each such
Employee Benefit Plan that is an Employee Pension
Benefit Plan and all contributions for any period ending
on or before the Closing Date that are not yet due have
been paid to each such Employee Pension Benefit Plan or
accrued in accordance with the past custom and practice
of the Target. All premiums or other payments for all
periods ending on or before the Closing Date have been
paid with respect to each such Employee Benefit Plan
that is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan that is an
Employee Pension Benefit Plan meets the requirements of
a "qualified plan" under Code Section 401(a) and has
either received a favorable determination letter from
the Internal Revenue Service or the remedial amendment
period for such plan under Code Section 401(b) has not
expired.
(E) No such Employee Benefit Plan is either a
Multiemployer Plan or subject to Title IV of ERISA or
Code Section 412.
(F) The Sellers have delivered to the Buyer
correct and complete copies of the plan documents and
summary plan descriptions, the most recent determination
letter received from the Internal Revenue Service, the
most recent Form 5500 Annual Report, and all related
trust agreements, insurance contracts, and other funding
agreements that implement each such Employee Benefit
Plan.
(ii) With respect to each Employee Benefit Plan that the
Target maintains or ever has maintained or to which it
contributes, ever has contributed, or ever has been required to
contribute:
(A) There have been no Prohibited Transactions
with respect to any such Employee Benefit Plan.
(B) No Fiduciary has any Liability for breach of
fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the
assets of any such Employee Benefit Plan.
(C) No action, suit, proceeding, hearing, or
investigation with respect to the administration or the
investment of the assets of any such Employee Benefit
Plan (other than routine claims for benefits) is pending
or, to the Knowledge of any of the Sellers (or ▇▇▇▇▇
▇▇▇▇▇), threatened.
-24-
(iii) The Target does not maintain, never has maintained
or contributed to, and never has been required to contribute to,
any Employee Welfare Benefit Plan providing medical, health, or
life insurance or other welfare-type benefits for current or
future retired or terminated employees, their spouses, or their
dependents (other than in accordance with Code Section 4980B).
(iv) The vesting, payment of, or entitlement to any
benefits under, or the requirement of contributions to, or
funding to any such Employee Benefit Plans, will not be
accelerated as a result of the transactions contemplated by this
Agreement. No amount that could be received (whether in cash or
property or the vesting of property) as a result of the
consummation of the transactions contemplated by this Agreement
by any employee, officer or manager of the Target who is a
"disqualified individual" (as such term is defined in proposed
Treasury Regulation Section 1.280G-1) under any such Employee
Benefit Plan could be characterized as an "excess parachute
payment" (as defined in Code Section 280G(b)(1)).
(y) Guaranties. The Target is not a guarantor or otherwise is
liable for any Liability or obligation (including indebtedness) of any other
Person.
(z) Environment, Health, and Safety.
(i) The Target (and its predecessors, if any) has
complied with all Environmental, Health, and Safety Laws in all
material respects, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has
been filed or commenced against it alleging any failure so to
comply. Without limiting the generality of the preceding
sentence, the Target (and its predecessors, if any) has obtained
and been in compliance with all of the terms and conditions of
all material permits, licenses, and other authorizations that
are required under, and has complied in all material respects
with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and
timetables that are contained in, all Environmental, Health, and
Safety Laws.
(ii) The Target (and its predecessors, if any) does not
have any Liability and has never handled or disposed of any
substance, arranged for the disposal of any substance, exposed
any employee or other individual to any substance or condition,
or owned or operated any property or facility in any manner that
could form the Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or
demand against the Target giving rise to any Liability) for
damage to any site, location, or body of water (surface or
subsurface), for any illness of or personal injury to any
employee or other individual, or for any reason under any
Environmental, Health, and Safety Law.
(iii) All properties and equipment used in the business
of the Target (and its predecessors, if any) have been free of
asbestos, PCB's, methylene
-25-
chloride, trichloroethylene, 1,2-trans-dichloroethylene,
dioxins, dibenzofurans, and Extremely Hazardous Substances.
(aa) Certain Business Relationships with the Target. None of the
Sellers and their respective Affiliates has been involved in any business
arrangement or relationship, other than an employment relationship, with the
Target within the past 12 months, and none of the Sellers and their respective
Affiliates owns any asset, tangible or intangible, that is used in the business
of the Target.
(bb) Disclosure. The representations and warranties contained in
this Section 4 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 4 not misleading.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his or its
commercially reasonable efforts to take all action and to do all things
necessary, proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfaction, but not
waiver, of the closing conditions set forth in Section 7 below).
(b) Notices and Consents. The Sellers will cause the Target to
give any notices to third parties, and will cause the Target to use its
commercially reasonable efforts to obtain any necessary third party consents in
connection with the matters referred to in Section 4(c) above. Each of the
Parties will (and the Sellers will cause the Target to) give any notices to,
make any filings with, and use his or its commercially reasonable efforts to
obtain any authorizations, consents, and approvals of governments, governmental
agencies and other third parties in connection with the matters referred to in
Section 3(a)(i), Section 3(b)(ii), and Section 4(c) above.
(c) Operation of Business. The Sellers will not cause or permit
the Target to engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, the Sellers will not cause or permit the Target to
engage in any practice, take any action, or enter into any transaction of the
sort described in Section 4(h) above without the prior written consent of the
Buyer.
(d) Preservation of Business. The Sellers will use commercially
reasonable efforts to cause the Target to keep its business and properties
substantially intact, including its present operations, physical facilities,
working conditions, and relationships with lessors, licensors, suppliers,
customers, and employees.
(e) Full Access. Each of the Sellers will permit, and the
Sellers will cause the Target to permit, representatives of the Buyer to have
full access at all reasonable times to all premises, properties, personnel,
books, records (including Tax records), contracts, and documents of or
pertaining to the Target.
(f) Notice of Developments. The Sellers will give prompt written
notice to the Buyer of any material adverse development causing a breach of any
of the representations and warranties in Section 4 above. Each Party will give
prompt written notice to the others of any
-26-
material adverse development causing a breach of any of his or its own
representations and warranties in Section 3 above. No disclosure by any Party
pursuant to this Section 5(f), however, shall be deemed to amend or supplement
Annex I or the Disclosure Schedule or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant.
(g) Exclusivity. None of the Sellers will (and the Sellers will
not cause or permit the Target to) (i) solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any equity interests or other voting securities, or any substantial portion
of the assets of the Target (including any acquisition structured as a merger,
consolidation, share exchange or otherwise) or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. None of the Sellers
will vote his Class A Units in favor of any such acquisition. The Sellers will
notify the Buyer within two (2) days if any Person makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing and will disclose the
details of a proposal or offer, including the Person or Persons making it and
the material terms of such proposal or offer.
(h) Restricted Units. Immediately prior to the Closing, the
Target shall take all action necessary to cause all restrictions in respect of
the Class A Units issued under the Target Plan to lapse.
(i) Tax Election. No Seller, or any manager or officer of the
Target, shall make any election or take any other action on behalf of, or with
respect to, the Target that is inconsistent with how the Target has filed its
prior Tax Returns and would increase the Target's Liability for Taxes for any
Taxable period (including a past, present or future Taxable period).
(j) Valuation of the Target's Assets for Income Tax Purposes.
The Buyer and the Seller Representatives shall use commercially reasonable
efforts to agree upon the value of each Target asset for income tax purposes
and, if and upon reaching such agreement, shall attach as Schedule 2 hereto a
written memorandum of such within five (5) business days of the date of this
Agreement. If the Buyer and the Seller Representatives are unable to so agree
within said five (5) day period, the Buyer and the Seller Representatives shall
mutually select an independent "Big 5" accounting firm to perform such valuation
on or prior to the Closing, and such firm's valuation shall be conclusive on all
Parties hereto and shall be set forth as Schedule 2 hereto. Schedule 2 shall
automatically become a part of this Agreement after it has been prepared in
accordance with this Section 5(j). If an accounting firm is selected to perform
a valuation in accordance with this Section 5(j), each of (i) the Buyer and (ii)
the Sellers shall pay one-half of the fees and expenses of such firm for such
valuation. No Party shall take any position for income tax purposes that is
inconsistent in any material respect with Schedule 2.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments
-27-
and documents) as any other Party may reasonably request, all at the sole cost
and expense of the requesting Party (unless the requesting Party is entitled to
indemnification therefor under Section 8 below). The Sellers acknowledge and
agree that from and after the Closing the Buyer will be entitled to possession
of all documents, books, records (including Tax records), agreements, and
financial data of any sort relating to the Target.
(b) Litigation Support. In the event and for so long as any
Party actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Target, each of the other Parties will
cooperate with him or it and his or its counsel in the contest or defense, make
available his or its personnel, and provide such testimony and access to his or
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 8 below).
(c) Transition. None of the Sellers will take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of the Target from maintaining
the same business relationships with the Target after the Closing as it
maintained with the Target prior to the Closing. Each of the Sellers will refer
all customer inquiries relating to the business of the Target to the Target from
and after the Closing.
(d) Confidentiality. Each of the Sellers will treat and hold as
such all of the Confidential Information, refrain from using any of the
Confidential Information, except in connection with this Agreement and in
connection with such Seller's employment by the Target to the extent any such
Seller remains an employee of the Target, and deliver promptly to the Buyer or
destroy, at the request and option of the Buyer, all tangible embodiments (and
all copies) of the Confidential Information that are in his possession to the
extent any such Seller ceases to be an employee of the Target. In the event that
any of the Sellers is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, that Seller will notify the Buyer promptly of the request or
requirement so that the Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Section 6(d). If, in the absence of a
protective order or the receipt of a waiver hereunder, any of the Sellers is, on
the advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, that Seller may disclose the
Confidential Information to the tribunal; provided, however, that the disclosing
Seller shall use his reasonable efforts to obtain, at the request of the Buyer
and at the Buyer's expense, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Information
required to be disclosed as the Buyer shall designate. The foregoing provisions
shall not apply to any Confidential Information that is generally available to
the public immediately prior to the time of disclosure.
-28-
(e) Stock Options.
(i) As soon as reasonably practicable following the date
of this Agreement, the Board of Directors of the Buyer (or, if
appropriate, any committee thereof administering the 1996 Equity
Participation Plan of the Buyer (the "Buyer Plan") shall adopt
such resolutions or take such other actions as may be required
to adjust the terms of all outstanding Options, whether vested
or unvested, as necessary to provide that each Option
outstanding immediately prior to the Closing shall be amended
and converted into an option to acquire, on the same terms and
conditions as were applicable under such Option, the number of
shares of Buyer Common Stock (rounded down to the nearest whole
share) equal to (A) the number of Class A Units subject to such
Option immediately prior to the Closing multiplied by (B) the
Exchange Ratio, at an exercise price per share of Buyer Common
Stock (rounded up to the nearest whole cent) equal to (x) the
exercise price per Class A Unit otherwise purchasable pursuant
to such Option immediately prior to the Closing divided by (y)
the Exchange Ratio (each, as so adjusted, an "Adjusted Option").
(ii) Except to the extent required under the respective
terms of the Options, all restrictions or limitations on
transfer and vesting with respect to Options awarded under the
Target Plan, to the extent that such restrictions or limitations
shall not have already lapsed, and all other terms thereof,
shall remain in full force and effect after giving effect to the
transactions contemplated in Section 2 above.
(iii) As soon as reasonably practicable following the
Closing, the Buyer shall prepare and file with the SEC a
registration statement on Form S-8 (or another appropriate form)
registering the number of shares of Buyer Common Stock subject
to the Adjusted Options and shall maintain the effectiveness of
such registration statement (and maintain the current status of
the prospectus contained therein) for so long as any such
Adjusted Options remain outstanding.
(f) Registration of Registrable Shares.
(i) If the Closing occurs in calendar year 2001, within
forty-five (45) days after the Closing Date, the Buyer shall
file with the SEC a registration statement on any appropriate
form under the Securities Act with respect to the offering and
sale or other disposition of the Registrable Shares. If the
Closing occurs in calendar year 2002, the Buyer shall have up to
ninety (90) days to file such registration statement. The Buyer
shall use all commercially reasonable efforts to cause such
registration statement to become effective as soon as reasonably
practicable after such filing. The Sellers shall cooperate with
and provide assistance to the Buyer, as the Buyer may reasonably
request, in connection with any registration and sale of the
Registrable Shares.
(ii) The Buyer shall (i) prepare and file with the SEC,
any amendments or supplements to such registration statement or
prospectus that may be necessary
-29-
to keep such registration statement effective and to comply with
the provisions of the Securities Act with respect to the offer
of the Registrable Shares covered by such registration statement
for a period of twelve months from the effective date of the
registration statement; (ii) prepare and promptly file with the
SEC and promptly notify the Sellers of the filing of such
amendment or supplement to such registration statement or
prospectus as may be necessary to correct any statement therein
or omission therefrom if, at any time when a prospectus relating
to the Registrable Shares is required to be delivered under the
Securities Act, any event with respect to the Buyer shall have
occurred as a result of which any prospectus would include an
untrue statement of material fact or omit to state any material
fact necessary to make the statements therein not misleading;
(iii) in case the Sellers are required to deliver a prospectus,
prepare promptly such amendment or amendments to such
registration statement and such prospectus or prospectuses as
may be necessary to permit compliance with the requirements of
Section 10(a)(3) of the Securities Act; (iv) advise the Sellers
promptly after the Buyer shall receive notice or obtain
knowledge of the issuance of any stop order by the SEC
suspending the effectiveness of any such registration statement
or amendment thereto or of the initiation or threatening of any
proceedings for that purpose, and promptly use commercially
reasonable efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued;
(v) use commercially reasonable efforts to qualify such
Registrable Shares for sale under the securities or "blue sky"
laws of such states within the United States as the Sellers may
reasonably designate, except that the Buyer shall not be
required in connection therewith or as a condition thereto to
qualify to do business in any such state or to take any action
that would subject it to general service of process in any such
jurisdiction where it is not then so subject; and (vi) furnish
to the Sellers, as soon as available, copies of any such
registration statement and each preliminary and final
prospectus, or supplement or amendment required to be prepared
with respect thereto, all in such quantities as they may from
time to time reasonably request.
(iii) The Sellers agree that, upon receipt of any notice
from the Buyer of the happening of any event of the kind
described in Section 6(f)(ii), they will forthwith discontinue
the disposition of the Registrable Shares until they have
received copies of the supplemented or amended prospectus
contemplated by Section 6(f)(ii), or until the Sellers are
advised in writing by the Buyer that the use of the prospectus
may be resumed, and have received copies of any additional or
supplemental filings that are incorporated by reference in the
prospectus, and, if so directed by the Buyer, the Sellers will
deliver to the Buyer all copies, other than permanent file
copies, then in the Sellers' possession of the prospectus
covering the Registrable Shares current at the time of receipt
of such notice.
(iv) If the Buyer takes any action to permit a public
offering or sale or other distribution of such Registrable
Shares, the Sellers shall furnish information to the Buyer
concerning the Sellers' holdings of securities of the Buyer and
the proposed method of sale or other disposition of the
Registrable Shares and such other information and undertakings
as shall be required in connection with the
-30-
preparation and filing of any registration statement and any
amendments thereto covering all or part of the Registrable
Shares in order to assist the Buyer in complying with the
Securities Act and the Securities Exchange Act. The Sellers
further agree to enter into such undertakings and take such
other action relating to the conduct of the proposed offering
that the Buyer may reasonably request as being necessary to
assist the Buyer in complying with the federal and state
securities laws and the rules or other requirements of the
National Association of Securities Dealers, Inc. ("NASD") or
otherwise to effectuate the offering.
(v) The Buyer shall pay all registration expenses
incident to the registration of the Registrable Shares
including, without limitation, all registration, filing and NASD
fees, all fees and expenses of complying with securities or blue
sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, and the fees and
disbursements of counsel for the Buyer and of its independent
public accountants, including the expenses of any special audits
or "cold comfort" letters required by or incident to such
performance and compliance. With respect to sales of Registrable
Shares, the Sellers shall pay all underwriting discounts and
commissions and fees of underwriters, selling brokers, dealer
managers or similar securities industry professionals relating
to the distribution of the Registrable Shares, and the fees and
disbursements of counsel retained by the Sellers and transfer
taxes, if any.
(g) Business Location. It is the intent of the Parties that the
business of the Target will continue to be conducted in the greater metropolitan
Phoenix area; provided, however, that the Buyer may after the Closing in its
sole discretion move the business of the Target to any other area.
(h) Employment Matters. With respect to employee retirement,
welfare and fringe benefit plans, policies or programs of the Buyer (the "Buyer
Employee Plans"), each Person who was an employee of the Target at the Closing
(the "Target Employee") is allowed to participate in or entitled to the
following after the Closing: (i) the Buyer will provide the Target Employee with
service credit in an amount equal to the service credit accrued prior to the
Closing, if any, under the Target's plans, policies, programs, agreements and
arrangements, and each Target Employee will be so recognized for purposes of
participation, eligibility and vesting, but not for purposes of benefit accrual,
under the Buyer Employee Plans and (ii) the Buyer will use commercially
reasonable efforts to cause its benefit providers to waive all waiting periods
and pre-existing condition requirements under any Buyer Employee Plan that has
any such requirements or restrictions. Without limiting the foregoing, the Buyer
will assume any accrued but unused vacation days, and any earned but unused sick
days, credited to each Target Employee under the Target's applicable vacation
and sick leave policies as of the Closing; it being understood that each Target
Employee will accrue vacation days and earn sick days for service following the
Closing in accordance with the applicable vacation and sick leave policies of
the Buyer.
(i) Intellectual Property. At all times after the Closing Date,
each Seller shall assist the Buyer in every proper way to obtain and prosecute
all patent applications in which such Seller is an inventor thereunder. The
Buyer shall (i) compensate such Seller at a reasonable rate
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if such Seller is not an employee of the Buyer at the time he is rendering such
assistance and (ii) reimburse all reasonable expenses of such Seller in
connection with his assistance.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in
Section 3(a) and Section 4 above shall be true and correct in
all material respects at and as of the Closing Date;
(ii) the Sellers shall have performed and complied with
all of their covenants hereunder in all material respects
through the Closing;
(iii) the Target shall have procured all of the third
party consents specified in Section 5(b) above;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, (C)
affect adversely the right of the Buyer to own the Class A Units
and to control the Target, or (D) affect adversely the right of
the Target to own its assets and to operate its businesses (and
no such injunction, judgment, order, decree, ruling, or charge
shall be in effect);
(v) the Sellers shall have delivered to the Buyer a
certificate dated the Closing Date to the effect that (A) each
of the conditions specified above in Section 7(a)(i)-(iv) is
satisfied in all respects; (B) all deferred wages, salaries,
commissions, bonuses or other direct compensation set forth on
Section 4(w) of the Disclosure Schedule have been paid in full
by the Sellers; and (C) all fees and expenses owing to the
Target's investment advisors have been paid in full by the
Sellers;
(vi) the Sellers shall have delivered to the Buyer a
certificate dated as of the Closing Date certified by the Seller
Representatives attaching duly authorized resolutions (or
similar document) of the members of the Target approving this
Agreement and the transactions contemplated hereby;
(vii) the Buyer shall have received from counsel to the
Sellers an opinion in form and substance as set forth in Exhibit
C attached hereto, addressed to the Buyer, and dated as of the
Closing Date;
(viii) the Buyer shall have received, effective as of
the Closing, the resignation of each manager (solely in his
capacity as manager) of the Target;
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(ix) the Buyer shall have received waiver letters in
form and substance as set forth in Exhibit D attached hereto
from individuals holding at least 95% of the outstanding
Options;
(x) the Buyer shall have received reasonable assurances
that the Target employees listed on Annex II will become
employees of the Buyer following the Closing on terms mutually
agreeable to the Buyer and such employees;
(xi) each of the Sellers listed in Section A of Annex
III shall have executed a Non-Compete Agreement in form and
substance as set forth in Exhibit E-1 attached hereto, and each
of the Sellers listed in Section B of Annex III shall have
executed a Non-Compete Agreement in form and substance as set
forth in Exhibit E-2;
(xii) the Seller Representatives and the Escrow Agent
shall have executed an Escrow Agreement in form and substance as
set forth in Exhibit F attached hereto (the "Escrow Agreement");
and
(xiii) all actions to be taken by the Sellers in
connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated
hereby will be reasonably satisfactory in form and substance to
the Buyer.
The Buyer may waive any condition specified in this Section 7(a) if it executes
a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Sellers. The obligation of
the Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in
Section 3(b) above shall be true and correct in all material
respects at and as of the Closing Date;
(ii) the Buyer shall have performed and complied with
all of its covenants hereunder in all material respects through
the Closing;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation (and no
such injunction, judgment, order, decree, ruling, or charge
shall be in effect);
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(iv) the Buyer shall have delivered to the Sellers an
officer's certificate to the effect that each of the conditions
specified above in Section 7(b)(i)-(iii) is satisfied in all
respects;
(v) the Buyer shall have delivered to the Sellers an
officer's certificate attaching resolutions duly adopted by its
board of directors approving this Agreement and the transactions
contemplated hereby;
(vi) the Sellers shall have received from counsel to the
Buyer an opinion in form and substance as set forth in Exhibit G
attached hereto, addressed to the Sellers, and dated as of the
Closing Date; and
(vii) all actions to be taken by the Buyer in connection
with consummation of the transactions contemplated hereby and
all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Seller
Representatives.
The Seller Representatives may waive any condition specified in this Section
7(b) if they execute a writing so stating at or prior to the Closing.
8. Remedies for Breaches of This Agreement.
(a) Indemnification by the Sellers. Each Seller agrees
subsequent to the Closing to indemnify and hold the Buyer and its Affiliates,
successors and assigns and persons serving as officers, directors, partners,
managers, stockholders, members, employees and agents thereof (individually a
"Buyer Indemnified Party" and collectively the "Buyer Indemnified Parties")
harmless from and against any Adverse Consequences that may be sustained or
suffered by any of them arising out of or based upon any of the following
matters:
(i) fraud, intentional misrepresentation or the willful
breach of any representations, warranties or covenants of the
Sellers under this Agreement or in any certificate, schedule,
annex or exhibit delivered pursuant hereto (collectively, "Fraud
Claims");
(ii) any Liability arising from any breach of the
representations and warranties set forth in Sections 3(a)(i),
3(a)(iv), 3(a)(v), 4(a), 4(b) and 4(f) (collectively, "Ownership
Claims");
(iii) any Liability for Taxes arising from the Target's
income, activities, assets, events, circumstances and
transactions on or prior to the Closing (to the extent such
Liability for Taxes (other than Taxes required to be reflected
on Tax Returns due prior to the Closing Date) exceeds $30,000)
or any breach of the representations and warranties set forth in
Sections 4(k) and 4(x) hereof or the covenants set forth in
Sections 2(b), 5(i) and 9 hereof (collectively, "Tax Claims");
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(iv) any Liability arising from any breach of the
environmental representations and warranties set forth in
Section 4(z) hereof (collectively, "Environmental Claims");
(v) any Liability arising from acts or omissions of any
of the Seller Representatives or any disputes among the Sellers
or between the Sellers and the Seller Representatives for the
allocation of the Purchase Price or otherwise (collectively,
"Allocation Claims"); and
(vi) other than Fraud Claims, Ownership Claims, Tax
Claims, Environmental Claims and Allocation Claims, any other
breach of any representation, warranty or covenant of the
Sellers under this Agreement or in any schedule, annex or
exhibit delivered pursuant hereto, or by reason of any claim,
action or proceeding asserted or instituted growing out of any
matter or thing constituting a breach of such representations,
warranties or covenants (collectively, "General Claims").
(b) Limitations on Indemnification by the Sellers. Anything
contained in this Agreement to the contrary notwithstanding, the Liability of
the Sellers to provide any indemnification to any Buyer Indemnified Party and
the right of the Buyer Indemnified Parties to indemnification under Section 8(a)
shall be subject to the following provisions:
(i) No claims for indemnification shall be made under
this Agreement against the Sellers, and no indemnification shall
be payable to any Buyer Indemnified Party, with respect to
General Claims after the date that is two years following the
Closing (except for those claims that were initiated prior to
such two-year limitation).
(ii) No claims for indemnification shall be made under
this Agreement against the Sellers, and no indemnification shall
be payable to any Buyer Indemnified Party, with respect to any
Tax Claim or Environmental Claim after expiration of all
applicable statutes of limitation with respect to the Tax Claim
or Environmental Claim, as applicable.
(iii) In no event shall the maximum aggregate Liability
of the Sellers under Section 8(a) with respect to General
Claims, Environmental Claims and Tax Claims exceed $13,161,529;
provided, however, that this Section 8(a)(iii) shall not apply
to any obligation or covenant of the Sellers to pay or reimburse
money to the Buyer that is expressly set forth in this
Agreement.
(iv) The Sellers shall not be liable under Section 8(a)
with respect to General Claims, Environmental Claims and Tax
Claims until the amount otherwise due to the Buyer Indemnified
Parties exceeds $100,000 in the aggregate, in which case the
Sellers will be liable to the Buyer Indemnified Parties for the
full amount due (excluding all amounts below $100,000);
provided, however, that this Section 8(a)(iv) shall not apply to
any obligation or covenant of the Sellers to pay or reimburse
money to the Buyer that is expressly set forth in this
Agreement.
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(v) Claims for indemnification with respect to Fraud
Claims, Ownership Claims and Allocation Claims made under this
Agreement by any Buyer Indemnified Party shall not be subject to
any of the limitations set forth in this Section 8(b).
(c) Indemnification by the Buyer. The Buyer agrees to indemnify
and hold the Sellers harmless from and against any Adverse Consequences that may
be sustained or suffered by any or all of them arising out of or based upon any
of the following matters:
(i) fraud, intentional misrepresentation or the willful
breach of any representations, warranties or covenants of the
Buyer under this Agreement or in any certificate, schedule,
annex or exhibit delivered pursuant hereto;
(ii) any breach of any representation, warranty or
covenant made by the Buyer in this Agreement or in any
certificate delivered by the Buyer hereunder, or by reason of
any claim, action or proceeding asserted or instituted growing
out of any matter or thing constituting such a breach; and
(iii) the operation of the business of the Target
following the Closing Date; except to the extent such Adverse
Consequences are attributable to acts or circumstances occurring
prior to the Closing Date.
(d) Limitation on Indemnification by the Buyer. Anything
contained in this Agreement to the contrary notwithstanding, no claim for
indemnification shall be made under this Agreement against the Buyer, and no
indemnification shall be payable to the Sellers with respect to claims asserted
pursuant to Section 8(c) above, after the date that is two years following the
Closing (except for those claims that were initiated prior to such two-year
limitation). In no event shall the maximum aggregate Liability of the Buyer
under Section 8(c) exceed $13,161,529. In addition, the Buyer shall not be
liable under Section 8(c) until the amount otherwise due to the Sellers exceeds
$100,000 in the aggregate, in which case the Buyer will be liable to the Sellers
for the full amount due (excluding all amounts below $100,000). Notwithstanding
the foregoing, claims for indemnification with respect to fraud, intentional
misrepresentation or the willful breach of any representations, warranties or
covenants of the Buyer under this Agreement or in any certificate, schedule,
annex or exhibit delivered pursuant hereto shall not be subject to any of the
limitations set forth in this Section 8(d).
(e) Notice; Defense of Claims. An indemnified party shall make
claims for indemnification hereunder by giving written notice thereof to the
indemnifying party promptly on discovery and in any event within the period in
which indemnification claims can be made hereunder. If indemnification is sought
for a claim or Liability asserted by a third party, the indemnified party shall
also give written notice thereof to the indemnifying party promptly after it
receives notice of the claim or Liability being asserted, but the failure to do
so shall not relieve the indemnifying party from any Liability except to the
extent that it is materially prejudiced by the failure or delay in giving such
notice. Such notice shall summarize the basis for the claim for indemnification
and any claim or Liability being asserted by a third party. Within twenty (20)
days after receiving such notice the indemnifying party shall give written
notice to the indemnified party stating whether it disputes the claim for
indemnification and whether it will
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defend against any third party claim or Liability at its own cost and expense.
If the indemnifying party fails to give notice that it disputes an
indemnification claim within twenty (20) days after receipt of notice thereof,
it shall be deemed to have accepted and agreed to the claim, which shall become
immediately due and payable. The indemnifying party shall be entitled to direct
the defense against a third-party claim or Liability with counsel selected by it
(subject to the consent of the indemnified party, which consent shall not be
unreasonably withheld or delayed) as long as the indemnifying party is
conducting a good faith and diligent defense. The indemnified party shall at all
times have the right to fully participate at its own expense in the defense of a
third-party claim or Liability, directly or through counsel; provided, however,
that if the named parties to the action or proceeding include both the
indemnifying party and the indemnified party and the indemnified party is
advised that representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct, the
indemnified party may engage separate counsel at the expense of the indemnifying
party. If no such notice of intent to dispute and defend a third-party claim or
Liability is given by the indemnifying party, or if such good faith and diligent
defense is not being or ceases to be conducted by the indemnifying party, the
indemnified party shall have the right, at the expense of the indemnifying
party, to undertake the defense of such claim or Liability (with counsel
selected by the indemnified party), and to compromise or settle it, with consent
of the indemnifying party, which consent shall not be unreasonably withheld or
delayed. If the third party claim or Liability is one that by its nature cannot
be defended solely by the indemnifying party, then the indemnified party shall
make available such information and assistance as the indemnifying party may
reasonably request and shall cooperate with the indemnifying party in such
defense, at the expense of the indemnifying party.
(f) Security for the Sellers' Indemnification Obligations. As
security for the agreement by the Sellers to indemnify the Buyer as described in
this Section 8, each Seller hereby instructs the Buyer to set aside and deposit
into escrow with Computershare Trust Company, Inc, as escrow agent (the "Escrow
Agent"), in accordance with the Escrow Agreement the Held Back Consideration.
The Buyer may set off against the Held Back Consideration any indemnification
claims for which the Sellers may be responsible pursuant to this Agreement.
(g) Currency Exchange. For purposes of the Held Back
Consideration as security for the indemnification provisions set forth in this
Agreement, the value given to each share of Buyer Common Stock held as Held Back
Consideration that is used at any time to satisfy indemnification claims of the
Buyer shall be $17.00 (the "Currency Exchange"). In the event that the market
price of the Buyer Common Stock increases or decreases while there is Held Back
Consideration subject to the Escrow Agreement, the Sellers shall retain the
Currency Exchange value per share for purposes of fulfilling any indemnification
obligation from the Held Back Consideration.
(h) Held Back Consideration Not Exclusive. Each Buyer
Indemnified Party shall have the right to satisfy its indemnification claims out
of the escrow created by the Escrow Agreement and pursuant to the terms thereof,
and the Sellers shall have no right to satisfy any indemnification claims of any
Buyer Indemnified Party outside of the Escrow Agreement; provided, however, that
the Held Back Consideration shall not be the Buyer's exclusive source of
indemnification from the Sellers pursuant to this Section 8. The foregoing
indemnification provisions are in addition to, and not in derogation of, any
statutory, equitable, or common law
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remedy any Party may have for breach of representation, warranty, or covenant.
Each of the Sellers hereby agrees that he will not make any claim for
indemnification against the Target by reason of the fact that he was a manager,
officer, employee, or agent of the Target or was serving at the request of the
Target as a partner, manager, trustee, director, officer, employee, or agent of
another entity (whether such claim is for judgments, damages, penalties, fines,
costs, amounts paid in settlement, losses, expenses, or otherwise and whether
such claim is pursuant to any statute, charter document, bylaw, operating
agreement, contract or otherwise) with respect to any action, suit, proceeding,
complaint, claim, or demand brought by the Buyer against such Seller (whether
such action, suit, proceeding, complaint, claim, or demand is pursuant to this
Agreement, applicable law, or otherwise).
9. Tax Matters. The following provisions shall govern the allocation of
responsibility as between the Buyer and the Sellers for certain tax matters
following the Closing Date:
(a) Characterization of the Transaction. The Parties agree that
the transaction will be reported on all applicable Tax Returns in a manner
consistent with the following:
(i) No Party will take a position on a Tax Return
contrary to the covenants and representations set forth in this
Agreement, including those set forth below in this Section 9(a);
(ii) Each Seller will treat the sale of the Class A
Units as a sale or exchange of a partnership interest pursuant
to Code Section 741, except as otherwise provided in Code
Section 751;
(iii) The Buyer will treat the purchase of the Class A
Units as an acquisition of all of the assets of the Target;
(iv) The Target will terminate pursuant to Code Section
708 as a result of, and immediately upon, the acquisition of the
Class A Units; and
(v) The Buyer shall have no obligation for the federal
and state income Taxes payable with respect to the transactions
of the Target that accrued on or prior to the Closing Date, and
the Sellers shall have no obligation for the federal and state
income Taxes payable with respect to the transactions of the
Target that accrue after the Closing Date.
(b) Tax Periods Ending on or Before the Closing Date. The
Sellers shall prepare or cause to be prepared and file or cause to be filed all
income Tax Returns for the Target for all periods ending on or prior to the
Closing Date but due thereafter. The Sellers shall permit the Buyer to review
and comment on each such Tax Return described in the preceding sentence prior to
filing. All such Tax Returns shall be prepared in a manner consistent with past
practice and, without the Buyer's written consent (which may be granted or
withheld in its sole and absolute discretion), no positions shall be taken,
elections made, or method adopted that is inconsistent with positions taken,
elections made, or methods used in preparing and filing similar Tax Returns in
prior periods (including, but not limited to, positions, elections or methods
that would have the effect of deferring income or gains to a period after the
Closing or accelerating
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deductions or losses to a period prior to the Closing). The Buyer shall prepare
or cause to be prepared and file or cause to be filed all non-income Tax Returns
for the Target for all periods ending on or prior to the Closing Date that are
due to be filed after the Closing Date. The Buyer shall permit the Seller
Representatives to review and comment on each such Tax Return described in the
preceding sentence prior to filing. All such Tax Returns shall be prepared in a
manner consistent with past practice and, on such Tax Returns, no positions
shall be taken, elections made, or method adopted that is inconsistent with
positions taken, elections made, or methods used in preparing and filing similar
Tax Returns in prior periods, unless counsel to the Buyer advises it that taking
a position, making or following an election or using a method consistent with
Tax Returns filed for prior periods is not supported by law or is likely to
expose the Target or the Buyer to penalties.
(c) Tax Periods Beginning Before and Ending After the Closing
Date. The Buyer shall prepare or cause to be prepared and file or cause to be
filed any non-income Tax Returns of the Target for Tax periods that begin before
the Closing Date and end after the Closing Date. All such Tax Returns shall be
prepared in a manner consistent with past practice and, on such Tax Returns, no
positions shall be taken, elections made, or method adopted that is inconsistent
with positions taken, elections made, or methods used in preparing and filing
similar Tax Returns in prior periods, unless counsel to the Buyer advises it
that taking a position, making or following an election or using a method
consistent with Tax Returns filed for prior periods is not supported by law or
is likely to expose the Target or the Buyer to penalties.
(d) Cooperation on Tax Matters.
(i) The Buyer, the Target and the Sellers shall
cooperate fully, as and to the extent reasonably requested by
the other party, in connection with the filing of Tax Returns
pursuant to this Section 9 and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include
the retention and (upon the other party's reasonable request)
the provision of records and information that are reasonably
relevant to any such audit, litigation or other proceeding and
making employees available on a mutually convenient basis to
provide additional information and explanation of any material
provided hereunder. The Target and the Sellers shall (A) retain
all books and records with respect to Tax matters pertinent to
the Target relating to any Taxable period beginning before the
Closing Date until the expiration of the statute of limitations
(and, to the extent notified by the Buyer or the Sellers, any
extensions thereof) of the respective Taxable periods, and to
abide by all record retention agreements entered into with any
taxing authority, and (B) give the Buyer reasonable written
notice prior to transferring, destroying or discarding any such
books and records and, if the other party so requests, the
Target or the Sellers, as the case may be, shall allow the other
party to take possession of such books and records.
(ii) The Buyer and the Sellers shall, upon request, use
commercially reasonable efforts to obtain any certificate or
other document from any governmental authority or any other
Person as may be necessary to mitigate, reduce or eliminate any
Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby).
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(e) Tax Sharing Agreements. The Sellers hereby represent and
covenant that there are no tax sharing agreements or similar agreements with
respect to or involving the Target and that the Target has no Liability with
respect to such an agreement.
(f) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with the Seller's sale of their respective
Units shall be paid by the Sellers when due, and the Sellers will, at their own
expense, file all necessary Tax Returns and other documentation with respect to
all such transfer, documentary, sales, use, stamp, registration and other Taxes
and fees, and, if required by applicable law, the Buyer will, and will cause its
Affiliates to, join in the execution of any such Tax Returns and other
documentation.
(g) Indemnification Payments. Any payments by a Party pursuant
to Section 8 shall be considered an adjustment to the Purchase Price for all
income and local tax purposes.
10. Seller Representatives.
(a) Appointment. As used in this Agreement, the "Seller
Representatives" means ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
or any person appointed as a successor Seller Representative pursuant to Section
10(b) below. The written approval of at least two of the three Seller
Representatives is required for any action of the Seller Representatives under
this Agreement or the Escrow Agreement.
(b) Election and Replacement. From and after the date hereof
until the date when all obligations under this Agreement have been discharged
(including all indemnification obligations under Section 8 hereof), the Sellers
representing a majority in interest of the Class A Units may, from time to time
upon written notice to the Seller Representatives and the Buyer, remove any of
the Seller Representatives (including any appointed by the Buyer) or appoint a
new Seller Representative to fill any vacancy created by the death,
incapacitation, resignation or removal of a Seller Representative. Furthermore,
if any Seller Representative dies, becomes incapacitated, resigns or is removed
by the Sellers representing a majority in interest of the Class A Units, the
Sellers shall promptly appoint a successor Seller Representative to fill the
vacancy so created. If the Sellers representing a majority in interest of the
Class A Units are required to but have not appointed a successor Seller
Representative within twenty (20) days from a request by the Buyer to appoint a
successor Seller Representative, the Buyer shall have the right to appoint a
Seller Representative to fill any vacancy so created from the managers of the
Target prior to the Closing Date, and shall advise the Seller Representatives of
such appointment by written notice. A copy of any appointment by the Sellers of
any successor Seller Representative shall be provided to the Buyer promptly
after it shall have been effected.
(c) Authority. In addition to any other authority granted to the
Seller Representatives herein, after the Closing Date the Seller Representatives
shall be authorized to enter into and perform their obligations under the Escrow
Agreement, and to discuss, negotiate, resolve and fully and finally settle on
behalf of the Sellers any claims for indemnification by the Buyer against the
Sellers under Section 8 hereof and any disputes arising out of this Agreement
and to take any action and to make and deliver any certificate, notice, consent
or instrument required or permitted to be made or delivered under this Agreement
or under the documents referred to in
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this Agreement (an "Instrument") that the Seller Representatives determine in
their discretion to be necessary, appropriate or desirable, and, in connection
therewith, to hire or retain, at the sole expense of the Sellers, such counsel,
investment bankers, accountants, and other professional advisors as they
determine in their sole and absolute discretion to be necessary, advisable or
appropriate in order to carry out and perform their rights and obligations
hereunder. Any party receiving an Instrument from the Seller Representatives
shall have the right to rely in good faith upon such Instrument, and to act in
accordance with the Instrument without independent investigation.
(d) No Liability of the Buyer. The Buyer shall have no Liability
to any of the Sellers or otherwise arising out of the acts or omissions of the
Seller Representatives or any disputes among the Sellers or between the Sellers
and the Seller Representatives. The Buyer may rely entirely on its dealings
with, and notices to and from, the Seller Representatives to satisfy any
obligations it might have under this Agreement or otherwise to the Sellers. The
Sellers shall indemnify the Buyer for any Adverse Consequences suffered as a
result of the Buyer's good faith reliance on the acts or omissions of the Seller
Representatives.
11. Termination.
(a) Termination of Agreement. The Parties may terminate this
Agreement as provided below:
(i) the Buyer and the Seller Representatives may
terminate this Agreement by mutual written consent at any time
prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving
written notice to the Seller Representatives at any time prior
to the Closing (A) in the event any of the Sellers has breached
any representation, warranty, or covenant contained in this
Agreement in any material respect, the Buyer has notified the
Seller Representatives of the breach, and the breach has
continued without cure for a period of 10 days after the notice
of breach or (B) if the Closing shall not have occurred on or
before January 15, 2002, by reason of the failure of any
condition precedent under Section 7(a) hereof (unless the
failure results primarily from the Buyer itself breaching any
representation, warranty, or covenant contained in this
Agreement); and
(iii) the Seller Representatives may terminate this
Agreement by giving written notice to the Buyer at any time
prior to the Closing (A) in the event the Buyer has breached any
representation, warranty, or covenant contained in this
Agreement in any material respect, the Seller Representatives
have notified the Buyer of the breach, and the breach has
continued without cure for a period of 10 days after the notice
of breach or (B) if the Closing shall not have occurred on or
before January 15, 2002, by reason of the failure of any
condition precedent under Section 7(b) hereof (unless the
failure results primarily from any of the Sellers themselves
breaching any representation, warranty, or covenant contained in
this Agreement).
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(b) Effect of Termination. If any Party terminates this
Agreement pursuant to Section 11(a) above, all rights and obligations, except
any rights and obligations related to Confidential Information, of the Parties
hereunder shall terminate without any Liability of any Party to any other Party
(except for any Liability of any Party then in breach).
12. Miscellaneous.
(a) Nature of Certain Obligations.
(i) The covenants of each of the Sellers in Section 2(a)
above concerning the sale of his Class A Units to the Buyer and
the representations and warranties of each of the Sellers in
Section 3(a) above concerning the transaction are several
obligations. This means that the particular Seller making the
representation, warranty, or covenant will be solely responsible
to the extent provided in Section 8 above for any Adverse
Consequences the Buyer may suffer as a result of any breach
thereof.
(ii) The remainder of the representations, warranties,
and covenants in this Agreement are joint and several
obligations. This means that each Seller will be responsible to
the extent provided in Section 8 above for the entirety of any
Adverse Consequences the Buyer may suffer as a result of any
breach thereof.
(b) Legend. All share certificates representing shares of Buyer
Common Stock delivered to the Sellers hereunder shall bear a legend
substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR QUALIFIED UNDER ANY APPLICABLE STATE
SECURITIES LAWS (THE "STATE ACTS"), HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND QUALIFICATION UNDER THE
STATE ACTS OR EXEMPTIONS FROM SUCH REGISTRATION OR QUALIFICATION
REQUIREMENTS (INCLUDING, IN THE CASE OF THE SECURITIES ACT, THE
EXEMPTION AFFORDED BY RULE 144).
(c) Press Releases and Public Announcements. No Party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the Buyer and the
Seller Representatives; provided, however, that any Party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing Party will use its commercially reasonable efforts to advise
the other Parties prior to making the disclosure).
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(d) No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(e) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
(f) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his rights, interests, or obligations hereunder without the prior written
approval of the Buyer and the Seller Representatives; provided, however, that
the Buyer may (i) assign any or all of its rights and interests hereunder to one
or more of its Affiliates and (ii) designate one or more of its Affiliates to
perform its obligations hereunder (in any or all of which cases the Buyer
nonetheless shall remain responsible for the performance of all of its
obligations hereunder).
(g) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(h) Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(i) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given three business days
after it is sent by registered or certified mail, return receipt requested,
postage prepaid, and addressed to the intended recipient as set forth below:
If to the Sellers or Seller Representatives:
▇▇▇▇ ▇. ▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
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Copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇, Esq.
If to the Buyer:
ViaSat, Inc.
▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail). Each such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
(i) if by fax, when such fax has been transmitted to the fax number set forth in
this Section 12(i) and evidence of receipt is received or (ii) if given by any
other means, upon delivery or refusal of delivery at the address set forth in
this Section 12(i). Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Parties notice in the manner herein set forth.
(j) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of California
without giving effect to any choice or conflict of law provision or rule
(whether of the State of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
California.
(k) Amendments and Waivers. No amendment or waiver of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by the Buyer and the Seller Representatives. No waiver by any Party
of any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
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(l) Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
(m) Expenses. Each of the Parties will bear his or its own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby. The Sellers agree that
the Target has not borne and will not bear any of the Sellers' costs and
expenses (including any of their investment advisor fees, legal fees and
expenses) in connection with this Agreement or any of the transactions
contemplated hereby.
(n) Termination of the Voting Trust Agreement. Each of the
Sellers who are a party to that certain Voting Trust Agreement dated as of March
27, 2000 hereby agrees that such Voting Trust Agreement shall be terminated as
of the Closing Date.
(o) Construction. 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 statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) that the Party
has not breached shall not detract from or mitigate the fact that the Party is
in breach of the first representation, warranty, or covenant.
(p) Incorporation of Exhibits, Annexes, and Schedules. The
Exhibits, Annexes, and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
(q) Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in Section 12(r) below), in addition to any other remedy to which they may
be entitled, at law or in equity.
(r) Mediation/Arbitration. If a dispute arises out of or relates
to this Agreement, or the breach thereof, the Buyer and the Seller
Representatives shall negotiate in good faith to settle such dispute,
controversy or claim within fifteen (15) calendar days of notice
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thereof. If the Buyer and the Seller Representatives are unable to resolve such
dispute, controversy or claim arising out of this Agreement or the performance,
breach or termination thereof within fifteen (15) calendar days, it shall be
settled by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association. The place of arbitration shall be San
Diego, California. The arbitration shall be conducted by a neutral arbitrator
selected by mutual agreement of the Buyer and the Seller Representatives within
ten days after notice by either party to the other requesting such arbitration.
If the Buyer and the Seller Representatives fail to agree within ten days on the
selection of the arbitrator, an arbitrator shall be promptly appointed by the
American Arbitration Association. Prior to issuing a final arbitration award,
the arbitrator shall provide the Buyer and the Seller Representatives with a
preliminary ruling and allow the Buyer and the Seller Representatives a
reasonable period (not to exceed five (5) business days) to respond in writing
to the preliminary ruling. Judgment upon the arbitration award rendered may be
entered in any court having jurisdiction. The prevailing party shall be entitled
to all costs of arbitration including, but not limited to, reasonable attorneys'
fees and out-of-pocket expenses. The Parties further agree that they shall be
entitled to discovery in the same manner as though the dispute were within the
jurisdiction of the Superior Court of the State of California. Except as
otherwise required by law (or by the fiduciary duties of the Buyer's directors),
all information resulting from or otherwise pertaining to any dispute shall be
nonpublic and handled by the Buyer, the Seller and their respective agents in
such a way as to prevent the public disclosure of such information.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
as of the date first above written.
BUYER: SELLERS:
VIASAT, INC., a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------- ---------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President-Administration, Address: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
General Counsel and Secretary ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SELLERS:
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------- --------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------- --------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ Address: ▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------------- --------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------- --------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ Address: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SIGNATURE PAGE TO UNIT PURCHASE AGREEMENT