SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 2, 2002
Performance Technologies, Incorporated
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(Exact name of registrant as specified in its charter)
Delaware 0-27460 16-1158413
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
205 Indigo Creek Drive, Rochester. N.Y. 14626
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (585) 256-0200
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(Former name or former address, if changed since last report.)
Item 2. Acquisition or Disposition of Assets
On October 2, 2002 the Registrant acquired a portion of Intel Corporation's
Embedded Communications Platform Division. The acquisition was completed
pursuant to the Stock Purchase Agreement, dated September 12, 2002, between
Intel Corporation and the Registrant to acquire all the issued and outstanding
shares of Ziatech Corporation. The stock purchase was completed at a cash
purchase price of $2,966,752, which was determined by arm's length negotiations
between the parties. The purchase price was paid in cash by the Registrant from
funds on hand. In connection with the Stock Purchase Agreement, the Registrant
entered into certain arrangements respecting inventory and the cross-licensing
of intellectual property, all as set forth in the Stock Purchase Agreement
attached hereto as Exhibit 2. Under the terms of the acquisition, the former San
Luis Obispo, California operation of Intel became a wholly-owned subsidiary of
the Registrant.
The Ziatech line of CompactPCI, PICMG 2.16 and STD 32-based processor
modules and system platforms will become an important extension to the
Performance Technologies product family that management believes can contribute
to the future growth and expansion of the company. The combined products will
allow Performance Technologies to serve a broader set of embedded applications
in the data communications, telecommunications, military, industrial automation,
transportation and medical markets.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
As of the date hereof, it is impractical for the Registrant to provide the
required audited financial information. The Registrant will file the required
audited financial information under cover of Form 8-K/A as soon as practicable,
but not later than sixty days after the date upon which this report is filed.
(b) Pro forma financial information.
As of the date hereof, it is impractical for the Registrant to provide the
required pro forma financial information. The Registrant will file the required
pro forma financial information under cover of Form 8-K/A as soon as
practicable, but not later than sixty days after the date upon which this report
is filed.
(c) Exhibits.
(2) Stock Purchase Agreement between Intel Corporation and Performance
Technologies, Incorporated, dated as of September 12, 2002 (Copies of
omitted Exhibits and Schedules will be provided to the Securities and
Exchange Commission upon written request.)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
PERFORMANCE TECHNOLOGIES, INCORPORATED
October 17, 2002 By: /s/ Donald L. Turrell
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Donald L. Turrell
President and Chief Executive Officer
October 17, 2002 By: /s/ Dorrance W. Lamb
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Dorrance W. Lamb
Chief Financial Officer and
Vice President, Finance
Exhibit 2
STOCK PURCHASE AGREEMENT
between
INTEL CORPORATION
and
PERFORMANCE TECHNOLOGIES INCORPORATED
Dated as of September 12, 2002
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of September 12, 2002 by and between INTEL
CORPORATION, a Delaware corporation ("Seller"), and PERFORMANCE TECHNOLOGIES
INCORPORATED, a Delaware corporation ("Buyer").
WHEREAS, Seller owns all of the issued and outstanding Shares (as defined
below) of Ziatech Corporation, a California corporation (the "Company") engaged
in the design, manufacture, and sale of the Products (as defined below);
WHEREAS, the parties desire that Seller sell to Buyer, and that Buyer
purchase from Seller, all of the issued and outstanding Shares of the Company,
as more specifically provided herein;
WHEREAS, in connection with the Transaction (as defined below), Buyer
desires to hire certain employees of Seller following the Closing (as defined
below) who currently provide services to the Company; and
WHEREAS, simultaneous with the Closing, Buyer, Seller and the Company, as
applicable, will execute and deliver the Intellectual Property Agreement in the
form attached hereto as Exhibit A, the cPCI 2.16 Development Agreement in the
form attached hereto as Exhibit B, the Seller and Buyer OEM Letter Agreements in
the forms attached hereto as Exhibit C-1 and C-2, respectively, and the Patent
Cross License Agreement in the form attached hereto as Exhibit D (collectively,
the "Ancillary Agreements").
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and undertakings contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
ARTICLE I. DEFINITIONS
Section 1.1 Certain Definitions.
In addition to the other definitions contained in this Agreement, the
following terms will, when used in this Agreement, have the following respective
meanings:
"Accountants" means a firm of independent public accountants as may be
mutually agreed upon by Buyer and Seller after the date hereof.
"Affiliate" means, with respect to any Person, any Person who directly or
indirectly owns or controls, is owned or controlled by, or is under direct or
indirect common ownership or control with such other Person. Without limiting
the generality of the foregoing, a Person shall be deemed to "own" another
person if it owns, directly or indirectly, more than 50% of the capital stock or
other equity interest of such other Person.
"Agreement" means this Stock Purchase Agreement, as the same may be amended
or supplemented from time to time in accordance with the terms hereof, together
with the Schedules and Exhibits hereto.
"Books and Records" means books, ledgers, files, reports, personnel files
(including, but not limited to, all personnel files of the Retained Employees
(as defined below) held or maintained by Seller since October 10, 2000),
operating records, accounting records, price lists, fixed asset lists,
correspondence and other forms of information relating in any manner to the
business, operations or financial or statistical history of a Person, whether in
written, electronic or magnetic form; provided that this definition shall not
include Tax Returns which contain any information related to Seller.
"Claim" means any pending or threatened contest, claim, demand, assessment,
action, cause of action, complaint, litigation, proceeding, hearing or notice
involving any Person.
"Closing" means the closing and consummation of the Transaction.
"Closing Documents" means: (a) with respect to Seller, all agreements,
documents and instruments required to be delivered by Seller at Closing, as set
forth in Section 7.2; and (b) with respect to Buyer, all agreements, documents
and instruments required to be delivered by Buyer at Closing, as set forth in
Section 7.3.
"COBRA"" means the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended, section 4980B of the Code and Title I, Part 6 of ERISA, and any
similar state group health plan continuation Law, together with all regulations
and proposed regulations promulgated thereunder.
"Code" means the Internal Revenue Code of 1986, as amended.
"Encumbrances" means liens, charges, encumbrances, security interests,
options or any other restrictions or third party rights.
"Environmental Law" means any Law relating to (a) the protection of human
health or the environment (including air, water vapor, surface water,
groundwater, drinking water supply, and surface or subsurface land), or (b) the
exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, management, release,
investigation, remediation, removal or disposal of, Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any Person that is a member of "controlled group of
corporations" with, or is under "common control" with, or is a member of the
same "affiliated service group" with the Company or Seller, as defined in
section 414 of the Code.
"Financial Statements" means the following: (a) the unaudited balance
sheets and income statements of the Company as of and for the years ended
December 31, 2000 and 2001, including the notes and schedules thereto (if any);
and (b) the unaudited balance sheet and income statement of the Company for the
period of January 1 through June 29, 2002, including the notes and schedules
thereto (if any).
"GAAP" means U.S. generally accepted accounting principles applied on a
consistent basis throughout the specified periods.
"Governmental Authorizations" means all licenses, permits, certificates and
other authorizations and approvals of any Governmental Entity required under any
applicable Law to carry on the business as currently conducted in the Ordinary
Course.
"Governmental Entity" means any U.S. or non-U.S. local, state, federal or
other government, including each of their respective branches, departments,
agencies, courts, instrumentalities or other subdivisions.
"Hazardous Substance" means any matter or material containing any
substance, whether solid, liquid or gaseous, (a) that is listed, defined,
designated or classified as hazardous or toxic under any applicable
Environmental Law, (b) the presence of which may require investigation or
remediation under any Environmental Law, or (c) is otherwise legally regulated
by a Governmental Entity which enforces such applicable Environmental Laws.
"Intellectual Property" means patents, inventions, trade secrets, concepts,
know-how, copyrights (whether registered or unregistered), works of authorship,
trademarks (whether registered or unregistered), service marks (whether
registered or unregistered), mask works, trade names, trade dress, product
names, slogans, logos and internet domain names, including registrations and
applications of any of the foregoing, software, firmware, object code, source
code, specifications, processes, drawings, designs, technology, methods,
techniques, formulae and proprietary information and documents incorporating any
similar rights, including technical reports and laboratory data (in all media).
"Inventory" means all inventory, raw materials, work in process, samples,
supplies, service parts, purchased parts and goods and finished goods.
"Knowledge" means with respect to any Person, the actual knowledge of such
Person. With respect to Seller, Knowledge shall include only the actual
knowledge of each of the following individuals: Paul Abbott, Martin Todd Dorris,
Shreesh Dubey, Bob Ehlers, Teana Fredeen, Jim Medeiros, Mark Novad, Dave
Parkinson, Todd Rallison, Sharon Seitz, Chris Teaford, Bob Tillman, Mark Tsai
and Todd Underwood.
"Law" means any law (including common law), statute, ordinance, rule,
regulation, code, order, judgment, injunction, decree or judicial or
administrative doctrine that is promulgated or issued by any Governmental
Entity.
"Liability" means any direct or indirect indebtedness, liability, Claim,
damage, deficiency, obligation or responsibility, fixed or unfixed, choate or
inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute,
contingent or otherwise.
"Losses" means Liabilities, losses, charges, actions, suits, proceedings,
interest, penalties and reasonable costs and expenses associated therewith
(including reasonable attorneys' fees, litigation costs, fines, penalties and
expenses of investigation), whether asserted by a party to this Agreement or by
a third party, but in no event includes incidental or consequential damages.
"Material Adverse Effect" means, with respect to a Person, any change,
event or effect that, when taken together with all other adverse changes, events
or effects that have occurred, (a) is materially adverse to the business,
operations, properties, condition (financial or otherwise), assets, or
Liabilities of the Person, taken as a whole, or (b) prevents or delays the
Closing, it being understood that any change, event or effect arising out of or
resulting from any of the following shall not be deemed to constitute a Material
Adverse Effect: (i) the public announcement of this Agreement or the
Transaction, (ii) general industry conditions not specifically related to, or
having a materially disproportionate effect on, the Person, and (iii) general
economic, market, regulatory or political conditions.
"Ordinary Course" means the ordinary course of business of the business,
consistent with past practices.
"Permitted Encumbrances" means (a) Encumbrances for Taxes or governmental
assessments, charges, or claims the payment of which are not yet due, (b)
statutory liens of landlords and liens of carriers, warehousemen, mechanics,
materialmen and other similar Persons and other liens imposed by applicable Law
incurred in the Ordinary Course for sums not yet delinquent or immaterial in
amount and being contested in good faith, and (c) other imperfections of title
or Encumbrances, if any, which imperfections of title or other Encumbrances
would not result in the creation of a Liability or obligation of Buyer after the
Closing Date.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization.
"Products" means the products listed on Schedule 3.11(b) to this Agreement.
"Shares" means all of the common stock, par value $0.01 per share, of the
Company.
"Subsidiary" means any Person, 50% or more of the outstanding equity
interests of which are owned, directly or indirectly, by the referenced Person.
"Taxes" means all taxes levied or imposed by any Governmental Entity,
including income, gross receipts, windfall profits, value added, severance,
production, sales, use, license, excise, franchise, employment, environmental,
real property, personal property, transfer, alternative minimum, estimated,
withholding or other taxes, together with any interest, additions or penalties
with respect thereto and any interest in respect of such additions or penalties,
whether or not disputed or contested.
"Tax Returns" means all U.S. and non-U.S. reports and returns required to
be filed with respect to Taxes, including all attachments thereto.
"Third Party Debt" means indebtedness that is (a) owed by the Company to a
Person who is neither Seller nor an Affiliate of the Company or of Seller, and
(b) payable in multiple installments.
"Transaction" means, collectively, the pre-Closing transactions
contemplated by Section 2.1, the purchase and sale of the Shares, and the
execution and delivery of the Ancillary Agreements, all as herein provided.
"Treasury Regulations" means the Treasury Regulations promulgated under the
Code.
"U.S." means the United States of America.
Section 1.2 Interpretation.
In this Agreement, unless the express context otherwise requires:
(a) the words "herein," "hereof" and "hereunder" and words of similar
import refer to this Agreement as a whole and not to any particular provision of
this Agreement;
(b) references to "Article" or "Section" are to the respective Articles and
Sections of this Agreement, and references to "Exhibit" or "Schedule" are to the
respective Exhibits and Schedules annexed hereto;
(c) references to a "party" means a party to this Agreement and include
such party's successors and permitted assigns;
(d) references to a "third party" means any Person other than a party to
this Agreement or an Affiliate of such party;
(e) the terms "dollars" and "$" mean U.S. dollars;
(f) terms defined in the singular have a comparable meaning when used in
the plural, and vice versa;
(g) the masculine pronoun includes the feminine and the neuter, and vice
versa, as appropriate in the context; and
(h) wherever the word "include," "includes" or "including" is used in this
Agreement, it will be deemed to be followed by the words "without limitation."
Section 1.3 Accounting Conventions.
Except as expressly provided otherwise herein, all references in this
Agreement to financial terms will be deemed to refer to such terms as they are
defined under GAAP.
ARTICLE II. PURCHASE AND SALE
Section 2.1 Pre-Closing Transfers and Other Actions.
(a) Prior to Closing, Seller will cause the Company to transfer to Seller
or an Affiliate of Seller the following assets and Liabilities, and Seller or
such Affiliate of Seller will accept such transfer and assume the Liabilities
related to such assets (collectively, the "Seller Retained Assets and
Liabilities"):
(i) the Intellectual Property licenses or agreements identified on Schedule
2.1(a)(i);
(ii) that certain parcel of real property located at 600 Tank Farm Road, San
Luis Obispo, California, which is identified on Schedule 2.1(a)(ii), together
with all Liabilities related thereto, including, but not limited to, those
related to Environmental Law, and any leases or other agreements of occupancy or
use related thereto;
(iii) certain Inventory of the Company, which is identified on Schedule
2.1(a)(iii);
(iv) all Company accounts receivable accrued up to Closing;
(v) all Company accounts payable (including, but not limited to, trade and other
payables) accrued up to Closing to the extent not otherwise satisfied by Seller
prior to Closing;
(vi) the assets and Liabilities of the Company identified on Schedule
2.1(a)(vi); and
(vii) all warranty obligations and Liabilities, including claims for repairs or
replacements (in each case, to the extent arising pursuant to the terms of the
purchase order under which the Product was sold) for Products shipped by Seller
or by the Company for its own account or the account of Seller prior to the
Closing Date (as defined below); provided, however, that such Liabilities shall
be satisfied in accordance with Section 6.11 hereof.
(b) Prior to Closing, Seller or an Affiliate of Seller and the Company will
enter into, and effect the transactions contemplated by, the Contribution and
Assumption Agreement in the form attached hereto as Exhibit E.
(c) Seller shall cause all intercompany accounts between Seller or an
Affiliate of Seller, on the one hand, and the Company, on the other hand, to be
settled in full on or prior to the Closing, and Seller shall cause all
intercompany agreements between Seller or an Affiliate Seller, on the one hand,
and the Company, on the other hand, to be terminated on or prior to the Closing.
Seller shall be responsible for all Liabilities associated with all intercompany
accounts and agreements and the satisfaction or termination of the foregoing.
(d) Seller shall remove all assets, if any, owned by Seller or an Affiliate
of Seller and physically situated at the Company's leased facility located at
1050 Southwood Drive, San Luis Obispo, California (the "Lease"), which assets
are set forth on Schedule 2.1(d), on or prior to Closing.
Section 2.2 Purchase and Sale of Shares.
(a) On the terms and subject to the conditions set forth herein, at Closing
Seller will sell, convey, transfer, assign and deliver to Buyer, and Buyer will
purchase from Seller, all right, title and interest in and to all of the Shares.
At Closing, Buyer shall pay to Seller as consideration for the Shares an
aggregate amount of Three Million Six Hundred Thirty Three Thousand Five Hundred
Thirty Dollars ($3,633,530) (the "Purchase Price") by wire transfer of
immediately available funds to such account or accounts as designated by Seller
prior to Closing; provided, however, that if Seller elects to adjust the
Purchase Price pursuant to Section 2.3(a) or Section 2.4(a) hereof upon
completion of the procedures contemplated thereby, the Purchase Price shall be
the dollar amount resulting from such adjustments.
(b) Through the purchase of the Shares as set forth above, Buyer will
thereby indirectly acquire all of the assets and Liabilities of the Company
(except for the Seller Retained Assets and Liabilities or as otherwise
contemplated by this Agreement), including, but not limited to, the Company's
capital equipment, fixed assets, equipment, furniture, and other personal
property, the Lease, its right, title and interest in and to certain
Intellectual Property owned by or licensed to the Company and permitted to be
retained by the Company, including the Company's patents, trademarks, service
marks, the trade name "Ziatech", copyrights, proprietary information (including
customer and supplier lists), Books and Records, and its contract rights and
intangibles. Except as otherwise provided in the Intellectual Property
Agreement, the Patent Cross License Agreement and the Contribution and
Assumption Agreement, Buyer acknowledges that no rights under any Intellectual
Property licenses or agreements between Seller and third parties and any
Intellectual Property licenses or agreements between Seller and the Company
which do not relate exclusively to the manufacture and sale of the Products will
be extended to Buyer or the Company following Closing.
Section 2.3 Asset Confirmation
(a) Four (4) days prior to Closing, Seller shall take a physical inventory
of the Company's tangible assets, at Seller's sole expense, which shall be
observed by Buyer or its representatives (the "Asset Confirmation"). Immediately
following completion of the Asset Confirmation, Seller shall notify Buyer in
writing regarding the results of the Asset Confirmation (the "Asset Statement").
Buyer shall deliver a certificate setting forth its acceptance of, or objections
to, the Asset Statement within one (1) day of receipt of such Asset Statement
from Seller. If Buyer accepts the Asset Statement, the determination of Seller
regarding the tangible assets shall be deemed final and binding and no further
actions will be taken or adjustments made by the parties related thereto. In the
event that Buyer objects to the Asset Statement or any portion thereof, Buyer
and Seller shall attempt in good faith to immediately resolve any such
objections. If Buyer and Seller resolve such objections and each party signs a
certificate to that effect, the Asset Statement, as adjusted by the parties,
shall be deemed final and binding for purposes of this Agreement and, to the
extent such adjusted Asset Statement identifies any assets missing from the list
of the Company's tangible assets set forth on Schedule 3.11(a) as of the date
hereof, Seller agrees, in its sole discretion, to take one of the following
actions:
(i) Seller shall replace such assets by delivering to the Company replacements
therefor on or prior to Closing; or
(ii) Seller shall reduce the Purchase Price by the aggregate value of all
missing assets, such value being based on the net book value of such
assets set forth next to each asset on Schedule 3.11(a);
provided, however, that the parties agree that Seller will not be obligated to
replace any missing assets or reduce the Purchase Price unless the aggregate
value of all such missing assets exceeds Twenty Five Thousand Dollars ($25,000).
(b) In the event that Buyer and Seller are unable to resolve such
objections, any dispute regarding the Asset Statement shall be governed by
Section 9.7 of this Agreement; provided, however, that if the parties cannot
resolve such dispute prior to the Closing Date, Buyer hereby agrees to effect
the Closing based on the Asset Statement originally submitted by Seller and to
defer the resolution of such dispute until after the Closing. The replacement of
assets or adjustment to the Purchase Price contemplated by this Section 2.3
shall be the sole remedy of Buyer for any of the Company's tangible assets that
were listed on Schedule 3.11(a) (other than the Seller Retained Assets and
Liabilities) but identified as missing on the Asset Statement, and in no event
shall Buyer be entitled to any other rights to indemnification under Article
VIII of this Agreement for any of such assets not transferred and delivered at
Closing; provided, however, that any such replacement or adjustment shall not be
included in any calculation of the limitations on indemnification set forth in
Section 8.5 hereof.
Section 2.4 Inventory Confirmation
(a) Four (4) days prior to Closing, Seller shall undertake a physical count
of the portion of the Inventory set forth on Schedule 2.4(a) (the "Demand
Forecast Inventory"), at Seller's sole expense, which shall be observed by Buyer
or its representatives (the "Inventory Confirmation"). Inventory that is not
Demand Forecast Inventory shall not be counted or included in the Inventory
Confirmation. Immediately following completion of the Inventory Confirmation,
Seller shall notify Buyer in writing regarding the results of the Inventory
Confirmation (the "Inventory Statement"). The Inventory Statement shall set
forth the value of the Inventory to be transferred to Seller immediately prior
to Closing pursuant to Section 2.1(a) hereof and the value of the Demand
Forecast Inventory that shall remain with the Company at Closing. Buyer shall
deliver a certificate setting forth its acceptance of, or objections to, the
Inventory Statement within one (1) day of receipt of such Inventory Statement.
If Buyer accepts the Inventory Statement, the determination of Seller regarding
the Inventory shall be deemed final and binding and no further actions will be
taken or adjustments made by the parties related thereto. In the event that
Buyer objects to the Inventory Statement or any portion thereof, Buyer and
Seller shall attempt in good faith to immediately resolve any such objections.
If Buyer and Seller resolve such objections and each party signs a certificate
to that effect, the Inventory Statement, as adjusted by the parties, shall be
deemed final and binding for purposes of this Agreement and, to the extent the
value of the Demand Forecast Inventory that will remain with the Company at
Closing reflected on such Inventory Statement is less than One Million Eight
Hundred Thirty Three Thousand Five Hundred Thirty Dollars ($1,833,530), the
parties agree that Seller will reduce the Purchase Price by such shortfall;
provided, however, that the parties agree that Seller will not be obligated to
take the foregoing action unless the aggregate value of the shortfall exceeds
Fifty Thousand Dollars ($50,000).
(b) In the event that Buyer and Seller are unable to resolve such
objections, any dispute regarding the Inventory Statement shall be governed by
Section 9.7 of this Agreement; provided, however, that if the parties cannot
resolve such dispute prior to the Closing Date, Purchaser hereby agrees to
effect the Closing based on the Inventory Statement originally submitted by
Sellers and to defer the resolution of such dispute until after the Closing. The
adjustments contemplated by this Section 2.4 shall be the sole remedy of Buyer
for any issues related to the value of the Inventory to be retained by the
Company at Closing, and in no event shall Buyer be entitled to any other rights
to indemnification under Article VIII related thereto; provided, however, that
any such adjustments shall not be included in any calculation of the limitations
on indemnification set forth in Section 8.5 hereof.
Section 2.5 Retention of Certain Employees.
(a) Prior to Closing, and in conformity with all applicable Law and
Seller's internal policies, Seller and Buyer will cooperate to facilitate for
Buyer or the Company the post-Closing employment of certain of those employees
of Seller who currently perform services for the Company pursuant to the
Employee Leasing Agreement (as defined below) and who Buyer desires to retain
after Closing so that they can continue to perform similar services for the
Company thereafter (the "Retained Employees"). Buyer regards the employment of a
certain Retained Employee as being essential to Buyer's ability to manage the
Company and operate the business following Closing (the "Key Employee"). The
Retained Employees and the Key Employee are set forth on Schedule 2.5. Buyer
will make offers of employment to no less than sixty-seven (67) Retained
Employees. The aforementioned cooperation between Seller and Buyer shall
include, but not be limited to, (i) Buyer extending to the Retained Employees
employment on terms that are competitive for similarly situated employees in the
prevailing employment market in San Luis Obispo, California, (ii) Buyer
crediting the service of the Retained Employees with Seller under Buyer's
seniority-based employment programs, paid time off programs and employee
benefits programs, and (iii) Seller making information concerning its
compensation and benefit programs and specific information relating to
individual Retained Employees available to Buyer for the purpose of formulating
compensation packages for Retained Employees.
(b) Following the Closing, Seller and Buyer agree that Buyer shall not be
responsible for providing employment, compensation or benefits of any sort to
any of Seller's employees in connection with services provided to the Company at
any time prior to Closing, other than the Retained Employees who have accepted
Buyer's offers of employment with the Company. Seller and Buyer further agree
that Seller shall be responsible for all Liabilities associated with such
employees related to the period prior to the Closing Date.
Section 2.6 Closing.
Closing will take place at the offices of counsel to Buyer, Harter, Secrest
& Emery LLP, 1600 Bausch & Lomb Place, Rochester, New York on October 1, 2002,
or such other date mutually agreed to by Buyer and Seller; provided, however,
that all of the conditions to Closing set forth in Article VII have been
satisfied or waived. In the alternative, Closing may take place by the parties'
simultaneous execution and delivery of the Closing Documents, with transmittal
of facsimile signature pages electronically and exchange of original executed
documents by overnight courier delivery. The date in the U.S. on which Closing
occurs is called the "Closing Date," and Closing will be effective as of 11:59
p.m., Rochester time, on the Closing Date. The required deliveries at Closing
are set forth in Article VII.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER
As of the date hereof, Seller represents and warrants to Buyer as follows:
Section 3.1 Power and Authority of Seller.
Seller has all requisite corporate power and authority to execute and
deliver this Agreement and each Ancillary Agreement to which it is a party, to
perform its obligations hereunder and thereunder, and to consummate the
Transaction.
Section 3.2 Organization, Power and Capitalization of the Company.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the Laws of the State of California. The Company has all
requisite corporate power and authority to own, lease, operate and transfer its
assets, and to carry on its business as now being conducted. The Company is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where its ownership or operation of assets or its conduct of
the business requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect on the Company. Except as set
forth on Schedule 3.2(a), the Company does not have any Subsidiaries.
(b) The total authorized capital stock of the Company consists of 1,000
shares of common stock, par value $0.01 per share. Schedule 3.2(b) is a true,
correct and complete listing of: (i) all capital stock of the Company issued and
outstanding; (ii) all rights, options, warrants, conversion rights, exchange
rights or similar commitments or equivalents, written or oral, to acquire
capital stock of the Company, whether vested or unvested, that are issued and
outstanding; and (iii) the respective holders of each thereof, and the amounts
of their respective holdings. Except as set forth on Schedule 3.2(b), there are
no preemptive or other outstanding rights, options, warrants, conversion rights
or agreements or commitments to issue or sell capital stock of the Company, or
any securities or obligations convertible into or exchangeable for, or giving
any Person a right to subscribe for or acquire, capital stock of the Company,
and no securities or obligations evidencing such rights are outstanding.
(c) Seller has made available to Buyer true, correct and complete copies of
the articles of incorporation (including all amendments to date), by-laws
(including all amendments to date), stock book and minute book of the Company
since October 10, 2000.
Section 3.3 Governmental Approvals.
No consent, approval, waiver, or authorization is required to be obtained
by Seller, and no notice or filing is required to be given by Seller to, or made
by Seller with, any Governmental Entity in connection with the execution,
delivery and performance by Seller of this Agreement, each Ancillary Agreement
and the consummation of the Transaction.
Section 3.4 Non-Contravention.
Except as set forth on Schedule 3.4, the execution, delivery and
performance by Seller of this Agreement and each Ancillary Agreement, and the
consummation of the Transaction, do not and will not: (a) violate any provision
of the articles of incorporation, bylaws or other organizational documents of
the Company; (b) conflict with, or result in the breach of, or constitute a
default under, or result in the termination, cancellation or acceleration
(whether after the filing of notice or the lapse of time or both) of any right
or obligation of Seller or the Company under, or a loss of any benefit to which
the Company is entitled under, any Material Contract (as defined below), or
result in the creation of any Encumbrance upon any of the material assets of the
Company, other than a Permitted Encumbrance; or (c) violate or result in a
material breach of or constitute a material default under any applicable Law,
judgment, injunction, order, decree or other restriction of any Governmental
Entity to which Seller or the Company is subject.
Section 3.5 Binding Effect.
This Agreement and each Ancillary Agreement, when executed and delivered by
Seller and Buyer (assuming such agreements constitute valid and legally binding
obligations of Buyer), will constitute valid and legally binding obligations of
Seller, enforceable against it in accordance with their respective terms,
subject to bankruptcy, insolvency, reorganization, moratorium and similar Laws
of general applicability relating to or affecting creditors' rights and to
general equity principles.
Section 3.6 Title Matters.
(a) Seller has, and at Closing will effectively transfer to Buyer, good and
marketable title to all of the Shares, free and clear of all Encumbrances.
(b) Except as set forth on Schedule 3.6(b), at Closing, the Company will
have, free and clear of all Encumbrances, other than Permitted Encumbrances,
good and marketable title to all of its tangible personal property used or held
for use in the operation of its business, other than the Seller Retained Assets
and Liabilities and any assets owned by Seller or an Affiliate of Seller and
removed from the Company's premises prior to Closing pursuant to Section 2.1(d)
of this Agreement.
Section 3.7 Financial Statements.
Attached hereto as Schedule 3.7 are the Financial Statements. The Financial
Statements fairly present in all material respects the financial position and
the results of operations of the Company for the respective periods therein
stated, and reflect adequate reserves for all known Liabilities, as of the
respective dates therein stated, in accordance with GAAP.
Section 3.8 Liabilities.
(a) Except as set forth on Schedule 3.8(a) and the Seller Retained Assets
and Liabilities, the Company has no Liabilities other than Liabilities (i)
reflected on the Financial Statements or (ii) arising since June 29, 2002 in the
Ordinary Course which individually or in the aggregate are not material.
(b) Except as set forth on Schedule 3.8(b), the Company has no Third Party
Debt, and will not have any Third Party Debt outstanding as of the Closing Date.
(c) Prior to Closing, Seller will, or will cause the Company to, satisfy
all Liabilities (including obligations for royalty payments) payable by the
Company to Seller (or to any Affiliate of Seller), and at Closing the Company
will have no Liability whatsoever to Seller (or to any Affiliate of Seller).
Section 3.9 Compliance with Laws.
(a) The Company is conducting, and has conducted since October 10, 2000,
its business in compliance in all material respects with all applicable Laws,
and the Company has all Governmental Authorizations necessary for the conduct of
the business as currently conducted.
(b) To Seller's Knowledge, the Company's leased facility located at 1050
Southwood Road, San Luis Obispo, California, conforms to and complies with in
all material respects all applicable covenants, conditions, restrictions,
reservations, land use, zoning, health, fire, water and building codes and other
similar Laws, and no such Laws prohibit or limit or condition the use or
operation of such premises as currently used and operated. To Seller's
Knowledge, there is no pending, contemplated, threatened or anticipated change
in the zoning classification of any of such premises.
Section 3.10 Litigation and Claims.
Except as set forth on Schedule 3.10: (a) there is no civil, criminal or
administrative Claim or investigation pending or, to Seller's Knowledge,
threatened, by, on behalf of or against the Company or the Company's assets; and
(b) neither the Company nor its assets are subject to any order, writ, judgment,
award, injunction or decree of any Governmental Entity of competent jurisdiction
or any arbitrator.
Section 3.11 Tangible Assets and Products.
(a) Schedule 3.11(a) is a true, correct and complete listing of: (i) all
material equipment, computer equipment and hardware, furniture, fixtures,
vehicles, machinery, apparatus, media, tools, appliances, implements, and other
tangible personal property of the Company as of March 31, 2002; and (ii) all
additions to and dispositions of the foregoing made between March 31, 2002 and
the date of this Agreement, other than those items having a cost of less than
Two Thousand Dollars ($2,000). Except as set forth in Schedule 3.11(a), such
assets are in a good state of repair and condition, ordinary wear and tear
excepted.
(b) Schedule 3.11(b) is a true, correct and complete listing of the
Products.
(c) Schedule 3.11(c) is a true, correct and complete listing, by category
and volume level as of the date of this Agreement, of the Company's Inventory.
All of such Inventory has been costed and valued, and presented in the Financial
Statements, in accordance with GAAP. Except as set forth on Schedule 3.11(c),
all of such Inventory is of good and merchantable quality and saleable and
usable in the Ordinary Course.
Section 3.12 Company Intellectual Property.
(a) The term "Company Intellectual Property" means all of the following
properties and rights of the Company:
(i) all schematics, bills of material, test programs, test fixtures, source
code, object code, design documentation and written procedures for Product
generation and testing of all Products including computer software, hardware and
firmware, including the software rules and algorithms, flowcharts, included in
or relating to the same (collectively, the "Technical Documentation");
(ii) copyrights, designs, technical works, technical data, trade secrets,
know-how and inventions of the Company;
(iii) the patents and patent applications listed on Schedule 3.12(a)(iii),
together with any division, continuation, continuation-in-part, continuing
prosecution application, continued examination application, reinstatement,
reexamination, revival, reissue, extension or substitution of any thereof, and
corresponding U.S. and foreign applications, patents and rights thereto
(collectively, the "Patents");
(iv) all trademarks, service marks, trade names, trade dress, and Product names
used in connection with the manufacture, promotion and sale of the Products
which are listed on Schedule 3.12(a)(iv), and corresponding U.S. and foreign
applications, registrations and rights thereto (collectively, the "Trademarks");
(v) all written material licenses, sublicenses and agreements by which the
Company uses Intellectual Property owned by Seller or a third party, or a third
party uses Intellectual Property owned by the Company, which documents are
listed on Schedule 3.12(a)(v), except that any Seller-wide cross-license
relationships into which Seller has entered that pertain to Seller's patent
portfolio are not listed in Schedule 3.12(a)(v) (the "Licenses"); and
(vi) all internet, intranet and World Wide Web content, sites and pages, and all
HTML and other code related thereto, and all domain names used in connection
with the manufacture, promotion or sale of the Products and the promotion of the
Company, which sites and domain names are set forth on Schedule 3.12(a)(vi).
(b) Except as set forth on Schedule 3.12(b), to Seller's Knowledge, the
Company owns or has a license to use, free and clear of all Encumbrances, other
than Permitted Encumbrances and non-exclusive licenses in favor of Seller (none
of which would impair the rights granted to Buyer pursuant to the Intellectual
Property Agreement or the Patent Cross License Agreement), all Company
Intellectual Property.
(c) Except as set forth in Schedule 3.12(c), to Seller's Knowledge, the
manufacture and sale of the Products by the Company or Seller has not infringed
any Intellectual Property rights of any third party or of Seller (other than as
licensed in the Intellectual Property Agreement and the Patent Cross License
Agreement), and, to Seller's Knowledge, no Claim has been asserted by any Person
as to the infringement by the Company of any third party Intellectual Property
or alleging any such infringement, and to Seller's Knowledge, there is no valid
basis for any such Claim. To Seller's Knowledge, no third party has infringed
upon any rights of the Company with respect to the Company Intellectual
Property.
(d) Seller has made available to Buyer correct and complete copies of all
of the tangible Technical Documentation, including documentation stored in
electronic form, in its possession, as amended to date. To Seller's Knowledge
and except as set forth in Schedule 3.12(d), with respect to each item of the
Technical Documentation, Seller or the Company is the author of, or has the
license to, the Technical Documentation and, to Seller's Knowledge, the Company
has the exclusive right to claim all copyrights in the Technical Documentation,
except that Seller may have co-ownership or license rights to such Technical
Documentation.
(e) The Company has made available to Buyer correct and complete copies of
all registered Patents listed on Schedule 3.12(a)(iii) and all registered
Trademarks listed on Schedule 3.12(a)(iv), as amended to date.
(f) Since October 10, 2000 and, to Seller's Knowledge, for any period prior
to October 10, 2000, except as set forth on Schedule 3.12(f), all personnel,
including employees, agents, consultants and contractors, who have contributed
to or participated in the conception, reduction to practice or development of
the Technical Documentation or the Company Intellectual Property either: (i)
have been party to a "work-for-hire" arrangement or agreement with the Company
or Seller, in accordance with applicable federal and state Law, that has
accorded the Company or Seller original authorship and exclusive ownership of,
and all right, title and interest in and to, all tangible and intangible
property thereby arising; or (ii) have executed appropriate instruments of
assignment in favor of the Company or Seller, as assignee that have conveyed to
the Company or Seller exclusive ownership or co-ownership with the Company and
Seller of all right, title and interest in and to all tangible and intangible
property arising thereby. In each case, where any rights to the Technical
Documentation are in Seller, Seller will transfer such rights to the Company
prior to Closing pursuant to the Contribution and Assignment Agreement.
Section 3.13 Major Vendors and Customers.
Schedule 3.13 sets forth a true, correct and complete list of the
following: (i) the twenty (20) largest customers of the Company for the year
ended December 31, 2001; (ii) the twenty (20) largest suppliers for the year
ended December 31, 2001; and (iii) all of the Company's distributors. Except as
set forth on Schedule 3.13, neither Seller nor, to Seller's Knowledge, any
employee of the Seller providing services for the Company, has been informed in
writing by a third party that the consummation of the Transaction would result
in the loss of any significant customer, potential customer, supplier or
distributor of the Company.
Section 3.14 Material Contracts; Warranties.
(a) Schedule 3.14(a) sets forth a list of all of the following contracts,
agreements, options, licenses, sales and purchase orders, commitments and other
instruments (each a "Contract") to which the Company is a party or otherwise
bound (each a "Material Contract" and, collectively, the "Material Contracts"):
(i) each sales Contract relating to the Company's business pursuant to which the
dollar volume of sales exceeded Twenty Five Thousand Dollars ($25,000) in the
twelve month period ended December 31, 2001 or Fifteen Thousand Dollars
($15,000) in the seven month period ended July 31, 2002; (ii) each Contract that
requires payment by or to the Company in respect of its business subsequent to
the date of this Agreement of more than Twenty Five Thousand Dollars ($25,000);
(iii) all Contracts in respect of the Company's business relating to, and
evidences of, indebtedness for borrowed money or deferred purchase price of
property; (iv) all partnership, joint venture or other similar Contracts
directly affecting the Company's business or assets; and (v) all other Contracts
that are material to the Company; provided that Schedule 3.14(a) does not list
any Contracts between the Company and Seller.
(b) Seller has made available to Buyer true and complete copies of each
Material Contract that is in written form, and true and complete written
summaries of each Material Contract that is oral. Except as set forth on
Schedule 3.14(b), each Material Contract is a legal, valid and binding
obligation of the Company, and to Seller's Knowledge, each other Person who is a
party thereto, enforceable against the Company and each such Person in
accordance with its terms, subject to subject to bankruptcy, insolvency,
reorganization, moratorium and similar Laws of general applicability relating to
or affecting creditors' rights and to general equity principles, and neither the
Company nor, to Seller's Knowledge, any other party thereto is in breach or
default thereunder.
(c) Seller has made available to Buyer true, correct and complete copies of
the Company's standard warranty terms. Schedule 3.14(c) contains a list of any
deviations from the Company's standard warranty terms.
Section 3.15 Tax Matters.
Except as set forth on Schedule 3.15:
(a) the Company (and each affiliated, unitary or combined group of which
the Company is or has been a member) has timely filed all material federal,
state, local and foreign income and franchise Tax Returns, and all other
material Tax Returns that are required to be filed by it on or before the date
hereof, and all Taxes shown on any Tax Return have been paid, and the Financial
Statements reflect an adequate accrual, based on the facts and circumstances
existing as of the respective dates thereof, for all Taxes payable by the
Company through the respective dates thereof;
(b) there are no deficiencies for any Taxes proposed, asserted or assessed
against the Company, no requests for waivers of the time to assess any Taxes are
pending, and no power of attorney with respect to any Taxes has been executed or
filed with any taxing authority;
(c) the Company has complied with all applicable Laws relating to the
payment and withholding of material Taxes and has withheld and paid all material
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor or other Person;
(d) there are no Encumbrances for Taxes (other than Permitted Encumbrances
set forth on Schedule 3.15) on the assets of the Company;
(e) the Company is not bound by any agreement (either with any Person or
any taxing authority) with respect to Taxes that will remain in effect following
Closing;
(f) the Company has not constituted either a "distributing corporation" or
a "controlled corporation" (within the meaning of section 355(a)(1)(A) of the
Code) in a distribution of stock qualifying for tax-free treatment under section
355 of the Code (i) in the two (2) years prior to the date of this Agreement or
(ii) in a distribution which could otherwise constitute part of a "plan" or
"series of related transactions" (within the meaning of section 355(e) of the
Code) in conjunction with the Transaction;
(g) the Company has never been a member of an affiliated, unitary or
combined group of corporations (within the meaning of section 1504 of the Code
and any analogous provision of state, local or foreign Law) other than the
affiliated group of which Seller is the common parent;
(h) the Company has not filed a consent pursuant to the provisions of
section 341(f) of the Code (or any corresponding provision of state or local
Law) or agreed to have section 341(f)(2) of the Code (or any corresponding
provision of state or local Law) apply to any disposition of any asset owned by
the Company;
(i) the Company has not agreed to make, nor is required to make, any
adjustment under section 481(a) of the Code or any similar provision of state,
local or foreign Law by reason of a change in accounting methods or otherwise;
(j) no property owned by the Company is (i) property required to be treated
as being owned by another Person pursuant to the provisions of section 168(f)(8)
of the Internal Revenue Code of 1954, as amended, and in effect immediately
prior to the enactment of the Tax Reform Act of 1986, (ii) "tax-exempt use
property" within the meaning of section 168(h)(1) of the Code, (iii) "tax-exempt
bond financed property" within the meaning of section 168(g) of the Code, or
(iv) "limited use property" (as that term is used in Rev. Proc. 76-30);
(k) no audit or other administrative or court proceedings are pending with
respect to Taxes of the Company and no notice thereof has been received; and no
issue has been raised by any taxing authority in any presently pending or prior
audit that could have a Material Adverse Effect on the Company for any period
after Closing;
(l) no Claim has been made by a taxing authority in a jurisdiction where
the Company does not file Tax Returns that the Company is or may be subject to
taxation in that jurisdiction;
(m) the Company is not a party to any contract, agreement or other
arrangement which provides for the payment of any amount which would not be
deductible by reason of section 280G of the Code; and
(n) the Company has made available to Buyer true and complete copies of (i)
all federal and California income Tax Returns of the Company (or the portion of
any affiliated, unitary or combined Tax Return relating to the Company) for the
preceding three (3) taxable years, and (ii) any audit report issued within the
last three (3) years (or otherwise with respect to any audit or proceeding in
progress) relating to Taxes of the Company.
Section 3.16 Employment Matters.
Except as set forth on Schedule 3.16: (a) the Retained Employees are not
the subject of, and the Company is not a party to or bound by, any collective
bargaining, works council or similar agreement; (b) during the three-year period
preceding the date hereof, there have been no strikes, grievances or Claims of
unfair labor practice relating to the Retained Employees; (c) Seller has no
Knowledge of any organizational effort presently being made or threatened by or
on behalf of any labor union with respect to the Retained Employees; (d) during
the three-year period preceding the date hereof, there has not been, and there
is not presently pending or existing or, to Seller's Knowledge, threatened, any
strike, work stoppage, labor arbitration or proceeding in respect of the
grievance of any Retained Employee, any application or complaint filed by a
Retained Employee or union with the National Labor Relations Board or any
comparable Governmental Entity, organizational activity or other labor dispute
relating to the Retained Employees; (e) no application for certification of a
collective bargaining agent is pending or, to Seller's Knowledge, threatened
with respect to the Retained Employees; (f) there is no lockout of any Retained
Employees; (g) there are no Claims currently pending or, to Seller's Knowledge,
threatened, against the Company alleging the violation of any Laws relating to
employment, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social security and
similar Taxes, occupational safety and health and plant closing, including the
Americans with Disabilities Act, the Immigration Reform and Control Act, and the
Worker Adjustment and Retraining Notification Act (collectively, "Employment
Laws"), or any other Claim whatsoever, whether based in tort, contract or Law,
arising out of or relating in any way to a Person's employment (actual or
alleged), application for employment or termination of employment with the
Company; (h) since October 10, 2000, with respect to employees performing
services for the Company, Seller has been in material compliance with all
applicable Employment Laws; (i) the Company and, with respect to the Retained
Employees, the Seller, have not been found liable for the payment of Taxes,
fines, penalties or other amounts, however designated, for failure to comply
with any Employment Laws in connection with the operation of the business; (j)
the jurisdictions in which the Company or Seller had persons employed for the
operation of the Company's business as of June 29, 2002 are listed on Schedule
3.16; and (k) as a result of the Employee Leasing Agreement between Seller and
the Company dated October 11, 2000 (the "Employee Leasing Agreement"), the
Company does not have any employees and, since October 10, 2000, the Company has
not had any employees.
Section 3.17 Benefits Arrangements.
(a) The Company does not sponsor or maintain any employee benefit plans and
policies, whether written or oral, under which any employee or former employee,
or any beneficiary of any employee or former employee, of the Company, Seller,
or any ERISA Affiliate, has any present or future right to benefits, including,
without limitation, (i) any "employee benefit plan" (within the meaning of
section 3(3) of ERISA); (ii) any profit-sharing, deferred compensation, bonus,
stock option, stock purchase, pension, retainer, consulting, retirement,
severance, welfare or incentive plan, agreement or arrangement; or (iii) any
plan, agreement or arrangement providing for "fringe benefits" or perquisites to
employees, officers, directors or agents, including benefits relating to
automobiles, clubs, vacation, child care, parenting, sabbatical, sick leave,
medical, dental, hospitalization, life insurance and other types of insurance.
The Company is not a party to any collective bargaining, employment, severance
or other similar agreements.
(b) Neither Seller, the Company, nor any ERISA Affiliate has ever
sponsored, maintained, incurred any obligations with respect to, or made
contributions to any employee benefit plans or policies, including, without
limitation, (i) any "employee benefit plan" (within the meaning of section 3(3)
of ERISA); (ii) any profit-sharing, deferred compensation, bonus, stock option,
stock purchase, pension, retainer, consulting, retirement, severance, welfare or
incentive plan, agreement or arrangement; (iii) any plan, agreement or
arrangement providing for "fringe benefits" or perquisites to employees,
officers, directors or agents, including benefits relating to automobiles,
clubs, vacation, child care, parenting, sabbatical, sick leave, medical, dental,
hospitalization, life insurance and other types of insurance, whether written or
oral, under which the Company has any Liability, and Seller has no Knowledge of
any event or condition that could reasonably be expected to result in any
Liability. Neither Seller, the Company, nor any ERISA Affiliate has ever been a
party to any collective bargaining, employment or severance agreements or other
similar arrangements, whether written or oral, under which the Company has any
Liability, and Seller has no Knowledge of any event or condition that could
reasonably be expected to result in any such Liability.
(c) Without limiting the foregoing, the Company has no Liability, and
Seller has no Knowledge of any event or condition that could reasonably be
expected to result in any such Liability, with respect to any plan subject to
Title IV of ERISA or section 412 of the Code, any "multiemployer plan" (within
the meaning of section 3(37) of ERISA), any "multiple employer plan" (within the
meaning of section 3(40) of ERISA or section 413(c) of the Code), a "voluntary
employees' beneficiary association" (within the meaning of Section 501(c)(9) of
the Code), or a "multiple employer welfare arrangement" (within the meaning of
Section 3(40)(A) of ERISA).
(d) Without limiting the foregoing, the Company has no Liability, and
Seller has no Knowledge of any event or condition that could reasonably be
expected to result in any such Liability, relating to COBRA with respect to any
events occurring prior to and including the Closing Date.
(e) The Company has no assets subject to (or expected to be subject to) an
Encumbrance under ERISA or the Code.
Section 3.18 Environmental Matters.
(a) Except with respect to the Seller Retained Assets and Liabilities, the
Company has complied in all material respects with all Environmental Laws, and
no Claim or investigation has been filed or commenced against the Company
alleging such failure, nor does Seller have any Knowledge of any valid basis for
such a Claim.
(b) Except as set forth in Schedule 3.18 and for the Seller Retained Assets
and Liabilities, to Seller's Knowledge, the Company has no Liability (and the
Company has not handled, used, stored, recycled or disposed of any Hazardous
Substance, arranged for the disposal of any Hazardous Substance, exposed any
employee or other Person to any Hazardous Substance or hazardous condition, or
owned or operated any property or facility in any manner, in each case that
could reasonably be expected to form the basis for any present or future Claim
or investigation giving rise to any such Liability) for damage or remediation to
any site, location or body of water (surface or subsurface), under any
Environmental Law.
Section 3.19 Insurance.
Schedule 3.19 lists all third party insurance policies covering the
ownership and operations of the business or any of the Company's assets,
reflecting the identity of insurers, amounts and coverage. Such third party
policies are in full force and effect. All of such third party policies, or
similar replacement policies, will be until Closing in full force and effect
with no premium arrearages.
Section 3.20 Conduct of Business.
(a) Since March 31, 2002, except as set forth on Schedule 3.20(a), there
has not occurred any event, condition or change in the operations, condition
(financial or otherwise) or assets of the Company that has had, or could at a
later date have, a Material Adverse Effect on the Company. Without limiting the
generality of the foregoing, since March 31, 2002, except as set forth on
Schedule 3.20(a) or as otherwise contemplated by this Agreement, the Company has
not:
(i) sold, leased, transferred, assigned or acquired any assets outside the
Ordinary Course;
(ii) entered into any Material Contract;
(iii) accelerated, terminated, modified or canceled a Material Contract except
in the Ordinary Course, or materially modified its backlog; and to Seller's
Knowledge, no other party has done so as a result of any default by the Company;
(iv) made any capital expenditure (or series of related capital expenditures)
involving more than Ten Thousand Dollars ($10,000);
(v) made any capital investment in, any loan to, or any acquisition of the
securities or assets of, any other Person;
(vi) issued any note, bond or other debt security or created, incurred, assumed
or guaranteed any indebtedness or capitalized lease obligation, other than trade
payables incurred in the Ordinary Course;
(vii) incurred, created or assumed any Encumbrance on any assets, other than
Permitted Encumbrances or in the Ordinary Course;
(viii) canceled, compromised, waived or released any material right or Claim (or
series of related rights and Claims) outside the Ordinary Course;
(ix) disposed of, licensed or permitted to lapse any rights in material Company
Intellectual Property outside the Ordinary Course;
(x) experienced any material damage, destruction or loss to its assets, taken as
a whole, not covered by insurance;
(xi) made any change of accounting or accounting practice, procedure or policy;
(xii) failed to maintain its assets in as good working order and condition,
ordinary wear and tear excepted;
(xiii) failed to keep in full force and effect any third party insurance
policies set forth on Schedule 3.19;
(xiv) amended its articles of incorporation, by-laws or any other governing
instrument or document;
(xv) split, combined or reclassified any shares of its capital stock, declared,
set aside or paid any dividend or other distribution (whether in cash, stock,
property or any combination thereof) in respect of its capital stock, or
redeemed, repurchased or otherwise acquired any of its securities;
(xvi) issued, granted or sold any shares of its capital stock or other equity
interest, or any options, warrants or other rights to purchase any such shares
or interests or securities convertible into or exchangeable therefor;
(xvii) acquired (by merger, consolidation, or acquisition of stock or assets)
any corporation, partnership or other business organization or division thereof;
(xviii) settled any Claims for amounts in excess of Ten Thousand Dollars
($10,000) individually or in the aggregate;
(xix) granted any increase in the base compensation of any employee or made any
other change in the employment terms, compensation or benefits of any employee,
director, officer or independent contractor, other than in the Ordinary Course;
(xx) made any changes in its general pricing practices or policies or any change
in its credit allowance practice or policies; or
(xxi) entered into any written or oral commitment to do any of the foregoing.
(b) Since March 31, 2002, except as contemplated by Section 3.20(a), the
Company has operated the business in the Ordinary Course, and Seller and the
Company have used commercially reasonable efforts to preserve the business
intact and to preserve the Company's relationship with licensors, developers,
consultants, remarketers, suppliers, distributors, customers, employees and
others having regular business relations with the Company.
Section 3.21 Related-Party Transactions.
Except as set forth in Schedule 3.21, the Company is not a party to any
Contract with, or any other commitment to, directly or indirectly, any
shareholder, director or officer of the Company.
Section 3.22 Finders' Fees.
There is no investment banker, broker, finder or other intermediary who has
been retained by or is authorized to act on behalf of Seller or the Company who
might be entitled to any fee or commission from Buyer in connection with the
Transaction.
Section 3.23 Adequacy of Assets of the Company.
Except for the Seller Retained Assets and Liabilities and the items set
forth in Schedule 3.23, the properties, assets and rights of the Company at
Closing, together with the rights granted to Buyer pursuant to the Intellectual
Property Agreement and the Patent Cross License Agreement, will include all
properties, assets and rights used by the Company to manufacture and sell the
Products as of the Closing Date. In the event that this Section 3.23 is breached
because Seller has failed to identify any such property, assets or rights used
by the Company to manufacture and sell the Products, to the extent Seller owns
and/or is permitted to transfer such property, asset or right, Seller shall cure
such breach by promptly transferring such property, asset or right to the
Company, and Buyer shall have no further remedy with respect thereto.
Section 3.24 Disclosure.
To Seller's Knowledge, the provisions of this Agreement with respect to
Seller and the Company do not include any untrue statements of material fact or
omit to state any material fact necessary in order to make the statements made
herein about Seller and the Company not misleading.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER
As of the date hereof, Buyer represents and warrants to Seller as follows:
Section 4.1 Organization and Power.
Buyer is a corporation duly organized, validly existing and in good
standing under the Laws of the State of Delaware. Buyer has all requisite
corporate power and authority to own, lease and operate its assets, and to carry
on its business as now being conducted.
Section 4.2 Authorization.
Buyer has full corporate power and authority to execute and deliver this
Agreement and each Ancillary Agreement, and to perform its obligations hereunder
and thereunder. The execution, delivery and performance by Buyer of this
Agreement and each Ancillary Agreement have been duly and validly authorized by
all necessary corporate action on the part of Buyer, and no additional corporate
authorization or consent is required in connection therewith.
Section 4.3 Governmental Approvals.
No consent, approval, waiver, or authorization is required to be obtained
by Buyer from, and no notice or filing is required to be given by Buyer to or
made by Buyer with, any Governmental Entity in connection with the execution,
delivery and performance by Buyer of this Agreement and each Ancillary Agreement
and the consummation of the Transaction.
Section 4.4 Non-Contravention.
Except as set forth on Schedule 4.4, the execution, delivery and
performance by Buyer of this Agreement and each Ancillary Agreement, and the
consummation of the Transaction, do not and will not: (a) violate any provision
of the certificate of incorporation, bylaws or other organizational documents of
Buyer; (b) conflict with, or result in the breach of, or constitute a default
under, or result in the termination, cancellation or acceleration (whether after
the filing of notice or the lapse of time or both) of any right or obligation of
Buyer under, any agreement, contract, lease, sublease, arrangement, commitment
or license to which Buyer is a party or by which any of its assets is bound; or
(c) violate or result in a breach of or constitute a default under any Law,
judgment, injunction, order, decree or other restriction of any Governmental
Entity to which Buyer is subject.
Section 4.5 Binding Effect.
This Agreement and each Ancillary Agreement, when executed and delivered by
Buyer and Seller (assuming such agreements constitute valid and legally binding
obligations of Seller), will constitute valid and legally binding obligations of
Buyer, enforceable against Buyer in accordance with their respective terms,
subject to bankruptcy, insolvency, reorganization, moratorium and similar Laws
of general applicability relating to or affecting creditors' rights and to
general equity principles.
Section 4.6 Finders' Fees.
No broker, investment banker, financial advisor or other person, other than
Harris Williams & Co., is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement.
Section 4.7 Financing.
On the Closing Date, Buyer will have sufficient funds to consummate the
Transaction and to perform its obligations hereunder.
Section 4.8 Disclosure.
To Buyer's knowledge, the provisions of this Agreement with respect to
Buyer do not include any untrue statements of a material fact or omit to state
any material fact necessary in order to make the statements made herein about
Buyer not misleading.
ARTICLE V. COVENANTS AS TO TAX MATTERS
Section 5.1 Transfer Taxes.
Buyer and Seller shall each be responsible for one-half of any excise,
sales, use, value added, transfer (including real property transfer or gains),
stamp, documentary, filing, recordation and other similar Taxes and fees that
may be imposed or assessed solely as a result of the transfer of the Shares
pursuant to this Agreement, together with any interest, additions or penalties
with respect thereto and any interest in respect of such additions or penalties;
provided, however, that Seller shall be responsible for any excise, sales, use,
value added, transfer (including real property transfer or gains), stamp,
documentary, filing, recordation and other similar Taxes and fees that may be
imposed or assessed solely as a result of the transfers contemplated by Section
2.1(a) hereof.
Section 5.2 Liability for Taxes.
(a) Seller shall be liable for and pay, and agrees to indemnify and hold
harmless Buyer and the Company against any and all Taxes (i) imposed on the
Company pursuant to Treasury Regulation Section 1.1502-6 or similar provision of
state or local law solely as the result of the Company having been a member of
the Seller's consolidated group, or (ii) imposed on the Company, or for which
the Company may otherwise be liable for any taxable year or period (or portion
thereof) that ends on or before the Closing Date (the "Pre-Closing Tax Period"),
other than any Taxes arising on the Closing Date from any actions taken by or at
the request of Buyer following Closing. Seller shall be entitled to any refund
of, or credit for, Taxes allocable to any Pre-Closing Tax Period which,
notwithstanding anything to the contrary, shall include Tax refunds or other Tax
benefits attributable to options to acquire stock of Seller held at any time by
Retained Employees (including, but not limited to, Tax refunds or other Tax
benefits attributable to the disposition of shares acquired pursuant to such
options).
(b) Buyer shall be liable for and pay, and agrees to indemnify and hold
harmless Seller from and against any and all Taxes imposed on the Company, or
for which the Company may otherwise be liable, for any taxable year or period
(or portion thereof) that begins after the Closing Date (the "Post-Closing Tax
Period"). Except as otherwise provided in this Agreement (including, but not
limited to, Section 5.6(c)), Buyer shall be entitled to any refund of (or credit
for) Taxes allocable to any Post-Closing Tax Period.
(c) For purposes of Sections 5.2(a) and (b), whenever it is necessary to
determine the liability for Taxes (other than the Taxes described in Section
5.2(d)) of the Company for a taxable year or period that begins before and ends
after the Closing Date (a "Straddle Period"), the determination of the Taxes of
the Company for the portion of such Straddle Period ending on and including, and
a portion of such Straddle Period beginning after, the Closing Date shall be
determined by assuming that such period consisted of two (2) taxable years or
periods, one of which ended at the close of business on the Closing Date and the
other which began at the beginning of the day following the Closing Date, and
items of income, gain, deduction, loss or credit of the Company for such period
shall be allocated between such two (2) taxable years or periods on a "closing
of the books basis" by assuming that the books of the Company were closed at the
close of the Closing Date; provided, however, that exemptions, allowances or
deductions that are calculated on an annual basis, such as the deduction for
depreciation, shall be apportioned between such two (2) taxable years or periods
on a daily basis.
(d) All personal and business property Taxes and similar ad valorem
obligations levied with respect to the Company for any Straddle Period shall be
apportioned between Seller and Buyer as of the Closing Date based on the number
of days of such Straddle Period included in the Pre-Closing Tax Period and the
number of days of such Straddle Period included in the Post-Closing Tax Period.
Seller shall be liable for the proportionate amount of such Taxes that is
attributable to the Pre-Closing Tax Period, and Buyer shall be liable for the
proportionate amount of such Taxes that is attributable to the Post-Closing Tax
Period. Within a reasonable period after Closing, Seller and Buyer shall present
a statement to the other setting forth the amount of reimbursement to which each
is entitled under this Section 5.2(d), together with such supporting evidence as
is reasonably necessary to calculate the proration amount. The proration amount
shall be paid by the party owing it to the other within ten (l0) days after
delivery of such statement. Thereafter, Seller shall notify Buyer upon receipt
of any bill for personal property taxes relating to the Company, part or all of
which are attributable to the Post-Closing Tax Period, and shall promptly
deliver such bill to Buyer who shall pay the same to the appropriate taxing
authority, provided that if such bill covers any part of the Pre-Closing Tax
Period, Seller shall also remit prior to the due date of assessment to Buyer
payment for the proportionate amount of such bill that is attributable to the
Pre-Closing Tax Period. In the event that either Seller or Buyer shall
thereafter make a payment for which it is entitled to reimbursement under this
Section 5.2(d), the other party shall make such reimbursement promptly, but in
no event later than ten (10) days after the presentation of a statement setting
forth the amount of reimbursement to which the presenting party is entitled
along with such supporting evidence as is reasonably necessary to calculate the
amount of reimbursement. Any payment required under this Section 5.2(d) and not
made within ten (10) days after delivery of the statement shall bear interest at
the rate per annum determined, from time to time, under the provisions of
Section 6621(a)(2) of the Code for each day until paid.
Section 5.3 Tax Returns.
(a) Seller will file or cause to be filed when due all Tax Returns which
are due to be filed on or prior to the Closing Date and any consolidated,
unitary income Tax Returns of the Company for the taxable periods beginning
before and ending on the Closing Date, or otherwise ending as a result of the
Closing. Buyer will file or cause to be filed when due all other Tax Returns of
the Company due to be filed after the Closing Date.
(b) If any party is liable hereunder for any portion of the Tax shown due
on any Tax Return required to be filed by any other party, the party preparing
such Tax Return will deliver a copy of the relevant portions of such Tax Return
to the party so liable for its review and approval not less than thirty (30)
days prior to the date on which such Tax Return is due to be filed (taking into
account any applicable extensions), together with a statement showing the other
party's obligations for Taxes relating to such Tax Return, which shall be paid
within the times, and shall accrue interest if not timely paid, as provided in
Section 5.2(d). If the parties disagree as to any item reflected on any such Tax
Return, the parties will jointly request Accountants, to resolve any issue in
dispute as promptly as possible. The decision of Accountants will be final and
binding on the parties, and the expenses of Accountants will be shared equally
by Seller and Buyer.
Section 5.4 Information to be Provided by Buyer.
With respect to Tax Returns to be filed by Seller pursuant to Section 5.3,
Buyer will within thirty (30) days prior to the due date (taking into account
extensions) prepare and provide to Seller a package of tax information
materials, that will be completed in accordance with past practice, including
past practice as to providing the information, schedules and work papers and as
to the method of computation of separate taxable income or other relevant
measures of income to the extent necessary to prepare Tax Returns for the
pre-Closing periods.
Section 5.5 Contests.
Each of Buyer and Seller will promptly notify the other in writing upon
receipt of notice of any pending or threatened audits or assessments with
respect to Taxes of the Company for which such other party (or such other
party's Affiliates) may be liable hereunder. Seller or Buyer, as applicable,
will be entitled to participate at its own expense in the defense of, and at its
option, take control of the complete defense of, any Tax audit or administrative
or court proceeding relating to Taxes for which it may be liable, and to employ
counsel of its choice at its expense; provided, however, that the audit or
proceeding will be controlled by that party which would bear the burden of the
greater portion of the sum of the adjustment plus any adjustment that may
reasonably be anticipated for one or more future taxable periods. Buyer and
Seller will cooperate on a reasonable basis to enable the party controlling an
audit or proceeding to take all actions with respect to such audit or
proceeding. Neither party may agree to settle any Claim for Taxes for which the
other may be liable without the prior written consent of such other party, which
consent will not be unreasonably withheld.
Section 5.6 Post-Closing Events that Affect Seller's Liability for Taxes.
(a) Except to the extent required by Law, Buyer and its Affiliates will
not, without the prior written consent of Seller, which consent will not be
unreasonably withheld, amend any Tax Return filed by or with respect to the
Company for any taxable period, or portion thereof, beginning before the Closing
Date.
(b) Buyer shall undertake to cause the Company to make an irrevocable
election under Section 172(b)(3) of the Code and, if applicable, Treasury
Regulation Section 1.1502-21(b)(3)(ii)(B) to relinquish, with respect to all
consolidated net operating losses attributable to the Company, the portion of
the carryback period for which the Company was a member of Seller's affiliated
group.
(c) In the event of (i) an adjustment to any income Tax Return filed prior
to Closing or filed in accordance with the procedures set forth in this Article
V that (A) changes the Tax Liability of Seller attributable to its interest in
the Company for a Pre-Closing Tax Period, and (B) results in a correlative
change in the reasonably anticipated Tax Liability of the Company for a
Post-Closing Tax Period or (ii) an adjustment to the income Tax Return of the
Company that (A) changes the Tax Liability of the Company for a Post-Closing Tax
Period, and (B) results in a correlative adjustment to the Tax Liability of the
Seller for a Pre-Closing Tax Period (such adjustment in Tax Liability being
referred to as a "Pre-Closing Tax Adjustment," where related to the Pre-Closing
Tax Period, and as a "Post-Closing Tax Adjustment," where related to the
Post-Closing Tax Period):
(I) in the case of a Pre-Closing Tax Adjustment that increases the Tax
Liability of the Seller and gives rise to a corresponding Post-Closing Tax
Adjustment that decreases the aggregate Tax liability of the Company, the
Company shall pay Seller an amount equal to the lesser of (x) the amount by
which Seller's aggregate Taxes are increased by such Pre-Closing Tax Adjustment
(taking into account any increase in Taxes resulting from the payment pursuant
to this clause (I)(x)), and (y) the after-Tax amount by which the Company's
aggregate Taxes are decreased or refunded (plus the after-Tax amount of any
interest received with respect to such decrease or refund) by the corresponding
Post-Closing Tax Adjustment; and
(II) in the case of a Post-Closing Tax Adjustment that increases the
aggregate Tax Liability of the Company and gives rise to a corresponding
Pre-Closing Tax Adjustment that decreases the Tax Liability of Seller, Seller
shall pay to the Company an amount equal to the lesser of (x) the amount by
which the Company's aggregate Taxes are increased by such Post-Closing Tax
Adjustment (taking into account any increase in Taxes resulting from the payment
pursuant to this clause (II)(x)), and (y) the after-Tax amount by which Seller's
Taxes are decreased or refunded (plus the after-Tax amount of any interest
received with respect to such decrease or refund) by the corresponding
Pre-Closing Tax Adjustment.
In computing the amounts payable pursuant to this Section 5.6(c), (i) the
amount of any Pre-Closing Tax Adjustment and the amount referred to in clause
(I)(x) above shall be computed (A) using the maximum Federal and state corporate
income Tax rate applicable to the relevant class of income and period, taking
into account the deductibility of such state Taxes for Federal income Tax
purposes, (B) taking into account any concomitant increase or decrease in
Seller's gain on its disposition of the Shares pursuant to this Agreement; and
(ii) the amount of any Post-Closing Tax Adjustment and the amount referred to in
clause (II)(x) above shall be computed (A) using the maximum corporate Federal
and state corporate income Tax rate (including any excise Tax based on income)
applicable to the relevant class of income and period, taking into account the
deductibility of such state Taxes for Federal income Tax purposes, (B) taking
into account any concomitant increase or decrease in the income of the Company
arising out of such Post-Closing Tax Adjustment, and (C) by treating the Company
as if it filed a separate company Tax Return and paid its own Liabilities for
Taxes.
An obligor under this Section 5.6(c) shall pay the amount due to any
obligee hereunder within ten (10) days of the date on which such obligee
provides proof reasonably satisfactory to such obligor that such obligee has
paid the taxes arising from the adjustment. In the event a payment is made based
on facts that subsequently are determined to have been incorrect, the parties
shall adjust the payments hereunder in order to reflect the subsequent
determination.
Section 5.7 Assistance and Cooperation.
After the Closing Date: (a) each party will assist the other in preparing
any Tax Returns of the Company which such other party is responsible for
preparing and filing; (b) each party will cooperate fully in preparing for any
audits of, or disputes with taxing authorities regarding, any Tax Returns and
payments in respect thereof; (c) each party will make available to the other and
to any taxing authority as reasonably requested all relevant Books and Records
relating to Taxes; provided, however, that in no event will any party have
access to the other party's consolidated, combined or unitary federal, state or
local income Tax Returns; (d) each party will provide timely notice in writing
to the others of any pending or proposed audits or assessments with respect to
Taxes for which such other party or any of its Affiliates may have Liability
under this Agreement; (e) each party will furnish the others with copies of all
relevant correspondence received from any taxing authority in connection with
any audit or information request with respect to any Taxes referred to in
Section 5.7(d); and (f) the party requesting assistance or cooperation will bear
the other party's reasonable out-of-pocket expenses in complying with such
request to the extent that those expenses are attributable to fees and other
costs of unaffiliated third party service providers.
ARTICLE VI. OTHER COVENANTS
Section 6.1 Further Assurances.
From the date hereof to the Closing Date, Buyer and Seller shall, and shall
cause their respective Affiliates to, as applicable, use commercially reasonable
efforts (including entering into all applicable Ancillary Agreements upon
satisfaction of all conditions related thereto) to cause the Closing conditions
set forth herein to be satisfied on or prior to the Closing Date. Without
limiting the generality of the foregoing, the parties will use commercially
reasonable efforts, and cooperate with each other, to obtain promptly all of the
approvals set forth on Schedule 6.1 hereto (the "Required Approvals"). Seller
will bear and pay the cost of all filing, recordation and similar fees and
Taxes, and any additional fees or charges (howsoever denominated) required by
any Governmental Entities or other Persons in connection with obtaining any
Required Approval. Subject to the provisions hereof, from time to time after the
Closing Date, each party will promptly execute, acknowledge and deliver any
other assurances or documents reasonably requested by another party and
necessary for the other party to satisfy its obligations hereunder or to obtain
the benefits contemplated hereby.
Section 6.2 Inability to Obtain Required Approvals.
To the extent that any Required Approval cannot be obtained or made and, as
a result, the full benefits of use of the Contract or other asset related
thereto will not be received by the Company following Closing, then Buyer and
Seller will cooperate with each other and enter into such mutually agreeable,
reasonable and lawful arrangements (including subcontracting, subleasing or
sublicensing, if permitted) to provide to the parties the economic (taking into
account all burdens and benefits, including Tax costs and benefits) and
operational equivalent, to the extent permitted, of obtaining or making such
Required Approval.
Section 6.3 Applied Computing Platform Provider Program.
Seller shall invite Buyer to participate in Seller's Applied Computing
Platform Provider program on the terms and conditions of that program, and
Buyer's participation therein will be subject to Buyer meeting the requirements
of such program.
Section 6.4 Additional Financial Information.
As soon as reasonably practicable after the Closing, but in no event later
than October 15, 2002, Seller shall provide Buyer with an unaudited balance
sheet as of the Closing Date and income statement of the Company for the period
from January 1, 2002 to the Closing Date. In addition, as soon as reasonably
practicable after Closing, but in no event later than October 28, 2002, Seller
shall provide Buyer with audited balance sheets, income statements and
statements of cash flow of the Company as of and for the years ended December
31, 1999, 2000 and 2001, including the notes related thereto. Such financial
information shall fairly present in all material respects the results of the
operations of the Company for the period therein stated. In connection with the
preparation of the audited financial information, Seller shall engage Ernst &
Young LLP and Deloitte & Touche, LLP to review the financial information for the
periods related to their engagement as the Company's independent accountant and
Seller shall be responsible for the lesser of (i) the actual fees of Ernst &
Young LLP and Deloitte & Touche, LLP for the services performed to prepare such
financial information or (ii) One Hundred Thousand Dollars ($100,000). In no
event shall Seller be obligated to pay any fees in excess of One Hundred
Thousand Dollars ($100,000) in connection with the preparation of such financial
information. In the event that the fees exceed such amount, Buyer shall be
responsible for the payment of the balance of any such fees.
Section 6.5 Confidentiality.
The parties understand and agree that this Agreement is subject to the
terms and conditions of the CNDA #5066040 entered into by and between Seller and
Buyer on May 9, 2002, as amended by the parties on August 1, 2002 pursuant to
that Addendum No. 1 (the "CNDA"); provided that, notwithstanding any other
provision of the CNDA, the parties agree that the terms and conditions of this
Agreement will not be disclosed without the prior written consent of the other
parties. In the event that any party hereto receives a request to disclose all
or any part of any confidential information under the terms of a subpoena,
order, civil investigative demand or similar process issued by a court of
competent jurisdiction or by another Governmental Entity, such party agrees to:
(a) immediately notify the party to whom such confidential information relates
of the existence, terms and circumstances surrounding such request, (b) consult
with such party to whom the information relates on the advisability of taking
legally available steps to resist or narrow such request; and (c) if disclosure
of such information is required, furnish only that portion of the confidential
information that, in the opinion of counsel to the party who has received the
request, such party is legally compelled to disclose and advise the party to
whom such confidential information relates as far in advance of such disclosure
as possible so that such party to whom the confidential information relates may
seek an appropriate protective order or other reliable assurance that
confidential treatment will be accorded such confidential information. In any
event, the party who receives the request shall not oppose actions by the party
to whom the confidential information relates to obtain an appropriate protective
order or other reliable assurance that confidential treatment will be accorded
such confidential information.
Section 6.6 Non-Solicitation.
For a period of one (1) year after the Closing Date, (a) Seller's Embedded
IA Division (or any successor division engaged in a substantially similar line
of business) shall not encourage, induce or solicit for employment or any
similar arrangement any employee of Buyer or any Retained Employee who, as a
result of the transactions contemplated by this Agreement, became an employee of
the Company or the Buyer as of the Closing, and (b) Buyer shall not encourage,
induce or solicit for employment or any similar arrangement any employee of
Seller's Embedded IA Division (or any successor division engaged in a
substantially similar line of business). Notwithstanding the foregoing (i)
general solicitations of employment published in a journal, newspaper, website
or other publication of general circulation shall not be deemed a violation of
this Section 6.6, (ii) Buyer and Seller's Embedded IA Division shall not be
prohibited from employing any Person who contacts them on his or her own
initiative and without any direct solicitation by Buyer or Seller's Embedded IA
Division, as the case may be, and (iii) Buyer and Seller's Embedded IA Division
shall not be prohibited from employing any Person who has been terminated by
Seller's Embedded IA Division (in the case of the Buyer) or the Company or the
Buyer (in the case of Seller's Embedded IA Division).
Section 6.7 Transition Services.
Seller or an Affiliate of Seller shall use commercially reasonable efforts
to perform the transition services specified on Schedule 6.7 prior to or within
sixty (60) days after the Closing, upon the terms and conditions mutually agreed
by the parties therein, at no cost to Buyer. In the event that Seller or an
Affiliate of Seller performs such services for Buyer after the initial sixty
(60) day period, Seller shall bill Buyer at its actual cost plus a servicing fee
of ten percent (10%) for such services on a monthly basis, which amount shall be
due and payable within thirty (30) days of receipt of such bill by Buyer;
provided, however, that in no event shall Seller or an Affiliate of Seller be
required to provide to Buyer any of the transition services specified on
Schedule 6.7 following the expiration of the ninety (90) day period following
the Closing.
Section 6.8 Notification; Updating Schedules.
From the date hereof to the Closing Date, each party shall give prompt
written notice to the other Parties with respect to any of the following: (a)
the occurrence or non-occurrence of any event of which it becomes aware, the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty made by it contained in this Agreement to be
materially untrue or inaccurate or prevent it from satisfying its Closing
obligations; and (b) any failure of such party to materially comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder. The applicable Schedule(s) shall be deemed supplemented by any
such disclosures that relate to occurrences subsequent to the date of this
Agreement (i.e., new occurrences not previously disclosed in the Schedules),
other than those related to the transactions contemplated by the Contribution
and Assumption Agreement; the Schedules shall not be otherwise amended or
supplemented by any such disclosures. Such supplements, however, shall be not be
given effect in determining whether the Closing conditions contained in Article
VII have been satisfied. The satisfaction of such conditions to Closing shall be
based on the Schedules as delivered on the date of this Agreement without regard
to such supplements. In the event such Closing conditions are satisfied or
waived by Buyer or Seller as the case may be, the right of Buyer or Seller, as
the case may be, to recover under the indemnity provisions appearing in Article
VIII of this Agreement shall be determined based upon the Schedules as so
supplemented, which supplements shall be deemed to cure and correct any breach
of the representations and warranties contained in Article III in the case of
Seller and Article IV in the case of Buyer that would have existed in the
absence thereof. In the case of any such matters disclosed that do not result in
a supplement of the Schedules as specified above, the parties will be entitled
to seek recovery under the indemnity provisions of Article VIII for any breach
of the representations and warranties contained in Article III and Article IV,
as applicable, related to or arising from such matters so disclosed.
Section 6.9 Retained Marks.
Buyer agrees and acknowledges that no right, title or interest in or to the
"Intel" name or mark or any derivation thereof (including, but not limited to,
the fictitious business name "Intel San Luis Obispo") (the "Retained Marks") is
being transferred by Seller to Buyer or the Company pursuant to this Agreement,
and that Buyer will not, and Buyer will cause its Affiliates not to, use any of
the Retained Marks or any name or mark confusingly similar thereto in any way
following the Closing Date. Buyer further agrees and acknowledges that Seller
shall take any and all commercially reasonable actions to terminate the
fictitious business name of "Intel San Luis Obispo" on or prior to Closing or as
soon as practicable thereafter.
Section 6.10 Access to Books and Records and Employees.
On and after the Closing Date, Seller and its Affiliates may require access
to the Books and Records of the Company and certain Retained Employees in
connection with certain audit or accounting questions involving or relating to
the Company prior to Closing. In such case, Buyer and its Affiliates shall
provide Seller, its Affiliates and their respective authorized representatives
reasonable access during normal business hours to the Retained Employees and the
Books and Records of the Company relating to all applicable periods, and Buyer
will reasonably cooperate with regard to such access (including, but not limited
to, permitting Seller and its Affiliates to make copies of relevant documents).
Section 6.11 Warranty Service.
(a) Following the Closing Date, the Company or Buyer will service all
warranty claims for repairs or replacements pursuant to the terms of the
purchase order under which the Product was sold ("Required Service") related to
Products shipped by Seller or by the Company for its own account or the account
of Seller prior to the Closing Date. For all warranty claims for which the
Company or Seller remains obligated to provide Required Service, the Company or
Buyer shall provide the Required Service and maintain true, accurate and
complete records of all such Required Service. From the Closing Date through the
first anniversary of the Closing Date, the Company or Buyer shall charge Seller
for the Required Service provided at the rate Seventy Five Dollars ($75.00) per
hour plus the Company's cost of materials and shall submit an invoice to Seller,
together with any underlying records, on a monthly basis. Upon receipt of the
invoice and records, Seller will review the same to determine whether all such
repairs invoiced to Seller were reasonably incurred for Required Service with
respect to Products shipped by the Company prior to the Closing Date. If Seller
disputes any of the charges, Seller and Buyer shall negotiate in good faith to
resolve any such disputes. Seller shall pay the invoices by the later of
forty-five (45) days after the receipt thereof or fifteen (15) days following
the resolution of any disputes.
(b) No later than one (1) month prior to the first anniversary of the
Closing Date, Buyer and Seller shall negotiate in good faith to determine a
final payment for any and all Required Service related to Products shipped by
the Company for its own account or the account of Seller prior to the Closing
Date. Upon agreement of such payment and the remittance thereof by Seller to
Buyer, Seller shall have no further obligations or Liability for any Required
Service.
Section 6.12 Dissolution of Sales Corporation; Termination of Liens.
Prior to Closing, Seller shall, and shall cause the Company to, use
commercially reasonable efforts to (a) dissolve Ziatech FSC, Ltd. and provide
evidence of such dissolution to Buyer, and (b) terminate the Encumbrance
represented by UCC Financing Statement no. 9811961038 set forth on Schedule
3.6(b) hereto and provide evidence of such termination to Buyer. In the event
that Seller cannot complete the actions described in the preceding sentence
prior to Closing, Seller shall use its commercially reasonable efforts to
complete such actions as soon as practicable following Closing.
Section 6.13 1099 Reporting Requirements.
Following Closing, Buyer and, as applicable, the Company shall be
responsible for all Internal Revenue Service 1099 reporting matters related to
the Company for the calendar year ending December 31, 2002, and Buyer
acknowledges that neither Seller nor any of its Affiliates shall be obligated to
make any such filings.
ARTICLE VII. CONDITIONS TO CLOSING
Section 7.1 Conditions to the Obligations of Buyer and Seller.
The obligations of Buyer and Seller to effect Closing are subject to the
satisfaction or waiver by Buyer and Seller prior to Closing of each of the
following conditions:
(a) No Injunctions, Etc. No Governmental Entity of competent jurisdiction
will have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, or non-appealable judgment, decree, injunction or other final order
that is in effect on the Closing Date and prohibits or prevents Closing or the
consummation of the Transaction.
(b) Ancillary Agreements. The parties shall have executed and delivered, or
caused the Company to execute and deliver if applicable, the following Ancillary
Agreements:
(i) the Intellectual Property Agreement attached hereto as Exhibit A; and
(ii) the cPCI 2.16 Development Agreement attached hereto as Exhibit B;
(iii) the Seller and Buyer OEM Letter Agreements attached hereto as Exhibit
C-1 and C-2, respectively; and
(iv) the Patent Cross License Agreement attached hereto as Exhibit D.
Section 7.2 Further Conditions to the Obligation of Buyer.
The obligation of Buyer to effect Closing is subject to the satisfaction or
waiver by Buyer prior to Closing of each of the following further conditions:
(a) Representations and Warranties. The representations and warranties of
Seller contained herein will be true, correct and complete in all material
respects.
(b) Required Approvals. All Required Approvals will have been obtained or
accomplished, as the case may be, and appropriate evidence of the same will have
been delivered to Buyer, or Buyer and Seller shall have entered into alternative
arrangements to provide Buyer with the necessary economic benefits as
contemplated by Section 6.2.
(c) Pre-Closing Transactions. Evidence of completion, reasonably
satisfactory to Buyer, of all of the transactions contemplated by Article II,
including, but not limited to, the execution and delivery of the Contribution
and Assumption Agreement attached hereto as Exhibit E, will have been delivered
to Buyer.
(d) Consent under the Lease. A duly executed consent of the landlord under
the Lease to the Transaction, together with an estoppel certificate, will have
been delivered to Buyer.
(e) Acceptance by Key Employee. The Key Employee will have agreed to be
employed by the Company after Closing; provided that if Buyer knows at any time
prior to Closing that the Key Employee has rescinded his acceptance of Buyer's
offer of employment, such condition shall be deemed waived by Buyer unless Buyer
notifies Seller within forty-eight (48) hours of Buyer's receipt of notice of
such rescission that it will not proceed with the Closing.
(f) Releases of Retained Employees. Seller will have released each Retained
Employee who is a party to a Non-Competition Agreement with Seller from the
non-competition provisions of such agreement and delivered evidence of such
release to Buyer; provided, however, that all other terms and provisions of such
agreements will remain in full force and effect.
(g) Additional Closing Deliveries. The following will have been delivered
to Buyer:
(i) stock certificates, together with stock powers or assignments duly executed
in blank by Seller, representing all of the Shares;
(ii) the original minute book of the Company, containing the articles of
incorporation and bylaws of the Company, including all amendments thereto, the
stock record book and the corporate seal;
(iii) a recent certificate of good standing for the Company from the Secretary
of State of California and a bring down of such certificate dated on or the day
prior to the Closing Date;
(iv) duly executed resignations of all officers and directors of the Company;
and
(v) such other instruments or documents, in form and substance reasonably
acceptable to Buyer, as may be necessary to effect Closing.
Section 7.3 Further Conditions to the Obligation of Seller.
The obligation of Seller to effect Closing is subject to the satisfaction
or waiver prior to Closing of each of the following further conditions:
(a) Representations and Warranties. The representations and warranties of
Buyer contained herein will be true, correct and complete in all material
respects.
(b) Payment. Buyer will have caused the Purchase Price to be delivered at
Closing as provided by Section 2.2.
(c) Additional Closing Deliveries. The following will have been delivered
to Seller:
(i) a duly executed consent to the Transaction from JPMorgan Chase Bank
(formerly known as The Chase Manhattan Bank) ("JPMorgan Chase") pursuant to the
terms of that certain Credit Agreement, dated as of December 30, 1998, by and
between Buyer and JPMorgan Chase; and
(ii) such other instruments or documents, in form and substance reasonably
acceptable to Seller, as may be necessary to effect Closing.
ARTICLE VIII. INDEMNIFICATION
Section 8.1 Survival; Limitation on Representations, Warranties.
(a) The parties agree that the representations, warranties, covenants,
agreements (in the case of covenants and agreements, to the extent of
performance or non-performance prior to the Closing Date) and indemnification
obligations of the parties contained in this Agreement shall survive the Closing
and terminate and expire at 5:00 p.m., San Francisco time, on March 31, 2004;
provided, however, that Buyer shall be permitted to assert Claims for
indemnification pursuant to this Article VIII until the second anniversary of
the Closing Date (to the extent Buyer delivers written notice to Seller
identifying such Claim and the basis thereof with reasonable specificity
pursuant to the applicable provisions of this Agreement on or prior to such
date) solely for Losses relating to or arising from Covered Third Party Claims
(as defined below) or fraud on the part of Seller in connection with the
Transaction. Notwithstanding anything herein to the contrary, (i) Seller's
representations set forth in Section 3.15 hereof shall survive until the
expiration of the applicable statute of limitations and (ii) Seller shall
indemnify Buyer for any Losses related to or arising from the transactions
contemplated by Section 2.1(a) and Section 2.1(c) hereof without regard to a
survival period or other limitations.
(b) Each of the parties hereto agrees that, except for the representations
and warranties contained in Article III and Article IV, none of the parties has
made any representations or warranties and, except for the representations and
warranties contained in Article III and Article IV, each of the parties
acknowledges that no representations or warranties have been made by, and it has
not relied upon any representations or warranties made by, any of the parties
hereto or any of their respective officers, directors, employees, agents,
financial and legal advisors or other representatives with respect to this
Agreement and the transactions contemplated hereby, and the documents and
instruments referred to herein, notwithstanding the delivery or disclosure to
such party or its representatives of any documentation or other information with
respect to any one or more of the foregoing.
Section 8.2 Indemnification by Seller.
(a) Subject to the provisions of this Article VIII, Seller will indemnify,
defend and hold harmless Buyer, its Affiliates, and their respective directors,
officers, attorneys, accountants, agents and employees, and their heirs,
successors and assigns (collectively, the "Buyer Indemnified Parties), from,
against and in respect of all Losses imposed on, sustained, incurred or suffered
by or asserted against any of the Buyer Indemnified Parties, relating to or
arising out of any of the following (collectively, "Buyer Losses):
(i) any breach of any representation or warranty of Seller contained herein;
(ii) any breach of any covenant or agreement of Seller contained herein;
(iii) any Taxes payable by the Company for any period through and including
the Closing Date to the extent set forth in Section 5.2;
(iv) the transactions contemplated by Section 2.1(a) and 2.1(c);
(v) actual out-of-pocket Losses paid with respect to Claims asserted by
third parties related to or arising from the operation of the Company
prior to the Closing Date ("Covered Third Party Claims"); provided,
however, that Seller shall not indemnify, defend or hold harmless the
Buyer Indemnified Parties for any Covered Third Party Claims related to
or arising from any (A) Liabilities listed on Schedule 8.2(a)(v),
(B) items disclosed in the disclosure schedules to this Agreement (other
than items disclosed in the disclosure schedules related to Section 2.1
(a)), or (C) Liabilities relating to or arising from any conditions or
set of facts disclosed in the disclosure schedules to this Agreement
(other than items disclosed in the disclosure schedules related to
Section 2.1(a)); and
(vi) fraud on the part of Seller in connection with the Transaction.
Section 8.3 Indemnification by Buyer.
(a) Subject to the provisions of this Article VIII, Buyer will indemnify,
defend and hold harmless Seller, its Affiliates, and their respective directors,
officers, attorneys, accountants, agents and employees, and their heirs,
successors and assigns (collectively, the "Seller Indemnified Parties"), from,
against and in respect of any Losses imposed on, sustained, incurred or suffered
by or asserted against any of the Seller Indemnified Parties, relating to or
arising out of any of the following (collectively, "Seller Losses"):
(i) any breach of any representation or warranty of Buyer contained herein;
(ii) any breach of any covenant or agreement of Buyer contained herein;
(iii) any Taxes payable by the Company for any period after the Closing Date
to the extent set forth in Section 5.2; and
(iv) any Liability of or related to the Company to the extent that such
Liability is solely attributable to an occurrence or circumstance
arising after the Closing Date, except for (A) any Liability
contemplated by Section 8.2(a)(iii), and (B) any Liability with respect
to which, and to the extent that, there was a failure or breach of any
representation or warranty, or a breach or nonfulfillment of any
covenant or agreement, of Seller contained herein.
Section 8.4 Indemnification Procedures.
(a) A party claiming indemnification under this Agreement (an "Indemnified
Party") for any Claim or Claims asserted by a third party, including, in the
case of Buyer, a Covered Third Party Claim (collectively, "Third Party Claims")
shall promptly:
(i) notify the party from whom indemnification is sought (the "Indemnifying
Party") of any Third-Party Claim asserted against the Indemnified Party which
could give rise to a right of indemnification under this Agreement; and
(ii) transmit to the Indemnifying Party a written notice ("Third Party Claim
Notice") describing in reasonable detail the nature of the Third Party Claim, a
copy of all papers served with respect to such claim (if any), an estimate of
the amount of Losses attributable to the Third Party Claim, if reasonably
possible, and the basis of the Indemnified Party's request for indemnification
under this Agreement.
(b) Within ten (10) days after receipt of any Third Party Claim Notice (the
"Election Period"), the Indemnifying Party shall notify the Indemnified Party:
(i) whether the Indemnifying Party disputes its potential liability to the
Indemnified Party under this Agreement with respect to such Third Party Claim;
and
(ii) whether the Indemnifying Party desires, at the sole cost and expense of the
Indemnifying Party, to defend the Indemnified Party against such Third Party
Claim.
(c) If the Indemnifying Party notifies the Indemnified Party within the
Election Period that the Indemnifying Party does not dispute its potential
liability to the Indemnified Party under this Agreement and that the
Indemnifying Party elects to assume the defense of the Third Party Claim, then
the Indemnifying Party shall have the right to defend, at its sole cost and
expense, such Third Party Claim by all appropriate proceedings, which
proceedings shall be prosecuted diligently by the Indemnifying Party to a final
conclusion or settled at the discretion of the Indemnifying Party in accordance
with this Section 8.4. The Indemnifying Party shall have full control of such
defense and proceedings including any compromise or settlement thereof;
provided, however, that any such compromise or settlement involving a dollar
amount in excess of the limitations set forth in Section 8.5(c), non-monetary
obligations of the Indemnified Party, or otherwise having a direct effect upon
its continuing operations or the business shall be subject to the consent of the
Indemnified Party. If requested by the Indemnifying Party, the Indemnified Party
shall, at the sole cost and expense of the Indemnifying Party, cooperate with
the Indemnifying Party and its counsel in contesting any Third Party Claim which
the Indemnifying Party elects to contest, including, without limitation, the
making of any related counterclaim against the Person asserting the Third Party
Claim or any cross-complaint against any Person. The Indemnified Party may
participate in, but not control, any defense or settlement of any Third Party
Claim controlled by the Indemnifying Party pursuant to this Section 8.4 and,
except as provided above or pursuant to this Section 8.4, shall bear its own
costs and expenses with respect to such participation.
(d) If the Indemnifying Party fails to notify the Indemnified Party within
the Election Period that the Indemnifying Party elects to defend the Indemnified
Party pursuant to this Section 8.4, or if the Indemnifying Party elects to
defend the Indemnified Party pursuant to this Section 8.4 but fails to
diligently and promptly prosecute or settle the Third Party Claim, then the
Indemnified Party shall have the right to defend at the sole cost and expense of
the Indemnifying Party, the Third Party Claim. The Indemnified Party shall have
full control of such defense and proceeding; provided, however, that the
Indemnified Party may not enter into, without the Indemnifying Party's consent,
which shall not be unreasonably withheld or delayed, any compromise or
settlement of such Third Party Claim. The Indemnifying Party may participate in,
but not control, any defense or settlement controlled by the Indemnified Party
pursuant to this Section 8.4, and the Indemnifying Party shall bear its own
costs and expenses with respect to such participation.
(e) In the event an Indemnified Party should have a Claim against an
Indemnifying Party hereunder which does not involve a Third Party Claim, the
Indemnified Party shall transmit to the Indemnifying Party a written notice (the
"Indemnity Notice") describing in reasonable detail the nature of the Claim, an
estimate of the amount of Losses attributable to such Claim, the basis of the
Indemnified Party's request for indemnification under this Agreement and the
amount for which a Claim for indemnification is made, taking into account the
limitations set forth in Section 8.5. If the Indemnifying Party does not notify
the Indemnified Party within thirty (30) days from its receipt of the Indemnity
Notice that the Indemnifying Party disputes such Claim, the Claim specified by
the Indemnified Party in the Indemnity Notice shall be deemed a Liability of the
Indemnifying Party hereunder. If the Indemnifying Party has timely disputed such
Claim, as provided above, such dispute shall be resolved in accordance with the
dispute resolutions provisions set forth in Section 9.7 of this Agreement.
(f) The failure to provide notices required by this Section 8.4 shall not
excuse any party from its continuing obligations hereunder; however, any Claim
shall be reduced by the Losses resulting from such party's delay or failure to
provide notice as required by this Section 8.4.
Section 8.5 Indemnification Limitations.
(a) No Claim for indemnification under this Article VIII shall be asserted
by any Indemnified Party after the expiration and termination of the
representations, warranties, covenants, agreements and indemnification
obligations as described in, or otherwise contemplated by, Section 8.1.
(b) No Indemnifying Party shall have any Liability hereunder to indemnify
the Indemnified Party for Buyer Losses or Seller Losses, as applicable, until
the aggregate amount of Buyer Losses or Seller Losses, as applicable, exceed One
Hundred Thousand Dollars ($100,000) in which event the Indemnified Party shall
be entitled to indemnification for all such Losses.
(c) The aggregate indemnification obligation of Seller or Buyer hereunder
for Buyer Losses (other than Buyer Losses described in the following sentence)
or Seller Losses, as applicable, shall not exceed Two Million Five Hundred
Thousand Dollars ($2,500,000). Notwithstanding the foregoing, the aggregate
indemnification obligation of Seller hereunder for actual out-of-pocket Buyer
Losses related to or arising from Sections 8.2(a)(v) or 8.2(a)(vi) hereof,
together with all other Buyer Losses described in the preceding sentence, shall
not exceed Ten Million Dollars ($10,000,000).
(d) Such limitations shall not apply to any indemnification for a breach of
Section 3.22 by Seller or pursuant to Sections 8.2(a)(iii), 8.2(a)(iv) or
8.3(a)(iii).
Section 8.6 Adjustment for Insurance Benefit.
Any indemnification payable in accordance with this Article VIII shall be
net of any amounts actually recovered (after deducting related costs and
expenses) by the Indemnified Party for the Losses for which such indemnification
payment is made under any insurance policy, warranty or indemnity from any
Person other than a party hereto.
Section 8.7 Exclusive Remedy.
Without limiting any rights of any party to bring an action for injunctive
relief as contemplated by Section 9.7(b), the rights of the parties to assert
indemnification claims and receive indemnification payments pursuant to this
Article VIII will be the sole and exclusive right and remedy exercisable by
Buyer Indemnified Parties and Seller Indemnified Parties with respect to any
Claims arising under this Agreement. Notwithstanding the foregoing, in the event
Seller breaches its representation in Section 3.23 with respect to any property,
assets or rights used by the Company to manufacture and sell the Products as of
the Closing Date, to the extent Seller owns and/or is permitted to transfer such
property, asset or right, Seller shall cure such breach by promptly transferring
such property, asset or right to the Company, and Buyer shall have no further
remedy with respect thereto.
ARTICLE IX. MISCELLANEOUS
Section 9.1 Notices.
All notices and other communications pursuant to this Agreement shall be in
writing and shall be deemed given if delivered personally, telecopied, sent by
nationally-recognized overnight courier or mailed by registered or certified
mail (return receipt requested), postage prepaid, to the parties at the
addresses set forth below or to such other address as the party to whom notice
is to be given may have furnished to the other parties hereto in writing in
accordance herewith. Any such notice or communication shall be deemed to have
been delivered and received (a) in the case of personal delivery, on the date of
such delivery, (b) in the case of telecopier, on the date sent if confirmation
of receipt is received and such notice is also promptly mailed by registered or
certified mail (return receipt requested), (c) in the case of a
nationally-recognized overnight courier in circumstances under which such
courier guarantees next business day delivery, on the next business day after
the date when sent and (d) in the case of mailing, on the third business day
following that on which the piece of mail containing such communication is
posted:
If to Buyer: Performance Technologies Incorporated
205 Indigo Creek Drive
Rochester, New York 14626
Attention: Chief Financial Officer
Fax: (585) 256-3520
with a copy to: Harter, Secrest & Emery LLP
1600 Bausch & Lomb Place
Rochester, New York 14604
Attention: Jeffrey H. Bowen, Esq.
Fax: (585) 232-2152
If to Seller: Intel Corporation
2200 Mission College Boulevard
Santa Clara, California 95052
Attention: Treasurer
Fax: (408) 765-8871
and: Intel Corporation
2200 Mission College Boulevard
Santa Clara, California 95052
Attention: General Counsel
Fax: (408) 765-1859
with a copy to: Weil, Gotshal & Manges LLP
201 Redwood Shores Parkway
Redwood Shores, California 94065
Attention: Richard Millard, Esq.
Fax: (650) 802-3100
Section 9.2 Amendment; Waiver.
Any provision of this Agreement may be amended or waived if such amendment
or waiver is in writing and signed, in the case of an amendment, by Buyer and
Seller, or in the case of a waiver, by the party against whom the waiver is to
be effective. No failure or delay by any party in exercising any right, power or
privilege hereunder will operate as a waiver thereof nor will any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
Section 9.3 No Assignment or Benefit to Third Parties.
No party may assign any of its rights or delegate any of its obligations
under this Agreement, by operation of Law or otherwise, without the prior
written consent of the other party, and any attempt to assign this Agreement
without such consent will be void and of no force or effect. Nothing in this
Agreement, express or implied, is intended to confer upon any Person other than
Buyer, Seller or the Indemnified Parties, or their respective successors or
permitted assigns, any rights or remedies under or by reason of this Agreement.
Without limiting the generality of the foregoing, nothing in this Agreement
creates any rights in any employees or groups of employees.
Section 9.4 Expenses.
Except as otherwise expressly provided by this Agreement, whether or not
the Transaction is consummated, all costs and expenses incurred in connection
with this Agreement and the Transaction will be borne by the party incurring the
same.
Section 9.5 Schedules and Exhibits, Etc.
Buyer's rights to indemnification or other remedies provided hereby based
on any breach by Seller of its representations, warranties, covenants and
agreements will not be affected by any investigation conducted with respect to,
or any knowledge acquired (or capable of being acquired) by Buyer at any time,
whether before or after the execution and delivery of this Agreement or the
Closing Date, with respect to the accuracy or inaccuracy of or compliance with,
any such representation, warranty, covenant or agreement. The due diligence
review conducted by Buyer and its representatives will not relieve Seller of any
duties concerning its representations, warranties, covenants or agreements
contained in this Agreement or in any Ancillary Agreement.
Section 9.6 Governing Law.
This Agreement will be governed by and construed in accordance with the
Laws of the State of Delaware without regard to its principles of conflicts of
laws.
Section 9.7 Dispute Resolution.
(a) All disputes arising directly under the express terms of this Agreement
shall be resolved as follows: The senior management of the parties to the
dispute shall meet to attempt to resolve such disputes. If the disputes cannot
be resolved by the senior management of the parties, any party may make a
written demand for formal dispute resolution and specify therein the scope of
the dispute. Within thirty (30) days after such written notification, the
parties agree to meet for one (1) day with an impartial mediator and consider
dispute resolution alternatives other than litigation. If an alternative method
of dispute resolution is not agreed upon within thirty (30) days after the one
(1) day mediation, either party may begin litigation proceedings.
(b) Notwithstanding the provisions of Section 9.7(a) above, each party
shall have the right, without the requirement of first seeking a remedy through
mediation, to seek preliminary injunctive or other equitable relief in any
proper court in the event that such party determines that eventual redress
through mediation will not provide a sufficient remedy for any violation of this
Agreement by any other party.
(c) In the event a proceeding is brought to enforce or interpret any
provision of this Agreement, the prevailing party shall be entitled to recover
reasonable attorneys' fees and costs in an amount to be fixed by the court or
arbitrator, as applicable.
Section 9.8 Submission to Jurisdiction; Waiver of Jury Trial.
(a) The parties hereby irrevocably submit to the jurisdiction of the courts
of the State of Delaware and the Federal courts of the United States of America
located in the State of Delaware solely in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred to
in this Agreement, and in respect of the transactions contemplated hereby, and
hereby waive, and agree not to assert, as a defense in any proceeding for the
interpretation or enforcement hereof or of any such document, that it is not
subject thereto or that such proceeding may not be brought or is not
maintainable in said courts or that the venue thereof may not be appropriate or
that this Agreement or any such document may not be enforced in or by such
courts, and the parties hereto irrevocably agree that all claims with respect to
such proceeding shall be heard and determined in such a Delaware state or
Federal court. The parties hereby consent to and grant any such court
jurisdiction over the person of such parties and over the subject matter of such
dispute and agree that mailing of process or other papers in connection with any
such action or proceeding in the manner provided in Section 9.1 or in such other
manner as may be permitted by applicable Law, shall be valid and sufficient
service thereof.
(b) The parties agree that irreparable damage may occur and that the
parties would not have any adequate remedy at law in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in any Federal court located in the State of Delaware or in
Delaware state court, this being in addition to any other remedy to which they
are entitled at law or in equity.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.8.
Section 9.9 Remedies Cumulative.
Except as otherwise set forth herein, the various rights and remedies
herein provided will be cumulative and not exclusive of any other rights or
remedies herein provided or any rights or remedies provided by Law.
Section 9.10 Inferences.
Inasmuch as this Agreement is the result of negotiations between
sophisticated parties of equal bargaining power represented by counsel, no
inference in favor of or against any party will be drawn from the fact that any
portion of this Agreement has been drafted by or on behalf of such party.
Section 9.11 Severability.
The provisions of this Agreement will be deemed severable and the
invalidity or unenforceability of any provision will not affect the validity or
enforceability of the other provisions hereof. If any provision of this
Agreement, or the application thereof to any Person or any circumstance, is
invalid or unenforceable, (a) a suitable and equitable provision will be
substituted therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision,
and (b) the remainder of this Agreement and the application of such provision to
other Persons or circumstances will not be affected by such invalidity or
unenforceability, nor will such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in any
other jurisdiction.
Section 9.12 Entire Agreement.
This Agreement, the CNDA and the Ancillary Agreements together contain the
entire agreement between the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters.
Section 9.13 Headings.
The heading references herein are for convenience purposes only, do not
constitute a part of this Agreement and will not be deemed to limit or affect
any of the provisions hereof.
Section 9.14 Counterparts.
This Agreement may be executed in one or more counterparts, each of which
will be deemed an original, and all of which will constitute one and the same
Agreement.
[Signature page follows]
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
INTEL CORPORATION
By: /s/ Leslie L. Vadasz
----------------------------------------------
Name: Leslie L. Vadasz
----------------------------------------------
Title: Executive Vice President
----------------------------------------------
PERFORMANCE TECHNOLOGIES INCORPORATED
By: /s/ Donald L. Turrell
----------------------------------------------
Name: Donald L. Turrell
----------------------------------------------
Title: President and Chief Executive Officer
----------------------------------------------
[SIGNATURE PAGE TO INTEL/PTI STOCK PURCHASE AGREEMENT]
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS........................................................1
Section 1.1 Certain Definitions......................................1
Section 1.2 Interpretation...........................................5
Section 1.3 Accounting Conventions...................................5
ARTICLE II. PURCHASE AND SALE.................................................5
Section 2.1 Pre-Closing Transfers and Other Actions..................5
Section 2.2 Purchase and Sale of Shares..............................6
Section 2.3 Asset Confirmation.......................................7
Section 2.4 Inventory Confirmation...................................8
Section 2.5 Retention of Certain Employees...........................9
Section 2.6 Closing...................................................9
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER.........................9
Section 3.1 Power and Authority of Seller...........................10
Section 3.2 Organization, Power and Capitalization of the Company...10
Section 3.3 Governmental Approvals..................................10
Section 3.4 Non-Contravention.......................................10
Section 3.5 Binding Effect..........................................11
Section 3.6 Title Matters...........................................11
Section 3.7 Financial Statements....................................11
Section 3.8 Liabilities.............................................11
Section 3.9 Compliance with Laws....................................12
Section 3.10 Litigation and Claims..................................12
Section 3.11 Tangible Assets and Products...........................12
Section 3.12 Company Intellectual Property..........................12
Section 3.13 Major Vendors and Customers............................14
Section 3.14 Material Contracts; Warranties.........................14
Section 3.15 Tax Matters............................................15
Section 3.16 Employment Matters.....................................16
Section 3.17 Benefits Arrangements..................................17
Section 3.18 Environmental Matters..................................18
Section 3.19 Insurance..............................................19
Section 3.20 Conduct of Business....................................19
TABLE OF CONTENTS
(continued)
Page
Section 3.21 Related-Party Transactions.............................20
Section 3.22 Finders' Fees..........................................21
Section 3.23 Adequacy of Assets of the Company......................21
Section 3.24 Disclosure.............................................21
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER..........................21
Section 4.1 Organization and Power..................................21
Section 4.2 Authorization...........................................21
Section 4.3 Governmental Approvals..................................21
Section 4.4 Non-Contravention.......................................22
Section 4.5 Binding Effect..........................................22
Section 4.6 Finders' Fees...........................................22
Section 4.7 Financing...............................................22
Section 4.8 Disclosure..............................................22
ARTICLE V. COVENANTS AS TO TAX MATTERS.......................................23
Section 5.1 Transfer Taxes..........................................23
Section 5.2 Liability for Taxes.....................................23
Section 5.3 Tax Returns.............................................24
Section 5.4 Information to be Provided by Buyer.....................25
Section 5.5 Contests................................................25
Section 5.6 Post-Closing Events that Affect Seller's Liability for
Taxes...................................................25
Section 5.7 Assistance and Cooperation..............................27
ARTICLE VI. OTHER COVENANTS..................................................27
Section 6.1 Further Assurances......................................27
Section 6.2 Inability to Obtain Required Approvals..................27
Section 6.3 Applied Computing Platform Provider Program.............28
Section 6.4 Additional Financial Information........................28
Section 6.5 Confidentiality.........................................28
Section 6.6 Non-Solicitation........................................29
Section 6.7 Transition Services.....................................29
Section 6.8 Notification; Updating Schedules........................29
Section 6.9 Retained Marks..........................................30
Section 6.10 Access to Books and Records and Employees..............30
Section 6.11 Warranty Service.......................................30
Section 6.12 Dissolution of Sales Corporation; Termination
of Liens...............................................31
Section 6.13 1099 Reporting Requirements............................31
ARTICLE VII. CONDITIONS TO CLOSING...........................................31
Section 7.1 Conditions to the Obligations of Buyer and Seller.......31
Section 7.2 Further Conditions to the Obligation of Buyer...........32
Section 7.3 Further Conditions to the Obligation of Seller..........33
ARTICLE VIII. INDEMNIFICATION................................................33
Section 8.1 Survival; Limitation on Representations, Warranties.....33
Section 8.2 Indemnification by Seller...............................34
Section 8.3 Indemnification by Buyer................................35
Section 8.4 Indemnification Procedures..............................35
Section 8.5 Indemnification Limitations.............................37
Section 8.6 Adjustment for Insurance Benefit........................37
Section 8.7 Exclusive Remedy........................................37
ARTICLE IX. MISCELLANEOUS....................................................38
Section 9.1 Notices..................................................38
Section 9.2 Amendment; Waiver.......................................39
Section 9.3 No Assignment or Benefit to Third Parties...............39
Section 9.4 Expenses................................................39
Section 9.5 Schedules and Exhibits, Etc.............................39
Section 9.6 Governing Law...........................................39
Section 9.7 Dispute Resolution......................................40
Section 9.8 Submission to Jurisdiction; Waiver of Jury Trial........40
Section 9.9 Remedies Cumulative.....................................41
Section 9.10 Inferences.............................................41
Section 9.11 Severability...........................................41
Section 9.12 Entire Agreement.......................................42
Section 9.13 Headings...............................................42
Section 9.14 Counterparts...........................................42
TABLE OF DEFINED TERMS
Defined Term Section
------------ -------
Accountants ..................................................ss. 1.1
Affiliate ....................................................ss. 1.1
Agreement ....................................................ss. 1.1
Ancillary Agreements..........................................Recitals
Article ......................................................ss. 1.2(b)
Asset Confirmation ...........................................ss. 2.3(a)
Asset Statement ..............................................ss. 2.3(a)
Books and Records ............................................ss. 1.1
Buyer ........................................................Introduction
Buyer Indemnified Parties.....................................8.2(a)
Buyer Losses..................................................8.2(a)
Claim ........................................................ss. 1.1
Closing ......................................................ss. 1.1
Closing Date .................................................ss. 2.6
Closing Documents ............................................ss. 1.1
CNDA .........................................................ss. 6.5
COBRA ........................................................ss. 1.1
Code .........................................................ss. 1.1
Company ......................................................Recitals
Company Intellectual Property ................................ss. 3.12(a)
Contract .....................................................ss. 3.14(a)
Covered Third Party Claim ....................................ss. 8.2(a)(v)
Demand Forecast Inventory.....................................ss. 2.4(a)
dollars ......................................................ss. 1.2(e)
Election Period ..............................................ss. 8.4(b)
Employee Leasing Agreement ...................................ss. 3.16
Employment Laws ..............................................ss. 3.16
Encumbrances .................................................ss. 1.1
Environmental Law ............................................ss. 1.1
ERISA ........................................................ss. 1.1
ERISA Affiliate ..............................................ss. 1.1
Exhibit ......................................................ss. 1.2(b)
Financial Statements .........................................ss. 1.1
GAAP .........................................................ss. 1.1
Governmental Authorizations ..................................ss. 1.1
Governmental Entity ..........................................ss. 1.1
Hazardous Substance ..........................................ss. 1.1
herein .......................................................ss. 1.2(a)
hereof .......................................................ss. 1.2(a)
hereunder.....................................................ss. 1.2(a)
include ......................................................ss. 1.2(h)
includes .....................................................ss. 1.2(h)
including ....................................................ss. 1.2(h)
Indemnified Party ............................................ss. 8.4(a)
Indemnifying Party ...........................................ss. 8.4(a)(i)
Indemnity Notice .............................................ss. 8.4(e)
Intel San Luis Obispo.........................................6.9
Intellectual Property ........................................ss. 1.1
Inventory ....................................................ss. 1.1
Inventory Confirmation .......................................ss. 2.4(a)
Inventory Statement ..........................................ss. 2.4(a)
JPMorgan Chase................................................7.3(c)(i)
Key Employee .................................................ss. 2.5(a)
Knowledge ....................................................ss. 1.1
Law ..........................................................ss. 1.1
Lease ........................................................ss. 2.1(d)
Liability ....................................................ss. 1.1
Licenses .....................................................ss. 3.12(a)(v)
Losses .......................................................ss. 1.1
Material Adverse Effect ......................................ss. 1.1
Material Contract ............................................ss. 3.14(a)
Material Contracts ...........................................ss. 3.14(a)
Ordinary Course ..............................................ss. 1.1
party ........................................................ss. 1.2(c)
Patents ......................................................ss. 3.12(a)(iii)
Permitted Encumbrances .......................................ss. 1.1
Person .......................................................ss. 1.1
Post-Closing Tax Adjustment ..................................ss. 5.6(c)(ii)(B)
Post-Closing Tax Period ......................................ss. 5.2(b)
Pre-Closing Tax Adjustment ...................................ss. 5.6(c)(ii)(B)
Pre-Closing Tax Period .......................................ss. 5.2(a)(ii)
Products .....................................................ss. 1.1
Purchase Price ...............................................ss. 2.2(a)
Required Approvals ...........................................ss. 6.1
Required Service..............................................6.11(a)
Retained Employees ...........................................ss. 2.5(a)
Retained Marks ...............................................ss. 6.9
Schedule .....................................................ss. 1.2(b)
Section ......................................................ss. 1.2(b)
Seller .......................................................Introduction
Seller Indemnified Parties ...................................ss. 8.3(a)
Seller Losses ................................................ss. 8.3(a)
Seller Retained Assets and Liabilities .......................ss. 2.1(a)
Shares .......................................................ss. 1.1
Straddle Period ..............................................ss. 5.2(c)
Subsidiary ...................................................ss. 1.1
Taxes ........................................................ss. 1.1
Tax Returns ..................................................ss. 1.1
Technical Documentation ......................................ss. 3.12(a)(i)
third party ..................................................ss. 1.2(d)
Third Party Claims ...........................................ss. 8.4(a)
Third Party Claim Notice .....................................ss. 8.4(a)(ii)
Third Party Debt .............................................ss. 1.1
Trademarks ...................................................ss. 3.12(a)(iv)
Transaction ..................................................ss. 1.1
Treasury Regulations .........................................ss. 1.1
U.S...........................................................ss. 1.1
Omitted exhibits and schedules to the stock purchase agreement will be
provided to the Securities and Exchange Commission upon written request.
TABLE OF EXHIBITS AND SCHEDULES
Exhibits
Exhibit A......... Form of Intellectual Property Agreement
Exhibit B......... Form of cPCI 2.16 Development Agreement
Exhibit C-1....... Form of Seller OEM Letter Agreement
Exhibit C-2....... Form of Buyer OEM Letter Agreement
Exhibit D......... Form of Patent Cross License Agreement
Exhibit E......... Form of Contribution and Assumption Agreement
Schedules
Schedule 2.1(a)(i): Seller Retained IP Licenses and Agreements
Schedule 2.1(a)(ii): Seller Retained Real Property
Schedule 2.1(a)(iii): Seller Retained Inventory
Schedule 2.1(a)(vi): Seller Retained Miscellaneous Assets
Schedule 2.1(d): Assets to be Removed Prior to Closing
Schedule 2.4(a): Demand Forecast Inventory
Schedule 2.5: Key Employee and Retained Employees
Schedule 3.2(a): Subsidiaries
Schedule 3.2(b): Capital Stock
Schedule 3.4: Non-Contravention
Schedule 3.6(b): Title Matters
Schedule 3.7: Financial Statements
Schedule 3.8(a): Liabilities
Schedule 3.8(b): Third Party Debt
Schedule 3.10: Litigation and Claims
Schedule 3.11(a): Tangible Assets
Schedule 3.11(b): List of Products
Schedule 3.11(c): Inventory
Schedule 3.12(a)(iii): Patents and Patent Applications
Schedule 3.12(a)(iv): Trademarks
Schedule 3.12(a)(v): Licenses
Schedule 3.12(a)(vi): World Wide Web Content and Domain Names
Schedule 3.12(b): Encumbrances
Schedule 3.12(c): Infringement
Schedule 3.12(d): Technical Documentation
Schedule 3.12(f): Invention Assignment Agreements
Schedule 3.13: Customers, Suppliers and Distributors
Schedule 3.14(a): Material Contracts
Schedule 3.14(b): Enforceability of Material Contracts
Schedule 3.14(c) Deviations from Standard Warranty
Schedule 3.15: Tax Matters
Schedule 3.16: Employment Matters
Schedule 3.18: Environmental Matters
Schedule 3.19: Insurance
Schedule 3.20(a): Conduct of Business
Schedule 3.21: Related-Party Transactions
Schedule 3.23: Exceptions to Adequacy of Assets
Schedule 4.4: Buyer Non-Contravention
Schedule 6.1: Required Approvals
Schedule 6.7: ... Transition Services
Schedule 8.5(a)(v): Buyer Liabilities