<PAGE> 1
Exhibit 2.1
ASSET PURCHASE AGREEMENT
dated as of
August 31, 2000
NETSILICON, INC.
PASW, INC.
PSI SOFTWORKS TECHNOLOGY, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I DEFINITIONS............................................................................................1
1.01. DEFINITIONS.............................................................................................1
ARTICLE II PURCHASE AND SALE.....................................................................................3
2.01. PURCHASE AND SALE.......................................................................................3
2.02. EXCLUDED ASSETS.........................................................................................4
2.03. LICENSE OF SELLER'S PROPRIETARY RIGHTS; REGISTRATION RIGHTS AGREEMENT...................................5
2.04. ASSUMPTION OF LIABILITIES...............................................................................5
2.05. EXCLUDED LIABILITIES....................................................................................5
2.06. ASSIGNMENT OF CONTRACTS AND RIGHTS......................................................................6
2.07. PURCHASE PRICE; ALLOCATION OF PURCHASE PRICE............................................................6
2.08. CLOSING.................................................................................................6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER.............................................................6
3.01. CORPORATE EXISTENCE AND POWER...........................................................................6
3.02. CORPORATE AUTHORIZATION.................................................................................7
3.03. GOVERNMENTAL AUTHORIZATION..............................................................................7
3.04. NON-CONTRAVENTION.......................................................................................7
3.05. REQUIRED CONSENTS.......................................................................................7
3.06. FINANCIAL INFORMATION...................................................................................7
3.07. ABSENCE OF CERTAIN CHANGES..............................................................................7
3.08. PROPERTIES..............................................................................................8
3.09. NO UNDISCLOSED MATERIAL LIABILITIES.....................................................................8
3.10. LITIGATION..............................................................................................8
3.11. MATERIAL CONTRACTS......................................................................................9
3.12. LICENSES AND PERMITS....................................................................................9
3.13. COMPLIANCE WITH LAWS...................................................................................10
3.14. PROPRIETARY RIGHTS.....................................................................................10
3.15. PRODUCTS...............................................................................................11
3.16. EMPLOYEES AND CUSTOMERS................................................................................11
3.17. OTHER INFORMATION......................................................................................12
3.18. INVESTMENT REPRESENTATIONS.............................................................................12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER..............................................................12
4.01. ORGANIZATION AND EXISTENCE.............................................................................12
4.02. CORPORATE AUTHORIZATION................................................................................12
4.03. GOVERNMENTAL AUTHORIZATION.............................................................................13
4.04. NON-CONTRAVENTION......................................................................................13
4.05. LITIGATION.............................................................................................13
4.06. SEC REPORTS............................................................................................13
4.07. VALIDITY OF SHARES.....................................................................................13
ARTICLE V COVENANTS OF SELLER...................................................................................13
5.01. NONCOMPETITION.........................................................................................13
5.02. CONFIDENTIALITY........................................................................................14
5.03. FACILITIES ACCESS AND DISTRIBUTOR ARRANGEMENT..........................................................14
ARTICLE VI COVENANTS OF BUYER...................................................................................14
6.01. ACCESS.................................................................................................14
6.02. ADMINISTRATION OF CONTRACTS............................................................................15
6.03. CONFIDENTIALITY........................................................................................15
6.04. NON-SOLICITATION.......................................................................................15
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
ARTICLE VII COVENANTS OF BOTH PARTIES...........................................................................15
7.01. BEST EFFORTS; FURTHER ASSURANCES.......................................................................15
7.02. PUBLIC ANNOUNCEMENTS...................................................................................15
ARTICLE VIII TAX MATTERS........................................................................................15
8.01. TAX DEFINITIONS........................................................................................15
8.02. TAX MATTERS............................................................................................16
8.03. TAX COOPERATION; ALLOCATION OF TAXES...................................................................16
ARTICLE IX EMPLOYEE BENEFITS....................................................................................17
9.01. EMPLOYEE BENEFITS DEFINITIONS..........................................................................17
9.02. ERISA REPRESENTATIONS..................................................................................18
9.03. EMPLOYEES AND OFFERS OF EMPLOYMENT.....................................................................18
9.04. SELLER'S EMPLOYEE BENEFIT PLANS........................................................................18
9.05. STOCK OPTIONS..........................................................................................19
9.06. NO THIRD PARTY BENEFICIARIES...........................................................................19
ARTICLE X SURVIVAL; INDEMNIFICATION.............................................................................20
10.01. SURVIVAL..............................................................................................20
10.02. INDEMNIFICATION.......................................................................................20
10.03. PROCEDURES; NO WAIVER; EXCLUSIVITY....................................................................20
ARTICLE XI MISCELLANEOUS........................................................................................21
11.01. NOTICES...............................................................................................21
11.02. AMENDMENTS; NO WAIVERS................................................................................21
11.03. EXPENSES..............................................................................................22
11.04. SUCCESSORS AND ASSIGNS................................................................................22
11.05. GOVERNING LAW.........................................................................................22
11.06. COUNTERPARTS; EFFECTIVENESS...........................................................................22
11.07. ENTIRE AGREEMENT......................................................................................22
11.08. CAPTIONS..............................................................................................22
</TABLE>
EXHIBITS
Exhibit A -- Form of License Agreement
Exhibit B -- Form of Escrow Agreement
Exhibit C -- Form of Registration Rights Agreement
SCHEDULES
Products Schedule
Schedule 3.05 Required Consents
Schedule 3.06 Financial Information
Schedule 3.08 Personal Property
Schedule 3.11 Contracts
Schedule 3.12 Licenses and Permits
Schedule 3.14 Proprietary Rights
Schedule 3.16 Employees
Schedule 3.17 Inventories
Schedule 9.02 Employee Benefits
Schedule 9.03 Employee Offer List
-ii-
<PAGE> 4
ASSET PURCHASE AGREEMENT
AGREEMENT dated as of August 31, 2000 between NETsilicon, Inc., a
Massachusetts corporation ("BUYER"); PASW, Inc., a California corporation
("PASW"); and PSI Softworks Technology, Inc., a California corporation ("PSI
TECH"). PASW and PSI Tech are sometimes referred to herein as a "SELLER" or
collectively as the "SELLERS". All representations, warranties, covenants and
agreements of the Sellers herein are joint and several, whether so expressed or
not.
WITNESSETH:
WHEREAS, PASW, through PSI Tech, conducts a business (the "BUSINESS")
whose product range is centered on communications software for the Internet and
the Web and whose current major product technologies and expertise include
networking and communications protocols, Web Technologies, Real Time Operating
Systems and Application and Integration Software;
WHEREAS, Buyer desires to purchase substantially all of the assets of
the Business from Sellers, and Sellers desire to sell such assets to Buyer, upon
the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01. DEFINITIONS. (a) The following terms, as used herein, have the
following meanings:
"AFFILIATE" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such other
Person.
"ANCILLARY AGREEMENTS" means the License Agreement and the
Registration Rights Agreement.
"BALANCE SHEET" means the unaudited balance sheet of the Business as
of August 31, 2000 found in SCHEDULE 3.06.
"BALANCE SHEET DATE" means August 31, 2000.
"CLOSING DATE" means the date of the Closing.
"ESCROW AGENT" means the escrow agent that is a signatory to the
Escrow Agreement.
<PAGE> 5
"ESCROW AGREEMENT" means the Escrow Agreement among Sellers, Buyer and
the Escrow Agent in the form set forth in EXHIBIT A.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
"MATERIAL ADVERSE CHANGE" means a material adverse change in the
business, assets, condition (financial or otherwise), or results of operations
or prospects of the Business taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, assets, condition (financial or otherwise), or results of operations
or prospects of the Business taken as a whole.
"PERSON" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
"PRODUCTS" means the current and proposed products of the Business,
including without limitation those listed in the PRODUCTS SCHEDULE.
"PROPRIETARY RIGHTS" means all (A) patents, patent applications,
patent disclosures and all related continuation, continuation-in-part,
divisional, reissue, re-examination, utility, model, certificate of invention
and design patents, patent applications, registrations and applications for
registrations, (B) trademarks, service marks, trade dress, logos, tradenames,
service names, domain names and corporate names and registrations and
applications for registration thereof, (C) copyrights and registrations and
applications for registration thereof, (D) mask works and registrations and
applications for registration thereof, (E) computer software, data and
documentation, (F) trade secrets and confidential business information, whether
patentable or nonpatentable and whether or not reduced to practice, know-how,
manufacturing and product processes and techniques, service methodologies,
research and development information, copyrightable works, financial, marketing
and business data, pricing and cost information, business and marketing plans
and customer and supplier lists and information, (G) other proprietary rights
relating to any of the foregoing (including without limitation associated
goodwill and remedies against infringements thereof and rights of protection of
an interest therein under the laws of all jurisdictions) and (H) copies and
tangible embodiments thereof.
"SELLERS' PROPRIETARY RIGHTS" means all Proprietary Rights that are
owned by any Seller or an Affiliate of any thereof that are used or proposed to
be used in the operation of the Business or that relate in any way to the
Products.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
2
<PAGE> 6
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Ancillary Agreements 3.02
Apportioned Obligations 8.03
Assumed Liabilities 2.04
Benefit Arrangement 9.01
Closing 2.08
Code 8.01
Contracts 2.01
Employee Plan 9.01
ERISA 9.01
ERISA Affiliate 9.01
Excluded Assets 2.02
Excluded Liabilities 2.05
Financial Statements 3.06
Indemnified Party 10.03
Indemnifying Party 10.03
License 2.03
Loss 10.02
Permits 3.12
Post-Closing Tax Period 8.01
Pre-Closing Tax Period 8.01
Purchased Assets 2.01
Purchase Price 2.07
Registration Rights Agreement 2.03
Required Consent 3.05
Shares 2.07
Tax 8.01
Transferred Employee 9.03
</TABLE>
ARTICLE II
PURCHASE AND SALE
2.01. PURCHASE AND SALE. Upon the terms and subject to the conditions
of this Agreement, Buyer agrees to purchase from Sellers and Sellers agree to
sell, transfer, assign and deliver, or cause to be sold, transferred, assigned
and delivered, to Buyer at Closing, free and clear of all Liens other than
Permitted Liens, all of the assets, properties and business, other than the
Excluded Assets, of every kind and description, wherever located, real, personal
or mixed, tangible or intangible, owned, held or used in the conduct of the
Business by Sellers or any of them or any Affiliate of a Seller as the same
shall exist on the Closing Date, including all assets shown on the Balance Sheet
and not disposed of in the ordinary course of business, and all assets of the
Business thereafter acquired by a Seller (the "PURCHASED ASSETS"), and
including, without limitation, all right, title and interest of Sellers and
their Affiliates in, to and under such of the foregoing as are more specifically
described below:
3
<PAGE> 7
(i) all personal property and interests therein, including machinery,
equipment, furniture, office equipment, communications equipment, vehicles
and other tangible property, including without limitation the items listed
on SCHEDULE 3.08;
(ii) all raw materials, work-in-process, finished goods, supplies and
other inventories, wherever situated, a listing of which as of a recent
date is set forth on SCHEDULE 3.17;
(iii) all rights under all contracts, agreements, proposals, requests
for proposals, leases, licenses, commitments, sales and purchase orders and
other instruments, including all employee or consultant confidentiality,
inventions and/or non-competition agreements and including without
limitation the items listed on SCHEDULE 3.11 (collectively, the
"Contracts");
(iv) all accounts, notes and other receivables;
(vi) all prepaid expenses and deposits including without limitation ad
valorem taxes, leases and rentals, excluding the deposit on the building at
703 Rancho Conejo Blvd., Newbury Park, California;
(vii) all of each Seller's rights, claims, credits, causes of action or
rights of set-off against third parties relating to the Purchased Assets,
including, without limitation, unliquidated rights under manufacturers' and
vendors' warranties;
(viii) all Proprietary Rights owned or licensed, or used in the
Business, by a Seller or its Affiliates or that relate in any way to the
Products, including without limitation the items listed on SCHEDULE 3.14;
(ix) all transferable licenses, permits or other governmental
authorizations affecting, or relating in any way to, the Business,
including without limitation the items listed on SCHEDULE 3.12;
(x) all books, records, files and papers, reasonably necessary for
the current and future conduct of the Business, whether in hard copy or
computer format, including, without limitation, engineering information,
sales and promotional literature, manuals and data, sales and purchase
correspondence, lists of present and former suppliers, lists of present and
former customers, personnel and employment records, and any information
relating to Tax imposed on the Purchased Assets; and
(xi) all goodwill associated with the Business or the Purchased
Assets, together with the right to represent to third parties that Buyer is
the successor to the Business.
2.02. EXCLUDED ASSETS. Buyer expressly understands and agrees that the
following assets and properties of Sellers (the "EXCLUDED ASSETS") shall be
excluded from the Purchased Assets:
(i) all cash and cash equivalents on hand and in banks;
4
<PAGE> 8
(ii) the stock and all assets of iAppliance.com, Inc.;
(iii) all of PASW's interest in Financial Services Provider Network;
and
(iv) all of PASW's interest in Pacific Softworks Europe Ltd. and
Network Research Corporation Japan (which serve certain distribution
functions with respect to the Business);
2.03. LICENSE-BACK OF SELLERS' PROPRIETARY RIGHTS; REGISTRATION RIGHTS
AGREEMENT. Simultaneously with the Closing, Buyer is licensing back to PASW and
its subsidiaries certain Proprietary Rights acquired by Buyer pursuant to this
Agreement pursuant a license agreement in the form attached hereto as EXHIBIT B
(the "LICENSE"). Simultaneously with the Closing, Buyer and PASW are entering
into a Registration Rights Agreement in the form attached hereto as EXHIBIT C
(the "REGISTRATION RIGHTS Agreement").
2.04. ASSUMPTION OF LIABILITIES. Upon the terms and subject to the
conditions of this Agreement, Buyer hereby assumes the following liabilities of
Sellers and no others (the "ASSUMED LIABILITIES"): all liabilities and
obligations of a Seller arising under the Contracts on and after the Closing
Date to the extent that such Contracts are assigned to Buyer or the benefits
thereof effectively made available to Buyer pursuant to Section 2.06, other than
liabilities or obligations, (whether or not asserted or arising before or after
the Closing) attributable to any failure by a Seller to comply with the terms of
any Contracts.
2.05. EXCLUDED LIABILITIES. Notwithstanding any provision in this
Agreement or any other writing to the contrary, Buyer is assuming only the
Assumed Liabilities and is not assuming any other liability or obligation of any
Seller or any Affiliate of any Seller (or any predecessor owner of all or part
of its business and assets) of whatever nature whether presently in existence or
arising or asserted hereafter. All such other liabilities and obligations shall
be retained by and remain obligations and liabilities of Sellers or their
Affiliates (all such liabilities and obligations not being assumed being herein
referred to as the "EXCLUDED LIABILITIES"). Without limiting the foregoing, none
of the following shall be Assumed Liabilities for the purposes of this
Agreement:
(i) any obligation or liability for Tax (i) arising from or with
respect to the Purchased Assets or the operation of the Business which is
incurred in or attributable to any Pre-Closing Tax Period, (ii) imposed on
Buyer pursuant to transferee or successor liability, by contract, under
principles of law analogous to Treas. Reg. Section 1.502-6 or otherwise or
(iii) attributable to the transactions contemplated by this Agreement;
(ii) any liabilities or obligations of a Seller relating to employee
benefits or compensation arrangements, including, without limitation, any
liabilities or obligations under any of a Seller's employee benefit
agreements, plans or other arrangements listed on SCHEDULE 9.02; and
5
<PAGE> 9
(iii) a Seller's obligation to provide accrued vacation pay to the
Transferred Employees, which obligation PASW shall satisfy in cash by
direct payment to the Transferred Employees within five business days after
the Closing.
2.06. ASSIGNMENT OF CONTRACTS AND RIGHTS. Anything in this Agreement
to the contrary notwithstanding, this Agreement shall not constitute an
agreement to assign any Purchased Asset or any claim or right or any benefit
arising thereunder or resulting therefrom if an attempted assignment thereof,
without consent of a third party thereto, would constitute a breach or other
contravention thereof or in any way adversely affect the rights of Buyer or a
Seller thereunder. Sellers and Buyer will use their best efforts (but without
any payment of money by Sellers or Buyer) to obtain the consent of the other
parties to any such Purchased Asset or claim or right or any benefit arising
thereunder for the assignment thereof to Buyer as Buyer may request. If such
consent is not obtained, or if an attempted assignment thereof would be
ineffective or would adversely affect the rights of a Seller thereunder so that
Buyer would not in fact receive all such rights, Sellers and Buyer will
cooperate in a mutually agreeable arrangement under which Buyer would obtain the
benefits and assume the obligations thereunder in accordance with this
Agreement, including subcontracting, sub-licensing, or subleasing to Buyer, or
under which a Seller would enforce for the benefit of Buyer, with Buyer assuming
a Seller's obligations, any and all rights of a Seller against a third party
thereto. Sellers will promptly pay to Buyer when received all monies received by
a Seller under any Purchased Asset or any claim or right or any benefit arising
thereunder on or after the Closing Date. In such event, Sellers and Buyer shall,
to the extent the benefits therefrom and obligations thereunder have not been
provided by alternate arrangements satisfactory to Buyer and Sellers, negotiate
in good faith an adjustment in the consideration paid by Buyer for the Purchased
Assets.
2.07. PURCHASE PRICE; ALLOCATION OF PURCHASE PRICE. The purchase price
for the Purchased Assets and the covenant not to compete contained in Section
5.04 (the "PURCHASE PRICE") is (a) 90,000 shares of the Common Stock of Buyer
(the "SHARES") and (b) the assumption of the Assumed Liabilities.
2.08. CLOSING. The closing (the "CLOSING") of the purchase and sale of
the Purchased Assets and the assumption of the Assumed Liabilities hereunder is
taking place simultaneously with the execution of this Agreement. Of the
Purchase Price, 81,000 Shares, registered in the name of PASW, are being
delivered directly to PASW by Buyer and 9,000 Shares, registered in the name of
PASW, are being delivered by Buyer to the Escrow Agent to be held and disbursed
in accordance with the Escrow Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers hereby jointly and severally represent and warrant to Buyer
that:
3.01. CORPORATE EXISTENCE AND POWER. Each of the Sellers is a
corporation duly incorporated, validly existing and in good standing under the
laws of California, and has all
6
<PAGE> 10
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on the Business.
3.02. CORPORATE AUTHORIZATION. The execution, delivery and performance
by each of the Sellers, as applicable, of this Agreement, the License Agreement,
the Registration Rights Agreement and each of the other agreements being
executed in connection herewith (the "ANCILLARY AGREEMENTS"), and the
consummation by Sellers of the transactions contemplated hereby and thereby are
within each Seller's corporate powers and have been duly authorized by all
necessary corporate action on the part of each Seller. This Agreement and each
of the Ancillary Agreements to which a Seller is a party constitute valid and
binding agreements of such Seller enforceable in accordance with their terms.
3.03. GOVERNMENTAL AUTHORIZATION. The execution delivery and
performance by Sellers of this Agreement and each of the Ancillary Agreements,
as applicable, do not require any action by or in respect of, or filing with,
any governmental body, agency, official or authority.
3.04. NON-CONTRAVENTION. The execution, delivery and performance by
each Seller of this Agreement and each of the Ancillary Agreements, as
applicable, do not and will not (i) contravene or conflict with the corporate
charter or bylaws of a Seller, (ii) contravene or conflict with or constitute a
violation of any provision of any law, regulation, judgment, injunction, order
or decree binding upon or applicable to a Seller or the Business; (iii) assuming
the receipt of all Required Consents, constitute a default under or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of a Seller or to a loss of any benefit relating to the Business to
which a Seller is entitled under any provision of any agreement, contract or
other instrument binding upon a Seller or by which any of the Purchased Assets
is or may be bound, or any Permit or (iv) result in the creation or imposition
of any Lien on any Purchased Asset.
3.05. REQUIRED CONSENTS. SCHEDULE 3.05 sets forth each agreement,
contract or other instrument binding upon a Seller or any Permit requiring a
consent as a result of the execution, delivery and performance of this Agreement
and the Ancillary Agreements or the consummation of the transactions
contemplated hereby and thereby (each such consent, a "REQUIRED CONSENT").
3.06. FINANCIAL INFORMATION. The Balance Sheet and the related
unaudited statements of operations and cash flows for the Business taken as a
whole for the years and the interim periods set forth in SCHEDULE 3.06
(collectively, the "FINANCIAL STATEMENTS") fairly present in accordance with
generally accepted accounting principles, the financial position of the Business
as of the dates thereof and its results of operations and cash flows for the
periods then ended. The Financial Statements are attached hereto as SCHEDULE
3.06.
3.07. ABSENCE OF CERTAIN CHANGES. Since December 31, 1999, Sellers
have conducted the Business in the ordinary course consistent with past
practices, and there has not been:
7
<PAGE> 11
(a) Any Material Adverse Change, or any event, occurrence,
development or state of circumstances or facts which could reasonably be
expected to result in a Material Adverse Change;
(b) any creation or other incurrence of any Lien on any Purchased
Asset;
(c) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the Business or any Purchased Asset which,
individually or in the aggregate, has had or could reasonably be expected
to have a Material Adverse Effect;
(d) any transaction, contract, agreement or other instrument entered
into, or commitment made, by Seller relating to the Business or any
Purchased Asset (including the acquisition or disposition of any assets) or
any relinquishment by a Seller of any contract or other right, in either
case, other than transactions and commitments in the ordinary course of
business consistent with past practices and those contemplated by this
Agreement;
(e) any (i) grant of any severance or termination pay to any employee
of the Business, (ii) entering into of any employment, deferred
compensation or other similar agreement (or any amendment to any such
existing agreement) with any employee of the Business, (iii) increase in
benefits payable under an existing severance or termination pay policies or
employment agreements or (iv) other than in the ordinary course of
business, increase in compensation, bonus or other benefits payable to
employees of the Business; or
(f) any labor dispute, other than routine individual grievances, or
any activity or proceeding by a labor union or representative thereof to
organize any employees of the Business, or any lockouts, strikes,
slowdowns, work stoppages or threats thereof by or with respect to such
employees.
3.08. PROPERTIES. SCHEDULE 3.08 contains a list of all personal
property included in the Purchased Assets. Upon consummation of the transactions
contemplated hereby, Buyer will have acquired good and marketable title in and
to, or a valid leasehold interest in, each of the Purchased Assets, free and
clear of all Liens. The Purchased Assets, and the Excluded Assets specified in
Section 2.02 (i) and (iv), together constitute all of the assets or property
used or held for use primarily in the Business.
3.09. NO UNDISCLOSED MATERIAL LIABILITIES. To the knowledge of
Sellers, there are no material liabilities of the Business of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise that could have an adverse effect on the operation of the Business by
Buyer.
3.10. LITIGATION. To the knowledge of Sellers, there is no action,
suit, investigation or proceeding (or any basis therefor) pending against, or to
the knowledge of Sellers, threatened against or affecting, the Business or any
Purchased Asset before any court or arbitrator or any governmental body, agency
or official that, if determined or resolved adversely in accordance with the
plaintiff's demands, would reasonably be expected to have a Material Adverse
Effect or
8
<PAGE> 12
that in any manner challenges or seeks to prevent, enjoin, alter or materially
delay the transactions contemplated hereby.
3.11. MATERIAL CONTRACTS. (a) Except for the Contracts disclosed in
SCHEDULE 3.11 or any other Schedule to this Agreement, in each case below with
respect to the Business, Seller is not a party to or subject to:
(i) any contract or the purchase of materials, supplies, goods,
services, equipment or other assets used primarily in the Business
providing for annual payments by a Seller of, or pursuant to which in the
last year a Seller paid in the aggregate, $15,000 or more;
(ii) any sales, distribution or other similar agreement for goods or
services provided by the Business;
(iii) any partnership, joint venture or other similar contract
arrangement or agreement;
(iv) any license agreement, franchise agreement or agreement in
respect of similar rights granted to or held by a Seller;
(v) any agency, dealer, sales representative or other similar
agreement;
(vi) any agreement, contract or commitment that substantially limits
the freedom of a Seller to compete in any line of business or with any
Person that in any way could limit the freedom of the Buyer to conduct the
Business after the Closing Date; or
(vii) any other agreement, contract or commitment not made in the
ordinary course of business which is material to the Business taken as a
whole and all material ongoing contracts for services.
(b) Each Contract disclosed in any Schedule to this Agreement or
required to be disclosed pursuant to Section 3.11(a) is valid and binding
agreement of a Seller and is in full force and effect, and neither any Seller
nor, to the knowledge of any Seller, any other party thereto is in default in
any material respect under the terms of any such Contract, nor, to the knowledge
of a Seller, has any event or circumstance occurred that, with notice or lapse
of time or both, would constitute any event of default thereunder.
3.12. LICENSES AND PERMITS. SCHEDULE 3.12 correctly described each
license, franchise, permit or other similar authorization affecting, or relating
in any way to, the Business, together with the name of the government agency or
entity issuing such license or permit (the "PERMITS"). Except as set forth on
the SCHEDULE 3.12, such Permits are valid and in full force and effect and,
assuming the receipt of the related Required Consents, are transferable by
Sellers and will not be terminated or impaired or become terminable as a result
of the transactions contemplated hereby. Upon consummation of such transactions,
Buyer will, assuming the related Required Consents have been obtained, have all
of the right, title and interest in all the Permits.
9
<PAGE> 13
3.13. COMPLIANCE WITH LAWS. Sellers are not in violation of, has not
for the last three years violated, and to Seller's knowledge is not under
investigation with respect to and has not been threatened to be charged with or
given notice of any violation of, any law, rule, ordinance or regulation, or
judgment, order or decree entered by any court, arbitrator or governmental
authority, domestic or foreign, applicable to the conduct of the Business,
except for violations that have not had and could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.
3.14. PROPRIETARY RIGHTS. (a) SCHEDULE 3.14 contains a list of all of
the following that are included in Sellers' Proprietary Rights: (i) patents and
patent applications; (ii) trademarks, tradenames, domain names and service marks
and registrations thereof and applications therefor; and (iii) registered
copyrights and applications for copyright registration; as well as licenses
relating to any of the foregoing. SCHEDULE 3.14 identifies the owner of each
item listed thereon and, in the case of registrations and applications, the
application or registration number and date.
(b) Sellers own or have the right to use all of Sellers' Proprietary
Rights. Upon execution and delivery by Sellers to Buyer of the instruments
of conveyance contemplated by this Agreement, each item of Sellers'
Proprietary Rights will be owned or available for use by Buyer on identical
terms and conditions immediately following the Closing, except as otherwise
indicated on SCHEDULE 3.14. Seller has taken reasonable and customary
measures to protect the proprietary nature of Sellers' Proprietary Rights
and to maintain in confidence the trade secrets and confidential
information that it owns or uses in the Business. To Sellers' knowledge, no
other Person or has any rights to any item of Sellers' Proprietary Rights
or has any rights to any of the Sellers' Proprietary Rights, except that
the items of Sellers' Proprietary Rights identified on SCHEDULE 3.14 as
licensed to Seller are owned by the respective owners identified on
SCHEDULE 3.14, and, to Sellers' knowledge, no other Person is infringing,
violating or misappropriating any of Sellers' Proprietary Rights, except as
otherwise indicated on SCHEDULE 3.14.
(c) Except as set forth in SCHEDULE 3.14, to Sellers' knowledge, none
of the activities or business presently conducted by the Business or
conducted by the Business at any time in the last three years infringes or
violates, or constitutes a misappropriation of, any Proprietary Rights of
any other person or entity. Except as set forth in SCHEDULE 3.14, no Seller
has received any complaint, claim or notice alleging any such infringement,
violation or misappropriation.
(d) Except as set forth in SCHEDULE 3.14, with respect to each item of
Sellers' Proprietary Rights:
(i) Sellers possess all right, title and interest in and to such
item;
(ii) such item is not subject to any outstanding judgment, order,
decree, stipulation or injunction; and
10
<PAGE> 14
(iii) Sellers have not agreed, except in the ordinary course of
business consistent with past practices in conjunction with product
sales, to indemnify any person or entity for or against any
infringement, misappropriation or other conflict with respect to such
item.
(e) SCHEDULE 3.14 identifies each item of Sellers' Proprietary Rights
used in the operation of the Business that is owned by a party other than
Seller. All licenses or other agreements pursuant to which Sellers use such
items are listed on SCHEDULE 3.14. Except as set forth in SCHEDULE 3.14,
with respect to each such item:
(i) the license or other agreement, covering such item is legal,
valid, binding, enforceable and in full force and effect with respect
to Sellers, and, to Sellers' knowledge, with respect to every other
party thereto;
(ii) except as set forth in SCHEDULE 3.14, each such license or
other agreement to which a Seller is a party is assignable by such
Seller to Buyer without the consent or approval of or any payment to
any party, and all such licenses and other agreements will continue to
be legal, valid, binding, enforceable and in full force and effect
immediately following the Closing in accordance with the terms thereof
as in effect immediately prior to the Closing, and the consummation of
the transactions contemplated herein will not conflict with, result in
a violation or breach of or constitute a default under (or would
result in a violation, breach or default with the giving of notice or
the passage of time or both) any such license or other agreement;
(iii) except as set forth in SCHEDULE 3.14, no Seller, nor, to
Sellers' knowledge, any other party is in breach or default under any
such license or other agreement, and no event has occurred which, with
notice and/or lapse of time, would constitute such a breach or default
or permit termination, modification or acceleration thereunder; and
(iv) to Sellers' knowledge, each of the underlying items of
Sellers' Proprietary Rights is not subject to any outstanding
judgment, order, decree, stipulation or injunction.
3.15. PRODUCTS. Each of the products produced or sold by Sellers in
connection with the Business is, and at all times has been, in compliance in all
material respects with all applicable federal, state, local and foreign laws.
3.16. EMPLOYEES AND CUSTOMERS. SCHEDULE 3.16 sets forth a true and
complete list of the names, titles, annual salaries and other compensation of
all employees of the Business. None of such employees has indicated to Seller
that he or she intends to resign or retire as a result of the transactions
contemplated by this Agreement. No Person that has been a customer of the
Business within the past twelve months has indicated to Seller that it intends
to terminate its relationship with Seller.
11
<PAGE> 15
3.17. OTHER INFORMATION. None of the documents or information
delivered to Buyer in connection with the transactions contemplated by this
Agreement and the Ancillary Agreements, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained therein not misleading.
3.18. INVESTMENT REPRESENTATIONS.
(a) PASW understands that the issuance and sale of the Shares has not
been registered under the Securities Act of 1933, as amended (the "SECURITIES
ACT"), and that the Shares are being offered and sold pursuant to an exemption
from registration thereunder in reliance in part upon PASW's representations
contained in this Agreement.
(b) PASW is an accredited investor within the meaning of Regulation D
under the Securities Act. PASW has sufficient experience in evaluating and
investing in private placement transactions of securities that it is capable of
evaluating the merits and risks of its investment in Buyer and has the capacity
to protect its own interests.
(c) PASW understands that the resale and distribution of the Shares is
restricted under the securities laws and that it must bear the economic risk of
this investment indefinitely unless the resale of the Shares is registered under
the Securities Act or an exemption from registration is available. PASW
understands that the Company has no obligation to register the resale of the
Shares. PASW also understands that there is no assurance that any exemption from
registration under the Securities Act will be available for any such resale and
that, even if available, such exemption may not allow PASW to transfer all or
any portion of the Shares in the circumstances, in the amounts, or at the times
PASW might propose.
(d) PASW is acquiring the Shares for its own account for investment
only, and not with a view towards their distribution in violation of applicable
securities laws.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warranties to Sellers that:
4.01. ORGANIZATION AND EXISTENCE. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of
Massachusetts.
4.02. CORPORATE AUTHORIZATION. The execution, delivery and performance
by Buyer of this Agreement and each of the Ancillary Agreements and the
consummation by Buyer of the transactions contemplated hereby and thereby are
within the corporate powers of Buyer and have been duly authorized by all
necessary corporate action on the part of Buyer. This Agreement and each of the
Ancillary Agreements to which Buyer is a party constitute valid and binding
agreements of Buyer, enforceable in accordance with their terms.
12
<PAGE> 16
4.03. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Buyer of this Agreement and each of the Ancillary Agreements
require no action by or in respect of, or filing with, any governmental body,
agency, official or authority.
4.04. NON-CONTRAVENTION. The execution, delivery and performance by
Buyer of this Agreement and each of the Ancillary Agreements do not and will not
(i) contravene or conflict with the corporate charter or bylaws of Buyer or (ii)
contravene or conflict with any provision of any law, regulation, judgment,
injunction, order or decree binding upon Buyer.
4.05. LITIGATION. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Buyer threatened against or
affecting, Buyer before any court or arbitrator or any governmental body, agency
or official which in any matter challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated hereby.
4.06. SEC REPORTS. Buyer has advised PASW that it is a public company
subject to the reporting requirements of the Securities and Exchange Commission
(the "COMMISSION") under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and advised PASW to review Buyer's most recent Form 10-K and
proxy statement filed thereunder and any additional filings made thereunder
since such documents were filed. All such reports and other filings are referred
to herein as the "REPORTS". As of their respective dates, the Reports complied
in all material respects with the then applicable published rules and
regulations of the Commission with respect thereto at the date of their issuance
and did contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of the date hereof, no additional filings or amendments to
previously filed Reports are required pursuant to such rules and regulations.
4.07. VALIDITY OF SHARES. The Shares, when issued pursuant to this
Agreement, will be validly issued, fully paid and nonassessable.
ARTICLE V
COVENANTS OF SELLERS
Sellers agree that:
5.01. NONCOMPETITION. (a) Sellers agree that for a period of two full
years from the Closing Date, no Seller and no Affiliate thereof shall:
(i) engage, either directly or indirectly, as a principal or for its
own account, solely or jointly with others, or through any form of
ownership in another Person, or otherwise, in any business that is
competitive with the Business as now conducted; or
(ii) employ or solicit, or receive or accept the performance of
services by, any Transferred Employee or any other employee of Buyer, other
than pursuant to any support
13
<PAGE> 17
and maintenance agreements that may be entered into by Buyer and one or
more Sellers or their Affiliates.
(b) If any provision contained in this Section shall for any reason by
held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
Section, but this Section shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. It is the intention of
the parties that if any of the restrictions or covenants contained herein is
held to cover a geographic area or to be for a length of time which is not
permitted by applicable law, or in any way construed to be too broad or to any
extent invalid, such provision shall not be construed to be null, void and of no
effect, but to the extent such provision would be valid or enforceable under
applicable law, a court of competent jurisdiction shall construe and interpret
or reform this Section to provide for a covenant having the maximum enforceable
geographic area, time period and other provisions (not greater than those
contained herein) as shall be valid and enforceable under such applicable law.
Sellers acknowledges that Buyer would be irreparably harmed by any breach of
this Section and that there would be no adequate remedy at law or in damages to
compensate Buyer for any such breach. Sellers agree that Buyer shall be entitled
to injunctive relief requiring specific performance by Sellers of this Section,
and Sellers consent to the entry thereof.
5.02. CONFIDENTIALITY. Sellers will hold, and will use its best
efforts to cause their respective officers, directors, employees, accountants,
counsel, consultants, advisors and agents to hold, in confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning Buyer
or the Business.
5.03. FACILITIES ACCESS AND DISTRIBUTOR ARRANGEMENT. Sellers shall
permit the Business to be conducted from its Newbury Park, California facilities
for the time period and on the terms and conditions set forth in a sublease
agreement between PASW and Buyer that is being executed simultaneously with the
execution of this Agreement. PASW is also causing its Japanese subsidiary to
enter into a short-term distribution agreement with Buyer simultaneously with
the execution of this Agreement.
ARTICLE VI
COVENANTS OF BUYER
Buyer agrees that:
6.01. ACCESS. On and after the Closing Date, Buyer will afford
promptly to Seller and its agents reasonable access to its properties, books,
records, employees and auditors to the extent necessary to permit Sellers to
determine any matter relating to its rights and obligations hereunder or to any
period ending on or before the Closing Date; provided that any such access by
Sellers shall not unreasonably interfere with the conduct of the business of
Buyer.
14
<PAGE> 18
6.02. ACCOUNTS RECEIVABLE. All payments received by a Seller in
respect of accounts receivable of the Business after the date of the Closing
shall be immediately remitted to Buyer.
6.03. CONFIDENTIALITY. Buyer will hold, and will use its best efforts
to cause its officers, directors, employees, accountants, counsel, consultants,
advisors and agents to hold, in confidence, unless compelled to disclose by
judicial or administrative process or by other requirements of law, all
confidential documents and information concerning Seller (not including items
relating to the Business).
6.04. NON-SOLICITATION. Buyer agrees that for a period of two (2)
years from the Closing Date, neither it nor any of its Affiliates will solicit
the employment of any employee of any Seller who has not previously terminated
his or her employment with such Seller.
ARTICLE VII
COVENANTS OF BOTH PARTIES
The parties hereto agree that:
7.01. BEST EFFORTS; FURTHER ASSURANCES. Subject to the terms and
conditions of this Agreement, each party will use its best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary or desirable under applicable laws and regulations to consummate the
transactions contemplated by this Agreement. Sellers and Buyer each agree to
execute and deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be necessary or desirable in
order to consummate or implement expeditiously the transactions contemplated by
this Agreement and to vest in Buyer good and marketable title to the Purchased
Assets and the full benefits of the Business.
7.02. PUBLIC ANNOUNCEMENTS. The parties agree to consult with each
other before issuing any press release or making any public statement with
respect to this Agreement or the transactions contemplated hereby and, except as
may be required by applicable law or any listing agreement with any national
securities exchange, will not issue any such press release or make any such
public statement prior to such consultation.
ARTICLE VIII
TAX MATTERS
8.01. TAX DEFINITIONS. The following terms, as used herein, have the
following meanings:
"CODE" means the Internal Revenue Code of 1986, as amended.
"POST-CLOSING TAX PERIOD" means any Tax period (or portion thereof)
ending after the Closing Date.
15
<PAGE> 19
"PRE-CLOSING TAX PERIOD" means any Tax period (or portion thereof)
ending on or before the Closing Date.
"TAX" means any net income, alternative or add-on minimum tax, gross
income, gross receipts, sales, use, ad valorem, franchise, capital, paid-up
capital, profits, greenmail, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, environmental or windfall
profit tax, custom, duty or other tax, governmental fee or other like assessment
or charge of any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amount imposed by any governmental authority
(domestic or foreign) responsible for the imposition of any such tax.
8.02. TAX MATTERS. Sellers hereby represents and warrants to Buyer
that:
(a) Sellers have timely paid all Taxes, and all interest and penalties
due thereon and payable by it, for the Pre-Closing Tax Period which will have
been required to be paid on or prior to the Closing Date, the non-payment of
which would result in a Lien on any Purchased Asset, would otherwise adversely
affect the Business or would result in Buyer becoming liable or responsible
therefor.
(b) Seller will timely pay all Tax liabilities, assessments, interest
and penalties which arise from or with respect to the Purchased Assets or the
operation of the Business and are incurred in or attributable to the Pre-Closing
Tax Period, the non-payment of which would result in a Lien on any Purchased
Asset, would otherwise adversely affect the Business or would result in Buyer
becoming liable therefor.
(c) No state of facts exists or has existed that would constitute
grounds for the assessment against Buyer, whether by reason of transferee
liability or otherwise, of any liability for any Tax. Sellers have withheld and
paid (and in connection with the options described in Section 9.05 hereof will
withhold and pay) all Taxes required (or that will be required) to have been
paid or owing to any employee, independent contractor, creditor or third party
with respect to the Business. No portion of the Purchase Price is subject to any
Tax withholding provision of Federal, state, local or foreign law.
8.03. TAX COOPERATION; ALLOCATION OF TAXES. (a) Buyer and Sellers
agree to furnish or cause to be furnished to each other, upon request, as
promptly as practicable, such information and assistance relating to the
Purchased Assets and the Business as is reasonably necessary for the filing of
all Tax returns, and making of any election related to Taxes, the preparation
for any audit by any taxing authority, and the prosecution or defense of any
claim, suit or proceeding relating to any Tax return. Sellers and Buyer shall
cooperate with each other in the conduct of any audit or other proceeding
related to Taxes involving the Business and each shall execute and deliver such
powers of attorney and other documents as are necessary to carry out the intent
of this paragraph (a) of Section 8.03.
(b) All real property taxes, personal property taxes and similar AD
VALOREM obligations levied with respect to the Purchased Assets for a taxable
period which includes (but does not end on) the Closing Date (collectively, the
"APPORTIONED OBLIGATIONS") shall be
16
<PAGE> 20
apportioned between Sellers and Buyer as of the Closing Date based on the number
of days of such taxable period included in the Pre-Closing Tax Period and the
number of days of such taxable period included in the Post-Closing Tax Period.
Sellers shall be liable for the proportionate amount of such taxes that is
attributable to the Pre-Closing Tax Period. Within 90 days after the Closing,
Sellers and Buyer shall present a statement to the other setting forth the
amount of reimbursement to which each is entitled under this Section 8.03(b)
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 10 days after delivery of such statement. Thereafter,
Sellers shall notify Buyer upon receipt of any bill for real or personal
property taxes relating to the Purchased Assets, 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 the Pre-Closing Tax Period, Sellers 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. If
either Sellers or Buyer shall thereafter make a payment for which it is entitled
to reimbursement under this Section 8.03(b), the other party shall make such
reimbursement promptly but in no event later than 30 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 and not made within 10 days of 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.
(e) Any transfer, documentary, sales, use or other Taxes assessed upon
or with respect to the transfer of the Purchased Assets to Buyer and any
recording or filing fees with respect thereto shall be the responsibility of
Sellers.
ARTICLE IX
EMPLOYEE BENEFITS
9.01. EMPLOYEE BENEFITS DEFINITIONS. The following terms, as used
herein, having the following meanings:
"BENEFIT ARRANGEMENT" means an employment, severance or similar
contract, arrangement or policy and each plan or arrangement providing for
severance, insurance coverage (including any self-insured arrangements),
workers' compensation, disability benefits, supplemental unemployment benefits,
vacation benefits, pension or retirement benefits or for deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation rights or other forms
of incentive compensation or post-retirement insurance, compensation or benefits
that (i) is not an Employee Plan and (ii) is maintained or contributed to by a
Seller or any of its ERISA Affiliates.
"EMPLOYEE PLAN" means each "employee benefit plan", as such term is
defined in Section 3(3) of ERISA, that (i) is subject to any provision of ERISA
and (ii) is maintained or contributed to by Seller or any of its ERISA
Affiliates, as the case may be.
17
<PAGE> 21
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" of any entity means any other entity that, together
with such entity, would be treated as a single employer under Section 414 of the
Code.
9.02. ERISA REPRESENTATIONS. Sellers hereby represent and warrant to
Buyer that:
(a) SCHEDULE 9.02 lists each Employee Plan and each Benefit Arrangement
that covers any employee of the Business, copies or descriptions of all of which
have previously been made available or furnished to Buyer.
(b) Each Employee Plan and Benefit Arrangement has been maintained in
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations, including but not limited to ERISA and
the Code, which are applicable to such Employee Plan or Benefit Arrangement.
(c) Neither the Company nor any ERISA Affiliate has ever maintained,
contributed to or been obligated to contribute to any Plan that is subject to
Title IV of ERISA or any Plan that is a multiemployer plan, as defined in
Section 3(37) of ERISA.
(d) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the period
from its adoption to date, and each trust forming a part thereof is exempt from
tax pursuant to Section 501(a) of the Code. Sellers have furnished to Buyer
copies of the most recent Internal Revenue Service determination letters with
respect to each such Employee Plan.
(e) No employee of the Business will become entitled to any bonus,
retirement, severance or similar benefit or enhanced benefit solely as a result
of the transactions contemplated hereby, except as described on SCHEDULE 9.02.
9.03. EMPLOYEES AND OFFERS OF EMPLOYMENT.
Buyer has offered employment to all employees of the Business listed
on SCHEDULE 9.03; provided that Buyer may terminate at any time the employment
of any employee who accepts such offer. Any such offers shall be at such salary
or wage and benefit levels and on such other terms and conditions as Buyer shall
in its sole discretion deem appropriate. The employees who accept and commence
employment with Buyer are hereinafter collectively referred to as the
"TRANSFERRED EMPLOYEES". Sellers will not take, any action that would impede,
hinder, interfere or otherwise compete with Buyer's effort to hire any
Transferred Employees. Buyer shall not assume responsibility for any Transferred
Employee until such employee begins employment with Buyer.
9.04. SELLER'S EMPLOYEE BENEFIT PLANS. (a) Seller shall retain all
obligations and liabilities under the Employee Plans and Benefit Arrangements in
respect of each employee or former employee (including any beneficiary thereof)
of the Business, including all of the Transferred Employees. Any benefits
accrued as of the Closing Date by Transferred Employees
18
<PAGE> 22
under the Employee Plans and Benefit Arrangements shall be promptly paid by
Sellers to the Transferred Employees, and neither Buyer nor any of its
Affiliates shall have any liability with respect thereto. No assets of any
Employee Plan or Benefit Arrangement shall be transferred to Buyer or any of its
Affiliates or to any plan of Buyer or any of its Affiliates. With respect to
Sellers' 401(k) Plan, Sellers shall amend the 401(k) Plan to provide that
Transferred Employees shall be entitled to a pro rata portion, based on the
number of days of the current plan year that occur before and including the
Closing Date, of any contribution to the 401(k) Plan by Sellers in respect of
the current plan year. Accrued benefits or account balances of Transferred
Employees under the Employee Plans and Benefit Arrangements shall be fully
vested as of the Closing Date.
(b) For purposes of Seller's defined contribution plans (including any
401(k) Plan), Sellers shall treat the Transferred Employees as having been
terminated. As soon as practicable after the next valuation date under such
plan, Sellers shall permit each Transferred Employees to elect a direct rollover
of his account balance to Buyer's defined contribution plan. Buyer or one of its
Affiliates may require evidence satisfactory to the Buyer that the Sellers'
plan(s) is/are qualified under Code Section 401(a) and that the Transferred
Employee's rollover qualifies for a direct rollover treatment. Each of the
parties shall pay its own expenses in connection with such rollovers. Neither
Buyer nor any of its Affiliates shall assume any obligations or liabilities
under or attributable to the 401(k) Plan, the same to be retained by Seller.
(c) Sellers shall treat all employees (and their beneficiaries) who
terminate employment with Sellers as a result of this sale (regardless of
whether the employee becomes a Transferred Employee) as "Qualified
Beneficiaries" entitled to continuation health coverage as described in Section
4980B of the Code and shall continue to provide COBRA Coverage for the maximum
period required by law to any former employee (or beneficiary) who is receiving
COBRA Coverage on the Closing Date. Sellers shall notify Buyer promptly if it
ceases to provide any group health coverage to any of its employees.
9.05. STOCK OPTIONS. Sellers shall not amend the terms of any stock
option held by any Transferred Employee without the consent of Buyer. Buyer
intends to establish a pool of options to purchase 50,000 shares of its common
stock to be made available to the Transferred Employees if the business unit of
Buyer that employes such employees meets certain performance milestones to be
established by Buyer. Such option are to be granted at fair market value under
Buyer's current stock option plan consistent with current vesting provisions and
other terms.
9.06. NO THIRD PARTY BENEFICIARIES. No provision of this Article shall
create any third party beneficiary or other rights in any employee or former
employee (including any beneficiary or dependent thereof) of Seller or of any of
its subsidiaries in respect of continued employment (or resumed employment) with
either Buyer or the Business or any of their Affiliates and no provision of this
Article IX shall create any such rights in any such Persons in respect of any
benefits that may be provided, directly or indirectly, under any Employee Plan
or Benefit Arrangement or any plan or arrangement that may be established by
Buyer or any of its Affiliates. No provision of this Agreement shall constitute
a limitation on rights to amend, modify or terminate after the Closing Date any
such plans or arrangements of Buyer or any of its Affiliates.
19
<PAGE> 23
ARTICLE X
SURVIVAL; INDEMNIFICATION
10.01. SURVIVAL. The covenants, agreements, representations and
warranties of the parties hereto contained in this Agreement or in any
certificate or other writing delivered pursuant hereto or in connection herewith
shall survive the Closing until December 31, 2001. Notwithstanding the preceding
sentence, any covenant, agreement, representation or warranty in respect of
which indemnity may be sought under Section 11.02 shall survive the time at
which it would otherwise terminate pursuant to the preceding sentence, if notice
of the inaccuracy or breach thereof giving rise to such right to indemnity shall
have been given to the party against whom such indemnity may be sought prior to
such time.
10.02. INDEMNIFICATION. (a) Sellers hereby jointly and severally
indemnify Buyer and its Affiliates against and agrees to hold each of them
harmless from any and all damage, loss, liability and expense (including,
without limitation, reasonable expenses of investigation and reasonable
attorneys' fees and expenses in connection with any action, suit or proceeding)
(collectively, "LOSS") incurred or suffered by Buyer or any of its Affiliates
arising out of:
(i) any misrepresentation or breach of warranty, covenant or agreement
made or to be performed by a Seller pursuant to this Agreement; or
(ii) the failure of a Seller to pay in full any Excluded Liability;
provided that Sellers shall not be liable under Section 10.02(a)(i) unless the
aggregate amount of Loss with respect to all matters referred to in this Section
10.02(a)(i) exceeds $50,000 and then only to the extent of such excess. The
Shares held pursuant to the Escrow Agreement shall be the first, but not the
sole source, for payments owing to Buyer under this Article X.
(b) Buyer hereby indemnifies Sellers and its Affiliates against and
agrees to hold each of them harmless from any and all Loss incurred or suffered
by Sellers or any of their Affiliates arising out of any misrepresentation or
breach of warranty, covenant or agreement made or to be performed by the Buyer
pursuant to this Agreement.
10.03. PROCEDURES; NO WAIVER; EXCLUSIVITY. (a) The party seeking
indemnification under Section 10.02 (the "INDEMNIFIED PARTY") agrees to give
prompt notice to the party against whom indemnity is sought (the "INDEMNIFYING
PARTY") of the assertion of any claim, or the commencement of any suit, action
or proceeding in respect of which indemnity may be sought under such Section.
The Indemnifying Party may, and at the request of the Indemnified Party shall,
participate in and control the defense of any such third party suit, action or
proceeding at its own expense. The Indemnifying Party shall not be liable under
Section 10.02 for any settlement effected without its consent of any claim,
litigation or proceeding in respect of which indemnity may be sought hereunder.
(b) Section 10.02 and the provisions of the Escrow Agreement will
provide the exclusive remedy for any misrepresentation or breach of warranty
under this Agreement.
20
<PAGE> 24
ARTICLE XI
MISCELLANEOUS
11.01. NOTICES. All notices, requests and other communications to
either party hereunder shall be in writing (including telex, fax or similar
writing) and shall be given,
if to Buyer, to:
NETsilicon, Inc.
411 Waverly Oaks Road, Building 227
Waltham, MA 02452
Attention: Chief Financial Officer
Fax: (781) 398-4877
with a copy to:
Edwin L. Miller, Jr., Esq.
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, MA 02110
Fax: (617) 248-7100
if to Sellers, to:
PASW, Inc.
703 Rancho Conejo Blvd.
Newbury Park, CA 91321
Attention: Chief Financial Officer
Fax: (805) 499-7722
with a copy to:
Joseph Lechman, Esq.
Gose and Lechman
1200 Paseo Camarillo, Suite 295
Camarillo, CA 93010
Fax: (805) 389-7375
11.02. AMENDMENTS; NO WAIVERS. (a) Any provisions of this Agreement
may be amended or waived if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by the Buyer and Sellers, or in the
case of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by either party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof
21
<PAGE> 25
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
11.03. EXPENSES. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement shall be paid by the party
incurring such cost or expense.
11.04. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
11.05. GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the law of the Commonwealth of Massachusetts.
11.06. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
a counterpart hereof signed by the other party hereto.
11.07. ENTIRE AGREEMENT. This Agreement and the Ancillary Agreements
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements, understandings and
negotiations, both written and oral, between the parties with respect to the
subject matter of this Agreement. No representation, inducement, promise,
understanding, condition or warranty not set forth herein has been made or
relied upon by either party hereto. None of this Agreement and the Ancillary
Agreements, nor any provision hereof or thereof, is intended to confer upon any
Person other than the parties hereto any rights or remedies hereunder.
11.08. CAPTIONS. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
[Signature page immediately follows.]
22
<PAGE> 26
NETsilicon, Inc.
Asset Purchase Agreement
IN WITNESS WHEREOF, the parties hereto here caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
NETSILICON, INC.
By:___________________________
Name:
Title:
PASW, INC.
By:___________________________
Name:
Title:
PSI SOFTWORKS TECHNOLOGY, INC.
By:___________________________
Name:
Title:
23
