SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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) JANUARY 31, 2000
GLOBESPAN, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 000-26401 75-2658218
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
100 Schultz Drive
RED BANK, NEW JERSEY 07701
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (732) 345-7500
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
ACQUISITION OF CERTAIN ASSETS OF PAIRGAIN TECHNOLOGIES, INC.
(a) On February 24, 2000, pursuant to an asset purchase agreement,
dated January 21, 2000 (the "PairGain Agreement"), between GlobeSpan,
Inc. ("GlobeSpan") and PairGain Technologies, Inc. ("PairGain"),
GlobeSpan acquired certain assets (the "Assets") of PairGain in
exchange for 1,081,197 shares of common stock, par value $0.001, of
GlobeSpan ("GlobeSpan Common Stock") and a subordinated redeemable
convertible note (the "Note") in the principal amount of $90,000,000.
The terms of the transaction were determined through arms length
negotiations between GlobeSpan and PairGain.
(b) Certain of the Assets acquired pursuant to the PairGain Agreement
are physical property and equipment. Such Assets were used by PairGain
in its conduct of the activities of the microelectronics group and will
be used by GlobeSpan in a similar capacity.
The foregoing description of the acquisition of the Assets is
qualified in its entirety by reference to the PairGain Agreement, the
Registration Rights Agreement, dated February 24, 2000 between
GlobeSpan and PairGain, the Note and the press release relating to the
acquisition of the Assets, copies of which are attached hereto as
Exhibits 2.2, 10.1, 10.2 and 99.2 respectively and incorporated by
reference herein.
ACQUISITION OF THE OUTSTANDING STOCK OF FICON TECHNOLOGY, INC.
On January 31, 2000, pursuant to an agreement and plan of merger,
dated January 12, 2000 (the "Ficon Merger Agreement"), among
GlobeSpan, FTI Acquisition Corp. (a wholly owned subsidiary of
GlobeSpan) and Ficon Technology, Inc. ("Ficon"), FTI Acquisition Corp.
was merged with and into Ficon (the "Ficon Merger"). Ficon was the
surviving corporation in the Ficon Merger. Pursuant to the Ficon
Merger, GlobeSpan issued to Ficon stockholders 320,000 shares of
GlobeSpan Common Stock and paid to those stockholders $5.0 million in
cash, less certain expenses of Ficon. The Company issued 333,333
additional shares of GlobeSpan Common Stock to Ficon stockholders to
be held in escrow until certain performance goals are met by Ficon.
The terms of the Ficon Merger were determined through arms length
negotiations between Ficon and GlobeSpan.
The foregoing description of the Ficon Merger is qualified in its
entirety by reference to the Ficon Merger Agreement and the press
release relating to the Ficon Merger, copies of which are attached
hereto as Exhibits 2.1 and 99.1 respectively and incorporated by
reference herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
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(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
1. Financial statements are not required to be filed for the
acquisition of the Assets from PairGain.
2. The required financial statements for the Ficon Merger are not yet
available and will be filed by amendment as soon as possible after the
filing of this report.
(b) PRO FORMA FINANCIAL INFORMATION.
1. Pro forma financial information is not required to be filed for the
acquisition of the Assets from PairGain.
2. The required pro forma financial information for the Ficon Merger
is not yet available and will be filed by amendment as soon as
possible after the filing of this report.
(c) EXHIBITS.
Exhibit DESCRIPTION
NO.
2.1 Agreement and Plan of Merger, dated January 12, 2000,
among GlobeSpan, Inc., FTI Acquisition Corp. and Ficon
Technology, Inc.
2.2 Asset Purchase Agreement, dated January 21, 2000, among
GlobeSpan,Inc. and PairGain Technologies, Inc.
10.1 Registration Rights Agreement, dated February 24, 2000,
among GlobeSpan, Inc. and PairGain Technologies, Inc.
10.2 Subordinated Redeemable Convertible Promissory Note,
issued February 24, 2000
99.1 Press Release, dated January 31, 2000
99.2 Press Release, dated February 24, 2000
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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.
GLOBESPAN, INC.
By: /s/ Robert McMullan
Name: Robert McMullan
Title: Chief Financial Officer, Vice
President, Treasurer and Secretary
Date: March 10, 2000
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EXHIBIT INDEX
Exhibit DESCRIPTION
NO.
2.1 Agreement and Plan of Merger, dated January 12, 2000,
among GlobeSpan, Inc., FTI Acquisition Corp. and Ficon
Technology, Inc.
2.2 Asset Purchase Agreement, dated January 21, 2000, among
GlobeSpan, Inc. and PairGain Technologies, Inc.
10.1 Registration Rights Agreement, dated February 24, 2000,
among GlobeSpan, Inc. and PairGain Technologies, Inc.
10.2 Subordinated Redeemable Convertible Promissory Note,
issued February 24, 2000
99.1 Press Release, dated January 31, 2000
99.2 Press Release, dated February 24, 2000
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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
among
GLOBESPAN, INC.
FTI ACQUISITION CORP.
and
FICON TECHNOLOGY, INC.
Dated as of January 12, 2000
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TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Defined Terms..........................................2
SECTION 1.02 Other Defined Terms............................................5
ARTICLE II
THE MERGER
SECTION 2.01 The Merger.....................................................6
SECTION 2.02 Effect of the Merger...........................................7
SECTION 2.03 Consummation of the Merger.....................................7
SECTION 2.04 Charter, Bylaws, Directors and Officers........................7
SECTION 2.05 Further Assurances.............................................7
ARTICLE III
CONVERSION OF SECURITIES
SECTION 3.01 Exchange Ratio.................................................8
SECTION 3.02 Conversion of Capital Stock of Acquisition Corp................9
SECTION 3.03 Dissenting Shares..............................................9
SECTION 3.04 Surrender and Exchange of Shares...............................9
SECTION 3.05 Release of Escrowed Merger Shares and Escrowed Shares.........10
SECTION 3.06 Closing of Stock Transfer Books...............................10
SECTION 3.07 Ancillary Agreements..........................................10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
SECTION 4.01 Organization and Qualification................................11
SECTION 4.02 Authorization of Agreements, Etc..............................11
SECTION 4.03 Validity......................................................12
SECTION 4.04 Capitalization................................................12
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SECTION 4.05 Financial Statements, Etc.....................................13
SECTION 4.06 Absence of Undisclosed Liabilities............................13
SECTION 4.07 Absence of Certain Changes or Events; Ficon India Acquisition.13
SECTION 4.08 Governmental Approvals........................................15
SECTION 4.09 Litigation....................................................15
SECTION 4.10 Infringement, Etc.............................................15
SECTION 4.11 Assets, Employees and the Business............................16
SECTION 4.12 Use of Real Property..........................................17
SECTION 4.13 Personal Property.............................................17
SECTION 4.14.1 Intellectual Property Schedules...............................18
SECTION 4.14.2 Intellectual Property Representations and Warranties..........19
SECTION 4.15 Labor Matters.................................................22
SECTION 4.16 Taxes.........................................................23
SECTION 4.17 Compliance with Law; Permits..................................25
SECTION 4.18 Employee Benefit Plans........................................26
SECTION 4.19 Environmental Matter .........................................27
SECTION 4.20 Contracts.....................................................28
SECTION 4.21 Insurance.....................................................30
SECTION 4.22 Pending Transactions..........................................30
SECTION 4.23 Claims Against Officers and Directors.........................30
SECTION 4.24 Key Employees, Etc............................................30
SECTION 4.25 Customers, Suppliers, Etc.....................................31
SECTION 4.26 Accounts Receivable and Advances..............................31
SECTION 4.27 Improper and Other Payments...................................31
SECTION 4.28 Development Agreements........................................31
SECTION 4.29 Accuracy of Statements........................................32
SECTION 4.30 Brokers.......................................................32
ARTICLE V
REPRESENTATION AND WARRANTIES
OF PARENT
SECTION 5.01 Organization and Qualification................................32
SECTION 5.02 Authorization of Agreements, Etc..............................33
SECTION 5.03 Validity......................................................33
SECTION 5.04 Capitalization................................................33
SECTION 5.05 Governmental Approvals........................................34
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PAGE
SECTION 5.06 SEC Filings...................................................34
SECTION 5.07 Financial Statements..........................................34
SECTION 5.08 Litigation....................................................35
SECTION 5.09 Brokers.......................................................35
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF ACQUISITION CORP.
SECTION 6.01 Organization and Qualification................................36
SECTION 6.02 Authorization of Agreements, Etc..............................36
SECTION 6.03 Validity......................................................36
SECTION 6.04 Governmental Approvals........................................36
SECTION 6.05 Litigation....................................................36
SECTION 6.06 Brokers.......................................................36
ARTICLE VII
COVENANTS
SECTION 7.01 Conduct of the Company's Business.............................37
SECTION 7.02 Access to Information.........................................38
SECTION 7.03 Further Assurances............................................40
SECTION 7.04 Inquiries and Negotiations....................................40
SECTION 7.05 Notification of Certain Matters...............................40
SECTION 7.06 Employee Matters..............................................41
SECTION 7.07 Acquisition Option Plan.......................................42
SECTION 7.08 Ancillary Agreements .........................................42
SECTION 7.09 Release of Certain Personal Guarantees........................42
SECTION 7.10 Actions Affecting Immigration Status..........................42
SECTION 7.11 Agreement to Cooperate........................................43
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PAGE
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01 Conditions to Each Party's Obligation to Effect the Merger....43
SECTION 8.02 Conditions to the Obligation of the Company to
Effect the Merger.............................................43
SECTION 8.03 Conditions to the Obligation of Parent and Acquisition Corp.
to Effect the Merger..........................................45
ARTICLE IX
TERMINATION AND ABANDONMENT
SECTION 9.01 Termination and Abandonment...................................47
SECTION 9.02 Effect of Termination.........................................48
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
SECTION 10.01 Survival of Representations...................................48
SECTION 10.02 Tax Indemnity.................................................48
SECTION 10.03 General Indemnity.............................................49
SECTION 10.04 Conditions of Indemnification.................................49
SECTION 10.05 Limitations on Indemnification and Remedies...................50
SECTION 10.06 Remedies Cumulative...........................................51
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 Expenses and Other Liabilities................................51
SECTION 11.02 Publicity, Confidentiality....................................52
SECTION 11.03 Execution in Counterparts.....................................52
SECTION 11.04 Notices.......................................................52
SECTION 11.05 Waivers.......................................................53
SECTION 11.06 Amendments, Supplements, Etc..................................54
SECTION 11.07 Entire Agreement..............................................54
SECTION 11.08 Applicable Law................................................54
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SECTION 11.09 Binding Effect, Benefits......................................54
SECTION 11.10 Assignability.................................................54
SECTION 11.11 Severability..................................................55
SECTION 11.12 Variation and Amendment.......................................55
INDEX TO SCHEDULES AND EXHIBITS
SCHEDULE DESCRIPTION
3.01(a) Stockholders and Merger Consideration
3.04(b) Escrowed Shares
4.01(a) Jurisdictions
4.01(b) Subsidiaries
4.02 Consents; Authorizations
4.04(a) Capitalization of the Company
4.04(b) Capitalization of the Subsidiaries
4.04(c) Ficon India Stock
4.06 Certain Liabilities
4.07 Certain Changes or Events
4.08 Governmental Approvals - Company and Subsidiaries
4.09 Litigation
4.11 Certain Assets; Liens and Encumbrances
4.12 Real Property Interests
4.13 Personal Property Interests
4.14.1(a) Intellectual Property Assets
4.14.1(b) Intellectual Property Obligations Owed to the Company
or any of its Subsidiaries
4.14.1(c) Intellectual Property Obligations Owed by the Company
or any of its Subsidiaries
4.14.1(d) Intellectual Property Licenses (From Third Parties)
4.14.1(e) Intellectual Property Licenses (To Third Parties)
4.14.1(f) Owned and Licensed Software
4.14.1(g) Employee Agreements
4.14.1(h) Confidentiality and NonDisclosure Agreements
4.14.1(i) Year 2000 Compatibility Issues
4.14.2 Exceptions to Certain Intellectual Property Matters
4.15 Labor Matters
4.16 Taxes
4.17 Permits
4.18 Employee Benefit Plans
4.19 Environmental Matters
4.20 Contracts
4.21 Insurance
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4.24 Compliance by Certain Employees
4.25 Customers; Suppliers, etc.
4.26 Accounts Receivable
4.27 Improper Payments
4.28 Development Agreements
4.30 Brokers - Parent and Subsidiaries
5.04(a) Capitalization of Parent
5.05 Governmental Approvals - Parent
5.09 Brokers - Parent
6.05 Governmental Approvals - Acquisition Corp.
EXHIBIT DESCRIPTION
A Restated Certificate of Incorporation of
the Surviving Corporation
B Amended and Restated Bylaws of the Surviving
Corporation
C Form of Escrow Agreement
D Contingent Merger Consideration Terms
E Acquisition Option Plan
F Noncompete Agreement
G Registration Rights Agreement
H-1 Representation Agreement (Bansal)
H-2 Representation Agreement (Gupta and Sharma)
H-3 Representation Agreement (Gaur)
I Form of Employment Agreement for Vivek Bansal
J Form of Opinion of Reboul, MacMurray, Hewitt, Maynard
& Kristol
K Form of Opinion of Saiber Schlesinger Satz &
Goldstein LLC
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 12, 2000, among
GLOBESPAN, INC., a Delaware corporation ("Parent"), FTI ACQUISITION CORP., a New
Jersey corporation and a wholly owned subsidiary of Parent ("Acquisition
Corp."), and FICON TECHNOLOGY, INC., a New Jersey corporation (the "Company").
The Company and Acquisition Corp. are hereinafter sometimes referred to as the
"Constituent Corporations" and the Company as the "Surviving Corporation".
WHEREAS, Parent, Acquisition Corp. and the Company desire that
Acquisition Corp. merge with and into the Company (the "Merger"), upon the terms
and subject to the conditions set forth herein and in accordance with the New
Jersey Business Corporation Act (the "New Jersey Law"), with the result that the
Company shall continue as the surviving corporation and the separate existence
of Acquisition Corp. (except as it may be continued by operation of law) shall
cease; and
WHEREAS, Acquisition Corp. and the Company desire that at the
Effective Time (as hereinafter defined) all outstanding shares of the Company's
Class A Common Stock, without par value (the "Class A Common Stock"), and Class
B Common Stock, without par value (the "Class B Common Stock" and, collectively
with the Class A Common Stock, the "Company Common Stock") (excluding (x) any
shares of capital stock held in treasury of the Company and (y) any Dissenting
Shares (as hereinafter defined)), be converted into the right to receive (A) an
aggregate $5,000,000 in cash, (B) the number of shares of fully paid and
nonassessable shares of Common Stock, $.001 par value, of Parent ("Parent Common
Stock"), as hereinafter provided and (C) on the terms and subject to the
conditions specified herein, certain additional shares of Parent Common Stock as
hereinafter provided; and
WHEREAS, Parent, Acquisition Corp. and the Company desire that,
immediately after the Effective Time and solely as a result of the Merger,
Parent will own all of the issued and outstanding capital stock of the Company;
and
WHEREAS, the respective Boards of Directors of Parent and Acquisition
Corp. have approved the Merger; and
WHEREAS it is a condition precedent to Parent's obligation to close
the Merger that each of the Stockholders executes and delivers a Representation
Agreement (as hereinafter defined) and Noncompete Agreement (as hereinafter
defined); and
WHEREAS, the Board of Directors and the Stockholders of the Company
have unanimously approved the Merger;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions contained herein, and in order
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to set forth the terms and conditions of the Merger and the mode of carrying the
same into effect, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the meanings specified below:
"ACTIVE EMPLOYEE" means each employee of the Company and/or any of the
Subsidiaries who:
(i) at the Effective Time, is performing work duties for the
Company or any of the Subsidiaries or is absent by reason of a
scheduled day off;
(ii) at the Effective Time, is absent from work by reason of
a sick day (not covered under clause (iii) below) or a paid vacation
day, personal day or holi day;
(iii) at the Effective Time, is absent from work by reason
of a family or medical leave covered under Section 102 of the Family
and Medical Leave Act of 1993; or
(iv) at the Effective Time, is absent from work due to any
other authorized leave under the policies or practices of the Company
or any of the Subsidiaries and such person returns to work within the
period permitted by such policies or practices, but not later than 30
days after the Effective Time or such later time as may be required by
law.
"ANCILLARY AGREEMENTS" means the Escrow Agreement, the Noncompete
Agree ment, the Registration Rights Agreement, the Representation Agreement
and the Key Employment Agreement.
"APPLICABLE PERCENTAGE" means, with respect to any Stockholder, the
result, expressed as a percentage, obtained by dividing (i) the sum of (x)
the total number of shares of Company Common Stock issued and outstanding
and held by such Stockholder at the Effective Time plus (y) the total
number of shares of Company Common Stock issuable to such Stockholder upon
exercise or conversion of any option, warrant, convert ible security or
other right outstanding at the Effective Time, by (ii) the sum of (x) the
total number of shares of Company Common Stock issued and outstanding at
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the Effective Time plus (y) the total number of shares of Company Common
Stock issuable upon exercise or conversion of any option, warrant,
convertible security or other right outstanding at the Effective Time.
"AVERAGE PRICE" means, as of any date, the average of the closing
price per share of Parent Common Stock on the NASDAQ National Market System
for the trading days included in the period beginning three days prior to
such date and ending on such date.
"BUSINESS" means the business of defining, developing, planning and
providing technologies, products, software and services relating to
networking and telecommunica tions, which as of the date hereof is being
conducted or is proposed to be conducted by the Company and/or the
Subsidiaries.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK RATIO" means the result obtained by dividing one (1) by
the sum of (x) the number of shares of Company Common Stock issued and
outstanding at the Effective Time plus (y) the number of shares of Company
Common stock issuable upon exercise or conversion of any option, warrant,
convertible security or other right outstand ing or in effect at the
Effective Time.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"FICON INDIA" means Ficon Technology India Private Limited, a private
limited corporation organized under India Companies Act, 1956.
"INTELLECTUAL PROPERTY" means any or all of the following and all
rights in, arising out of, or associated therewith anywhere in the world
relating to, used in or useful to the Business: (1) all United States,
international and foreign patents and applications therefor and all
reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (2) all inventions (whether patentable or
not), patterns, drawings, blueprints, specifications, products in
development, processes, applications, circuits, invention disclosures,
improvements, trade secrets, proprietary information, know how, mask works
(and all information contained in a mask but not yet fixed in a chip),
technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (3) all copyrights, copyrights
registrations and applications therefor; (4) all industrial designs and any
registrations and applications therefor throughout the world; (5) all trade
names, trade dress, all mask works (including all registrations), logos,
common law trademarks and service marks; trademark and service mark
registrations and applica tions therefor and all goodwill associated
therewith throughout the world; (6) all databases and data collections and
all rights therein throughout the world; (7) all software including all
source code, object code, firmware, development tools, files, records and
data, all media on which any of the foregoing is recorded; (8) all permits,
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privileges or royalties; (9) any similar, corresponding or equivalent
rights to any of the foregoing and (10) all documentation related to any of
the foregoing.
"KEY EMPLOYMENT AGREEMENT" means the Employment Agreement between
Parent and Vivek Bansal in substantially the form attached hereto as
Exhibit I.
"NONCOMPETE AGREEMENT" means the Noncompete Agreement between Parent
and each of the Stockholders in the form of Exhibit F hereto.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement among Parent and each of the Stockholders in the form of Exhibit
G hereto
"REPRESENTATION AGREEMENT" means the Representation Agreement between
Parent and each of the Stockholders in the forms attached hereto as
Exhibits H-1, H-2 and H-3.
"SPECIFIED PRICE" means $75 per share of Parent Common Stock.
"STOCKHOLDERS" means Vivek Bansal, Amit Gaur, Ashok Gupta and Ajay
Sharma.
"SUBSIDIARY" or "SUBSIDIARIES", when used with respect to the Company,
means any corporation or other business entity a majority of whose
outstanding equity securities is at the time owned, directly or indirectly,
by the Company and/or one or more other Subsid iaries of the Company. For
purposes of this Agreement, Ficon India shall be deemed to be a Subsidiary
of the Company from and after the date of this Agreement even if the
transactions contemplated by the Ficon India Purchase Agreements will not
be consum mated until immediately prior to the Effective Time.
"TAX" and "TAXES" means (i) any net income, alternative or add-on
minimum tax, gross income, gross receipts, sales, use, AD VALOREM, value
added, transfer, gains, fran chise, profits, license, withholding on
amounts paid or received, payroll, employment, excise, severance, stamp,
occupation, premium, property, environmental or windfall profit taxes,
custom duties or other taxes, governmental fees or other like assessments
or charges of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amount imposed by any governmental
authority responsible for the imposi tion of any such taxes (domestic or
foreign) and (ii) liability of the Company or any of the Subsidiaries for
the payment of any amounts of the type described in (i) as a result of
being a member of an affiliated, consolidated, combined or unitary group
for federal, state, local or foreign Tax purposes, or being a party to any
agreement or arrangement whereby liability of the Company or any of the
Subsidiaries for payments of such amounts was determined or taken into
account with reference to the liability of any other person for any period
prior to, or up to and including, the Effective Time, and (iii) liability
of the Company or any of the Subsidiaries with respect to the payment of
any amounts described in (i) as a result of any express or implied
obligation to indemnify any other person.
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SECTION 1.02. OTHER DEFINED TERMS. The following terms shall have the
meanings defined for such terms in the Sections set forth below:
TERM: SECTION:
Accounts Receivable 4.25
Acquisition Corp. Recitals
Additional Ficon India Expenses 11.01(c)
Alternative Transactions 7.04
Assets 4.11(a)
Cash Exchange Amount 3.01(a)(i)
Cash Merger Consideration 3.01(a)(i)
Class A Common Stock Recitals
Class B Common Stock Recitals
Closing Parent Common Stock 3.01(a)(ii)
Exchange Amount
Closing Stock Merger Consideration 3.01(a)(ii)
Company Recitals
Company Affiliated Group 4.16(c)
Company Common Stock Recitals
Company Transaction Expenses 11.01(b)
Computer Systems 4.14.1(i)
Constituent Corporations Recitals
Contingent Merger Consideration Terms 3.01(a)(iv)
Contingent Parent Common Stock 3.01(a)(iv)
Exchange Amount
Contingent Stock Merger Consideration 3.01(a)(iv)
Damages 10.03(a)
Development Agreements 4.28
Dissenting Shares 3.03
Effective Time 2.03
ERISA Affiliates 4.18(a)
Escrow Agent 3.04(b)
Escrow Agreement 3.01(a)(ii)
Escrow Parent Common Stock 3.01(a)(iii)
Exchange Amount
Escrow Stock Merger Consideration 3.01(a)(iii)
Escrowed Shares 3.04(b)
Escrowed Closing Shares 3.04(b)
Escrowed Contingent Shares 3.04(b)
Escrowed Merger Shares 3.04(b)
Excess Company Expenses 11.01(b)
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Excess Ficon India Expenses 11.01(c)
Ficon India Expenses 11.01(c)
Ficon India Purchase 4.07(b)
Ficon India Purchase Agreements 4.07(b)
GAAP 4.05
Leased Properties 4.12
Licensed Software 4.14.1(g)
Liens 4.02
Major Customers 4.24
Major Suppliers 4.24
Material Adverse Effect 4.09
Merger Recitals
New Jersey Law Recitals
Option Plan 7.07
Original Ficon India Assets 4.07(b)
Owned Software 4.14.1(g)
Parent Recitals
Parent Common Stock Recitals
Parent Material Adverse Effect 5.01(a)
Penalties 4.28
Permitted Liens 4.11
Plans 4.18(a)
Remaining Ficon India Shares 4.04(c)
Securities Act 5.04(c)
Stockholders 3.01(a)
Stockholders' Representative Acknowledgment
Surviving Corporation Recitals
Tax Returns 4.16
Transaction Expenses 11.01(a)
Year 2000 Compliant 4.14.1(i)
ARTICLE II.
THE MERGER
SECTION 2.01. THE MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time, in accordance with this Agreement and the New
Jersey Law, Acquisition Corp. shall be merged with and into the Company, the
separate existence of Acquisition Corp. (except as it may be continued by
operation of law) shall cease, and the Company shall continue as the surviving
corporation.
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SECTION 2.02. EFFECT OF THE MERGER. Upon the effectiveness of the
Merger, the Surviving Corporation shall succeed to, and assume all the rights
and obligations of, the Company and Acquisition Corp. in accordance with the New
Jersey Law and the Merger shall otherwise have the effects set forth in Section
14A:10-6 of the New Jersey Law.
SECTION 2.03. CONSUMMATION OF THE MERGER. As soon as practicable (but
no later than three business days) after the satisfaction or waiver of the
conditions to the obligations of the parties to effect the Merger set forth
herein, provided that this Agreement has not been terminated previously, the
parties hereto will cause the Merger to be consummated by filing with the New
Jersey Department of Treasury a properly executed certificate of merger in
accordance with the New Jersey Law (the time of such filing being the "Effective
Time").
SECTION 2.04. CHARTER, BYLAWS, DIRECTORS AND OFFICERS. As of the
Effective Time, the Certificate of Incorporation of the Surviving Corporation
shall be amended and restated to read as set forth in Exhibit A hereto, until
thereafter amended in accordance with the provisions thereof and as provided by
the New Jersey Law. The Bylaws of the Surviving Corporation from and after the
Effective Time shall be amended and restated to read as set forth in Exhibit B
hereto, continuing until thereafter amended in accordance with the provisions
thereof and the Certificate of Incorporation of the Surviving Corporation and as
provided by the New Jersey Law. The initial directors and officers,
respectively, of the Surviving Corporation shall be (i) the directors of
Acquisition Corp. immediately prior to the Effective Time and (ii) the officers
of the Company immediately prior to the Effective Time, respectively, in each
case until their removal or until their respective successors are duly elected
and qualified.
SECTION 2.05. FURTHER ASSURANCES. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (i) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation, its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations, or (ii) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations, all such
deeds, bills of sale, assignments and assurances and do, in the name and on
behalf of such Constituent Corporation, all such other acts and things
necessary, desirable or proper to vest, perfect or confirm its right, title or
interest in, to or under any of the rights, privileges, powers, franchises,
properties or assets of such Constituent Corporation and otherwise to carry out
the purposes of this Agreement.
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ARTICLE III.
CONVERSION OF SECURITIES
SECTION 3.01. EXCHANGE RATIO. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof:
(a) COMMON STOCK. Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares to be
canceled pursuant to paragraph (b) of this Section 3.01 and Dissenting Shares)
shall be converted into:
(i) the right to receive an amount in cash (the "Cash Exchange
Amount") equal to the product of (x) (A) $5,000,000 (the "Cash Merger
Consideration") less (B) the amount of any Excess Company Expenses and
Excess Ficon India Expenses, multiplied by (y) the Common Stock Ratio;
(ii) the right to receive, subject to the terms and conditions
specified in this Agreement, the Escrow Agreement substantially in the form
attached hereto as Exhibit C (the "Escrow Agreement") and the
Representation Agreement, the number of shares of Parent Common Stock (the
"Closing Parent Common Stock Exchange Amount") determined by multiplying
the Common Stock Ratio by 240,000 shares of Parent Common Stock (such
240,000 shares of Parent Common Stock being referred to herein as the
"Closing Stock Merger Consideration"); and
(iii) the right to receive, subject to the terms and conditions
specified in this Agreement and in the Escrow Agreement, the number of
shares of Parent Common Stock (the "Escrow Parent Common Stock Exchange
Amount") determined by multiplying the Common Stock Ratio by 80,000 shares
of Parent Common Stock (such 80,000 shares of Parent Common Stock being
referred to herein as the "Escrow Stock Merger Consideration"); and
(iv) the right to receive, subject to the terms and conditions
specified in Exhibit D hereto (the "Contingent Merger Consideration Terms")
and in the Escrow Agreement, up to a maximum of the number of shares of
Parent Common Stock (the "Contingent Parent Common Stock Exchange Amount")
determined by multiplying the Common Stock Ratio by 333,333 shares of
Parent Common Stock (such 333,333 shares of Parent Common Stock being
referred to herein as the "Contingent Stock Merger Consideration").
Each of the Cash Exchange Amount, the Closing Parent Common Stock
Exchange Amount, the Escrow Parent Common Stock Exchange Amount, the Contingent
Parent Common Stock Exchange Amount, the Closing Stock Merger Consideration, the
Escrow Stock Merger Consideration and the Contingent Stock Merger Consideration
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shall be calculated by the parties hereto as of two business days prior to the
Effective Time and shall be set forth on Schedule 3.01(a) hereto (to be provided
at the Effective Time), together with a calculation of the total Cash Merger
Consideration, Closing Stock Merger Consideration, Escrow Stock Merger
Consideration and Contingent Stock Merger Consideration payable or issuable to
each of the Stockholders.
(b) TREASURY STOCK. Each share of capital stock that is held in the
treasury of the Company shall be canceled and retired and no capital stock of
Parent, cash or other consideration shall be paid or delivered in exchange
therefor.
SECTION 3.02. CONVERSION OF CAPITAL STOCK OF ACQUISITION CORP. At the
Effective Time, each share of Common Stock of Acquisition Corp. issued and
outstanding immediately prior to the Effective Time shall remain outstanding
and, by virtue of the Merger, automatically and without any action on the part
of the holder thereof, be converted into and become one validly issued, fully
paid and nonassessable share of Common Stock of the Surviving Corporation.
SECTION 3.03. DISSENTING SHARES. All of the holders of shares of
capital stock of the Company that will be outstanding immediately prior to the
Effective Time have approved the adoption of this Agreement and, as a result,
there will not be any demand for appraisal of any of such shares under Section
14A:11-2 of the New Jersey Law.
SECTION 3.04. SURRENDER AND EXCHANGE OF SHARES.
(a) At the Effective Time, each Stockholder shall surrender to Parent
(or its designated agent) for cancellation all outstanding certificates, duly
endorsed, that prior thereto represented shares of Company Common Stock held by
such Stockholder, whereupon Parent shall deliver to such Stockholder a check in
an amount equal to the product of (x) such number of shares of Company Common
Stock multiplied by (y) the Cash Exchange Amount.
(b) At the Effective Time, Parent shall deliver to the escrow agent
(the "Escrow Agent") designated under the Escrow Agreement (i) a certificate or
certificates representing the Closing Stock Merger Consideration (such shares
are collectively hereinafter referred to as the "Escrowed Merger Shares"), (ii)
a certificate or certificates representing the Escrow Stock Merger Consideration
(such shares are collectively hereinafter referred to as the "Escrowed Closing
Shares") and (iii) a certificate or certificates representing the Contingent
Stock Merger Consideration (such shares are collectively hereinafter referred to
as the "Escrowed Contingent Shares" and collectively with the Escrowed Closing
Shares, the "Escrowed Shares"). Schedule 3.04(b) will set forth the number of
Escrowed Merger Shares, Escrowed Closing Shares and Escrowed Contingent Shares
allocable to each Stockholder under the headings "Number of Escrowed Merger
Shares", "Number of Escrowed Closing Shares" and "Number of Escrowed Contingent
Shares".
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(c) If a certificate representing shares of the capital stock of the
Company has been lost, stolen or destroyed, and a replacement certificate has
not been issued as of the Effective Time, the holder of such certificate shall
submit an affidavit describing the lost, stolen or destroyed certificate, the
number of shares evidenced thereby and affirming the status of that certificate
in lieu of surrendering such certificate to Parent, which shall deem such
certificate canceled. Until so surrendered, each outstanding certificate that,
prior to the Effective Time, represented shares of the capital stock of the
Company that shall have been converted as aforesaid shall be deemed for all
corporate purposes, except as hereinafter provided, to evidence the ownership of
the consideration into which such shares have been so converted.
(d) No certificates representing fractional shares of Parent Common
Stock shall be issued upon the surrender for exchange of certificates evidencing
stock of the Company held by the Stockholders, and such fractional share
interests will not entitle the owner thereof to vote or to any rights of a
shareholder of Parent. Each holder of shares of the capital stock of the Company
who would otherwise have been entitled to receive in the Merger a fraction of a
share of Parent Common Stock (after taking into account all certificates
surrendered by such holder) shall be entitled to receive from Parent at the
Effective Time, in lieu thereof, cash (without interest) in an amount equal to
such fractional part of a share of Parent Common Stock multiplied by the
Specified Price. It is understood (i) that the payment of cash in lieu of
fractional shares of Parent Common Stock is solely for the purpose of avoiding
the expense and inconvenience to Parent of issuing fractional shares and does
not represent separately bargained for consideration; and (ii) that no holder of
shares of Company capital stock will receive cash in lieu of fractional shares
of Parent Common Stock in an amount greater than the value of one full share of
Parent Common Stock.
SECTION 3.05. RELEASE OF ESCROWED MERGER SHARES AND ESCROWED SHARES.
The Escrowed Merger Shares and the Escrowed Shares shall be released from Escrow
and delivered to the Stockholders or Parent, as the case may be, in accordance
with the terms of this Agreement and the Escrow Agreement.
SECTION 3.06. CLOSING OF STOCK TRANSFER BOOKS. On and after the
Effective Time, there shall be no transfers on the stock transfer books of the
Company of shares of capital stock of the Company.
SECTION 3.07. ANCILLARY AGREEMENTS. At the Effective Time, Parent and
each Stockholder shall execute and deliver each of the Ancillary Agreements to
which the Company and each such Stockholder is a party.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
The Company and each of the Stockholders represents and warrants to
Parent and Acquisition Corp. as follows:
SECTION 4.01. ORGANIZATION AND QUALIFICATION.
(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of New Jersey and has all
requisite corporate power and authority to own or lease and operate its
properties and assets and to carry on its business as it is now being conducted.
Except as set forth in Schedule 4.01(a) hereto, the Company is duly qualified as
a foreign corporation to do business, and is in good standing, in each
jurisdiction in which the character of its properties owned or leased or the
nature of its activities makes such qualification necessary. Schedule 4.01(a)
sets forth the jurisdictions in which the Company is so qualified.
(b) Except as set forth on Schedule 4.01(b) hereto, the Company does
not own of record or beneficially, directly or indirectly, (i) any shares of
capital stock or securities convertible into capital stock of or interests in
any limited liability company or other corporation or (ii) any participating
interest in any partnership, joint venture or other non-corporate business
enterprise. Each Subsidiary is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and has all
requisite power and authority to own or lease and operate its properties and
assets and to carry on its business as it is now being conducted. Each
Subsidiary is duly qualified to do business, and is in good standing, in each
jurisdiction in which the character of its properties owned or leased or the
nature of its activities makes such qualification necessary. Schedule 4.01(b)
sets forth those jurisdictions in which each Subsidiary is so qualified.
SECTION 4.02. AUTHORIZATION OF AGREEMENTS, ETC. The Company has all
requisite corporate power and authority to enter into this Agreement and the
Escrow Agreement and to perform its obligations hereunder and thereunder. The
execution and delivery of this Agreement and the Escrow Agreement by the Company
and the performance by the Company of its obligations hereunder and thereunder,
have been duly authorized by all requisite corporate action of the Company's
Board of Directors and Stockholders and will not violate any provision of law,
any order of any court or other agency of government, the Certificate of
Incorporation or Bylaws of the Company, or, except as set forth in Schedule
4.02, any provision of any indenture, agreement or other instrument to which the
Company is a party or by which it or any of its properties or assets is bound or
affected, or conflict with, result in a breach of or constitute (with due notice
or lapse of time or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any liens, charges,
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pledges, security interests or other encumbrances of any nature whatsoever
("Liens") upon the properties or assets of the Company.
SECTION 4.03. VALIDITY. Each of this Agreement and the Escrow
Agreement has been duly executed and delivered by the Company and constitutes
the legal, valid and binding obligation of the Company, enforceable in
accordance with its terms.
SECTION 4.04. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 7,000,000
shares of Class A Common Stock and 1,433,736 shares of Class B Common Stock, of
which 6,790,000 shares of Class A Common Stock and 210,000 shares of Class B
Common Stock are validly issued and outstanding, fully paid and nonassessable,
and no other shares of capital stock of the Company have ever been issued.
Except as set forth on Schedule 4.04(a), no subscription, warrant, option,
convertible security, stock appreciation or other right (contingent or other) to
purchase or acquire any shares of any class of capital stock of the Company is
authorized or outstanding and there is not any commitment of the Company to
issue any shares, warrants, options or other such rights or to distribute to
holders of any class of its capital stock any evidences of indebtedness or
assets. Except as set forth on Schedule 4.04(a), the Company does not have any
obligation (contingent or other) to purchase, redeem or otherwise acquire any
shares of its capital stock or any interest therein or to pay any dividend or
make any other distribution in respect thereof. Schedule 4.04(a) sets forth a
complete and correct list as of the date hereof of the holders of record of the
Company Common Stock and the holders of all options or other rights to purchase
capital stock of the Company, including by name of the holder the number of
shares or the number of shares obtainable on exercise of options or rights held.
(b) The authorized capital stock and the number of issued and
outstanding shares of capital stock of each of the Subsidiaries is set forth on
Schedule 4.04(b) hereto. All of such issued and outstanding shares of capital
stock are validly issued and outstanding, fully paid and nonassessable, and no
other shares of capital stock of any of the Subsidiaries have ever been issued.
Except as set forth on Schedule 4.04(b), no subscription, warrant, option,
convertible security, stock appreciation or other right (contingent or other) to
purchase or acquire any shares of any class of capital stock of any of the
Subsidiaries is authorized or outstanding and there is not any commitment of any
of the Subsidiaries to issue any shares, warrants, options or other such rights
or to distribute to holders of any class of its capital stock any evidences of
indebtedness or assets. Except as set forth on Schedule 4.04(b), none of the
Subsidiaries has any obligation (contingent or other) to purchase, redeem or
otherwise acquire any shares of its capital stock or any interest therein or to
pay any dividend or make any other distribution in respect thereof. Schedule
4.04(b) sets forth a complete and correct list as of the date hereof of the
holders of record of the shares of capital stock of each Subsidiary and the
holders of all options or other rights to purchase capital stock of each
Subsidiary, including by name of the holder the number of shares or the number
of shares obtainable on exercise of options or rights held.
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(c) Except as described on Schedule 4.04(c) hereto, the Company owns
all of the issued and outstanding capital stock of Ficon India, which shares of
capital stock were acquired pursuant to the terms set forth in the Ficon India
Purchase Agreement. The Company has the absolute right to acquire all of the
shares of capital stock of Ficon India not owned by the Company (collectively,
the "Remaining Ficon India Shares") for the consideration described on said
Schedule 4.04(c), and the Company has the power and authority to acquire, and,
assuming that the Company tenders payment for the Remaining Ficon India Shares
as described on said Schedule 4.04(c), will acquire, the Remaining Ficon India
Shares no later than 90 days following the Effective Time for such
consideration.
SECTION 4.05. FINANCIAL STATEMENTS, ETC. The Company has previously
furnished to Parent (i) the unaudited consolidated balance sheets of the Company
and the Subsidiaries as of December 31, 1997 and 1998 and the related unaudited
consolidated statements of operations, stockholders' equity and cash flows for
the two years then ended, in each case certified by Vivek Bansal and (ii) the
unaudited consolidated balance sheet of the Company and the Subsidiaries as of
October 31, 1999 and the related unaudited consolidated statements of
operations, stockholders' equity and cash flows for the ten months then ended
(collectively, the "Company Financial Statements"). Except as specifically
described therein, the Company Financial Statements were prepared from the books
and records of the Company and the Subsidiaries and present fairly in all
material respects the consolidated financial position of the Company and the
Subsidiaries as of the respective dates specified therein and the consolidated
results of operations of the Company and the Subsidiaries for the respective
periods then ended, and were prepared in conformity with generally accepted
accounting principles in the United States ("GAAP") consistently applied,
subject to the absence of certain footnote disclosures and normal year-end audit
adjustments.
SECTION 4.06. ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent
(i) reflected on the unaudited consolidated balance sheet of the Company and the
Subsidiaries as of December 31, 1998 referred to above, (ii) incurred since
December 31, 1998 in the ordinary course of business consistent with past
practice, (iii) reflected on the unaudited consolidated balance sheet of the
Company and the Subsidiaries as of October 31, 1999, or (iv) set forth on
Schedule 4.06 hereto, neither the Company nor any of the Subsidiaries has any
liabilities or obligations of any kind or nature, whether known or unknown or
secured or unsecured (whether absolute, accrued, contingent or otherwise, and
whether due or to become due) of a nature customarily accrued, reserved against
or disclosed in a corporate balance sheet prepared in conformity with GAAP.
SECTION 4.07. ABSENCE OF CERTAIN CHANGES OR EVENTS; FICON INDIA
ACQUISITION.
(a) Except as set forth on Schedule 4.07 hereto, or as otherwise
disclosed in the financial statements of the Company and the Subsidiaries as of
and for the twelve months ended December 31, 1998 referred to above, since
December 31, 1998, neither the Company nor any of the Subsidiaries has (i)
issued any stock, bonds or other corporate securities, (ii) borrowed or
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refinanced any amount or incurred any liabilities (absolute or contingent) in
excess of $10,000, other than trade payables incurred in the ordinary course of
business consistent with past practice, (iii) discharged or satisfied any claim
in excess of $10,000 or incurred or paid any obligation or liability (absolute
or contingent) other than current liabilities shown on the balance sheet of the
Company as of December 31, 1998 and current liabilities incurred since the date
of such balance sheet in the ordinary course of business consistent with past
practice, (iv) declared or made any payment or distribution to stockholders or
purchased or redeemed any shares of its capital stock or other securities, (v)
mortgaged, pledged or subjected to lien any of its assets, tangible or
intangible, other than liens for current taxes not yet due and payable, (vi)
sold, assigned or transferred any of its tangible assets, or canceled any debts
or claims, except in the ordinary course of business consistent with past
practice or as otherwise contemplated hereby, (vii) sold, assigned or
transferred any Intellectual Property or other intangible assets, (viii)
knowingly waived any rights of substantial value, whether or not in the ordinary
course of business, (ix) entered into, adopted, amended or terminated any bonus,
profit sharing, compensation, termination, stock option, stock appreciation
right, restricted stock, performance unit, pension, retirement, deferred
compensation, employment, severance or other employee benefit plan, agreement,
trust, fund or other arrangement for the benefit of any director, officer or
employee, or increased in any manner the compensation or fringe benefits of any
director or officer, or increased the compensation or fringe benefits of any
executive officer other than in the ordinary course of business consistent with
past practice, or made any payment of a cash bonus to any director or officer or
to any employee of, or consultant or agent to, the Company or any of the
Subsidiaries or made any other material change in the terms or conditions of
employment, (x) announced any plan or legally binding commitment to create any
employee benefit plan, program or arrangement or to amend or modify in any
material respect any existing employee benefit plan, program or arrangement,
(xi) eliminated the vesting conditions or otherwise accelerated the payment of
any compensation, including any stock options, (xii) suffered any material
damage, destruction or loss to any of its assets or properties, (xiii) made any
change in its accounting systems, policies, principles or practices, (xiv) made
any loans to any person other than expense advances to employees in the ordinary
course of business, (xv) suffered any material adverse change in its business,
operations, condition (financial or other) or prospects or (xvi) to the extent
not otherwise set forth herein, taken any action described in Section 7.01
hereof.
(b) The Company has provided Parent with true and correct copies of
all documents and agreements pursuant to which the Company purchased and/or
acquired all or any portion of its interest in Ficon India (the "Ficon India
Purchase Agreements"). Prior to the purchase of 99.5% of the capital stock of
Ficon India by the Company (the "Ficon India Purchase"), Ficon India owned,
leased or otherwise had the legal and valid right to use all properties,
franchises, licenses, personal property, Intellectual Property and all other
assets of any nature whatsoever necessary to or used in the conduct of the
business of Ficon India as the same had been conducted prior to the date of the
Ficon India Purchase (all such properties, franchises, licenses, personal
property and other assets being referred to herein collectively as the "Original
Ficon India Assets"). After consummation of the Ficon India Purchase, Ficon
India (i) continued to own, pursuant to good and marketable title, or lease,
under valid and subsisting leases, or
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otherwise retain its interests in the Original Ficon India Assets without
incurring any penalty or other adverse consequence, including, without
limitation, any increase in rentals, royalties, or licenses or other fees
imposed as a result of, or arising from, the consummation of the transactions
contemplated by the Ficon India Purchase Agreements, and (ii) continued to
employ the employees who, prior to the date of the Ficon India Purchase, were
employed by Ficon India in the conduct of the business of Ficon India as the
same had been conducted prior to the date of the Ficon India Purchase.
SECTION 4.08. GOVERNMENTAL APPROVALS. Except as set forth on Schedule
4.08, no order, authorization, approval or consent from, or filing with, any
Federal, state or foreign governmental or public body or other authority having
jurisdiction over the Company or any of the Subsidiaries is required for the
execution, delivery and performance by the Company of this Agreement and the
Escrow Agreement, or is necessary in order to ensure, with respect to the
Company, the legality, validity, binding effect or enforceability of this
Agreement and the Escrow Agreement.
SECTION 4.09. LITIGATION. Except as set forth on Schedule 4.09 hereto,
(i) there is no action, suit, dispute, investigation, proceeding or claim
pending or, to the best knowledge of the Company, threatened against or
affecting the Company or any of the Subsidiaries, or their respective properties
or rights, or the Business, before any court, administrative agency,
governmental body, arbitrator, mediator or other dispute resolution body, and
the Company is not aware of any facts or circumstances which may give rise to
any such action, suit, dispute, investigation, proceeding or claim, (ii) neither
the Company nor any of its Subsidiaries is subject to any order, judgment,
decree, injunction, stipulation, or consent order of or with any court or other
governmental agency, and (iii) neither the Company nor any of its Subsidiaries
has entered into any agreement to settle or compromise any proceeding pending or
threatened against it which has involved any obligation other than the payment
of money or for which the Company or such Subsidiary has any continuing
obligation. No such pending or threatened actions, suits or proceedings, if
determined adversely, would, individually or in the aggregate have a material
adverse effect on the business, operations, condition (financial or other) or
prospects of the Company or any of its Subsidiaries (hereinafter referred to as
a "Material Adverse Effect").
SECTION 4.10. INFRINGEMENT, ETC.
(a) PATENTS. No third party has notified the Company or any of its
Subsidiaries that any product made, sold, developed, or used by the Company or
any of its Subsidiaries has infringed, may have infringed, infringes, may
infringe, will infringe, or could infringe any claims of any issued or pending
patents, United States or foreign. The Company does not presently believe or
suspect that any product made, sold, developed or used by the Company or any of
its Subsid iaries has infringed, may have infringed, infringes, may infringe,
will infringe, or could infringe any claims of any issued or pending patents,
United States or foreign.
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(b) COPYRIGHT. No third party has notified the Company or any of its
Subsidiaries that anything made, sold, developed, published, distributed, or
used by the Company or any of its Subsidiaries has infringed, may have
infringed, infringes, may infringe, will infringe, or could infringe any
copyright, United States or foreign. The Company does not presently believe or
suspect that anything made, sold, developed, published, distributed, or used by
the Company or any of its Subsidiaries has infringed, may have infringed,
infringes, may infringe, will infringe, or could infringe any copyright, United
States or foreign.
(c) TRADEMARK, SERVICE MARK, OR TRADE DRESS. No third party has
notified the Company or any of its Subsidiaries that anything made, developed,
sold, published, distributed, or used by the Company or any of its Subsidiaries
has infringed, may have infringed, infringes, may infringe, will infringe, or
could infringe any trademark, service mark, or trade dress. The Company does not
presently believe or suspect that anything made, sold, developed, published,
distributed, or used by the Company or any of its Subsidiaries has infringed,
may have infringed, infringes, may infringe, will infringe, or could infringe
any trademark, service mark, or trade dress.
(d) MASK WORK. No third party has notified the Company or any of its
Subsidiaries that anything made, sold, developed, published, distributed, or
used by the Company or any of its Subsidiaries has infringed, may have
infringed, infringes, may infringe, will infringe, or could infringe any mask
work, United States or foreign. The Company does not presently believe or
suspect that anything made, sold, developed, published, distributed, or used by
the Company or any of its Subsidiaries has infringed, may have infringed,
infringes, may infringe, will infringe, or could infringe any mask work, United
States or foreign.
(e) KNOW HOW, SHOW HOW, OR TECHNOLOGY TRANSFER. No third party has
notified the Company or any of its Subsidiaries that anything made, sold,
developed, published, distributed, or used by the Company or any of its
Subsidiaries has violated, may have violated, violates, may violate, will
violate, or could violate any agreements regarding know how, show how, or
technology transfer. The Company does not presently believe or suspect that
anything made, sold, developed, published, distributed, or used by the Company
or any of its Subsidiaries has violated, may have violated, violates, may
violate, will violate, or could violate any agreements regarding know how, show
how, or technology transfer.
SECTION 4.11. ASSETS, EMPLOYEES AND THE BUSINESS.
(a) Except as disclosed in Schedule 4.11 hereto, the Company and the
Subsidiaries own, lease or otherwise have the legal and valid right to use all
properties, franchises, licenses, personal property and other assets of any
nature whatsoever (including, without limitation, the Intellectual Property,
Leased Properties and contracts, agreements or arrangements described in
Schedule 4.20 hereto) necessary to, used in or currently proposed to be used in
the conduct of the Business or otherwise owned, leased or used by the Company or
any of the Subsidiaries (all such properties, franchises, licenses, personal
property and other assets being referred to herein collectively as the
"Assets"). The Company and each of the Subsidiaries have
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good and valid title to all of their respective Assets, in each case, free and
clear of any Liens, except (i) as described in said Schedule 4.11, (ii) Liens
for current taxes not yet due, (iii) mechanic's and materialmen's and other
similar Liens which may have arisen in the ordinary course of business and
which, in the aggregate, would not have a Material Adverse Effect, and (iv)
security interests securing indebtedness, not in default for the purchase price
of or rental payments on property purchased or leased under capital lease
arrangements in the ordinary course of business (collectively, "Permitted
Liens").
(b) The Assets constitute all the material or necessary properties,
material or necessary assets and material or necessary rights forming a part of,
used, held or intended to be used in, and all such properties, assets and rights
as are necessary in the conduct of, the Business. At all times since December
31, 1998, the Company has caused the Assets to be maintained in accordance with
good business practice, and all the Assets are in good operating condition and
repair, ordinary wear and tear excepted, and are suitable for the purposes for
which they are used and intended.
(c) Except as set forth in Schedule 4.11, following the Effective Time
the Company and the Subsidiaries will continue to own, pursuant to good and
marketable title, or lease, under valid and subsisting leases, or otherwise
retain its respective interest in the Assets without incurring any penalty or
other adverse consequence, including, without limitation, any increase in
rentals, royalties, or licenses or other fees imposed as a result of, or arising
from, the consummation of the transactions contemplated by this Agreement.
Immediately following the Effective Time, the Company and the Subsidiaries shall
own and possess all documents, books, records, agreements and financial data of
any sort used by such entity in the conduct of the Business.
SECTION 4.12. USE OF REAL PROPERTY. Neither the Company nor any of its
Subsidiaries owns any real property. Each lease or agreement to which the
Company or any of its Subsidiaries is a party and under which it is a lessee of
any property, real or personal, owned by any third party is a valid and
subsisting agreement, without any default of the Company or such Subsidiaries
thereunder and without any default thereunder of any other party thereto. The
leased real properties listed in Schedule 4.12 (the "Leased Properties") hereto
are used and operated by the Company and its Subsidiaries in material compliance
and conformity with all such applicable leases. Neither the Company nor any of
its Subsidiaries has received notice of any continuing material violation of any
applicable zoning or building regulation, ordinance or other law, order,
regulation or requirement relating to the leased real property or assets of the
Company and its Subsidiaries and, to the best knowledge of the Company, there
are no such continuing violations. The possession by the Company and its
Subsidiaries of such property has not been disturbed nor has any claim been
asserted against the Company or any of its Subsidiaries adverse to their
respective rights in such leasehold interests.
SECTION 4.13. PERSONAL PROPERTY. Schedule 4.13 sets forth (i) all of
the tangible personal property used by the Company and/or any of the
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Subsidiaries having an original acquisition cost of $20,000 or more, and (ii)
all leases of personal property binding upon the Company having an annual rental
in excess of $20,000. All of such tangible personal property is presently
utilized by the Company and the Subsidiaries in the ordinary course of the
Business and is in good repair, ordinary wear and tear excepted.
SECTION 4.14.1 INTELLECTUAL PROPERTY SCHEDULES.
(a) Schedule 4.14.1(a) sets forth a list and summary description of
all Intellectual Property held by the Company or any of its Subsidiaries. For
each listed Intellectual Property the schedule shall specify, where applicable,
the jurisdictions in which each such Intellectual Property has been issued or
registered or in which an application for such issuance or registration has been
filed, including the respective registration or application numbers and the
names of all owners or assignees or parties with an ownership interest.
(b) Schedule 4.14.1(b) sets forth a list of all Intellectual Property
obligations (excluding licenses and sublicenses) owed to the Company or any of
its Subsidiaries. The listed Intellectual Property obligations include: (i) all
employee assignment obligations; (ii) all contractor assignment obligations;
(iii) all obligations to convey or share ownership of Intellectual Property;
(iv) all obligations to convey or share use of or access to Intellectual
Property; and (v) all assignment obligations arising from or in conjunction with
any joint ventures, product development services, conveyances of know how, or
technology transfers. For each listed Intellectual Property obligation, the
schedule shall specify, where applicable, the scope of each Intellectual
Property obligation and all other parties with concurrent obligations to the
same Intellectual Property.
(c) Schedule 4.14.1(c) sets forth a list of all Intellectual Property
obligations (excluding licenses and sublicenses) of the Company or any of its
Subsidiaries. The listed Intellectual Property obligations include: (i) all
assignment obligations to third parties; (ii) all obligations to convey or share
ownership of Intellectual Property; (iii) all obligations to convey or share use
of or access to Intellectual Property; and (iv) all assignment obligations
arising from or in conjunction with any joint ventures, product development
services, conveyances of know how, or technology transfers. For each listed
Intellectual Property obligation, the schedule shall specify, where applicable,
the scope of each Intellectual Property obligation.
(d) Schedule 4.14.1(d) sets forth a list of all Intellectual Property
licenses, sublicenses, or other agreements under which the Company or any of its
Subsidiaries are authorized to use or licensing Intellectual Property licensed
to the Company or any of its Subsidiaries. For each listed Intellectual Property
license, the schedule shall specify the licensed Intellectual Property rights,
the jurisdictions in which each such Intellectual Property right has been
licensed, the conditions on transferability, and the term of the license.
(e) Schedule 4.14.1(e) sets forth a list of all Intellectual Property
licenses, sublicenses, or other agreements authorizing the use or licensing of
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Intellectual Property, licensed by the Company or any of its Subsidiaries
(excluding licenses granted to customers or distributors in the ordinary course
of business) to a third party. For each listed Intellectual Property license,
the schedule shall specify the licensed Intellectual Property rights, the
jurisdictions in which each such Intellectual Property right has been licensed,
the conditions on transferability, and the term of the license.
(f) Schedule 4.14.1(f) sets forth a list of all computer software
programs, applications and databases used in connection with the Business,
whether owned by the Company or any of its Subsidiaries (the "Owned Software")
or licensed by the Company or any of its Subsidiaries from third parties (the
"Licensed Software").
(g) Schedule 4.14.1(g) sets forth a list of all employee agreements to
which the Company or any of its Subsidiaries are a party. For each listed
employee agreement, the schedule shall specify the employee who is a party
thereto and, if other than as set forth in such agreement, the term of the
agreement.
(h) Schedule 4.14.1(h) sets forth a list of all confidentiality and
non-disclosure agreements to which the Company or any of its Subsidiaries or
employees are a party. For each listed agreement, the schedule shall specify the
parties thereto and, if other than as set forth in such agreement, the term of
the agreement.
(i) Schedule 4.14.1(i) sets forth a list of the Owned and Licensed
Software, as well as all computer hardware, including embedded microcontrollers,
(collectively, the "Computer Systems") used by the Company and its Subsidiaries
in the Business that have been determined, in whole or in part, through a
comprehensive world wide audit, to not be Year 2000 Compliant. For purposes of
this Agreement, "Year 2000 Compliant" means that the Computer Systems: (i)
correctly perform date data century recognition, and calculations that
accommodate same century and multi-century formulas and date values; (ii)
operate correctly prior to, during and after the calendar year 2000 A.D.,
including, but not limited to, leap years; and (iii) do not abnormally end
operations or provide invalid or incorrect results because of date data,
including date data that represents or references different centuries or more
than one century.
(j) Schedule 4.14.1(j) sets forth a list of Agreements that the
Company or any of its Subsidiaries have entered into that limit the knowledge or
information that may be used by the Company, its Subsidiaries, or any of their
respective employees in any product or development efforts.
SECTION 4.14.2 INTELLECTUAL PROPERTY REPRESENTATIONS AND WARRANTIES.
(a) Except as set forth in Schedule 4.14.2, the Company and its
Subsidiaries own and have good and exclusive title to, or have exclusive and
assignable licenses to use, each item of Intellectual Property listed in
Schedule 4.14.1(a) free and clear of all liens, encumbrances and adverse claims
of title (other than Permitted Liens), such Intellectual Property is valid and
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enforceable (to the extent constituting an asset that can be "enforced"), and
the rights of the Company and its Subsidiaries therein will not be terminated,
canceled or modified as a result of the transactions contemplated by this
Agreement.
(b) Except as set forth in Schedule 4.14.2, the Company and its
Subsidiaries own and have good and exclusive title to, or have exclusive and
assignable licenses to use, each Intellectual Property obligation listed in
Schedule 4.14.1(b) free and clear of all liens, encumbrances and adverse claims
of title (other than Permitted Liens), such Intellectual Property obligations
are valid and enforceable, and the rights of the Company and its Subsidiaries in
respect thereof will not be terminated, canceled or modified as a result of the
transactions contemplated by this Agreement.
(c) The Intellectual Property licenses, sublicenses or other
agreements listed in Schedule 4.14.1(d) are current, enforceable, free and clear
of encumbrances (other than Permitted Liens), are not subject to revocation or
cancellation because of nonfeasance or malfeasance by the Company or its
Subsidiaries prior to the Effective Time, and will not become terminable or be
subject to cancellation or modification as a result of the transactions
contemplated by this Agreement.
(d) The Intellectual Property licenses, sublicenses or other
agreements listed in Schedule 4.14.1(e) are current, enforceable, free and clear
of liens and encumbrances (other than Permitted Liens), and will not become
terminable or be subject to cancellation or modification as a result of the
transactions contemplated by this Agreement.
(e) Except as set forth in Schedule 4.14.2, the Company and its
Subsidiaries own and have good and exclusive title to all Owned Software (and
licenses to use all Licensed Software), in each case free and clear of all
liens, encumbrances and adverse claims of title (other than Permitted Liens),
and the rights of the Company and its Subsidiaries in respect thereof will not
be terminated, canceled or modified as a result of the transactions contemplated
by this Agreement. The Company and each of the Subsidiaries have taken all steps
reasonably necessary to protect their respective right, title and interest in
and to the Owned Software and the Licensed Software listed in Schedule
4.14.1(f), including, without limitation, the use of written agreements
containing appropriate confidentiality provisions with all third parties having
access to the source code or object code relating to the Owned Software or the
Licensed Software.
(f) Except as set forth in Schedule 4.14.2, the Company and its
Subsidiaries possess or have access to the original and all copies of all
documentation, including, without limitation, all source and object code for all
Owned Software. Except as set forth in Schedule 4.14.2(f), upon consummation of
the transactions contemplated by this Agreement, the Company and its
Subsidiaries will continue to own all of the Owned Software, free and clear of
all claims, liens, encumbrances, obligations and liabilities and, with respect
to the agreements for the license of the Licensed Software which require action
as a result of the consummation of the transactions contemplated by this
Agreement in order for the Company and its Subsidiaries to continue to use
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and operate such Licensed Software after the Closing Date, the Company and its
Subsidiaries will have taken such action
(g) Except as set forth in Schedule 4.14.2, any programs,
modifications, enhancements or other inventions, improvements, discoveries,
methods or works of authorship included in the Owned Software that were created
by employees of the Company or any of its Subsidiaries were made in the regular
course of such employees' employment with the Company or such Subsidiaries using
the Company's or such Subsidiary's facilities and resources and, as such,
constitute "works made for hire", and all rights thereto have been assigned to
the Company.
(h) Except as set forth in Schedule 4.14.2, any programs,
modifications, enhancements or other inventions, improvements, discoveries,
methods or works of authorship included in the Owned Software that were created
by consultants or independent contractors were created under an obligation to
convey or assign Intellectual Property rights in the programs, modifications,
enhancements or other inventions, improvements, discoveries, methods or works of
authorship to the Company.
(i) The Company has obtained Intellectual Property assignment
obligations for all Intellectual Property developed by or on behalf of the
Company and/or its Subsidiaries by their respective employees and others
performing services for the Company and/or its Subsidiaries, requiring such
employees and other parties to assign such Intellectual Property to the Company
and its Subsidiaries, and there are no inconsistent and/or conflicting
obligations to convey or assign the Intellectual Property to a third party.
(j) The Company and its Subsidiaries own and have good and exclusive
title to, or have good and valid licenses to use, all Intellectual Property
rights necessary to conduct the Business without interference.
(k) Except as set forth in Schedule 4.14.2, the Company and its
Subsidiaries have taken all reasonable measures and precautions necessary to
protect and maintain the confidentiality and secrecy of the Intellectual
Property owned and/or used by the Company and/or its Subsidiaries and otherwise
to maintain and protect the value of the Intellectual Property owned and/or used
by the Company and/or its Subsidiaries, including, without limitation, requiring
all employees of the Company and each of its Subsidiaries (1) to maintain the
confidentiality of trade secrets of the Company and its Subsidiaries and (2) to
assign all rights to any Intellectual Property developed by such employees while
working for the Company and/or such Subsidiaries to the Company or such
Subsidiaries, as appropriate. Neither Vivek Bansal nor Amit Gaur nor any other
officer, director, employee, agent or representative of the Company and/or any
of its Subsidiaries has taken any actions or entered into any agreements or
assignments or incurred any liability or obligation limiting or restricting the
Company's or any of its Subsidiary's rights to Intellectual Property.
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(l) Except as set forth in Schedule 4.14.2, the Company and its
Subsidiaries have obtained from all current and former employees and from all
current and former consultants and independent contractors signed agreements
restricting the use and disclosure of the Intellectual Property of the Company
and its Subsidiaries and requiring such employees, consultants and independent
contractors (1) to maintain the confidentiality of trade secrets of the Company
and its Subsidiaries, (2) to assign all rights to any Intellectual Property
developed by such employees while working for the Company and/or such
Subsidiaries to the Company or such Subsidiaries, as appropriate, and (3) to
assist in the perfection and/or enforcement of the Company's and such
Subsidiaries' rights in any such Intellectual Property.
(m) Each confidentiality or non-disclosure agreement listed in
Schedule 4.14.1(h) is valid and enforceable in accordance with its terms.
(n) There are no outstanding claims for infringement,
misappropriation, unauthorized use, possession, or violation of the Intellectual
Property rights of any third party by the Company or any of its Subsidiaries in
the operation of the Business and there is no basis for any such claim
(o) The Company and its Subsidiaries have taken reasonable and prudent
measures to review the Owned and Licensed Software, as well as all computer
hardware, including the Computer Systems used by the Company and its
Subsidiaries in the Business, in order to determine which parts of the Computer
Systems are not Year 2000 Compliant.
(p) The Computer Systems that are not listed in Schedule 4.14.1(i) are
Year 2000 Compliant.
(q) Except as set forth in Schedule 4.14.1(j), the Company and its
Subsidiaries have not entered into any agreements and are not under any
obligations that limit or impair the use of residual know-how and techniques
known to the Company, any of its Subsidiaries or any of their respective
employees in any products or development efforts.
SECTION 4.15. LABOR MATTERS.
(a) Neither the Company nor any of the Subsidiaries is or has been a
party to any collective bargaining or union agreement, and no such agreement is
or has been applicable to any employees of the Company or any of the
Subsidiaries. There are not any controversies between the Company or any of the
Subsidiaries and any of such employees that might reasonably be expected to
materially adversely affect the conduct of the Business, or any unresolved labor
union grievances or unfair labor practice or labor arbitration proceedings
pending, or, to the best knowledge of the Company, threatened relating to the
Business. To the best knowledge of the Company, there are no labor unions or
other organizations representing or purporting to represent any employees of the
Company or any of the Subsidiaries and there are not any organizational efforts
currently being made or threatened involving any of such employees. Except as
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set forth on Schedule 4.15 hereto, the Company and the Subsidiaries are in
compliance in all material respects with all laws and regulations or other legal
or contractual requirements regarding the terms and conditions of employment of
employees, former employees or prospective employees or other labor related
matters, including, without limitation, laws, rules, regulations, orders,
rulings, conciliation agreements, decrees, judgments and awards relating to
wages, hours, the payment of social security and similar taxes, equal employment
opportunity, employment discrimination, fair labor standards and occupational
health and safety, wrongful discharge or violation of the personal rights of
employees, former employees or prospective employees. Neither the Company nor
any of the Subsidiaries is liable for any arrears of wages or any taxes or
penalties for failure to comply with any of the foregoing.
(b) The Company has provided Parent with a true, correct and complete
list of the name and work status of each employee of the Company working in the
United States who is not a United States citizen.
SECTION 4.16. TAXES.
(a) Except as set forth on Schedule 4.16 hereto, each of the Company,
the Subsidiaries and any affiliated, combined or unitary group of which any such
entity is or was a member has (A) timely filed all Federal and all state, local
and foreign returns, declarations, reports, estimates, information returns and
statements ("Tax Returns") required to be filed by it in respect of any Taxes,
(B) timely paid all Taxes that are due and payable with respect to the periods
covered by the Tax Returns referred to in clause (A), (C) established reserves
that are adequate for the payment of all Taxes not yet due and payable with
respect to the results of operations of the Company and the Subsidiaries, and
(D) complied with all applicable laws, rules and regulations relating to the
payment and withholding of Taxes and has timely withheld from employee wages and
paid over to the proper governmental authorities all amounts required to be so
withheld and paid over.
(b) Except as set forth on Schedule 4.16, the period of assessment
under applicable law, after giving effect to extensions or waivers, with respect
to the Tax Returns of the Company or any of the Subsidiaries has expired for all
of the taxable years of the Company and such Subsidiaries. Schedule 4.16
indicates those Tax Returns of the Company and the Subsidiar ies that either
have been audited or are currently the subject of an audit. There is no dispute
or claim (including any anticipated claim) concerning any Taxes of the Company
or any of the Subsidiaries either (i) claimed or raised by any authority in
writing or (ii) as to which the Company or any of its affiliates has knowledge
after due inquiry.
(c) The Company has never been an includible member of an "affiliated
group" (within the meaning of Section 1504 of the Code) other than the
"affiliated group" of which the Company is currently the parent (the "Company
Affiliated Group"). For all periods of its existence, the Company Affiliated
Group has been entitled to report its income on consolidated federal income tax
returns filed on behalf of the Company Affiliated Group and, for such periods,
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all federal income tax returns required to be filed by the Company Affiliated
Group have been (or will be) duly and timely filed on a consolidated basis.
Except as set forth on Schedule 4.16 hereto, all other Tax Returns of the
Company and the Subsidiaries have been filed on a separate company,
non-combined, non-consolidated and non-unitary basis.
(d) Except as set forth in Schedule 4.16, neither the Company nor any
of the Subsidiaries has (i) received or is the subject of an application for a
tax ruling or entered into a legally binding agreement (such as a closing
agreement) with a taxing authority, which ruling or agreement could have an
effect on the Taxes of the Company or any of the Subsidiaries after the
Effective Time, or (ii) filed any election or caused any deemed election under
Section 338 of the Code.
(e) Except as set forth in Schedule 4.16, (i) no extensions of time
have been granted to the Company or any of the Subsidiaries to file any Tax
Return required by applicable law to be filed by it prior to the Effective Time,
which have expired, or will expire, before the Effective Time without such Tax
Return having been filed, (ii) no deficiency or adjustment for any Taxes of the
Company or any of the Subsidiaries has been proposed, asserted or assessed in
writing, and no federal, state, local or foreign audits or other administrative
proceedings or court proceedings are pending with regard to any such Taxes of
the Company or any of the Subsidiar ies, (iii) no waiver or consent extending
any statute of limitations for the assessment or collection of any Taxes has
been executed by the Company or any of the Subsidiaries, nor have any requests
for such waivers or consents been proposed in writing and (iv) neither the
Company nor any of the Subsidiaries owns or leases any interest in real property
in any jurisdiction in which a Tax will be payable with respect to such interest
in real property as a result of the transactions contemplated hereby.
(f) Except as set forth in Schedule 4.16, the Company is not and has
never been a party to any tax-sharing or allocation agreements, arrangements or
understandings, whether written or oral.
(g) Neither the Company nor any of the Subsidiaries is a party to any
agreement, contract or arrangement that would result, by reason of the
consummation of any of the transactions contemplated herein, separately or in
the aggregate, in the payment of any "excess parachute payments" by the Company
or any member of such Tax Group within the meaning of Section 280G of the Code.
(h) The Company and each of the Subsidiaries has complied with all
applicable laws relating to the withholding of Taxes (including withholding of
Taxes pursuant to Sections 1441 and 1442 of the Code) and has, within the time
and within the manner prescribed by law, withheld and paid over to the proper
taxing authorities all amounts required to be withheld and paid over under all
applicable laws in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party.
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(i) Neither the Company nor any of the Subsidiaries is required to
include in income any adjustment pursuant to Section 481(a) of the Code by
reason of a voluntary change in accounting method (nor has any taxing authority
proposed in writing any such adjustment or change of accounting method).
(j) No power of attorney has been granted by or with respect to the
Company or any of the Subsidiaries with respect to any matter relating to Taxes.
(k) Neither the Company nor any of the Subsidiaries has filed a
consent pursuant to Section 341(f) of the Code (or any predecessor provision).
(l) No claim has ever been made by any governmental authority in a
jurisdiction where the Company or any of the Subsidiaries does not file Tax
Returns that the Company or any such Subsidiary is or may be subject to taxation
by that jurisdiction.
(m) The Company has previously delivered or made available to Parent
complete and accurate copies of each of: (i) all audit reports, letter rulings
and technical advice memoranda relating to federal, state and local Taxes due
from or with respect to the Company and each of the Subsidiaries, (ii) the
federal, state, local and foreign Tax Returns filed by the Company and each of
the Subsidiaries and (iii) any closing agreements entered into by the Company or
any of the Subsidiaries with any taxing authority.
(n) None of the assets of the Company or any Tax Group of which the
Company is a member is required to be treated as being owned by any other person
pursuant to the "safe harbor" leasing provision of Section 168(f)(8) of the
Internal Revenue Code of 1954, as in effect prior to the repeal thereof.
(o) The Company is not and has not been at any time over the last five
years a "U.S. real property holding corporation" (as defined in Section
897(c)(2) of the Code).
SECTION 4.17. COMPLIANCE WITH LAW; PERMITS. Neither the Company nor
any of the Subsidiaries is in any material respect in default under or in
violation of (i) any order or decree of any court, governmental authority,
arbitrator or arbitration board or tribunal or (ii) any laws, ordinances,
governmental rules or regulations to which the Company or any Subsidiary or any
of their respective properties or assets is subject. Schedule 4.17 hereto sets
forth a list of all permits, authorizations, approvals, registrations, variances
and licenses ("Permits") issued to or used by the Company or any of the
Subsidiaries in connection with the conduct of the Business. Such Permits
constitute all Permits necessary for the Company or the Subsidiaries to own, use
and maintain their properties and assets or required for the conduct of the
Business in substantially the same manner as it is currently conducted. Each
Permit listed on Schedule 4.17 is in full force and effect and no proceeding is
pending or, to the best knowledge of the Company, threatened, to modify,
suspend, revoke or otherwise limit any of such Permits and no administrative or
governmental actions have been taken or, to the best knowledge of the Company,
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threatened, in connection with the expiration or renewal of any of such Permits.
Except as set forth on Schedule 4.17, neither the Company or any of the
Subsidiaries nor the Surviving Corporation will be required, as a result of the
consummation of the transactions contemplated hereby, to obtain or renew any
material Permits.
SECTION 4.18. EMPLOYEE BENEFIT PLANS.
(a) Schedule 4.18 hereto sets forth a complete and accurate list of
each plan, program, arrangement, agreement or commitment that is an employment,
consulting or deferred compensation agreement, or an executive compensation,
incentive bonus or other bonus, employee pension, profit-sharing, savings,
retirement, stock option, stock purchase, severance pay, life, health,
disability or accident insurance plan, or vacation or other employee benefit
plan, program, arrangement, agreement or commitment ("Plans"), including,
without limitation, each employee benefit plan (as defined under Section 3(3) of
ERISA), maintained by the Company or any of the Subsidiaries or any trade or
business (whether or not incorporated) which, together with such persons, would
be treated as a single employer under Title IV of ERISA or Section 414 of the
Code (collectively, the "ERISA Affiliates") or to which any ERISA Affiliate
contributes or has any obligation to contribute to, or has or may have any
liability (including, without limitation, a liability arising out of an
indemnification, guarantee, hold harmless or similar agreement). Each Plan is
identified on Schedule 4.18, to the extent applicable, as one or more of the
following: an "employee pension plan" (as defined in Section 3(2)(A) of ERISA),
an "employee welfare plan" (as defined in Section 3(l) of ERISA), or as a plan
intended to be qualified under Section 401 of the Code.
(b) The Company and each of the Subsidiaries have complied, and
currently are in compliance, in all material respects with all laws and
regulations applicable to the Plans, including, without limitation, ERISA and
the Code.
(c) Except as set forth on Schedule 4.18, no ERISA Affiliate has
maintained, adopted or established, contributed to or been required to
contribute to, or otherwise participated in or been required to participate in,
any employee benefit plan or other program or arrangement subject to Title IV of
ERISA (including, without limitation, a "multi-employer plan" (as defined in
Section 3(37) of ERISA) and a defined benefit plan (as defined in Section 3(35)
of ERISA)).
(d) Except as set forth on Schedule 4.18, neither the Company nor any
of the Subsidiaries provides or may be required to provide and no Plan, other
than a Plan that is an employee pension benefit plan (within the meaning of
Section 3(2)(A) of ERISA), provides or may be required to provide benefits,
including, without limitation, death, health or medical benefits (whether or not
insured), with respect to current or former employees of the Company or any of
the Subsidiaries beyond their retirement or other termination of service with
the Company or the Subsidiaries (other than (A) coverage mandated by applicable
law, (B) deferred compensation benefits accrued as liabilities on the books of
the Company or the Subsidiaries, or (C) benefits the full cost of which is borne
by the current or former employee (or his or her beneficiary)). No ERISA
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Affiliate maintains any Plan under which any employee or former employee of any
of the ERISA Affiliates may receive medical benefits which cannot be modified or
terminated by the ERISA Affiliates at any time without the consent of any
person, and no employees or former employees of the ERISA Affiliates will have
any claim in respect of such benefits as of the Effective Time.
(e) The transactions contemplated hereby will not result in (i) any
portion of any amount paid or payable by the Company to a "disqualified
individual" (within the meaning of Section 280G(c) of the Code and the
regulations promulgated thereunder), whether paid or payable in cash, securities
of the Company or otherwise and whether considered alone or in conjunction with
any other amount paid or payable to such a "disqualified individual," being an
"excess parachute payment" within the meaning of Section 280G(b)(1) of the Code
and the regulations promulgated thereunder, (ii) except as provided in Section
7.07 hereof, any employee of the Company or any of the Subsidiaries being
entitled to severance pay, unemployment compensation, or any other payment,
(iii) except as provided in Section 7.08 hereof, an accelera tion of the time of
payment or vesting, or an increase in the amount of compensation due to any such
employee or former employee or (iv) any prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Code for which an exemption is not
available.
(f) No ERISA Affiliate has incurred any material liability with
respect to any Plan under ERISA (including, without limitation, Title I or Title
IV thereof, other than liability for premiums due to the Pension Benefit
Guaranty Corporation), the Code or other applicable law, which has not been
satisfied in full or been accrued on the consolidated balance sheet of the
Company and the Subsidiaries as of December 31, 1998 pending full satisfaction,
and no event has occurred, and there exists no condition or set of
circumstances, which could result in the imposition of any liability under
ERISA, the Code or other applicable law with respect to any Plan.
(g) With respect to each Plan that is funded wholly or partially
through an insurance policy, all premiums required to have been paid to date
under the insurance policy have been paid, and, except as set forth on Schedule
4.18, as of the Effective Time there will be no liability of any of the ERISA
Affiliates under any such insurance policy or ancillary agreement with respect
to such insurance policy in the nature of a retroactive rate adjustment, loss
sharing arrangement or other actual or contingent liability arising wholly or
partially out of events occurring prior to the Effective Time.
(h) None of the ERISA Affiliates has made any contribution to any Plan
that may be subject to any excise tax under Section 4972 of the Code.
SECTION 4.19. ENVIRONMENTAL MATTERS. The Company and the Subsidiaries
are in compliance in all material respects with all Federal, state or local
statutes, ordinances, orders, judgments, rulings or regulations relating to
environmental pollution or to environmental regulation or control. Except as set
forth on Schedule 4.19 hereto, neither the Company, any of the Subsidiaries nor
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any of their respective officers, employees, representatives or agents or any
other person, has treated, stored, processed, discharged, spilled or otherwise
disposed of any substance defined as hazardous or toxic by any applicable
Federal, state, local or foreign law, rule, regulation, order or directive, or
any waste or by-product thereof, at any real property or any other facility
owned, leased or used by the Company or any of the Subsidiaries, in violation of
any applicable statutes, regulations, ordinances or directives of any
governmental authority or court. No employee or other person has ever made a
claim or demand against the Company or any of the Subsidiaries based on alleged
damage to health caused by any such hazardous or toxic substance or by any waste
or by-product thereof. Neither the Company nor any of the Subsidiaries has been
charged by any governmental authority with improperly using, handling, storing,
discharging or disposing of any such hazardous or toxic substance or waste or
by-product thereof or with causing or permitting any pollution of any body of
water. To the best knowledge of the Company, except as set forth on Schedule
4.19, the Leased Properties and the Business are not subject to any pending or
threatened administrative or judicial proceeding under any environmental law and
there are no facts or circumstances known to the Company which may give rise to
any such proceeding. Except as set forth on Schedule 4.19, to the best knowledge
of the Company and its Subsidiaries, there are no inactive, closed, or abandoned
storage or disposal areas or facilities or underground storage tanks on the
Leased Properties.
SECTION 4.20. CONTRACTS.
(a) Schedule 4.20 lists the following contracts, agreements and
arrangements relating to the Company and/or any of its Subsidiaries under which
the Company and/or any of its Subsidiaries has any liability or obligation of
any nature whatsoever (whether contingent or in the nature of a warranty,
surety, guaranty, stand-by obligation or otherwise):
(i) any contract or arrangement with a sales representative,
distributor, dealer, broker, sales agency, advertising agency or other
person engaged in sales, distribution or promotional activities, or any
contract to act as one of the foregoing on behalf of any person, which is
not terminable by the Company on 30 or fewer days' notice;
(ii) any contract or arrangement of any nature which involves the
payment or receipt of cash or other property, an unperformed commitment, or
goods or services;
(iii) any contract or arrangement pursuant to which the Company has
made or will make loans or advances, or has or will have incurred
indebtedness for borrowed money or become a guarantor or surety or pledged
its credit on or otherwise become responsible with respect to any
undertaking of another (except for the negotiation or collection of
negotiable instruments in transactions in the ordinary course of business);
(iv) any indenture, credit agreement, loan agreement, note, mortgage,
security agreement, lease of real property or personal property, loan
commitment or other contract or arrangement relating to the borrowing of
funds, an extension of credit or financing;
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(v) any contract or arrangement involving a partnership, joint venture
or other cooperative undertaking;
(vi) any contract or arrangement involving any restrictions with
respect to the geographical area of operations or scope or type of business
of the Company or any of the Subsidiaries;
(vii) any power of attorney or agency agreement or arrangement with
any person pursuant to which such person is granted the authority to act
for or on behalf of the Company or any of the Subsidiaries, or the Company
or the Subsidiaries is granted the authority to act for or on behalf of any
person;
(viii) any contract not fully performed and relating to any
acquisition or disposition of the Company or any predecessor in interest
of the Company, or any acquisition or disposition of any Subsidiary,
division, line of business, or real property; and
(ix) any other contract or agreement (whether or not in writing)
relating to or used in connection with the Business not specified above.
(b) The Company has delivered to Parent complete and accurate copies
of the contracts and agreements set forth on Schedule 4.20. Each such contract
or agreement is a valid and subsisting agreement, without any default of the
Company or any of the Subsidiaries thereunder and, to the best knowledge of the
Company and its Subsidiaries, without any default thereunder of the other party
or parties thereto. Except as set forth on Schedule 4.20, the Company has not
received notice of any cancellation or termination of, or of any threat to
cancel or terminate, any such contracts or agreements.
(c) Except as set forth on Schedule 4.20, (i) none of the transactions
contemplated by this Agreement and/or the Ancillary Agreements shall impair or
adversely effect in any manner whatsoever any of the Company's rights or
obligations under or in respect of any of the contracts or agreements set forth
(or required to be set forth) on Schedule 4.20, including, without limitation,
the contracts with Mitel, NEC and Sumitomo and (ii) except to the extent that
the consents set forth on Schedule 4.20 are not obtained, each contract and
agreement set forth on Schedule 4.20 shall continue in full force and effect
without penalty or other adverse conse quence from and after the Effective Time.
(d) There is no contract, agreement, arrangement or understanding that
would entitle any of the Stockholders to seek indemnification from the Company
or any of its Subsidiaries.
(e) Except as set forth on Schedule 4.20, nothing contained in any
contract or agreement set forth (or required to be set forth) on Schedule 4.20
limits or impairs the Company's or any Subsidiary's rights to use its
Intellectual Property or to engage in the Business.
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SECTION 4.21. INSURANCE.
(a) All policies of fire, liability, workers' compensation and other
forms of insurance providing insurance coverage to or for the Company or any of
the Subsidiaries for events or occurrences arising or taking place in the case
of occurrence type insurance, and for claims made and/or suits commenced in the
case of claims-made type insurance, between the date of this Agreement and the
Effective Time, are listed on Schedule 4.21 hereto, and, except as set forth on
Schedule 4.21, all premiums with respect thereto have been paid, and no notice
of cancellation or termination has been received with respect to any such
policy. All such policies are in full force and effect. All such policies will
remain in full force and effect and will not terminate or lapse by reason of any
of the transactions contemplated hereby.
(b) The Company has provided Parent information concerning each claim
which in exceeds $20,000 and which has been made by the Company and any of the
Subsidiaries in the last two years under any workers' compensation, general
liability, property, directors' and officers' liability or other insurance
policy (except group medical insurance) applicable to the Company, the
Subsidiaries or any of their properties. Except as set forth in written
materials provided by the Company to Parent, to the knowledge of the Company,
there are no pending or threatened claims under any insurance policy, the
outcome of which would reasonably be expected to have a Material Adverse Effect
on the Company.
SECTION 4.22. PENDING TRANSACTIONS. Except for this Agreement and the
transactions contemplated hereby, neither the Company nor any of the
Subsidiaries is a party to or bound by any agreement, negotiation, discussion,
commitment or undertaking with respect to a merger or consolidation with, or an
acquisition of any material property and assets of, any other corporation or
person or the sale, lease or exchange of any material properties and assets to
any other person.
SECTION 4.23. CLAIMS AGAINST OFFICERS AND DIRECTORS. To the knowledge
of the Company, there are no pending or threatened claims against any director,
officer, employee or agent of the Company or any of the Subsidiaries or any
other person which could give rise to any claim from any director, officer,
employee or agent of the Company or any of the Subsidiaries for indemnification
from the Company or any of the Subsidiaries.
SECTION 4.24. KEY EMPLOYEES. Except as set forth on Schedule 4.24
hereto, all directors, officers, management employees, and technical and
professional employees of the Company and the Subsidiaries are under written
obligation to the Company and such Subsidiaries to maintain in confidence all
confidential or proprietary information acquired by them in the course of their
employment and to assign to the Company and such Subsidiaries all inventions
made by them within the scope of their employment during such employment and for
a reasonable period thereafter.
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SECTION 4.25. CUSTOMERS, SUPPLIERS, ETC. The Company has provided
Parent with information concerning (i) the largest customers of the Company and
the Subsidiaries (in terms of aggregate revenues to the Company and the
Subsidiaries during the fiscal year ended December 31, 1998) representing in the
aggregate 80% of the revenues received by the Company and the Subsidiaries in
respect of such fiscal year (such customers being referred to herein as the
"Major Customers") and (ii) the largest suppliers of the Company and the
Subsidiaries (in terms of aggregate charges to the Company and the Subsidiaries
during the fiscal year ended December 31, 1998) representing in the aggregate
80% of the charges to the Company and the Subsidiaries in respect of such fiscal
year (such suppliers being referred to herein as the "Major Suppliers"). Except
to the extent set forth in Schedule 4.25, since December 31, 1998, there has not
been any adverse change in the business relationship, there has been no material
dispute between the Company or any of the Subsidiaries and any Major Customer or
Major Supplier and the Company has received no notice that any Major Customer
intends to reduce its purchases from the Company or any of the Subsidiaries or
that any Major Supplier intends to reduce its sale of goods or services to the
Company or any of the Subsidiaries.
SECTION 4.26. ACCOUNTS RECEIVABLE AND ADVANCES. Except as disclosed on
Schedule 4.26 or in the Company Financial Statements, (i) each account
receivable of the Company and the Subsidiaries (collectively, the "Accounts
Receivable") represents a sale made in the ordinary course of business other
than to affiliates and which arose pursuant to an enforceable written contract
for a bona fide sale of goods or for services performed, and the Company and the
Subsidiaries have performed all of their respective obligations to produce the
goods or perform the services to which such Accounts Receivable relates, and
(ii) except to the extent reserved for in the Company Financial Statements, no
Accounts Receivable is subject to any claim for reduction, counterclaim,
set-off, recoupment or other claim for credit, allowances or adjustments by the
obligor thereof.
SECTION 4.27. IMPROPER AND OTHER PAYMENTS. Except as set forth on
Schedule 4.27, neither the Company nor any of the Subsidiaries, nor any
director, officer, employee, agent or representative of the Company or any of
the Subsidiaries, nor any person acting on behalf of any of them, has (i) made,
paid or received any bribes, kickbacks or other similar payments to or from any
person, whether lawful or unlawful, (ii) made any unlawful contributions,
directly or indirectly, to a domestic or foreign political party or candidate,
or (iii) made any improper foreign payment (as defined in the Foreign Corrupt
Practices Act).
SECTION 4.28. DEVELOPMENT AGREEMENTS. Schedule 4.28 sets forth a list
of all contracts, agreements or arrangements relating to the design, testing and
implementation of any software or firmware program, product or project
(hereinafter referred to as "Development Agreements") to which the Company or
any of its Subsidiaries is a party. Except as set forth on said Schedule 4.28,
the Company and the Subsidiaries have satisfied, or will satisfy, all
requirements, including but not limited to any minimum production and
development schedule, set forth in any Development Agreement and neither the
Company nor any of the Subsidiaries is in default (nor has any event occurred
which, with the giving of notice or passage of time would result in an
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event of default) under any Development Agreement. Except as set forth on said
Schedule 4.28, no amounts ("Penalties") are owed by the Company or any of its
Subsidiaries, and no such Penalties are reasonably anticipated by the Company or
any of its Subsidiaries to be owed, due to the failure of the Company or any of
its Subsidiaries to satisfy any requirements under any Development Agreement, by
the Company or any of its Subsidiaries to any third party with whom the Company
or any of its Subsidiaries has entered into a Development Agreement. Schedule
4.28 also sets forth a list of all Penalties which are owed, or are reasonably
anticipated by the Company or any of the Subsidiaries to be owed, by any of them
pursuant to any Development Agreement.
SECTION 4.29. ACCURACY OF STATEMENTS. Neither this Agreement nor any
schedule or exhibit hereto, nor the certificates required by Section 8.03(a) and
(b), contains or will contain any untrue statement of a material fact or omits
or will omit to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
SECTION 4.30. BROKERS. Except as set forth on Schedule 4.30, neither
the Company nor any of the Subsidiaries has used any broker or finder in
connection with the transactions contemplated hereby, and neither the Company
nor any of the Subsidiaries has or will have any liability or otherwise suffer
or incur any loss as a result of or in connection with any brokerage or finder's
fee or other commission of any person retained by the Company, any of the
Subsidiaries or the Stockholders in connection with any of the transactions
contemplated by this Agreement.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
OF PARENT
Parent represents and warrants to the Company and each of the
Stockholders as follows:
SECTION 5.01. ORGANIZATION AND QUALIFICATION.
(a) Parent is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own or lease and operate its properties and
assets and to carry on its business as it is now being conducted. Parent is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction in which the character of its properties owned or leased or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified would not have a material adverse effect on the
financial condition, operating results or business of Parent and its
subsidiaries taken as a whole (a "Parent Material Adverse Effect").
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(b) Except in each case as would not have a Parent Material Adverse
Effect, each subsidiary of Parent (i) is duly organized, validly existing and in
good standing under the laws of its jurisdiction of formation and has all
requisite power and authority to own or lease and operate its properties and
assets and to carry on its business as it is now being conducted and (ii) is
duly qualified to do business, and is in good standing, in each jurisdiction in
which the character of its properties owned or leased or the nature of its
activities makes such qualification necessary.
SECTION 5.02. AUTHORIZATION OF AGREEMENTS, ETC. Parent has all
requisite corporate power and authority to enter into this Agreement and each of
the Ancillary Agreements to which it is a party and to perform its obligations
hereunder and thereunder. The execution and delivery of this Agreement and each
of such Ancillary Agreements by Parent and the performance by Parent of its
obligations hereunder and thereunder, have been duly authorized by all requisite
corporate action and will not violate any provision of law, any order of any
court or other agency of government, the Certificate of Incorporation or Bylaws
of Parent, or any provision of any indenture, agreement or other instrument to
which Parent is a party or by which it or any of its properties or assets is
bound or affected, or conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under any such indenture,
agreement or other instrument, or result in the creation or imposition of any
Liens upon the properties or assets of Parent or any of its subsidiaries.
SECTION 5.03. VALIDITY. Each of this Agreement and each of the
Ancillary Agreements to which Parent is a party have been duly executed and
delivered by Parent and constitute the legal, valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms.
SECTION 5.04. CAPITALIZATION.
(a) The authorized capital stock of Parent is set forth on Schedule
5.04(a) hereto. As of September 30, 1999, 19,290,468 shares of Parent Common
Stock were issued and outstanding, all of which were duly and validly issued,
fully paid and nonassessable. Except as set forth in the Parent Filings, as of
September 30, 1999 there are no subscription, warrant, option, convertible
security, stock appreciation or other right (contingent or other) to purchase or
acquire, or any securities convertible into or exchangeable for, any shares of
any class of capital stock of Parent or any subsidiary thereof is authorized or
outstanding and as of September 30, 1999 there is not any commitment of Parent
or any such subsidiary to issue any shares, warrants, options or other such
rights or to distribute to holders of any class of its capital stock any
evidences of indebtedness or assets. Except as set forth in the Parent Filings,
as of September 30, 1999, neither Parent nor any of its subsidiaries has any
obligation (contingent or other) to purchase, redeem or otherwise acquire any
shares of its capital stock or any interest therein or to pay any dividend or to
make any other distribution in respect thereof. Since September 30, 1999 (i) no
shares of Parent Common Stock have been issued other than in connection with
employee option and stock plans, and (ii) no agreements to issue new shares
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(other than as provided in this Agreement and other than in connection with
employee option and stock arrangements) have been entered into.
(b) Parent has provided to the Company true, complete and correct
copies of Parent's Certificate of Incorporation and Bylaws, in each case, as in
effect on the date hereof.
(c) The shares of Parent Common Stock to be issued pursuant to this
Agreement have been duly authorized, and upon issuance to the Stockholders
entitled to receive such shares, will be validly issued and outstanding, fully
paid and nonassessable, and will be free of any Liens other than (i) those
created or suffered to exist by the shareholder to whom any such shares are
issued and (ii) restrictions on transfer imposed by this Agreement, the
Ancillary Agreements, the Securities Act of 1933, as amended (the "Securities
Act"), and any applicable state securities laws.
SECTION 5.05. GOVERNMENTAL APPROVALS. Except as set forth on Schedule
5.05, no order, authorization, approval or consent from, or filing with, any
federal or state governmen tal or public body or other authority having
jurisdiction over Parent is required for the execution, delivery and performance
by Parent of this Agreement or any of the Ancillary Agreements to which Parent
is a party, or is necessary in order to ensure, with respect to Parent, the
legality, validity, binding effect and enforceability of this Agreement.
SECTION 5.06. SEC FILINGS. Parent has provided to the Company true and
complete copies of (i) the Quarterly Reports of Parent on Form 10-Q for the
three months ended June 30, 1999 and September 30, 1999, (ii) its proxy and
information statements relating to meetings of, or actions taken without a
meeting by, the stockholders of Parent subsequent to June 23, 1999 and (iii) all
other reports, statements and registration statements filed by Parent with the
SEC subsequent to June 23, 1999 (collectively, the "Parent Filings"). The Parent
Filings (including, without limitation, any financial statements or schedules
included therein) (i) were prepared in compliance with the requirements of the
Securities Act or the Exchange Act of 1934, as amended, as the case may be, and
(ii) did not at the time of filing (or if amended, supplemented or superceded by
a filing prior to the date hereof, on the date of that filing) contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. Parent is
current in all filings required to be made by it with the SEC under applicable
law.
SECTION 5.07. FINANCIAL STATEMENTS. The consolidated financial
statements of Parent included in the Parent Filings have been prepared in
accordance with generally accepted accounting principles consistently applied
and consistent with prior periods, subject, in the case of unaudited interim
consolidated financial statements, to year-end adjustments (which consist of
normal recurring accruals) and the absence of certain footnote disclosures. The
consolidated balance sheets of Parent included in the Parent Filings fairly
present the financial position of Parent and its subsidiaries as of their
respective dates, and the related consolidated statements of operations,
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stockholders' equity and cash flows included in the Parent Filings fairly
present the results of operations of Parent and its Subsidiaries for the
respective periods then ended, subject, in the case of unaudited interim
financial statements, to year-end adjustments (which consist of normal recurring
accruals) and the absence of certain footnote disclosures. Except for
liabilities or obligations that are accrued or reserved against in Parent's
financial statements (or reflected in the notes thereto) included in the
Parent's Filings made prior to the date hereof or that were incurred subsequent
to September 30, 1999 in the ordinary course of business and consistent with
past practice, none of Parent and its subsidiaries has any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of a nature
required by generally accepted accounting principles to be reflected in a
consolidated balance sheet (or reflected in the notes thereto) or which would
have a Parent Material Adverse Effect. Parent has not suffered a Parent Material
Adverse Effect subsequent to September 30, 1999.
SECTION 5.08. LITIGATION. Except as described in the Parent Filings or
as would not, individually or in the aggregate, have a Parent Material Adverse
Effect, (i) there is no action, suit, dispute, investigation, proceeding or
claim pending or, to the best knowledge of Parent, threatened against or
affecting Parent or its properties or rights, before any court, administrative
agency, governmental body, arbitrator, mediator or other dispute resolution
body, and Parent is not aware of any facts or circumstances which may give rise
to any such action, suit, dispute, investigation, proceeding or claim, (ii)
Parent is not subject to any order, judgment, decree, injunction, stipulation,
or consent order of or with any court or other governmental agency, and (iii)
Parent has not entered into any agreement to settle or compromise any proceeding
pending or threatened against it which has involved any obligation other than
the payment of money or for which Parent has any continuing obligation.
SECTION 5.09. BROKERS. Except as set forth on Schedule 5.09, neither
Parent nor any of its subsidiaries has used any broker or finder in connection
with the transactions contemplated hereby, and neither the Parent nor any of its
subsidiaries has or shall have any liability or otherwise suffer or incur any
loss as a result of or in connection with any brokerage or finder's fee or other
commission of any person retained by the Parent, any of its subsidiaries or the
stockholders of Parent in connection with any of the transactions contemplated
by this Agreement.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES
OF ACQUISITION CORP.
Acquisition Corp. represents and warrants to the Company and each of
the Stockholders as follows:
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SECTION 6.01. ORGANIZATION AND QUALIFICATION. Acquisition Corp. is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of New Jersey and has not engaged in any business other than
in connection with its formation and the negotiation of this Agreement.
SECTION 6.02. AUTHORIZATION OF AGREEMENTS, ETC. Acquisition Corp. has
all requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
by Acquisition Corp. and the performance by Acquisition Corp. of its obligations
hereunder, have been duly authorized by all requisite corporate action and will
not violate any provision of law, any order of any court or other agency of
government, the Certificate of Incorporation or Bylaws of Acquisition Corp., or
any provision of any indenture, agreement or other instrument to which
Acquisition Corp. is a party or by which it or any of its properties or assets
is bound or affected, or conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any such indenture,
agreement or other instrument, or result in the creation or imposition of any
Liens upon the properties or assets of Acquisition Corp.
SECTION 6.03. VALIDITY. This Agreement has been duly executed and
delivered by Acquisition Corp. and constitutes the legal, valid and binding
obligation of Acquisition Corp., enforceable against Acquisition Corp. in
accordance with its terms.
SECTION 6.04. GOVERNMENTAL APPROVALS. Except as set forth on Schedule
6.04, no order, authorization, approval or consent from, or filing with, any
federal or state governmen tal or public body or other authority having
jurisdiction over Acquisition Corp. is required for the execution, delivery and
performance by Acquisition Corp. of this Agreement, or is necessary in order to
ensure, with respect to Acquisition Corp., the legality, validity, binding
effect and enforceability of this Agreement.
SECTION 6.05. LITIGATION. There is no action, suit, dispute,
investigation, proceeding or claim pending or, to the best knowledge of
Acquisition Corp., threatened against or affecting Acquisition Corp. or any of
its Subsidiaries, arising in connection with or seeking to enjoin any of the
transactions contemplated by this Agreement.
SECTION 6.06. BROKERS. Acquisition Corp. has not used any broker or
finder in connection with the transactions contemplated hereby, and Acquisition
Corp. has not or shall not have any liability or otherwise suffer or incur any
loss as a result of or in connection with any brokerage or finder's fee or other
commission of any person retained by Acquisition Corp. in connection with any of
the transactions contemplated by this Agreement.
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ARTICLE VII.
COVENANTS
SECTION 7.01. CONDUCT OF THE COMPANY'S BUSINESS. The Company covenants
and agrees that, prior to the Effective Time, unless Parent shall otherwise
consent in writing or as otherwise expressly contemplated by this Agreement:
(a) the business of the Company and the Subsidiaries shall be
conducted only in, and the Company and the Subsidiaries shall not take any
action except in, the ordinary course of business consistent with past practice
and each of the Company and the Subsidiaries shall use its best efforts to
preserve intact its present business organization, keep available the services
of its current officers and employees, maintain its assets (other than those
permitted to be disposed of hereunder) in good repair and condition, maintain
its books of account and records in the usual, regular and ordinary manner and
preserve its goodwill and ongoing business;
(b) the Company shall not directly or indirectly do any of the
following: (i) issue, sell, pledge, dispose of or encumber (or permit any of the
Subsidiaries to issue, sell, pledge, dispose of or encumber) (A) any capital
stock of the Company or any of the Subsidiaries, or (B) any property or assets
(including Intellectual Property) of the Company or any of the Subsidiaries,
except inventory and immaterial assets in the ordinary course of business
consistent with past practice; (ii) amend or propose to amend its Certificate of
Incorporation or Bylaws; (iii) split, combine or reclassify any outstanding
shares of its capital stock, or declare, set aside or pay any dividend payable
in cash, stock, property or otherwise with respect to such shares (except for
any dividends paid in the ordinary course to the Company or to any Subsidiary);
(iv) redeem, purchase, acquire or offer to acquire (or permit any of the
Subsidiaries to redeem, purchase, acquire or offer to acquire) any shares of its
capital stock; or (v) enter into any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this paragraph (b);
(c) neither the Company nor any of the Subsidiaries shall (i) issue,
sell, pledge or dispose of, or agree to issue, sell, pledge or dispose of, any
additional shares of, or securities convertible or exchangeable for, or any
options, warrants or rights of any kind to acquire any shares of, its capital
stock of any class or other property or assets; (ii) acquire (by merger,
consolidation or acquisition of stock or assets) any corporation, partnership or
other business organization or division thereof (except a Subsidiary) or any
material amount of assets; (iii) incur or guarantee any indebtedness for
borrowed money other than in the ordinary course of business and consistent with
past practices, or refinance any such indebtedness or issue or sell any debt
securities; (iv) enter into or modify any material contract, lease, agreement or
commitment, or permit or perform any act that would cause a material breach of
any such contract, lease, agreement or commitment; (v) terminate, modify,
assign, waive, release or relinquish any material contract rights or amend any
material rights or claims; (vi) discharge or satisfy any material claim or
settle or compromise any material claim, action, suit or proceeding pending or
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threatened against the Company or any of the Subsidiaries, or, if the Company or
any of the Subsidiaries may be liable or obligated to provide indemnification,
against the Company's directors or officers, before any court, governmental
agency or arbitrator; (vii) make any loans, advances (except for travel and
similar expenses to employees of the Company in the ordinary course of business)
or capital contributions to or investments in, any other person, except as may
be required under agreements in effect as of and identified on Schedule 4.20
hereto and upon prior notice to Parent; (viii) alter through merger,
liquidation, reorganization, restructuring or in any other manner the corporate
structure or ownership of any Subsidiary; (ix) violate or fail to perform any
obligation imposed upon the Company or any of the Subsidiaries by any applicable
laws, orders or decrees, ordinances, government rules or regulations or
conciliation agreements if such violation or failure would have a Material
Adverse Effect; or (x) to the extent not described herein, take any action
described in Section 4.07 hereof;
(d) neither the Company nor any of the Subsidiaries shall grant any
increase in the salary or other compensation of its directors, officers or
employees, except reasonable salary increases, in the case of employees who are
not directors or executive officers of the Company or any of the Subsidiaries,
in the ordinary course of business consistent with past practice, or grant any
bonus to any employee (except pursuant to plans disclosed herein) or enter into
any employment agreement or make any loan (except for expenses in the ordinary
course of business) to or enter into any material transaction of any other
nature with any employee of the Company or any Subsidiary;
(e) except as contemplated by Sections 7.06(b) and 7.07, neither the
Company nor any of the Subsidiaries shall take any action to institute any new
severance or termination pay practices with respect to any directors, officers
or employees of the Company or the Subsidiaries or to increase the benefits
payable under its severance or termination pay practices, PROVIDED, HOWEVER,
that the Company shall be permitted to transmit a letter describing certain
vesting benefits for four employees previously identified to Parent in a form
acceptable to Parent prior to the Effective Time;
(f) neither the Company nor any of the Subsidiaries shall adopt or
amend, in any material respect, any plan for the benefit or welfare of any
directors, officers or employees, except as contemplated hereby or as may be
required by applicable law or regulation;
(g) each of the Company and the Subsidiaries shall use its best
efforts, to the extent not prohibited by the foregoing provisions of this
Section 7.01, to maintain its relationships with its suppliers and customers,
clients, and others having business dealings with it.
SECTION 7.02. ACCESS TO INFORMATION.
(a) Each of Parent and the Company shall, and shall cause its
respective subsidiaries, officers, directors, employees, representatives,
advisors and agents to, afford, from the date hereof to the Effective Time, the
officers, employees, representatives, advisors and agents of the other party
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complete access at all reasonable times to its officers, employees, agents,
properties, books, records and workpapers, and shall furnish each other party
all financial, operating and other information and data as Parent or Company,
through its officers, employees or agents, may reasonably request and shall
promptly furnish to the other monthly operating and financial reports in such
form as Parent or the Company shall reasonably request. All such requests shall
be directed to Vivek Bansal or to another representative of the Company
designated by him.
(b) The Company, at least three business days prior to the Effective
Date, shall deliver to Parent a list setting forth the names and locations of
each bank or other financial institution at which the Company and the
Subsidiaries has an account (giving the account numbers) or safe deposit box and
the names of all persons authorized to draw thereon or have access thereto, and
the names of all persons, if any, now holding powers of attorney or comparable
delegation of authority from the Company and any of the Subsidiaries and a
summary statement thereof.
(c) If this Agreement is terminated prior to the Effective Time:
(i) each of the parties hereto shall, and shall cause its officers,
employees, representatives, advisors and agents to, deliver to the other
party, or if requested, destroy, all confidential documents, work papers
and other materials, and all copies thereof, obtained by it or on its
behalf from such other party as a result of this Agreement or in connection
herewith, whether so obtained before or after the execution and delivery
hereof; and
(ii) each of the parties hereto agree not to induce or attempt to
induce any employee of the other party to leave the employ of such party
(or any subsidiary or affiliate thereof), or to interfere with the
relationship between any of the parties and any employee thereof, in either
case for a period of three years after such termination.
(d) Each of the parties hereto and its officers and employees shall
not disclose or use any information so obtained, except as required by
applicable law or legal process without the prior written consent of the other
party; PROVIDED that any such information may be disclosed to a party's
financial advisors, accountants, counsel and other representatives, and lenders
and regulatory authorities whose approvals are required hereunder, as may be
appropriate or required in connection with the transactions contemplated hereby,
but only if such persons shall be specifically informed by such party of the
confidential nature of such information and agree to comply with the
restrictions contained herein, and to preserve the confidentiality of any such
information obtained. The agreements contained in this Section 7.02(d) do not
apply to informa tion that (i) is or becomes generally available to the public
other than as a result of a disclosure by a receiving party or its
representatives, (ii) was known to the receiving party on a confidential basis
prior to its receipt, (iii) becomes available to a party on a non-confidential
basis from a source not bound by any duty of confidentiality to the other party
or (iv) is independently developed by a receiving party without reference to any
confidential information.
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(e) No investigation pursuant to this Section 7.02 shall affect, add
to or subtract from any representations or warranties of the parties hereto or
the conditions to the obligations of the parties hereto to effect the Merger.
SECTION 7.03. FURTHER ASSURANCES. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its best efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement,
including, without limitation, using all reasonable efforts to obtain all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings; PROVIDED that the foregoing shall not require Parent
to agree to make, or to require the Company or any of the Subsidiaries to make,
any divestiture of a significant asset in order to obtain any waiver, consent or
approval or to incur any material liability or expense.
SECTION 7.04. INQUIRIES AND NEGOTIATIONS. Neither the Company nor any
of the Subsidiaries, nor any of their respective affiliates, directors,
officers, employees, representatives, advisors or agents, shall, directly or
indirectly, encourage, solicit or initiate any discussions, submissions of
proposals or offers or negotiations with, or, subject to the fiduciary
obligations of the Company's Board of Directors under applicable law as advised
by counsel, participate in any negotiations or discussions with, or provide any
information or data of any nature whatsoever to, or otherwise cooperate in any
other way with, or assist or participate in, facilitate or encourage any effort
or attempt by, any person, other than Parent and its affiliates, representatives
and agents, concerning any merger, consolidation, sale of substantial assets,
sale of shares of capital stock or other equity securities, recapitalization,
debt restructuring or similar transaction involving the Company or any
Subsidiary, or any division of the company or any of the Subsidiaries (such
transactions being hereinafter referred to as "Alternative Transactions"). The
Company shall immediately notify Parent if any proposal, offer, inquiry or
request from, or any discussions or negotiations are sought to be initiated or
continued with, the Company in respect of an Alterative Transaction, and shall,
in any such notice to Parent, indicate the identity of the offeror and the terms
and conditions of any proposals or offers or the nature of any inquiries or
contacts, and thereafter shall keep Parent informed of the status and terms of
any such proposals or offers and the status of any such discussions or
negotiations. The Company shall not release any third party from, or waive any
provision of, any confidentiality or standstill agreement under which the
Company is a beneficiary.
SECTION 7.05. NOTIFICATION OF CERTAIN MATTERS.
(a) The Company shall give prompt notice to Parent and Acquisition
Corp. of (i) the occurrence, or failure to occur, of any event that the Company
believes would be likely to cause any of its representations or warranties
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to the Effective Time and (ii) any material
failure of the Company or any officer, director, employee or agent thereof, to
comply with or satisfy any covenant, condition or agreement to be complied with
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or satisfied by it hereunder; provided, however, that failure to give such
notice shall not constitute a waiver of any defense that may be validly
asserted.
(b) Parent shall give prompt notice to the Company of (i) the
occurrence, or failure to occur, of any event that Parent believes would be
likely to cause any of its representa tions or warranties contained in this
Agreement to be untrue or inaccurate in any material respect at any time from
the date hereof to the Effective Time and (ii) any material failure of Parent or
any officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that failure to give such notice shall not
constitute a waiver of any defense that may be validly asserted.
SECTION 7.06. EMPLOYEE MATTERS.
(a) Parent agrees that, as of the Effective Time, it shall cause the
Surviving Corporation to continue to employ all of the employees of the Company
and the Subsidiaries who are Active Employees, it being understood that nothing
in this Agreement shall be deemed to create any employment status other than
employment at will. Employees who continue as employees of the Surviving
Corporation or any of the Subsidiaries shall be entitled to participate in all
employee benefit plans maintained by Parent or the Surviving Corporation for
employees of the Surviving Corporation generally, it being understood and
agreed, however, that nothing in this Section 7.06 shall require Parent (i) to
provide or continue for the benefit of any employees any Plan currently
maintained by the Company or any Subsidiary thereof, or (ii) to maintain the
organizational structure of the Business as in effect on the date hereof.
(b) Parent and Acquisition Corp. acknowledge that the Company intends
to pay employee bonuses at the Effective Time to employees who execute and
deliver the documen tation described in Section 7.06(c) in amounts not to exceed
(i) $60,000 for any single employee and (ii) $800,000 in the aggregate, and the
parties hereto acknowledge that the payment of such bonuses shall not constitute
a breach of any covenant or representation and warranty of the Company under
this Agreement. Parent acknowledges that such bonuses will be funded out of cash
made available to the Company by Parent no later than thirty days after the
Effective Time.
(c) Prior to the Effective Time the Stockholders and the Company
acknowl edges and agree that Parent shall have the right to conduct personal
interviews and meetings with each of the employees of the Company and the
Subsidiaries, and the Stockholders and the Company shall cooperate with Parent
in arranging for and conducting such interviews and meetings. The Company and
the Stockholders acknowledge that Parent will request each employee of the
Company and the Subsidiaries (other than any such employees excluded at the sole
discretion of Parent) to execute and deliver to Parent an offer letter,
noncompetition and confidentiality agreements and other documentation relating
to Parent's business and the protection of Parent's Intellectual Property.
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(d) Each Stockholder hereby waives, to the fullest extent permitted
under applicable law, any and all rights or claims they may have to claim
indemnification from the Company and/or the Surviving Corporation for any claim,
suit or action brought against such Stockholder arising from or related to any
action or failure to act on the part of such Stockholder in his capacity as an
officer and/or director of the Company prior to the Effective Time.
SECTION 7.07. ACQUISITION OPTION PLAN. At the Effective Time Parent
shall adopt and put into effect, for the benefit of employees of the Company
selected by Vivek Bansal and approved by Parent, an Acquisition Option Plan
having the terms and conditions set forth in Exhibit E hereto (the "Option
Plan"), which plan shall provide for the issuance of "non-qualified" stock
options exercisable for up to 284,444 shares of Parent Common Stock at the
exercise price set forth in the Option Plan. The parties hereto acknowledge and
agree that options will be granted to employees of the Company under the Option
Plan only if such employees execute and deliver to Parent the documentation
described in Section 7.06(c) above. Prior to the first anniversary of the
Effective Time, Parent will prepare and file with the Commission (as defined in
the Registration Rights Agreement) a registration statement on Form S-8 with
respect to the shares of Parent Common Stock issuable under the Option Plan and
will use its best efforts to cause such registration statement to become and
remain effective by the first anniversary of the Effective Time. If any option
granted under the Option Plan lapses or terminates prior to the issuance of all
of the shares of Parent Common Stock issuable upon exercise of such option, the
shares of Parent Common Stock not so issued may be made subject to a new option
granted under the Option Plan to such individual or individuals, and having such
exercise price and other terms, as Vivek Bansal (for so long as Mr. Bansal is an
employee of Parent) and Parent may mutually agree.
SECTION 7.08. ANCILLARY AGREEMENTS. Parent, the Company and each of
the Stockholders shall execute and deliver the Ancillary Agreements to which
each of them is a party at or immediately prior to the Effective Time.
SECTION 7.09. RELEASE OF CERTAIN PERSONAL GUARANTEES. Subject to the
consummation of the Merger, Parent shall use commercially reasonable efforts to
cause Vivek Bansal to be released from his personal guarantees of the
obligations of the Company described in Schedule 7.09 hereto, PROVIDED, HOWEVER,
that nothing herein shall require Parent to set aside or deposit with any party
any collateral to secure any such obligations. Subject to the consummation of
the Merger, Parent shall indemnify and hold Vivek Bansal harmless from any
amounts required to be paid by him on behalf of the Company pursuant to such
personal guarantees.
SECTION 7.10. ACTIONS AFFECTING IMMIGRATION STATUS. Parent shall
cooperate with the Company in connection with matters relating to the
immigration status of Company Employees and shall not take any action to combine
with another entity unless Parent takes reasonable action to address any
material adverse effect incurred by any of such Company Employees as a result of
the effect of such combination on the immigration status of such Company
Employees.
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SECTION 7.11. AGREEMENT TO COOPERATE. In the event that any provision
contained in any Development Agreement as in effect at the Effective Time
adversely affects Parent's access to any of the Intellectual Property of the
Company, then Parent and the Stockholders shall cooperate to minimize such
adverse effect, and the cost, fees and expenses incurred by Parent and the
Company in connection therewith shall be paid 60% by the Stockholders on a joint
and several basis and 40% by Parent. For purposes of this Section 7.11, payments
required to be made by the Company to any third party in the ordinary course
pursuant to the express terms of any Development Agreement shall not be deemed
to be costs, fees or expenses required to be paid in part by the Stockholders as
described in the preceding sentence.
ARTICLE VIII.
CONDITIONS TO THE MERGER
SECTION 8.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) the Company shall have completed its acquisition of Ficon India in
accordance with the terms of the Ficon India Purchase Agreements.
(b) no preliminary or permanent injunction or other order, decree or
ruling issued by any court of competent jurisdiction nor any statute, rule,
regulation or order entered, promulgated or enacted by any governmental,
regulatory or administrative agency or authority shall be in effect that would
prevent the consummation of the Merger as contemplated hereby.
SECTION 8.02. CONDITIONS TO THE OBLIGATION OF THE COMPANY TO EFFECT
THE MERGER. The obligation of the Company to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Parent and Acquisition Corp. contained in this Agreement shall be true and
correct at the Effective Time with the same force and effect as though such
representations and warranties had been made at and as of the Effective Time,
and Parent and Acquisition Corp. shall have certified to such effect to the
Company in writing.
(b) PERFORMANCE. Parent and Acquisition Corp. shall have performed and
complied with all agreements and conditions contained herein required to be
performed and complied with by it prior to or at the Effective Time, and Parent
and Acquisition Corp. shall have certified to such effect to the Company in
writing.
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(c) LEGAL ACTIONS OR PROCEEDINGS. No legal action or proceeding shall
have been instituted or threatened seeking to restrain, prohibit, invalidate or
otherwise affect the consummation of the transactions contemplated hereby.
(d) OPINION OF COUNSEL. The Company shall have received the opinion of
Reboul, MacMurray, Hewitt, Maynard & Kristol, special counsel to Parent, to the
effect set forth in Exhibit J hereto.
(e) ANCILLARY AGREEMENTS. Parent and Acquisition Corp. shall have
executed and delivered to the Company the Ancillary Agreements to which the
Parent and Acquisition Corp. are parties.
(f) CONSENTS AND REGULATORY APPROVALS. Parent shall have obtained all
written consents, permits, licenses, authorizations and approvals in forms
acceptable to the Company of any and all persons (including, without limitation,
(i) governmental agencies, authorities and third parties and (ii) the consents
set forth in Schedule 5.05 hereof) required to be obtained prior to the
consummation of the transactions contemplated hereby.
(g) NO MATERIAL ADVERSE EFFECT. Parent shall not have suffered after
the date of this Agreement any change which has had, or in the reasonable
opinion of the Company could reasonably be expected to have, individually or in
the aggregate, a Parent Material Adverse Effect.
(h) SUPPORTING DOCUMENTS. At or prior to the Effective Time, the
Company and its counsel shall have received copies of the following supporting
documents:
(i) copies of the Certificate of Incorporation of Parent, and all
amendments thereto, certified as of a recent date by the Secretary of State
of the State of Delaware, and a certificate of said Secretary dated as of a
recent date as to the due incorporation and good standing of Parent and
listing all documents of Parent on file with said Secretary;
(ii) copies of the Certificate of Incorporation of Acquisition Corp.,
and all amendments thereto, certified as of a recent date by the Secretary
of State of the State of New Jersey, and a certificate of said Secretary
dated as of a recent date as to the due incorporation and good standing of
Acquisition Corp. and listing all documents of Acquisition Corp. on file
with said Secretary;
(iii) a certificate of the Secretary or an Assistant Secretary of
Parent as of the Effective Time certifying (w) that attached thereto is a
true and complete copy of the Bylaws of Parent as in effect on the date of
such certification; (x) that attached thereto is a true and complete copy
of resolutions adopted by the Board of Directors of Parent authorizing the
execution, delivery and performance of this Agreement, and that all such
resolutions are still in full force and effect and are all the resolutions
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adopted in connection with the transactions contemplated by this Agreement;
(y) that the Articles of Incorporation of Parent have not been amended
since the date of the last amendment referred to in the certificate
delivered pursuant to clause (i) above; and (z) as to the incumbency and
specimen signature of each officer of Parent executing this Agreement and
any certificate or instrument furnished pursuant hereto, and a
certification by another officer of Parent as to the incumbency and
signature of the officer signing the certificate referred to in this
paragraph (iii); and
(iv) a certificate of the Secretary or an Assistant Secretary of each
of Acquisition Corp. as of the Effective Time certifying (w) that attached
thereto is a true and complete copy of the By-laws of Acquisition Corp. as
in effect on the date of such certification; (x) that attached thereto is a
true and complete copy of resolutions adopted by the Board of Directors of
Acquisition Corp. authorizing the execution, delivery and performance of
this Agreement, and that all such resolutions are still in full force and
effect and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement; (y) that the Certificate of
Incorporation of Acquisition Corp. have not been amended since the date of
the last amendment referred to in the certificate delivered pursuant to
clause (ii) above; and (z) as to the incumbency and specimen signature of
each officer of Acquisition Corp. executing this Agreement and any
certificate or instrument furnished pursuant hereto, and a certification by
another officer of Acquisition Corp. as to the incumbency and signature of
the officer signing the certificate referred to in this paragraph (iv); and
(iv) such additional supporting documents and other information with
respect to the operations and affairs of Parent and Acquisition Corp. as
the Company or its counsel may reasonably request.
All such documents shall be reasonably satisfactory in form and substance to the
Company and its counsel.
SECTION 8.03. CONDITIONS TO THE OBLIGATION OF PARENT AND ACQUISITION
CORP. TO EFFECT THE MERGER. The obligation of Parent and Acquisition Corp. to
effect the Merger shall be subject to the fulfillment at or prior to the
Effective Time of the following additional conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in this Agreement shall be true and correct at the
Effective Time with the same force and effect as though such representations and
warranties had been made at and as of the Effective Time, and the Company shall
have certified to such effect to Parent in writing.
(b) PERFORMANCE. The Company shall have performed and complied with
all agreements and conditions contained herein required to be performed and
complied with by it prior to or at the Effective Time, and the Company shall
have certified to such effect to Parent in writing.
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(c) LEGAL ACTIONS OR PROCEEDINGS. No legal action or proceeding shall
have been instituted or threatened seeking to restrain, prohibit, invalidate or
otherwise affect the consummation of the transactions contemplated hereby.
(d) OPINION OF COUNSEL. Parent shall have received the opinion of
Saiber Schlesinger Satz & Goldstein, LLC, counsel to the Company, to the effect
set forth in Exhibit K hereto.
(e) ANCILLARY AGREEMENTS; OTHER AGREEMENTS. The Company and each of
the Stockholders shall have executed and delivered to Parent the Ancillary
Agreements to which the Company and such Stockholders are parties. The Company
and Suresh Paul Bansal shall have executed and delivered to Parent the Agreement
granting the Company the right to purchase the Remaining Ficon India Shares in
the form approved by Parent as of the date of this Agreement. The Stockholders
shall have terminated the Stockholders' Agreement dated as of October 1, 1999
among the Company and them.
(f) CONSENTS AND REGULATORY APPROVALS. The Company shall have obtained
all written consents, permits, licenses, authorizations and approvals in forms
acceptable to Parent of any and all persons (including, without limitation, (i)
governmental agencies, authorities and third parties and (ii) the consents set
forth in Schedule 4.02 hereof) required to be obtained prior to the consummation
of the transactions contemplated hereby and required to be obtained in order
that Surviving Corporation may conduct the Business immediately following the
Effective Time.
(g) NO MATERIAL ADVERSE EFFECT. The Company shall not have suffered
after the date of this Agreement any change which has had, or in the reasonable
opinion of Parent could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
(h) SUPPORTING DOCUMENTS. At or prior to the Effective Time, Parent
and its counsel shall have received copies of the following supporting
documents:
(i) copies of the Certificate of Incorporation of the Company, and all
amendments thereto, certified as of a recent date by the Secretary of
State of the State of New Jersey, and a certificate of said Secretary dated
as of a recent date as to the due incorporation and good standing of the
Company and listing all documents of the Company on file with said
Secretary;
(ii) a certificate of the Secretary or an Assistant Secretary of the
Company as of the Effective Time certifying (w) that attached thereto is a
true and complete copy of the By-laws of the Company as in effect on the
date of such certification; (x) that attached thereto is a true and
complete copy of resolutions adopted by the Board of Directors of the
Company authorizing the execution, delivery and performance of this
Agreement, and that all such resolutions are still in full force and effect
and are all the resolutions adopted
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in connection with the transactions contemplated by this Agreement; (y)
that the Certificate of Incorporation of the Company has not been amended
since the date of the last amendment referred to in the certificate
delivered pursuant to clause (i)(x) above; and (z) as to the incumbency and
specimen signature of each officer of the Company executing this Agreement
and any certificate or instrument furnished pursuant hereto, and a
certification by another officer of the Company as to the incumbency and
signature of the officer signing the certificate referred to in this
paragraph (ii); and
(iii) such additional supporting documents and other information with
respect to the operations and affairs of the Company as Parent or its
counsel may reasonably request.
All such documents shall be reasonably satisfactory in form and substance to
Parent and its counsel.
ARTICLE IX.
TERMINATION AND ABANDONMENT
SECTION 9.01. TERMINATION AND ABANDONMENT. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time:
(a) by mutual action of the Boards of Directors of Parent and the
Company;
(b) by the Company, if any of the conditions set forth in Sections
8.01 and/or 8.02 shall not have been complied with or performed and such
noncompliance or nonperformance shall not have been cured or eliminated (or by
its nature cannot be cured or eliminated) by Parent and Acquisition Corp. on or
before January 25, 2000;
(c) by Parent or Acquisition Corp., if the conditions set forth in
Sections 8.01 and 8.03 shall not have been complied with or performed and such
noncompliance or nonperfor mance shall not have been cured or eliminated (or by
its nature cannot be cured or eliminated) by the Company on or before January
25, 2000; or
(d) by Parent or the Company (i) if there has been a material breach
of a representation or warranty made by the other party, the effect of which is
a Material Adverse Effect, and such breach (and the consequences thereof) have
not been cured within ten days after written notice of such breach has been
given to the breaching party, or (ii) if there has been a breach by the other
party in any material respect of the covenants set forth in this Agreement which
by its nature cannot be cured or eliminated.
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SECTION 9.02. EFFECT OF TERMINATION. In the event of the termination
of this Agreement and the abandonment of the Merger pursuant to Section 9.01,
this Agreement shall thereafter become void and have no effect, and no party
hereto shall have any liability to any other party hereto or its stockholders or
directors or officers in respect thereof, and each party shall be responsible
for its own expenses, except as follows: (i) the obligations imposed by Sections
7.02(d) and 11.01 hereof shall survive the termination and (ii) nothing herein
shall relieve any party from liability for any willful breach or improper
termination of this Agreement.
ARTICLE X.
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
SECTION 10.01. SURVIVAL OF REPRESENTATIONS. All representations and
warranties made by any party hereto in this Agreement or pursuant hereto shall
survive the Effective Time and shall terminate at the close of business on the
fourth anniversary of the Effective Time, except for the representations and
warranties of the Company and the Stockholders contained in Sections 4.01
through 4.06, 5.01 through 5.04, 5.07 and 6.01 through 6.03 (which shall survive
indefinitely), in Section 4.16 (which shall survive until the date that is 90
days after the expiration of any applicable statute of limitations, including
extensions thereof, for the Taxes referred to therein) and in Section 4.18
(which shall survive for the applicable statute of limitations, including any
extensions thereof).
SECTION 10.02. TAX INDEMNITY.
(a) The Stockholders, jointly and severally, shall indemnify, defend
and hold harmless Parent and its affiliates (including after the Effective Time,
the Company and the Subsidiaries) from and against:
(i) a breach of any representations or warranties relating to Taxes;
and
(ii) without duplication of amounts payable under Section 10.02(a)(i),
(x) any and all Taxes asserted against or incurred or sustained by Parent
or any such affiliate for any tax period (or portion thereof) ending on or
before the Effective Time and (y) all reasonable fees and expenses
(including all reasonable legal, accounting and other professional fees and
expenses) incurred by Parent or any such affiliate in connection therewith.
(b) For purposes of paragraph (a) above, any interest, penalty or
additional charge included in Taxes shall be deemed to be a Tax for the period
in which the item on which the interest, penalty or additional charge is based,
and not a Tax for the periods during which the item accrues.
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(c) The indemnity provided for in this Section 10.02 shall be
independent of any other indemnity provision in this Agreement and, anything in
this Agreement to the contrary notwithstanding, shall survive until the date
that is 90 days after the expiration of any applicable statute of limitations,
including extensions thereof, for the Taxes referred to herein.
SECTION 10.03. GENERAL INDEMNITY.
(a) Subject to the terms and conditions of this Article X, the
Stockholders, jointly and severally, shall indemnify, defend and hold the
Company and Parent harmless from and against all demands, claims, actions or
causes of action, assessments, losses, damages, liabilities, costs and expenses,
including, without limitation, interest, penalties and reasonable attorneys'
fees and expenses (collectively, "Damages"), asserted against, resulting to,
imposed upon or incurred by the Company, any of the Subsidiaries or Parent by
reason of or resulting from a breach of any representation, warranty, covenant
or agreement of the Stockholders contained in or made pursuant to this Agreement
or any of the Ancillary Agreements, or any facts or circumstances constituting
such a breach, except as to and to the extent that Section 10.02 above shall be
applicable thereto, in which case the provisions of said Section 10.02 shall
govern. Notwithstanding the foregoing sentence, each Stockholder shall be
severally and not jointly and severally liable to Parent and the Company for all
Damages asserted against, resulting to, imposed upon or incurred by the Company,
any of the Subsidiaries or Parent by reason of or resulting from a breach by
such Stockholder of any representation, warranty, covenant or agreement relating
exclusively to such Stockholder and contained in the Noncompete Agreement, the
Representation Agreement, the Escrow Agreement or, in the case of Vivek Bansal,
the Key Employment Agreement.
(b) Subject to the terms and conditions of this Article X, Parent
agrees to and shall indemnify, defend and hold the Stockholders harmless from
and against all Damages asserted against, resulting to, imposed upon or incurred
by them by reason of or resulting from or arising out of a breach of any
representation, warranty or covenant of Parent or Acquisition Corp. contained in
this Agreement.
SECTION 10.04. CONDITIONS OF INDEMNIFICATION. The respective
obligations and liabilities of the Stockholders under paragraph (a) of Section
10.03 to Parent and the Company, on the one hand, and of Parent to the
Stockholders under paragraph (b) of Section 10.03, on the other hand (herein
sometimes called the "indemnifying party"), to the other (herein sometimes
called the "party to be indemnified") under Section 10.03 hereof with respect to
claims resulting from the assertion of liability by third parties shall be
subject to the following terms and conditions:
(a) Within 20 days after receipt of notice of commencement of any
action or the assertion of any claim by a third party, the party to be
indemnified shall give the indemnifying party written notice thereof together
with a copy of such claim, process or other legal pleading (provided that
failure so to notify the indemnifying party of the assertion of a claim within
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such period shall not affect its indemnity obligation hereunder except as and to
the extent that such failure shall adversely affect the defense of such claim),
and the indemnifying party shall have the right to undertake the defense thereof
by representatives of its own choosing.
(b) In the event that the indemnifying party, by the 30th day after
receipt of notice of any such claim (or, if earlier, by the tenth day preceding
the day on which an answer or other pleading must be served in order to prevent
judgment by default in favor of the person asserting such claim), does not elect
to defend against such claim, the party to be indemnified will (upon further
notice to the indemnifying party) have the right to undertake the defense,
compromise or settlement of such claim on behalf of and for the account and
risk of the indemnifying party, subject to the right of the indemnifying party
to assume the defense of such claim at any time prior to settlement, compromise
or final determination thereof.
(c) Except with the prior written consent of the indemnified party, no
indemnifying party, in the defense of such claim or litigation, shall consent to
entry of any judgment or order, interim or otherwise, or enter into any
settlement that provides for injunctive or other nonmonetary relief affecting
the indemnified party or that does not include as an unconditional term thereof
the giving by each claimant or plaintiff to such indemnified party of a release
from all liability with respect to such claim or litigation. In the event that
the indemnified party shall in good faith determine that the indemnified party
may have available to it one or more defenses or counterclaims that are
inconsistent with one or more of those that may be available to the indemnifying
party in respect of such claim or any litigation relating thereto, the
indemnified party shall have the right at all times to take over and assume
control over the defense, settlement, negotiations or litigation relating to
such claim at the sole cost of the indemnifying party; PROVIDED, HOWEVER, that
if the indemnified party does so take over and assume control, the indemnified
party shall not settle such claim or litigation without the written consent of
the indemnifying party, such consent not to be unreasonably withheld.
(d) In connection with any such indemnification, the indemnified party
shall cooperate in all reasonable requests of the indemnifying party.
SECTION 10.05. LIMITATIONS ON INDEMNIFICATION AND REMEDIES.
(a) Notwithstanding anything in the foregoing provisions of this
Article X to the contrary:
(i) no Stockholder shall have any liability or obligation to indemnify
Company or Parent from any Damages incurred by them as a result of a breach
of any representation or warranty made by the Company or any Stockholder
unless and until the aggregate amount of all such Damages equals or exceeds
$50,000, at which point the Company and/or Parent shall be entitled to
collect from the Stockholders as provided above all such Damages in excess
of such $50,000 amount;
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(ii) each Stockholder's obligation to indemnify, defend and hold
harmless the Company and Parent under this Article X shall be limited in
the aggregate to an amount equal to the sum of such Stockholder's
Applicable Percentage multiplied by (i) the Cash Merger Consideration, (ii)
the Closing Stock Merger Consideration, (iii) the Escrow Stock Merger
Consideration and (iv) the Contingent Stock Merger Consideration; and
(iii) Parent's obligation to indemnify, defend and hold harmless the
Stockholders under this Article X shall be limited in the aggregate to an
amount equal to the sum of (i) the Cash Merger Consideration, (ii) the
Closing Stock Merger Consideration, (iii) the Escrow Stock Merger
Consideration and (iv) the Contingent Stock Merger Consideration.
(b) Each Stockholder's indemnification obligations with respect to any
claim hereunder shall be satisfied:
(i) prior to the Indemnity Release Date (as defined in the Escrow
Agreement), (x) to the extent possible, by the Escrow Agent releasing from
escrow for cancellation the number of Escrowed Closing Shares described in
Section 2.01(a)(i) of the Escrow Agreement or, at the election of such
Stockholder, by payment in cash from such Stockholder and (y) if no
Escrowed Closing Shares for such Stockholder remain in escrow, by payment
in cash from such Stockholder; and
(ii) from and after the Indemnity Release Date, by payment in cash
from such Stockholder.
SECTION 10.06. REMEDIES CUMULATIVE. The remedies provided herein shall
be cumulative and shall not preclude assertion by any party hereto of any other
rights or the seeking of any other remedies against the other parties hereto.
ARTICLE XI.
MISCELLANEOUS
SECTION 11.01. EXPENSES AND OTHER LIABILITIES.
(a) Whether or not the transactions contemplated by this Agreement are
consummated, neither the Company, on the one hand, nor Parent and Acquisition
Corp., on the other hand, shall have any obligation to pay any of the fees and
expenses of the other incident to the negotiation, preparation and execution of
this Agreement, including the fees and expenses of counsel, accountants,
investment bankers and other experts (collectively, the "Transaction Expenses"),
and Parent shall pay all such Transaction Expenses incurred by Acquisition Corp.
The Company, on the one hand, and Parent and Acquisition Corp., on the other
hand, shall indemnify the other and hold it harmless from and against any claims
for finders' fees or brokerage commissions in relation to or in connection with
51
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such transactions as a result of any agreement or understanding between such
indemnifying party and any third party.
(b) The Stockholders represent and warrant that the total of all
Transaction Expenses incurred and to be incurred by the Company and its
Subsidiaries (collectively, the "Company Transaction Expenses") shall not exceed
$250,000. If and to the extent that the Company Transaction Expenses exceed
$250,000, the amount of such excess (the "Excess Company Expenses") shall be
deducted from the Cash Merger Consideration as provided in Section 3.01(a)(i) of
this Agreement.
(c) The Stockholders represent and warrant that the total of all fees,
costs, purchase price payments and other charges payable by the Company in
connection with the acquisition of Ficon India, other than the cost of acquiring
the Remaining Ficon India Shares as described in Schedule 4.04(c) (such fees,
costs, payments and changes, other than the cost of acquiring the Remaining
Ficon India Shares, being referred to herein collectively as the "Ficon India
Expenses") shall not exceed $400,000. If and to the extent that the Ficon India
Expenses exceed $400,000, the amount of such excess (the "Excess Ficon India
Expenses") shall be deducted from the Cash Merger Consideration as provided in
Section 3.01(a)(i) of this Agreement; PROVIDED, HOWEVER, that if any additional
Ficon India Expenses are discovered after the Effective Time (the "Additional
Ficon India Expenses"), the Stockholders shall pay to Parent the full amount of
such Additional Ficon India Expenses in cash no later than ten days after
receiving notice from Parent specifying the amount of such Additional Ficon
India Expenses. Each Stockholder shall be responsible for paying a portion of
such Additional Ficon India Expenses equal to the product of (i) such
Stockholder's Applicable Percentage multiplied by (ii) such Additional Ficon
India Expenses.
SECTION 11.02. PUBLICITY, CONFIDENTIALITY. The Company and Parent
agree that this Agreement and the exchange of information pursuant thereto is
confidential and they will not disclose or issue any press release or make any
other public announcement concerning this Agreement or the transactions
contemplated hereby without the prior consent of the other party or as required
by law.
SECTION 11.03. EXECUTION IN COUNTERPARTS. For the convenience of the
parties, this Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
SECTION 11.04. NOTICES. All notices that are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if given in writing and delivered by hand or national
overnight courier service, transmitted by telecopy or mailed by registered or
certified mail, postage prepaid, and shall be deemed given upon receipt, as
follows:
52
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If to Parent to:
GlobeSpan, Inc.
100 Schulz Drive
Red Bank, New Jersey 07701
Telecopy Number: (732) 345-7556
Attention: President and Chief Executive Officer
with copies to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Telecopy Number: (212) 841-5725
Attention: William H. Hewitt, Esq.
If to the Company, to:
Ficon Technology, Inc.
1000 Route 9 North
Woodbridge, New Jersey 07095
Telecopy Number: (413) 383-5920
Attention: Mr. Vivek Bansal
with a copy to:
Saiber Schlesinger Satz & Goldstein, LLC
One Gateway Center
Newark, New Jersey 07102
Telecopy Number: (973) 622-3349
Attention: John L. Conover, Esq.
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto.
SECTION 11.05. WAIVERS. The Company, on the one hand, and Parent and
Acquisition Corp., on the other hand, may, by written notice to the other, (i)
extend the time for the performance of any of the obligations or other actions
of the other under this Agreement; (ii) waive any inaccuracies in the
representations or warranties of the other contained in this Agreement or in
any document delivered pursuant to this Agreement; (iii) waive compliance with
any of the conditions of the other contained in this Agreement; or (iv) waive
performance of any of the obligations of the other under this Agreement. Except
as provided in the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
53
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any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.
SECTION 11.06. AMENDMENTS, SUPPLEMENTS, ETC. At any time, this
Agreement may be amended or supplemented by such additional agreements, articles
or certificates, as may be determined by the parties hereto to be necessary,
desirable or expedient to further the purposes of this Agreement, or to clarify
the intention of the parties hereto, or to add to or modify the covenants, terms
or conditions hereof or to effect or facilitate any governmental approval or
acceptance of this Agreement or to effect or facilitate the filing or recording
of this Agreement or the consummation of any of the transactions contemplated
hereby. Any such instrument must be in writing and signed by all of the parties
hereto.
SECTION 11.07. ENTIRE AGREEMENT. This Agreement and its Schedules and
Exhibits, and the documents to be executed or delivered at the Effective Time in
connection herewith, constitute the entire agreement among the parties hereto
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral and written, among the parties hereto with respect to the
subject matter hereof. No representation, warranty, promise, inducement or
statement of intention has been made by any party that is not embodied in this
Agreement or such other documents, and none of the parties shall be bound by, or
be liable for, any alleged representation, warranty, promise, inducement or
statement of intention not embodied herein or therein. As used herein, the "best
knowledge" or "awareness" of the Company shall refer to the knowledge of each
director and executive officer of the Company and each of the Subsidiaries after
due inquiry.
SECTION 11.08. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY, WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES.
SECTION 11.09. BINDING EFFECT, BENEFITS. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and assigns. Except for the provisions of Sections 7.07 and 7.08
hereof and the provisions of Article X applicable to the Stockholders (who have
agreed to acknowledge their respective obligations under said Article by signing
the acknowledgment and agreement appearing at the foot of this Agreement),
nothing in this Agreement, expressed or implied, is intended to confer on any
person other than the parties hereto or their respective successors and assigns,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
SECTION 11.10. ASSIGNABILITY. Neither this Agreement nor any of the
parties' rights hereunder shall be assignable by any party hereto prior to the
Effective Time without the prior written consent of the other parties hereto.
After the Effective Time, no assignment shall operate to release the original
parties hereto.
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SECTION 11.11. SEVERABILITY. Any term or provision of this Agreement
that is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction.
SECTION 11.12. VARIATION AND AMENDMENT. This Agreement may be varied
or amended at any time before or after the approval and adoption of this
Agreement by the stockholders of Parent and the Company by action of the
respective Boards of Directors of the Company, Parent and Acquisition Corp.,
without action by the stockholders thereof, provided that after approval and
adoption of this Agreement by the Company's stockholders no such variance or
amendment shall, without consent of such stockholder(s), reduce the
consideration that the holders of the capital stock of the Company shall be
entitled to receive upon the Effective Time pursuant to Section 3.01 hereof or
amend the provisions of Article X.
55
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IN WITNESS WHEREOF, the parties have executed and delivered this Agree
ment as of the day and year first above written.
GLOBESPAN, INC.
By /s/Armando Geday
------------------------------
Name: Armando Geday
Title: Chief Executive Officer
FTI ACQUISITION CORP.
By /s/Armando Geday
Name: Armando Geday
Title: President
FICON TECHNOLOGY, INC.
By /s/Vivek Bansal
Name: Vivek Bansal
Title: President
56
Exhibit 2.2
Execution Copy
ASSET PURCHASE AGREEMENT
between
GLOBESPAN, INC.
and
PAIRGAIN TECHNOLOGIES, INC.
Dated as of January 21, 2000
<PAGE>
TABLE OF CONTENTS
Page
I. SALE AND TRANSFER OF ASSETS...............................................2
SECTION 1.01 Sale of Assets............................................2
SECTION 1.02 Nonassignability of Assets................................5
SECTION 1.03 License Option............................................6
II. CLOSING, PURCHASE PRICE, LIABILITIES, ETC.................................6
SECTION 2.01 Closing...................................................6
SECTION 2.02 Payment to the Seller on Closing Date.....................6
SECTION 2.03 Liabilities...............................................6
SECTION 2.04 Deliveries at the Closing.................................8
III. REPRESENTATIONS AND WARRANTIES............................................8
SECTION 3.01 Representations and Warranties of the Seller..............8
SECTION 3.02 Representations and Warranties of the Buyer..............24
IV. COVENANTS................................................................29
SECTION 4.01 Covenants of the Seller..................................29
SECTION 4.02 Covenants of the Buyer...................................31
SECTION 4.03 Notification of Certain Matters..........................31
SECTION 4.04 Confidentiality..........................................31
SECTION 4.05 Allocation of Purchase Price.............................32
SECTION 4.06 Transfer Taxes...........................................32
SECTION 4.07 Insurance................................................32
SECTION 4.08 Non-Competition..........................................32
SECTION 4.09 Group Employees..........................................34
SECTION 4.10 Further Assurances.......................................35
SECTION 4.11 Inquiries and Negotiations...............................35
SECTION 4.12 Transfer of Assets.......................................36
SECTION 4.13 Transition Services......................................36
SECTION 4.14 License of Embedded Trademarks...........................37
V. CONDITIONS PRECEDENT......................................................37
SECTION 5.01 Conditions Precedent to Obligations of the Buyer.........37
SECTION 5.02 Conditions Precedent to Obligations of the Seller........39
VI. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION.............................41
SECTION 6.01 Survival of Representations..............................41
SECTION 6.02 Tax Indemnity............................................42
SECTION 6.03 Seller's General Indemnity...............................42
SECTION 6.04 Intellectual Property Indemnification....................42
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SECTION 6.05 Indemnification Pursuant to Certain Agreements...........45
SECTION 6.06 Buyer's General Indemnity................................46
SECTION 6.07 Conditions of Indemnification............................46
SECTION 6.08 Limitations on Indemnity.................................47
SECTION 6.09 Remedies Cumulative......................................47
VII. TERMINATION AND ABANDONMENT.............................................48
SECTION 7.01 Termination of Agreement.................................48
SECTION 7.02 Effect of Termination....................................48
VIII. MISCELLANEOUS...........................................................48
SECTION 8.01 Definitions..............................................48
SECTION 8.02 Specific Performance.....................................53
SECTION 8.03 Service of Process.......................................53
SECTION 8.04 Bulk Transfer Laws.......................................53
SECTION 8.05 Expenses, Etc............................................54
SECTION 8.06 Execution in Counterparts................................54
SECTION 8.07 Notices..................................................54
SECTION 8.08 Waivers..................................................55
SECTION 8.09 Amendments, Supplements, Etc.............................55
SECTION 8.10 Entire Agreement.........................................55
SECTION 8.11 Dispute Resolution.......................................55
SECTION 8.12 Applicable Law...........................................57
SECTION 8.13 Binding Effect; Benefits.................................57
SECTION 8.14 Assignability............................................57
ii
<PAGE>
INDEX TO EXHIBITS AND ANNEXES
Exhibit Description
A Form of Note
B Form of Bill of Sale and Assignment Agreement
C Form of Assumption Agreement
D Form of License Agreement
E Summary of Terms of the Sublease
F Form of Supply Agreement
G Form of Registration Rights Agreement
H The Lewyn Agreement
Annex Description
I Form of Opinion of Counsel for the Seller
II Form of Opinion of Counsel for the Buyer
iii
<PAGE>
INDEX TO SCHEDULES
Schedule Description
1.01(a) Sale of Assets
1.01(e) Excluded Assets
3.01(a) Organization; Power; Capacity
3.01(c) Non-Contravention
3.01(g) Governmental Approvals
3.01(h) Title to Properties, Absence of Liens and Encumbrances
3.01(i) Contracts and Other Data
3.01(j) Customers
3.01(k) Intellectual Property
3.01(m) Litigation
3.01(n) Taxes
3.01(o) Labor Matters
3.01(p) Insurance
3.01(s) Employee Benefit Plans
3.01(t) Transactions with Affiliates
3.01(u) Environmental, Health and Safety Matters
3.01(w) Broker's or Finder's Fees
3.01(y) Year 2000 Compliance
3.01(aa) Absence of Undisclosed Liabilities
3.01(bb) Product Warranty
3.01(dd) Assets Necessary to Group Activity
3.01(gg) Development Agreements
3.02(a) Organization, Corporate Power, Etc.
3.02(d) Capitalization
3.02(i) Brokers
4.09 Group Employees
iv
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of January 21, 2000, among
GLOBESPAN, INC., a Delaware corporation (the "Buyer") and PAIRGAIN TECHNOLOGIES,
INC., a Delaware corporation (the "Seller"). Certain of the capitalized terms
used in this Agreement are defined in Section 8.01 hereof.
W I T N E S S E T H,
WHEREAS, the Seller is in the business of manufacturing transmission
and networking systems, including DSL transmission systems, for sale to local
telephone companies, competitive local exchange carriers (CLECS), business
enterprises, data networking services providers and other customers;
WHEREAS, the Seller, through its microelectronics engineering
development group (the "Group"), is engaged in the business of the design,
development, license and supply of intellectual property necessary for the
manufacture, have-manufacture and sale of integrated circuits and related
systems and software (the "Group Activity");
WHEREAS, the Seller, until now, has utilized the Group Activity with
the intent to develop components ahead of the general market availability and at
lower costs than available from commercial electronic components manufacturers
in order to provide a competitive advantage for the Seller's products;
WHEREAS, the Group Activity heretofore has been conducted as an
integrated part of the Seller and not on a stand-alone basis, and it is the
intention of the parties hereto to transfer to the Buyer the Group Activity by
the transfer to the Buyer all of the assets of the Seller used in or necessary
to the conduct by the Seller of the Group Activity, subject to certain specified
liabilities;
WHEREAS, the Seller desires to sell the Assets (as defined herein) to
the Buyer who can make better business use of the expertise and
intellectual property;
WHEREAS, the Seller desires to maintain the limited rights set forth
in the License Agreement (as defined herein) to conduct the activities described
therein;
WHEREAS, in connection with such purchase and sale, each of the Buyer
and the Seller desires to enter into certain mutually beneficial arrangements
relating to the operation of the Group Activity by the Buyer from and after the
Closing Date (as defined in Section 2.01 hereof); and
WHEREAS, the Seller desires to maintain licenses to utilize certain
intellectual property being sold to the Buyer with limited rights to modify such
property;
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereby agree as follows:
I. SALE AND TRANSFER OF ASSETS
SECTION 1.01 Sale of Assets. (a) On the terms and subject to the
conditions hereinafter set forth, on the Closing Date (as hereinafter defined),
the Seller shall sell, convey, transfer, assign and deliver to the Buyer (or one
or more subsidiaries of the Buyer (each a "Designated Subsidiary") as may be
designated by the Buyer prior to the Closing Date), and the Buyer (or such
Designated Subsidiaries as are identified by Buyer prior to the Closing Date)
shall purchase from the Seller, for the aggregate consideration set forth in
Article II hereof, all the assets and properties (of every kind, nature and
description, real, personal or mixed, tangible or intangible and wherever
situated, whether or not carried on the books of the Seller) of the Seller that
are used in, or necessary to the Seller's conduct of the Group Activity (it
being the intention hereby to assign and transfer all the assets owned or
claimed by the Seller and used in, or necessary to, the Seller's conduct of
Group Activity or used by, or in connection with, the activities of the Group
Activity, whether or not such assets are listed on the accounts of the Seller),
free and clear of all mortgages, liens, pledges, security interests, charges,
claims, restrictions and encumbrances of any nature whatsoever ("Liens"), other
than Permitted Liens, and except those assets excluded pursuant to paragraph (b)
below (said assets and properties so to be sold, conveyed, transferred, assigned
and delivered being hereinafter collectively called the "Assets"), including,
without limitation:
(i) all tangible personal property, inventories, machinery,
equipment, supplies, tools, fixtures, leaseholds, computer equipment,
applications circuits, products in development, work in process, spare
parts, supplies, vehicles, furniture and office furnishings, wherever
situated, used in or necessary to the Seller's conduct of the Group
Activity, including without limitation all items listed on Schedule
1.01(a)(i) hereto;
(ii) all leases, subleases and rights thereunder used in or
necessary to the Seller's conduct of the Group Activity, including, without
limitation, all items listed on Schedule 1.01(a)(ii);
(iii) all claims, deposits, prepayments, refunds, causes of
action, rights of recovery, rights of setoff and rights of recoupment
relating to, used in or necessary to the Seller's conduct of the Group
Activity, including, without limitation, all items listed on Schedule
1.01(a)(iii) hereto;
(iv) all franchises, approvals, permits, licenses, orders,
registrations, certificates, variances and similar rights obtained from
governments and governmental agencies, to the extent they relate primarily
to or are used in or necessary to the Seller's
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conduct of the Group Activity including, without limitation, all items
listed on Schedule 1.01(a)(iv) hereto;
(v) all intangible personal property of whatsoever kind or
character, whether evidenced in writing or not, used in or necessary to the
Seller's conduct of the Group Activity, including, but not limited to, all
customer lists, data bases, securities, claims, and causes of action
(whether fixed or contingent) including, without limitation, all items
listed on Schedule 1.01(a)(v) hereto;
(vi) all Group Intellectual Property, including, without
limitation, all items listed on Schedule 1.01(a)(vi) hereto;
(vii) any royalties paid to the Seller from and after September
29, 1999, pursuant to ADSL Agreement (including any such royalties as may
be paid to the Seller following the Closing Date, which royalties will be
promptly paid by the Seller to the Buyer upon receipt);
(viii) all technical documentation, materials and guidelines,
brochures, sales literature, promotional material and other selling
material primarily relating to or used in or necessary to the Seller's
conduct of the Group Activity including, without limitation, all items
listed on Schedule 1.01(a)(viii) hereto;
(ix) all papers, documents, instruments, books and records,
files, agreements, books of account and other records by which the Assets
might be identified or enforced, or otherwise pertaining to the Assets or
the Group Activity that are located at the offices or other locations used
in connection with the Assets or the Group Activity (including, without
limitation, customer invoices, customer lists, vendor and supplier lists,
drafts and other documents and materials relating to customer transactions)
including, without limitation, all items listed on Schedule 1.01(a)(ix)
hereto;
(x) the rights of the Seller under all contracts, agreements,
licenses, leases, sales orders, purchase orders and other commitments
(whether oral or written) primarily relating to, used in or necessary to
the Seller's conduct of the Group Activity including, without limitation,
all items listed on Schedule 1.01(a)(x) hereto;
(xi) all computer software programs, the source and object codes
for such software programs and all documentation and training manuals
related thereto, used in or necessary to the Seller's conduct of the Group
Activity including, without limitation, all items listed on Schedule
1.01(a)(xi) hereto; and
(xii) all other assets and rights of every kind and nature, real
or personal, tangible or intangible, that are owned or claimed by the
Seller, or any Affiliate of the Seller, and that are used by the Seller, or
any Affiliate of the Seller, in connection with, or necessary to the
3
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Seller's conduct of the Group Activity (including, without limitation, all
goodwill), whether or not such assets are reflected in the balance sheets
and other financial statements of the Seller, or any Affiliate of the
Seller.
Without limiting the generality of the foregoing, the Assets shall, except as
set forth in paragraph (b) below, include all assets as may be acquired by the
Seller in respect of the Group Activity after the date of this Agreement that
would be included on a balance sheet prepared in accordance with generally
accepted accounting principles as of the Closing Date for the Group Activity,
but shall exclude any such assets that may be or have been disposed of after
said date in the ordinary course of business on a basis consistent with past
practice.
(b) In the event that any of the Group Intellectual Property, or
any license or other agreement relating to any of the Group Intellectual
Property is updated or otherwise modified in the name of or for the benefit of
the Seller, the Seller shall promptly transfer, assign and deliver to the Buyer
(or such Designated Subsidiaries as may be designated by the Buyer), and the
Buyer or such Designated Subsidiary shall acquire from the Seller, without
additional consideration, all such updates or other modifications.
(c) In the event that the Buyer shall establish at any time or
from time to time during the twelve-month period following the Closing Date that
any of the Schedules describing the Assets as provided in Section 1.01(a) hereof
failed to include assets or properties of the Seller used by the Seller in, or
necessary to the Seller's conduct of, the Group Activity (other than the
Excluded Assets) then the Seller shall promptly sell, convey, transfer, assign
and deliver to the Buyer (or such Designated Subsidiaries as may be designated
by the Buyer), and the Buyer or such Designated Subsidiary shall acquire from
the Seller, without additional consideration, all such assets and properties
(herein referred to as the "Additional Assets").
(d) In the event that the Buyer shall establish at any time or
from time to time during the twelve-month period following the Closing Date that
no arrangements have been made either in this Agreement or in any of the
Ancillary Agreements to provide the Buyer with nonexclusive use of any assets or
properties of the Seller not transferred hereunder and (i) used by the Seller in
the Group Activity or (ii) necessary to the Seller's conduct of the Group
Activity (other than the Excluded Assets), then the Seller shall use its
reasonable best efforts to enter into an agreement with the Buyer providing for
such nonexclusive use on a cost basis consistent with the Seller's existing cost
allocations for such assets or properties, and on such other terms and
conditions as may be mutually satisfactory to the Buyer and the Seller.
(e) Notwithstanding anything to the contrary contained herein,
the following assets and properties (the "Excluded Assets") of the Seller are
specifically excluded from the Assets and shall be retained by the Seller:
(i) the minute books, stock records and related corporate records
of the Seller;
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(ii) any rights or benefits which arise under the terms and
provisions of the ADSL Agreement and which accrue to either the Group or
the Seller, including, but not limited to, the DMT ADSL Chip Set Technology
(such DMT ADSL Chip Set Technology to be assigned after March 6, 2000);
(iii) the cash surrender value of any life insurance policy for
the benefit of any Group Employee; and
(iv) the assets and properties identified on Schedule 1.01(e)(iv)
hereto.
SECTION 1.02 Nonassignability of Assets. To the extent that any
license, permit, agreement, lease, sales or purchase order, commitment or other
contract, property interest, qualification or asset described in this Agreement
as being sold, assigned, transferred or conveyed to the Buyer by the Seller
(collectively the "Commitments") or any claim, right or benefit arising
thereunder or resulting therefrom (collectively, together with the Commitments,
the "Interests"), is not capable of being sold, assigned, transferred or
conveyed without the approval, consent or waiver of the issuer thereof or the
other party thereto, or any third Person, including a government or governmental
or regulatory authority, or if such sale, assignment, transfer or conveyance or
attempted sale, assignment, transfer or conveyance would be invalid, or would
destroy, terminate or eliminate (or permit any other Person to destroy,
terminate or eliminate) the Interests related thereto, or would constitute a
breach of a Commitment or a violation of any law, rule or regulation then any
provision in this Agreement or any specific conveyance to the contrary
notwithstanding, this Agreement shall not constitute a sale, assignment,
transfer or conveyance thereof or an attempted sale, assignment, transfer or
conveyance thereof, but the Seller and the Buyer shall do such acts and things
as may be reasonably necessary to give the Buyer the full benefit in respect of
the Interests and the Seller the full benefit of the assumption of the Assumed
Liabilities with respect thereto, including using reasonable efforts in order
that any necessary third party shall execute such documents and do such acts and
things as may be reasonably required for such purpose (including any consent,
approval or amendment required to novate, reissue or assign the affected
Commitments); provided, however, that neither the Seller nor the Buyer shall be
obligated to pay any consideration therefor (except for filing fees and other
similar charges which shall be paid by the Seller) to, or commence litigation
against, the third party or Person from whom such consents, approvals or waivers
are requested. If the Buyer or the Seller is unable to obtain any such required
consent, approval or waiver, then until such required consent, approval or
waiver is obtained, and in the absence of any alternative arrangement
established by agreement between the Buyer and the Seller, the Seller shall
continue to be bound by such Commitments and the Buyer shall, as agent for the
Seller or as subcontractor, pay, perform and discharge fully all the obligations
of the Seller thereunder from and after the Closing Date and the Seller shall,
without further consideration, pay and remit to the Buyer (or its designee)
promptly all money, rights and other consideration received in respect of such
performance after payment of any taxes, costs or expenses due from the Seller
(or its Affiliates) with respect to such receipt. The Seller shall conduct
itself in the exercise of its rights under all such commitments only as
reasonably directed by the Buyer and at the Buyer's expense. If and when any
such approval, consent or waiver shall be obtained or such Commitment shall
5
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otherwise become assignable or able to be novated or such restriction shall have
been satisfied or waived or no longer apply, the assignment of the Assets and
the assumption of the Assumed Liabilities related to such approval, consent or
waiver or restriction on assignment and/or assumption shall become effective
automatically as of the Closing Date, without further action on the part of the
Seller, the Buyer or any other Person, and without payment of further
consideration.
SECTION 1.03 LICENSE OPTION. The Seller hereby grants to the Buyer the
option (each, an "Option" and collectively, the "Options") to require the Seller
to assign to the Buyer all of its right, title and interest in, to and under the
Cross License Agreement (the "Cross License") dated as of October 23, 1997,
between Amati Communications Corporation and the Seller and the Level One
Agreements (such agreements being referred to herein as the "Optioned
Agreements"), each such Option being exercisable by the Buyer at any time on or
after the Closing Date subject only to the provisions of such Optioned
Agreement. The Seller will be deemed to have made all the representations and
warranties set forth in Section 3.01 hereof with respect to the applicable
Optioned Agreement (and the Intellectual Property licensed under such Optioned
Agreement) as of the date the applicable Option is exercised by the Buyer and is
assigned to the Buyer pursuant to the provisions of such Optioned Agreement.
II. CLOSING, PURCHASE PRICE, LIABILITIES, ETC.
SECTION 2.01 Closing. Subject to the provisions of Article IV hereof,
the closing (the "Closing") of the transactions contemplated by this Agreement
shall take place at the offices of Reboul, MacMurray, Hewitt, Maynard & Kristol,
45 Rockefeller Plaza, New York, New York 10111, on the business day following
the day on which the last of the conditions set forth in Sections 5.01 and 5.02
(other than the conditions which by their terms are to be satisfied at the
Closing) shall have been fulfilled or waived, or at such other time and/or place
or on such other date as the parties may mutually agree (such date and time of
closing being herein called the "Closing Date").
SECTION 2.02 Payment to the Seller on Closing Date. On the Closing
Date, in full consideration for the sale, conveyance, transfer, assignment and
delivery to the Buyer of the Assets, the Buyer shall:
(a) deliver to the Seller 1,081,197 shares (the "Initial Shares")
of common stock, par value $0.001, of the Buyer (the "Common Stock"),
subject to appropriate adjustment for any stock split (including the form
of a stock dividend) or reverse stock split on or prior to the Closing
Date;
(b) deliver to the Seller a convertible subordinated note (the
"Note") in the principal amount of $90 million, substantially in the form
attached hereto as Exhibit A; and
(c) assume the liabilities of the Seller as and to the extent
provided in Section 2.03.
SECTION 2.03 Liabilities.
(a) Liabilities to be Assumed. On the Closing Date, and subject
to the terms and conditions of this Agreement (including Section 2.03(b) below),
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the Buyer will assume and agree to pay, perform and discharge when due, all
obligations accruing after the Closing Date under the agreements listed in
Schedule 3.01(i) unless such obligations are specified in Section 3.01(i) as not
being assumed by the Buyer (collectively the "Assumed Liabilities").
(b) Liabilities Not Assumed. The Buyer shall not assume, and
shall not be deemed to have assumed, any liabilities or obligations of the
Seller of any kind or nature whatsoever, except as expressly provided in the
Assumption Agreement (as defined hereafter) and in Section 2.03(a) above.
Without limiting the generality of the foregoing, it is hereby agreed that the
Buyer is not assuming any liability and shall not have any obligation for or
with respect to:
(i) any liabilities or obligations of the Seller or the Group
that arise under the terms of a contract, agreement, license, lease, sales
order, purchase order, or other commitment that shall not be assigned,
except as contemplated by Section 1.02 of this Agreement;
(ii) any liabilities or obligations of the Seller or the Group
that arise under the terms of the ADSL Agreement or the Excluded Agreements
set forth in item 4 of Schedule 1.01(e);
(iii) any liabilities or obligations of the Seller or the Group
under any Plan (as defined in Section 3.01(s)), including (x) any
obligation to adopt or to sponsor such Plan of the Seller except as the
Buyer may, in its sole discretion, elect to adopt or to sponsor and (y) any
deferred compensation benefits accrued as liabilities on the books of the
Seller;
(iv) any obligation of the Seller or the Group arising out of any
action, suit or proceeding based upon an event occurring or a claim arising
(A) prior to or as of the Closing Date or (B) after the Closing Date in the
case of claims in respect of products or services sold or provided by the
Seller or the Group or the conduct of the Group Activity prior to the
Closing Date and attributable to acts performed or omitted by the Seller or
the Group prior to the Closing Date; and
(v) any and all liabilities or obligations for Taxes incurred by
or imposed upon the Seller, or any predecessor company thereof, whether
relating to periods, before, including or after the Closing Date, and any
taxes arising from or with respect to the Assets or the operations of the
Group Activity that are incurred or relate to any period prior to (or up to
and including) the Closing Date, including, without limitation, any Taxes
incurred by or imposed upon the Seller or the Group and arising out of the
consummation of the transactions contemplated by this Agreement, as well as
sales and use Taxes arising out of the transactions contemplated by this
Agreement, whether such Taxes are imposed upon the Seller or the Buyer;
provided, however, that sales and use Taxes resulting from the purchase and
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sale of the Assets hereunder shall be paid as provided in Section 4.06
below.
(the liabilities described in the preceding clauses (i) through (v) being herein
collectively called the "Excluded Liabilities").
SECTION 2.04 Deliveries at the Closing. At the Closing, (i) the Seller
will deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 5.01, including, without limitation, the Ancillary
Agreements; (ii) the Buyer will deliver to the Seller the various certificates,
instruments and documents referred to in Section 5.02, including, without
limitation, the Ancillary Agreements; (iii) the Seller will execute, acknowledge
(if appropriate), and deliver to the Buyer (A) a bill of sale in the form of the
Bill of Sale and Assignment Agreement annexed hereto as Exhibit B (the "Bill of
Sale"), (B) appropriate assignments (including real property and Group
Intellectual Property transfer documents) and (C) such other instruments of
sale, transfer, conveyance, and assignment as the Buyer and its counsel
reasonably may request; (iv) the Buyer will execute, acknowledge (if
appropriate), and deliver to the Seller (A) an assumption in the form of the
Assumption Agreement attached hereto as Exhibit C (the "Assumption Agreement")
and (B) such other instruments of assumption as the Seller and its counsel
reasonably may request; and (v) the Buyer will deliver to the Seller the
consideration specified in Section 2.02.
III. REPRESENTATIONS AND WARRANTIES
SECTION 3.01 Representations and Warranties of the Seller. The Seller
represents and warrants to the Buyer as follows:
(a) Organization, Power; Capacity. (i) The Seller is a corporation
duly organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation and is duly licensed or qualified to do
business as a foreign entity in each jurisdiction in which it is required
to be so qualified with respect to the operations of the Group and as set
forth in Schedule 3.01(a)(i), except where the failure to so qualify would
not be likely to result in a Material Adverse Effect on the Group. The
Seller has all requisite corporate power and authority to own, operate and
lease the Assets, to carry on the Group Activity as it is now being
conducted and to execute and deliver this Agreement and each Ancillary
Agreement to which it is party and to perform its obligations hereunder and
thereunder. Schedule 3.01(a)(i) hereto sets forth a complete list of the
jurisdictions in which the Seller is qualified to do business with respect
to the operations of the Group. The Seller has heretofore made available to
the Buyer true, complete and correct copies of its Certificate of
Incorporation and by-laws as currently in effect.
(ii) The Group does not own and is not party to any joint venture
or other enterprise and is not party to any contract to provide funds to or
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make any investment (in the form of a loan, capital contribution or similar
payment) in any entity or enterprise that is not wholly owned by it.
(b) Authorization of Agreements. The execution and delivery by the
Seller of this Agreement and each Ancillary Agreement to which the Seller
is a party, and the consummation by the Seller of the transactions
contemplated hereby and thereby, have been duly authorized by all requisite
corporate action. This Agreement has been duly and validly executed by the
Seller and, subject to due execution by any other parties thereto, will
constitute the legal, valid and binding obligation of the Seller,
enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization and moratorium laws and other laws
of general application affecting the enforcement of creditors' rights
generally. Each Ancillary Agreement to which the Seller is party, when duly
executed and delivered in accordance with this Agreement, subject to due
execution by any other parties thereto, will constitute a legal, valid and
binding obligation of the Seller, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization and moratorium
laws and other laws of general application affecting the enforcement of
creditors' rights generally. No other corporate proceedings on the part of
the Seller are necessary to authorize this Agreement, the Ancillary
Agreements or the transactions contemplated hereby or thereby.
(c) Non-Contravention. The execution, delivery and performance of this
Agreement by the Seller and the consummation of the transactions
contemplated hereby will not (i) conflict with any provision of the
Certificate of Incorporation of the Seller (as in effect at the Closing) or
(ii), except as set forth on Schedule 3.01(c) result (with the giving of
notice or the lapse of time or both) in any violation of or default or loss
of a benefit under, or permit the acceleration of any obligation under, any
mortgage, indenture, lease, agreement or other instrument, permit,
concession, grant, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to the Seller, the Group, the
Group Activity or any of the Seller's properties, other than any such
violation, default, loss or acceleration that would not materially
adversely affect the ability of the Seller to consummate the transactions
contemplated hereby and which would not otherwise have a Material Adverse
Effect on the Seller, the Group or the Group Activity.
(d) Governmental Approvals. No consent, approval, order or
authorization of, or registration, declaration or filing with, any federal,
state, municipal or foreign governmental agency, public body, court,
tribunal or other authority (each a "Governmental Agency") having
jurisdiction over the Seller is required to be made or obtained by the
Seller in connection with the execution and delivery of this Agreement by
the Seller or the consummation by the Seller of the transactions
contemplated hereby, except for (i) compliance by the Seller with the
Hart-Scott Act, (ii) filings pursuant to Securities Act and the Exchange
Act and the rules and regulations promulgated by the SEC thereunder and
(iii) such consents, approvals, orders or authorizations which if not
obtained, or registrations, declarations or filings which if not made,
9
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would not materially adversely affect the ability of the Seller to
consummate the transactions contemplated hereby.
(e) [reserved]
(f) [reserved]
(g) Governmental Authorizations and Regulations. (i) Except as set
forth in Schedule 3.01(g)(i) hereto, the Seller has all governmental
licenses, franchises and permits ("Permits") required under applicable law
for the conduct of the Group Activity as currently conducted. Schedule
3.01(g)(i) hereto lists all material Permits held by the Seller required
under applicable law for the conduct of the Group Activity as currently
conducted.
(ii) The Group Activity is being conducted in compliance with all
Permits, except for such noncompliance as would not be likely to result in
a Material Adverse Effect on the Group. The Seller has not received any
notice of any alleged violation of any of the foregoing Permits.
(iii) Neither the Seller nor any of its properties, operations or
businesses relating to the Seller's conduct of the Group Activity is
subject to any court or administra tive order, judgment, injunction or
decree.
(iv) There is no restriction upon the ability or right of the
Seller to assign, convey and transfer any material Permit to the Buyer.
(h) Title to Properties, Absence of Liens and Encumbrances. Except as
set forth on Schedule 3.01(h), the Seller or the Group has good and
marketable title to or a valid leasehold interest in all of the Assets, in
each case free and clear of all Liens, other than (i) the liens described
on Schedule 3.01(h) hereto, (ii) liens for taxes not yet due, or (iii)
mechanic's, materialman's, landlord's and similar statutory liens arising
in the ordinary course of business and which, in the aggregate, would not
have a Material Adverse Effect on the Group or the Group Activity (the
Liens described in clauses (i), (ii) and (iii) above being referred to
herein as "Permitted Liens").
(i) Contracts and Other Data. Annexed hereto as Schedule 3.01(i), or
supplied separately, is a list setting forth the following with respect to
the Group Activity:
(i) a description of all leases of personal property used by the
Group in or otherwise necessary to the Seller's conduct of the Group
Activity as currently conducted, to which the Seller is a party,
either as lessee or lessor, including a description of the parties to
each such lease, the property to which each such lease relates, the
10
<PAGE>
rental term and the monthly (or other) rents payable under each such
lease;
(ii) all Group Intellectual Property and all licenses granted by
or to the Seller and all other agreements to which the Seller or the
Group is party that relate, in whole or in part, to any Group
Intellectual Property or to other proprietary rights used in or
necessary to the Seller's conduct of the Group Activity as currently
conducted, whether owned by the Seller, the Group or otherwise;
(iii) all collective bargaining agreements, employment and
consulting agreements (whether written or oral), independent
contractor agreements (whether written or oral), executive
compensation plans (whether written or oral), bonus plans, deferred
compensation agreements, employee pension plans or retirement plans,
employee profit sharing plans, employee stock purchase and stock
option plans, group life insurance, hospitalization insurance or other
similar plans or arrangements (whether written or oral) maintained for
or providing benefits to employees of, or independent contractors or
other agents of the Seller who are engaged exclusively in the
day-to-day operations and support of the Group Activity;
(iv) the names and titles of, and current annual base salary or
hourly rates for, each of the Group Employees, together with a
statement of the full amount and nature of any other remuneration,
whether in cash or kind, paid to each such person during the past or
current fiscal year or payable to each such person in the future, and
the bonuses accrued for, and the vacation and severance benefits, to
which each such person is entitled; and
(v) all contracts (whether written or oral), including, without
limitation, guarantees, mortgages, indentures and loan agreements
which relate to the Group Activity, to which the Group (or the Seller
on behalf of the Group) is party, or to which the Group (or the Seller
on behalf of the Group) or any of the assets or properties used in or
necessary to the Seller's conduct of the Group Activity is subject and
which are not specifically referred to in clauses (i), (ii), (iii) or
(iv) above, including, but not limited to, contracts which (A) contain
warranties by the Seller or the Group in excess of those customary in
the business of the Group, (B) extend for more than 12 months after
the Closing Date, (C) contain any non-compete or exclusivity provision
which in any way could restrict the ability of the Buyer to conduct
the Group Activity freely, in any manner and in any geographic
location or to solicit for hire any Person, (D) obligate third parties
to maintain confidentiality of information relating to the Group or
the Group Activity obligating the Group to maintain confidentiality
relating to a third party, (E) contain any provision limiting the
Group's or the Seller's rights under such contract upon a change of
control, (F) contain any restriction upon the assignability of the
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contract by the Group or the Seller or (G) have been, or are in the
process of being, negotiated by the Seller or the Group but are not
yet executed by all of the parties thereto.
True and complete copies of all documents and complete descriptions of
all material binding oral commitments (if any) referred to in Schedule
3.01(i) have been provided or made available to the Buyer and its counsel.
All material provisions of the contracts referred to in such Schedule are
valid and enforceable obligations of the Seller and of, to the best of the
Seller's knowledge, the other parties thereto. The Seller has not been
notified of any claim that any contract referred to in such Schedule is not
valid and enforceable in accordance with its terms for the periods stated
therein, or that there is under any such contract any existing default or
event of default or event which with notice or lapse of time or both would
constitute such a default. Schedule 3.01(i) also specifies which
obligations listed therein (except for obligations which arise only after
the Closing Date) are being assumed, and, if such obligations arise after
the Closing Date, which such obligations are not being assumed.
(j) Customers. Since January 1, 1999, neither the Group nor the Seller
on behalf of the Group, has sold goods or services to any third party
customer and neither Group nor the Seller on behalf of the Group maintains
any customer list.
(k) Intellectual Property.
(i) "Intellectual Property" of any Person shall mean any or all
of the following and all rights in, arising out of, or associated therewith
anywhere in the world held by such Person and not otherwise in the public
domain: (1) all United States, international and foreign patents and
applications therefor (including provisional applications) and all
reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (2) all inventions (whether patentable or
not), patterns, drawings, blueprints, specifications, products in
development, processes, applications, circuits, invention disclosures,
improvements, trade secrets, proprietary information, know how, mask works
(and all information contained in a mask but not yet fixed in a chip),
technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (3) all copyrights, copyright
registrations and applications therefor; (4) all industrial designs and any
registrations and applications therefor throughout the world; (5) all trade
names, logos, common law trademarks and service marks; trademark and
service mark registrations and applications therefor and all goodwill
associated therewith throughout the world; (6) all databases and data
collections and all rights therein throughout the world; (7) all software
including all source code, object code, firmware, development tools, files,
records and data, all media on which any of the foregoing is recorded; (8)
all permits, privileges or royalties; (9) any similar, corresponding or
equivalent rights to any of the foregoing and (10) all documentation
related to any of the foregoing.
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(ii) Schedule 3.01(k)(ii)(a) lists all Intellectual Property used
in or necessary to the conduct of the Group Activity (the "Group
Intellectual Property"). Schedule 3.01(k)(ii)(b) lists all Group
Intellectual Property (A) owned by, or filed in the name of, the Group or
(B) owned by, or filed in the name of the Seller and relating to, used by
the Group in or necessary to the Seller's conduct of the Group Activity
(the "Group Protectable Intellectual Property").
(iii) Except as set forth on Schedule 3.01(k)(iii), the Seller
(1) owns or shall own as of the Closing Date, and has or will have as of
the Closing Date good title to each item of Group Protectable Intellectual
Property, free and clear of any Liens, (2) has exclusive and assignable
license to use each item of the Group Intellectual Property (other than
Group Protectable Intellectual Property set forth in (1) above), free and
clear of any Liens, (3) is the exclusive owner of or has the assignable
permission of the owner to use all trademarks and trade names used in
connection with the operation or conduct of the Group Activity, including
the sale of any products or the provision of any services by the Group and
(4) owns exclusively, and has good title to, all copyrighted works that are
Group products or other works of authorship that the Group otherwise
purports to own.
(iv) To the extent that any work, invention or material has been
developed or created by a third party for the Group (or for the Seller for
use in the Group Activity), the Group has a written agreement with such
third party with respect thereto and the Group (or the Seller) thereby has
obtained ownership of, and is the exclusive owner of, all Intellectual
Property in such work, material or invention by operation of law or by
valid assignment.
(v) The Group has not transferred ownership or, or granted any
exclusive license with respect to, any Group Intellectual Property, to any
third party, except for the exclusive license granted to Conexant under the
ADSL Agreement (which exclusive license expires on March 7, 2000).
(vi) Except as set forth on Schedule 3.01(k)(vi), the operation
of the Group Activity as it currently is conducted, including to the extent
applicable the Group's design, development, manufacture, license and sale
of the products (including products currently under development) or
services of the Group Activity, does not (1) infringe or misappropriate the
Intellectual Property of any other person, (2) violate the rights of any
person (including rights to privacy or publicity), or (3) constitute unfair
competition or trade practices under the laws of any jurisdiction, and
neither the Seller nor the Group has received written or oral notice from
any person claiming that such operation or any act, product or service of
the Group Activity infringes or misappropriates the Intellectual Property
of any third party, violates the rights of any person or constitutes unfair
competition or trade practices under the laws of any jurisdiction.
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(vii) The Group (or the Seller, for use in the Group Activity)
owns or has the exclusive right to use all Intellectual Property used by
the Group in or necessary to the Seller's conduct of the Group Activity as
it is currently conducted, including, without limitation, in the design,
development, manufacture, license and sale of all products currently
manufactured (either directly or under contract) or sold by the Group or
under development by the Group, in the use and sale by Group customers
thereof, and in the performance of all services provided or contemplated to
be provided by the Group.
(viii) Each item of the Group Protectable Intellectual Property
is valid and subsisting, all necessary registration, maintenance and
renewal fees in connection with such Group Protectable Intellectual
Property have been paid and all necessary documents and certificates in
connection with such Group Protectable Intellectual Property have been
filed with the relevant patent, copyright, trademark or other authorities
in the Untied States or foreign jurisdictions, as the case may be, for the
purposes of maintaining such Group Protectable Intellectual Property,
except, in each case as would not be likely to result in a Material Adverse
Effect on the Group or the Buyer.
(ix) There are no contracts, licenses and agreements between the
Group or the Seller and any other person with respect to the Group
Intellectual Property under which there is any dispute known to the Group
or the Seller regarding the scope of such agreement, or performance under
such agreement including with respect to any payments to be made or
received by the Group thereunder.
(x) To the best of the Seller's knowledge, no Person is
infringing or misappropriating any of the Group Intellectual Property.
(xi) The Group and the Seller have taken all steps that are
reasonably required to protect the Group's rights in confidential
information and trade secrets of the Group or provided by any third party
to the Group. Without limiting the foregoing, the Seller and the Group
have, and enforce, a policy requiring each employee and contractor to
execute (A) proprietary information and confidentiality agreements in
connection with Group Intellectual Property and Group Protectable
Intellectual Property and (B) invention assignment agreements,
substantially in the Seller or the Group standard forms, and all current
employees and contractors of the Group have executed such agreements.
(xii) There are no proceedings or actions instituted by the Group
or the Seller or of which the Group or the Seller has received written
notice before any court, tribunal (including the United States Patent and
Trademark Office or equivalent authority anywhere in the world) related to
any Group Intellectual Property.
(xiii) No Intellectual Property or product or service of the
Group is subject to any proceeding or outstanding decree, order, judgment,
agreement or stipulation that restricts in any manner the use, transfer or
licensing thereof by the Group or may affect the validity, use or
enforceability of such Intellectual Property.
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(xiv) No (1) product, service or publication of the Group, (2)
material published or distributed by the Group or (3) conduct or statement
of, or attributable to, the Group, constitutes obscene material or a
defamatory statement or material.
(xv) The Seller owns, or shall own as of the Closing Date, and
has, or will have as of the Closing Date, good title to all of the Patent
Rights (as defined in the Lewyn Agreement) free and clear of any Liens.
(l) Software. The Seller holds valid licenses to all copies of all
operating and applications computer software programs and databases used by
the Group in or necessary to the Seller's conduct of the Group Activity and
such programs and databases are adequate for the conduct of the Group
Activity as currently conducted.
(m) Litigation. Except as set forth in Schedule 3.01(m) hereto, there
are no Claims at law or in equity, pending or, to the knowledge of the
Seller, threatened, against the Seller or by or before any Governmental
Agency relating to the Group or the Group Activity. Except as set forth in
Schedule 3.01(m) hereto, there are no orders, rulings, charges, judgments
or decrees of any court or Governmental Agency with respect to which the
Seller has been named or is a party that apply, in whole or in part, to the
Group or the Group Activity or any of the Assets or which would limit the
ability of the Seller to consummate the transactions contemplated hereby.
(n) Taxes. (i) The Seller has, as of the date hereof, and will have as
of the Closing Date, timely filed in proper form all federal, state, local
and foreign tax returns, reports, estimates, information statements and
other statements in respect of Taxes, including without limitation Taxes
incurred in connection with the operations of the Group Activity ("Tax
Returns") that are required to be filed as of the date hereof, or which are
required to be filed on or before the Closing Date, as the case may be, and
all such Tax Returns are or will be accurate and complete in all material
respects. There are no liens for Taxes upon any Asset and no event has
occurred which with the passage of time or the giving of notice, or both,
could be reasonably likely to result in a lien for Taxes on any Asset. In
addition, except as set forth on Schedule 3.01(n)(i), all Taxes due or
payable by the Seller on or before the date hereof or the Closing Date, as
the case may be, with respect to which the Seller or the Assets may be
liable or otherwise in any way subject have been or will be timely paid,
except to the extent any such Taxes (as set forth as of the date hereof on
Schedule 3.01(n)(i)) are being contested in good faith by appropriate
proceedings by the Seller and for which adequate reserves for any disputed
amounts shall have been established. Except as set forth on Schedule
3.01(n)(i), as of the date hereof, there has been no Tax examination,
audit, proceeding or investigation of the Seller by any relevant taxing
authority, and the Seller has not received from any governmental or
regulatory authority any oral or written notice of any proposed adjustment,
deficiency or underpayment of any Taxes pertaining to the Assets or the
Group Activity, which notice has not been satisfied by payment or been
withdrawn. Except as set forth on Schedule 3.01(n)(i), there are no pending
or, to Seller's knowledge, threatened actions, audits, examination,
15
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proceedings or investigations, by any relevant taxing authority with
respect to the Seller. The Seller does not have any outstanding request for
an extension of time within which to pay any Taxes, including without
limitation with respect to the Group Activity. The Seller has withheld and
paid in a timely manner to all relevant taxing authorities all payments for
withholding Taxes, unemployment insurance and other amounts required to be
withheld and paid. Each individual providing services to the Seller
(whether in his or her individual capacity or through any entity) in
connection with the Group Activity is properly classified by the Seller as
an employee or independent contractor, as the case may be, and Seller
respects such classification for all purposes, including without limitation
for purposes of withholding Taxes, unemployment insurance and entitlement
to participate in retirement plans.
(ii) Except as set forth in Schedule 3.01(n)(ii), the Seller has
not received a tax ruling (other than a determination with respect to a
Plan (as defined in Section 3.01(s)) or entered into a legally binding
agreement (such as a closing agreement) with a taxing authority.
(iii) None of the Assets is required to be treated as being owned
by any other person other than Seller pursuant to the "safe harbor" leasing
provisions of Section 168(f)(8) of the Code as in effect prior to the
repeal thereof.
(iv) For purposes of this Agreement, "Tax" (and with correlative
meaning, "Taxes") shall mean (a) any net income, gross income, gross
receipts, franchise, profits, gains, license, sales, use, ad valorem, value
added, property, payroll, withholding, excise, severance, transfer,
employment, social security, medicare, alternative or add-on minimum,
stamp, occupation, premium, environmental or windfall profits taxes,
customs duties or other taxes, governmental fees or other like assessments
or charges of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amount imposed by any governmental
authority responsible for the imposition of any such taxes (domestic or
foreign), (b) liability of the Seller for the payment of any amounts of the
type described in clause (a) as a result of Seller or any predecessor
thereof being a member of an affiliated, consolidated, combined or unitary
group, or being a party to any agreement or arrangement whereby liability
of the Seller for payments of such amounts was determined or taken into
account with reference to the liability of any other person for any period
(or portion thereof) ending on or prior to the Closing Date, and (c)
liability of the Seller with respect to the payment of any amounts
described in (a) as a result of any express or implied obligation to
indemnify any other person.
(o) Labor Matters. Except to the extent set forth in Schedule 3.01(o),
(i) the Group is in compliance with all applicable laws respecting
employment and employment practices, terms and conditions of employment,
occupational safety and health and wages and hours, except where the
failure to be in compliance would not, individually or in the aggregate,
have a Material Adverse Effect on the Group or Group Activity; (ii) there
is no unfair labor practice complaint or charge against the Group or the
Seller with respect to Group Employees which is pending or, to the
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knowledge of the Seller, threatened before the National Labor Relations
Board; (iii) there is no labor strike, dispute, slowdown or stoppage
pending or, to the knowledge of the Seller, threatened against or affecting
the Group and there has been no such job action during the past three
years; (iv) no representation question exists respecting the Group
Employees and, to the knowledge of the Seller; there are no current
organizing activities among the Group Employees; and (v) there is no
pending or, to the knowledge of the Seller, threatened litigation between
the Group, on the one hand, and current or former officers or employees, on
the other hand, including without limitation, any claims for wrongful
termination, breach of any express or implied contract of employment or for
violation of equal employment opportunity laws which would, individually or
in the aggregate, have a Material Adverse Effect on the Group or Group
Activity.
(p) Insurance. Schedule 3.01(p) identifies each insurance policy
(including policies providing property, casualty, liability and workers'
compensation coverage and bond and surety arrangements) with respect to
which the Group is a party or otherwise the beneficiary of the coverage or
which covers Seller's operation of the Group Activity.
With respect to each such insurance policy: (A) neither the Seller nor
the Group is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with
notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration under the policy; and (B)
no party to the policy has repudiated any provision thereof. Schedule
3.01(p) describes any self-insurance arrangements affecting the Group.
(q) Condition of Assets. All tangible personal property, fixtures,
machinery and equipment comprising the Assets (A) are free from material
defects, have been maintained in accordance with normal industry practice,
are in good operating condition and repair (ordinary wear and tear
excepted) and are suitable for the purposes for which they are being used
and (B) conform with all applicable ordinances, codes, regulations and
requirements, including, without limitation, all applicable ordinances,
codes, regulations and requirements relating to the environment,
occupational safety and food safety, and no law presently in effect or
condition precludes or materially restricts continuation of the present use
of such properties.
(r) Accounts Receivable. Neither the Group nor the Seller on behalf of
the Group has any accounts or notes receivable.
(s) Employee Benefit Plans. (i) Schedule 3.01(s)(i) hereto sets forth
a complete and accurate list of each plan, program, arrangement, agreement
or commitment that is an employment, consulting or deferred compensation
agreement, or an executive compensation, incentive bonus or other bonus,
employee pension, profit-sharing, savings, retirement, stock option, stock
purchase, severance pay, life, health, disability or accident insurance
plan, or vacation or other employee benefit plan, program, arrangement,
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agreement or commitment applicable to any Group Employee applicable to any
individual who is or was active in the Group Activity or in which any such
individual was a participant or otherwise had any interest whatsoever
("Plans"), including, without limitation, each employee benefit plan (as
defined under Section 3(3) of ERISA), maintained by the Seller or any of
its affiliates or any trade or business (whether or not incorporated)
which, together with such persons, would be treated as a single employer
under Title IV of ERISA or Section 414 of the Code (collectively, the
"ERISA Affiliates") or to which any ERISA Affiliate contributes or has any
obligation to contribute to, or has or may have any liability (including,
without limitation, a liability arising out of an indemnification,
guarantee, hold harmless or similar agreement). Each Plan is identified on
Schedule 3.01(s), to the extent applicable, as one or more of the
following: an "employee pension plan" (as defined in Section 3(2)(A) of
ERISA), an "employee welfare plan" (as defined in Section 3(l) of ERISA),
or as a plan intended to be qualified under Section 401 of the Code.
(ii) The Seller and each of its affiliates have complied, and
currently are in compliance, in all material respects with all laws and
regulations applicable to the Plans, including, without limitation, ERISA
and the Code.
(iii) Except as set forth on Schedule 3.01(s)(iii), no ERISA
Affiliate has maintained, adopted or established, contributed to or been
required to contribute to, or otherwise participated in or been required to
participate in, any employee benefit plan or other program or arrangement
subject to Title IV of ERISA (including, without limitation, a
"multi-employer plan" (as defined in Section 3(37) of ERISA) and a defined
benefit plan (as defined in Section 3(35) of ERISA)).
(iv) Except as set forth on Schedule 3.01(s)(iv) neither the
Seller nor any of its affiliates provides or may be required to provide,
and no Plan, other than a Plan that is an employee pension benefit plan
(within the meaning of Section 3(2)(A) of ERISA), provides or may be
required to provide benefits, including, without limitation, death, health
or medical benefits (whether or not insured), with respect to current or
former employees of the Group beyond their retirement or other termination
of service with the Group (other than (A) coverage mandated by applicable
law, (B) deferred compensation benefits accrued as liabilities on the books
of the Seller or the affiliates, or (C) benefits the full cost of which is
borne by the current or former employee (or his or her beneficiary)). No
ERISA Affiliate maintains any Plan under which any employee or former
employee of any of the ERISA Affiliates may receive medical benefits which
cannot be modified or terminated by the ERISA Affiliates at any time
without the consent of any person, and no employees or former employees of
the ERISA Affiliates will have any claim in respect of such benefits as of
the Closing Date.
(v) Except as set forth in Schedule 3.01(s)(v), the transactions
contemplated hereby will not result in (i) any portion of any amount paid
or payable by the Seller to a "disqualified individual" (within the meaning
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of Section 280G(c) of the Code and the regulations promulgated thereunder),
whether paid or payable in cash, securities of the Seller or otherwise and
whether considered alone or in conjunction with any other amount paid or
payable to such a "disqualified individual," being an "excess parachute
payment" within the meaning of Section 280G(b)(1) of the Code and the
regulations promulgated thereunder, (ii) any employee of the Group being
entitled to severance pay, unemployment compensation, or any other payment,
(iii) an acceleration of the time of payment or vesting, or an increase in
the amount of compensation due to any such employee or former employee or
(iv) any prohibited transaction described in Section 406 of ERISA or
Section 4975 of the Code for which an exemption is not available.
(vi) No ERISA Affiliate has incurred any material liability with
respect to any Plan under ERISA (including, without limitation, Title I or
Title IV thereof, other than liability for premiums due to the Pension
Benefit Guaranty Corporation), the Code or other applicable law, which has
not been satisfied in full or been accrued on the consolidated balance
sheet of the Seller and the affiliates as of December 31, 1998 pending full
satisfaction, and no event has occurred, and there exists no condition or
set of circumstances, which could result in the imposition of any liability
under ERISA, the Code or other applicable law with respect to any Plan.
(vii) With respect to each Plan that is funded wholly or
partially through an insurance policy, all premiums required to have been
paid to date under the insurance policy have been paid, and, except as set
forth on Schedule 3.01(s)(vii), as of the Closing Date there will be no
liability of any of the ERISA Affiliates under any such insurance policy or
ancillary agreement with respect to such insurance policy in the nature of
a retroactive rate adjustment, loss sharing arrangement or other actual or
contingent liability arising wholly or partially out of events occurring
prior to the Closing Date.
(viii) None of the ERISA Affiliates has made any contribution to
any Plan that may be subject to any excise tax under Section 4972 of the
Code.
(t) Transactions with Affiliates. Except for the items set forth on
Schedule 3.01(t) hereto, (i) there are no agreements between the Seller and
any of its Affiliates, on the one hand, and the Group, on the other hand,
for the provision of goods or services to or by the Group; (ii) neither the
Seller nor any of its Affiliates have been involved in any other material
business arrangement or relationship with, or pertaining to, the Group
within the past twelve months; (iii) there are no facilities occupied in
whole or in part by the Group, and no other property, assets, franchises,
licenses or rights used by the Group, that are owned, leased by or to, or
occupied by any Affiliate of the Seller; and (iv) no Affiliate of the
Seller owns any asset, tangible or intangible, which is used in the Group
Activity.
(u) Environmental, Health and Safety Matters. (i) Except as set forth
on Schedule 3.01(u) hereto:
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(A) No Hazardous Substances have been treated or stored, or have
been or have threatened to be, discharged, released or emitted into
the air, water, surface water, ground water, land surface or
subsurface strata or transported to or from any property occupied by
the Group, its predecessors or Affiliates or the operations of the
Group Activity except in accordance with all applicable Environmental,
Health and Safety Requirements and except for incidental releases of
Hazardous Substances in amounts or concentrations that would not be
expected to give rise to any claims or liabilities against the Group
(except where the failure to comply would not reasonably be likely to
have a Material Adverse Effect on the Group or the Group Activity)
under any Environmental, Health and Safety Requirements including, but
not limited to, any liability for response costs, corrective action
costs, personal injury, property damage, natural resources damages or
attorneys fees, pursuant to the Comprehensive Environmental Reasons,
Compensation and Liability Act of 1980, as amended ("CERCLA") or the
Solid Waste Disposal Act, as amended ("SWDA") or any other
Environmental Law.
(B) The Group, its predecessors, and Affiliates are in compliance
with all Environmental, Health and Safety Requirements and have all
permits required pursuant to any Environmental, Health and Safety
Requirements (except where the failure to comply would not reasonably
be likely to have a Material Adverse Effect on the Group or the Group
Activity). The Seller has not received any notification from a
governmental agency that there is any violation of any Environmental,
Health and Safety Requirements with respect to the Group Activity and
properties of the Group and has not received any notification from a
governmental agency pursuant to Section 104, 106 or 107 of the
Comprehensive Environmental Response Compensation and Liability Act,
as amended.
(C) To Seller's knowledge, none of the following exist at any
property or facility owned or operated by the Group or used in
connection with or by the Group Activity: (x) asbestos or
asbestos-containing material, (y) polychlorinated biphenyls, or (z)
landfills, surface impoundments, disposal areas or underground storage
tanks.
(ii) The Seller has provided the Buyer with copies of all
environmental assessment or audit reports and other similar studies or
analyses relating to any property occupied by the Group or the operations
of the Group Activity.
(iii) Neither this Agreement nor the consummation of the
transactions that are the subject of this Agreement will result in any
obligations for site investigation or cleanup, or notification to or
consent of Governmental Agencies or third parties, pursuant to any of the
so-called "transaction-triggered" or "responsible party transfer"
Environmental, Health and Safety Requirements.
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(v) Compliance With Law. The Group has complied with all applicable
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of all Governmental
Agencies (except where the failure to comply would not reasonably be likely
to have a Material Adverse Effect on the Group or the Group Activity), and
no Claim has been filed or commenced against it alleging any failure so to
comply.
(w) Broker's or Finder's Fees. Except as set forth on Schedule
3.01(w), all negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by the Seller directly with
Buyer, without the intervention of any persons on behalf of the Seller in
such a manner to give rise to any claim by any person against Buyer.
(x) Other Information. None of the information furnished by the Seller
to the Buyer in this Agreement, the exhibits hereto, the schedules
identified herein, or in any certificate or other document to be executed
or delivered pursuant hereto by the Seller at or prior to the Closing Date
taken as a whole, is, or on the Closing Date will be, false or misleading
or contains, or on the Closing Date will contain, any misstatement of fact,
or omits, or on the Closing Date will omit, to state any material fact
required to be stated in order to make the statements therein not
misleading in light of the circumstances under which they were made.
(y) Year 2000 Compliance. (i) There is no failure to be Year 2000
Compliant (as herein defined) of any computer software or hardware owned,
used, licensed or sold by the Group, or the Seller in connection with the
Group Activity, including, without limitation, computer hardware systems,
software applications, firmware, microchips, equipment containing embedded
microchips and other embedded systems that are used the Group, or the
Seller in connection with the Group Activity, or the software, hardware,
firmware and other technology which constitutes part of the products and
services manufactured, marketed or sold the Group, or the Seller in
connection with the Group Activity, licensed by the Group or the Seller to
third parties in connection with the Group Activity or used by Seller or
the Group in the conduct of Group Activity (the "Computer Systems") where
such failure would result in any material liability or expense to the
Seller or the Buyer following the Closing;
(ii) For purposes of this Agreement, "Year 2000 Compliant" means
that (1) neither performance nor functionality of the Computer Systems is
affected by dates prior to, during and after the year 2000; (2) no value
for any then-current date will cause any interruption in operation; (3)
date-based functionality must behave consistently for dates prior to,
during and after year 2000; and (4) in all interfaces and data storage, the
century in any date must be specified either explicitly or by unambiguous
algorithms or inferencing rules.
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<PAGE>
(iii) Except as set forth on Schedule 3.01(y)(iii), neither the
Seller nor the Group has provided any written guarantee or warranty for any
product sold or licensed, or service provided by the Group to the effect
that such product or service (x) complies with or accounts for the fact of
the arrival of the year 2000, (y) will not be adversely affected with
respect to functionality, interoperability, performance or volume capacity
(including, without limitation, the processing and reporting of data) by
virtue of the arrival of the year 2000 or (z) is otherwise Year 2000
Compliant.
(z) Private Placement. The Seller (i) acknowledges and understands
that neither the Shares nor the Note have been registered under the
Securities Act of 1933, as amended (the "Act"), or any state securities
laws, and are being offered and sold in reliance upon federal and state
exemptions for transactions not involving any public offering, (ii) is an
accredited investor, within the meaning of Rule 501 of Regulation D under
the Act, (iii) has received certain information concerning the Buyer and
has had the opportunity to obtain additional information as desired in
order to evaluate the merits and risks inherent in holding the Shares and
the Note and (iv) understands that it may not offer or sell the Shares or
the Note except pursuant to an effective registration statement under the
Act or pursuant to a valid exemption from the requirements of Section 5 of
the Act and applicable state securities laws.
(aa) Absence of Undisclosed Liabilities. Except as set forth in
Schedule 3.01(aa), the Group has no liability or obligation of any kind,
whether accrued, absolute, fixed or contingent that would be required to be
reflected on a balance sheet (or the notes thereto) prepared in accordance
with generally accepted accounting principles for the Group which would,
individually or in the aggregate, have a Material Adverse Effect on the
Group or the Group Activity.
(bb) Product Warranty. All of the products manufactured, sold, leased,
and delivered by the Group have conformed in all material respects with all
applicable contractual commitments, any express and implied warranties and
all written specifications, and the Group has no material liability
(whether known or unknown, whether asserted or unasserted, whether absolute
or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due) for replacement or repair
thereof or other damages in connection therewith. Except as set forth on
Schedule 3.01(bb), all of the products manufactured, sold, leased, or
delivered by the Group are subject to standard terms and conditions of sale
or lease. Schedule 3.01(bb) includes copies of the standard terms and
conditions of sale or lease for the Group (containing applicable guaranty,
warranty, and indemnity provisions).
(cc) Product Liability. The Group does not have any material liability
(whether known or unknown, whether asserted or unasserted, whether absolute
or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due) arising out of any injury
to individuals or property as a result of the ownership, possession, or use
22
<PAGE>
of any product heretofore manufactured, sold, leased, or delivered by the
Group.
(dd) Assets Necessary to Group Activity. (i) The Assets, together with
all rights to be conveyed under the Ancillary Agreements, constitute all
the property and assets, real, personal and mixed, tangible and intangible,
all the Intellectual Property and all leases, licenses and other
agreements, necessary to permit the Seller to conduct the Group Activity as
it currently conducts it. At the Closing, the Buyer will obtain all rights
to the Assets necessary to permit the Buyer to conduct the Group Activity
as it is currently conducted, in all material respects.
(ii) The Group Employees constitute all the employees who have
played a material role in the development of any of the Group Intellectual
Property and are currently employed by the Seller.
(iii) Except as set forth on Schedule 3.01(dd)(iii), every
contract or other agreement with any vendor, supplier or manufacturer of
any products or services supplied by the Group to a third party expressly
provides for a pass-through of such vendor's, supplier's or manufacturer's
warranties, indemnities and obligations from the Seller to the Buyer.
Except as set forth on Schedule 3.01(dd)(iii), the Seller has all such
pass-through rights as are necessary for it to fulfill all of its
obligations pursuant to Section VI hereof and for the Buyer to be defended,
and defend itself, against any Damages.
(iv) The description of the "Group Activity" as set forth in the
preamble of this Agreement is an accurate description, in all material
respects, of the activities conducted by the Group being conveyed hereby.
(ee) SEC Filings. The Seller has provided to the Buyer true and
complete copies of (i) the Annual Reports of the Seller on Form 10-K for
each of fiscal years ended December 31, 1996, 1997 and 1998, (ii) the
Quarterly Reports of the Seller on Form 10-Q for the months ended March 31,
1999, June 30, 1999 and September 30, 1999, (iii) its proxy or information
statements relating to meetings of, or actions taken without a meeting by,
the stockholders of the Seller subsequent to December 31, 1996, and (iv)
all other reports, statements and registration statements filed by the
Seller with the SEC subsequent to December 31, 1996 (collectively, the
"Seller Filings"). The Seller Filings (including, without limitation, any
financial statements or schedules included therein) (i) were prepared in
compliance with the requirements of the Securities Act or the Exchange Act,
as the case may be, and (ii) did not at the time of filing (or if amended,
supplemented or superseded by a filing prior to the date hereof, on the
date of that filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
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<PAGE>
(ff) Fairness Opinion. The Seller has received the opinion of
Broadview International LLC that, with regard to the consideration to be
paid to the Seller for the Assets being purchased (and the liabilities
being assumed) by the Buyer, the transactions contemplated in this
Agreement and the Ancillary Agreements are fair to the Seller from a
financial point of view as of the date of such opinion.
(gg) Development Agreements. Schedule 3.01(gg)(i) sets forth a list of
all development agreements to which the Seller is a party that relate to
the Group Activity (the "Development Agreements"). Except as set forth on
Schedule 3.01(gg)(ii), the Seller has satisfied, or will satisfy, all
material requirements, including but not limited to any minimum production
and development schedule, set forth in any Development Agreement and the
Seller is not in default (nor has any event occurred which, with the giving
of notice or passage of time would result in an event of default) under any
Development Agreement. Except as set forth on Schedule 3.01(gg)(iii), no
amounts ("Penalties") are owed by the Seller, and no such Penalties are
reasonably anticipated by the Seller to be owed, due to the failure of the
Group or the Seller to satisfy any requirements under any Development
Agreement, by the Seller to any third party with whom the Seller has
entered into a Development Agreement. Schedule 3.01(gg)(iii) also sets
forth a list of all Penalties which are owed, or are reasonably anticipated
by the Group or the Seller to be owed, by the Group or the Seller pursuant
to any Development Agreement.
SECTION 3.02 Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Seller as follows:
(a) Organization, Corporate Power, Etc. The Buyer is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is duly licensed or qualified to do
business as a foreign entity in each jurisdiction in which it is required
to be so qualified and as set forth in Schedule 3.02(a), except where the
failure to be so qualified would not be likely to result in a Material
Adverse Effect on the Buyer. The Buyer has all requisite corporate power
and authority to (i) own, operate and lease its properties, (ii) to execute
and deliver this Agreement and each Ancillary Agreement to which it is
party and to perform its obligations hereunder and thereunder, (iii) issue
and deliver the Initial Shares and (iv) issue and deliver the shares of
Common Stock issuable upon conversion of the Note (the "Conversion Shares",
and together with the Initial Shares, the "Shares"). Schedule 3.02(a)
hereto sets forth a complete list of the jurisdictions in which the Buyer
is qualified to do business.
(b) Authorization of Agreements. (i) The execution and delivery by the
Buyer of this Agreement and each Ancillary Agreement to which the Buyer is
a party, and the consummation by the Buyer of the transactions contemplated
hereby and thereby, have been duly authorized by all requisite corporate
action. This Agreement has been duly and validly executed by the Buyer and,
subject to due execution by any other parties thereto, will constitute the
legal, valid and binding obligation of the Buyer, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency,
24
<PAGE>
reorganization and moratorium laws and other laws of general application
affecting the enforcement of creditors' rights generally. Each Ancillary
Agreement to which the Buyer is party, when duly executed and delivered in
accordance with this Agreement, subject to due execution by any other
parties thereto, will constitute a legal, valid and binding obligation of
the Buyer, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization and moratorium laws and other laws
of general application affecting the enforcement of creditors' rights
generally. No other corporate proceedings on the part of the Buyer are
necessary to authorize this Agreement, the Ancillary Agreements or the
transactions contemplated hereby or thereby.
(ii) The Initial Shares have been duly authorized by the Buyer
and, when issued in accordance with this Agreement, will be validly issued
and outstanding and fully paid.
(iii) The Conversion Shares have been duly reserved for issuance
upon conversion of the Note, and upon such conversion will be validly
issued and outstanding, fully paid and non-assessable shares of Common
Stock.
(c) Non-Contravention. The execution and delivery of this Agreement
and the Ancillary Agreements by the Buyer and the consummation of the
transactions contemplated hereby will not (i) conflict with any provision
of the Certificate of Incorporation of the Buyer (as in effect at the
Closing) (ii) result (with the giving of notice or the lapse of time or
both) in any violation of or default or loss of a benefit under, or permit
the acceleration of any obligation under, any mortgage, indenture, lease,
agreement or other instrument, permit, concession, grant, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Buyer or any of its properties, other than any
such violation, default, loss or acceleration that would not materially
adversely affect the ability of the Buyer to consummate the transactions
contemplated hereby and which would not otherwise have a Material Adverse
Effect on the Buyer.
(d) Capitalization. The authorized capital stock of the Buyer consists
of 100,000,000. As of December 31, 1999, 19,595,241 were issued and
outstanding, all of which were duly and validly issued, fully paid and
nonassessable. Except as set forth on Schedule 3.02(d), and except for
options to purchase an aggregate 2,474,525 shares of Common Stock granted
pursuant to the stock option plans of the Buyer, as of the date hereof
there are no subscription, warrant, option, convertible security, stock
appreciation or other right (contingent or other) to purchase or acquire,
or any securities convertible into or exchangeable for, any shares of any
class of capital stock of the Buyer or any subsidiary thereof is authorized
or outstanding and as of the date hereof there is not any commitment of the
Buyer or any such subsidiary to issue any shares, warrants, options or
other such rights or to distribute to holders of any class of its capital
stock any evidences of indebtedness or assets. As of the date hereof,
neither the Buyer nor any of its subsidiaries has any obligation
(contingent or other) to purchase, redeem or otherwise acquire any shares
25
<PAGE>
of its capital stock or any interest therein or to pay any dividend or to
make any other distribution in respect thereof.
(e) Governmental Approvals. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Agency is required to be made or obtained by the Buyer in
connection with the execution and delivery of this Agreement by the Buyer
or the consummation by the Buyer of the transactions contemplated hereby,
except for (i) compliance by the Buyer with Hart-Scott, (ii) filings
pursuant to Securities Act and the Exchange Act and the rules and
regulations promulgated by the SEC thereunder and (iii) such consents,
approvals, orders or authorizations which if not obtained, or
registrations, declarations or filings which if not made, would not
materially adversely affect the ability of the Buyer to consummate the
transactions contemplated hereby.
(f) SEC Filings. The Buyer has provided to the Seller true and
complete copies of (i) the Quarterly Reports of the Buyer on Form 10-Q for
the three months ended June 30, 1999 and September 30, 1999 (ii) its proxy
or information statements relating to meetings of, or actions taken without
a meeting by, the stockholders of the Buyer subsequent to June 23, 1999,
and (iii) all other reports, statements and registration statements filed
by the Buyer with the SEC subsequent to June 23, 1999 (collectively, the
"Buyer Filings"). The Buyer Filings (including, without limitation, any
financial statements or schedules included therein) (i) were prepared in
compliance with the requirements of the Securities Act or the Exchange Act,
as the case may be, and (ii) did not at the time of filing (or if amended,
supplemented or superseded by a filing prior to the date hereof, on the
date of that filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(g) Financial Statements. The consolidated financial statements of the
Buyer included in the Buyer Filings have been prepared in accordance with
generally accepted accounting principles consistently applied and
consistent with prior periods, subject, in the case of unaudited interim
consolidated financial statements, to year-end adjustments (which consist
of normal recurring accruals) and the absence of certain footnote
disclosures. The consolidated balance sheets of the Buyer included in the
Buyer Filings fairly present the financial position of the Buyer and its
subsidiaries as of their respective dates, and the related consolidated
statements of operations, stockholders' equity and cash flows included in
the Buyer Filings fairly present the results of operations of the Buyer and
its subsidiaries for the respective periods then ended, subject, in the
case of unaudited interim financial statements, to year-end adjustments
(which consist of normal recurring accruals) and the absence of certain
footnote disclosures. Except for liabilities or obligations that are
accrued or reserved against in the Buyer's financial statements (or
reflected in the notes thereto) included in the Buyer's Filings made prior
to the date hereof or that were incurred subsequent to September 30, 1999
in the ordinary course of business and consistent with past practice, none
of the Buyer and its subsidiaries has any liabilities or obligations
26
<PAGE>
(whether absolute, accrued, contingent or otherwise) of a nature required
by generally accepted accounting principles to be reflected in a
consolidated balance sheet (or reflected in the notes thereto) or which
would have a Material Adverse Effect on the Buyer.
(h) Compliance with Laws. The Buyer has complied with all applicable
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of all Governmental
Agencies (except where the failure to comply would not have a Material
Adverse Effect on the Buyer), and no Claim has been filed or commenced
against it alleging any failure so to comply.
(i) Brokers. Except as set forth on Schedule 3.02(i), no person is
entitled to any brokerage or finder's fee or commission in connection with
the transactions contemplated by this Agreement as a result of any action
taken by or on behalf of the Buyer.
(j) Fairness Opinion. The Buyer has received the opinion of Thomas
Weisel Partners LLC that, with regard to the consideration to be paid to
the Seller for the Assets being purchased (and the liabilities being
assumed) by the Buyer, the transactions contemplated in this Agreement and
the Ancillary Agreements are fair to the Buyer from a financial point of
view as of the date of such opinion.
(k) Litigation. No action, suit or proceeding by or before any court
or Governmental Agency, involving the Buyer or its property is pending or,
to the best knowledge of the Buyer, threatened that (i) could reasonably be
expected to have a Material Adverse Effect on the performance by the Buyer
of its obligations under this Agreement or the consummation of any of the
transactions contemplated hereby or (ii) could reasonably be expected to
result in a Material Adverse Effect on the Buyer.
(l) Taxes. The Buyer has filed all necessary federal, state and
foreign income and franchise tax returns or has properly requested
extensions thereof and has paid all taxes required to be paid by it and, if
due and payable, any related or similar assessment, fine or penalty levied
against it. The Buyer has made adequate charges, accruals and reserves in
the applicable financial statements set forth in the Buyer Filings in
respect of all federal, state and foreign income and franchise taxes for
all periods as to which the tax liability of the Buyer has not been finally
determined. The Buyer is not aware of any tax deficiency that has been or
might be asserted or threatened against the Buyer that could result in a
Material Adverse Effect on the Buyer.
(m) Intellectual Property. The Buyer owns or possesses adequate rights
to use all Intellectual Property which is necessary to conduct its business
as described in the Buyer Filings; the expiration of any patents, patent
rights, trade secrets, trademarks, service marks, trade names or copyrights
will not result in a Material Adverse Effect on the Buyer that is not
otherwise disclosed in the Buyer Filings; the Buyer has not received
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any notice of, and has no knowledge of, any infringement of or conflict
with asserted rights of the Buyer by others with respect to any of the
Buyer's Intellectual Property which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, might have a
Material Adverse Effect on the Buyer; and the Buyer has not received any
notice of, and has no knowledge of, any infringement of or conflict with
asserted rights of others with respect to any of the Buyer's Intellectual
Property which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, might have a Material Adverse
Effect on the Buyer. There is no claim being made against the Buyer
regarding the Buyer's Intellectual Property which, if the subject of an
unfavorable decision, ruling or finding, might have a Material Adverse
Effect on the Buyer. The Buyer does not in the conduct of its business as
now or proposed to be conducted as described in the Buyer Filings infringe
or conflict with any right or patent of any third party, or any discovery,
invention product or process which is the subject of a patent application
filed by any third party, known to the Buyer, which such infringement or
conflict is reasonably likely to result in a Material Adverse Effect on the
Buyer.
(n) Environmental Matters. (i) The Buyer is in compliance with all
rules, laws and regulations relating to the use, treatment, storage and
disposal of toxic substances and protection of health or the environment
which are applicable to its business, except where the failure to comply
would not result in a Material Adverse Effect, (ii) the Buyer has received
no notice from any Governmental Agency or third party of an asserted claim
under any Environmental, Health and Safety Requirement which claim is
required to be disclosed in the Buyer Filings, (iii) the Buyer will not be
required to make future material capital expenditures to comply with any
Environmental, Health and Safety Requirement and (iv) no property which is
owned, leased or occupied by the Buyer has been designated as Superfund
site pursuant to the Comprehensive Response, Compensation, and Liability
Act of 1980, as amended (42 U.S.C. Section 9601, et seq.), or otherwise
designated as a contaminated site under applicable state or local law.
(o) Offering of the Securities. Neither the Buyer nor any person
acting on its behalf has taken or will take any action (including, without
limitation, any offer, issuance or sale of any securities of the Buyer
under circumstances which might require the integration of such securities
with the Shares or the Note under the Securities Act of 1933, as amended
(the "Securities Act") or the rules and regulations of the Securities and
Exchange Commission thereunder) which might subject the offering, issuance
or sale of the Shares or the Note to the registration provisions of the
Securities Act.
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IV. COVENANTS
SECTION 4.01 Covenants of the Seller.
(a) The Seller agrees that, at all times between the date hereof and
the Closing Date, unless the Buyer and the Seller shall otherwise agree in
writing, the Seller shall and shall cause the Group to:
(i) operate the Group Activity only in the ordinary course, in
accordance with past practices and, to the extent consistent with such
operations, the Seller will use best efforts to preserve (x) the existing
business organization of the Group Activity, (y) relationships with all
employees and (z) the Seller's present relationships with all lessors,
customers, suppliers and licensors of, and all other persons having
business dealings with, the Group Activity;
(ii) maintain all the Assets in good repair, order and condition
(reasonable wear and tear excepted);
(iii) not take any action or refrain from taking any action that
would affect (1) Seller's ownership of or right, exclusive or
non-exclusive, to use any Group Intellectual Property, (2) any registration
or application pending with respect to such Group Intellectual Property, or
(3) in any material respect, the value or utility of such Group
Intellectual Property to the Group Activity as currently conducted.
(iv) maintain the Group's records in the usual, regular and
ordinary manner, on a basis consistent with past practice, and use its best
efforts to comply with all laws applicable to it and to the conduct of the
Group Activity and perform all its material obligations without default;
(v) not change the character of the Group Activity in any manner;
(vi) not, with respect to the Group Activity (A) incur any
obligation or liability (fixed or contingent), or incur any indebtedness
for money borrowed which is to be repaid by the Group, except normal trade
or business obligations incurred in the ordinary course and consistent
with past practice and except in connection with this Agreement and the
transactions contemplated hereby; (B) mortgage, pledge or subject to any
lien, security interest or encumbrance any of the Assets (other than
mechanic's, materialman's and similar statutory liens arising in the
ordinary course and purchase money security interest arising in the
ordinary course between the date of delivery and payment); (C) transfer,
sell, lease or otherwise dispose of any of the Assets (except for Excluded
Assets) except for a fair consideration in the ordinary course and
consistent with past practice or, except in the ordinary course and
consistent with past practice, acquire any assets or properties; (D) cancel
or compromise any debt or claim individually or in the aggregate in excess
of $50,000, except in the ordinary course and consistent with past
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practice; (E) waive or release any rights of material value or surrender,
cause to be revoked or otherwise terminate any material license, permit or
other approval, authorization or consent from any court, administrative
agency or other governmental authority relating to the conduct of the Group
Activity; (F) transfer or grant any rights under any concessions, leases,
licenses, agreements, patents, inventions, trademarks, trade names,
servicemarks, or copyrights or with respect to any Group Intellectual
Property or permit any license, permit or other form of authorization
relating to any such Intellectual Property to lapse having a value
individually or in the aggregate in excess of $50,000; (G) suffer any
casualty loss or damage which materially or adversely affects the ability
of the Seller to conduct the Group Activity; (H) make or grant any wage,
salary or benefit increase or bonus payment to any Group Employee
individually or in the aggregate in excess of $50,000, enter into or
materially amend the terms of any employment contract with, or make any
loan to, or grant any severance benefits to, or modify any severance
arrangements applicable to, or enter into or amend the terms of any
material transaction of any other nature with, any officer or employee
engaged in the operations of the Group Activity, other than in the ordinary
course of business and consistent with past practice; (I) enter into or
amend any contract agreement, lease or license involving the performance of
services or the provision of goods (in either case as a vendor or vendee)
which in accordance with its terms will not be completed for a period in
excess of one year after the date of such contract, binds the Group in any
way other than in the ordinary course and/or involves payments in excess of
$50,000; (J) enter into any other material transaction, contract or
commitment, except in the ordinary course and consistent with past
practice; or (K) except in the ordinary course and consistent with past
practice, amend or modify in any material respect adverse to the interests
of the Group Activity any contract listed on Schedule 3.01(i) hereto.
(vii) conduct the Group Activity in all material respects in
compliance with all applicable laws and regulations.
(b) Between the date hereof and the Closing Date, the Seller will
afford the representatives of the Buyer reasonable access during normal business
hours to the offices, facilities, books and records of the Seller related to the
Group Activity and the opportunity to discuss the affairs of the Group with
officers and employees of the Seller familiar therewith.
(c) (i) Between the date hereof and the Closing Date, the Seller
shall, with the Buyer's assistance and cooperation, but, except as set forth in
clause (c)(ii), at the expense of the Seller, promptly apply for or otherwise
seek and use the Seller's reasonable efforts to obtain all authorizations,
consents, waivers and approvals as may be required in connection with (1) the
assignment of the contracts, agreements, licenses, leases, sales orders,
purchase orders and other commitments of which the Seller is the beneficiary to
be assigned to the Buyer pursuant to Section 5.01(f) hereof and (2) the
Commitments and Interests described in Section 1.02 hereto.
(ii) All filing fees related to the efforts to obtain approval
under the Hart-Scott Act shall be borne equally by Buyer and Seller.
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(d) Between the date hereof and the Closing Date, the Seller will not
enter into any transaction or make any agreement or commitment, or permit any
event to occur, which would result in any of the representations or warranties
of the Seller contained in this Agreement not being true and correct at and as
of the time immediately after the occurrence of such transaction or event or
omit to take any action necessary to prevent any such representation or warranty
from being untrue or incorrect at any such time.
(e) Between the date hereof and the Closing Date, the Seller shall use
its best efforts to assist the Buyer in its efforts to enter into employment
agreements with all Group Employees and to ensure that all Group Employees
remain as employees of the Seller at least through the Closing Date, including
without limitation, honoring the terms of the employee retention programs
previously disclosed to the Buyer.
SECTION 4.02 Covenants of the Buyer.
(a) The Seller shall furnish Buyer such information as Buyer or its
counsel shall reasonably request with respect to the preparation of the Form S-1
and the public offering of the Shares (including, without limitation, all
financial statements and other information required by the Act and the rules and
regulations thereunder) and the Seller shall take any other action Buyer may
reasonably request in connection with the preparation and filing of the Form S-1
(including, without limitation, causing the Seller's independent public
accountants to prepare and deliver all consents, reports, opinions or other
information or instruments that may be required by the Act and the rules and
regulations thereunder or otherwise necessary).
(b) Between the date hereof and the Closing Date, the Buyer will not
enter into any transaction or make any agreement or commitment, or permit any
event to occur, which would result in any of the representations or warranties
of the Buyer contained in this Agreement not being true and correct at and as of
the time immediately after the occurrence of such transaction or event or omit
to take any action necessary to prevent any such representation or warranty from
being untrue or incorrect at any such time.
SECTION 4.03 Notification of Certain Matters. The Seller shall give
prompt notice to Buyer, and Buyer shall give prompt notice to the Seller of (i)
the occurrence, or failure to occur, of any event that such party believes would
be likely to cause any of its representations or warranties contained in this
Agreement to be untrue or inaccurate at any time from the date hereof to the
Closing Date and (ii) any material failure of the Seller or Buyer, as the case
may be, or any officer, director, employee, representative or agent thereof, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that failure to give such
notice shall not constitute a waiver of any defense that may be validly
asserted.
SECTION 4.04 Confidentiality. The contents of this Agreement shall be
kept confidential between the parties, except that each party may reveal and
discuss the contents with its respective professional advisors, including
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attorneys and accountants. In addition, the parties may mutually agree in
writing as to the revealing of the subject transaction with current employees
and to the public. In so doing, the parties shall agree to the timing and
content of the release of such information. In furtherance of the foregoing, the
parties hereto agree to incorporate herein by reference that certain
confidentiality agreement, dated October 1, 1999 (the "Confidentiality
Agreement"), between the Buyer and the Seller and further agree that,
notwithstanding anything herein to the contrary, the terms and provisions of the
Confidentiality Agreement shall remain in full force and effect.
SECTION 4.05 Allocation of Purchase Price. The Purchase Price (and any
liabilities assumed by the Buyer from the Seller) shall be allocated among the
Assets in the manner determined by Buyer in its reasonable discretion as soon as
practicable after the Closing Date, subject to the approval of the Seller, which
approval will not be unreasonably withheld. The parties shall adhere to such
allocation for all Tax purposes and shall file all Tax Returns and other
documents with all taxing authorities on a basis consistent therewith. In
particular, Buyer and the Seller shall (i) file a Form 8594 Asset Acquisition
Statement of Allocation consistent with such allocation, (ii) provide a copy of
such form to the other, and (iii) file a copy of such form with its federal
income tax return for the period that includes the Closing Date.
SECTION 4.06 Transfer Taxes. All transfer, sales and use taxes imposed
upon or incurred by any of the parties hereto in connection with this Agreement
and the transactions contemplated hereby shall be borne equally by the Seller
and the Buyer. The Seller and the Buyer shall jointly prepare and file, at the
expense of Seller, all necessary Tax Returns and other documents with respect to
all such transfer, sales and use taxes. If required by applicable law, any other
party hereto shall join in the execution and filing of any such Tax Returns or
other documents. The Seller and the Buyer agree to cooperate in any endeavor to
effect a reduction in any such transfer, sales and use taxes.
SECTION 4.07 Insurance. Between the date of this Agreement and the
Closing Date, the Buyer shall use reasonable efforts to obtain policies of fire,
liability, workers' compensation and other forms of insurance in such amounts
and against such risks as the Buyer deems appropriate. The Seller shall
cooperate with the Buyer in obtaining such insurance and, in the event that the
Buyer is unable by the Closing Date to obtain such insurance, the Seller shall,
at the Buyer's written request, maintain their insurance policies in full force
and effect for the benefit of Buyer for a period after the Closing Date not to
exceed 60 days. The Buyer shall reimburse the Seller within 30 days in respect
of any premiums paid in keeping the Seller's insurance policies in full force
and effect after the Closing Date.
SECTION 4.08 Non-Competition. (a) (i) For a period of four years after
the Closing, neither the Seller nor any of its Affiliates that are business
entities shall, directly or indirectly, engage or invest in, own, manage,
operate, finance, control or participate in the ownership, management,
operation, financing or control of, or be associated in any manner connected
with, lend the Seller's credit to, or render services to, any business or
activity that is engaged, in whole or in part, in the design, development,
license and supply of intellectual property necessary for the manufacture,
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have-manufacture and sale of integrated circuits and related systems and
software that is currently engaged in by the Group or the sale of integrated
circuits and related systems and software that utilizes such intellectual
property (the "Competing Activity") except that the Seller may engage in the
Permitted Activities and the Permitted Framer Activities to the extent and on
the terms set forth in the License Agreement. Neither the Seller nor any of its
Affiliates that are business entities will, without the prior written consent of
the Buyer, own an interest in, manage, operate, join, control or be connected
with, as an officer, employee, partner, stockholder, consultant or otherwise,
any Person that is engaged in the Competing Activity. For the purposes of this
Section 4.08, the term "Affiliate" shall not include companies of which members
of the board of directors on the date hereof are also members of the board of
directors of the Seller on the date hereof. (ii) Nothing herein shall prohibit
the Seller from being acquired (in whole or in part) by merger or otherwise, by
another business entity that is engaged in the Competing Activity; provided that
the acquiring company shall not utilize the DSL Technology for any purpose
whatsoever.
(b) As a separate and independent covenant, the Seller agrees with the
Buyer that, for a period of four years following the Closing, the Seller shall
not, without the Buyer's consent, which consent may be given or withheld by the
Buyer in its sole discretion, (i) employ, or otherwise engage as an employee,
consultant, advisor, independent contractor, or otherwise, any Group Employees
or solicit, cause or encourage, directly or indirectly, any Group Employees to
leave the employ of the Group or the Buyer or to violate the terms of their
contracts, or any employment arrangements, or cause or encourage any Person
(including the Seller itself) to enter into any employment, consulting, advisory
or other similar arrangement with any of the Group Employees and (ii) neither
the Seller, its Affiliates, nor any of their employees, contractors, agents or
other representatives, will induce, directly or indirectly, any Group Employee
to take any action which in any way, directly or indirectly, interferes with,
causes harm or damage to, or in any way disadvantages the Buyer, the Group
Activity or the Group.
(c) The Seller acknowledges that this Section 4.08 constitutes an
independent covenant and shall not be affected by performance or nonperformance
of any other provision of this Agreement by Buyer. The Seller has independently
consulted with its counsel and agrees after such consultation that the covenants
set forth in this Section 4.08 are reasonable and proper.
(d) The parties agree that a remedy at law for any breach of any
obligation contained in this Section 4.08 will be inadequate and that in
addition to any other rights and remedies to which Buyer shall be entitled
hereunder, at law or in equity, the Buyer shall be entitled to injunctive relief
and reimbursement for all reasonably attorneys' fees and other expenses incurred
in connection with the enforcement hereof.
(e) Notwithstanding the provisions of Section 8.14, the Buyer's rights
under this Section 4.08 may, without the Seller's consent, be assigned by the
Buyer to any third party in connection with any sale (by merger or otherwise) of
all or substantially all of the Assets to any such third party.
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SECTION 4.09 Group Employees.
(a) Schedule 4.09(a) sets forth a list of all Group Employees. On the
Closing Date, the Seller shall terminate the employment of all of the Group
Employees and such Group Employees shall cease to accrue any benefits under any
employee benefit plans maintained by or for the benefit of the Seller or any of
its affiliates, and the Buyer shall be deemed to have offered to continue the
employment of each such individual whose employment was so terminated effective
from the Closing Date or, in the case of a Group Employee not actively at work
on the Closing Date on account of a disability, on the day such employee reports
for work after termination of such disability. For purposes of the immediately
preceding sentence, the term "continue the employment" shall mean employment on
terms (i) with respect to salary, competitive with those of individuals having
similar duties at comparable businesses and (ii) with respect to position,
"substantially the same duties in the same functional area" as in effect on the
Closing Date. Nothing in this Section 4.09 shall require the Buyer (1) to
provide or continue for the benefit of any employees any bonus or other
compensation plan or arrangement or any other employee benefit plan currently
maintained by the Seller or any affiliate thereof or (2) to maintain the
organizational structure of the Group Activity in effect on the date hereof.
Seller and Buyer acknowledge and agree that, to the maximum extent permitted or
allowed by applicable law, employment by the Buyer of any Group Employees as
described in this paragraph (a) shall be employment at will.
(b) The Seller hereby acknowledges and agrees that any severance,
termination or other obligation to any Group Employee arising from the
employment of such Group Employee by the Seller or any affiliate thereof or the
termination of the employment of such Group Employee as a result of the
transactions contemplated by this Agreement or otherwise shall be the sole
responsibility and liability of the Seller.
(c) The Buyer agrees that effective as of the Closing Date, all Group
Employees who shall commence employment with the Buyer ("Transferred Employees")
shall participate in the Buyer's employee benefit plans as the same may be in
effect from time to time, including a group health plan providing major medical
benefits, on substantially similar terms and conditions as the Buyer's similarly
situated employees.
(d) The Seller has heretofore delivered to the Buyer a schedule (the
"Vacation Schedule") showing, with respect to each Group Employee as of December
31, 1999, the number of days of vacation pay to which such Group Employee is
entitled as of such date. The Seller shall take responsibility for and cause to
be paid in the normal course of business the vacation pay of all Transferred
Employees as reflected on the Vacation Schedule.
(e) Except as specifically set forth in this Agreement (i) the Buyer
shall not be obligated to assume, continue or maintain any of the Seller's
Plans; (ii) no assets or liabilities of the Seller's Plans shall be transferred
to, or assumed by, the Buyer or the Buyer's benefit plans; and (iii) the Seller
shall be responsible solely for funding and/or paying any benefits under any of
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the Seller's Plans, including any termination benefits and other employee
entitlements accrued under such plans by or attributable to employees of the
Group Activity prior to the Closing Date.
(f) Nothing in this Agreement, express or implied, shall confer upon
any employee of the Seller, or any representative of any such employee, any
rights or remedies, including any right to employment or continued employment
for any period, of any nature whatsoever.
(g) The Buyer will take all action necessary to grant to the Group
Employees at the Closing stock options, to be allocated among the Group
Employees as the Buyer determines in its sole discretion, to acquire Common
Stock. The Seller shall take all action necessary to cause all stock options
granted by the Seller to any Transferred Employee to vest at the Closing Date.
(h) The Seller agrees that if at any time after the Closing Date the
Buyer, in its reasonable determination, should require the assistance of
employees of the Seller (other than the Group Employees) who played a role in
the development of the Group Intellectual Property, the Seller shall make such
employees available to the Buyer, upon the Buyer's reasonable request, at such
rates and for such periods of time as the parties shall reasonably agree.
SECTION 4.10 Further Assurances. Subject to the terms and conditions
herein provided, the Seller and Buyer hereto agree to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement,
including, without limitation, using all reasonable efforts to obtain all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings (including, without limitation, any necessary filings
under Hart-Scott); provided that the foregoing shall not require Buyer to agree
to make any divestiture of a significant asset in order to obtain any waiver,
consent or approval.
SECTION 4.11 Inquiries and Negotiations. From the date hereof until
the termination hereof, the Seller and its officers, directors, employees and
representatives and other agents will not, directly or indirectly, continue,
consider, solicit or encourage in any way (including by furnishing any
non-public information concerning the Seller, the Group Activity or the Assets)
or otherwise cooperate in any way with, or assist or participate in, or
encourage any effort or attempts by any person, corporation, entity or group
other than Buyer and its Affiliates, representatives and agents (each, a "Third
Party") in connection with any dispositions or divestiture of the Group or all
or any portion of the Assets, (whether by merger, sale of stock, sale or lease
of assets or otherwise and other than sales of inventory in the ordinary course
of business) (such transactions being hereinafter referred to as "Alternative
Transactions"). The Seller shall immediately notify Buyer if any proposal,
offer, inquiry or other contact is received by, any information is requested
from, or any discussions or negotiations are sought to be initiated or continued
with, the Seller in respect of an Alternative Transaction, and shall, in any
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such notice to Buyer, indicate the identity of the Third Party and the terms and
conditions of any proposals or offers or the nature of any inquiries or
contacts.
SECTION 4.12 Transfer of Assets. Any Affiliate of the Seller that
holds, owns, controls or has any rights in any of the Assets or any assets
relating to, used in or useful to, the Group Activity shall, prior to the
Closing, transfer such assets to the Seller free and clear of any mortgage,
lien, pledge, claim, restriction, security interest, charge or encumbrance of
any nature whatsoever.
SECTION 4.13 Transition Services. (a) For a period of six (6) months
from the Closing Date, the Buyer shall make three (3) of its engineers available
at any time, at the Seller's request to design and develop the DMT ADSL hardware
and software onto the 12-port and 24-port Falcon-based G.lite/full rate DMT
channel cards, to support the on-the-job training of new DMT development support
engineers and to support the solution of problem reports that may arise from the
Seller's obligation to support Conexant's utilization of the Falcon components
pursuant to its obligations under the ADSL Agreement. The engineering support
services will be required principally of the engineers agreed upon between the
Buyer and the Seller. In the event any of such individuals should not accept the
Buyer's employment offer or subsequently terminate his employment with the
Buyer, the Buyer shall provide the services of such other employees then
employed by the Buyer with the requisite skills as are reasonably needed to
fulfill the Buyer's obligations under this Section 4.13(a), subject to the
reasonable approval of the Seller. Additionally, other engineers may be required
from time to time to support questions from Conexant, which cannot be predicted
at this time. In no event will the aggregate time commitment of the three named
engineers and the additional engineers exceed the equivalent of the full time
commitment of three engineers for such six-month period. So long as the Buyer is
satisfying the Seller's product development requirements as described in the
first sentence above, the Buyer will be entitled to use any or all of such
engineers in its own operations. The engineers shall be available to provide
such services to the Seller within two (2) days of the Seller's request, and in
consideration for such services, the Seller shall pay the Buyer Three Hundred
Dollars ($300) per hour for each engineer providing such services.
For a period of six (6) months, commencing six (6) months from the Closing
Date, the Buyer shall make two (2) of its engineers available at any time, at
the Seller's request, to support the completion of and bug-fixes related to the
Falcon Chip and for continuing support to enable the Seller to fulfill its
obligations under the ADSL Agreement. Such engineers shall be available to
provide such services to the Seller within two (2) days of the Seller's request,
and in consideration for such services, the Seller shall pay the Buyer One
Hundred Fifty Dollars ($150) per hour for each engineer providing such services.
The services described in this Section 4.13(a) are defined as the "Transition
Services".
(b) (i) Billing for transition services provided by the Buyer
pursuant to Section 4.13(a) will be made to the Seller, by the tenth
business day of the month following the month in which the Transaction
Service was provided.
(ii) Payment is due thirty (30) days from the Buyer's invoice
date. The Buyer may change credit or payment terms at any time when, in the
Buyer's reasonable opinion, the Seller's financial condition, previous
payment record, or the nature of the Seller's relationship with the Buyer
so warrants.
(iii) The Buyer may discontinue performance if the Seller fails
to pay any sum due that is not reasonably disputed, or fails to perform in
any material respects under this or any other Buyer agreement if, after
thirty (30) days written notice, the failure has not been cured.
(c) (i) Either party may terminate its obligations under this Section
4.13 for cause at any time unless the other party cures the breach within
thirty (30) days of written notice of such breach.
(ii) If either party becomes insolvent, is unable to pay its debt
when due, files for bankruptcy, is the subject of involuntary bankruptcy,
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has a receiver appointed or has its assets assigned, the other party may
terminate its obligations under this Section 4.13 without notice and may
cancel any unfulfilled obligations.
(iii) Provisions herein which by their nature extend beyond the
termination or expiration of this Section 4.13 will remain in effect until
fulfilled.
(d) Each of the Seller and the Buyer agree that in the event of any
breach of Section 4.13(a) by the Buyer, the Seller would be irreparably
harmed and could not be made whole by monetary damages. It is accordingly
agreed that the Buyer waives the defense in any action alleging breach of
the provisions of this Section 4.13 seeking specific performance of the
Buyer's obligations under Section 4.13(a) that damages, or any other remedy
at law would be an adequate remedy. The parties further agree, in addition
to any other remedy to which it may be entitled at law or in equity, the
Seller shall be entitled to compel specific performance of Section 4.13(a)
in any action instituted by the Seller. The parties further agree that a
breach of Section 4.13(a) would require immediate redress. Accordingly, the
parties agree that in the event a legal proceeding is commenced by the
Seller which seeks specific performance of Section 4.13(a), such proceeding
shall be expedited to the fullest extent permitted by law.
SECTION 4.14 License of Embedded Trademarks. The Seller hereby
licenses the Buyer, for no additional consideration, the use of the Seller's
tradenames and trademarks in any mask work or mask set where such tradename or
trademark is embedded in the finished product, such license to terminate at such
time as the Buyer replaces the mask work or mask set.
V. CONDITIONS PRECEDENT
SECTION 5.01 Conditions Precedent to Obligations of the Buyer. The
obligation of the Buyer to consummate the transaction set forth in this
Agreement is subject to the fulfillment at or prior to the Closing Date of each
of the following conditions, any of which may be waived in whole or in part by
the Buyer to the extent permitted by applicable law:
(a) Accuracy of Representations and Warranties. The representations
and warranties contained in Section 3.01 of this Agreement or in any
certificate or document delivered to the Buyer pursuant hereto shall be
true and correct on and as of the Closing Date as though made at and as of
that date (without regard to any notification that may be made by the
Seller under Section 4.03), and the Seller shall have delivered to the
Buyer a certificate to that effect.
(b) Compliance with Covenants. The Seller shall have performed and
complied in all material respects with all terms, agreements, covenants and
conditions of this Agreement to be performed or complied with by it at or
prior to the Closing Date, and the Seller shall have delivered to the Buyer
a certificate of its president to that effect.
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(c) All Proceedings To Be Satisfactory. All proceedings to be taken by
the Seller in connection with the transactions contemplated hereby and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Buyer and its counsel, Reboul, MacMurray, Hewitt, Maynard
& Kristol, and the Buyer and said counsel shall have received all such
counterpart originals or certified or other copies of such documents as
they may reasonably request.
(d) Legal Opinion. The Buyer shall have received the opinion of
Stradling Yocca Carlson & Rauth, counsel to the Seller, addressed to the
Buyer and dated the Closing Date, satisfactory in form and substance to the
Buyer and its counsel, to the effect set forth in Annex I hereto.
(e) Legal Actions or Proceedings. No preliminary or permanent
injunction or other order, decree or ruling issued by any court of
competent jurisdiction nor any statute, rule, regulation or order entered,
promulgated or enacted by any governmental, regulatory or administrative
agency or authority shall be in effect that would prevent the consummation
of the transactions contemplated hereby.
(f) Assignment of Contracts. The Seller shall have obtained all the
authorizations, consents, waivers and approvals required in connection with
the assignment of those contracts, agreements, licensee, leases, sales
orders, purchase orders and other commitments to be assigned to the Buyer
pursuant to this Agreement and set forth on Schedule 3.01(i) hereto,
including, but not limited to, those consents required in connection with
Section 1.02 hereof.
(g) Ancillary Agreements. Each Ancillary Agreement shall have been
executed and delivered by each party thereto other than the Buyer and said
Agreements shall be in full force and effect as of the Closing Date.
(h) Supporting Documents. On or prior to the Closing Date, the Buyer
and its counsel shall have received copies of the following supporting
documents:
(i) copies of the Certificates of Incorporation of the
Seller and all amendments thereto, certified as of a recent date by
the Secretary of State of the State of Delaware, and (2) certificates
of said Secretary dated as of a recent date as to the good standing of
the Seller and listing all documents of each on file with said
Secretary; and
(ii) certificates of the Secretary or an Assistant Secretary
of the Seller dated the Closing Date and certifying: (1) that attached
thereto is a true and complete copy of the By-laws of the Seller as in
effect on the date of such certification; (2) that attached thereto
is a true and complete copy of resolutions adopted by the Board of
Directors of the Seller authorizing the execution, delivery and
performance of this Agreement and each Ancillary Agreement to which
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the Seller is a party and the transactions contemplated hereby and
thereby and that all such resolutions are still in full force and
effect and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement and each Ancillary
Agreement to which the Seller is a party; (3) that the Certificate of
Incorporation of the Seller has not been amended since the date of the
last amendment referred to in the certificate delivered pursuant to
clause (i)(2) above; and (4) as to the incumbency and specimen
signature of each officer of such Seller executing this Agreement and
any certificate or instrument furnished pursuant hereto, and a
certification by another officer of the Seller as to the incumbency
and signature of the officer signing the certificate referred to in
this paragraph (ii).
(i) Consents and Regulatory Approvals. The Buyer shall have (i)
obtained all material written consents, permits, licenses, authorizations
and approvals in forms acceptable to the Buyer of any and all persons,
including, without limitation, Governmental Agencies, authorities and third
parties, required to be obtained prior to the consummation of the
transactions contemplated hereby and required to be obtained in order that
Buyer may conduct the Group Activity immediately following the Closing
Date, and (ii) received evidence in form and substance satisfactory to
Buyer and its counsel reflecting that the Seller notified the Governmental
Agencies with whom the Seller transacts business as to the (x) transactions
contemplated hereby and (y) Seller's desire to enter into any required
novation agreements. Any waiting period (and any extension thereof) under
Hart-Scott applicable to the purchase of the Group Activity contemplated
hereby shall have expired or been terminated.
(j) No Material Adverse Effect. Neither the Group nor the Group
Activity shall have suffered, after the date of this Agreement any change
which has had, or in the reasonable opinion of Buyer could reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on the Group Activity or the Group.
(k) Payment of Certain Excluded Liabilities. The Seller shall have
paid all Excluded Liabilities which are secured by liens or other
encumbrances on the Assets, and the Buyer shall have been furnished
evidence of such payment satisfactory to it.
SECTION 5.02 Conditions Precedent to Obligations of the Seller. The
obligation of the Seller to consummate the transactions set forth in this
Agreement is subject to the fulfillment at or prior to the Closing Date of each
of the following conditions, any of which may be waived in whole or in part by
the Seller to the extent permitted by applicable law:
(a) Accuracy of Representations and Warranties. The representations
and warranties of the Buyer contained in Section 3.02 or in any certificate
or document delivered to the Seller pursuant hereto shall be true and
correct on and as of the Closing Date as though made at and as of that date
(without regard to any notification that may be made by the Buyer under
Section 4.03), and the Buyer shall have delivered to the Seller a
certificate to such effect.
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(b) Compliance with Covenants. The Buyer shall have performed and
complied in all material respects with all terms, agreements, covenants and
conditions of this Agreement to be performed or complied with by it at or
prior to the Closing Date, and the Buyer shall have delivered to the Seller
a certificate to that effect.
(c) Supporting Documents. On or prior to the Closing Date, the Seller
shall have received copies of the following supporting documents:
(i) (1) copies of the Certificate of Incorporation of the
Buyer and all amendments thereto, certified as of a recent date by the
Secretary of State of the State of Delaware, and (2) a certificate of
said Secretary dated as of a recent date as to the due incorporation
and good standing of the Buyer and listing all documents of the Buyer
on file with said Secretary; and
(ii) a certificate of the Secretary or an Assistant
Secretary of the Buyer dated the Closing Date and certifying: (1) that
attached thereto is a true and complete copy of the By-laws of the
Buyer as in effect on the date of such certification; (2) that
attached thereto is a true and complete copy of resolutions adopted by
the Board of Directors of the Buyer authorizing the execution,
delivery and performance of this Agreement, each Ancillary Agreement
to which the Buyer is a party and the transactions contemplated hereby
and thereby and that all such resolutions are still in full force and
effect and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement and such Ancillary
Agreements; (3) that the Certificate of Incorporation of the Buyer
have not been amended since the date of the last amendment referred to
in the certificate delivered pursuant to clause (i)(2) above; and (4)
as to the incumbency and specimen signature of each officer of the
Buyer executing this Agreement and any certificate or instrument
furnished pursuant hereto, and a certification by another officer of
the Buyer as to the incumbency and signature of the officer signing
the certificate referred to in paragraph (ii).
(d) Legal Actions or Proceedings. No preliminary or permanent
injunction or other order, decree or ruling issued by any court of
competent jurisdiction nor any statute, rule, regulation or order entered,
promulgated or enacted by any governmental, regulatory or administrative
agency or authority shall be in effect that would prevent the consummation
of the transactions contemplated hereby.
(e) Ancillary Agreements. Each Ancillary Agreement shall have been
executed and delivered by each party thereto other than the Seller and any
Key Employee, as the case may be, and said Agreements shall be in full
force and effect as of the Closing Date.
(f) All Proceedings To Be Satisfactory. All proceedings to be taken by
the Buyer in connection with transactions contemplated hereby and all
documents incident thereto shall be reasonably satisfactory in form and
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substance to the Seller and their counsel, Stradling Yocca Carlson & Rauth,
and the Seller and said counsel shall have received all such counterpart
originals or certified or other copies of such documents as they may
reasonably request.
(g) Legal Opinion. The Seller shall have received the opinion of
Reboul MacMurray, Hewitt, Maynard & Kristol, counsel to the Buyer addressed
to the Seller and dated the Closing Date, satisfactory in form and
substance to the Seller and its counsel, to the effect set forth in Annex
II hereto.
VI. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
SECTION 6.01 Survival of Representations. All representations and
warranties made by any party hereto in this Agreement or pursuant hereto shall
survive the Closing hereunder and shall terminate at the close of business on
the third anniversary of the Closing Date, except for (i) the representations
and warranties of Seller contained in Sections 3.01(a), (b), (c) and (k), which
shall, subject to Section 6.04, survive indefinitely and (ii) the
representations and warranties of the Seller in Sections 3.01(n) and (u), which
shall survive for 90 days after the expiration of the applicable statute of
limitation (including any extensions or waivers thereof).
SECTION 6.02 Tax Indemnity. (a) Regardless of any disclosure made to
the Buyer, the Seller agrees to and shall indemnify the Buyer and its affiliates
and hold each of them harmless from and against
(i) a breach of any representations or warranties relating to
Taxes; and
(ii) without duplication of amounts payable under the preceding
clause (i), any and all Taxes incurred by, imposed upon or attributable to
any of them in respect of or attributable to the Assets (including as a
result of the imposition of any lien thereon) or the Group Activity or in
connection with the purchase of the Assets;
including reasonable legal, accounting and other professional fees and expenses
incurred by the Buyer or its affiliates in connection with Taxes subject to
indemnification under this Section 6.02, insofar as such Taxes pertain to
periods (or any portion of a period thereof) ending on or prior to the Closing
Date or the sale and transfer of the Assets, except for Taxes specifically
assumed by the Buyer pursuant to this Agreement.
(b) For purposes of paragraph (a) above, any interest, penalty or
additional charge included in Taxes shall be deemed to be a Tax for the period
in which the item on which the interest, penalty or additional charge is based,
an not a Tax for the periods during which the item accrues.
(c) The indemnity provided for in this Section 6.02 shall be
independent of any other indemnity provision hereof and, anything in this
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Agreement to the contrary notwithstanding, shall survive until the expiration of
the applicable statutes of limitation (including extensions thereof) for the
Taxes referred to herein and any Taxes subject to indemnification under this
Section 6.02 shall not be subject to the provisions of Section 6.03.
SECTION 6.03 Seller's General Indemnity. Subject to the terms and
conditions of this Article VI, the Seller hereby agrees to indemnify, defend and
hold the Buyer and its Affiliates harmless from and against all demands, claims,
actions or causes of action, assessments, losses, damages, liabilities, costs
and expenses, including, without limitation, interest, penalties and reasonable
attorneys' fees and expenses (collectively, "Damages") as they are incurred,
asserted against, resulting to, imposed upon or incurred or suffered by the
Buyer and its Affiliates by reason of or resulting from:
(i) a breach by the Seller of any representation, warranty,
covenant or agreement contained in or made pursuant to Section 3.01 (except
for breaches of Section 3.01(k)(vi)(1) which shall be governed by Section
6.04) or Article IV of this Agreement;
(ii) any liabilities or obligations of, or claims against or
imposed on the Group or the Buyer (whether absolute, accrued, contingent or
otherwise and whether a contractual, or any other type of liability,
obligation or claim) which relate to acts or omissions by the Seller on or
prior to the Closing Date and which are not expressly assumed by the Buyer
pursuant to this Agreement;
(iii) any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) in respect of (A) any of the actions, suits or
proceedings or threatened actions, suits or proceedings described on
Schedule 3.01(m) hereof, or (B) any action, suit or proceeding commenced
after the Closing Date based upon an event occurring or a claim arising on
or prior to the Closing Date; and
(iv) any claim by any customer or licensee of the Seller relating
to the provision of goods or services or the licensing of any rights by the
Group prior to the Closing Date.
SECTION 6.04 Intellectual Property Indemnification.
(a) Anything herein to the contrary notwithstanding, the Seller's
obligations to the Buyer relating to any infringement or misappropriation
of any third party's Intellectual Property by the conduct of any Group
Activity shall be pursuant to the terms and provisions set forth in this
Section 6.04. The Seller hereby agrees to indemnify and hold the Buyer and
its Affiliates harmless from and against any Damages as they are incurred
asserted against, resulting to, imposed upon or incurred or suffered by the
Buyer or its affiliates by reason of or resulting from and to the extent of
the infringement or misappropriation of the Intellectual Property of any
other party by the conduct of any Group Activity as such Group Activity was
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conducted on or before the Closing Date, including, without limitation, the
use of any trade name for a product or service offered by the Group; the
making, importing, selling, offering for sale, or using of any product of
the Group; the carrying out of any method or process involved in a Group
Activity; the reproduction of any mask work for a semiconductor chip
product or the importation or distribution of a semiconductor chip product
in which a mask work is embodied; or the running or reproduction of any
computer software in connection with a Group Activity (collectively, the
"Infringement").
(b) (i) Upon the receipt by the Buyer of the first actual notification
of any Infringement from any third party or from the Seller (an
"Infringement Notice"), the Buyer shall, (A) as promptly as practicable,
forward such Infringement Notice to the Seller (provided, however, that the
failure of the Buyer to forward such notice to the Seller shall not act as
a waiver of the obligations of the Seller set forth in this provision) and
(B) make a determination as to what action, if any, to take to address the
allegations set forth in the Infringement Notice, such determination to be
made by Buyer in its sole discretion and to be binding for purposes of this
Section 6.04 until such time as the party who alleges its Intellectual
Property is being infringed or misappropriated commences a lawsuit against
either the Seller or the Buyer in connection with such alleged Infringement
(the "Infringement Lawsuit"). If, following receipt of the Infringement
Notice, the Buyer determines that the alleged Infringement set forth in the
Infringement Notice is, through commercially reasonable efforts, capable of
being cured with the result that the subject Intellectual Property can be
used by the Buyer as it wishes in its sole discretion (such Infringement to
be referred to herein as a "Curable Claim of Infringement"), the Seller's
indemnification obligation shall be limited to all Damages asserted
against, resulting to, imposed upon or incurred or suffered by the Buyer or
its Affiliates by reason of or resulting from the alleged Infringement up
to and including the date of the Notification Event. If the Buyer elects,
in its sole discretion, to effect such cure, then the Buyer shall promptly
take commercially reasonable steps to cure the alleged Infringement.
(ii) Upon the commencement of an Infringement Lawsuit, if the Buyer
shall have determined that the Infringement alleged in the Infringement
Lawsuit is a Curable Infringement, the provisions of the last two sentences
of Section 6.04(b)(i) shall govern. If, within a commercially reasonable
period following the commencement of the Infringement Lawsuit the Buyer
shall determine that the Infringement alleged in the Infringement Lawsuit
is not a Curable Claim of Infringement, it shall provide written notice to
the Seller at which time, the provisions set forth in this paragraph (ii)
shall apply with the intent that all actions taken and communications made
pursuant to this paragraph (ii) shall be covered by the joint defense
privilege shared by the Buyer and the Seller, it being understood that upon
the commencement of an Infringement Lawsuit, the parties hereto will enter
into a mutually satisfactory joint defense agreement. The Seller shall
promptly notify the Buyer, in writing, as to whether it reasonably regards
the subject Infringement as a Curable Claim of Infringement. If the Seller
agrees with the Buyer that the alleged Infringement is not a Curable Claim
of Infringement, the Notification Event shall not serve to limit the
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Damages from and against which the Seller shall indemnify and hold the
Buyer and its Affiliates harmless; provided that at any time thereafter the
Seller shall be entitled, at its sole option and expense (and without
limiting the Seller's obligation to indemnify the Buyer and its Affiliates
for any Damages incurred as a result of the subject Infringement), to
procure for the Buyer a license in and to the subject Intellectual Property
pursuant to which the Buyer is permitted, without liability for
infringement or misappropriation, to design, develop, make, have made, use,
import, export, sell, offer for sale, lease, license, transfer or otherwise
utilize and distribute the subject Intellectual Property in whatever manner
it deems necessary; and provided, further, that the Buyer hereby agrees
that it shall reasonably cooperate with the Seller in connection therewith
and shall, at the Seller's sole expense, take such actions as are
reasonably necessary to enable the Seller to procure such right. If the
Seller, acting reasonably and in good faith, regards the alleged
Infringement as a Curable Claim of Infringement, the parties shall endeavor
in good faith to reach an agreement as to whether such Infringement is a
Curable Claim of Infringement. If, after 60 days, the parties are unable to
reach an agreement as to whether such Infringement is a Curable Claim of
Infringement, the parties shall begin dispute resolution as set forth in
Section 8.11 hereof. In the event that the Infringement Lawsuit is finally
resolved in a manner unfavorable to the Buyer, then the Seller shall be
obligated to indemnify the Buyer and its Affiliates for Damages asserted
against, resulting to, imposed upon or incurred or suffered by the Buyer or
its Affiliates by reason of or resulting from the alleged Infringement (A)
up to and including the date on which the Buyer received the Infringement
Notice in the event that the parties, whether on their own or through the
procedures set forth in Section 8.11 hereof, determined that the alleged
Infringement was a Curable Claim of Infringement and (B) up to and
including the date on which such Infringement Lawsuit is finally resolved
in the event that the parties, whether on their own or through the
procedures set forth in Section 8.11 hereof, determined that the alleged
Infringement was not a Curable Claim of Infringement.
(c) The above notwithstanding, the Seller shall not be responsible for
Damages suffered or incurred by the Buyer or its Affiliates that were the
result of (i) changes in the way any Group Activity was conducted after the
Closing Date, such as the use of the Buyer's or any other party's
Intellectual Property in connection with the conduct of a Group Activity
after the Closing Date where the conduct of such Group Activity prior to
the Closing Date did not constitute an Infringement or (ii) the Buyer
intentionally substituting the Group Intellectual Property of the Group in
place of Intellectual Property of the Buyer (the "Buyer Intellectual
Property") in cases where the Buyer did not have a commercially reasonable
justification for doing so (it being understood, however, that the Buyer's
substitution of the Group Intellectual Property in place of the Buyer
Intellectual Property for the primary purpose of having the Seller bear the
risk in the event any Infringement claim is brought by a third party, shall
not be deemed a commercially reasonable justification for purposes hereof).
(d) In the event of a claim by a third party or the filing of an
Infringement Lawsuit relating to an alleged Infringement or to the conduct
of any Group Activity prior to a Notification Event, the parties agree to
cooperate in good faith in evaluating and determining the appropriate
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method of defense of the claim, including, without limitation, the
determination of the appropriate party which is best positioned to be
responsible for the defense of the claim given the parties respective
interests and obligations. Regardless of which party is responsible for the
defense of any such claim, the settlement of any such claim must be
approved by both of the parties, which approval will not be unreasonably
withheld. In the event the parties are unable to determine the appropriate
method of defense of the claim within twenty (20) days of the receipt of
the notice of the claim, the procedure and method of the defense of the
claim shall be determined according to the provisions of Section 6.07
below.
(e) The Seller agrees that it shall use its best efforts to assist the
Buyer in the defense of any Infringement claim arising at any time,
including without limitation, those claims arising after the occurrence of
a Notification Event and shall, among other things which the Buyer shall
reasonably request, provide access, upon the request of the Buyer, to any
of the Seller's engineers or other personnel who, in the Buyer's opinion,
would be helpful to the Buyer in defending any claim to any Infringement of
the Intellectual Property of any third party.
(f) Unless and until the Buyer exercises its Option on the Cross
License pursuant to Section 1.03 hereof and the Cross License is
effectively assigned to the Buyer pursuant to the provisions of the Cross
License, the Seller shall not have any indemnification obligations under
this Section 6.04 with respect to any claims brought against the Buyer for
misappropriation or infringement of any of the Amati Patents (as defined in
the Cross License); PROVIDED, however, that the Seller shall be obligated
to indemnify the Buyer pursuant to this Section 6.04 in the event that the
Buyer exercises its Option on the Cross License and the assignment thereof
is ineffective due to a breach of any provision other than Section 4.4 of
the Cross License.
(g) Unless and until the Buyer exercises its Option on one or both of
the Level One Agreements pursuant to Section 1.03 hereof and such Optioned
Agreement is effectively assigned to the Buyer pursuant to the provisions
set forth in such Optioned Agreement, the Seller shall not have any
indemnification obligations under this Section 6.04 with respect to any
claims brought against the Buyer for misappropriation or infringement of
any of the Intellectual Property licensed under such Optioned Agreement;
PROVIDED, however, that the Seller shall be obligated to indemnify the
Buyer pursuant to this Section 6.04 in the event that the Buyer exercises
its Option on either of the Level One Agreements and the assignment thereof
is ineffective due to a breach of any provision in such Optioned Agreement
other than (i) Section 8.4 in the case where the Optioned Agreement is the
Joint Development and Supply Agreement, dated May 14, 1997, between the
Seller and Level One Communications, Inc. and (ii) Section 9.4 in the case
where the Optioned Agreement is the License Agreement, dated July 7, 1999,
between the Seller and Level One Communications, Inc.
SECTION 6.05 Indemnification Pursuant to Certain Agreements. Anything
herein to the contrary notwithstanding, the Seller hereby agrees to indemnify
and hold the Buyer and its Affiliates harmless from and against any Damages, as
they are incurred, asserted against, resulting to, imposed upon or incurred or
suffered by the Buyer or its Affiliates by reason of or resulting from:
(a) any unauthorized or impermissible disclosure to the Buyer or any
of its employees of any confidential or proprietary information in any
form, including residual information in the minds of one or more of the
Group Employees, which may have been disclosed to the Seller pursuant to
the Level One Agreements, the ADSL Agreement or the Cross License;
provided, however, that the Seller shall not be obligated to indemnify the
Buyer in cases where the Seller can establish that the Buyer deliberately,
intentionally and willfully, and with the actual knowledge and, during the
first two years following the Closing Date, at the direction of any of the
persons agreed to by the Buyer and the Seller or, thereafter, at the
direction of engineering management with direct development responsibility
and any members of management ranking senior to such engineering managers,
misappropriated or infringed (A) the Jointly Developed DMT ADSL Chip Set
Technology, the Future DMT ADSL Chip Set Technology, the Rockwell
Background Technology or Rockwell's DMT ADSL Chip Set Technology (each as
defined in the ADSL Agreement), (B) the Amati Patents (as defined in the
Cross License) or (C) the Pre-Existing LOC Technology, the Project
Developed Technology, the Chip Developed Technology in AFE and CAP (each as
defined in the Level One Agreements).
(b) any breach or alleged breach by the Seller of, default or alleged
default by the Seller in an obligation under, or failure or alleged failure
of the Seller to perform under, the Level One Agreements or the ADSL
Agreement; provided, however, that the Seller shall not be obligated to
indemnify the Buyer for any Damages arising from the Buyer's breach of the
covenants set forth in Section 4.13 hereof.
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SECTION 6.06 Buyer's General Indemnity. Subject to the terms and
conditions of this Article VI, the Buyer hereby agrees to indemnify, defend and
hold the Seller and its Affiliates harmless from and against all Damages as they
are incurred, asserted against, resulting to, imposed upon or suffered by the
Seller and its Affiliates by reason of or resulting from:
(i) a breach by the Buyer of any representation, warranty,
covenant or agreement contained in or made pursuant to Section 3.02 or
Article IV of this Agreement; and
(ii) any liabilities or obligations of, or claims against or
imposed on, the Seller that are expressly assumed by the Buyer
pursuant to this Agreement.
SECTION 6.07 Conditions of Indemnification. The obligations and
liabilities of the party responsible for indemnifying hereunder (sometimes
referred to herein as "the indemnifying party"), and the party entitled to
indemnification hereunder (sometimes referred to herein as "the party to be
indemnified" or "the indemnified party"), under Sections 6.02, 6.03, 6.04 and
6.05, 6.06 hereof with respect to claims resulting from the assertion of
liability by third parties shall be subject to the following terms and
conditions:
(a) Within 20 days after receipt of notice of commencement of any
action or the assertion of any claim by a third party, the party to be
indemnified shall give the indemnifying party written notice thereof
together with a copy of such claim, process or other legal pleading
(provided that failure so to notify the indemnifying party of the assertion
of a claim within such period shall not affect its indemnity obligation
hereunder except as and to the extent that such failure shall adversely
affect the defense of such claim), and the indemnifying party shall have
the obligation to undertake the defense thereof by representatives of its
own choosing reasonably satisfactory to the indemnified party; provided,
that the indemnified party may retain separate co-counsel at its sole cost
and expense and participate in the defense of the third party claim;
(b) In the event that the indemnifying party, by the thirtieth day
after receipt of notice of any such claim (or, if earlier, by the tenth day
preceding the day on which an answer or other pleading must be served in
order to prevent judgment by default in favor of the person asserting such
claim), does not assume the defense of such claim, the party to be
indemnified will (upon further notice to the indemnifying party) have the
right to undertake the defense, compromise or settlement of such claim on
behalf of and for the account and risk of the indemnifying party, subject
to the right of the indemnifying party to assume the defense of such claim
at any time prior to settlement, compromise or final determination thereof;
(c) Other than as set forth in Section 6.07(b), except with the prior
written consent of the party to be indemnified, no indemnifying party, in
the defense of such claim or litigation, shall consent to entry of any
judgment or order, interim or otherwise, or enter into any settlement that
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provides for injunctive or other nonmonetary relief affecting the party to
be indemnified or that does not include as an unconditional term thereof
the giving by each claimant or plaintiff to such party to be indemnified of
a release from all liability with respect to such claim or litigation. In
the event that the party to be indemnified shall in good faith determine
that the representation of both the indemnifying and indemnified parties
would be inappropriate due to a conflict of interest arising from the
availability to the indemnified party of one or more defenses or
counterclaims that are inconsistent with one or more of those that may be
available to the indemnifying party in respect of such claim or any
litigation relating thereto, the party to be indemnified shall have the
right (subject to applicable rules of professional conduct) at all times to
take over and assume control over the defense, settlement, negotiations or
litigation relating to such claim at the sole cost of the indemnifying
party; provided, however, that if the party to be indemnified does so take
over and assume control, the party to be indemnified may consent to the
entry of any judgment or enter into any settlement with respect to any
third party claim in any manner it may deem appropriate and, in the event
that the indemnifying party did not undertake the defense of such claim due
to a conflict of interest, such consent to entry of judgment or entry into
any settlement will be subject to the approval, not to be unreasonably
withheld, of the indemnifying party; and
(d) In connection with any such indemnification, the party to be
indemnified shall cooperate with all reasonable requests of the
indemnifying party.
SECTION 6.08 Limitations on Indemnity. No indemnifying party shall be
obligated to indemnify an indemnified party against Damages caused by a breach
of any representation, warranty or covenant of the Seller or the Buyer, as the
case may be, herein unless the aggregate amount of such Damages to the
indemnified party shall exceed $200,000, and the indemnifying party shall
thereafter be liable for the entire amount of any Damages incurred by the
indemnified party since the Closing Date in excess of $200,000 provided that the
total amount of Damages shall not exceed $200,000,000.
SECTION 6.09 Remedies Cumulative. Except as otherwise expressly
provided in this Article VI, the remedies provided herein shall be cumulative
and shall not preclude assertion by any party hereto of any equitable rights or
the seeking of any other equitable remedies against any other party hereto.
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VII. TERMINATION AND ABANDONMENT
SECTION 7.01 Termination of Agreement. Certain of the parties may
terminate this Agreement as provided below:
(a) the Buyer and the Seller may terminate this Agreement by mutual
written consent of the Board of Directors of each party at any time prior
to the Closing;
(b) the Buyer may terminate this Agreement by giving written notice to
the Seller at any time prior to the Closing (A) in the event the Seller has
breached any material representation, warranty, or covenant contained in
this Agreement in any material respect, the Buyer has notified the Seller
of the breach, and the breach has continued without cure for a period of
fifteen days after the notice of breach or (B) if the Closing shall not
have occurred on or before March 31, 2000, by reason of the failure of any
condition precedent under Section 5.02 hereof (unless the failure results
primarily from the Buyer itself breaching any representation, warranty or
covenant contained in this Agreement); and
(c) the Seller may terminate this Agreement by giving written notice
to the Buyer at any time prior to the Closing (A) in the event the Buyer
has breached any material representation, warranty or covenant contained in
this Agreement in any material respect, the Seller has notified the Buyer
of the breach, and the breach has continued without cure for a period of
fifteen days after the notice of breach or (B) if the Closing shall not
have occurred on or before March 31, 2000, by reason of the failure of any
condition precedent under Section 5.01 hereof (unless the failure results
primarily from the Seller itself breaching any representation, warranty or
covenant contained in this Agreement).
SECTION 7.02 Effect of Termination. If any party terminates this
Agreement pursuant to Section 7.01 above, all rights and obligations of the
parties hereunder shall terminate without any liability on the part of any party
hereto except for willful breach.
VIII. MISCELLANEOUS
SECTION 8.01 Definitions. The following terms are used in this
Agreement with the meanings specified below, unless the context clearly
indicates otherwise:
"Act" has the meaning set forth in Section 3.01(z).
"ADSL Agreement" means the DMT ADSL Joint Development Agreement, dated
March 6, 1998, between the Seller and Conexant (as successor
interest to Rockwell Semiconductor Systems, Inc.), as amended.
"Additional Assets" has the meaning set forth in Section 1.01(a).
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"Affiliate" with respect to any Person, means any Person controlling,
controlled by or under common control with such Person.
"Alternative Transaction" means any merger, consolidation, sale of all
or part of the Group or the Group Activity that is material to
the Group Activity, recapitalization, debt restructuring or
similar transaction involving the Group or Group Activity (other
than as contemplated between the parties hereto).
"Ancillary Agreements" means (i) the Bill of Sale, (ii) the License
Agreement, (iii) the Supply Agreement, (iv) the Sublease, (v) the
Note, (vi) the Assumption Agreement, (vii) the Registration
Rights Agreement and (viii) the Lewyn Agreement.
"Assets" has the meaning set forth in Section 1.01(a).
"Assumed Liabilities" has the meaning set forth in Section 2.03(a).
"Assumption Agreement" has the meaning set forth in Section 2.04.
"Bill of Sale" has the meaning set forth in Section 2.04.
"Buyer" has the meaning set forth in the preamble.
"Buyer Filings" has the meaning set forth in Section 3.02(f).
"CERCLA" means the Comprehensive Environmental Reasons, Compensation
and Liability Act of 1980, as amended.
"Claim" means any action, cause of action, suit (in contract, tort or
otherwise), proceeding, hearing, inquiry, investigation, charge,
complaint, claim, or demand by or before any Governmental Agency.
"Closing Date" and "Closing" have the respective meanings set forth in
Section 2.01.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitments" has the meaning set forth in Section 1.02.
"Common Stock" has the meaning set forth in Section 2.02(a).
"Competing Activity" has the meaning set forth in Section 4.08(a).
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"Computer Systems" has the meaning set forth in Section 3.01(y).
"Conexant" means Conexant Systems, Inc.
"Confidential Information" means any information concerning the
businesses and affairs of the Group or the Buyer that is not
already generally available to the public.
"Confidentiality Agreement" has the meaning set forth in Section 4.04.
"Conversion Shares" has the meaning set forth in Section 3.02(a).
"Cross License" has the meaning set forth in Section 1.03.
"Curable Claim of Infringement" has the meaning set forth in Section
6.04(b).
"Damages" has the meaning set forth in Section 6.03.
"Designated Subsidiary" has the meaning set forth in Section 1.01(a).
"Development Agreements" has the meaning set forth in Section
3.01(gg).
"DMT ADSL Chip Set Technology" has the meaning set forth for such term
in the ADSL Agreement.
"DSL Technology" has the meaning set forth for such term in the
License Agreement.
"Environmental, Health and Safety Requirements" shall mean all
federal, state, local and foreign statues, regulations,
ordinances and similar provisions having the force or effect of
law, all judicial and administrative orders and determinations,
and all common law concerning public health and safety, worker
health and safety, and pollution or protection of the
environment, including without limitation all those relating to
the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution,
labeling, testing, processing, discharge, release, threatened
release, control or cleanup of any Hazardous Substance.
"ERISA" has the meaning set forth in Section 3.01(s).
"ERISA Affiliates" has the meaning set forth in Section 3.01(s).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Excluded Assets" has the meaning set forth in Section 1.01(e).
"Excluded Liabilities" has the meaning set forth in Section 2.03(b).
"Governmental Agency" has the meaning set forth in Section 3.01(d).
"Group" has the meaning set forth in the preamble.
"Group Activity" has the meaning set forth in the preamble.
"Group Employees" shall mean all those employees of the Group set
forth on Schedule 4.09(a) hereto. Each person listed on Schedule
4.09(a) shall be considered a "Group Employee".
"Group Intellectual Property" has the meaning set forth in Section
3.01(k)(ii).
"Hart-Scott" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated
thereunder.
"Hazardous Substances" means any substance, whether liquid, solid or
gas, listed, identified or designated as hazardous or toxic under
any Environmental, Health and Safety Requirements, which,
applying criteria specified in any Environmental, Health and
Safety Requirements, is hazardous or toxic, or the use or
disposal of which is regulated under any Environmental, Health
and Safety Requirements.
"Infringement Lawsuit" has the meaning set forth in Section 6.04(b).
"Initial Shares" has the meaning set forth in Section 2.02(a).
"Intellectual Property" has the meaning set forth in Section
3.01(k)(i).
"Interests" has the meaning set forth in Section 1.02.
"Key Employee Employment Agreements" shall mean those employment
agreements, dated as of the Closing Date, between a Key Employee,
on the one hand, and the Buyer, on the other hand.
"Level One Agreements" means the Joint Development and Supply
Agreement dated 14 May 1997 and the Development and License
Agreement dated 7 July 1999, both between the Seller and Level
One Communications, Incorporated.
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"Lewyn Agreement" means the agreement, dated January 20, 2000, between
Lewyn Consulting, Inc., and the Seller, attached hereto as
Exhibit H.
"License Agreement" means the license agreement, to be dated as of the
Closing Date, between the Buyer and Seller, substantially in the
form set forth in Exhibit D hereto (for the license of DSL
Technology from Buyer to the Seller).
"Liens" has the meaning set forth in Section 1.01(a).
"Material Adverse Effect" shall mean such state of fact, event, change
or effect that has had, or would reasonably be expected to have,
a material adverse effect on the assets, liabilities, business,
results of operations, properties, operations, prospects or
condition (financial or otherwise) of such Person; provided,
however, that no change (i) in the general economic condition in
any of the countries in which such party operates, (ii) that
generally affects the industry in which such party is operated,
(iii) in the price of the Common Stock on any stock exchange or
in any interdealer quotation system in which the Common Stock
trades or is quoted, or (iv) resulting from the announcement of
this Agreement shall be taken into account for purposes of
determining the occurrence or existence of a Material Adverse
Effect.
"Note" has the meaning set forth in Section 2.02(b).
"Option" or "Options" has the meaning set forth in Section 1.03.
"Optioned Agreements" has the meaning set forth in Section 1.03.
"Permitted Activities" has the meaning set forth in the License
Agreement.
"Permits" has the meaning set forth in Section 3.01(g).
"Permitted Liens" has the meaning set forth in Section 3.01(h).
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity.
"Plans" has the meaning set forth in Section 3.01(s).
"Registration Rights Agreement" means the registration rights
agreement, to be dated as of the Closing Date, between the Buyer
and the Seller, substantially in the form attached hereto as
Exhibit G.
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"Seller" has the meaning set forth in the preamble.
"Seller Filings" has the meaning set forth in Section 3.01(ee).
"Shares" has the meaning set forth in Section 3.02(a).
"Sublease" means the Sublease Agreement to be dated as of the Closing
Date substantially pursuant to the terms set forth in Exhibit E
hereto.
"Supply Agreement" means the pricing agreement, to be dated as of the
Closing Date, between Buyer and Seller, substantially in the form
attached hereto as Exhibit F (for pricing of DSL).
"SWDA" means the Solid Waste Disposal Act, as amended.
"Tax" has the meaning set forth in Section 3.01(n)(iv).
"Tax Returns" has the meaning set forth in Section 3.01(n)(i).
"Third Party" has the meaning set forth in Section 4.11.
"Transferred Employees" has the meaning set forth in Section 4.09(c).
"Vacation Schedule" has the meaning set forth in Section 4.09(d).
"Year 2000 Compliant" has the meaning set forth in Section
3.01(y)(ii).
SECTION 8.02 Specific Performance. Each of the Seller and the Buyer
acknowledges that the acquisition of the Assets is a vital, necessary and unique
part of the Buyer's strategic plan, which includes the acquisition and
consolidation of other related businesses, and that any breach of this Agreement
by the Seller or the Buyer could not be adequately compensated by monetary
damages. Accordingly, if the Seller or the Buyer breaches its obligations under
this Agreement prior to the Closing, the Buyer shall be entitled, in addition to
any other remedies that it may have, to enforcement of this Agreement by a
decree of specific performance requiring the Seller to fulfill its obligations
under this Agreement.
SECTION 8.03 Service of Process. Each party to this Agreement hereby
irrevocably agrees that service of process in any legal action or proceeding
with respect to this Agreement or any Ancillary Agreement may be effected by
mailing a copy thereof by registered or certified mail, postage prepaid, to the
address of such party set forth in Section 8.07 hereof.
SECTION 8.04 Bulk Transfer Laws. The Buyer hereby waives compliance by
the Seller with any applicable bulk transfer laws, including, without
limitation, the bulk transfer provisions of the Uniform Commercial Code of any
state, or any similar statute, with respect to
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the transactions contemplated hereby. The Seller hereby agrees to indemnify the
Buyer and hold it harmless from and against any loss or damage which it may
incur by reason of such non-compliance.
SECTION 8.05 Expenses, Etc. Except as otherwise expressly provided
herein, each party hereto shall pay its own fees and expenses (including, but
not limited to, legal, accounting and other professional fees) incurred in
connection with this Agreement, the Ancillary Agreements and the transactions
contemplated hereby and thereby.
SECTION 8.06 Execution in Counterparts. For the convenience of the
parties, this Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
SECTION 8.07 Notices. All notices which are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if (i) delivered personally, (ii) mailed by
registered or certified mail, return receipt requested and postage prepaid,
(iii) sent via a nationally recognized overnight courier service or (iv) sent
via facsimile confirmed in writing to the recipient, in each case as follows:
If to the Seller, to it at the address indicated below:
PairGain Technologies, Inc.
14402 Franklin Avenue
Tustin, California 92780
Attn: Michael Pascoe
with a copy to:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Facsimile No. (949) 725-4100
Attention: Nick E. Yocca, Esq.
If to the Buyer, at:
GlobeSpan, Inc.
100 Schultz Drive
Red Bank, New Jersey 07701
Attn: Armando Geday
President and CEO
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with a copy to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Facsimile No. (212) 841-5725
Attention: William J. Hewitt, Esq.
or such other address or addresses as any party shall have designated by notice
in writing to the other parties.
SECTION 8.08 Waivers. Either the Seller, on the one hand, or the
Buyer, on the other hand, may, by written notice to the other, (i) extend the
time for the performance of any of the obligations or other actions of the other
under this Agreement, (ii) waive any inaccuracies in the representations or
warranties of the other contained in this Agreement or in any document delivered
pursuant to this Agreement, (iii) waive compliance with any of the conditions or
covenants of the other contained in this Agreement, or (iv) waive performance of
any of the obligations of the other under this Agreement. Except as provided in
the preceding sentence, no action taken pursuant to this Agreement, including
without limitation any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
SECTION 8.09 Amendments, Supplements, Etc. At any time this Agreement
may be amended or supplemented by such additional agreements, articles or
certificates, as may be determined by the mutual agreement of the parties hereto
to be necessary, desirable or expedient to further the purposes of this
Agreement, or to clarify the intention of the parties hereto, or to add to or
modify the covenants, terms or conditions hereof or to effect or facilitate any
governmental approval or acceptance of this Agreement or to effect or facilitate
the filing or recording of this Agreement or the consummation of any of the
transactions contemplated hereby. Any such instrument must be in writing and
signed by all parties hereto.
SECTION 8.10 Entire Agreement. This Agreement, its Exhibits, Schedules
and Annexes, the Ancillary Agreements and the other documents executed on the
Closing Date in connection herewith, constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral and written, between the parties hereto with
respect to the subject matter hereof.
SECTION 8.11 Dispute Resolution. All claims, disputes and other
matters in controversy (herein called "dispute") arising directly or indirectly
out of or related to this Agreement or any Ancillary Agreement, or the breach
thereof, whether contractual or noncontractual, and whether during the term or
after the termination of this Agreement, shall be resolved exclusively according
to the procedures set forth in this Section 8.11.
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(a) Mediation. Neither party shall commence an arbitration proceeding
pursuant to the provisions of Section 8.11(b) below unless such party shall
first give a written notice (a "Dispute Notice") to the other party setting
forth the nature of the dispute. The parties shall attempt in good faith to
resolve the dispute by mediation under the Commercial Mediation Rules of the
American Arbitration Association ("AAA") in effect on the date of the Dispute
Notice. If the parties cannot agree on the selection of a mediator within twenty
(20) days after delivery of the Dispute Notice, the mediator will be selected by
the AAA. If the dispute has not been resolved by mediation as provided above
within sixty (60) days after delivery of the Dispute Notice, then the dispute
shall be determined by arbitration in accordance with the provisions of Section
8.11(b).
(b) Arbitration. (i) Any dispute that is not settled through mediation
as provided in Section 8.11(a) above shall be resolved by arbitration in Los
Angeles, California, governed by the Federal Arbitration Act, 9 U.S.C. ss. 1 et
seq., and administered by the American Arbitration Association under its
commercial Arbitration Rules in effect on the date of the Dispute Notice, as
modified by the provisions of this Section 8.11(b), by a single arbitrator.
Persons eligible to be selected as an arbitrator shall be limited to lawyers
with excellent academic and professional credentials who have had both training
and experience as an arbitrator. In the event the parties cannot agree on a
mutually acceptable single arbitrator, the AAA shall designate three persons
who, in its opinion, meet the criteria set forth herein. Each party shall be
entitled to strike one of such three designees on a peremptory basis, indicating
its order of preference with respect to the remaining designees, and the
selection of the arbitrator shall be made from among such designee(s) which have
not been so stricken by either party in accordance with their indicated order of
mutual preference to the extent possible. The arbitrator shall based the award
on applicable law and judicial precedent and, unless both parties agree
otherwise, shall include in such award the findings of fact and conclusions of
law upon which the award is based. Judgment on the awarded rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.
(ii) Upon application by either party to a court for an order
confirming, modifying or vacating the award, the court shall have the power to
review whether, as a matter of law based on the findings of fact determined by
the arbitrator, the award should be confirmed, modified or vacated in order to
correct any errors of law made by the arbitrator. In order to effectuate such
judicial review limited to issues of law, the parties agree (and shall stipulate
to the court) that the findings of fact made by the arbitrator shall be final
and binding on the parties and shall serve as the facts to be submitted to and
relied on by the court in determining the extent to which the award should be
confirmed, modified or vacated.
(iii) If either party fails to proceed with mediation or
arbitration as provided herein or unsuccessfully seeks to stay such mediation or
arbitration, or fails to comply with any arbitration award, or is unsuccessful
in vacating or modifying the award pursuant to a petition or application for
judicial review, the other party shall be entitled to be awarded costs,
including reasonable attorneys' fees, paid or incurred by such other party in
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successfully compelling such arbitration or defending against the attempt to
stay, vacate or modify such arbitration award and/or successfully defending or
enforcing the award.
SECTION 8.12 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, exclusive of the
conflicts of law provisions thereof.
SECTION 8.13 Binding Effect; Benefits. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Notwithstanding anything contained in this
Agreement to the contrary, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
SECTION 8.14 Assignability. Except as set forth in Section 4.08(e),
neither this Agreement nor any of the parties' rights hereunder shall be
assignable by any party hereto without the prior written consent of the other
parties hereto.
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IN WITNESS WHEREOF, this Asset Purchase Agreement has been duly
executed and delivered by the parties hereto as of the date first above written.
GLOBESPAN, INC.
By /s/Armando Geday
------------------------------
Name: Armando Geday
Title: President and Chief Executive Officer
PAIRGAIN TECHNOLOGIES, INC.
By /s/ Howard Flagg
------------------------------
Name: Howard Flagg
Title: Executive Vice President -
Business Development
58
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of
the 24th day of February 2000, by and between GlobeSpan, Inc., a Delaware
corporation (the "Company") and PairGain Technologies, Inc., a Delaware
corporation ("PairGain")."
RECITALS
WHEREAS, the Company and PairGain are parties to that certain Asset
Purchase Agreement dated January 21, 2000 (the "Asset Purchase Agreement"),
pursuant to which the Company purchased from PairGain all of the assets
("Assets") used in or necessary to PairGain's conduct, through its
microelectronics engineering development group, of the business of the design,
development, license and supply of intellectual property necessary for the
manufacture, have-manufacture and sale of integrated circuits and related
systems and software;
WHEREAS, the consideration paid by the Company to PairGain for the
Assets consists of (i) 1,081,197 shares of common stock, par value
$0.001("Common Stock"), of the Company (the "Shares") and (ii) a convertible
subordinated promissory note (the "Note") in the principal amount of
$90,000,000, which convertible subordinated promissory note is convertible,
under certain circumstances, into 973,078 shares of Common Stock (any shares of
Common Stock issued or issuable upon conversion of the Note are defined herein
as the "Conversion Shares")); and
WHEREAS, in order to induce PairGain to enter into the Asset Purchase
Agreement, PairGain and the Company hereby agree that this Agreement shall
govern the rights of PairGain to cause the Company to register the Shares and
any Conversion Shares issued or issuable to PairGain, and certain other matters
as set forth herein.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. REGISTRATION RIGHTS. The Company covenants and agrees as follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "Act" means the Securities Act as amended.
(b) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC that permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(c) The term "Holder" means PairGain or any person owning or
having the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.10 hereof.
(d) The term "1934 Act" means the Securities Exchange Act of
1934, as amended.
<PAGE>
(e) The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.
(f) The term "Registrable Securities" means (i) the Shares,
(ii) the Conversion Shares and (iii) any Common Stock of the Company issued as
(or issuable upon the conversion or exercise of any warrant, right or other
security that is issued as) a dividend or other distribution with respect to, or
in exchange for, or in replacement of, the shares referenced in (i) or (ii)
above, excluding in all cases, however, any Registrable Securities sold by a
person in a transaction in which his rights under this Section 1 are not
assigned.
(g) The number of shares of "Registrable Securities"
outstanding shall be determined by the number of shares of Common Stock
outstanding and the number of Conversion Shares that are Registrable Securities.
(h) The term "SEC" shall mean the Securities and Exchange
Commission.
1.2 REQUEST FOR REGISTRATION.
(a) Subject to the conditions of this Section 1.2, if the
Company shall receive at any time, a written request from the Holder that the
Company file a registration statement under the Act covering the registration of
Registrable Securities with an anticipated aggregate offering price of at least
$30,000,000, then the Company shall use reasonable efforts to effect, as soon as
practicable, the registration under the Act of all Registrable Securities that
the Holder requests to be registered.
(b) If the Holder intends to distribute the Registrable
Securities covered by its request by means of an underwriting, it shall so
advise the Company as a part of its request made pursuant to this Section 1.2.
In such event the right of the Holder to include its Registrable Securities in
such registration shall be conditioned upon the Holder's participation in such
underwriting and the Holder's execution of an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by the Company (which underwriter or underwriters shall be
reasonably acceptable to the Holder). Notwithstanding any other provision of
this Section 1.2, if the underwriter advises the Company that marketing factors
require a limitation of the number of securities underwritten (including
Registrable Securities), then the Company shall so advise the Holder, and the
number of Registrable Securities that may be included in the underwriting may be
reduced; provided, however, that the number of shares of Registrable Securities
to be included in such underwriting shall not be reduced unless all other
securities are proportionately reduced, subject to the provisions of Section
1.2(d) below. Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from the registration.
(c) The Company shall not be required to effect a
registration pursuant to this Section 1.2:
(i) in any particular state in which under relevant
Blue Sky law the Company would be required to execute a general consent to
service of process in effecting such registration, unless the Company is already
subject to service in such jurisdiction and except as may be required under the
Act; or
<PAGE>
(ii) if the Company has, within the six (6) month
period preceding the date of such request, already effected a registration for
the Holder pursuant to this Section 1.2; or
(iii) if not more than thirty (30) days prior to
receipt of a written notice of a request for registration pursuant to this
Section 1.2, the Company shall have (x) circulated to prospective underwriters
and their counsel a draft of a registration statement for a primary offering of
equity securities on behalf of the Company, (y) solicited bids for a primary
offering of shares of Common Stock of the Company or (z) otherwise reached an
understanding with an underwriter with respect to a primary offering of shares
of Common Stock of the Company, subject to the provision of Section 1.3 hereof,
the Company may preempt the registration requested pursuant to this Section 1.2
with such primary offering by delivering notice of such intention (the
"PREEMPTION NOTICE") to the Holder within five days after the Company has
received such notice of request for registration; PROVIDED that the period of
preemption may be up to thirty (30) days following the date of Preemption
Notice;
(iv) if the Holder proposes to dispose of Registrable
Securities that may be registered on Form S-3 pursuant to Section 1.4 hereof; or
(v) if the Company shall furnish to Holder a
certificate signed by the Company's Chief Executive Officer or Chairman of the
Board stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such registration to be effected at such time, in which event the Company
shall have the right to defer such registration for a period of not more than
forty-five (45) days after receipt of the request of the Holder, provided that
such right to delay a request shall be exercised by the Company not more than
twice in any twelve (12)-month period, provided, further, that if the Company
exercises such right more than once, then the second deferral of such
registration shall not be for a period of more than thirty (30) days and there
shall be at least forty-five (45) days between the first and second such
deferral (which forty-five (45) day period shall not include any days during
which the Holder shall be prohibited from selling any Registrable Securities
because of any "black-out" or similar policies instituted by GlobeSpan which
serve to prohibit sales of GlobeSpan securities by the Holder, while the Holder
is in possession, or is presumed to be in possession, of material non-public
information).
(d) If, following the receipt of a written notice of a
request for registration pursuant to this Section 1.2, the Company shall furnish
to Holder a certificate signed by the Company's Chief Executive Officer or
Chairman of the Board stating that (i) the Company intends to sell securities
pursuant to the registration statement to be filed pursuant to such written
notice and to use the net proceeds of such issuance to prepay that portion of
the Note not converted as of the time of the sale of such securities and (ii)
the prospective underwriters of such offering advise the Company that market
factors require a limitation on the number of securities underwritten, the
amount of Conversion Shares which have not yet been issued and which are
entitled to be included in such registration by Holder shall be reduced or
eliminated before the securities to be sold by the Company are reduced.
<PAGE>
1.3 COMPANY REGISTRATION.
(a) If (but without any obligation to do so under this
Section 1) the Company proposes to register (including for this purpose a
registration effected by the Company for stockholders other than the Holder) any
of its stock or other securities under the Act in connection with the public
offering of such securities (other than a registration relating solely to the
sale of securities to participants in a Company stock plan or a registration
relating to a corporate reorganization or other transaction under Rule 145 of
the Act or a registration on any form that does not include substantially the
same information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at such
time, promptly give the Holder written notice of such registration. Upon the
written request of the Holder given within twenty (20) days after receipt of
such notice from the Company in accordance with Section 2.5, the Company shall,
subject to the provisions of Section 1.3(c), use its best efforts to cause to be
registered under the Act all of the Registrable Securities that the Holder has
requested to be registered.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 1.3 prior to the effectiveness of such registration whether or not the
Holder has elected to include securities in such registration. The expenses of
such withdrawn registration shall be borne by the Company in accordance with
Section 1.7 hereof.
(c) UNDERWRITING REQUIREMENTS. In connection with any
offering involving an underwriting of shares of the Company's capital stock, the
Company shall not be required under this Section 1.3 to include any of the
Holder's securities in such underwriting unless it accepts the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it and enter into an underwriting agreement in customary form with an
underwriter or underwriters selected by the Company; PROVIDED, that the Holder
may, at its option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
the Holder and that any or all of the conditions precedent to the obligations of
such underwriters under such underwriting agreement be conditions precedent to
the obligations of the Holder; PROVIDED FURTHER, that the Holder shall not be
required to make any representations or warranties to or agreements with the
Company other than representations, warranties or agreements regarding the
Holder, the Holder's Registrable Securities and the Holder's intended method of
distribution and any other representation required by law or with respect to
matters incidental to the foregoing as reasonably requested by the underwriters.
If (i) the total amount of securities, including Registrable Securities,
requested by stockholders to be included in such offering exceeds the amount of
securities requested to be sold other than by the Company that the underwriters
determine in their good faith judgment is compatible with the success of the
offering and (ii) other stockholders of the Company who hold registration rights
are also restricted in their ability to include securities in such offering by
terms at least as restrictive as this Section 1.3(c), then the Company shall be
required to include in the offering only that number of such securities,
including Registrable Securities, that the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the stockholders of the Company who
hold registration rights on parity with those granted to the Holder pursuant to
this Section 1.3 and propose to sell their shares of Common Stock in such
offering, including the Holder, according to the total amount of securities
entitled to be included therein owned by each such stockholder or in such other
proportions as shall mutually be agreed to by all such stockholders). For
purposes of the preceding parenthetical concerning apportionment, for any
selling stockholder that holds registration rights on parity with those granted
to the Holder pursuant to this Section 1.3 and that is a partnership or
<PAGE>
corporation, the partners, retired partners and stockholders of such
stockholder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be single "selling stockholder," and any pro rata reduction with
respect to such "selling stockholder" shall be based upon the aggregate amount
of securities owned by all such related entities and individuals.
1.4 FORM S-3 REGISTRATION. In case the Company shall receive from
the Holder a written request that the Company effect a registration on Form S-3,
including pursuant to Rule 415 under the Act and any related qualification or
compliance with respect to all or part of the Registrable Securities owned by
the Holder, the Company shall:
(a) use reasonable efforts to effect, as soon as
practicable, such registration and all such qualifications and compliances as
may be so requested and as would permit or facilitate the sale and distribution
of all or such portion of the Holder's Registrable Securities as are specified
in such request, provided, however, that the Company shall not be obligated to
effect any such registration, qualification or compliance, pursuant to this
Section 1.4:
(i) if Form S-3 is not available for such offering by
the Holder; or
(ii) if the Holder, proposes to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public of less than $30,000,000; or
(iii) if the Company shall furnish to the Holder a
certificate signed by the Chief Executive Officer or Chairman of the Board of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
stockholders for such Form S-3 registration to be effected at such time, in
which event the Company shall have the right to defer such registration for a
period of not more than forty-five (45) days after receipt of the request of the
Holder under this Section 1.4; provided, however, that the Company shall not
utilize this right or the right set forth in Section 1.2(c)(v) more than twice
in any twelve (12) month period, provided, further, that if the Company
exercises such right more than once, then the second deferral of such
registration shall not be for a period of more than thirty (30) days and there
shall be at least forty-five (45) days between the first and second such
deferral (which forty-five (45) day period shall not include any days during
which the Holder shall be prohibited from selling any Registrable Securities
because of any "black-out" or similar policies instituted by GlobeSpan which
serve to prohibit sales of GlobeSpan securities by the Holder, while the Holder
is in possession, or is presumed to be in possession, of material non-public
information); or
(iv) if the Company has, within the six (6) month
period preceding the date of such request, already effected a registration on
Form S-3 for the Holder pursuant to this Section 1.4; or
(v) in any particular state in which under relevant
Blue Sky laws the Company would be required to qualify to do business or to
execute a general consent to service of process in effecting such registration,
qualification or compliance, unless the Company is already subject to service in
such jurisdiction and except as may be required under the Act.
<PAGE>
(b) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request of the Holder.
1.5 OBLIGATIONS OF THE COMPANY. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration statement
with respect to such Registrable Securities (the "Shelf Registration Statement")
and use its reasonable best efforts to cause such registration statement to
become effective, and to keep such registration statement effective until the
distribution contemplated in the Registration Statement has been completed
except in the case of a "shelf registration" for which such period shall be the
earlier of two (2) years or until the date on which all securities registered
under such registration statement have been sold or withdrawn; PROVIDED THAT as
far in advance as practicable before filing each such registration statement,
the Company shall furnish copies of all such documents proposed to be filed to
counsel to the Holder;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement and to comply with the provisions of all
applicable securities laws with respect to the sale or other disposition of all
securities covered by such registration statement during such period in
accordance with the intended method or methods of disposition by the sellers
thereof set forth in such registration statement; PROVIDED that as far in
advance as practicable before filing each such amendment and supplement, the
Company shall furnish copies of all such documents proposed to be filed to
counsel to the Holder;
(c) furnish to the Holder such numbers of copies of such
registration statement (including amendments and supplements thereto) and the
prospectus, including the preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as the Holder may reasonably
request in order to facilitate the disposition of Registrable Securities;
(d) use reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holder, keep such registration or qualification in effect for so long as such
registration statement remains in effect, and do any and all other acts and
things which may be reasonably necessary or advisable to enable the Holder to
consummate the disposition in such jurisdictions of such securities owned by the
Holder; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service or process in any such states or jurisdictions;
(e) in the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering;
<PAGE>
(f) as soon as practicable notify the Holder at any time
when a prospectus relating to the registration statement covering the
Registrable Securities is required to be delivered under the Act or the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing and the Company shall promptly prepare and furnish
to the Holder a reasonable number of copies of a supplement or amendment to such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein in the light of
circumstances under which were made, not misleading;
(g) cause all such Registrable Securities registered
pursuant hereunder to be listed, on or prior to the effective date of such
registration statement, on each securities exchange on which similar securities
issued by the Company are then listed;
(h) provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration;
(i) make available for inspection by the Holder, any
underwriter participating in any sale or other disposition pursuant to such
registration statement, and any attorney, accountant or other agent retained by
the Company or any such underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by the Holder or any such underwriter,
attorney, accountant or agent in connection with such registration statement
(including the opportunity to discuss the business of the Company with its
officers and the independent public accountants who have certified its financial
statements) as shall be necessary, in the opinion of their respective counsel,
to conduct a reasonable investigation within the meaning of the Act; and give
the Holder, the underwriters and their respective attorneys, accountants or
agents the opportunity to participate in the preparation of such registration
statement, each prospectus included therein or each prospectus filed with the
Securities and Exchange Commission (the "COMMISSION") in connection therewith;
(j) promptly notify the Holder and each underwriter, if any:
(i) when such registration statement or any prospectus
used in connection therewith has been filed and, with respect to such
registration statement or any post-effective amendment thereto, when the same
has become effective;
(ii) of any written comments from the Commission with
respect to any filing referred to in clause (i) and of any written request by
the Commission for amendments or supplements to such registration statement or
prospectus;
(iii) of the notification to the Company by the
Commission or any other regulatory authority of its initiation of any proceeding
with respect to, or of the issuance by the Commission or any other regulatory
authority of, any stop order suspending the effectiveness of such registration
statement; and
<PAGE>
(iv) of the receipt by the Company of any notice with
respect to the suspension of the qualification of any Registrable Shares for
sale under applicable securities or blue sky laws of any jurisdiction;
and, in the case of clauses (ii), (iii) and (iv), promptly use all reasonable
and diligent efforts (A) to respond satisfactorily to any such comments and to
file promptly any necessary amendments or supplements, (B) to prevent the
issuance of any stop order or to obtain its withdrawal if such stop order should
be issued and (C) to obtain the withdrawal of any such suspension or
qualification, respectively;
(k) furnish to the Holder a signed counterpart, addressed to
the Holder (and each underwriter, if any) of:
(i) an opinion of counsel to the Company, dated the
effective date of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of the closing under
the underwriting agreement), reasonably satisfactory in form and substance to
the Holder (and such underwriter); and
(ii) a "comfort" letter, dated the effective date of
such registration statement (and, if such registration includes an underwritten
public offering, dated the date of the closing under the underwriting
agreement), signed by the independent public accountants who have certified the
Company's financial statements included in such registration statement, provided
that the Holder provides such accountants with such certificates as are
reasonably and customarily requested by such accountants;
in each case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the case of
the accountants' letter, with respect to events subsequent to the date of such
financial statements and other financial matters, as are customarily covered in
opinions of issuer's counsel and in accountants' letters delivered to the
underwriters in underwritten public offerings of securities;
(l) otherwise use all reasonable and diligent efforts to
comply with all applicable securities laws; and
(m) cooperate with the Holder and each underwriter or agent
participating in the disposition of such Registrable Shares and their respective
counsel in connection with any filings required to be made with the National
Association of Securities Dealers, Inc.
; provided, however, that if the Company shall furnish to Holder, a certificate
signed by the Company's Chief Executive Officer or Chairman of the Board stating
that in the good faith judgment of the Board of Directors of the Company, it
would be seriously detrimental to the Company and its stockholders for the shelf
registration to be effected at such time, in which event the Company shall have
the right to defer such shelf registration for a period of not more than
forty-five (45) days after receipt of the request of the Holder, provided that
such right to delay a request shall be exercised by the Company not more than
twice in any twelve (12)-month period, provided, further, that if the Company
exercises such right more than once, then the second deferral of such shelf
registration shall not be for a period of more than thirty (30) days and there
shall be at least forty-five (45) days between the first and second such
deferral (which forty-five (45) day period shall not include any days during
which the Holder shall be prohibited from selling any Registrable Securities
<PAGE>
because of any "black-out" or similar policies instituted by GlobeSpan which
serve to prohibit sales of GlobeSpan securities by the Holder, while the Holder
is in possession, or is presumed to be in possession, of material non-public
information).
1.6 OBLIGATIONS OF HOLDER.
(a) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of the Holder that (i) the Holder shall furnish to the
Company such information regarding itself (including, without limitation (if
PairGain is the Holder), all financial statements and other information required
by the Act and the Exchange Act and the rules and regulations thereunder), the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of the
Registrable Securities and (ii) if PairGain is the Holder, the Holder shall take
any other action the Company may reasonably request in connection with the
preparation and filing of the registration statement (including, without
limitation, causing PairGain's independent public accountants to prepare and
deliver all consents, reports, opinions or other information or instruments that
may be required by the Act, the Exchange Act and the rules and regulations
thereunder or as are otherwise necessary).
(b) The Holder agrees to notify the Company as promptly as
practicable of any inaccuracy or change in information previously furnished by
the Holder to the Company or of the occurrence of any event in either case as a
result of which any prospectus relating to any registration contains or would
contain an untrue statement of a material fact regarding the Holder or the
Holder's intended method of distribution of such Registrable Securities or omits
to state any material fact regarding the Holder or the Holder's intended method
of distribution of such Registrable Securities required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing, and promptly to furnish to the Company any
additional information required so that such prospectus shall not, with respect
to the Holder or the Holder's intended method of distribution of such
Registrable Securities, contain an untrue statement of material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(c) The Holder shall provide written notice to the Company
at least 24 hours prior to the sale by Holder of any Registrable Securities
pursuant to the Shelf Registration Statement. Notwithstanding anything to the
contrary contained herein, upon the receipt of such notice, the Company shall
have the right to prohibit the sale of the Registrable Securities pursuant to
such Shelf Registration Statement provided that the Company provides written
notice to the Holder within 24 hours of its prohibition of such sale and (i) the
Company in its good faith judgment believes that it would be seriously
detrimental to the Company and its stockholders for such sale to be effected at
that time or (ii) upon the happening of any event, as a result of which the
prospectus filed under the shelf registration statement includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing, it being agreed that in the case of
the prohibitions contemplated (i) and (ii) above, the Company shall use
reasonable efforts to minimize the period of time in which it shall so prohibit
the sale of any Registrable Securities and in no event shall any period of time
during which all sales are prohibited hereunder exceed an aggregate of 45 days
in any twelve month period.
<PAGE>
1.7 EXPENSES OF REGISTRATION. All expenses other than
underwriters discounts and commissions incurred in connection with
registrations, listings, filings, and qualifications pursuant to Sections 1.2,
1.3 and 1.4, including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees, fees and disbursements of
counsel for the Company and the reasonable fees and disbursements of one counsel
for the Holder shall be borne by the Company (whether or not such registrations
shall become effective).
1.8 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the fullest extent permitted by law, the Company
shall indemnify and hold harmless the Holder, the partners or officers,
directors and stockholders of the Holder, legal counsel and accountants for the
Holder, any underwriter (as defined in the Act) for the Holder and each person,
if any, who controls, is controlled by or under common control with the Holder
or underwriter within the meaning of the Act or the 1934 Act (collectively, the
"indemnified parties"), against any losses, claims, damages, penalties,
judgments, costs, expenses or liabilities (joint or several) to which they may
become subject under the Act, the 1934 Act or any state securities laws, insofar
as such losses, claims, damages, penalties, judgments, costs, expenses or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following (collectively a "Violation"): (i) any untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, (iii) any violation or
alleged violation by the Company of the Act, the 1934 Act, any state securities
laws or any rule or regulation promulgated under the Act, the 1934 Act or any
state securities laws, (iv) any breach of any representation, warranty,
agreement or covenant made by the Company in this Agreement, any registration
statement (including any supplement or amendment), each periodic report or proxy
statement filed by the Company with the Commission under the 1934 Act and any
agreement or other document in furtherance of any of the foregoing, or (v) any
litigation, claims, suits or proceedings to which an indemnified party is made a
party (other than as a plaintiff) in its capacity as a direct or indirect holder
or owner of shares of Common Stock of the Company; and the Company will
reimburse the Holder, underwriter or controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, penalty, judgment, cost, expense or
liability; provided, however, that the indemnity agreement contained in this
subsection 1.8(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, penalty, judgment, cost, expense or liability if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, penalty, judgment, cost, expense or liability
to the extent that it arises out of or is based upon a Violation that occurs in
reliance upon and in conformity with any information furnished expressly for use
in connection with such registration by the Holder or such underwriter or
controlling person.
(b) Promptly after receipt by an indemnified party under
this Section 1.8 of notice of the commencement of any action (including any
governmental action) such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
<PAGE>
satisfactory to the parties; provided, however, that an indemnified party shall
have the right, but not the obligation, to participate, at its own expense, in
the defense thereof through counsel of its own choice and shall have the right,
but not the obligation, to assert any and all cross-claims or counterclaims it
may have; PROVIDED FURTHER that an indemnified party (together with all other
indemnified parties that may be represented without conflict by one counsel)
shall have the right to retain one separate counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential differing interests between such indemnified party
and any other party represented by such counsel in such proceeding.
(c) If the indemnification provided for in this Section 1.8
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, penalty, judgment,
cost or expense referred to herein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss, liability,
claim, damage, penalty, judgment, cost or expense (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying party
on the one hand and the indemnified party or parties on the other hand or (ii)
if the allocation provided by clause (i) of this Section 1.8(c) is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) in this Section 1.8(c) but also the
relative fault of the indemnifying party or parties on the one hand and of the
indemnified party or parties on the other hand in connection with the Violation
that resulted in such loss, liability, claim, damage, penalty, judgment, cost or
expense, as well as any other relevant equitable considerations. In connection
with any registration statement filed with the Commission by the Company, (x)
the relative benefits received by the indemnifying party on the one hand and the
indemnified parties on the other hand shall be deemed to be in the same
respective proportions as the net proceeds from the offering of any securities
registered thereunder (before deducting expenses) received by the indemnifying
party and the net proceeds from the offering of any shares of Common Stock of
the Company (before deducting expenses) received by such indemnified parties,
bear to the aggregate public offering price of the securities registered
thereunder, (y) the relative fault of the indemnifying party on the one hand and
such indemnified parties on the other hand shall be determined by reference to,
among other things, whether any untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified parties and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission and (z) the indemnified
parties' respective obligations to contribute pursuant to this Section 1.8 are
several in proportion to the respective number of shares of Common Stock of the
Company they sell under any such registration statement, and not joint.
(d) The Company and the Holder agree that it would not be
just or equitable if contribution pursuant to this Section 1.8 were determined
by PRO RATA allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in Section 1.8(c) hereof.
The amount paid or payable by an indemnified party as a result of any loss,
liability, claim, damage, penalty, judgment, cost or expense referred to in
Section 1.8(a) shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 1.8, in connection with any
registration statement filed by the Company, the Holder shall not be required to
contribute any amount in excess of the net proceeds from the offering of the
shares of Common Stock of the Company (before deducting expenses) received by
<PAGE>
the Holder under any registration statement, by reason of any untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section 1.8 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
(e) The obligations of the Company and the Holder under this
Section 1.8 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise and
shall, in any event, remain in effect with respect to the Holder so long as the
Holder may, in the reasonable judgment of counsel for the Holder as evidenced by
a written opinion to such effect, constitute a "controlling person" with respect
to the Company, or be part of a group that may constitute such a "controlling
person," within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act; PROVIDED that the termination of Section 1.8 hereof shall not
be effective as to any loss, liability, claim, damage, penalty, judgment, cost
or expense or to any related facts that arose while Section 1.8 shall have been
in effect, and as to each of such loss, liability, claim, damage, penalty,
judgment, cost or expense the parties' rights and obligations hereunder shall
survive.
1.9 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holder the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit the
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times;
(b) take such action, as is necessary to enable the Holder
to utilize Form S-3 for the sale of its Registrable Securities, such action to
be taken as soon as practicable after the end of the fiscal year in which the
first registration statement filed by the Company for the offering of its
securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the 1934 Act; and
(d) furnish to the Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144,
the Act and the 1934 Act (at any time after it has become subject to such
reporting requirements), or that it qualifies as a registrant whose securities
may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a
copy of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested in availing the Holder of any rule or regulation
of the SEC that permits the selling of any such securities without registration
or pursuant to such form.
1.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by the Holder to a transferee
or assignee of such securities that is an affiliate, or a subsidiary, parent,
partner, limited partner, retired partner or shareholder, of the Holder;
<PAGE>
provided: (a) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; (b) such transferee or assignee agrees in writing to be bound by
and subject to the terms and conditions of this Agreement; and (c) such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act.
1.11 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holder, enter into any agreement with any holder or prospective
holder of any securities of the Company that would grant to such holder or
prospective holder registration rights that are senior to the registration
rights set forth in this Section 1.
1.12 TERMINATION OF REGISTRATION RIGHTS. The Holder shall not be
entitled to exercise any right provided for in this Section 1 at such time at
which (i) the Holder holds less than one percent (1%) of the Company's
outstanding stock and (ii) all Registrable Securities held by the Holder (and
any affiliate of the Holder with whom such Holder must aggregate its sales under
Rule 144) can be sold in any three (3)-month period without registration in
compliance with Rule 144 under the Act.
1.13 MARKET STAND-OFF. The Holder hereby agrees that, so long as
it holds five percent (5%) or more of the total outstanding shares of Common
Stock and Preferred Stock of the Company on a fully-diluted basis and all
officers and directors of the Company are also restricted in their ability to
transfer securities of the Company after an underwritten offering of the
Company's securities by terms at least as restrictive as this Section 1.13, it
will not, without the prior written consent of the managing underwriter, during
the period commencing on the date of the final prospectus relating to any such
offering and ending on the date specified by the Company and the managing
underwriter (such period not to exceed sixty (60) days) (i) lend, offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock (whether such shares or any such securities are then owned by the
Holder or are thereafter acquired), or (ii) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Common Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise. The underwriters in
connection with any such offering are intended third party beneficiaries of this
Section 1.13 and shall have the right, power and authority to enforce the
provisions hereof as though they were a party hereto. In order to enforce the
foregoing covenant, the Company may impose stop-transfer instructions with
respect to the Registrable Securities of the Holder (and the shares or
securities of every other person subject to the foregoing restriction) until the
end of such period.
2. MISCELLANEOUS.
2.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this Agreement,
<PAGE>
express or implied, is intended to confer upon any party hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
2.2 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
2.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
2.5 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
delivery by confirmed facsimile transmission, nationally recognized overnight
courier service, or upon deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed to the party to be
notified at the address indicated for such party on the signature page hereof,
or at such other address as such party may designate by ten (10) days' advance
written notice to the other parties.
2.6 EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
2.7 ENTIRE AGREEMENT: AMENDMENTS AND WAIVERS. This Agreement
(including the Exhibits hereto, if any) constitutes the full and entire
understanding and agreement among the parties with regard to the subjects hereof
and thereof. Any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company the Holder. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
Registrable Securities each future holder of all such Registrable Securities,
and the Company.
2.8 SEVERABILITY. If one ore more provisions of this Agreement
are held to be unenforceable under applicable law, such provisions shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provisions were so excluded and shall be enforceable in
accordance with its terms.
2.9 AGGREGATION OF STOCK. All shares of Registrable Securities
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE "COMPANY"
GLOBESPAN, INC.
By:/s/ Armando Geday
Armando Geday
Title: President and Chief Financial Officer
THE "HOLDER"
PAIRGAIN TECHNOLOGIES, INC.
By:/s/ Howard Flagg
Title: Executive Vice President-
Business Development
[copy]
NEITHER THE SECURITY EVIDENCED BY THIS NOTE NOR THE SECURITIES ISSUABLE UPON
CONVERSION HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE, AND SUCH SECURITIES MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF REGISTRATION THEREUNDER
OR AN EXEMPTION THEREFROM, UNLESS AN OPINION OF COUNSEL IS FURNISHED
REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY STATING
THAT AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE SECURITIES LAWS IS AVAILABLE.
GLOBESPAN, INC.
SUBORDINATED CONVERTIBLE PROMISSORY NOTE
$90,000,000 February 24, 2000
Red Bank, New Jersey
FOR VALUE RECEIVED, GlobeSpan, Inc., a Delaware corporation
("Company"), promises to pay to PairGain Technologies, Inc. ("Holder"), or its
assigns, the principal sum of Ninety Million Dollars ($90,000,000.00), or such
lesser amount as shall equal the outstanding principal amount hereof, together
with interest from the date of this subordinated convertible promissory note
(this "Note") on the unpaid principal balance calculated in accordance with
Section 2 hereof. All unpaid principal, together with any then unpaid and
accrued interest and other amounts payable hereunder, shall be due and payable
on the earlier of (i) the seventh anniversary of the date of this Note, or (ii)
when, upon or after the occurrence of an Event of Default (as defined below),
such amounts are declared due and payable by Holder or made automatically due
and payable in accordance with the terms hereof. This Note is issued pursuant to
the Asset Purchase Agreement (as defined below).
The following is a statement of the rights of Holder and the
conditions to which this Note is subject, and to which Holder, by the acceptance
of this Note, agrees:
1. Definitions. As used in this Note, the following capitalized terms
have the following meanings:
(a) "Asset Purchase Agreement" shall mean the Asset Purchase
Agreement dated January 21, 2000, between the Company and the Holder.
(b) "Business Day" shall mean any day other than a Saturday,
Sunday or a legal holiday under the laws of the State of New York.
(c) "Common Stock" shall mean the shares of common stock, par
value $0.001, of Company.
(d) "Event of Default" has the meaning given in Section 4 hereof.
<PAGE>
(e) "Holder" shall mean the Person specified in the introductory
paragraph of this Note or any Person who shall at the time be the holder of this
Note.
(f) "Liquidity Event" shall mean (i) any consolidation or merger
of Company with or into any Person, or any other corporate reorganizations in
which Company shall not be the continuing or surviving entity of such
consolidation, merger or reorganization or any transaction or series of related
transactions by Company in which in excess of 50% of Company's voting power is
transferred; (ii) a sale of Company assets in one or a series of related
transactions where the aggregate gross proceeds to the Company are in excess of
$30,000,000; or (iii) a sale of debt or equity securities of the Company, where
the aggregate gross proceeds to the Company are in excess of $30,000,000.
(g) "Obligations" shall mean and include all loans, advances,
debts, liabilities and obligations, howsoever arising, owed by Company to Holder
of every kind and description (whether or not evidenced by any note or
instrument and whether or not for the payment of money), now existing or
hereafter arising under or pursuant to the terms hereof, including, all
interest, fees, charges, expenses, attorneys' fees and costs and accountants'
fees and costs chargeable to and payable by Company hereunder and thereunder, in
each case, whether direct or indirect, absolute or contingent, due or to become
due, and whether or not arising after the commencement of a proceeding under
Title 11 of the United States Code (11 U. S. C. Section 101 et seq.), as amended
from time to time (including post-petition interest) and whether or not allowed
or allowable as a claim in any such proceeding.
(h) "Person" shall mean and include an individual, a partnership,
a corporation (including a business trust), a joint stock company, a limited
liability company, an unincorporated association, a joint venture or other
entity or a governmental authority.
(i) "Registration Rights Agreement" shall mean that certain
Registration Rights Agreement of even date herewith, between the Company and the
Holder.
(j) "Senior Indebtedness" shall mean, unless expressly
subordinated to or made on a parity with the amounts due under this Note, the
principal of (and premium, if any), unpaid interest on and amounts reimbursable,
fees, expenses, costs of enforcement and other amounts due in connection with,
(i) indebtedness of Company, to banks, commercial finance lenders, insurance
companies, leasing or equipment financing institutions or other lending
institutions regularly engaged in the business of lending money (excluding
venture capital, investment banking or similar institutions which sometimes
engage in lending activities but which are primarily engaged in investments in
equity securities), which is for money borrowed, or purchase or leasing of
equipment in the case of lease or other equipment financing, whether or not
secured, and (ii) any such indebtedness or any debentures, notes or other
evidence of indebtedness issued in exchange for such Senior Indebtedness, or any
indebtedness arising from the satisfaction of such Senior Indebtedness by a
guarantor.
(k) "Subsidiary" shall mean (a) any corporation of which more
than 50% of the issued and outstanding equity securities having ordinary voting
<PAGE>
power to elect a majority of the Board of Directors of such corporation is at
the time directly or indirectly owned or controlled by Company, (b) any
partnership, joint venture, or other association of which more than 50% of the
equity interest having the power to vote, direct or control the management of
such partnership, joint venture or other association is at the time directly or
indirectly owned and controlled by Company, (c) any other entity included in the
financial statements of Company on a consolidated basis.
2. Interest. The interest rate to be applied to the unpaid principal
balance of this Note shall be five percent (5%) per annum (calculated on the
basis of a 360-day year consisting of twelve 30-day months). Interest shall
accrue and shall not be payable until the final maturity of the Note or its
earlier prepayment or conversion. If this Note or a portion hereof is called for
prepayment or conversion as provided herein, this Note or such portion shall
cease to bear interest on and after the date fixed for such prepayment or
conversion.
3. Prepayment. At any time (i) on or prior to August 24, 2000, upon
fifteen days prior written notice to Holder, or (ii) after August 24, 2000,
concurrently with the consummation of a Liquidity Event, provided that Company
has given Holder not less than ten Business Days prior written notice of the
consummation of such Liquidity Event, Company may (subject to the limitations
set forth below in this Section 3), at its option, prepay, without penalty or
premium, this Note in whole or in part, from time to time, unless Holder elects
to convert this Note in accordance with section 7 of this Note; provided that
any such prepayment will be applied first to interest accrued on this Note to
the date of prepayment and second, if the amount of prepayment exceeds the
amount of all such expenses and accrued interest to the date of prepayment, to
the payment of principal of this Note. Any notice of prepayment given by the
Company under this Section 3 in connection with a Liquidity Event, shall include
the aggregate gross proceeds that the Company will receive in connection with
such Liquidity Event (the "Liquidity Proceeds") together with the amount under
this Note that the Company intends to prepay concurrently with the consummation
of such Liquidity Event (the "Prepayment Amount"); provided, that, in no event
shall the Prepayment Amount exceed the Liquidity Proceeds; provided, further,
that in the event such Liquidity Event is a sale of equity securities of the
Company pursuant to a registered offering under the Securities Act of 1933, as
amended, in which the Holder would be entitled to participate pursuant to the
terms of the Registration Rights Agreement, then in no event shall the
Prepayment Amount exceed the aggregate net proceeds that the Holder would have
received had the Holder elected to participate in such offering. In addition,
notice of prepayment or other notices shall be given by registered or certified
mail to the person in whose name this Note is registered at its address
designated on the register maintained by the Company on the date of making such
notice of prepayment or other notice.
4. Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" under this Note:
(a) FAILURE TO PAY. Company shall fail to pay (i) when due any
principal payment on the due date hereunder or (ii) any interest or other
payment required under the terms of this Note on the date due and such payment
shall not have been made within five (5) Business Days of Company's receipt of
Holder's written notice to Company of such failure to pay; or
<PAGE>
(b) VOLUNTARY BANKRUPTCY OR INSOLVENCY PROCEEDINGS. Company or
any of its Subsidiaries shall (i) apply for or consent to the appointment of a
receiver, trustee, liquidator or custodian of itself or of all or a substantial
part of its property, (ii) be unable, or admit in writing its inability, to pay
its debts generally as they mature, (iii) make a general assignment for the
benefit of its or any of its creditors, (iv) be dissolved or liquidated, (v)
become insolvent (as such term may be defined or interpreted under any
applicable statute), (vi) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession of
its property by any official in an involuntary case or other proceeding
commenced against it, or (vii) take any action for the purpose of effecting any
of the foregoing; or
(c) INVOLUNTARY BANKRUPTCY OR INSOLVENCY PROCEEDINGS. Proceedings
for the appointment of a receiver, trustee, liquidator or custodian of Company
or any of its Subsidiaries or of all or a substantial part of the property
thereof, or an involuntary case or other proceedings seeking liquidation,
reorganization or other relief with respect to Company or any of its
Subsidiaries or the debts thereof under any bankruptcy, insolvency or other
similar law now or hereafter in effect shall be commenced and an order for
relief entered or such proceeding shall not be dismissed or discharged within
thirty (30) days of commencement.
5. Rights of Holder upon Default. Upon the occurrence or existence of
any Event of Default (other than an Event of Default referred to in Sections
4(b) and 4(c)) and at any time thereafter during the continuance of such Event
of Default, Holder may, by written notice to Company, declare all outstanding
Obligations payable by Company hereunder to be immediately due and payable
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived, anything contained herein to the contrary
notwithstanding. Upon the occurrence or existence of any Event of Default
described in Sections 4(b) and 4(c), immediately and without notice, all
outstanding Obligations payable by Company hereunder shall automatically become
immediately due and payable, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived, anything contained
herein to the contrary notwithstanding. At any time after any declaration of
acceleration as to this Note has been made as provided in this Section 5, the
Holder may, by notice to the Company, rescind such declaration and its
consequences, if (i) the Company has paid all overdue installments of interest
on this Note and all principal that has become due otherwise than by such
declaration of acceleration and (ii) all other defaults and Events of Default
(other than nonpayments of principal and interest that have become due solely by
reason of acceleration) shall have been remedied or cured or shall have been
waived pursuant to this paragraph; provided, however, that no such recission
shall extend to or affect any subsequent default or Event of Default or impair
any right consequent thereon. In addition to the foregoing remedies, upon the
occurrence or existence of any Event of Default, Holder may exercise any other
right power or remedy permitted to it by law, either by suit in equity or by
action at law, or both.
<PAGE>
6. Subordination.
(a) SUBORDINATION. The indebtedness evidenced by this Note is
hereby expressly subordinated, to the extent and in the manner hereinafter set
forth, in right of payment to the prior payment in full of all of Company's
Senior Indebtedness.
(b) FURTHER ASSURANCES. By acceptance of this Note, Holder agrees
to execute and deliver customary forms of subordination agreements requested
from time to time by holders of Senior Indebtedness, and as a condition to
Holder's rights hereunder, Company may require that Holder execute such forms of
subordination agreements; provided that such forms shall not impose on Holder
terms less favorable than those provided herein.
(c) OTHER INDEBTEDNESS. No indebtedness which does not constitute
Senior Indebtedness shall be senior in any respect to the indebtedness
represented by this Note.
(d) NO IMPAIRMENT. Subject to the rights, if any, of the holders
of Senior Indebtedness, under subordination agreements entered into between
Holder and holders of Senior Indebtedness, to receive cash, securities or other
properties otherwise payable or deliverable to Holder, nothing contained in this
Section 6 shall impair, as between Company and Holder, the obligation of
Company, subject to the terms and conditions hereof, to pay to Holder the
principal hereof and interest hereon as and when the same become due and
payable, or shall prevent Holder, upon default hereunder, from exercising all
rights, powers and remedies otherwise provided herein or by applicable law.
7. Conversion.
(a) VOLUNTARY CONVERSION. On or after August 24, 2000, Holder has
the right, at Holder's option, at any time prior to payment in full of this
Note, to convert this Note, in whole or in part, at the office of the Company or
any transfer agent into the number of shares of Common Stock of the Company
which is equal to the quotient obtained by dividing (A) the outstanding
principal unpaid amount of this Note (or a portion thereof) which the Holder
elects to convert, by (B) the Note Conversion Price, immediately in effect prior
to the time of such conversion. The "Note Conversion Price" shall be $92.49 (as
adjusted from time to time as provided below).
(b) MECHANICS OF CONVERSION. This Note is convertible by
surrendering the original Note, duly endorsed, at the office of the Company or
of any transfer agent for the shares of Common Stock and giving written notice
to Company at such office that Holder elects to convert the same. Thereupon, the
Company shall, as soon as practicable thereafter, issue and deliver at such
office to Holder a certificate or certificates for the number of shares of
Common Stock to which Holder is entitled together with a check in an amount
equal to the amount of accrued but unpaid interest on the principal amount of
the Note which is being converted, and, if the Holder elects to convert less
than the entire unpaid amount of this Note, then the Company shall, at the same
time it issues and delivers the Common Stock certificate or certificates, issue
and deliver at such office to Holder a new promissory note, in substantially the
form hereof, representing the remaining amounts owing hereunder. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the certificate or certificates representing the
shares to be converted, and the person entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder of such shares of Common Stock on such date.
<PAGE>
(c) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company
at any time or from time to time after the date of this Note (the "Effective
Date") effects a division of the outstanding shares of Common Stock, then the
Note Conversion Price shall be proportionately decreased and, conversely, if
this Company at any time, or from time to time, after the Effective Date
combines the outstanding shares of Common Stock, then the Note Conversion Price
shall be proportionately increased. Any adjustment under this Section 7(c) shall
be effective on the close of business on the date such division or combination
becomes effective.
(d) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. If the
Company at any time or from time to time after the Effective Date pays or fixes
a record date for the determination of holders of shares of Common Stock
entitled to receive a dividend or other distribution in the form of shares of
Common Stock, or rights or options for the purchase of, or securities
convertible into, Common Stock, then in each such event the Note Conversion
Price shall be decreased, as of the time of such payment or, in the event a
record date is fixed, as of the close of business of such record date, by
multiplying the Note Conversion Price by a fraction (i) the numerator of which
shall be the total number of shares of Common Stock outstanding immediately
prior to the time of such payment or the close of business on such record date,
as the case may be, and (ii) the denominator of which shall be the sum of (A)
the total number of shares of Common Stock outstanding immediately prior to the
time of such payment or the close of business on such record date, as the case
may be, plus (B) the number of shares of Common Stock issuable in payment of
such dividend or distribution or upon exercise of such option or right of
conversion; PROVIDED, HOWEVER, that if a record date is fixed and such dividend
is not fully paid or such other distribution is not fully made on the date fixed
therefor, then the Note Conversion Price shall not be decreased as of the close
of business on such record date as hereinabove provided as to the portion not
fully paid or distributed and thereafter the Note Conversion Price shall be
decreased pursuant to this Section 7(d) as of the date or dates of actual
payment of such dividend or distribution.
(e) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If the
Company at any time or from time to time after the Effective Date pays, or fixes
a record date for the determination of holders of shares of Common Stock
entitled to receive, a dividend or other distribution in the form of securities
of the Company other than shares of Common Stock or rights or options for the
purchase of, or securities convertible into, Common Stock, then in each such
event provision shall be made so that the Holder shall receive upon conversion
of this Note, in addition to the number of shares of Common Stock receivable
thereupon, the amount of securities of the Company which it would have received
had this Note been converted into shares of Common Stock on the date one day
before such event (adjusted to account for any additional accrued but unpaid
interest and other fees due under this Note) and had Holder thereafter, from the
date of such event to and including the actual date of conversion of this Note,
retained such securities, subject to all other adjustments called for during
such period under this Section 7 with respect to the rights of the Holder.
<PAGE>
(f) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION.
If at any time or from time to time after the Effective Date the number of
shares of Common Stock issuable upon conversion of this Note, is changed into
the same or a different number of shares of any other class or classes of stock
or other securities, whether by recapitalization, reclassification or otherwise
(other than a recapitalization, division or combination of shares or a stock
dividend, or a reorganization, merger, consolidation or sale of assets provided
for elsewhere in this Section 7), then in any such event the Holder shall have
the right thereafter to convert this Note into the same kind and amount of stock
and other securities receivable upon such recapitalization, reclassification or
other change, as the maximum number of shares of Common Stock into which this
Note, could have been converted immediately prior to such recapitalization
(adjusted to account for any additional accrued but unpaid interest and other
fees due under this Note), reclassification or change, all subject to further
adjustment as provided herein.
(g) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS.
If at any time or from time to time after the Effective Date there is a capital
reorganization of the Common Stock (other than a recapitalization, division,
combination, reclassification or exchange of shares provided for elsewhere in
this Section 7) or a merger or consolidation of this Company into or with
another corporation or the sale of all or substantially all of its assets to
another corporation in such a way (including, without limitation, by way of
consolidation or merger) that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then, unless this Note is converted prior thereto or prepaid upon
consummation thereof as provided in Section 3 above, as a part of such capital
reorganization, merger or ,consolidation, or sale, provision shall be made so
that the Holder shall thereafter receive upon conversion hereof the number of
shares of stock or other securities or property of this Company, or of the
successor corporation resulting from such capital reorganization, merger, or
consolidation or sale, to which a holder of the number of shares of Common Stock
into which this Note would have been entitled on such capital reorganization,
merger, consolidation or sale (adjusted to account for any additional accrued
but unpaid interest due under this Note). In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 7
with respect to the rights of the Holder after such capital reorganization,
merger, consolidation, or sale. The provisions of this Section 7 (including
adjustment of the Note Conversion Price and the number of shares into which this
Note may be converted) shall be applicable after that event and be as nearly
equivalent to such Note Conversion Prices and number of shares as may be
practicable.
(h) FRACTIONAL SHARES; EFFECT OF CONVERSION. The Company may, but
shall not be obligated to, issue any fractional shares upon conversion of this
Note. In the event that Company elects not to issue fractional shares, Company
shall round the number of shares to the nearest whole share of each type of
Common Stock, provided that if such rounding would result in Holder receiving
less than 99.9% of the amount of such Common Stock to which it is entitled,
pursuant to this Section 7, such fraction shall be rounded up to the next whole
share of Common Stock.
(i) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company
shall at all times reserve and keep available out of its authorized but unissued
<PAGE>
[copy]
shares of Common Stock or treasury stock, solely for the purpose of effecting
the conversion of this Note, such number of shares of Common Stock as shall from
time to time be sufficient to effect the conversion of this Note.
8. Successors and Assigns. Subject to the restrictions on transfer
described in Section 9 below, the rights and obligations of Company and Holder
of this Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
9. Assignment by Company. Neither this Note nor any of the rights,
interests or obligations hereunder may be assigned, by operation of law or
otherwise, in whole or in part, by Company without the prior written consent of
Holder.
10. Waiver. Company hereby waives presentment, demand, or protest and
any notice of any kind in connection with the delivery, acceptance, performance,
default, acceleration, or collection of this Note.
11. Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by recognized overnight courier or
personal delivery at the respective addresses of the parties as set forth in the
Asset Purchase Agreement or on the register maintained by Company. Any party
hereto may by notice so given change its address for future notice hereunder.
Notice shall conclusively be deemed to have been given when received.
12. Payment. Payments made hereunder shall be made in lawful tender of
the United States.
13. Expenses. If action is instituted to collect any amounts owing
under this Note, Company promises to pay all costs and expenses, including,
without limitation, reasonable attorneys' fees and costs, incurred in connection
with such action.
14. Governing Law. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance with
the laws of the State of New York, without regard to the conflicts of law
provisions of the State of New York, or of any other state.
IN WITNESS WHEREOF, Company has caused this Note to be issued as of
the date first written above.
GLOBESPAN, INC.,
a Delaware corporation
By:/s/Armando Geday [copy]
Armando Geday, President and Chief
Executive Officer
Exhibit 99.1
GLOBESPAN CLOSES FICON TECHNOLOGY, INC. ACQUISITION
Red Bank, NJ--(BUSINESS WIRE)-- Jan. 31, 2000 - GlobeSpan, Inc. (NASDAQ:GSPN
news), a leading provider of integrated circuit, software and systems designs
for digital subscriber line (DSL) applications today announced the closing of
its acquisition of Ficon Technology,Inc., a Woodbridge, N.J. based communication
software provider for packet-based broadband access and switching solutions.
Ficon Technology, Inc., is a leading provider of solutions in the areas of IP,
ATM and Voice over Packet, which enable the service providers to build the next
generation communications infrastructure. The broadband communication software
solutions offered by Ficon play a crucial role in equipment vendors products
required to build a packet-based converged switching and routing network with
guaranteed Quality of Service (QoS) for voice, data and multimedia applications.
Ficon's products represent critical components of broadband access systems and
network edge devices which are experiencing high growth due to the Internet
revolution. GlobeSpan plans to retain all of Ficon's employees comprising of
approximately 60 engineers.
About GlobeSpan
GlobeSpan, Inc. is a leading worldwide developer of advanced DSL chipsets, which
enable data transmission over the existing network of copper telephone wires,
known as the local loop, at rates over 100 times faster than today's commonly
deployed 56K modems. To date, the company has shipped more than one million DSL
chipsets, representing a significant share of this emerging market, to a
customer base of more than 100 DSL equipment manufacturers. GlobeSpan, Inc. is
based at 100 Schulz Drive, Red Bank, New Jersey 07701 and can be reached by
phone at + 1-732-345-7500. The company's web site is WWW.GLOBESPAN.NET.
GlobeSpan is a trademark of GlobeSpan, Inc.
About Ficon Technology, Inc.
Ficon Technology provides products and system solutions in next-generation
networking and communication technologies such as IP routing and switching, ATM,
Inverse Multiplexing over ATM (IMA), and Voice over Packet. These solutions have
been successfully incorporated into many customer products including IP edge
switches and routers, ATM edge and core switches, Voice Gateways, Integrated
Access Devices, DSL modems and DSL Access Multiplexers (DSLAMs). Ficon was
founded in 1996 in Woodbridge and has grown rapidly opening three more
engineering centers in Richardson, TX., and Durham, NC., and a subsidiary in New
Delhi, India. Ficon Technology, Inc. is headquartered at 1000 Route 9 North,
Woodbridge, New Jersey 07095. The company's web site is WWW.FICON-TECH.COM
Except for the historical information contained herein, the matters discussed in
the press release are forward-looking statements within the meaning of the
safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are subject to risks and uncertainties that may
cause actual results to differ materially, including but not limited to
economic, competitive, governmental and technological factors affecting the
company's operations, markets, services and related products, prices and other
factors discussed in GlobeSpan's recent prospectus and other periodic filings
with the Securities and Exchange Commission.
Exhibit 99.2
Contact:
Bob McMullan
Chief Financial Officer
GlobeSpan, Inc
+1-732-345-7558
Kim Gower
PairGain Technologies, Inc.
+1-714-832-9922
GLOBESPAN CLOSES PAIRGAIN'S MICROELECTRONICS GROUP ACQUISITION
RED BANK, NEW JERSEY AND TUSTIN, CA - FEBRUARY 25, 2000 - GlobeSpan, Inc.
(NASDAQ:GSPN), a), a leading provider of integrated circuit, software and
systems designs for digital subscriber line (DSL) applications and PairGain
Technologies, Inc. (NASDAQ:PAIR), a leader in DSL access systems, today
announced they closed the purchase and sale of PairGain's microelectronics
group, designers of integrated circuits and software for DSL applications, to
GlobeSpan.
The purchase price was a combination of 1,081,197 shares of GlobeSpan common
stock and a $90.0 million subordinated redeemable convertible note.
About GlobeSpan
GlobeSpan, Inc. is a leading worldwide developer of advanced DSL chipsets, which
enable data transmission over the existing network of copper telephone wires,
known as the local loop, at rates over 100 times faster than today's commonly
deployed 56K modems. To date, the company has shipped several million DSL
chipsets, representing a significant share of this emerging market, to a
customer base of more than 100 DSL equipment manufacturers. GlobeSpan, Inc. is
based at 100 Schulz Drive, Red Bank, New Jersey 07701 and can be reached by
phone at + 1-732-345-7500. The company's web site is WWW.GLOBESPAN.NET.
GlobeSpan is a trademark of GlobeSpan, Inc.
About PairGain Technologies, Inc.
PairGain is the leader in the design, manufacture and sale of DSL networking
systems. Service providers and private network operators worldwide use
PairGain's products to deploy DSL-based services such as high-speed Internet and
remote LAN access. On February 23, 2000 the company announced that it had
reached an agreement with ADC Telecommunications (NASDAQ: ADCT) for the
acquisition of PairGain by ADC.
Additional information about the company is available on the Internet at
WWW.PAIRGAIN.COM.
# # #
Except for the historical information contained herein, the matters discussed in
this press release are forward-looking statements within the meaning of the
safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are subject to risks and uncertainties that may
cause actual results to differ materially, including but not limited to
economic, competitive, governmental and technological factors affecting both
GlobeSpan's and PairGain Technologies' operations, markets, services and related
products, prices and other factors discussed in GlobeSpan's recent prospectus
and other periodic filing with the Securities and Exchange Commission and
PairGain's periodic filings with the Securities and Exchange Commission.
