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EXCHANGE AGREEMENT
among:
ALTEON WEBSYSTEMS, INC.,
a Delaware corporation;
PHARSALIA TECHNOLOGIES, INC.
a Delaware corporation;
and
the KEY STOCKHOLDER (as defined herein)
Dated as of March 31, 2000
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TABLE OF CONTENTS
Page
1. Description of Transaction............................................ 1
1.1 Alteon Stock.................................................... 1
1.2 The Exchange.................................................... 2
1.3 Effect of the Exchange.......................................... 2
1.4 Sale and Purchase of Shares..................................... 2
1.5 Exchange Ratio.................................................. 2
1.6 Closing......................................................... 2
1.7 Directors and Officers.......................................... 3
1.8 Conversion of Shares............................................ 3
1.9 Employee Stock Options.......................................... 4
1.10 Closing of Seller's Transfer Books.............................. 5
1.11 Delivery of Certificates and Stock Powers to Seller; Exchange
of Certificates; Escrow Stock................................... 5
1.12 Seller Board Meetings........................................... 6
1.13 Tax Treatment................................................... 6
2. Representations and Warranties of Seller and the Key Stockholder...... 6
2.1 Due Organization; No Subsidiaries; Etc.......................... 6
2.2 Certificate of Incorporation and Bylaws; Records................ 7
2.3 Capitalization, Etc............................................. 7
2.4 Financial Statements............................................ 8
2.5 Title to Assets................................................. 9
2.6 Equipment....................................................... 9
2.7 Real Property................................................... 9
2.8 Proprietary Assets.............................................. 9
2.9 Intentionally Omitted........................................... 10
2.10 Contracts....................................................... 10
2.11 Liabilities..................................................... 11
2.12 Compliance With Legal Requirements.............................. 11
2.13 Governmental Authorizations..................................... 11
2.14 Tax Matters..................................................... 12
2.15 Employee and Labor Matters...................................... 12
2.16 Benefit Plans; ERISA............................................ 13
2.17 Environmental Matters........................................... 15
2.18 Insurance....................................................... 15
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TABLE OF CONTENTS
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2.19 Related Party Transactions...................................... 15
2.20 Certain Payments, Etc........................................... 16
2.21 Proceedings; Orders............................................. 16
2.22 Authority; Binding Nature of Agreements......................... 17
2.23 Non-Contravention; Consents..................................... 17
2.24 No Brokers...................................................... 18
2.25 Intentionally Omitted........................................... 18
2.26 Full Disclosure................................................. 18
2.27 Accredited Investor............................................. 19
2.28 Seller's Assets................................................. 19
3. Representations and Warranties of Purchaser........................... 19
3.1 Acquisition of Shares........................................... 19
3.2 Authority; Binding Nature of Agreement.......................... 19
3.3 Brokers......................................................... 19
3.4 Valid Issuance.................................................. 19
3.5 Due Organization................................................ 19
4. Pre-Closing Covenants of Seller and the Key Stockholder............... 20
4.1 Access and Investigation........................................ 20
4.2 Operation of Business........................................... 20
4.3 Filings and Consents............................................ 22
4.4 Notification; Updates to Disclosure Schedule.................... 22
4.5 Payment of Indebtedness by Related Parties...................... 23
4.6 No Negotiation.................................................. 23
4.7 Best Efforts.................................................... 24
4.8 Confidentiality................................................. 24
4.9 Additional Capital.............................................. 24
4.10 Audited Financial Statements.................................... 24
4.11 Stockholder Agreements; Delivery of Seller Stock Certificates... 24
4.12 Assumed Options Permitted under Option Plan..................... 24
4.13 Registration Statement.......................................... 24
5. Pre-Closing Covenants of Purchaser.................................... 25
5.1 Best Efforts.................................................... 25
5.2 Confidentiality................................................. 25
6. Conditions Precedent to Purchaser's Obligation to Close............... 25
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TABLE OF CONTENTS
Page
6.1 Accuracy of Representations..................................... 25
6.2 Performance of Obligations...................................... 26
6.3 Consents........................................................ 26
6.4 Additional Documents............................................ 26
6.5 No Proceedings.................................................. 26
6.6 No Claim Regarding Stock Ownership or Sale Proceeds............. 26
6.7 No Prohibition.................................................. 26
7. Conditions Precedent to Stockholders' Obligation to Close............. 27
7.1 Accuracy of Representations..................................... 27
7.2 Purchaser's Performance......................................... 27
7.3 No Injunction................................................... 27
7.4 No Proceedings.................................................. 27
8. Termination........................................................... 27
8.1 Termination Events.............................................. 27
8.2 Termination Procedures.......................................... 28
8.3 Effect of Termination........................................... 29
8.4 Nonexclusivity of Termination Rights............................ 29
9. Indemnification, Etc.................................................. 29
9.1 Survival of Representations and Covenants........................ 29
9.2 Indemnification by Stockholders.................................. 29
9.3 Threshold........................................................ 31
9.4 Right to Require Cure of Breach.................................. 31
9.5 No Contribution.................................................. 31
9.6 Exclusive Remedy................................................. 31
9.7 Defense of Third Party Claims.................................... 31
9.8 Exercise of Remedies by Indemnitees Other Than Purchaser......... 32
10. Miscellaneous Provisions.............................................. 32
10.1 Several Liability............................................... 32
10.2 Intentionally Omitted........................................... 33
10.3 Fees and Expenses............................................... 33
10.4 Attorneys' Fees................................................. 34
10.5 Notices......................................................... 34
10.6 Publicity....................................................... 35
10.7 No Hire......................................................... 35
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TABLE OF CONTENTS
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10.8 Time of the Essence............................................ 35
10.9 Headings....................................................... 35
10.10 Counterparts................................................... 35
10.11 Governing Law; Venue........................................... 35
10.12 Successors and Assigns; Assignment............................. 36
10.13 Remedies Cumulative; Specific Performance...................... 36
10.14 Waiver......................................................... 37
10.15 Amendments..................................................... 37
10.16 Severability................................................... 37
10.17 Parties in Interest............................................ 37
10.18 Entire Agreement............................................... 37
10.19 Construction................................................... 37
10.20 Purchaser Voting Rights Waiver................................. 38
EXHIBITS
Exhibit A: Certain Definitions
Exhibit B: Form of Stockholder Agreement
Exhibit C: Escrow Agreement
Exhibit D: OEM Agreement
Exhibit E: Form of Non-Competition Agreement
Exhibit F: Form of Opinion of Sims Moss Kline & Davis LLP
Exhibit G: Form of Opinion of Cooley Godward LLP
Exhibit H: Registration Rights Agreement
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EXCHANGE AGREEMENT
This Exchange Agreement is entered into as of March 31, 2000 (the
"Effective Date"), by and among Alteon WebSystems, Inc., a Delaware corporation
("Purchaser"), Pharsalia Technologies, Inc., a Delaware corporation ("Seller"),
and Richard A. Howes (the "Key Stockholder"). Capitalized terms used in this
Agreement and not otherwise defined shall have the meanings given to them on
Exhibit A. Purchaser, Seller and the Key Stockholder are referred to herein
individually, as a "Party," and collectively, as the "Parties."
Recitals
A. The stockholders and optionholders of Seller, including the Key
Stockholder (the "Stockholders") own all of the outstanding capital stock and
options of Seller, other than the Alteon Stock which is owned by Purchaser. For
the purpose of this Agreement, the Stockholders include all holders of any
capital stock of Seller and all holders of any option, convertible debt
securities or other right to purchase any shares of capital stock of Seller as
of the Effective Date, or as of the date of becoming a Stockholder if such date
is after the Effective Date, and through the Closing Date. A listing of the
Stockholders and their respective holdings of Seller is set forth in the
Disclosure Schedule.
B. Pursuant to this Agreement and the Stockholder Agreements (as described
in Recital C), the Seller on behalf of the Stockholders shall have the right to
put, and Purchaser shall have the right to call, the outstanding capital stock
of Seller, other than the Alteon Stock, as a result of which Seller will become
a wholly-owned subsidiary of Purchaser and each Stockholder's capital stock and
all outstanding options will be automatically exchanged for shares of common
stock and options of Purchaser, as applicable.
C. Concurrently with the execution of this Agreement, and as a condition
and inducement to Purchaser's willingness to enter into this Agreement, (i) each
Stockholder shall enter into with Purchaser a Stockholder Agreement and an
Escrow Agreement, in the form of Exhibit B and Exhibit C, respectively, attached
hereto, (ii) Seller shall enter into an OEM agreement with Purchaser in the form
of Exhibit D attached hereto (the "OEM Agreement") whereby Seller shall develop
the Product in accordance with the Product Specifications and (iii) each
Stockholder shall enter into a registration rights agreement in the form of
Exhibit H attached hereto (the "Registration Rights Agreement").
Agreement
Purchaser, Seller and the Key Stockholder, intending to be legally bound,
agree as follows:
1. Description of Transaction
1.1 Alteon Stock. On the Effective Date, Seller shall issue to Purchaser
300 shares of Series A preferred stock of Seller, $.0001 par value per share
("Series A Preferred Stock"), plus the number of shares of Series A Preferred
Stock (including fractional shares) valued at $10,000 per share equal to the
accrued interest on the promissory note in the principal amount of $2,000,000
dated December 30, 1999 between Purchaser and Seller (the "Note"), with a per
share value of $10,000 and with the powers, designations, preferences and other
special rights as set forth in the Certificate of Designations, Preferences and
Rights of Series A Preferred Stock of Seller dated March 31, 2000. Any shares of
stock issued to Purchaser by Seller, including such shares of Series A Preferred
Stock, shall be referred to as the "Alteon Stock." The consideration provided to
Seller by Purchaser for such issuance is (i) the Note; (ii) the accrued interest
on the Note; and (iii) $1,000,000 in cash to be paid by Purchaser to Seller on
the Effective Date.
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1.2 The Exchange. Upon delivery by written notice to the other Parties to
this Agreement (the "Exchange Notice") and subject to Section 1.6 below: (i)
Purchaser may at any time following September 1, 2000 and prior to the
Termination Date and (ii) Seller, on behalf of the Stockholders, may at any time
following the Satisfaction Date and prior to the Termination Date, elect to
cause the exchange (the "Exchange"). The Exchange shall mean (i) the automatic
exchange of the Seller Common Stock for Purchaser Common Stock in accordance
with the Exchange Ratio, as provided for in the Stockholder Agreements and (ii)
the automatic assumption by Purchaser of each Seller Option as provided in
Section 1.9.
1.3 Effect of the Exchange. In the event of consummation of the Exchange,
Seller shall become a wholly-owned subsidiary of Purchaser and (i) pursuant to
Section 1.8, each share of common stock of Seller, par value $0.0001 per share
("Seller Common Stock") shall be automatically exchanged for shares of common
stock of Purchaser, par value $0.001 per share ("Purchaser Common Stock") and
(ii) pursuant to Section 1.9, each Seller Option (as defined in Section 1.9)
shall be assumed by Purchaser. The terms of each such Exchange are set forth in
the Stockholder Agreement between Purchaser and each Stockholder.
1.4 Sale and Purchase of Shares. At the Closing, each Stockholder shall
sell, assign, transfer and deliver all of their shares of common stock of Seller
to Purchaser, and Purchaser shall purchase the same from the Stockholders, on
the terms and subject to the conditions set forth in this Agreement.
1.5 Exchange Ratio.
(a) Certain Definitions for Purposes of Determining the Exchange
Ratio.
(i) "Average Trading Price" means the average of the closing
prices of Purchaser Common Stock as reported on the Nasdaq National Market or
over-the-counter market for each of the 60 trading days ending on the day
immediately preceding the Satisfaction Date.
(ii) "Seller Value" means (A) if the Delivery Date is
November 1, 2000, $100,000,000 or (B) if the Delivery Date is prior to
November 1, 2000, the sum of (1) $100,000,000 and (2) $333,333 multiplied by the
number of calendar days between and including the Delivery Date and September 1,
2000; provided, however, that in no event shall the Seller Value exceed
$120,000,000.
(iii) "Fully-Diluted Capitalization" means the sum of (1) the
outstanding shares of Seller Common Stock and (2) the number of shares issuable
upon the exercise of all options, warrants or any rights for the issuance of any
other type of security (excluding the Alteon Stock) of Seller, whether or not
any of the foregoing is disclosed on the Disclosure Schedule.
(b) Exchange Ratio. The purchase price per share payable by Purchaser
for the Seller Common Stock and the ratio to be used in Section 1.9(b) to
calculate the number of Assumed Options shall be based on an exchange ratio that
is determined by dividing the Seller Value by the Average Trading Price and
dividing that quotient by the Fully-Diluted Capitalization of Seller on the
Closing Date (the "Exchange Ratio").
1.6 Closing.
(a) The closing of the Exchange (the "Closing") shall take place at
the offices of Cooley Godward LLP, Five Palo Alto Square, 3000 El Camino Real,
Palo Alto, CA 94306 (or at such other place Purchaser and the Agent may jointly
designate) within 10 business days following the
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delivery of the Exchange Notice, subject to the Parties' compliance with
applicable regulatory and securities requirements and the conditions set forth
in Sections 6 and 7. For the purposes of this Agreement, "Scheduled Closing
Time" means the time and date that the Closing is required to take place
pursuant to this Section 1.6(a) and "Closing Date" means the time and date that
the Closing actually takes place.
(b) At the Closing:
(i) Seller shall deliver to Purchaser (i) all Seller Stock
Certificates representing the outstanding shares of Seller Common Stock, (ii) 5
original Stock Powers (as defined in the Stockholder Agreements) and (iii) a
Stockholder Agreement and the Registration Rights Agreement, executed by Seller
and each Stockholder;
(ii) Purchaser shall issue the total number of shares of
Purchaser Common Stock (the "Total Consideration") to the Agent and the Escrow
Agent as contemplated by Section 1.11;
(iii) The Key Stockholder and each other employee of Seller
("Employee") set forth in Part 2.15 of the Disclosure Schedule shall execute and
deliver to Purchaser and Seller a Noncompetition Agreement in the form of
Exhibit E attached hereto; and
(iv) The Seller and the Key Stockholder shall execute and
deliver to Purchaser a certificate (the "Closing Certificate") setting forth the
Seller's and Key Stockholder stating that (A) each of the representations and
warranties made by Seller and the Key Stockholder in this Agreement was accurate
in all respects as of the date of this Agreement, (B) except as expressly set
forth in the Closing Certificate, each of the representations and warranties
made by Seller and the Key Stockholder in this Agreement is accurate in all
respects as of the Closing Date as if made on the Closing Date, (C) each of the
covenants and obligations that Seller and the Key Stockholder are required to
have complied with or performed pursuant to this Agreement at or prior to the
Closing has been duly complied with and performed in all respects and (D) except
as expressly set forth in the Closing Certificate, each of the conditions set
forth in Sections 6.2(b), 6.5 and 6.6 has been satisfied in all respects.
1.7 Directors and Officers. Unless otherwise determined by Purchaser prior
to the Closing Date, the directors and officers of Seller immediately after the
Closing Date shall be the individuals specified by Purchaser and those
individuals not so specified shall resign prior to the Closing. Nothing
contained herein shall require any person serving as an officer or director of
Seller to continue in such position following the Closing Date.
1.8 Conversion of Shares.
(a) Subject to Section 1.11(d), at the Closing Date, each share of
common stock of Seller Common Stock outstanding immediately prior to the Closing
Date shall be converted into the right to receive the number of whole shares of
Purchaser Common Stock based on the Exchange Ratio. The Alteon Stock shall not
be converted and, as set forth in Section 1.11(d), no fractional shares shall be
issued.
(b) If any Seller Common Stock immediately prior to the Exchange is
unvested or subject to a repurchase option, risk of forfeiture or other
condition under any applicable restricted stock purchase agreement or other
agreement with Seller, then Purchaser Common Stock issued in exchange for such
Seller Common Stock will also be unvested and/or subject to the same vesting
schedule, repurchase option, risk of forfeiture or other condition and, as of
the Closing Date, Seller is hereby deemed to have
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assigned and transferred to Purchaser all such rights, and the certificates
representing such shares of Purchaser Common Stock may accordingly be marked
with appropriate legends.
(c) A portion of the shares of the Seller Common Stock shall be
delivered into escrow and held as specified in Section 1.11(a).
1.9 Employee Stock Options.
(a) At the Closing Date, each stock option then outstanding under the
stock option plan of Seller (the "Option Plan"), whether vested or unvested
("Seller Option"), shall be assumed by Purchaser ("Assumed Option") in
accordance with the terms of this Agreement and the terms (as in effect as of
the Effective Date) of the Option Plan and the stock option agreement by which
such Seller Option is evidenced. The Option Plan will be adopted by Seller
within a reasonable time after the Effective Date in a form mutually acceptable
to Seller and Purchaser. All rights with respect to Seller Common Stock under
outstanding Seller Options shall thereupon be converted into rights with respect
to Purchaser Common Stock.
(b) Accordingly, from and after the Closing Date (a) each Assumed
Option may be exercised solely for shares of Purchaser Common Stock, (b) the
number of shares of Purchaser Common Stock subject to each Assumed Option shall
be equal to the number of shares of Purchaser Common Stock that were subject to
such Assumed Option immediately prior to the Closing Date multiplied by the
Exchange Ratio, rounded down to the nearest whole number of shares of Purchaser
Common Stock, (c) the per share exercise price for Purchaser Common Stock
issuable upon exercise of each Assumed Option shall be determined by dividing
the exercise price per share of Purchaser Common Stock subject to such Assumed
Option, as in effect immediately prior to the Closing Date, by the Exchange
Ratio, and rounding the resulting exercise price up to the nearest whole cent,
(d) each Assumed Option designated an "incentive stock option" as defined in
Section 422 of the Code ("ISO") immediately prior to the Closing Date shall
remain an ISO and (e) all restrictions on the exercise of each Assumed Option
shall continue in full force and effect (except that the conversion of each
Seller Option into an option for Purchaser Common Stock in accordance herewith
shall result in a cancellation of any provision in such Seller Option requiring
the Employee to resell to Seller shares acquired by exercise of such Seller
Option if such Employee voluntarily ends his employment with Seller), and the
term, exercisability, vesting schedule and other provisions of such Seller
Option shall otherwise remain unchanged; provided, however, that each Assumed
Option shall, in accordance with its terms, be subject to further adjustment as
appropriate to reflect any stock split, reverse stock split, stock dividend,
recapitalization or other similar transaction effected by Purchaser after the
Closing Date.
(c) At the Closing Date, and in accordance with the stock purchase
agreements between Seller and certain of its Employees, Seller hereby agrees
that all rights of Seller has with respect to any Seller Common Stock, as well
as all other rights of Seller under such stock purchase agreements, are hereby
deemed to be assigned to Purchaser. Seller and Purchaser shall take all action
that may be necessary (under the Option Plan and otherwise) to effectuate the
provisions of this Section 1.9. Following the Closing Date, Purchaser will send
to each holder of an Assumed Option a written notice setting forth (i) the
number of shares of Purchaser Common Stock subject to such Assumed Option and
(ii) the exercise price per share of Purchaser Common Stock issuable upon
exercise of such Assumed Option.
(d) Pursuant to Section 4.13, Purchaser shall file with the Securities
and Exchange Commission ("SEC"), a registration statement on Form S-8
registering the shares of Purchaser Common Stock issuable upon exercise of the
Assumed Options pursuant to this Section 1.9.
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1.10 Closing of Seller's Transfer Books. At the Closing Date, holders of
certificates representing shares of the capital stock of Seller that were
outstanding immediately prior to the Closing Date shall cease to have any rights
as stockholders of Seller, and the stock transfer books of Seller shall be
closed with respect to all shares of capital stock outstanding immediately prior
to the Closing Date. No further transfer of any such shares of the capital
stock of Seller shall be made by Seller on its stock transfer books after the
Closing Date. If, after the Closing Date, a valid certificate previously
representing a Seller Stock Certificate (as defined in Section 1.11) is
presented to Seller or Purchaser, such Seller Stock Certificate shall be
canceled and shall be exchanged as provided in Section 1.11.
1.11 Delivery of Certificates and Stock Powers to Seller; Exchange of
Certificates; Escrow Stock.
(a) As of the Effective Date, or as of the date upon becoming a
Stockholder if such date is after the Effective Date, Seller shall cause each
Stockholder to deliver (i) to Seller, (A) each of their respective Seller Stock
Certificates representing the outstanding shares of Seller Common Stock and (B)
5 original executed and undated Stock Powers and (ii) to Purchaser, an executed
Stockholder Agreement, Escrow Agreement and Registration Rights Agreement. Until
delivery to the Agent of the Purchaser Common Stock as contemplated by Section
1.11(b), the Seller Stock Certificates shall be held by Purchaser's counsel.
(b) Within 5 business days after the Closing Date, Purchaser's
transfer agent shall deliver (i) to the Agent, a certificate in the name of each
Stockholder each representing (x) 90% of the number of whole shares of Purchaser
Common Stock that each Stockholder has the right to receive pursuant to Section
1.8 less (y) the Unvested Shares, as defined below (the "Primary Shares") and
(ii) to the Escrow Agent, on behalf and in the name of the Stockholders, a
certificate representing 10% of the number of whole shares of Purchaser Common
Stock that such Stockholders have the right to receive pursuant to the
provisions of Section 1.8 (the "Escrow Stock"). The Escrow Stock shall consist
of shares of Purchaser Common Stock that are subject to repurchase upon certain
events pursuant to the terms of the stock purchase agreement or employment
agreement (the "Repurchase Agreements") between each Stockholder and Seller (the
"Unvested Shares"). To the extent that the Primary Shares otherwise deliverable
to Agent pursuant to clause (i) of the first sentence of this Section 1.11(b)
are Unvested Shares, such Unvested Shares shall continue to be held by
Purchaser's transfer agent and remain subject to all rights of repurchase of
Purchaser or Seller until released pursuant to the last sentence of this Section
1.11(b). The Escrow Stock shall be retained by the Escrow Agent, pursuant to the
Escrow Agreement, to secure the Stockholders' indemnification and certain other
obligations to Purchaser, as set forth in the Stockholder Agreements, for a
period of 1 year after the Closing (or if an indemnification claim is pending at
the expiration of such period, until the resolution of such claim) and shall be
available to Purchaser in accordance with Section 9. If any Seller Stock
Certificate shall have been lost, stolen or destroyed, Purchaser may, in its
discretion and as a condition precedent to the issuance of any certificate
representing Purchaser Common Stock, require the owner of such lost, stolen or
destroyed Seller Stock Certificate to provide an appropriate affidavit and to
deliver a bond (in such sum as Purchaser may reasonably direct) as indemnity
against any claim that may be made against Purchaser or Seller with respect to
such Seller Stock Certificate. Following the Closing Date and upon the request
of the Stockholder, but not more often than following each 30 day period of
continuous service of such Stockholder with Purchaser, Purchaser shall, as soon
as reasonably practicable, instruct its transfer agent to deliver to such
Stockholder a stock certificate representing the whole number of Primary Shares
issued to such Stockholder that are no longer Unvested Shares pursuant to the
terms of such Stockholder's Repurchase Agreement.
(c) No dividends or other distributions declared or made with respect
to Purchaser Common Stock with a record date after the Closing Date shall be
paid to the holder of any unsurrendered
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Seller Stock Certificate with respect to the shares of Purchaser Common Stock
represented thereby, and no cash payment in lieu of any fractional share shall
be paid to any such holder, until such holder surrenders such Seller Stock
Certificate in accordance with this Section 1.11 (at which time such holder
shall be entitled to receive all such dividends and distributions and such cash
payment).
(d) No fractional shares of Purchaser Common Stock shall be issued in
connection with the Exchange, and no certificates for any such fractional shares
shall be issued. In lieu of such fractional shares, any holder of Seller's
capital stock who would otherwise be entitled to receive a fraction of a share
of Purchaser Common Stock (after aggregating all fractional shares of Purchaser
Common Stock issuable to such holder) shall, upon surrender of such holder's
Seller Stock Certificate(s), be paid in cash the dollar amount (rounded to the
nearest whole cent), without interest, determined by multiplying such fraction
by the Average Trading Price.
(e) Neither Purchaser or Seller shall be liable to any holder or
former holder of capital stock of Seller for any shares of Purchaser Common
Stock (or dividends or distributions with respect thereto), or for any cash
amounts, delivered to any public official pursuant to any applicable abandoned
property, escheat or similar law.
1.12 Seller Board Meetings. Until the Termination Date, Purchaser shall
have the right to designate one person reasonably acceptable to Seller to attend
all meetings of the board of directors of Seller and any committees thereof, in
the capacity as a visitor, and to receive all materials provided to members of
the Board or committees thereof; provided, however, that (i) such person shall
not be entitled to attend portions of meetings or receive materials related to
the Memorandum of Understanding dated December 30, 1999 between Purchaser and
Seller, this Agreement and any related agreements, including the Transactional
Agreements (the "Excluded Matters"), and (ii) such person agrees to sign a
proprietary information and assignment agreement, in a form acceptable to the
Parties.
1.13 Tax Treatment. For federal income tax purposes, the Parties intend
that the Exchange qualify as a tax-free reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code") and
will use reasonable Best Efforts to have it so qualify; provided, however, that
none of the Parties makes any representation or warranty that the Exchange will
so qualify.
2. Representations and Warranties of Seller and the Key Stockholder
Seller and the Key Stockholder severally represent and warrant, to and for
the benefit of the Indemnitees, except as set forth on the Disclosure Schedule,
as follows:
2.1 Due Organization; No Subsidiaries; Etc.
(a) Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all necessary
power and authority:
(i) to conduct its business in the manner in which its business
is currently being conducted and in the manner in which its business is proposed
to be conducted;
(ii) to own and use its assets in the manner in which its assets
are currently owned and used and in the manner in which its assets are proposed
to be owned and used; and
(iii) to perform its obligations under all Seller Contracts.
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(b) Seller has never conducted any business under or otherwise used,
for any purpose or in any jurisdiction, any fictitious name, assumed name, trade
name or other name, other than the name "Seller."
(c) Seller is not required to be qualified, authorized, registered or
licensed to do business as a foreign corporation in any jurisdiction other than
the state of Georgia. Seller is in good standing as a foreign corporation in the
state of Georgia.
(d) Part 2.1 of the Disclosure Schedule accurately sets forth (i) the
names of the members of Seller's board of directors and (ii) the names and
titles of Seller's officers.
(e) Neither Seller nor any of its stockholders has ever approved, or
commenced any Proceeding or made any election contemplating, the dissolution or
liquidation of Seller or the winding up or cessation of Seller's business or
affairs.
(f) Seller has no subsidiaries, and Seller has never owned,
beneficially or otherwise, any shares or other securities of, or any direct or
indirect interest of any nature in, any Entity.
2.2 Certificate of Incorporation and Bylaws; Records.
(a) Seller has delivered to Purchaser accurate and complete copies of:
(i) Seller's certificate of incorporation and bylaws, including
all amendments thereto;
(ii) the stock records of Seller; and
(iii) the minutes and other records of the meetings and other
proceedings (including any actions taken by written consent or otherwise without
a meeting) of the stockholders of Seller, the board of directors of Seller and
all committees of the board of directors of Seller.
There have been no meetings or other proceedings of the stockholders of Seller,
the board of directors of Seller or any committee of the board of directors of
Seller that are not fully reflected in such minutes or other records.
(b) There has not been any violation of any of the provisions of
Seller's certificate of incorporation or bylaws or of any resolution adopted by
the Stockholders, Seller's board of directors or any committee of Seller's board
of directors; and no event has occurred, and no condition or circumstance
exists, that might (with or without notice or lapse of time) constitute or
result directly or indirectly in such a violation.
2.3 Capitalization, Etc.
(a) The authorized capital stock of Seller consists of:
(i) 90,000,000 shares of Seller Common Stock, 496,000 shares
(constituting all of the shares held by the Stockholders) of which are issued
and outstanding, with all such Seller Common Stock issued pursuant to a form
stock purchase agreement (including any amendments thereto) that has been
provided to Purchaser; and
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(ii) 10,000,000 shares of preferred stock having a par value of
$0.0001 per share, of which 300 shares, plus the number of shares (including
fractional shares) equal to the accrued interest on the "Note" (collectively
constituting the Alteon Stock) have been issued and are outstanding.
(b) The Stockholders have, and Purchaser will acquire at the Closing,
good and valid title to the shares held by the Stockholders free and clear of
any Encumbrances.
(c) All of the shares held by the Stockholders (i) have been duly
authorized and validly issued, (ii) are fully paid and non-assessable and (iii)
have been issued in full compliance with all applicable securities laws and
other applicable Legal Requirements. Each Stockholder has delivered to Purchaser
executed copies of the Stockholder Agreement, Escrow Agreement and Registration
Rights Agreement and accurate and complete copies of the stock certificates
evidencing all of the shares held by such Stockholder and each such stock
certificate has been delivered to Seller.
(d) Except as set forth in this Agreement and the Stockholder
Agreements, there is no:
(i) outstanding subscription, option, call, warrant or right
(whether or not exercisable) to acquire any shares of the capital stock or other
securities of Seller;
(ii) outstanding security, instrument or obligation that is or
may become convertible into or exchangeable for any shares of the capital stock
or other securities of Seller;
(iii) Contract under which Seller is or may become obligated to
sell or otherwise issue any shares of its capital stock or any other securities;
or
(iv) condition or circumstance that may directly or indirectly
give rise to or provide a basis for the assertion of a claim by any Person to
the effect that such Person is entitled to acquire or receive any shares of
capital stock or other securities of Seller.
(e) All reserved shares of Seller Common Stock remain available for
issuance to directors, Employees and consultants pursuant to the Option Plan.
(f) Except as set forth in Part 2.3 of the Disclosure Schedule, no
stock plan, stock purchase, stock option or other agreement or understanding
between Seller and any holder of any equity securities or rights to purchase
equity securities provides for acceleration or other changes in the vesting
provisions or other terms of such agreement or understanding as the result of
(i) any Acquisition, merger, consolidated sale of stock or assets, change in
control or any other transaction(s) by Seller, including, without limitation,
the Exchange or (ii) termination of employment or change in employment duties,
responsibilities or job title ("Vesting Acceleration").
2.4 Financial Statements.
(a) Seller has made available to Purchaser the unaudited balance
sheet of Seller as of January 31, 2000, and the related unaudited income
statement of profit and loss of Seller for the period since inception
(collectively, with the financial statements referred to in Section 4.11, the
"Seller Financial Statements"):
(b) The Seller Financial Statements in Section 2.4(a) are, and the
Seller Financial Statements in Section 4.11 shall be when provided to Purchaser
at the Closing Date, present fairly the financial position of Seller as of the
respective dates thereof. The Seller Financial Statements in Section
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2.4(a) have been, and the Seller Financial Statements in Section 4.11 shall be,
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered (except that the financial statements in Section 4.11 shall not
contain footnotes and are subject to normal and recurring year-end audit
adjustments, which, to the best of the Knowledge of Seller, will not,
individually or in the aggregate, be material in magnitude).
2.5 Title to Assets.
(a) Seller owns, and has good, valid and marketable title to, all
assets purported to be owned by it. Except as set forth in Part 2.5 of the
Disclosure Schedule, all of such assets are owned by Seller free and clear of
any Encumbrances.
(b) Part 2.5 of the Disclosure Schedule identifies all assets that
are being leased or licensed to Seller.
2.6 Equipment. All material items of equipment and other tangible assets
owned by or leased to Seller are adequate for the uses to which they are being
put, are in good condition and repair (ordinary wear and tear excepted) and are
adequate for the conduct of Seller's business in the manner in which such
business is currently being conducted.
2.7 Real Property. Seller does not own any real property or any interest
in real property, except for the leaseholds created under the real property
leases identified in Part 2.9 of the Disclosure Schedule.
2.8 Proprietary Assets.
(a) Part 2.8 of the Disclosure Schedule sets forth, with respect to
each Proprietary Asset owned by Seller ("Seller Proprietary Asset") and
registered with any Governmental Body or for which an application has been filed
with any Governmental Body: (i) a brief description of such Proprietary Asset
and (ii) the names of the jurisdictions covered by the applicable registration
or application. Part 2.8 of the Disclosure Schedule identifies and provides a
brief description of all other material unregistered copyrights, trademarks,
service marks and other material intellectual property rights owned by Seller.
Part 2.8 of the Disclosure Schedule identifies and provides a brief description
of each Proprietary Asset licensed to Seller by any Person, and identifies the
license agreement under which such Proprietary Asset is being licensed to
Seller. Seller has good, valid and marketable title to all Seller Proprietary
Assets identified in Part 2.8 of the Disclosure Schedule, free and clear of all
liens and other Encumbrances, and has a valid right to use all Proprietary
Assets identified in Part 2.8 of the Disclosure Schedule. Seller is not
obligated to make any payment to any Person for the use of any Seller
Proprietary Asset. Seller has not developed jointly with any other Person any
Seller Proprietary Asset with respect to which such other Person has any rights.
(b) Seller has used its Best Efforts to employ measures and
precautions necessary to protect and maintain the confidentiality and secrecy of
all Seller Proprietary Assets. Seller has not (other than to Employees)
disclosed or delivered to any Person, or permitted the disclosure or delivery to
any Person of any Seller Proprietary Asset, including, without limitation: (i)
the source code, or any portion or aspect of the source code, of any Seller
Proprietary Asset or (ii) the object code, or any portion or aspect of the
object code, of any Seller Proprietary Asset.
(c) No Seller Proprietary Asset currently infringes or conflicts with
any Proprietary Asset owned or used by any other Person. Seller is not
infringing, misappropriating or making any unlawful use of, and Seller has not
at any time infringed, misappropriated or made any unlawful use of, or
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received any notice or other communication (in writing or otherwise) of any
actual, alleged, possible or potential infringement, misappropriation or
unlawful use of, any Proprietary Asset owned or used by any other Person. To the
best of the Knowledge of Seller, no other Person is infringing, misappropriating
or making any unlawful use of, and no Proprietary Asset owned or used by any
other Person infringes or conflicts with, any Seller Proprietary Asset.
(d) (i) Each Seller Proprietary Asset conforms in all material
respects with any specification or documentation with respect thereto and (ii)
Seller has not received any notice or other communication (in writing or, to the
Knowledge of Seller, otherwise) of any claim by any customer or other Person
alleging that any Seller Proprietary Asset does not conform in all material
respects with any such specification or documentation, and, to the best of the
Knowledge of Seller, there is no basis for any such claim.
(e) Except as set forth in Part 2.8 of the Disclosure Schedule, the
Seller Proprietary Assets constitute all the Proprietary Assets necessary to
enable Seller to conduct its business in the manner in which such business is
being conducted as of the date of this Agreement. (i) Seller has not licensed
any Seller Proprietary Asset to any Person on an exclusive basis and (ii) Seller
has not entered into any covenant not to compete or Contract limiting its
ability to exploit fully any of its Proprietary Assets or to transact business
in any market or geographical area or with any Person.
(f) All current and former Employees have executed and delivered to
Seller an agreement (containing no exceptions to or exclusions from the scope of
its coverage) that is substantially identical to the form of employment
agreement between Seller and each Employee previously made available to
Purchaser that contains provisions relating to such Employee's nonuse and
nondisclosure of confidential information and assignment of inventions
("Employment Agreement").
2.9 Intentionally Omitted.
2.10 Contracts.
(a) Part 2.10 of the Disclosure Schedule identifies each Seller
Contract, except for any Excluded Contract. Seller has delivered to Purchaser
accurate and complete copies of all Seller Contracts identified in Part 2.10 of
the Disclosure Schedule, including all amendments thereto.
(b) Each Seller Contract is valid and in full force and effect, and
is enforceable by Seller in accordance with its terms.
(c) Except as set forth in Part 2.10 of the Disclosure Schedule:
(i) no Person has violated or breached, or declared or
committed any default under, any Seller Contract;
(ii) no event has occurred, and no circumstance or condition
exists, that might (with or without notice or lapse of time) (A) result in a
material violation or breach of any of the provisions of any Seller Contract,
(B) give any Person the right to declare a material default or exercise any
remedy under any Seller Contract, (C) give any Person the right to accelerate
the maturity or performance of any material portion of any Seller Contract, or
(D) give any Person the right to cancel, terminate or materially modify any
Seller Contract;
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(iii) Seller has not received any notice or other communication
(in writing or otherwise) regarding any actual, alleged, possible or potential
violation or breach of, or default under, any Seller Contract; and
(iv) Seller has not waived any of its rights under any
Seller Contract.
(d) Except as set forth in Part 2.10 of the Disclosure Schedule:
(i) Seller has never guaranteed or otherwise agreed to cause,
insure or become liable for, and none of the Companies has ever pledged any of
its assets to secure, the performance or payment of any obligation or other
Liability of any other Person; and
(ii) Seller has never been a party to or bound by (A) any
joint venture agreement, partnership agreement, profit-sharing agreement, cost-
sharing agreement, loss-sharing agreement or similar Contract or (B) any
Contract that creates or grants to any Person, or provides for the creation or
grant of, any stock appreciation right, phantom stock right or similar right or
interest.
(e) The performance of the Seller Contracts will not result in any
violation of or failure to comply with any Legal Requirement.
(f) No Person is renegotiating, or has the right to renegotiate, any
amount paid or payable to Seller under any Seller Contract or any other term or
provision of any Seller Contract.
(g) The Contracts identified in Part 2.10 of the Disclosure Schedule
and the Excluded Contracts collectively constitute all of the Contracts
necessary to enable Seller to conduct its business in the manner in which its
business is currently being conducted and in the manner in which its business is
proposed to be conducted.
2.11 Liabilities. Seller has no Liabilities, except for: (i) liabilities
identified as such in Part 2.11 of the Disclosure Schedule or the Seller
Financial Statements and (ii) Seller's obligations under the Contracts listed in
Part 2.10 of the Disclosure Schedule and under Excluded Contracts, to the extent
that the existence of such obligations is ascertainable solely by reference to
such Contracts.
2.12 Compliance With Legal Requirements. Except as set forth in Part 2.12
of the Disclosure Schedule or as would not have a Material Adverse Effect: (i)
Seller is in full compliance with each Legal Requirement that is applicable to
it or to the conduct of its business or the ownership or use of any of its
assets, (ii) Seller has at all times been in full compliance with each Legal
Requirement that is or was applicable to it or to the conduct of its business or
the ownership or use of any of its assets and (iii) no event has occurred, and
no condition or circumstance exists, that might (with or without notice or lapse
of time) constitute or result directly or indirectly in a violation by Seller
of, or a failure on the part of Seller to comply with, any Legal Requirement.
2.13 Governmental Authorizations. Part 2.13 of the Disclosure Schedule
identifies each material Governmental Authorization held by Seller, and Seller
has made available to Purchaser accurate and complete copies of all Governmental
Authorizations identified in Part 2.13 of the Disclosure Schedule. To the best
of the Knowledge of Seller, the Governmental Authorizations identified in Part
2.13 of the Disclosure Schedule are valid and in full force and effect, and
collectively constitute all Governmental Authorizations necessary to enable
Seller to conduct its business in the manner in which its business is currently
being conducted. Seller is, and at all times since inception has been, in
substantial compliance with the terms and requirements of the respective
Governmental Authorizations identified in Part 2.13 of the Disclosure Schedule.
Since inception, Seller has not received any notice or other
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communication (in writing) from any Governmental Body regarding (i) any actual
or possible violation of or failure to comply with any term or requirement of
any Governmental Authorization or (ii) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
Governmental Authorization.
2.14 Tax Matters.
(a) Each Tax required to have been paid, or claimed by any
Governmental Body to be payable, by Seller (whether pursuant to any Tax Return
or otherwise) to the extent that the same is due has been duly paid in full and
on a timely basis, except as would not have a Material Adverse Effect. Any Tax
required to have been withheld or collected by Seller has been duly withheld and
collected; and (to the extent required) each such Tax has been paid to the
appropriate Governmental Body, except as would not have a Material Adverse
Effect.
(b) All Tax Returns required to be filed by or on behalf of Seller
with any Governmental Body with respect to any taxable period ending on or
before the Closing Date ("Seller Returns") (i) have been or will be filed when
due and (ii) have been, or will be when filed, accurately and completely
prepared in material compliance with all applicable Legal Requirements, except
as would not have a Material Adverse Effect.
(c) Except as set forth in Part 2.14 of the Disclosure Schedule, no
claim or other Proceeding is pending or has been threatened against or with
respect to Seller in respect of any Tax. There are no unsatisfied Liabilities
for Taxes (including liabilities for interest, additions to tax and penalties
thereon and related expenses) with respect to any notice of deficiency or
similar document received by Seller. Seller has never entered into or has become
bound by any agreement or consent pursuant to Section 341(f) of the Code. Seller
has never been, and Seller will not be, required to include any adjustment in
taxable income for any tax period (or portion thereof) pursuant to Section 481
or 263A of the Code or any comparable provision under state or foreign Tax laws
as a result of transactions or events occurring, or accounting methods employed,
prior to the Closing.
(d) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of Seller that, individually or collectively, could give
rise directly or indirectly to the payment of any amount that would not be
deductible pursuant to Section 280G or Section 162 of the Code. Seller is not,
and has never been, a party to or bound by any tax indemnity agreement, tax
sharing agreement, tax allocation agreement or similar Contract.
2.15 Employee and Labor Matters.
(a) Seller is not a party to or bound by, and has never been a
party to or bound by, any employment agreement or any union contract, collective
bargaining agreement or similar Contract.
(b) The employment of each Employee is terminable by Seller at will
without payment of severance or any other type of cash or equity compensation or
any other obligation by Seller, except as otherwise vested as of the Termination
Date. Seller has delivered to Purchaser accurate and complete copies of any
Employee manuals and handbooks, disclosure materials, policy statements and
other materials relating to the employment of current and former Employees.
(c) To the best of the Knowledge of Seller and the Key Stockholder:
(i) no Employee intends to terminate his employment with Seller, (ii) no
Employee has received an offer to join a business that may be competitive with
Seller's business and (iii) no Employee is a party to or is bound
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by (A) any noncompetition agreement or non-solicitation agreement or (B) any
confidentiality agreement or other Contract (with any Person) that may have an
adverse effect on (1) the performance by such Employee of any of his duties or
responsibilities as an Employee or (2) Seller's business or operations,
including development of the Product.
(d) Part 2.15 of the Disclosure Schedule contains a list of the
salary grades of all salaried Employees, and the number of Employees in each
such grade, as of the date of this Agreement, and correctly reflects, in all
material respects, any other compensation payable to them (including
compensation payable pursuant to bonus, deferred compensation or commission
arrangements) and their positions. Seller is in compliance in all material
respects with all applicable Legal Requirements and Contracts relating to
employment, employment practices, wages, bonuses and terms and conditions of
employment, including Employee compensation matters, and, except as set forth in
Part 2.8(a) of the Disclosure Schedule, no such Contract violates any previous
agreement to which any Employee was a party prior to such Employee's employment
by Seller.
(e) Seller is not aware that any Employee is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with their duties to Seller or that
would conflict with Seller's business as presently proposed to be conducted,
including as set forth in the Transactional Agreements. Each former and current
Employee, officer and consultant of Seller has executed an Employment Agreement
as provided to Purchaser. Seller does not believe it is or will be necessary to
use any inventions, trade secrets or proprietary information that any Employee
made prior to their employment by Seller, except for inventions, trade secrets
or proprietary information that have been licensed to Seller and which are
disclosed in the Disclosure Schedule.
(f) Neither the execution nor delivery of this Agreement or the
Transactional Agreements, nor the carrying on of Seller's business by the
Employees, nor the conduct of Seller's business as presently proposed, including
as set forth in the Transactional Agreements, will, to Seller's Knowledge,
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any Employee is now obligated.
2.16 Benefit Plans; ERISA.
(a) Part 2.16 of the Disclosure Schedule identifies each salary,
bonus, deferred compensation, incentive compensation, stock purchase, stock
option, severance pay, termination pay, hospitalization, medical, life or other
insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (collectively, the "Plans") sponsored,
maintained, contributed to or required to be contributed to by Seller for the
benefit of any Employee, except for Plans which would not require Seller to make
payments or provide benefits having a value in excess of $10,000 in the
aggregate.
(b) Seller does not maintain, sponsor or contribute to, and, to the
best of the Knowledge of Seller, has not at any time in the past maintained,
sponsored or contributed to, any Employee pension benefit plan (as defined in
Section 3(2) of ERISA), whether or not excluded from coverage under specific
Titles of ERISA) for the benefit of current or former Employees (a "Pension
Plan").
(c) Seller maintains, sponsors or contributes to only those
Employee welfare benefit plans (as defined in Section 3(1) of ERISA, whether or
not excluded from coverage under specific Titles of ERISA) for the benefit of
Employees or former Employees which are described in Part 2.16 of the
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Disclosure Schedule (the "Welfare Plans"), none of which is a multiemployer plan
(within the meaning of Section 3(37) of ERISA).
(d) With respect to each Plan, Seller has made available to Purchaser:
(i) an accurate and complete copy of such Plan (including all
amendments thereto);
(ii) an accurate and complete copy of the most recent summary plan
description, together with each modification, if required under ERISA, with
respect to such Plan, and all material Employee communications relating to such
Plan;
(iii) if such Plan is funded through a trust or any third party
funding vehicle, an accurate and complete copy of the trust or other funding
agreement (including all amendments thereto) and accurate and complete copies
the most recent financial statements thereof; and
(iv) accurate and complete copies of all Contracts relating to such
Plan, including service provider agreements, insurance contracts, minimum
premium contracts, stop-loss agreements, investment management agreements,
subscription and participation agreements and recordkeeping agreements.
(e) Seller is not required to be, and, to the best of the Knowledge of
Seller, has never been required to be, treated as a single employer with any
other Person under Section 4001(b)(1) of ERISA or Section 414(b), (c), (m) or
(o) of the Code. Seller has never been a member of an "affiliated service group"
within the meaning of Section 414(m) of the Code. To the best of the Knowledge
of Seller, Seller has never made a complete or partial withdrawal from a
multiemployer plan, as such term is defined in Section 3(37) of ERISA, resulting
in "withdrawal liability," as such term is defined in Section 4201 of ERISA
(without regard to subsequent reduction or waiver of such liability under either
Section 4207 or 4208 of ERISA).
(f) Seller does not have any plan or commitment to create any additional
Welfare Plan or any Pension Plan, or to modify or change any existing Welfare
Plan or Pension Plan (other than to comply with applicable law) in a manner that
would affect any Employee.
(g) No Welfare Plan provides death, medical or health benefits (whether or
not insured) with respect to any current or former Employee after any such
Employee's termination of service (other than (i) benefit coverage mandated by
applicable law, including coverage provided pursuant to Section 4980B of the
Code, (ii) deferred compensation benefits accrued as liabilities on the
Unaudited Interim Balance Sheet, and (iii) benefits the full cost of which are
borne by current or former Employees (or the Employees' beneficiaries)).
(h) With respect to each of the Welfare Plans constituting a group health
plan within the meaning of Section 4980B(g)(2) of the Code, the provisions of
Section 4980B of the Code ("COBRA") have been complied with in all material
respects.
(i) Each of the Plans has been operated and administered in all material
respects in accordance with applicable Legal Requirements, including without
limitation ERISA and the Code.
(j) Neither the execution, delivery or performance of this Agreement, nor
the consummation of the Exchange or any of the other transactions contemplated
by this Agreement, will result in any payment (including any bonus, golden
parachute or severance payment) to any current or
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former Employee or director of Seller (whether or not under any Plan), or
materially increase the benefits payable under any Plan, or result in any
acceleration of the time of payment or vesting of any such benefits.
2.17 Environmental Matters. Seller is in compliance in all material
respects with all applicable Environmental Laws (as defined below), which
compliance includes the possession by Seller of all permits and other
Governmental Authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof. Seller has not received any
notice or other communication (in writing or otherwise), whether from a
Governmental Body, citizens group, Employee or otherwise, that alleges that
Seller is not in compliance with any Environmental Law. To the best of the
Knowledge of Seller, no current or prior owner of any property leased or
controlled by Seller has received any notice or other communication (in writing
or otherwise), whether from a Government Body, citizens group, Employee or
otherwise, that alleges that such current or prior owner or Seller is not in
compliance with any Environmental Law. All Governmental Authorizations currently
held by Seller pursuant to Environmental Laws are identified in Part 2.17 of the
Disclosure Schedule. (For purposes of this Section 2.17: (i) "Environmental Law"
means any federal, state, local or foreign Legal Requirement relating to
pollution or protection of human health or the environment (including ambient
air, surface water, ground water, land surface or subsurface strata), including
any law or regulation relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern (as defined below), or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern and (ii)
"Materials of Environmental Concern" include chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products and any
other substance that is now regulated by any Environmental Law or that is
otherwise a danger to health, reproduction or the environment.)
2.18 Insurance. Part 2.18 of the Disclosure Schedule identifies all
insurance policies owned or maintained by Seller and identifies any material
claims made thereunder, and Seller has made available to Purchaser accurate and
complete copies of the insurance policies identified on Part 2.18 of the
Disclosure Schedule. To the best Knowledge of Seller, each of the insurance
policies identified in Part 2.18 of the Disclosure Schedule is in full force and
effect. Since inception, Seller has not received any notice or other
communication (in writing) regarding any actual or possible (a) cancellation or
invalidation of any insurance policy, (b) refusal of any coverage or rejection
of any claim under any insurance policy or (c) material adjustment in the amount
of the premiums payable with respect to any insurance policy.
2.19 Related Party Transactions. Except for Permitted Transactions or as
set forth in Part 2.19 of the Disclosure Schedule:
(a) no Related Party has, and no Related Party has at any time had,
any direct or indirect interest of any nature in any asset used in or otherwise
relating to the business of Seller;
(b) no Related Party is, or has at any time been, indebted to
Seller;
(c) no Related Party has entered into, or has had any direct or
indirect financial interest in, any Contract, transaction or business dealing of
any nature involving Seller;
(d) no Related Party is competing, or has at any time competed,
directly or indirectly, with Seller in any market served by Seller;
(e) no Related Party has any claim or right against Seller; and
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(f) no event has occurred, and no condition or circumstance exists,
that might (with or without notice or lapse of time) directly or indirectly give
rise to or serve as a basis for any claim or right in favor of any Related Party
against Seller.
2.20 Certain Payments, Etc. Seller, and no officer, Employee, agent or
other Person associated with or acting for or on behalf of Seller, has at any
time, directly or indirectly:
(a) used any corporate funds (i) to make any unlawful political
contribution or gift or for any other unlawful purpose relating to any political
activity, (ii) to make any unlawful payment to any governmental official or
Employee or (iii) to establish or maintain any unlawful or unrecorded fund or
account of any nature;
(b) made any false or fictitious entry, or failed to make any entry
that should have been made, in any of the books of account or other records of
Seller;
(c) made any payoff, influence payment, bribe, rebate, kickback or
unlawful payment to any Person;
(d) performed any favor or given any gift which was not deductible
for federal income tax purposes;
(e) made any payment (whether or not lawful) to any Person, or
provided (whether lawfully or unlawfully) any favor or anything of value
(whether in the form of property or services, or in any other form) to any
Person, for the purpose of obtaining or paying for (i) favorable treatment in
securing business or (ii) any other special concession; or
(f) agreed, committed, offered or attempted to take any of the
actions described in clauses (a) through (e) above.
2.21 Proceedings; Orders.
(a) Except as set forth in Part 2.21 of the Disclosure Schedule,
there is no pending Proceeding, and to the Knowledge of Seller and the Key
Stockholder no Person has threatened to commence any Proceeding:
(i) that involves Seller or that otherwise relates to or might
affect Seller's business or any of the assets owned or used by Seller (whether
or not Seller is named as a party thereto); or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with, any of the Transactions.
Except as set forth in Part 2.21 of the Disclosure Schedule, no event has
occurred, and no claim, dispute or other condition or circumstance exists, that
might directly or indirectly give rise to or serve as a basis for the
commencement of any such Proceeding.
(b) Except as set forth in Part 2.21 of the Disclosure Schedule, no
Proceeding has ever been commenced by or against Seller; and no Proceeding
otherwise involving or relating to Seller has been pending or to the Knowledge
of Seller and the Key Stockholder threatened at any time.
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(c) Seller has delivered to Purchaser accurate and complete copies of
all pleadings, correspondence and other written materials to which Seller has
access that relate to the Proceedings identified in Part 2.21 of the Disclosure
Schedule.
(d) There is no Order to which Seller, or any of the assets owned or
used by Seller, is subject; and none of the Stockholders is subject to any Order
that relates to Seller's business or to any of the assets owned or used by
Seller.
(e) To the best of the Knowledge of Seller and the Key Stockholder,
no officer or Employee is subject to any Order that prohibits such officer or
Employee from engaging in or continuing any conduct, activity or practice
relating to Seller's business.
(f) There is no proposed Order that, if issued or otherwise put into
effect, (i) may have an adverse effect on Seller's business, condition, assets,
liabilities, operations, financial performance, net income or prospects (or on
any aspect or portion thereof) or on the ability of Seller or any of the
Stockholders to comply with or perform any covenant or obligation under any of
the Transactional Agreements, or (ii) may have the effect of preventing,
delaying, making illegal or otherwise interfering with any of the Transactions.
(g) There is no Proceeding pending, and to the Knowledge of Seller
and the Key Stockholder, no Person has threatened to commence any Proceeding,
that may have an adverse effect on the ability of any Stockholder to comply with
or perform any of such Stockholder's covenants or obligations under any of the
Transactional Agreements. No event has occurred, and no claim, dispute or other
condition or circumstance exists, that might directly or indirectly give rise to
or serve as a basis for the commencement of any such Proceeding.
2.22 Authority; Binding Nature of Agreements. Seller and the Key
Stockholder have the absolute and unrestricted right, power and authority to
enter into and to perform their obligations under this Agreement; and the
execution, delivery and performance by Seller and the Key Stockholder of this
Agreement have been duly authorized by all necessary action on the part of
Seller and its Stockholders, board of directors and officers. This Agreement
constitutes the legal, valid and binding obligation of Seller and the Key
Stockholder, enforceable against Seller and the Key Stockholder in accordance
with its terms.
2.23 Non-Contravention; Consents. - Except as set forth in Part 2.23 of the
Disclosure Schedule, neither the execution and delivery of any of the
Transactional Agreements, nor the consummation or performance of any of the
Transactions contemplated therein, will directly or indirectly (with or without
notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of Seller's certificate of incorporation or bylaws or (ii) any
resolution adopted by Seller's stockholders, Seller's board of directors or any
committee of Seller's board of directors;
(b) contravene, conflict with or result in a material violation of,
or give any Governmental Body or other Person the right to challenge any of the
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which Seller or any of the Stockholders, or any of
the assets owned or used by Seller, is subject;
(c) cause Seller, Purchaser or any affiliate of Purchaser to become
subject to, or to become liable for the payment of, any Tax (other than Taxes
due upon sale by the Stockholders of the Purchased Common Stock ;
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(d) cause any of the assets owned or used by Seller to be reassessed
or revalued by any taxing authority or other Governmental Body;
(e) contravene, conflict with or result in a material violation of
any of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by Seller or any of its Employees or that otherwise
relates to Seller's business or to any of the assets owned or used by Seller;
(f) contravene, conflict with or result in a material violation or
breach of, or result in a default under, any provision of any Seller Contract;
(g) give any Person the right to (i) declare a material default or
exercise any remedy under any Seller Contract, (ii) accelerate the maturity or
performance of any Seller Contract or (iii) cancel, terminate or modify any
Seller Contract;
(h) contravene, conflict with or result in a material violation or
breach of or a material default under any provision of, or give any Person the
right to declare a default under, any Contract to which any of the Stockholders
is a party or by which any of the Stockholders is bound; or
(i) result in the imposition or creation of any Encumbrance upon or
with respect to any asset owned or used by Seller.
Except as set forth in Part 2.23 of the Disclosure Schedule, neither Seller nor
any of the Stockholders was, is or will be required to make any filing with or
give any notice to, or to obtain any Consent from, any Person in connection with
the execution and delivery of any of the Transactional Agreements or the
consummation or performance of any of the Transactions.
2.24 No Brokers. Neither Seller or the Key Stockholder have agreed or
become obligated to pay, or has taken any action that might result in any Person
claiming to be entitled to receive, any brokerage commission, finder's fee or
similar commission or fee in connection with any of the Transactions.
2.25 Intentionally Omitted.
2.26 Full Disclosure.
(a) None of the Transactional Agreements contains or will contain any
untrue statement of material fact; and none of the Transactional Agreements
omits or will omit to state any material fact necessary to make any of the
representations, warranties or other statements or information contained therein
not misleading.
(b) All of the information set forth in the Disclosure Schedule, and
all other information regarding Seller and its business, condition, assets,
liabilities, operations, financial performance, net income and prospects that
has been furnished to Purchaser or any of its Representatives by or on behalf of
Seller or any of Seller's Representatives, is accurate and complete in all
material respects.
(c) Seller and the Key Stockholder have provided Purchaser and
Purchaser's Representatives with full and complete access to all of Seller's
records and other documents and data, other than related to the Excluded
Matters.
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2.27 Accredited Investor. The Key Stockholder is an "accredited investor"
as such term is defined in Rule 501 under the Securities Act of 1933.
2.28 Seller's Assets. Seller does not have total assets of $10,000,000
or more.
3. Representations and Warranties of Purchaser
Purchaser represents and warrants, to and for the benefit of the
Stockholders, as follows:
3.1 Acquisition of Shares. Purchaser is not acquiring the capital stock
of Seller with the current intention of making a public distribution thereof.
3.2 Authority; Binding Nature of Agreement.
(a) Purchaser has the absolute and unrestricted right, power and
authority to enter into and perform its obligations under this Agreement;
(b) the execution, delivery and performance of this Agreement by
Purchaser was duly authorized by all necessary action on the part of Purchaser
and its board of directors; and
(c) this Agreement constitutes the legal, valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
terms.
3.3 Brokers. Purchaser has not agreed or become obligated to pay, and
has not taken any action that might result in any Person claiming to be entitled
to receive, any brokerage commission, finder's fee or similar commission or fee
in connection with any of the Transactions.
3.4 Valid Issuance. Subject to Section 1.11(c), Purchaser Common Stock
to be issued in the Exchange will, when issued in accordance with the provisions
of this Agreement, be validly issued, fully paid and nonassessable.
3.5 Due Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all necessary power and authority to conduct its business in the manner in which
its business is currently being conducted and to own and use its assets in the
manner in which its assets are currently owned and used and to perform its
obligations under any contract.
3.6 As of the time Purchaser filed each report or registration
statement, on a form other than Form S-8 (a "Purchaser Filing"), with the
Securities and Exchange Commission ("SEC") (or, if amended or superseded by a
filing prior to the Effective Date, then on the date of such filing): (i) each
Purchaser Filing complied in all material respects with the applicable
requirements of the Securities Act or the Exchange Act (as the case may be) and
(ii) no Purchaser Filing contained any untrue statement of a material fact or
omitted 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, except any inaccuracy that would not have
a Material Adverse Effect on Purchaser.
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4. Pre-Closing Covenants of Seller and the Key Stockholder
4.1 Access and Investigation. Seller and the Key Stockholder shall
ensure that, at all times during the Pre-Closing Period:
(a) Seller and its Representatives provide Purchaser and its
Representatives with free and complete access, upon reasonable request during
normal business hours, to Seller's Representatives, personnel and assets and to
all existing books, records, Tax Returns, work papers and other documents and
information relating to Seller, other than related to the Excluded Matters;
(b) Seller and its Representatives provide Purchaser and its
Representatives with such copies of existing books, records, Tax Returns, work
papers and other documents and information relating to Seller as Purchaser may
reasonably request in good faith. other than related to the Excluded Matters;
and
(c) Seller and its Representatives compile and provide Purchaser and
its Representations with such additional financial, operating and other data and
information regarding Seller as Purchaser may reasonably request in good faith.
4.2 Operation of Business. Unless Seller obtains the prior written consent
of Purchaser (which consent shall not be unreasonably withheld), during the Pre-
Closing Period:
(a) Seller shall conduct its business and operations in the ordinary
course and in substantially the same manner as such business and operations have
been conducted prior to the date of this Agreement;
(b) Seller shall use reasonable efforts to preserve intact its
current business organization, keep available the services of its current
officers and Employees and maintain its relations and good will with all
suppliers, customers, landlords, creditors, Employees and other Persons having
business relationships with Seller;
(c) Seller shall keep in full force all insurance policies identified
in Part 2.18 of the Disclosure Schedule;
(d) Seller shall cause its officers to report regularly (but in no
event less frequently than monthly) to Purchaser concerning the status of
Seller's business, other than related to the Excluded Matters;
(e) Seller shall not declare, accrue, set aside or pay any dividend
or make any other distribution in respect of any shares of capital stock, and
shall not repurchase, redeem or otherwise reacquire any shares of capital stock
or other securities, other than repurchases of Common Stock at cost from
terminated Employees;
(f) Except as otherwise permitted in Section 4.9, Seller shall not
sell, issue or authorize the issuance of (a) any capital stock or other
security, (b) any option or right to acquire any capital stock or other security
or (c) any instrument convertible into or exchangeable for any capital stock or
other security (except that Seller shall be permitted (i) to grant Seller
Options to Employees in accordance with its past practices, (ii) to issue Seller
Common Stock to Employees, including issuance upon the exercise of outstanding
Seller Options and (iii) to issue shares of Alteon Stock to Purchaser);
provided, that no Seller Option or agreement with any holder of Seller Common
Stock shall contain any Vesting Acceleration except as agreed to by Purchaser;
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(g) Seller shall not amend or waive any of its rights under, or
permit the acceleration of vesting under, (i) any provision of its Plans or (ii)
any provision of any agreement evidencing any outstanding Seller Option;
provided, that no Seller Option or agreement with any holder of Seller Common
Stock may contain any Vesting Acceleration except as agreed to by Purchaser and
any Seller Option or purchase agreement for Seller Common Stock will be in a
form, including the vesting schedule, approved by Purchaser.
(h) Neither Seller nor any of the Stockholders shall amend or permit
the adoption of any amendment to Seller's Certificate of Incorporation or
Bylaws, or effect or permit Seller to become a party to any Acquisition
Transaction, recapitalization, reclassification of shares, stock split, reverse
stock split or similar transaction (except that Seller may issue shares of
Alteon Stock to Purchaser);
(i) Seller shall not form any subsidiary or acquire any equity
interest or other interest in any other Entity;
(j) Other than within the ordinary course of business and consistent
with past practices, Seller shall not (i) acquire, lease or license any right or
other asset from any other Person, (ii) sell or otherwise dispose of, or lease
or license, any right or other asset to any other Person, or (iii) waive or
relinquish any right, except for assets acquired, leased, licensed or disposed
of by Seller pursuant to Contracts that are not Material Contracts;
(k) Other than the Permitted Transactions, Seller shall not (i) lend
money to any Person (except that Seller may make routine travel advances to
Employees in the ordinary course of business) or (ii) incur or guarantee any
indebtedness for borrowed money;
(l) Seller shall not change any of its methods of accounting or
accounting practices in any material respect;
(m) Seller shall not make any Tax election;
(n) Seller shall not settle any material Proceeding in which it is
a defendant;
(o) Seller shall not provide any holder of its equity securities or
rights to purchase its equity securities with Vesting Acceleration (as defined
in Part 2.3(f));
(p) Seller shall not, without board approval by the board of
directors of Seller:
(i) make any capital expenditure, except for capital
expenditures in accordance with a plan approved by the board of directors of
Seller;
(ii) enter into, or permit any of the assets owned or used by
it to become bound by, any Contract that is or would constitute a Material
Contract, or (ii) amend or prematurely terminate, or waive any material right or
remedy under, any such Material Contract of Seller;
(iii) (x) establish, adopt or amend any Employee Benefit Plan,
(y) pay any bonus or make any profit-sharing payment, cash incentive payment or
similar payment to, or increase the amount of the wages, salary, commissions,
fringe benefits or other compensation or remuneration payable to, any of its
directors, officers or Employees or (z) hire any new Employee whose aggregate
annual compensation is expected to exceed the salary grade, as set forth in Part
2.15(c), by 20%, other than the Permitted Transactions;
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(q) Seller shall not have outstanding or incur any direct or
contingent liabilities or lease obligations or become liable for the liabilities
of others, other than Permitted Indebtedness;
(r) Not to create, assume or allow any mortgage, lien (including
judicial liens), deed of trust, charge, pledge, security interest or other
encumbrance (collectively, "Liens") on property Seller now or later owns; and
(s) Seller shall not agree or commit to take any of the actions
described in clauses (e) through (p) above.
4.3 Filings and Consents. Seller and the Key Stockholder shall ensure
that:
(a) each filing or notice required to be made or given (pursuant to
any applicable Legal Requirement, Order or Contract, or otherwise) by Seller or
any of the Stockholders in connection with the execution and delivery of any of
the Transactional Agreements or in connection with the consummation or
performance of any of the Transactions (including each of the filings and
notices identified in Part 2.23 of the Disclosure Schedule) is made or given as
soon as possible after the date of this Agreement;
(b) each Consent required to be obtained (pursuant to any applicable
Legal Requirement, Order or Contract, or otherwise) by Seller or any of the
Stockholders in connection with the execution and delivery of any of the
Transactional Agreements or in connection with the consummation or performance
of any of the Transactions (including each of the Consents identified in Part
2.23 of the Disclosure Schedule) is obtained as soon as possible after the date
of this Agreement and remains in full force and effect through the Closing Date;
(c) Seller promptly delivers to Purchaser a copy of each filing made,
each notice given and each Consent obtained by Seller or any Stockholder during
the Pre-Closing Period; and
(d) during the Pre-Closing Period, Seller and its Representatives
cooperate with Purchaser and with Purchaser's Representatives, and prepare and
make available such documents and take such other actions as Purchaser may
reasonably request in good faith, in connection with any filing, notice or
Consent that Purchaser is required or elects to make, give or obtain, other than
with respect to the Excluded Matters.
4.4 Notification; Updates to Disclosure Schedule.
(a) During the Pre-Closing Period, Seller and the Key Stockholder
shall promptly notify Purchaser in writing of:
(i) the discovery by Seller or the Key Stockholder of any event,
condition, fact or circumstance that occurred or existed on or prior to the date
of this Agreement and that caused or constitutes a Breach of any representation
or warranty made by Seller or any of the Stockholders in this Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute a material Breach of any representation or warranty made by Seller or
any of the Stockholders in this Agreement if (A) such representation or warranty
had been made as of the time of the occurrence, existence or discovery of such
event, condition, fact or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement;
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(iii) any Breach of any covenant or obligation of Seller or any
of the Stockholders; and
(iv) any event, condition, fact or circumstance that may make
the timely satisfaction of any of the conditions set forth in Section 6 or
Section 7 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required to
be disclosed pursuant to Section 4.4(a) requires any change in the Disclosure
Schedule, or if any such event, condition, fact or circumstance would require
such a change assuming the Disclosure Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then Seller and the Stockholders shall promptly deliver to
Purchaser an update to the Disclosure Schedule specifying such change. No such
update shall be deemed to supplement or amend the Disclosure Schedule for the
purpose of (i) determining the accuracy of any of the representations and
warranties made by Seller or any of the Stockholders in this Agreement or in the
Closing Certificate, (ii) determining whether any of the conditions set forth in
Section 6 has been satisfied or (iii) for the purpose of liability under Section
9.
4.5 Payment of Indebtedness by Related Parties. Seller and the Key
Stockholder shall cause all indebtedness and other Liabilities of each Related
Party to Seller (including any such indebtedness or other Liability identified
in Part 2.11 of the Disclosure Schedule) to be discharged and paid in full prior
to the Closing, other than indebtedness arising from Permitted Transactions.
4.6 No Negotiation.
(a) Seller and the Key Stockholder shall ensure that, during the Pre-
Closing Period, neither Seller nor any of Seller's Representatives directly or
indirectly:
(i) Enter into any agreement, understanding or arrangement
relating to any Acquisition Proposal (as defined below);
(ii) Consider or engage in any discussions or negotiations
relating to any Acquisition Proposal; or
(iii) Solicit the submissions of any Acquisition Proposal that
results in an Acquisition on or before February 1, 2001.
The obligations of Seller and the Key Stockholder under this Section 4.6
shall terminate on November 21, 2000.
(b) In the event that Seller violates Section 4.6(a), then Purchaser
shall automatically receive, as reasonable liquidated damages (i) a perpetual,
transferable, royalty-free license to use, modify, license and sell the Product
and all related materials without restriction (including source code) and (ii)
fully paid maintenance and support for the Product for a period of 2 years.
This Section 4.6 shall survive termination of this Agreement.
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4.7 Best Efforts. During the Pre-Closing Period, Seller and the Key
Stockholder shall use their Best Efforts to cause the conditions set forth in
Section 6 to be satisfied on a timely basis.
4.8 Confidentiality. Seller and the Key Stockholder shall ensure that,
during the Pre-Closing Period:
(a) Seller and its Representatives shall keep strictly confidential
the existence and terms of this Agreement;
(b) neither Seller nor any of its Representatives issues or
disseminates any press release or other publicity or otherwise makes any
disclosure of any nature (to any of Seller's suppliers, customers, landlords,
creditors or Employees or to any other Person) regarding any of the
Transactions, except to the extent permitted under Section 10.6(a); and
(c) if Seller is required by law to make any disclosure regarding
the Transactions, Seller advises Purchaser, at least 5 business days before
making such disclosure, of the nature and content of the intended disclosure.
4.9 Additional Capital. In the event that following the Effective Date
Seller (i) requires additional capital to fund development as contemplated by
the OEM Agreement; (ii) is in compliance with this Agreement and other
agreements contemplated hereby, and (iii) all representations and warranties of
Seller in Section 2 are true and correct and Seller so certifies. Purchaser
agrees to purchase an additional 100 shares of Series A Preferred Stock of
Seller for aggregate consideration of $1,000,000 (the "Additional Funding").
Purchaser shall provide Seller with the Additional Funding within 5 business
days of receipt of Seller's written request for the Additional Funding. In the
event that Seller requires capital in addition to the Additional Funding, the
Parties shall mutually agree on an amount of capital to be provided by Purchaser
to Seller; provided, however, that in Purchaser's judgment, Seller has
appropriately spent its capital as of such date and the additional capital
required is reasonable in light of Seller's business.
4.10 Audited Financial Statements. Seller and the Stockholders shall
ensure that the audited balance sheet of Seller as of the Closing Date, and the
related audited statements of operations and changes in stockholders' equity and
cash flows of Seller as of the Closing Date, together with the notes thereto and
the unqualified report and opinion of Seller's independent accountant, Grant
Thornton LLP, relating thereto, are provided to Purchaser.
4.11 Stockholder Agreements; Delivery of Seller Stock Certificates. Seller
and the Stockholders shall ensure that, as of the Effective Date, or as of the
date upon becoming a Stockholder if such date is after the Effective Date, each
Stockholder has (i) signed the Stockholder Agreement and (ii) delivered his
Seller Stock Certificates to the Escrow Agent in accordance with this Agreement
and the Escrow Agreement.
4.12 Assumed Options Permitted under Option Plan. Seller and the
Stockholders shall ensure that all holders of any option, convertible debt
securities or other right to purchase any shares of capital stock of Seller
enter into an agreement whereby the same can be assumed by Purchaser pursuant to
Section 1.9. as of the Closing Date.
4.13 Registration Statement. Within 10 business days of the Closing Date,
Purchaser shall file with the SEC a Registration Statement on Form S-3
registering the shares of Purchaser Common Stock issued at the Closing in
accordance with the provisions of the Registration Rights Agreement and a
Registration Statement on Form S-8 with respect to the Assumed Options
(collectively, the "Registration
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Statements"), which Registration Statements will be effective for a period of 1
year following the date of Closing, or, for the Registration Statement on Form
S-8, so long as any Assumed Options are outstanding. Purchaser shall use its
Best Efforts to cause the Registration Statements to be declared effective as
soon as possible by the SEC.
5. Pre-Closing Covenants of Purchaser
5.1 Best Efforts. During the Pre-Closing Period, Purchaser shall use its
Best Efforts to cause the condition set forth in Section 7.2 to be satisfied.
5.2 Confidentiality. Purchaser shall ensure that, during the Pre-Closing
Period:
(a) Purchaser shall keep strictly confidential the existence and terms
of this Agreement;
(b) Neither Purchaser nor any of its Representatives issues or
disseminates any press release or other publicity or otherwise makes any
disclosure of any nature (to any of Purchaser's suppliers, customers, landlords,
creditors or employees or to any other Person) regarding any of the
Transactions, except to the extent permitted under Section 10.6(a); and
(c) if Purchaser is required by law to make any disclosure regarding
the Transactions, Purchaser gives Seller reasonable notice under the
circumstances before making such disclosure, of the nature and content of the
intended disclosure.
6. Conditions Precedent to Purchaser's Obligation to Close
Purchaser's obligation to purchase the outstanding capital stock and
options of Seller, other than the Alteon Stock, and to take the other actions
required to be taken by Purchaser at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Purchaser, in whole or in part, in accordance with Section
10.13):
6.1 Accuracy of Representations.
(a) Each of the Specified Representations shall have been accurate in
all respects as of the date of this Agreement, and shall be accurate in all
respects as of the Scheduled Closing Time as if made at the Scheduled Closing
Time, without giving effect to any update to the Disclosure Schedule.
(b) All of the other representations and warranties made by Seller and
the Stockholders in this Agreement (considered collectively), and each of such
representations and warranties (considered individually), shall have been
accurate in all material respects as of the date of this Agreement (except for
such representations and warranties that are qualified by their terms by a
reference to any "Material Adverse Effect" or other materiality qualifications,
or any similar qualifications, contained or incorporated directly or indirectly
in such representations and warranties, which representatives and warranties as
so qualified shall be true and correct in all respects), and shall be accurate
in all material respects as of the Scheduled Closing Time as if made at the
Scheduled Closing Time (except for such representations and warranties that are
qualified by their terms by a reference to any "Material Adverse Effect" or
other materiality qualifications, or any similar qualifications, contained or
incorporated directly or indirectly in such representations and warranties,
which representatives and warranties as so qualified shall be true and correct
in all respects), without giving effect to any update to the Disclosure
Schedule.
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6.2 Performance of Obligations.
(a) Seller shall have executed and delivered each of the agreements
required to be executed and delivered by Seller pursuant to Section 1.6(b).
(b) The Stockholders shall have delivered to Purchaser the
certificates representing the shares held by the Stockholders and related Stock
Powers as required by Section 1.6(b)(i), and each Stockholder shall have
executed and delivered each of the other documents required to be executed and
delivered by such Stockholder pursuant to Section 1.6(b) and each such document,
together with each Repurchase Agreement and Employment Agreement shall be in
full force and effect.
(c) All of the other covenants and obligations that Seller and the
Stockholders are required to comply with or to perform at or prior to the
Closing (considered collectively), and each of such covenants and obligations
(considered individually), shall have been duly complied with and performed in
all material respects.
6.3 Consents. Any of the Consents identified in Part 2.23 of the
Disclosure Schedule shall have been obtained and shall be in full force and
effect.
6.4 Additional Documents. Purchaser shall have received the following
documents:
(a) an opinion letter from Sims Moss Kline & Davis LLP, dated the
Closing Date, in the form of Exhibit F; and
(b) such other documents as Purchaser may reasonably request in good
faith for the purpose of (i) evidencing the accuracy of any representation or
warranty made by Seller or any of the Stockholders, (ii) evidencing the
compliance by Seller or any of the Stockholders with, or the performance by
Seller or any of the Stockholders of, any covenant or obligation set forth in
this Agreement, (iii) evidencing the satisfaction of any condition set forth in
this Section 6 or (iv) otherwise facilitating the consummation or performance of
any of the Transactions.
6.5 No Proceedings. Since the date of this Agreement, there shall not have
been commenced or threatened against Purchaser, or against any Person affiliated
with Purchaser, any Proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the Transactions, or (b) that
may have the effect of preventing, delaying, making illegal or otherwise
interfering with any of the Transactions.
6.6 No Claim Regarding Stock Ownership or Sale Proceeds. No Person shall
have made or threatened any claim asserting that such Person (a) may be the
holder or the beneficial owner of, or may have the right to acquire or to obtain
beneficial ownership of, any capital stock or other securities of Seller or (b)
may be entitled to all or any portion of the Total Consideration.
6.7 No Prohibition. Neither the consummation nor the performance of any
the Transactions will, directly or indirectly (with or without notice or lapse
of time), contravene or conflict with or result in a violation of, or cause
Purchaser or any Person affiliated with Purchaser to suffer any adverse
consequence under, (a) any applicable Legal Requirement or Order or (b) any
Legal Requirement or Order that has been proposed by or before any Governmental
Body.
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7. Conditions Precedent to Stockholders' Obligation to Close
The Stockholders' obligation to sell their shares and to take the other
actions required to be taken by the Stockholders at the Closing is subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by the Agent, in whole or in part, in
accordance with Section 10.13):
7.1 Accuracy of Representations. All of the representations and warranties
made by Purchaser in this Agreement (considered collectively), shall have been
accurate in all material respects as of the date of this Agreement and shall be
accurate in all material respects as of the Scheduled Closing Time as if made at
the Scheduled Closing Time.
7.2 Purchaser's Performance. All of the other covenants and obligations
that Purchaser is required to comply with or to perform pursuant to this
Agreement at or prior to the Closing (considered collectively), and each of such
covenants and obligations (considered individually), shall have been complied
with and performed in all material respects.
7.3 No Injunction. There shall not be in effect any injunction that shall
have been entered by a court of competent jurisdiction since the date of this
Agreement and that prohibits the sale of the shares by the Stockholders to
Purchaser.
7.4 No Proceedings. Since the date of this Agreement, there shall not have
been commenced or threatened against Purchaser, or against any Person affiliated
with Purchaser, any Proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the Transactions, or (b) that
may have the effect of preventing, delaying, making illegal or otherwise
interfering with any of the Transactions.
7.5 Seller shall have received:
(a) The Registration Rights Agreement and the Escrow Agreement,
executed by Purchaser;
(b) An opinion of Cooley Godward LLP, dated the Closing Date, in the
form of Exhibit G; and
(c) Either: (i) the Purchaser Stock Certificates in accordance with
1.11(b)(i) or (ii) a letter from Cooley Godward LLP reasonably acceptable to
Seller containing its promise to hold all Seller Stock Certificates representing
the outstanding shares of Seller Common Stock from the Closing Date until such
date that Purchaser's transfer agent delivers the Stockholders' Purchaser Stock
Certificates required to be delivered at the Closing in accordance with Section
1.11(b)(i).
8. Termination
8.1 Termination Events.
This Agreement shall automatically terminate on the Termination Date.
This Agreement may be terminated prior to the Closing:
(a) by Purchaser if (i) there is a material Breach of any covenant or
obligation of Seller or any of the Stockholders, or (ii) Purchaser reasonably
determines that the timely satisfaction of
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any condition set forth in Section 6 has become impossible or impractical (other
than as a result of any failure on the part of Purchaser comply with or perform
its covenants and obligations under this Agreement);
(b) by the Agent if (i) there is a material Breach of any covenant or
obligation of Purchaser or (ii) the Agent reasonably determines that the timely
satisfaction of any condition set forth in Section 7 has become impossible or
impractical (other than as a result of any failure on the part of Seller or any
of the Stockholders to comply with or perform any covenant or obligation set
forth in this Agreement);
(c) by Purchaser if the Closing has not taken place on or before 10
business days following the Satisfaction Date (other than as a result of any
failure on the part of Purchaser to comply with or perform its covenants and
obligations under this Agreement);
(d) by Seller if the Closing has not taken place on or before 10
business days following the Satisfaction Date (other than as a result of the
failure on the part of Seller or any of the Stockholders to comply with or
perform any covenant or obligation set forth in this Agreement);
(e) by Purchaser if:
(i) Seller or any of its representatives has given Purchaser
materially false or misleading information or representations in writing or
failed to disclose in writing material information regarding Seller, including
without limitation, the obligations of its Employees or prospective Employees to
former employers;
(ii) Seller files a bankruptcy petition, a bankruptcy petition
is filed against Seller or Seller makes a general assignment for the benefit of
creditors, and such petition or assignment is not removed or terminated within a
period of 45 days after such filing or assignment;
(iii) A receiver or similar official is appointed for Seller's
business and such appointment is not terminated within a period of 45 days after
such appointment, or the business is terminated; and
(iv) Any judgments or arbitration awards are entered against
Seller, or Seller enters into any settlement agreements with respect to any
litigation or arbitration, in an aggregate amount of $500,000 or more in excess
of any insurance coverage therefor; or
(f) by the mutual consent of Purchaser and Seller.
8.2 Termination Procedures. If Purchaser wishes to terminate this
Agreement pursuant to Section 8.1(a), Section 8.1(c) or Section 8.1(e),
Purchaser shall deliver to Seller a written notice stating that Purchaser is
terminating this Agreement and setting forth a brief description of the basis on
which Purchaser is terminating this Agreement. If Seller wishes to terminate
this Agreement pursuant to Section 8.1(b), Section 8.1(d) or Section 8.1(f),
Seller shall deliver to Purchaser a written notice stating that the Agent is
terminating this Agreement and setting forth a brief description of the basis on
which Seller is terminating this Agreement. In the event that the alleged breach
is curable, the alleged breaching party shall have a thirty (30) day period from
the date of such written notice to cure any such breach.
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8.3 Effect of Termination. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that:
(a) no party shall be relieved of any obligation or other Liability
arising from any Breach by such party of any provision of this Agreement;
(b) the parties shall, in all events, remain bound by and continue to
be subject to the provisions set forth in Section 10; and
(c) Purchaser, Seller and the Stockholders shall, in all events,
remain bound by and continue to be subject to Sections 4.6, 4.8 and 10.7.
8.4 Nonexclusivity of Termination Rights. The termination rights provided
in Section 8.1 shall not be deemed to be exclusive. Accordingly, the exercise by
any party of its right to terminate this Agreement pursuant to Section 8.1 shall
not be deemed to be an election of remedies and shall not be deemed to
prejudice, or to constitute or operate as a waiver of, any other right or remedy
that such party may be entitled to exercise (whether under this Agreement, under
any other Contract, under any statute, rule or other Legal Requirement, at
common law, in equity or otherwise).
9. Indemnification, Etc.
9.1 Survival of Representations and Covenants.
(a) The representations, warranties, covenants and obligations of
Seller and the Stockholders shall survive (without limitation): (i) the Closing
and the sale of the outstanding capital stock and options to Purchaser; (ii) any
sale or other disposition of any or all of the capital stock and options by
Purchaser and (iii) any Acquisition effected by or otherwise involving Purchaser
or Seller. All of such representations, warranties, covenants and obligations
shall remain in full force and effect and shall survive for a period of one (1)
year following the Closing.
(b) The representations, warranties, covenants and obligations of
Seller and the Stockholders, and the rights and remedies that may be exercised
by the Indemnitees, shall not be limited or otherwise affected by or as a result
of any information furnished to, or any investigation made by or Knowledge of,
any of the Indemnitees or any of their Representatives.
(c) For purposes of this Agreement and the Stockholder Agreements,
each statement or other item of information set forth in the Disclosure Schedule
or in any update to the Disclosure Schedule shall be deemed to be a
representation and warranty made by Seller and the Stockholders in this
Agreement and the Stockholder Agreements, respectively.
(d) The representations, warranties, covenants and obligations of
Purchaser shall expire upon the Closing.
9.2 Indemnification by Stockholders.
(a) The Stockholders, severally and not jointly, shall hold harmless
and indemnify, each of the Indemnitees from and against, and shall compensate
and reimburse each of the Indemnitees for, any Damages which are directly or
indirectly suffered or incurred by any of the Indemnitees or to which any of the
Indemnitees may otherwise become subject at any time (regardless of whether or
not such Damages relate to any third-party claim) and which arise directly or
indirectly from or as a direct or indirect result of, or are directly or
indirectly connected with:
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(i) any Breach of any representation or warranty made by
Seller or any of the Stockholders in this Agreement (without giving effect to
any update to the Disclosure Schedule or to any "Material Adverse Effect" or
other materiality qualification or similar qualification contained or
incorporated directly or indirectly in such representation) or in the Closing
Certificate;
(ii) any Breach of any representation, warranty, statement,
information or provision contained in the Disclosure Schedule or in any other
document delivered or otherwise made available to Purchaser or any of its
Representatives by or on behalf of Seller or any of Seller's Representatives;
(iii) any Breach of any covenant or obligation of Seller or any
of the Stockholders;
(iv) any Liability to which Seller or any of the other
Indemnitees may become subject and that arises directly or indirectly from or
relates directly or indirectly to (A) any product manufactured or sold, or any
service performed, by or on behalf of Seller on or at any time prior to the
Closing Date, (B) the presence of any Hazardous Material at any site owned,
leased, occupied or controlled by Seller on or at any time prior to the Closing
Date, or (C) the generation, manufacture, production, transportation,
importation, use, treatment, refinement, processing, handling, storage,
discharge, release or disposal of any Hazardous Material (whether lawfully or
unlawfully) by or on behalf of Seller on or at any time prior to the Closing
Date;
(v) any matter identified or referred to in Part 2.8 of the
Disclosure Schedule; or
(vi) any Proceeding relating directly or indirectly to any
Breach, alleged Breach, Liability or matter of the type referred to in clause
(i), (ii), (iii), (iv) or (v) above (including any Proceeding commenced by any
Indemnitee for the purpose of enforcing any of its rights under this Section 9).
(b) The Stockholders acknowledge and agree that, if there is any
Breach of any representation, warranty or other provision relating to Seller or
Seller's business, condition, assets, liabilities, operations, financial
performance, net income or prospects (or any aspect or portion thereof), or if
Seller becomes subject to any Liability of the type referred to in clause (iv)
of Section 9.2(a), then Purchaser itself shall be deemed, by virtue of its
ownership of common stock of Seller, to have incurred Damages as a result of
such Breach or Liability. Nothing contained in this Section 9.2(b) shall have
the effect of (i) limiting the circumstances under which Purchaser may otherwise
be deemed to have incurred Damages for purposes of this Agreement, (ii) limiting
the other types of Damages that Purchaser may be deemed to have incurred
(whether in connection with any such Breach or Liability or otherwise) or (iii)
limiting the rights of Seller or any of the other Indemnitees under this Section
9.2.
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9.3 Threshold. The Stockholders shall not be required to make any
indemnification payment pursuant to Section 9.2 for any Breach of any of their
representations and warranties until such time as the total amount of all
Damages (including the Damages arising from such Breach and all other Damages
arising from any other Breaches of any representations or warranties) that have
been directly or indirectly suffered or incurred by any one or more of the
Indemnitees, or to which any one or more of the Indemnitees has or have
otherwise become subject, that exceeds $250,000 in the aggregate. At such time
as the total amount of such Damages exceeds $250,000 in the aggregate, the
Indemnitees shall be entitled to be indemnified against the portion of such
Damages exceeding $250,000 exclusively from the Escrow Stock as set forth in the
Escrow Agreement.
9.4 Right to Require Cure of Breach. Without limiting the generality of
anything contained in Section 9.2, if there is any Breach of any representation
or warranty made by Seller or any of the Stockholders, then the Stockholders,
severally, shall be obligated to pay such amounts to Seller and take such other
actions as Purchaser may in good faith reasonably request for the purpose of
causing such Breach to be corrected, cured and eliminated in all respects (at no
cost to Seller or Purchaser).
9.5 No Contribution. Each Stockholder waives, and acknowledges and agrees
that such Stockholder shall not have and shall not exercise or assert or attempt
to exercise or assert, any right of contribution or right of indemnity or any
other right or remedy against Seller in connection with any indemnification
obligation or any other Liability to which such Stockholder may become subject
under any of the Transactional Agreements or otherwise in connection with any of
the Transactions.
9.6 Exclusive Remedy. The Escrow Stock is the sole and exclusive remedy of
the Indemnitees against any of the Stockholders with respect to any matter
arising out of or in connection with the Transactional Agreements; provided,
however, that no claim against the Stockholders for fraud, or breach of Section
2.3 shall be subject to the limitations of this paragraph or this Section 9. Any
release of the Escrow Stock shall be in accordance with the terms of the Escrow
Agreement. Subject to the rights of the Indemnitees set forth in Section 9.7, no
Stockholder shall be liable or responsible in any manner whatsoever to the
Indemnitees, whether for indemnification or otherwise, except for indemnity as
expressly provided in this Section 9. The maximum liability of any Stockholder
under the Transactional Agreements shall be equal to their pro-rata portion of
the Escrow Stock as set forth in the Escrow Agreement (the "Maximum Liability").
9.7 Defense of Third Party Claims. In the event of the assertion or
commencement by any Person of any claim or Proceeding (whether against Seller,
against any other Indemnitee or against any other Person) with respect to which
any of the Stockholders may become obligated to indemnify, hold harmless,
compensate or reimburse any Indemnitee pursuant to this Section 9, Purchaser
shall have the right, at its election, to designate the Agent to assume the
defense of such claim or Proceeding at the sole expense of the Stockholders. If
Purchaser so elects to designate the Agent to assume the defense of any such
claim or Proceeding:
(a) the Agent shall proceed to defend such claim or Proceeding in a
diligent manner with counsel satisfactory to Purchaser;
(b) Purchaser shall make available to the Agent any non-privileged
documents and materials in the possession of Purchaser that may be necessary to
the defense of such claim or Proceeding;
(c) the Agent shall keep Purchaser informed of all material
developments and events relating to such claim or Proceeding;
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(d) Purchaser shall have the right to participate in the defense of
such claim or Proceeding;
(e) the Agent shall not settle, adjust or compromise such claim or
Proceeding without the prior written consent of Purchaser, not to be
unreasonably withheld; and
(f) Purchaser may at any time (notwithstanding the prior designation
of the Agent to assume the defense of such claim or Proceeding) assume the
defense of such claim or Proceeding.
If Purchaser does not elect to designate the Agent to assume the defense of any
such claim or Proceeding (or if, after initially designating the Agent to assume
such defense, Purchaser elects to assume such defense), Purchaser may proceed
with the defense of such claim or Proceeding on its own. If Purchaser so
proceeds with the defense of any such claim or Proceeding on its own:
(i) all expenses relating to the defense of such claim or
Proceeding (whether or not incurred by Purchaser) shall be borne and paid
exclusively by the Stockholders;
(ii) the Stockholders shall make available to Purchaser any
documents and materials in the possession or control of any of the
Stockholders that may be necessary to the defense of such claim or
Proceeding;
(iii) Purchaser shall keep the Agent informed of all material
developments and events relating to such claim or Proceeding;
(iv) Agent shall have the right to participate in the defense
of such claim or Proceeding with Sims Moss Kline & Davis LLP as counsel;
and
(v) Purchaser shall have the right to settle, adjust or
compromise such claim or Proceeding with the consent of the Agent; provided,
however, that the Agent shall not unreasonably withhold such consent.
9.8 Exercise of Remedies by Indemnitees Other Than Purchaser. No
Indemnitee (other than Purchaser or any successor thereto or assign thereof)
shall be permitted to assert any indemnification claim or exercise any other
remedy under this Agreement unless Purchaser (or any successor thereto or assign
thereof) shall have consented to the assertion of such indemnification claim or
the exercise of such other remedy.
10. Miscellaneous Provisions
10.1 Several Liability. Subject to Section 9.5:
(a) the Stockholders severally agree that they shall be severally
liable with Seller for the due and timely compliance with and performance of
each of the covenants and obligations of Seller set forth in this Agreement, up
to the Maximum Liability;
(b) each Stockholder agrees that such Stockholder shall be severally
liable with each of the other Stockholders for the due and timely compliance
with and performance of each of the covenants and obligations of such other
Stockholders set forth in this Agreement, up to the Maximum Liability;
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(c) Seller agrees that, prior to the Closing, Seller shall be
severally liable with each Stockholder for the due and timely compliance with
and performance of each of the covenants and obligations of such Stockholder set
forth in this Agreement (including the indemnification obligations of such
Stockholder set forth in Section 9); and
(d) Stockholders' Agent. Pursuant to the Stockholder Agreements, the
Stockholders irrevocably nominated and appointed Richard A. Howes as the agent
and true and lawful attorney-in-fact of the Stockholders (the "Agent"), with
full power of substitution, to act in the name, place and instead of the
Stockholders as set forth in the Stockholder Agreements.
10.2 Intentionally Omitted.
10.3 Fees and Expenses.
(a) Without limiting the generality of anything contained in Section
10.3(b), Seller shall bear and pay all reasonable fees, costs and expenses
(including all legal and auditors fees and expenses), that have been incurred or
that are in the future incurred by, on behalf of or for the benefit of Seller or
any of the Stockholders in connection with:
(i) the negotiation, preparation and review of any term sheet
or similar document relating to any of the Transactions;
(ii) the investigation and review conducted by Purchaser and
its Representatives with respect to Seller's business (and the furnishing of
information to Purchaser and its Representatives in connection with such
investigation and review);
(iii) the negotiation, preparation and review of this Agreement
(including the Disclosure Schedule), the other Transactional Agreements and all
certificates, opinions and other instruments and documents delivered or to be
delivered in connection with the Transactions;
(iv) the preparation and submission of any filing or notice
required to be made or given in connection with any of the Transactions, and the
obtaining of any Consent required to be obtained in connection with any of the
Transactions; and
(v) the consummation and performance of the Transactions.
To the extent the Closing occurs, any such fees, costs or expenses shall not
exceed $200,000, unless any such excess is borne by the Stockholders.
(b) Subject to the provisions of Section 9 (including the
indemnification and other obligations of the Stockholders thereunder) and the
provisions of Section 10.4(c), Purchaser shall bear and pay all reasonable fees,
costs and expenses (including all legal and auditors fees and expenses payable
to Cooley Godward LLP and Deloitte & Touche LLP, respectively, or to other
counsel or auditors to Purchaser) that have been incurred or that are in the
future incurred by or on behalf of Purchaser in connection with:
(i) the negotiation, preparation and review of any term sheet
or similar document relating to any of the Transactions;
(ii) the investigation and review conducted by Purchaser and its
Representatives with respect to Seller's business;
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(iii) the negotiation, preparation and review of this
Agreement, the other Transactional Agreements and all certificates, opinions and
other instruments and documents delivered or to be delivered in connection with
the Transactions; and
(iv) the consummation and performance of the Transactions.
10.4 Attorneys' Fees. If any legal action or other legal proceeding
relating to any of the Transactional Agreements or the enforcement of any
provision of any of the Transactional Agreements is brought against any Party
hereto, the prevailing Party shall be entitled to recover reasonable attorneys'
fees, costs and disbursements (in addition to any other relief to which the
prevailing Party may be entitled).
10.5 Notices. Any notice or other communication required or permitted to
be delivered to any Party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile number set forth beneath the name of such Party below (or
to such other address or facsimile number as such Party shall have specified in
a written notice given to the other parties hereto):
if to Seller or any of the Stockholders:
Pharsalia Technologies, Inc.
1000 Holcomb Woods Parkway, Suite 410-C
Roswell, GA 30075
Attention: Richard A. Howes
Facsimile: (678) 366-4454
with a copy to:
Raymond Moss, Esq.
Sims Moss Kline & Davis LLP
400 Northpark Town Center, Suite 310
1000 Abernathy Road, N.E.
Atlanta, GA 30328
Facsimile: (770) 481-7210
(which shall not constitute notice)
if to the Agent:
Richard A. Howes, as Agent of the Stockholders
c/o Pharsalia Technologies, Inc.
1000 Holcomb Woods Parkway, Suite 410-C
Roswell, GA 30075
Facsimile: (678) 366-4454
if to Purchaser:
Alteon WebSystems, Inc.
50 Great Oaks Boulevard
San Jose, CA 95119
Attention: Frank Laurencio
Facsimile: (650) 360-5761
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with a copy to:
Eric C. Jensen, Esq.
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Facsimile: (650) 849-7400
(which shall not constitute notice)
10.6 Publicity. Without limiting the generality of anything contained in
Section 4.8, on and at all times after the Closing Date:
(a) no press release or other publicity concerning any of the
Transactions shall be issued or otherwise disseminated by or on behalf of any of
Seller, Purchaser or the Stockholders, and the parties shall continue to keep
the existence and terms of this Agreement and the other Transactional Agreements
strictly confidential; provided, however, that if after consultation with its
counsel, Purchaser determines that any law, rule or regulatory requirement
(including any Nasdaq rule) requires Purchaser to issue, make or otherwise
disseminate a press release, disclosure or other publicity concerning the
possible transactions contemplated by this letter, Purchaser may (without being
deemed to be in breach of this letter) issue, make or otherwise disseminate such
press release, disclosure or other publicity, provided that Purchaser has
provided to Seller reasonable notice and a reasonable opportunity to review the
foregoing prior to such disclosure; and
(b) Seller and each Stockholder shall keep strictly confidential,
and shall not use or disclose to any other Person, any non-public document or
other information in such Stockholder's possession that relates directly or
indirectly to the business of Seller, Purchaser or any affiliate of Purchaser.
10.7 No Hire. Each Party and its affiliates, if any, agrees during the
term of this Agreement and for a period of 1 year after the Termination Date,
not to directly or indirectly solicit employment of or hire any employee,
officer, director or consultant of the other Party and/or its affiliates.
10.8 Time of the Essence. Time is of the essence of this Agreement.
10.9 Headings. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.10 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
10.11 Governing Law; Venue.
(a) This Agreement shall be construed in accordance with, and
governed in all respects by Delaware law (without giving effect to principles of
conflicts of laws).
(b) Any Proceeding relating to this Agreement or the enforcement of
any provision of this Agreement may be brought or otherwise commenced in any
state or federal court located in the County of Santa Clara, California and the
County of Fulton, Georgia. Each Party to this Agreement:
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(i) expressly and irrevocably consents and submits to the
jurisdiction of each state and federal court located in the County of Santa
Clara, California and the County of Fulton, Georgia (and each appellate court
located in the State of California and the State of Georgia) in connection with
any such Proceeding;
(ii) agrees that each state and federal court located in the
County of Santa Clara, California and the County of Fulton, Georgia shall be
deemed to be a convenient forum; and
(iii) agrees not to assert (by way of motion, as a defense or
otherwise), in any such Proceeding commenced in any state or federal court
located in the County of Santa Clara, California and the County of Fulton,
Georgia, any claim that such Party is not subject personally to the jurisdiction
of such court, that such Proceeding has been brought in an inconvenient forum,
that the venue of such Proceeding is improper or that this Agreement or the
subject matter of this Agreement may not be enforced in or by such court.
(c) Each Stockholder agrees that, if any Proceeding is commenced
against any Indemnitee by any Person in or before any court or other tribunal
anywhere in the world, then such Indemnitee may proceed against such Stockholder
in such court or other tribunal with respect to any indemnification claim or
other claim arising directly or indirectly from or relating directly or
indirectly to such Proceeding or any of the matters alleged therein or any of
the circumstances giving rise thereto.
(d) Nothing contained in Section 10.10(b) or 10.10(c) shall be
deemed to limit or otherwise affect the right of any Indemnitee to commence any
Proceeding or otherwise proceed against Seller or any of the Stockholders in any
other forum or jurisdiction.
(e) The Stockholders irrevocably constitute and appoint the Agent
as their agent to receive service of process in connection with any Proceeding
relating to this Agreement or the enforcement of any provision of this
Agreement.
(f) The Stockholders irrevocably waive the right to a jury trial in
connection with any Proceeding relating to this Agreement or the enforcement of
any provision of this Agreement.
10.12 Successors and Assigns; Assignment. This Agreement shall be binding
upon Seller and its successors and assigns (if any), the Stockholders and their
respective personal representatives, executors, administrators, estates, heirs,
successors and assigns (if any) and Purchaser and its successors and assigns (if
any). This Agreement shall inure to the benefit of Seller, the Stockholders,
Purchaser, the other Indemnitees (subject to Section 9.10) and the respective
successors and assigns (if any) of the foregoing. Purchaser may freely assign
any or all of its rights under this Agreement (including its indemnification
rights under Section 9), in whole or in part, in connection with an Acquisition
without obtaining the consent or approval of any other Party hereto or of any
other Person. Other than in connection with an Acquisition, Purchaser may not
assign any of its rights under this Agreement without the prior written consent
of Seller, which consent shall not be unreasonably withheld. Seller may not
assign any of its rights under this Agreement without the prior written consent
of Purchaser.
10.13 Remedies Cumulative; Specific Performance. The rights and remedies
of the parties hereto shall be cumulative (and not alternative). Each
Stockholder agrees that:
(a) in the event of any Breach or threatened Breach by a party of
any covenant, obligation or other provision set forth in this Agreement, the
other party shall be entitled (in addition to any other remedy that may be
available to it) to (i) a decree or order of specific performance or
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mandamus to enforce the observance and performance of such covenant, obligation
or other provision, and (ii) an injunction restraining such Breach or threatened
Breach; and
(b) neither Purchaser nor any other Indemnitee shall be required to
provide any bond or other security in connection with any such decree, order or
injunction or in connection with any related action or Proceeding.
10.14 Waiver.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
10.15 Amendments. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of Purchaser and the Agent.
10.16 Severability. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
10.17 Parties in Interest. Except for the provisions of Section 9 hereof,
none of the provisions of this Agreement is intended to provide any rights or
remedies to any Person other than the parties hereto and their respective
successors and assigns (if any).
10.18 Entire Agreement. The Transactional Agreements set forth the entire
understanding of the parties relating to the subject matter thereof and
supersede all prior agreements and understandings among or between any of the
parties relating to the subject matter thereof.
10.19 Construction.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) The Parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting Party shall not
be applied in the construction or interpretation of this Agreement.
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(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this
Agreement and Exhibits to this Agreement.
10.20 Purchaser Voting Rights Waiver. On or after November 21, 2000,
Purchaser hereby automatically and irrevocably waives its voting rights under
the Certificate of Designations, Preferences and Rights of Series A Preferred
Stock of Pharsalia Technologies, Inc. filed with the State of Delaware on March
31, 2000.
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The Parties hereto have caused this Agreement to be executed and delivered
as of March 31, 2000.
"Purchaser": Alteon WebSystems, Inc.
By: /s/ Barton M. Burstein
------------------------------------
Name:
Title:
"Seller": Pharsalia Technologies, Inc.
By: /s/ Richard A. Howes
------------------------------------
Name:
Title:
"Key Stockholder":
/s/ Richard A. Howes
----------------------------------------
Richard A. Howes
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Exhibit A
CERTAIN DEFINITIONS
"Acceptance Criteria" has the meaning specified in the OEM Agreement.
"Acquisition Proposal" means any proposal, plan, agreement, understanding
or arrangement contemplating any of the following (each an "Acquisition") (i)
any merger, consolidation, reorganization, recapitalization or similar
transaction involving Seller or any of its affiliates, (ii) any transfer or
issuance of any capital stock or other securities of Seller or any of its
affiliates, except for stock issued to or stock options granted to Employees in
the ordinary course of business in accordance with Section 9 or (iii) any
transfer or license of any material asset of Seller, including any intellectual
property related to the Product. An Acquisition Proposal shall not include (a)
general discussions regarding the networking industry and technological
developments related thereto or (b) the receipt by Seller of an unsolicited
offer of an Acquisition Proposal, so long as the only response by Seller is that
it will not consider such proposal.
"Agent" has the meaning specified in Section 10.2 of this Agreement.
"Average Trading Price" has the meaning specified in Section 1.5(a)(i) of
this Agreement.
"Alteon Stock" has the meaning specified in Section 1.1(a) of this
Agreement.
"Agreement" means the Exchange Agreement to which this Exhibit A is
attached, as it may be amended from time to time.
"Best Efforts" means the efforts that a prudent Person desiring to achieve
a particular result would use in order to ensure that such result is achieved as
expeditiously as possible.
Breach. There shall be deemed to be a "Breach" of a representation,
warranty, covenant, obligation or other provision if there is or has been (a)
any inaccuracy in or breach of, or any failure to comply with or perform, such
representation, warranty, covenant, obligation or other provision or (b) any
claim (by any Person) or other circumstance that is inconsistent with such
representation, warranty, covenant, obligation or other provision; and the term
"Breach" shall be deemed to refer to any such inaccuracy, breach, failure, claim
or circumstance.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act.
"Closing" has the meaning specified in Section 1.6(a) of this Agreement.
"Closing Certificate" has the meaning specified in Section 1.6(b)(iv) of
this Agreement.
"Closing Date" has the meaning specified in Section 1.6(a) of this
Agreement.
"Code" has the meaning specified in Section 1.13 of this Agreement.
"Comparable Entities" means Entities (other than Seller) that are engaged
in businesses similar to Seller's business.
<PAGE>
"Consent" means any approval, consent, ratification, permission, waiver or
authorization (including any Governmental Authorization).
"Contract" means any written, oral, implied or other agreement, contract,
understanding, arrangement, instrument, note, guaranty, indemnity,
representation, warranty, deed, assignment, power of attorney, certificate,
purchase order, work order, insurance policy, benefit plan, commitment,
covenant, assurance or undertaking of any nature.
"Damages" shall include any loss, damage, injury, decline in value, lost
opportunity, Liability, claim, demand, settlement, judgment, award, fine,
penalty, Tax, fee (including any legal fee, expert fee, accounting fee or
advisory fee), charge, cost (including any cost of investigation) or expense of
any nature.
"Delivery Date" means the date on which Seller delivered to Purchaser a
Product which, as subsequently confirmed by Alteon and its customers in
accordance with the process set forth in Section 4.2 of the OEM Agreement,
conformed in all material respects to the Acceptance Criteria.
"Disclosure Schedule" means the schedule (dated as of the date of this
Agreement) delivered to Purchaser on behalf of Seller and the Stockholders.
"Employee" has the meaning specified in Section 1.6(b)(iii) of this
Agreement.
"Encumbrance" means any lien, pledge, hypothecation, charge, mortgage,
security interest, encumbrance, equity, trust, equitable interest, claim,
preference, right of possession, lease, tenancy, license, encroachment,
covenant, infringement, interference, Order, proxy, option, right of first
refusal, preemptive right, community property interest, legend, defect,
impediment, exception, reservation, limitation, impairment, imperfection of
title, condition or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
"Entity" means any corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, cooperative, foundation, society, political party,
union, company (including any limited liability company or joint stock company),
firm or other enterprise, association, organization or entity.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"Excluded Contract" means any Seller Contract that:
(a) Seller has entered into in the Ordinary Course of Business;
(b) has a term of less than 90 days or may be terminated by Seller
(without penalty) within 90 days after the delivery of a termination notice by
Seller; and
(c) does not contemplate or involve the payment of cash or other
consideration in an amount or having a value in excess of $25,000.
"GAAP" means generally accepted accounting principles, applied on a basis
consistent with the basis on which the Seller Financial Statements were
prepared.
<PAGE>
"Governmental Authorization" means any (a) permit, license, certificate,
franchise, concession, approval, consent, ratification, permission, clearance,
confirmation, endorsement, waiver, certification, designation, rating,
registration, qualification or authorization that is, has been or may in the
future be issued, granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Legal Requirement or (b)
right under any Contract with any Governmental Body.
"Governmental Body" means any (a) nation, principality, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature, (b) federal, state, local, municipal, foreign or
other government, (c) governmental or quasi-governmental authority of any nature
(including any governmental division, subdivision, department, agency, bureau,
branch, office, commission, council, board, instrumentality, officer, official,
representative, organization, unit, body or Entity and any court or other
tribunal), (d) multi-national organization or body or (e) individual, Entity or
body exercising, or entitled to exercise, any executive, legislative, judicial,
administrative, regulatory, police, military or taxing authority or power of any
nature.
"Hazardous Material" shall include: (a) any petroleum, waste oil, crude
oil, asbestos, urea formaldehyde or polychlorinated biphenyl, (b) any waste, gas
or other substance or material that is explosive or radioactive, (c) any
"hazardous substance," "pollutant," "contaminant," "hazardous waste," "regulated
substance," "hazardous chemical" or "toxic chemical" as designated, listed or
defined (whether expressly or by reference) in any statute, regulation or other
Legal Requirement (including CERCLA, any other so-called "superfund" or
"superlien" law, the Resource Conservation Recovery Act, the Federal Water
Pollution Control Act, the Toxic Substances Control Act, the Emergency Planning
and Community Right-to-Know Act and the respective regulations promulgated
thereunder), (d) any other substance or material (regardless of physical form)
or form of energy that is subject to any Legal Requirement which regulates or
establishes standards of conduct in connection with, or which otherwise relates
to, the protection of human health, plant life, animal life, natural resources,
property or the enjoyment of life or property from the presence in the
environment of any solid, liquid, gas, odor, noise or form of energy and (e) any
compound, mixture, solution, product or other substance or material that
contains any substance or material referred to in clause (a), (b), (c) or (d)
above.
"Indemnitees" means the following Persons: (a) Purchaser (b) Purchaser's
current and future affiliates (including Seller) (c) the respective
Representatives of the Persons referred to in clauses (a) and (b) above and (d)
the respective successors and assigns of the Persons referred to in clauses (a),
(b) and (c) above; provided, however, that (i) Seller shall not be entitled to
exercise any rights as an Indemnitee prior to the Closing and (ii) the
Stockholders shall not be deemed to be "Indemnitees."
Knowledge. An individual shall be deemed to have "Knowledge" of a
particular fact or other matter if: (a) such individual is actually aware of
such fact or other matter; or (b) a prudent individual could be expected to
discover or otherwise become aware of such fact or other matter in the course of
conducting a diligent and comprehensive investigation concerning the truth or
existence of such fact or other matter. Seller shall be deemed to have
"Knowledge" of a particular fact or other matter if any officer, Employee or
other Representative of Seller has Knowledge of such fact or other matter.
"Legal Requirement" means any federal, state, local, municipal, foreign or
other law, statute, legislation, constitution, principle of common law,
resolution, ordinance, code, edict, decree, proclamation, treaty, convention,
rule, regulation, ruling, directive, pronouncement, requirement, specification,
determination, decision, opinion or interpretation that is, has been or may in
the future be issued, enacted, adopted, passed, approved, promulgated, made,
implemented or otherwise put into effect by or under the authority of any
Governmental Body.
<PAGE>
"Liability" means any debt, obligation, duty or liability of any nature
(including any unknown, undisclosed, unmatured, unaccrued, unasserted,
contingent, indirect, conditional, implied, vicarious, derivative, joint,
several or secondary liability), regardless of whether such debt, obligation,
duty or liability would be required to be disclosed on a balance sheet prepared
in accordance with generally accepted accounting principles and regardless of
whether such debt, obligation, duty or liability is immediately due and payable.
"Material Adverse Effect" A violation or other matter will be deemed to
have a "Material Adverse Effect" on a Party if such violation or other matter
(considered together with all other matters that would constitute exceptions to
the representations and warranties set forth in the Agreement) would have a
material adverse effect on a Party's business, condition (financial or
otherwise), assets, liabilities or operations.
"Maximum Liability" has the meaning specified in Section 9.6 of this
Agreement.
"Order" means any (a) order, judgment, injunction, edict, decree, ruling,
pronouncement, determination, decision, opinion, verdict, sentence, subpoena,
writ or award that is, has been or may in the future be issued, made, entered,
rendered or otherwise put into effect by or under the authority of any court,
administrative agency or other Governmental Body or any arbitrator or
arbitration panel or (b) Contract with any Governmental Body that is, has been
or may in the future be entered into in connection with any Proceeding.
Ordinary Course of Business. An action taken by or on behalf of Seller
shall not be deemed to have been taken in the "Ordinary Course of Business"
unless:
(a) such action is recurring in nature, is consistent with Seller's
past practices and is taken in the ordinary course of Seller's normal day-to-day
operations;
(b) such action is taken in accordance with sound and prudent business
practices;
(c) such action is not required to be authorized by Seller's
stockholders, Seller's board of directors or any committee of Seller's board of
directors and does not require any other separate or special authorization of
any nature; and
(d) such action is similar in nature and magnitude to actions
customarily taken, without any separate or special authorization, in the
ordinary course of the normal day-to-day operations of other Entities that are
engaged in businesses similar to Seller's business.
"Permitted Indebtedness" shall mean (a) indebtedness of Seller in favor of
Alteon arising under this Agreement, (b) liabilities to trade creditors incurred
in connection with the acquisition of goods, supplies or merchandise on normal
trade credit in the ordinary course of business, (c) obligations under real
estate leases entered into in the ordinary course of business, (d) capital
leases or indebtedness incurred solely to purchase equipment, computers,
software or implement tenant improvements which is secured in accordance with
clause (b) of Section 9.3 and is not in excess of the lesser of the purchase
price of such equipment, computers, software or tenant improvements or the fair
market value of such equipment, computers, software or tenant improvements on
the date of acquisition, and (e) extensions, refinancings, modifications,
amendments and restatements of any item described in clauses (b) through (d)
above, provided that the principal amount thereof is not increased or the terms
thereof are not modified, other than in the ordinary course of business.
<PAGE>
"Permitted Transactions" shall mean (i) loans to Employees in connection
with their purchase of shares issued under the Option Plan, which loans shall be
due in full in the event of termination of employment, (ii) loans to Employees
in the ordinary course of business of not more than $10,000 for any Employee, or
$75,000 in the aggregate, or (iii) sign-on bonuses to Employees which are in the
form of loans.
"Person" means any individual, Entity or Governmental Body.
"Pre-Closing Period" means the period commencing as of the Effective Date
and ending on the earlier to occur of (i) the Closing Date or (ii) the
Termination Date.
"Proceeding" means any action, suit, litigation, arbitration, proceeding
(including any civil, criminal, administrative, investigative or appellate
proceeding and any informal proceeding), prosecution, contest, hearing, inquiry,
inquest, audit, examination or investigation that is, has been or may in the
future be commenced, brought, conducted or heard by or before, or that otherwise
has involved or may involve, any Governmental Body or any arbitrator or
arbitration panel.
"Product" has the meaning specified in the OEM Agreement.
"Proprietary Asset" means any patent, patent application, trademark
(whether registered or unregistered and whether or not relating to a published
work), trademark application, trade name, fictitious business name, service mark
(whether registered or unregistered), service mark application, copyright
(whether registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, franchise, system, computer software,
invention, design, blueprint, proprietary product, technology, proprietary right
or other intellectual property right or intangible asset, including, without
limitation the Specifications.
"Related Party" means (a) each of the Stockholders, (b) each individual who
is, or who has at any time been, an officer of Seller, (c) each member of the
family of each of the individuals referred to in clauses (a) and (b) above and
(d) any Entity (other than Seller) in which any one of the individuals referred
to in clauses (a), (b) and (c) above holds (or in which more than one of such
individuals collectively hold), beneficially or otherwise, a material voting,
proprietary or equity interest.
"Representatives" means officers, directors, Employees, agents, attorneys,
accountants, advisors and representatives. The Stockholders and all other
Related Parties shall be deemed to be "Representatives" of Seller.
"Satisfaction Date" has the meaning specified in the OEM Agreement.
"Seller Contract" means any contract: (a) to which Seller is a party; (b)
by which Seller or any of its assets is or may become bound or under which
Seller has, or may become subject to, any obligation; or (c) under which Seller
has or may acquire any right or interest.
"Seller Financial Statements" has the meaning specified in Section 2.4(a)
of this Agreement.
"Seller Value" has the meaning specified in Section 1.5(a)(ii) of this
Agreement
"Specifications" has the meaning specified in the OEM Agreement.
"Scheduled Closing Time" has the meaning specified in Section 1.6(a) of
this Agreement.
<PAGE>
"Specified Representations" means the representations and warranties set
forth in Sections 2.1, 2.3 and 2.4 of this Agreement.
"Stockholders" has the meaning specified in the introductory paragraph of
this Agreement.
"Tax" means any tax (including any income tax, franchise tax, capital gains
tax, estimated tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, occupation tax, inventory tax, occupancy tax, withholding tax or payroll
tax), levy, assessment, tariff, impost, imposition, toll, duty (including any
customs duty), deficiency or fee, and any related charge or amount (including
any fine, penalty or interest), that is, has been or may in the future be (a)
imposed, assessed or collected by or under the authority of any Governmental
Body or (b) payable pursuant to any tax-sharing agreement or similar Contract.
"Tax Return" means any return (including any information return), report,
statement, declaration, estimate, schedule, notice, notification, form,
election, certificate or other document or information that is, has been or may
in the future be filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Legal
Requirement relating to any Tax.
"Termination Date" means November 1, 2000, provided that (i) each Party is
in compliance with this Agreement and the Transactional Agreements (for purposes
of the clause (i), each party shall be deemed to be in compliance herewith and
therewith, unless, no later that October 1, 2000, such party shall have received
written notice of one or more alleged breaches hereof or thereof, specifying the
nature of such alleged breach or breaches); and (ii) the Satisfaction Date shall
not have occurred.
"Total Consideration" has the meaning specified in Section 1.5(c) of this
Agreement.
"Transactional Agreements" means:
(a) this Agreement;
(b) the OEM Agreement;
(c) the Stockholder Agreements;
(d) the Escrow Agreement;
(e) the Noncompetition Agreements;
(f) the Closing Certificate; and
(g) the Registration Rights Agreement.
"Transactions" means (a) the execution and delivery of the respective
Transactional Agreements and (b) all of the transactions contemplated by the
respective Transactional Agreements, including: (i) the sale of the outstanding
capital stock and options by the Stockholders to Purchaser in accordance with
this Agreement and (ii) the performance by Seller, the Stockholders and
Purchaser of their respective obligations under the Transactional Agreements and
the exercise by Seller, the Stockholders and Purchaser of their respective
rights under the Transactional Agreements.
<PAGE>
EXHIBIT B
FORM OF STOCKHOLDER AGREEMENT
<PAGE>
STOCKHOLDER AGREEMENT
This Stockholder Agreement is entered into as of March 31, 2000, by and
between ____________, a stockholder (the "Stockholder") of Pharsalia
Technologies, Inc. ("Seller"), and Alteon WebSystems, Inc., a Delaware
corporation ("Purchaser"). Certain capitalized terms used in this Agreement and
not otherwise defined shall have the meanings given to them in the Exchange
Agreement, dated March 31, 2000, by and between Purchaser, Seller and the Key
Stockholder (as defined therein) attached hereto as Exhibit A (the "Exchange
Agreement").
Recitals
A. The stockholders and optionholders of Seller, including the Stockholder
(the "Stockholders") collectively own all of the outstanding capital stock and
options of Seller, other than the Alteon Stock. A listing of the Stockholders
and their respective holdings of Seller is set forth in the Disclosure Schedule
to the Exchange Agreement.
B. Pursuant to this Agreement and the Exchange Agreement, Seller on behalf
of the Stockholders shall have the right to put and Purchaser shall have the
right to call, the outstanding capital stock of Seller, other than the Alteon
Stock (the "Exchange") based on the Exchange Ratio, as a result of which Seller
will become a wholly-owned subsidiary of Purchaser and each Stockholder's
capital stock and all outstanding options of Seller will be automatically
exchanged for shares of common stock and options of Purchaser, as applicable.
C. Concurrently with the execution of this Agreement, and as a condition
and inducement to Purchaser's willingness to enter into the Exchange Agreement,
the Stockholder shall enter into with Purchaser an escrow agreement, in the form
of Exhibit B (the "Escrow Agreement") and a registration rights agreement, in
the form of Exhibit C (the "Registration Rights Agreement").
Agreement
Purchaser and the Stockholder, intending to be legally bound, agree as
follows:
1. Exchange Of Shares. Each Stockholder hereby irrevocably agrees to sell,
assign, transfer and deliver all of the Stockholder's shares of common stock of
Seller, par value $0.0001 per share ("Seller Common Stock") (the "Shares") to
Purchaser, and Purchaser shall purchase the Shares, on the terms and subject to
the conditions set forth in this Agreement, the Exchange Agreement and the
Escrow Agreement (collectively, the "Agreements").
2. Representations and Warranties of the Stockholder. The Stockholder
represents, warrants and certifies to Purchaser as follows:
2.1 The Stockholder is the holder and beneficial owner of the Shares and
the number of shares issuable upon exercise of Seller Options as set forth on
the signature page hereof and has good and valid title to the foregoing free and
clear of any Encumbrances. Such Shares are the only shares of the capital stock
of Seller held by the Stockholder and the Stockholder does not own any options,
warrants, convertible debt securities or other rights to purchase shares of
Seller Common Stock or any other securities of Seller other than any such Seller
Options as set forth on the signature page hereof. The Stockholder has the
ability to vote all of the Shares at any meeting of the Stockholders of Seller
or by written consent in lieu of any such meeting. The Stockholder has not
appointed or granted any proxy or
<PAGE>
entered into any agreement, contract, commitment or understanding with respect
to any of the Shares that is now in force.
2.2 The Stockholder has the absolute and unrestricted right, power and
authority to enter into and perform its obligations under the Agreements and
each other agreement, document or instrument referred to in or contemplated by
the Agreements to which the Stockholder is or is to become a party, the
execution, delivery and performance of the Agreements by the Stockholder has
been duly authorized by all necessary action on the part of the Stockholder.
2.3 The Stockholder has carefully reviewed the Agreements and, to the
extent the Stockholder felt necessary, has discussed with counsel, among other
things, his or her individual liability and the limitations imposed on the
Stockholder's ability to hold, sell, transfer or otherwise dispose of the Shares
or the shares of Purchaser Common Stock and Assumed Options that the Stockholder
is to receive pursuant to the Agreements as a stockholder of Seller in
connection with the Exchange. The Stockholder fully understands the limitations
the Agreements places upon the Stockholder's ability to hold, sell, transfer or
otherwise dispose of securities of Seller.
2.4 The Stockholder understands that the representations, warranties and
covenants set forth in this Agreement will be relied upon by Purchaser, its
counsel and accountants for purposes of determining whether Purchaser should
proceed with the Exchange.
2.5 The Stockholder has the absolute and unrestricted right, power,
authority, capacity and financial capability to enter into, execute, deliver and
perform all of his obligations under the Agreements and each other agreement,
document or instrument referred to in or contemplated by the Agreements to which
the Stockholder is or is to become a party.
2.6 Each agreement, document or instrument referred to in or contemplated
by the Agreements to which the Stockholder is or is to become a party (i) has
been (or will when executed by the Stockholder be) duly and validly executed by
the Stockholder and (ii) constitutes (or will when executed by the Stockholder
constitute) a valid and binding obligation of the Stockholder, enforceable
against the Stockholder in accordance with its terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and to
rules of law governing specific performance, injunctive relief and other
equitable remedies.
2.7 Neither the execution, delivery or performance of any agreement,
document or instrument referred to in or contemplated by the Agreements to which
the Stockholder is or is to become a party, nor the consummation of the Exchange
or any of the other transactions contemplated by the Agreements, will directly
or indirectly: (i) result in any violation or breach of any agreement or other
instrument to which the Stockholder is a party or by which the Stockholder is
bound or (ii) result in a violation of any law, rule, regulation, Order,
judgment or decree to which the Stockholder or any of the Shares is subject. No
authorization, consent or approval of, or notice to, any Person is required to
be obtained or given by the Stockholder in connection with the execution,
delivery or performance of the Agreements or of any other agreement, document or
instrument referred to in or contemplated by the Agreements to which the
Stockholder is or is to become a party.
2.8 There is no Proceeding by or before any Governmental Body pending or,
to the knowledge of the Stockholder, threatened against the Stockholder that
challenges or would challenge the execution and delivery of the Agreements or of
any other agreement, document or instrument referred to in or contemplated by
the Agreements to which the Stockholder is or is to become a party or the taking
of any of the actions required to be taken by the Stockholder under the
Agreements or under any other agreement, document or instrument referred to in
or contemplated by the Agreements to which the
<PAGE>
Stockholder is or is to become a party. No event has occurred, and no claim,
dispute or other condition or circumstance exists, that might directly or
indirectly give rise to or serve as a basis for the commencement of any
Proceeding.
2.9 The Stockholder has never, at any time, (A) made a general assignment
for the benefit of creditors, (B) filed, or had filed against him, any
bankruptcy petition or similar filing, (C) suffered the attachment or other
judicial seizure of all or a substantial portion of his assets, (D) admitted in
writing his inability to pay his debts as they become due or (E) taken or been
the subject of any action that may have a Material Adverse Effect on the
Stockholder's ability to comply with or perform any of such Stockholder's
covenants or obligations under any of the Transactional Agreements.
2.10 The Stockholder is aware (i) that the Purchaser Common Stock (as
defined in the Exchange Agreement) to be issued to the Stockholder in connection
with the Exchange will be issued pursuant to a registration statement under the
Securities Act of 1933, as amended (the "Act") and (ii) that neither the
Exchange nor the issuance of such Purchaser Common Stock has been approved or
reviewed by the Securities and Exchange Commission or by any other Governmental
Body.
2.11 The Stockholder is aware that the Purchaser Common Stock to be issued
in connection with the Exchange cannot be resold unless such Purchaser Common
Stock is registered under the Act or unless an exemption from registration is
available. The Stockholder is also aware that: (i) except pursuant to the
Registration Rights Agreement and the Exchange Agreement, Purchaser is under no
obligation to file a registration statement with respect to the Purchaser Common
Stock to be issued to the Stockholder in connection with the Exchange and (ii)
the provisions of Rule 144 under the Act will permit resale of the Purchaser
Common Stock to be issued to the Stockholder in connection with the Exchange
only under limited circumstances and such Purchaser Common Stock must be held by
the Stockholder for at least 1 year before it can be sold pursuant to Rule 144.
2.12 The Purchaser Common Stock to be issued to the Stockholder in
connection with the Exchange will be acquired by the Stockholder for investment
and for his own account, and not with a view to, or for resale in connection
with, any unregistered distribution thereof.
2.13 The Stockholder has received and examined, including the risk factors
described therein, Purchaser's latest prospectus dated January 25, 2000 covering
a public offering wherein, excluding the exercise of the underwriter's over-
allotment option, Purchaser and certain of its stockholders offered 5,000,000
shares of Purchaser Common Stock. Without limiting the generality of the
foregoing, the Stockholder specifically acknowledges that the stock price of
Purchaser Common Stock has been, and will likely continue to be, extremely
volatile, and the Stockholder unconditionally and forever waives and discharges
any rights he may have against Purchaser or any other Person relating solely to
any change in the price of Purchaser Common Stock between the date of the
Agreements and the Closing Date.
2.14 The Stockholder has been given the opportunity: (i) to ask questions
of, and to receive answers from, persons acting on behalf of Seller and
Purchaser concerning the terms and conditions of the Exchange and the
contemplated issuance of Purchaser Common Stock in connection with the Exchange,
and the business, properties, prospects and financial condition of Seller and
Purchaser; and (ii) to obtain any additional information (to the extent Seller
or Purchaser possesses such information or is able to acquire it without
unreasonable effort or expense and without breach of confidentiality
obligations) that is necessary to verify the accuracy of the information set
forth in the documents, provided or made available to the Stockholder.
2.15 The Stockholder (either alone or together with the Agent) is
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to investments in securities
<PAGE>
presenting investment decisions like that involved in the Stockholder's
contemplated investment in the Purchaser Common Stock to be issued in connection
with the Agreements. The Stockholder acknowledges that he appointed the Agent,
Richard A. Howes, pursuant to Section 6 below.
2.16 The Stockholder understands that stop transfer instructions will be
given to Purchaser's transfer agent with respect to the Purchaser Common Stock
to be issued to the Stockholder in connection with the Exchange, and that there
will be placed on the certificate or certificates representing such Purchaser
Common Stock a legend identical or similar in effect to the following legend
(together with any other legend or legends required by applicable state
securities laws or otherwise):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS REGISTERED
UNDER THE ACT OR UNLESS AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE ACT IS AVAILABLE OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO
PURCHASER IS AVAILABLE IN THE EVENT SUCH TRANSFER MAY BE EFFECTED WITHOUT
REGISTRATION UNDER THE ACT."
2.17 The Stockholder has not agreed or become obligated to pay, and has not
taken any action that might result in any Person claiming to be entitled to
receive, any brokerage commission, finder's fee or similar commission or fee in
connection with the Exchange.
2.18 The Stockholder does not have total assets of $10 million dollars or
more.
2.19 The Stockholder acknowledges and agrees that if any of the
Stockholder's Seller Common Stock is unvested or subject to a repurchase option,
risk of forfeiture or other condition under any applicable stock purchase
agreement or employment agreement with Seller, then Purchaser Common Stock
issued in exchange for such Seller Common Stock will also be unvested and/or
subject to the same vesting schedule, repurchase option, risk of forfeiture or
other condition and, as of the Closing Date, Stockholder is hereby deemed to
have assigned and transferred to Purchaser all such rights.
3. Reliance. The Stockholder acknowledges that Purchaser will rely on his
representations, warranties and certifications set forth in Section 2 above for
purposes of determining his suitability as an investor in Purchaser Common Stock
and for purposes of confirming the availability of an exemption from the
registration requirements of the Act.
4. Delivery of Certificates to Agent. As of the Effective Date, or as of the
date upon becoming a Stockholder if such date is after the Effective Date, each
Stockholder shall deliver to Seller (i) all Seller Stock Certificates
representing the Shares, (ii) 5 executed and undated original "assignments
separate from certificate," attached hereto as Exhibit D, endorsed by each
Stockholder with signatures "medallion" guaranteed by a commercial bank or by a
member firm of the New York Stock Exchange ("Stock Powers") and (iii) a
completed and executed Substitute Form W-9 (or Form W-8, in the case of non-U.S.
persons) attached as Exhibit F to the Escrow Agreement.
5. Assumed Options. If necessary, the Stockholder agrees to enter into an
agreement whereby any option, convertible debt security or other right to
purchase any shares of capital stock of Seller can be assumed by Purchaser
pursuant to Section 1.9 of the Exchange Agreement as of the Closing Date.
6. Prohibitions Against Transfer.
<PAGE>
6.1 The Stockholder agrees that, during the period from the date hereof and
the Closing Date, the Stockholder shall not sell, transfer (other than a
transfer for estate planning purposes to a trust, partnership or limited
liability company comprised of family members) or otherwise dispose of or reduce
his interest in or risk relating to: (i) any Seller Common Stock (including,
without limitation, the Shares and any additional shares of Seller Common Stock
acquired by the Stockholder, whether upon exercise of a stock option, conversion
of debt securities or otherwise), except pursuant to and upon consummation of
the Exchange, or (ii) any option, convertible debt securities or other right to
purchase any shares of Seller Common Stock, except pursuant to and upon
consummation of the Exchange.
6.2 The Stockholder shall not effect any sale, transfer or other
disposition of any of the Purchaser Common Stock that he is to receive in
connection with the Exchange unless:
(a) such sale, transfer or other disposition has been registered under
the Act;
(b) such sale, transfer or other disposition is made in conformity
with the requirements of Rule 144 under the Act, as evidenced by a broker's
letter and a representation letter executed by the Stockholder (satisfactory in
form and content to Purchaser) stating that such requirements have been met;
(c) counsel reasonably satisfactory to Purchaser shall have advised
Purchaser in a written opinion letter (satisfactory in form and content to
Purchaser), upon which Purchaser may rely, that such sale, transfer or other
disposition will be exempt from registration under the Act; or
(d) an authorized representative of the SEC shall have rendered
written advice to the Stockholder to the effect that the SEC would take no
action, or that the staff of the SEC would not recommend that the SEC take
action, with respect to such sale, transfer or other disposition, and a copy of
such written advice and all other related communications with the SEC shall have
been delivered to Purchaser.
7. Stockholders' Agent.
7.1 The Stockholder hereby irrevocably nominates and appoint Richard A.
Howes as the agent and true and lawful attorney-in-fact of the Stockholders (the
"Agent"), with full power of substitution, to act in the name, place and instead
of the Stockholder, and to bind the Stockholder, for purposes of executing any
documents and taking any actions that the Agent may, in his sole discretion,
determine to be necessary, desirable or appropriate in connection with any of
the Transactional Agreements or any of the Transactions and bind the Stockholder
with respect to all matters relating to the Transactional Agreements and the
Transactions.
7.2 The Stockholder hereby grants to the Agent full authority to execute,
deliver, acknowledge, certify and file on behalf of the Stockholder (in the name
of the Stockholders or otherwise) any and all documents that the Agent may, in
his sole discretion, determine to be necessary, desirable or appropriate
(including the Closing Certificate and any amendment to or waiver of rights
under any of the Transactional Agreements). Notwithstanding anything to the
contrary contained in any of the Transactional Agreements:
(a) Purchaser shall be entitled to deal exclusively with the Agent on
all matters relating to the respective Transactional Agreements and the
respective Transactions (including all matters relating to any notice to, or any
Consent to be given or action to be taken by, any Stockholder); and
<PAGE>
(b) each Indemnitee shall be entitled to rely conclusively (without
further evidence of any kind whatsoever) on any document executed or purported
to be executed on behalf of any Stockholder by the Agent and on any other action
taken or purported to be taken on behalf of any Stockholder by the Agent, as
fully binding upon such Stockholder.
7.3 The Stockholder recognizes and intends that the power of attorney
granted in Section 7.1 above: (i) is coupled with an interest and is
irrevocable, (ii) may be delegated by the Agent and (iii) shall survive the
death or incapacity of each of the Stockholder.
7.4 The Agent shall be entitled to treat as genuine, and as the document it
purports to be, any letter, facsimile, telex or other document that is believed
by him to be genuine and to have been telexed, telegraphed, faxed or cabled by
the Stockholder or to have been signed and presented by the Stockholder.
7.5 If the Agent shall die, become disabled or otherwise be unable to
fulfill his responsibilities hereunder, a majority in interest of the
Stockholders shall, within 10 days after such death or disability, appoint a
successor to the Agent and immediately thereafter notify Purchaser of the
identity of such successor. Any such successor shall succeed the Agent as Agent
hereunder. If for any reason there is no Agent at any time, all references
herein to the Agent shall be deemed to refer to the Stockholders.
7.6 All expenses incurred by the Agent in connection with the performance
of his duties as Agent shall be borne and paid by the Stockholders.
7.7 Liability of the Agent; Right of Contribution. Nothing contained herein
shall be deemed to make the Agent liable to the Stockholder because of service
in his capacity as Agent and attorney-in-fact. The Stockholders agrees not to
institute any Proceeding against the Agent in connection with the performance of
his duties under the Agreements, including, without limitation, the negotiation
of the terms of the Exchange Agreement. The Agent shall not incur any liability
to the Stockholder for losses, damages, liabilities or expenses, except for
fraud and his own willful misconduct, and shall not receive any remuneration for
acting in such capacity. The Stockholder shall severally indemnify, protect and
hold harmless the Agent against any and all loss, liability or expense as and
when incurred without gross negligence, bad faith, fraud or willful misconduct
on the part of the Agent that arises out of or in connection with the acceptance
or administration of the Agent's duties hereunder or pursuant to the Exchange
Agreement or of any breach by the Stockholder of this Agreement or the
Transactional Agreements. In the event a Proceeding is instituted against the
Agent by a third party, the Agent shall have a right of contribution against the
Stockholders for any and all loss, liability, damage or expense.
8. Representations and Warranties of Purchaser. Purchaser represents and
warrants, to and for the benefit of the Stockholder, as of the date of this
Agreement, that Purchaser has the absolute and unrestricted right, power and
authority to enter into and perform its obligations under the Agreements, the
execution, delivery and performance of the Agreements by Purchaser has been duly
authorized by all necessary action on the part of Purchaser and its board of
directors, and this Agreement constitutes the legal, valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
terms and the terms of the Exchange Agreement.
9. Indemnification. The Stockholder agrees that Section 9 of the Exchange
Agreement is incorporated herein by reference.
10. General Release
<PAGE>
10.1 Definitions for Purposes of Section 10.
(a) The term "Associated Parties" shall mean and include: (i)
Releasor's predecessors, successors, executors, administrators, heirs and
estate; (ii) Releasor's past, present and future assigns, agents and
representatives; (iii) each entity that Releasor has the power to bind (by
Releasor's acts or signature) or over which Releasor directly or indirectly
exercises control and (iv) each entity of which Releasor owns, directly or
indirectly, at least 50% of the outstanding equity, beneficial, proprietary,
ownership or voting interests.
(b) The term "Releasees" shall mean and include: (i) Purchaser; (ii)
Seller; (iii) Richard A. Howes, individually and as the Agent; (iv) each of the
direct and indirect subsidiaries of Purchaser; (v) each other affiliate of
Purchaser; and (vi) the successors and past, present and future assigns,
directors, officers, employees, agents, attorneys and representatives of the
respective entities identified or otherwise referred to in clauses "(i)" through
"(v)" of this sentence, other than Releasor.
(c) The term "Claims" shall mean and include all past and present
disputes, claims, controversies, demands, rights, obligations, liabilities,
actions and causes of action of every kind and nature, including: (i) any
unknown, unsuspected or undisclosed claim; (ii) any claim or right that may be
asserted or exercised by Releasor in his capacity as a stockholder, director,
officer or employee of Seller or in any other capacity; and (iii) any claim,
right or cause of action based upon any breach of any express, implied, oral or
written contract or agreement.
(d) The term "Released Claims" shall mean and include each and every
Claim that (i) Releasor or any Associated Party may have had in the past or may
now have against any of the Releasees and (ii) has arisen or arises directly or
indirectly out of, or relates directly or indirectly to, any circumstance,
agreement, activity, action, omission, event or matter occurring or existing on
or prior to the date of this Agreement (excluding only Releasor's rights, if
any, under the Transactional Agreements).
(e) The term "Releasor" shall mean the Stockholder.
10.2 Release. Releasor, for himself and for each of the Associated Parties
(as defined in Section 2), hereby generally, irrevocably, unconditionally and
completely releases and forever discharges each of the Releasees (as defined in
Section 10.1) from, and hereby irrevocably, unconditionally and completely
waives and relinquishes, each of the Released Claims (as defined Section 10.1)
10.3 Civil Code (S)1542. Releasor: (a) represents, warrants and acknowledges
that Releasor understands the contents of Section 1542 of the Civil Code of the
State of California and (b) hereby expressly waives the benefits thereof and any
rights Releasor may have thereunder. Section 1542 of the Civil Code of the State
of California provides as follows:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor."
Releasor also hereby waives the benefits of, and any rights Releasor may have
under, any statute or common law principle of similar effect in any
jurisdiction.
10.4 Representations and Warranties. Releasor represents and warrants that:
<PAGE>
(a) Releasor has not assigned, transferred, conveyed or otherwise
disposed of any Claim against any of the Releasees, or any direct or indirect
interest in any such Claim, in whole or in part;
(b) to the best of Releasor's knowledge, no other person or entity
has any interest in any of the Released Claims;
(c) no Associated Party has or had any Claim against any of the
Releasees; and
(d) no Associated Party will in the future have any Claim against any
Releasee that arises directly or indirectly from or relates directly or
indirectly to any circumstance, agreement, activity, action, omission, event or
matter occurring or existing on or before the date of this Agreement;
10.5 Indemnification. Without in any way limiting any of the rights or
remedies otherwise available to any Releasee, Releasor shall indemnify and hold
harmless each Releasee against and from any loss, damage, injury, harm,
detriment, lost opportunity, liability, exposure, claim, demand, settlement,
judgment, award, fine, penalty, tax, fee, charge or expense (including
attorneys' fees) that is directly or indirectly suffered or incurred at any time
by such Releasee, or to which such Releasee otherwise becomes subject at any
time, and that arises directly or indirectly out of or by virtue of, or relates
directly or indirectly to, (a) any failure on the part of Releasor to observe,
perform or abide by, or any other breach of, any restriction, covenant,
obligation, representation, warranty or other provision contained herein or (b)
the assertion or purported assertion of any of the Released Claims by Releasor
or any of the Associated Parties.
11. Miscellaneous Provisions
11.1 Counterparts; Facsimile. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original and all of which,
when taken together, will be deemed to constitute one and the same agreement.
This Agreement may be executed by facsimile, with such facsimile copy to serve
as conclusive evidence of the consent and ratification of the matters contained
herein by the parties hereto.
11.2 Section Headings; Construction. The headings of sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation."
11.3 Successors and Assigns; Assignment. This Agreement shall be binding
upon the parties and their respective successors and assigns. This Agreement
shall inure to the benefit of the parties and the other Indemnitees and their
respective successors and assigns. Purchaser may freely assign any or all of
its rights under this Agreement, in whole or in part, in connection with an
Acquisition without obtaining the consent or approval of any other party hereto
or of any other Person. Other than in connection with an Acquisition, Purchaser
may not assign any of its rights under this Agreement without the prior written
consent of Seller, which consent shall not be unreasonably withheld. Seller may
not assign any of its rights under this Agreement without the prior written
consent of Purchaser.
11.4 Remedies Cumulative; Specific Performance. The rights and remedies of
the parties hereto shall be cumulative. Each Stockholder agrees that in the
event of any Breach or threatened Breach by a party of any covenant, obligation
or other provision set forth in this Agreement, Purchaser shall be entitled (in
addition to any other remedy that may be available to it) to (i) a decree or
order of specific
<PAGE>
performance or mandamus to enforce the observance and performance of such
covenant, obligation or other provision and (ii) an injunction restraining such
Breach or threatened Breach.
11.5 Waiver. No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy. No Person shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
11.6 Exclusive Agreement; Modification; Severability. The Transactional
Agreements set forth the entire understanding of the parties relating to the
subject matter thereof and supersede all prior agreements and understandings
among or between any of the parties relating to the subject matter thereof. This
Agreement may not be amended, modified, altered or supplemented other than by
means of a written instrument duly executed and delivered on behalf of each of
the parties hereto. In the event that any provision of this Agreement, or the
application of any such provision to any Person or set of circumstances, shall
be determined to be invalid, unlawful, void or unenforceable to any extent, the
remainder of this Agreement, and the application of such provision to Persons or
circumstances other than those as to which it is determined to be invalid,
unlawful, void or unenforceable, shall not be impaired or otherwise affected and
shall continue to be valid and enforceable to the fullest extent permitted by
law.
11.7 Governing Law; Venue. This Agreement shall be governed by the internal
laws of the State of Delaware, without regard to conflicts of law principles.
Any legal action or other Proceeding relating to this Agreement or the
enforcement of any provision of this Agreement may be brought or otherwise
commenced in any state or federal court located in the County of Santa Clara,
California and the County of Fulton, Georgia.
11.8 Further Assurances. Each party hereto shall execute and/or cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing the
Exchange.
11.9 Several Liability. The Stockholder agrees that Section 10.1 of the
Exchange Agreement is incorporated herein by reference. Nothing in this
Agreement shall increase the liability of any Stockholder as set forth in the
Exchange Agreement, except to the extent the Agent has a right of contribution
against the Stockholders pursuant to Section 7.7.
11.10 Fees and Expenses. The parties shall bear and pay all of their own
fees, costs and expenses, except as provided otherwise in the Exchange
Agreement.
11.11 Publicity. Without limiting the generality of anything contained in
the Exchange Agreement, on and at all times after the Closing Date:
(a) no press release or other publicity concerning any of the
Transactions shall be issued or otherwise disseminated by or on behalf of any of
Seller, Purchaser or the Stockholders, and the parties shall continue to keep
the existence and terms of this Agreement and the other Transactional Agreements
strictly confidential; provided, however, that if after consultation with its
counsel, Purchaser determines that any law, rule or regulatory requirement
(including any Nasdaq rule) requires Purchaser to
<PAGE>
issue, make or otherwise disseminate a press release, disclosure or other
publicity concerning the possible transactions contemplated by this letter,
Purchaser may (without being deemed to be in breach of this letter) issue, make
or otherwise disseminate such press release, disclosure or other publicity,
provided that Purchaser has used best efforts to notify Seller prior to such
disclosure.; and
(b) Stockholder shall keep strictly confidential, and shall not use
or disclose to any other Person, any non-public document or other information in
such Stockholder's possession that relates directly or indirectly to the
business of Seller, Purchaser or any affiliate of Purchaser.
11.12 Substitute Form W-8. The Stockholder agree to provide the Escrow Agent
with his or her certified tax identification number by furnishing appropriate
forms W-9 (or Form W-8, in the case of non-U.S. persons), as attached hereto as
Exhibit E, and other forms and documents that the Escrow Agent may reasonably
request (collectively, "Tax Reporting Documentation") to the Escrow Agent within
30 days after the date hereof. The Stockholder understands that, if such Tax
Reporting Documentation is not so certified to the Escrow Agent, the Escrow
Agent may be required by the Internal Revenue Code, as it may be amended from
time to time, to withhold a portion of any interest or other income earned on
the investment of monies or other property held by the Escrow Agent pursuant to
the Escrow Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Stockholder
Agreement to be executed and delivered as of the date first above written.
ALTEON WEBSYSTEMS, INC. STOCKHOLDER
By:
----------------------------- ------------------------------------------
Its: Name:
NUMBER OF OUTSTANDING SHARES OF SELLER
COMMON STOCK
------------------------------------------
NUMBER OF OPTIONS TO PURCHASE SHARES OF
SELLER COMMON STOCK
------------------------------------------
[SIGNATURE PAGE]
<PAGE>
EXHIBIT C
ESCROW AGREEMENT
<PAGE>
ESCROW AGREEMENT
This Escrow Agreement is made as of March 31, 2000, by and among: Alteon
WebSystems, Inc., a Delaware corporation ("Purchaser"), the Stockholders of
Pharsalia Technologies, Inc. ("Seller"), a Delaware corporation, Richard A.
Howes, as agent to the Stockholders (the "Agent") and State Street Bank and
Trust Company of California, N.A., a national banking association (the "Escrow
Agent"). Certain capitalized terms used in this Agreement and not otherwise
defined shall have the meanings given to them in the Exchange Agreement, dated
March 31, 2000, by and between Purchaser, Seller and the Key Stockholder (as
defined therein) attached hereto as Exhibit A (the "Exchange Agreement").
Recitals
A. Concurrently with the execution of this Agreement, and as a condition
and inducement to Purchaser's willingness to enter into the Exchange Agreement,
each Stockholder shall enter into with Purchaser a stockholder agreement, in the
form of Exhibit B (the "Stockholder Agreement") and a registration rights
agreement, in the form of Exhibit C (the "Registration Rights Agreement").
B. The Exchange Agreement and the Stockholder Agreements contemplate the
establishment of an escrow arrangement to secure the indemnification obligations
of the Stockholders under the Exchange Agreement.
C. Pursuant to Section 10.2 of the Exchange Agreement and Section 6 of the
Stockholder Agreements, the Stockholders have appointed Richard A. Howes to
serve as their Agent for, among other things, all matters set forth in Section 9
of the Exchange Agreement.
Agreement
Now, Therefore, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and intending to be legally bound, the parties
agree as follows:
1. Escrow and Indemnification.
1.1 Issuance of and Delivery of Purchaser Common Stock; Release of Seller
Stock Certificates; Escrow Stock. Within 5 business days after the Closing Date,
which shall be set forth in a notice to be delivered to the Escrow Agent, (i)
Purchaser's transfer agent shall deliver (A) to the Agent, a certificate in the
name of each Stockholder each representing (x) 90% of the number of whole shares
of Purchaser Common Stock that each Stockholder has the right to receive
pursuant to Section 1.8 of the Exchange Agreement less (y) the Unvested Shares,
as defined below (the "Primary Shares") and (B) to the Escrow Agent, on behalf
and in the name of the Stockholders, a certificate representing 10% of the
number of whole shares of Purchaser Common Stock that such Stockholders have the
right to receive pursuant to the provisions of Section 1.8 of the Exchange
Agreement (the "Escrow Stock") and (ii) the Agent shall deliver to the Escrow
Agent, 3 Stock Powers fully executed by each Stockholder bearing a "medallion"
signature guarantee. The Escrow Stock shall consist of shares of Purchaser
Common Stock that are subject to repurchase upon certain events pursuant to the
terms of the stock purchase agreement or employment agreement (the "Repurchase
Agreements") between each Stockholder and Seller (the "Unvested Shares"). To the
extent that the Primary Shares otherwise deliverable to Agent pursuant to clause
(i) of the first sentence of this Section 1.1 are Unvested Shares, such Unvested
Shares shall continue to be held by Purchaser's transfer agent and remain
subject to all rights of repurchase of Purchaser or Seller until released
pursuant to the last sentence of this Section 1.1. The Escrow Stock shall
constitute an escrow fund (the "Escrow Fund") with respect to the
indemnification obligations of the
<PAGE>
Stockholders under the Exchange Agreement. The Escrow Stock shall be registered
in the name of the Stockholders in accordance with their ownership interests set
forth in Exhibit D. The Escrow Fund shall be held as a trust fund and it is the
intention of Purchaser, Seller, the Stockholders and the Agent that the Escrow
Fund shall not be subject to any lien, attachment, trustee process or any other
judicial process of any creditor of any Stockholder or of any party hereto. The
Escrow Agent agrees to accept delivery of the Escrow Fund and to hold the Escrow
Fund in an escrow account (the "Escrow Account"), subject to the terms and
conditions of this Agreement and the Exchange Agreement. The Escrow Stock shall
be retained in the Escrow Fund until the Escrow Account Termination Date.
Following the Closing Date and upon the request of the Stockholder, but not more
often than following each 30 day period of continuous service of such
Stockholder with Purchaser, Purchaser shall, as soon as reasonably practicable,
instruct its transfer agent to deliver to such Stockholder a stock certificate
representing the whole number of Primary Shares issued to such Stockholder that
are no longer Unvested Shares pursuant to the terms of such Stockholder's
Repurchase Agreement.
1.2 Voting of the Escrow Stock. The record owner of the Escrow Stock shall
be entitled to exercise all voting rights with respect to such Escrow Stock.
1.3 Dividends, Etc. Purchaser and each of the Stockholders agree, for the
benefit of Purchaser and the Escrow Agent, that any cash, securities or other
property distributable (whether by way of dividend, stock split or otherwise) in
respect of or in exchange for any Escrow Stock shall not be distributed to the
record owners of the same, but rather shall be distributed by Purchaser to and
held by the Escrow Agent in the Escrow Account. Unless and until the Escrow
Agent receives such cash, securities or other property, it may assume without
inquiry that the Escrow Stock currently being held by it in the Escrow Account
is all that the Escrow Agent is required to hold. At the time any Escrow Stock
are required to be released from the Escrow Account to any Person pursuant to
this Escrow Agreement, any cash, securities or other property previously
received by the Escrow Agent in respect of or in exchange for such Escrow Stock
shall be released from the Escrow to such Person.
1.4 Transferability. The interests of the Stockholders in the Escrow
Account and in the Escrow Stock shall not be assignable or transferable, other
than by operation of law. No transfer of any of such interests by operation of
law shall be recognized or given effect until Purchaser and the Escrow Agent
shall have received written notice of such transfer.
1.5 Fractional Shares. No fractional shares of Purchaser Common Stock shall
be retained in or released from the Escrow Account pursuant to this Agreement.
In connection with any release of Escrow Stock from the Escrow Account,
Purchaser and the Escrow Agent shall "round down" in order to avoid retaining
any fractional share in the Escrow Account and in order to avoid releasing any
fractional share from the Escrow Account. When shares are "rounded down,"
Purchaser shall make a cash payment to the Escrow Agent to be held in the Escrow
Account or distributed, as appropriate.
2. Administration of Escrow Account. Except as otherwise provided herein, the
Escrow Agent shall administer the Escrow Account as follows:
2.1 If any Indemnitee has or claims to have incurred or suffered Damages
for which it is or may be entitled to indemnification, compensation or
reimbursement under either of the Agreements, such Indemnitee may, deliver a
claim notice (a "Claim Notice") to the Agent and to the Escrow Agent in
accordance with Section 10 below. Each Claim Notice shall state that such
Indemnitee believes in good faith and after investigation that there is or has
been a breach of a representation, warranty or covenant contained in one of the
Agreements or that such Indemnitee is entitled to indemnification, compensation
or reimbursement under the Exchange Agreement and contain a brief description of
the circumstances supporting such Indemnitee's belief that there is or has been
such a breach or that such Indemnitee is so
<PAGE>
entitled to indemnification, compensation or reimbursement and shall, to the
extent possible, contain a non-binding, preliminary estimate of the amount of
Damages such Indemnitee claims to have so incurred or suffered (the "Claimed
Amount").
2.2 Within 30 business days after receipt by the Agent and the Escrow Agent
of a Claim Notice, the Agent may deliver to the Indemnitee who delivered the
Claim Notice and to the Escrow Agent a written response (the "Response Notice")
in which the Agent: (i) agrees that a whole number of shares of Escrow Stock
having a Stipulated Value equal to the full Claimed Amount may be released from
the Escrow Account to the Indemnitee, (ii) agrees that a whole number of shares
of Escrow Stock having a Stipulated Value equal to part, but not all, of the
Claimed Amount (the "Agreed Amount") may be released from the Escrow Account to
the Indemnitee or (iii) indicates that no Escrow Stock may be released from the
Escrow Account to the Indemnitee; provided, however, that in no event shall the
Agent agree to release a whole number of Escrow Stock with an aggregate value
that exceeds the Stipulated Value for any Claimed Amount or otherwise. Any part
of the Claimed Amount that is not to be released to the Indemnitee shall be the
"Contested Amount." If a Response Notice is not received by the Escrow Agent
within such 30 business-day period, then the Agent shall be deemed to have
agreed that a whole number of Escrow Stock having a Stipulated Value equal to
the full Claimed Amount may be released to the Indemnitee from the Escrow
Account up to the whole number of shares of Escrow Stock equal to the Stipulated
Value.
2.3 If the Agent delivers a Response Notice agreeing that a whole number of
shares of Escrow Stock having a Stipulated Value equal to the full Claimed
Amount may be released from the Escrow Account to the Indemnitee, or if the
Agent does not deliver a Response Notice in accordance with Section 2.2 above,
the Escrow Agent shall promptly following the receipt of the Response Notice
(or, if the Agent has not delivered a Response Notice, promptly following the
expiration of the 30 business-day period referred to in Section 2.2 above),
deliver to such Indemnitee such Escrow Stock.
2.4 If the Agent delivers a Response Notice agreeing that a whole number of
shares of Escrow Stock having a Stipulated Value equal to part, but not all, of
the Claimed Amount may be released from the Escrow Account to the Indemnitee,
the Escrow Agent shall promptly following the receipt of the Response Notice
deliver to such Indemnitee Escrow Stock equal to the Agreed Amount.
2.5 If the Agent delivers a Response Notice indicating that there is a
Contested Amount, the Agent and the Indemnitee shall attempt in good faith to
resolve the dispute related to the Contested Amount. If the Indemnitee and the
Agent shall resolve such dispute, such resolution shall be binding on all of the
Stockholders and a settlement agreement containing the terms and conditions of
such resolution shall be signed by the Indemnitee and the Agent and delivered to
the Escrow Agent. The Escrow Agent shall release Escrow Stock from the Escrow
Account in connection with any Contested Amount within 5 business days after the
delivery to it of a copy of a settlement agreement executed by the Indemnitee
and the Agent setting forth instructions to the Escrow Agent as to the
Stipulated Value of the Escrow Stock, if any, to be released from the Escrow
Account, with respect to such Contested Amount.
2.6 Any Escrow Stock released from the Escrow Account to an Indemnitee
shall be deemed to reduce the Escrow Stock pro rata with respect to each
Stockholder in accordance with each Stockholder's percentage interest in the
Escrow Fund as set forth in Exhibit D.
3. Valuation of Escrow Stock; Stock Splits.
3.1 For purposes of this Agreement, the "Stipulated Value" per share of
Escrow Stock shall be equal to the average of the closing sales prices of a
share of Purchaser Common Stock as reported on the Nasdaq National Market or the
over-the-counter market for the 30 consecutive trading days ending on
<PAGE>
the 5th business day prior to the date any shares of Escrow Stock are to be
released from escrow by the Escrow Agent pursuant to Sections 2.2, 2.3, 2.4 or
5.1 of this Agreement. Upon request of the Escrow Agent, Purchaser and Agent
shall deliver to the Escrow Agent, prior to any such release, a jointly-signed
certificate that shall set forth the Stipulated Value, on which certificate the
Escrow Agent may rely without inquiry.
3.2 All numbers contained in, and all calculations required to be made
pursuant to, this Agreement shall be adjusted as appropriate to reflect any
stock split, reverse stock split, stock dividend or similar transaction effected
by Purchaser after the date hereof; provided, however, that the Escrow Agent
shall have received notice of such stock split or other action and shall have
received the appropriate number of additional shares of Purchaser Common Stock
or other property pursuant to Section 1.3 above, together with an updated
version of Exhibit D.
4. Limitation of Escrow Agent's Liability.
4.1 The Escrow Agent undertakes to perform such duties as are specifically
set forth in this Agreement only and shall have no duty under any other
agreement or document notwithstanding their being referred to herein or attached
hereto as an exhibit. The Escrow Agent shall not be liable except for the
performance of such duties as are specifically set forth in this Agreement, and
no implied covenants or obligations shall be read into this Agreement against
the Escrow Agent. The Escrow Agent shall incur no liability with respect to any
action taken by it or for any inaction on its part in reliance upon any notice,
direction, instruction, consent, statement or other document believed by it to
be genuine and duly authorized, nor for any other action or inaction except for
its own willful misconduct or negligence. The Escrow Agent may rely on and use
the Stock Powers and shall not be liable in connection therewith. In all
questions arising under this Agreement, the Escrow Agent may rely on the advice
of counsel, and for anything done, omitted or suffered in good faith by the
Escrow Agent based upon such advice the Escrow Agent shall not be liable to
anyone. The Escrow Agent shall not be required to take any action hereunder
involving any expense unless the payment of such expense is made or provided for
in a manner reasonably satisfactory to it. The Escrow Agent shall not be liable
for incidental, consequential or punitive damages.
4.2 The parties hereby agree to severally indemnify the Escrow Agent for,
and hold it harmless against, any loss, liability or expense incurred without
negligence or willful misconduct on the part of Escrow Agent, arising out of or
in connection with its carrying out of its duties hereunder. This right of
indemnification shall survive the termination of this Agreement, and the
resignation of the Escrow Agent. The costs and expenses of enforcing this right
of indemnification shall also be paid by Purchaser.
5. Release of Escrow Stock. The Escrow Agent is not the stock transfer agent
for the Purchaser Common Stock. Accordingly, if a distribution of a number of
shares of Purchaser Common Stock less than all of the Escrow Stock is to be
made, the Escrow Agent must requisition the appropriate number of shares from
such stock transfer agent, delivering to it the appropriate stock certificates
and related Stock Powers. For the purposes of this Agreement, the Escrow Agent
shall be deemed to have delivered Purchaser Common Stock to the Person entitled
to it when the Escrow Agent has delivered such certificates and Stock Powers to
such stock transfer agent with instructions to deliver it to the appropriate
Person. Distributions of Purchaser Common Stock shall be made to Purchaser or
the Stockholders, as appropriate, at the addresses described in Section 10
below. Whenever a distribution is to be made to the Stockholders, pro rata
distributions shall be made to each of them based on the percentage interests in
the Escrow Fund as set forth in Exhibit D. Within 5 business days after the
Escrow Account Termination Date, the Escrow Agent shall distribute or cause
Purchaser's transfer agent to distribute to each Stockholder such Stockholder's
pro-rata portion of the Escrow Stock then held in escrow based on the
<PAGE>
percentage interests in the Escrow Fund as set forth in Exhibit D; provided,
however, that if, prior to the Escrow Account Termination Date, any Indemnitee
has given a Claim Notice containing a claim that has not been resolved prior to
the Escrow Account Termination Date, the Escrow Agent shall (i) retain the
number of shares of Escrow Stock having a Stipulated Value equal to the Claimed
Amount of such unresolved Claim Notice in the Escrow Account until the claim has
been resolved and (ii) release all other shares of Escrow Stock to each
Stockholder in accordance with such Stockholder's percentage interests in the
Escrow Fund.
6. Termination. This Agreement shall terminate on the first anniversary of the
Closing Date, or earlier, upon the release by the Escrow Agent of the entire
Escrow Fund in accordance with this Agreement (the "Escrow Account Termination
Date"); provided, however, that if the Escrow Agent has received from any
Indemnitee a Claim Notice setting forth a claim that has not been resolved by
the Escrow Account Termination Date, then this Agreement shall continue in full
force and effect until the claim has been fully adjudicated or otherwise
resolved and the Escrow Stock released in accordance with this Agreement.
7. The Agent.
7.1 The Agent may: (i) modify, amend or otherwise change this Agreement or
any of the terms or provisions included herein (including modifications,
amendments or changes subsequent to Closing), (ii) take all actions and to
execute all documents under this Agreement and the Exchange Agreement necessary
or desirable to consummate the Exchange and the transactions contemplated by the
Exchange Agreement, and to take all actions and to execute all documents which
may be necessary or desirable in connection therewith, (iii) give and receive
consents and all notices hereunder, (iv) authorize delivery to Purchaser of
Seller Common Stock, cash or other property from the Escrow Fund, to object to
such deliveries, to agree to, negotiate, enter into settlements and compromises
of this Agreement and the Exchange Agreement, and to take all actions necessary
or appropriate in the judgment of the Agent for the accomplishment of the
foregoing and (v) deal with Purchaser exclusively on all matters relating to the
Exchange Agreement. Purchaser and the Escrow Agent shall be entitled to deal
exclusively with the Agent on all matters set forth in this Section 7.1 and
shall be entitled to rely exclusively (without further evidence of any kind
whatsoever) on any document executed or purported to be executed on behalf of
any Stockholder by the Agent, and on any other action taken or purported to be
taken on behalf of any Stockholder by the Agent, as fully binding on such
Stockholder, without any obligation to notify or make inquiries with respect to
any Stockholder. Unless and until the Escrow Agent receives a certificate
setting forth the name of a successor Agent, the Escrow Agent may assume without
inquiry that no successor Agent has been appointed by the Stockholders. THE
STOCKHOLDERS, AND EACH OF THEM INDIVIDIUALLY, AGREE THAT SERVICE OF PROCESS UPON
THE AGENT IN ANY PROCEEDING ARISING UNDER OR PERTAINING TO THIS AGREEMENT OR THE
TRANSACTIONAL AGREEMENTS SHALL BE DEEMED TO BE VALID SERVICE OF PROCESS UPON
EACH OF THE STOCKHOLDERS AND ANY CLAIM BY PURCHASER AGAINST THE STOCKHOLDERS, OR
ANY OF THEM, IN RESPECT TO THIS AGREEMENT OR THE TRANSACTIONAL AGREEMENTS, MAY
BE ASSERTED AGAINST AND SETTLED ON BEHALF OF ANY OF THEM BY THE AGENT.
7.2 Liability of the Agent; Right of Contribution. Nothing contained herein
shall be deemed to make the Agent liable to the Stockholders because of service
in his capacity as Agent and attorney-in-fact. The Stockholders agrees not to
institute any Proceeding against the Agent in connection with the performance of
his duties under the Agreements, including, without limitation, the negotiation
of the terms of the Exchange Agreement. The Agent shall not incur any liability
to the Stockholders for losses, damages, liabilities or expenses, except for
fraud and his own willful misconduct, and shall not receive any remuneration for
acting in such capacity. The Stockholders shall severally indemnify, protect
<PAGE>
and hold harmless the Agent against any and all loss, liability or expense as
and when incurred without gross negligence, bad faith, fraud or willful
misconduct on the part of the Agent that arises out of or in connection with the
acceptance or administration of the Agent's duties hereunder or pursuant to the
Exchange Agreement or of any breach by the Stockholders of this Agreement or the
Transactional Agreements. In the event a Proceeding is instituted against the
Agent by a third party, the Agent shall have a right of contribution against the
Stockholders for any and all loss, liability, damage or expense.
8. Fees and Expenses. Purchaser shall pay to the Escrow Agent reasonable
compensation for its normal services hereunder in accordance with the fee
schedule attached hereto as Exhibit E (which may be subject to change on an
annual basis) and shall reimburse the Escrow Agent hereunder for all reasonable
expenses, disbursements and advances incurred or made by the Escrow Agent in
performance of its duties hereunder (including reasonable fees, expenses and
disbursements of its counsel).
9. Resignation; Removal; Successor.
9.1 The Escrow Agent may resign as escrow agent under this Agreement and
thereby become discharged from the obligations hereby created, by notice in
writing given to Purchaser and the Stockholder not less than 30 days before such
resignation is to take effect.
9.2 The Escrow Agent may be removed at any time by an instrument or
concurrent instruments in writing delivered to the Escrow Agent and signed by
Purchaser and the Stockholder.
9.3 If at any time hereafter the Escrow Agent shall give notice of its
resignation pursuant to Section 9.1 above, shall be removed pursuant to Section
9.2 above, or shall be dissolved or otherwise become incapable of acting, or the
position of the Escrow Agent shall become vacant for any other reason, Purchaser
and the Stockholder shall promptly appoint a mutually acceptable successor
Escrow Agent. Upon such appointment such successor shall execute, acknowledge
and deliver to its predecessor, and also to Purchaser and the Stockholder an
instrument in writing accepting such appointment hereunder and agreeing to be
bound by the terms and provisions of this Agreement. Thereupon such successor
Escrow Agent, without any further act, shall become fully vested with all the
rights, immunities, and powers, and shall be subject to all of the duties and
obligations of its predecessor and such predecessor Escrow Agent shall promptly
deliver the funds in the Indemnity Escrow Account to such successor pursuant to
written instructions from Purchaser or the Stockholder.
9.4 In the event the Escrow Agent is merged or consolidated with any other
entity, and as a result thereof the Escrow Agent ceases to exist as a separate
entity, or the Escrow Agent sells substantially all of its corporate trust
business (including the escrow contemplated by this Agreement) to another
entity, then such surviving entity, without any further act shall become fully
vested with all the rights, immunities, and powers, and shall be subject to all
of the duties and obligations of the Escrow Agent.
10. Notices. All notices, consents, waivers and other communications under
this Agreement must be in writing and will be deemed to have been duly given
when (i) delivered by hand (with written confirmation of receipt), (ii) sent by
facsimile (with written confirmation of receipt), provided that a copy is mailed
by registered mail, return receipt requested, or (iii) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):
<PAGE>
if to Purchaser:
Alteon WebSystems, Inc.
50 Great Oaks Boulevard
San Jose, CA 95119
Attention: Frank Laurencio
Telephone: (408) 360-5500
Facsimile: (650) 360-5761
with a copy to:
Eric C. Jensen, Esq.
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Telephone: (650) 843-5000
Facsimile: (650) 849-7400
(which shall not constitute notice)
if to the Stockholders:
c/o Pharsalia Technologies, Inc.
1000 Holcomb Woods Parkway, Suite 400
Roswell, GA 30076
Attention: Richard A. Howes
Telephone: (770) 642-5760
Facsimile: (770) 650-6409
if to the Agent:
Richard A. Howes, as Agent of the Stockholders
c/o Pharsalia Technologies, Inc.
1000 Holcomb Woods Parkway, Suite 400
Roswell, GA 30076
Telephone: (770) 642-5760
Facsimile: (770) 650-6409
with a copy to:
Raymond Moss, Esq.
Sims Moss Kline & Davis LLP
400 Northpark Town Center, Suite 310
1000 Abernathy Road, N.E.
Atlanta, GA 30328
Telephone: (770) 481-7201
Facsimile: (770) 481-7210
(which shall not constitute notice)
if to the Escrow Agent:
State Street Bank and Trust Company of California, N.A.
<PAGE>
Library Tower
633 West 5th Street, 12th Floor
Los Angeles, CA 90071
Attention: Corporate Trust Administration
(Alteon WebSystems, Inc./Pharsalia Technologies, Inc. 2000 escrow)
Telephone: (213) 362-7373
Facsimile: (213) 362-7357
11. Counterparts; Facsimile. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original and all of which,
when taken together, will be deemed to constitute one and the same agreement.
This Agreement may be executed by facsimile, with such facsimile copy to serve
as conclusive evidence of the consent and ratification of the matters contained
herein by the parties hereto.
12. Section Headings; Construction. The headings of sections in this Agreement
are provided for convenience only and will not affect its construction or
interpretation. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation."
13. Successors and Assigns; Assignment. This Agreement shall be binding upon
the parties and their respective successors and assigns. This Agreement shall
inure to the benefit of the parties and the other Indemnitees and their
respective successors and assigns. Purchaser may freely assign any or all of
its rights under this Agreement, in whole or in part, in connection with an
Acquisition without obtaining the consent or approval of any other party hereto
or of any other Person. Other than in connection with an Acquisition, Purchaser
may not assign any of its rights under this Agreement without the prior written
consent of Seller, which consent shall not be unreasonably withheld. Seller may
not assign any of its rights under this Agreement without the prior written
consent of Purchaser.
14. Remedies Cumulative; Specific Performance. The rights and remedies of
the parties hereto shall be cumulative. Each Stockholder agrees that in the
event of any Breach or threatened Breach by a party of any covenant, obligation
or other provision set forth in this Agreement, Purchaser shall be entitled (in
addition to any other remedy that may be available to it) to (i) a decree or
order of specific performance or mandamus to enforce the observance and
performance of such covenant, obligation or other provision and (ii) an
injunction restraining such Breach or threatened Breach.
15. Waiver. No failure on the part of any Person to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any Person
in exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy. No Person shall be deemed to have waived any claim arising out of this
Agreement, or any power, right, privilege or remedy under this Agreement, unless
the waiver of such claim, power, right, privilege or remedy is expressly set
forth in a written instrument duly executed and delivered on behalf of such
Person; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.
16. Exclusive Agreement; Modification; Severability. The Transactional
Agreements set forth the entire understanding of the parties relating to the
subject matter thereof and supersede all prior agreements and understandings
among or between any of the parties relating to the subject matter thereof. This
Agreement may not be amended, modified, altered or supplemented other than by
means of a written instrument duly executed and delivered on behalf of each of
the parties hereto. In the event that any provision of this Agreement, or the
application of any such provision to any Person or set of
<PAGE>
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or unenforceable, shall not
be impaired or otherwise affected and shall continue to be valid and enforceable
to the fullest extent permitted by law.
17. Governing Law; Venue. This Agreement shall be governed by the internal
laws of the State of Delaware, without regard to conflicts of law principles.
Any legal action or other legal proceeding relating to this Agreement or the
enforcement of any provision of this Agreement may be brought or otherwise
commenced in any state or federal court located in the County of Santa Clara,
California and the County of Fulton, Georgia.
18. Further Assurances. Each party hereto shall execute and/or cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing the
Exchange.
19. Attorneys' Fees. If any action or proceeding relating to this Agreement or
the enforcement of any provision of this Agreement is brought against any party
hereto, the prevailing party shall be entitled to recover reasonable attorneys'
fees, costs and disbursements (in addition to any other relief to which the
prevailing party may be entitled).
20. Tax Reporting Information and Certification of Tax Identification Numbers.
20.1 The parties hereto agree that, for tax reporting purposes, all
interest on or other income, if any, attributable to the Escrow Stock or any
other amount held in escrow by the Escrow Agent pursuant to this Agreement shall
be allocable to the Stockholders in accordance with their percentage interests
in the Escrow Fund set forth in Exhibit D.
20.2 Purchaser and each of the Stockholders agree to provide the Escrow
Agent with certified tax identification numbers for each of them by furnishing
appropriate forms W-9 (or Form W-8, in the case of non-U.S. persons) and other
forms and documents that the Escrow Agent may reasonably request (collectively,
"Tax Reporting Documentation") to the Escrow Agent within 30 days after the date
hereof. The parties hereto understand that, if such Tax Reporting Documentation
is not so certified to the Escrow Agent, the Escrow Agent may be required by the
Internal Revenue Code, as it may be amended from time to time, to withhold a
portion of any interest or other income earned on the investment of monies or
other property held by the Escrow Agent pursuant to this Escrow Agreement.
20.3 Addition of Stockholders. Notwithstanding anything to the contrary
contained herein, if Seller shall issue additional shares of Purchaser Common
Stock, any purchaser of such shares may become a party to the Agreement by
executing and delivering an additional counterpart signature page to this
Agreement and shall be deemed a "Stockholder" hereunder.
<PAGE>
In Witness Whereof, the parties have executed this Escrow Agreement as of
the date first written above.
ALTEON WEBSYSTEMS, INC.
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
STOCKHOLDER
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA,
N.A.,
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
RICHARD A. HOWES
By:
-----------------------------------------------
<PAGE>
EXHIBIT D
OEM AGREEMENT
<PAGE>
Alteon WebSystems, Inc.
OEM Agreement
This OEM Agreement (the "Agreement") is entered into as of this 31ST day of
March, 2000 (the "Effective Date"), by and between Alteon WebSystems, Inc., a
Delaware corporation having its principal place of business at 6351 San Ignacio
Avenue, San Jose, California ("Alteon") and Pharsalia Technologies, Inc., a
Delaware corporation having its principal place of business at 9595 River Lake
Drive, Roswell, GA 30075 ("Pharsalia").
Agreement
1. Definitions. Certain of the defined terms used in this Agreement are as
follows:
1.1. "Acceptance Criteria" means the mutually agreed upon acceptance test
criteria for the Product attached hereto as Attachment A and incorporated herein
by reference, as may be amended from time-to-time upon mutual written agreement
of the parties. Such Acceptance Criteria shall set forth objective standards
for verification of the functionality and performance of the Product, including
the severity level of permissible software errors.
1.2. "Delivery Date" means the date on which Pharsalia delivered to Alteon
a Product which, as subsequently confirmed by Alteon and its customers in
accordance with the process set forth in Section 4.2 below, conformed in all
material respects to the Acceptance Criteria.
1.3. "Intellectual Property Rights" means any patent, patent application,
copyright, trade name, trademark, trade secret, copyright, and any applications
therefor, know-how, mask work, schematics, computer software programs, tangible
or intangible proprietary information, or any other intellectual property right
or proprietary information or technology, whether registered or unregistered.
1.4. "Object Code" means the machine-executable version of a software
program and all related end user documentation.
1.5. "Product" means one or more computer software programs, in Source Code
and Object Code, including, without limitation, all third party technology
and/or software reasonably required by and/or integrated into the Product,
provided by Pharsalia and licensed to Alteon under this Agreement.
1.6. "Satisfaction Date" means the date on which all Acceptance Defects (as
defined in Section 4.2) have been remedied and the Product has been operating
with no uncorrected Rejection Notices (as defined in Section 4.2) for a period
of six (6) weeks, or less time if mutually agreed to by the parties.
1.7. "Specifications" means the detailed design and functional
specifications for the Product attached hereto as Attachment B and incorporated
herein by reference, which includes, without limitation, a listing of all third
party technology and/or software reasonably required by and/or integrated into
the Product, all third party licenses and related fees and royalties required
for the proposed implementation of the Product and an implementation schedule
for the development and delivery of the Product.
1.8. "Source Code" means the human readable source code version of a
software program and all related internal documentation such that a programmer
reasonably skilled in the programming language could read, understand and modify
the software program.
2. License Grants.
2.1. Object License. Pharsalia grants to Alteon a limited, exclusive,
fully-paid, royalty-free license to (i) reproduce, perform, display and use the
Product in Object Code form internal to Alteon and solely for the purposes of
verifying conformance to the Acceptance Criteria in accordance with the
procedures set forth in Section 4.2; and (ii) license and distribute the Product
in Object Code form to beta test customers identified by Alteon and approved by
Pharsalia (herein, the "Beta Customers"); provided that any such Beta Customer
shall be subject to a written non-disclosure agreement with confidentiality
provisions at least as restrictive as the confidentiality
<PAGE>
obligations set forth in Section 6 ("Confidentiality") and that any use the
Product by such Beta Customer shall be in accordance with a restricted license
to be mutually agreed to by the Alteon and Pharsalia on a Beta Customer-by-Beta
Customer basis. Pharsalia's approval of any such Beta Customer, and agreement
as to the restricted license rights to be granted to such Beta Customer, shall
not be unreasonably withheld or delayed.
2.2. Source License. Pharsalia grants to Alteon a limited, exclusive,
fully-paid, royalty-free license to reproduce and use the Product in Source Code
form internal to Alteon solely for the purposes of verifying conformance to the
Acceptance Criteria in accordance with the procedures set forth in Section 4.2
in both standalone form and as integrated with certain Alteon products. [To be
discussed.]
2.3. Protection of Product. Alteon agrees to use the same degree of care,
but no less than reasonable care, to protect the Product as Alteon uses to
protect is own Source Code and Object Code of like importance.
2.4. Third Party Software. The parties acknowledge that the Product may
contain third party technology and/or software reasonably required by and/or
integrated into the Product. Pharsalia shall be responsible for obtaining all
such third party licenses and paying to such third parties any related fees and
royalties required for Alteon's use of the Product in accordance with the
licenses granted to Alteon in this Section 2.
3. Ownership. Except for any third party components contained therein, and any
license provided under Section 2 ("License Grants"), Pharsalia shall exclusively
retain all right, title and interest, including all Intellectual Property
Rights, in and to the Product developed and delivered by Pharsalia under this
Agreement as modified by or on behalf of Pharsalia in any and all respects
thereafter.
4. Delivery and Acceptance of Product.
4.1. Deliverables. Pharsalia shall deliver to Alteon a master copy of the
Object Code of the Product in accordance with the implementation schedule set
forth in the Specifications and shall use its best efforts to deliver to Alteon
a Product that conforms to the Acceptance Criteria no later than December 31,
2000. The date on which Pharsalia delivers such a conforming Product to Alteon
shall be deemed the "Delivery Date."
4.2. Acceptance of Product. After the date any version of the Product is
provided to Alteon, Alteon may reject the Product if it does not conform to the
Acceptance Criteria, which shall include a determination by Beta Customers that
the Product is a satisfactory "beta" version. If Alteon rejects the Product as
non-conforming, which it may do on one or more occasions following delivery of
any version of the Product, Alteon will provide Pharsalia written notice within
twenty-four (24) hours of such rejection (the "Rejection Notice") and such
notice shall set forth a description of the nature of the non-conformance (the
"Acceptance Defect") in reasonable detail. Upon receipt of a Rejection Notice,
Pharsalia shall use its best efforts to promptly correct the non-conformance and
redeliver a modified Product to Alteon for further evaluation and testing. The
foregoing process shall repeat until the Acceptance Defects have been remedied
or until the six (6) week period specified in Section 1.6 hereof has passed. The
parties acknowledge that any defect in the Product that is not listed on a
Rejection Notice is not an Acceptance Defect for purposes of subsequently
rejecting the Product unless it is of such a nature that it could not reasonably
have been detected at the time of delivery of such version. Alteon shall use its
best efforts to promptly determine the Satisfaction Date.
4.3. Access to Test Environment. Pharsalia shall have access to Alteon's
test environment and beta customers and may fully participate in Alteon's
evaluation and testing of the Product.
4.4. Support and Training. Upon Alteon's request, Pharsalia shall provide
Alteon with additional support and/or training regarding the use of the Product
at Pharsalia's then-current rates for such support and/or training.
<PAGE>
5. Term and Termination.
5.1. Term. The term of this Agreement shall commence upon the Effective
Date and shall continue until the earlier of: (i) termination pursuant to
Section 5.2; or (ii) termination of the Exchange Agreement executed by the
parties concurrently with the execution of this Agreement (herein, the "Exchange
Agreement").
5.2. Termination for Breach. Either party may terminate this Agreement for
a material breach by the other party that is not cured within thirty (30) days
after receipt of written notice of such breach.
5.3. Survival. The following sections shall survive termination of this
Agreement: Section 1 ("Definitions"), Section 3 ("Ownership"), Section 5.3
("Survival"), Section 6 ("Confidentiality"), Section 7 ("Warranties, Indemnities
and Limitations of Liability) and Section 8 ("Miscellaneous").
6. Confidentiality.
6.1. Protections. Each party shall hold in confidence all materials or
information disclosed to it in confidence hereunder ("Confidential Information")
which are marked as confidential or proprietary, or if disclosed verbally,
reduced to writing and marked confidential within thirty (30) days after the
date of disclosure. Each party agrees to take precautions to prevent any
unauthorized disclosure or use of Confidential Information consistent with
precautions used to protect such party's own confidential information, but in no
event less than reasonable care.
6.2. Exceptions. The obligations of the parties hereunder shall not apply
to any materials or information which: (i) is now, or hereafter becomes, through
no act or failure to act on the part of the receiving party, generally known or
available; (ii) is known by the receiving party at the time of receiving such
information as evidenced by its records; (iii) is hereafter furnished to the
receiving party by a third party, as a matter of right and without restriction
on disclosure; (iv) is independently developed by the receiving party without
any breach of this Agreement; or (v) is the subject of a written permission to
disclose provided by the disclosing party. Notwithstanding any other provision
of this Agreement, disclosure of Confidential Information shall not be precluded
if such disclosure: (i) is in response to a valid order of a court or other
governmental body of the United States or any political subdivision thereof;
provided, however, that the responding party shall first have given notice to
the other party hereto and shall have made a reasonable effort to obtain a
protective order requiring that the Confidential Information so disclosed be
used only for which the order was issued; (ii) is otherwise required by law; or
(iii) is otherwise necessary to establish rights or enforce obligations under
this Agreement, but only to the extent that any such disclosure is necessary.
7. Warranties, Indemnities and Limitations of Liability. The warranties,
indemnities and limitations of liability set forth in the Exchange Agreement are
hereby incorporated into this Agreement by reference and shall govern and
control the rights and obligations of the parties as related to the Products to
be provided by Pharsalia hereunder.
8. Miscellaneous.
8.1. No Assignment. Neither party may transfer or assign this Agreement or
any of its rights or obligations hereunder without the prior written consent of
other party; provided, however, that either party may assign this Agreement
without the other party's consent in the event of merger, acquisition or
reorganization. Any attempted assignment or transfer in violation of the
foregoing be null and void.
8.2. Notices. Any notice required under this Agreement shall be given in
writing and shall be deemed effective upon delivery to the party to whom
addressed by (i) express courier upon written verification of actual receipt or
(ii) facsimile upon confirmation of receipt generated by the sending device. All
notices shall be sent to the applicable address on the cover page hereof or to
such other address as the parties may designate in writing, with a copy to the
president and to the legal department of such party.
<PAGE>
8.3. Governing Law. This Agreement shall be governed and interpreted by the
laws of the State of Delaware, without giving effect to its principles of
conflicts of laws. In any legal action relating to this Agreement, Alteon and
Pharsalia agree to the exercise of jurisdiction by a state or federal court in
Santa Clara County, California or Fulton County, Georgia. In the event an action
is brought to enforce any provision or declare a breach of this Agreement, the
prevailing party shall be entitled to recover, in addition to any other amounts
awarded, reasonable legal and other related costs and expenses, including
attorney's fees, incurred thereby.
8.4. Independent Contractor. The parties are independent contractors, and
nothing in this Agreement shall be deemed to create a joint venture, partnership
or agency relationship between the parties. Neither party has the right or
authority to assume or create any obligation or responsibility on behalf of the
other.
8.5. Construction. This Agreement has been negotiated by the parties and by
their respective counsel. This Agreement will be fairly interpreted in
accordance with its terms and without any strict construction in favor of or
against either party.
8.6. Entire Agreement. If any portion of this Agreement is determined to be
or becomes unenforceable or illegal, such portion shall be deemed eliminated and
the remainder of this Agreement shall remain in effect in accordance with its
terms as modified by such deletion. No waiver of any breach of this Agreement
shall be effective unless in writing, nor shall any breach constitute a waiver
of any subsequent breach of any provision of this Agreement. This Agreement
(including without limitation the Specifications, Acceptance Criteria and
provisions of the Exchange Agreement incorporated herein by reference) contains
the entire agreement and understanding between the parties with respect to the
subject matter hereof, and supersedes all prior agreements, negotiations,
proposals and communications between the parties. This Agreement may be executed
in counterparts.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date.
ALTEON WEBSYSTEMS, INC. PHARSALIA TECHNOLOGIES, INC.
By: /s/ Barton M. Burstein By: /s/ Richard A. Howes
----------------------------- ------------------------------------
Name: Name:
--------------------------- ----------------------------------
Title: Title:
-------------------------- ---------------------------------
Date: 3/31/00 Date: 3/31/00
--------------------------- ----------------------------------
<PAGE>
EXHIBIT E
FORM OF NONCOMPETITION AGREEMENT
<PAGE>
NON-COMPETITION AGREEMENT
This Non-Competition Agreement is made and entered into as of March 31,
2000, by and between Alteon WebSystems, Inc., a Delaware corporation
("Purchaser"), Pharsalia Technologies, Inc., a Delaware corporation ("Seller"),
and __________ (the "Stockholder"). Certain capitalized terms used in this
Agreement and not otherwise defined shall have the meanings given to them in the
Exchange Agreement, dated March 31, 2000, by and between Purchaser, Seller and
the Stockholder attached hereto as Exhibit A (the "Exchange Agreement").
Recitals
A. The Stockholder an employee and stockholder of Seller. Subject to the
terms of the Exchange Agreement, Seller will become a wholly-owned subsidiary of
Purchaser and each Stockholder's capital stock and all outstanding options of
Seller will be automatically exchanged for shares of common stock and options of
Purchaser.
B. Immediately following the Exchange, the business of Seller will be
conducted by Purchaser through Seller. The Stockholder (i) will receive
substantial benefits as a result of the Exchange and (ii) has been offered
employment with Purchaser following the Exchange (the "Stockholder's
Employment") and, in connection therewith, the Stockholder has agreed not to
compete in the manner and to the extent herein set forth. The Stockholder is
entering into this Agreement as an inducement to Purchaser to consummate the
Exchange, with all of the attendant financial benefits to the Stockholder as an
employee of Seller.
C. Purchaser has requested, as a condition precedent to executing the
Exchange Agreement and consummating the transactions contemplated by the
Exchange Agreement, that the Stockholder execute and deliver this Agreement and
the Stockholder desires to enter into this Agreement.
Agreement
Now, Therefore, in consideration of the mutual covenants herein contemplated
and intending to be legally bound hereby, the parties hereto agree, that as of
the Closing Date, as follows:
1. Stockholder Acknowledgements. The Stockholder acknowledges that by
virtue of his position with Seller he has developed considerable expertise in
the business operations of Seller and has had extensive access to trade secrets
and other confidential information of Seller. The Stockholder recognizes that
Purchaser would be irreparably damaged, and its substantial investment in Seller
materially impaired, if the Stockholder were to enter into an activity competing
with the business of Seller in violation of the terms of this Agreement or if
the Stockholder were to disclose or make unauthorized use of any confidential
information concerning the business of Seller (or any subsidiary, successor or
acquiror of Seller). Accordingly, the Stockholder expressly acknowledges that he
is voluntarily entering into this Agreement and that the terms and conditions of
this Agreement are fair and reasonable to the Stockholder in all respects.
2. Termination; Restricted Period. This Agreement shall expire on the first
anniversary of the termination date of the Stockholder's Employment (the "Non-
Competition Termination Date"). The period of time that elapses from the
consummation of the Exchange until the Non-Competition Termination Date shall be
referred to herein as the "Restricted Period."
<PAGE>
3. Non-Competition.
(a) During the Restricted Period, the Stockholder shall not, directly
or indirectly, without the prior written consent of Purchaser, own, manage,
operate, join, control, finance or participate in the ownership, management,
operation, control or financing of, or be connected as an officer, director,
employee, partner, principal, agent, representative, or consultant of any entity
engaged in any activity that relates to the development, promotion, marketing,
licensing or distribution of products or services that provide or facilitate
load balancing of Internet traffic of static or dynamic Web content distribution
which then compete with the products or services of Purchaser nationwide, that
exist as of the date such the Stockholder leaves the Stockholder's Employment
(the "Restricted Business"). Because Purchaser is in the business of providing
infrastructure solutions to e-businesses on a nationwide basis, through
strategic partnerships and otherwise, and due to the inherent nationwide scope
of any Internet-related business, the geographic area of the Restricted Business
was determined by the parties to be nationwide. Notwithstanding the above, the
Stockholder shall not be deemed to be in contravention of the foregoing if the
Stockholder participates as a passive investor holding up to 5% of the equity
securities of an entity engaged in the Restricted Business, which securities are
publicly traded. Notwithstanding anything contained herein to the contrary, the
restrictions of this Section 3 shall not apply if (i) the Stockholder's
employment is terminated by Purchaser without Cause (as defined in the
Employment Agreement, dated as of the date hereof, by and between the
Stockholder, Seller and Purchaser (the "Employment Agreement")) or (ii) the
Stockholder terminates his employment with Purchaser with Good Cause (as defined
below in Section 3(b) below.
(b) As used in this Agreement, "Good Cause" means, without the
express written consent of the Stockholder, the occurrence of any of the
following events unless such events are substantially corrected within 30 days
following written notification by the Stockholder to the Company that he intends
to terminate his employment hereunder for one of the following reasons: (i) any
material reduction in the Stockholder's Base Salary or job responsibility as in
effect immediately following the Closing; (ii) a material breach by the Company
of any provision of this Agreement; (iii) Seller relocates its principal place
of business to another city or state more than 25 miles from its present place
of business as of the Closing Date or requires the Stockholder to travel more
than 25 miles per day from his home in Atlanta, Georgia on a regular basis and
(iv) the occurrence of a Change in Control. As used in this Agreement, "Change
of Control" means the occurrence of any of the following, but shall not include
the Exchange as provided in the Exchange Agreement: (i) the adoption of a plan
relating to the liquidation or dissolution of the Company; (ii) the consummation
of any transaction (including, without limitation, any merger or consolidation)
the result of which is that any person or group, becomes the "beneficial owner"
(as such term is defined in Rule 13d-3 and Rule 13d-5 under the Securities
Exchange Act of 1934), directly or indirectly, of more than 50% of the total
voting power of the total outstanding voting stock of the Company on a fully
diluted basis; (iii) the consummation of the first transaction (including,
without limitation, any merger or consolidation) the result of which is that any
person or group, becomes the beneficial owner, directly or indirectly, of more
than fifty percent (50%) of the total voting power of the total outstanding
voting stock of the Company or (iv) the sale of substantially all of the assets
of any of the Company. If the Stockholder elects to resign for Good Cause, the
Stockholder shall deliver written notice of resignation to the Company (the
"Notice of Resignation"). The Notice of Resignation shall set forth the date
such resignation shall become effective (the "Date of Resignation"), which date
shall, in any event, be at least 30 days and no more than 60 days from the date
the Notice of Resignation is delivered to the Company. At its option, the
Company may reduce such notice period to any length, upon 10 days written notice
to the Stockholder.
4. Non-Interference. The Stockholder further agrees that during the
Restricted Period, he will not, without the prior written consent of Purchaser,
(i) interfere with the business of Seller or
<PAGE>
Purchaser, by soliciting, attempting to solicit, induce or attempt to induce any
employee or consultant of Seller or Purchaser to terminate his employment as
such in order to become an employee, consultant or independent contractor to or
for any competitor of Seller or Purchaser or to or for any company with which
the Stockholder is associated in any way; (provided that, in the absence of a
violation of this Section 4(i), this restriction shall not be construed as a
prohibition against hiring); or (ii) induce or attempt to induce any customers,
suppliers, distributors, resellers, or independent contractors of Seller or
Purchaser to terminate their relationships with, or to take any action that
would be disadvantageous to the business of, Seller or Purchaser.
5. Representations and Warranties. The Stockholder represents and warrants,
to and for the benefit of the Indemnitees, that: (a) he has full power and
capacity to execute and deliver, and to perform all of the Stockholder's
obligations under, this Agreement; and (b) neither the execution and delivery of
this Agreement nor the performance of this Agreement will result directly or
indirectly in a violation or breach of (i) any agreement or obligation by which
he is or may be bound, or (ii) any law, rule or regulation. The Stockholder's
representations and warranties shall survive the expiration of the Restricted
Period for an unlimited period of time.
6. Independence of Obligations. The covenants of the Stockholder set forth
in this Agreement shall be construed as independent of any other agreement or
arrangement between the Stockholder, on the one hand, and Seller or Purchaser or
any of their affiliates or subsidiaries, on the other hand, and the existence of
any claim or cause of action by the Stockholder against Seller or Purchaser or
any of their affiliates or subsidiaries shall not constitute a defense to the
enforcement of such covenants against the Stockholder.
7. Remedies. The Stockholder expressly acknowledges that damages alone will
not be an adequate remedy for any breach by the Stockholder of any of the
covenants set forth in this Agreement and that Purchaser and Seller, in addition
to any other remedies which they may have, shall be entitled, as a matter of
right, to injunctive relief, including, without limitation, specific
performance, in any court of competent jurisdiction with respect to any actual
or threatened breach by the Stockholder of any of said covenants. The rights and
remedies of Purchaser and the other Indemnitees under this Agreement are not
exclusive of or limited by any other rights or remedies which they may have,
whether at law, in equity, by contract or otherwise, all of which shall be
cumulative (and not alternative). Without limiting the generality of the
foregoing, the rights and remedies of Purchaser and the other Indemnitees under
this Agreement, and the obligations and liabilities of the Stockholder under
this Agreement, are in addition to their respective rights, remedies,
obligations and liabilities under the law of unfair competition, under laws
relating to misappropriation of trade secrets, under other laws and common law
requirements and under all applicable rules and regulations. The Stockholder's
obligations under this Agreement are absolute and nothing in this Agreement
shall limit any of the Stockholder's obligations, or the rights or remedies of
Purchaser or any of the other Indemnitees, under the Exchange Agreement; and
nothing in the Exchange Agreement shall limit any of the Stockholder's
obligations, or any of the rights or remedies of Purchaser or any of the other
Indemnitees, under this Agreement. No breach on the part of Purchaser or any
other party of any covenant or obligation contained in the Exchange Agreement or
any other agreement or by virtue of any failure to perform or other breach of
any obligation of Purchaser, any other Indemnitee or any other Person shall
limit or otherwise affect any right or remedy of Purchaser or any of the other
Indeminitees under this Agreement.
<PAGE>
8. Severability. If any provision of this Agreement shall be held by a
court of competent jurisdiction to be excessively broad as to duration, activity
or subject, it shall be deemed to extend only over the maximum duration,
activity and geographic coverage or subject as to which such provision shall be
valid and enforceable under applicable law. In the event that any provision of
this Agreement, or the application of any such provision to any Person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or unenforceable, shall not
be impaired or otherwise affected and shall continue to be valid and enforceable
to the fullest extent permitted by law.
9. Notices. Any notice or other communication required or permitted to be
delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered in the manner and
to the address or facsimile telephone number set forth in Section 10.5 of the
Exchange Agreement (or to such other address or facsimile telephone number as
such party shall have specified in a written notice given to the other parties
hereto).
10. Counterparts; Facsimile. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original and all of which,
when taken together, will be deemed to constitute one and the same agreement.
This Agreement may be executed by facsimile, with such facsimile copy to serve
as conclusive evidence of the consent and ratification of the matters contained
herein by the parties hereto.
11. Section Headings; Construction. The headings of sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation."
12. Successors and Assigns; Assignment. This Agreement shall be binding
upon the parties and their respective successors and assigns. This Agreement
shall inure to the benefit of the parties and the other Indemnitees and their
respective successors and assigns. Purchaser may freely assign any or all of its
rights under this Agreement, in whole or in part, in connection with an
Acquisition without obtaining the consent or approval of any other party hereto
or of any other Person. Other than in connection with an Acquisition, Purchaser
may not assign any of its rights under this Agreement without the prior written
consent of Seller, which consent shall not be unreasonably withheld. Seller may
not assign any of its rights under this Agreement without the prior written
consent of Purchaser.
13. Waiver. No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy. No Person shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
14. Exclusive Agreement; Modification. The Transactional Agreements set
forth the entire understanding of the parties relating to the subject matter
thereof and supersede all prior agreements and understandings among or between
any of the parties relating to the subject matter thereof. This Agreement may
not be amended, modified, altered or supplemented other than by means of a
written instrument duly executed and delivered on behalf of each of the parties
hereto.
<PAGE>
15. Governing Law; Venue. This Agreement shall be governed by the internal
laws of the State of Georgia, without regard to conflicts of law principles. Any
legal action or other legal proceeding relating to this Agreement or the
enforcement of any provision of this Agreement may be brought or otherwise
commenced in any state or federal court located in the County of Santa Clara,
California and the County of Fulton, Georgia. THE STOCKHOLDER IRREVOCABLY WAIVES
THE RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY LEGAL PROCEEDING RELATING TO
THIS AGREEMENT OR THE ENFORCEMENT OF ANY PROVISION OF THIS AGREEMENT.
16. Further Assurances. Each party hereto shall execute and/or cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing the
Exchange.
17. Attorneys' Fees. If any action or proceeding relating to this Agreement
or the enforcement of any provision of this Agreement is brought against any
party hereto, the prevailing party shall be entitled to recover reasonable
attorneys' fees, costs and disbursements (in addition to any other relief to
which the prevailing party may be entitled).
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
STOCKHOLDER
--------------------------------------------
Name:
---------------------------------------
ALTEON WEBSYSTEMS, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
PHARSALIA TECHNOLOGIES, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
<PAGE>
EXHIBIT F
FORM OF OPINION OF SIMS MOSS KLINE & DAVIS LLP
1. Seller is duly organized and validly existing and in good standing
under the laws of the State of Delaware, and Seller has the requisite corporate
power and authority to own its properties and to conduct its businesses as it is
presently conducted. Seller is qualified as a foreign corporation to do business
and is in good standing under the laws of the State of Delaware.
2. The authorized capital stock of Seller consists of (i) 90,000,000
shares of common stock, par value $0.0001 per share ("Seller Common Stock"),
________ shares of which are issued and outstanding, (ii) 10,000,000 shares of
preferred stock, par value $0.0001 per share, _____ shares of which are issued
and outstanding and (iii) ________ shares of Seller Common Stock that will be
reserved for future issuance to employees pursuant to stock grants or a stock
option plan. The outstanding shares of capital stock of Seller are duly
authorized, validly issued, fully paid and non-assessable.
3. Seller has the full corporate power and authority to enter into,
execute, deliver and perform the Exchange Agreement. The execution and delivery
of the Exchange Agreement, and the consummation of the transactions contemplated
therein, have been duly and validly authorized by all necessary corporate action
of the Board of Directors and stockholders of Seller, have been duly executed
and delivered by an authorized officer of Seller and constitute legal, valid and
binding obligations of Seller and the stockholders of Seller that are party
thereto, enforceable by Purchaser against Seller and the stockholders that are
party thereto in accordance with its terms, except as rights to indemnity under
Section 9 of the Exchange Agreement may be limited by applicable laws, and
except as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium, fraudulent transfer and other similar
laws affecting the rights of creditors generally; and subject to general
equitable principles and limitations on availability of equitable relief,
including specific performance.
4. Neither the execution or delivery by Seller of the Exchange Agreement
nor the consummation by Seller of the transaction contemplated by the Exchange
Agreement will (i) violate any provision of the Certificate of Incorporation or
Bylaws of Seller, (ii) violate or be in conflict with any governmental statute,
rule or regulation generally applicable in transactions of the type contemplated
by the Exchange Agreement, (iii) to the best of our knowledge, violate or
contravene any judgment, decree, injunction or order of any federal or
California court, arbitrator or governmental agency or authority, entered
against Seller or its properties or (iv) constitute a material breach of, or
result in a material default under, any term or provision of any of the Exchange
Agreement.
5. No consent, approval or authorization of, or registration, declaration
or filing with any governmental authority or agency is required to have been
obtained or made by Seller prior to the date hereof in connection with the
execution, delivery or performance by Seller of the Exchange Agreement, except
for: (i) those contemplated by Section 4 of the Exchange Agreement and (ii) such
consents, approvals, authorizations, registrations, declarations and filings as
have been obtained or made.
6. To the best of our knowledge, there is no action, claim, suit,
litigation, proceeding or investigation pending or overtly threatened against
Seller before any governmental authority that questions the validity of or
enforceability of the Exchange Agreement or the right of Seller to enter into
the Exchange Agreement.
<PAGE>
EXHIBIT G
FORM OF OPINION OF COOLEY GODWARD LLP
July 17, 2000
Pharsalia Technologies, Inc.
1000 Holcomb Woods Parkway, Suite 400
Roswell, GA 30076
Re: The Exchange
Ladies and Gentlemen:
We have acted as counsel to Alteon WebSystems, Inc., a Delaware corporation
("Purchaser"), pursuant to the Exchange Agreement, dated as of March 31, 2000,
by and among Purchaser, Pharsalia Technologies, Inc. and Richard A. Howes (the
"Exchange Agreement"). We are rendering this opinion pursuant to Section 7.5(b)
of the Exchange Agreement. Capitalized terms used but not defined herein shall
have the respective meanings given to them in the Exchange Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in, and made
pursuant to, the Exchange Agreement by the various parties and originals or
copies, certified to our satisfaction, of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below.
In rendering this opinion, we have assumed: the genuineness and
authenticity of all signatures on original documents; the authenticity of all
documents submitted to us as originals; the conformity to originals of all
documents submitted to us as copies; the accuracy, completeness and authenticity
of certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by Purchaser of the Exchange Agreement), where authorization, execution and
delivery are prerequisites to the effectiveness of such documents. We have also
assumed that: all individuals executing and delivering documents had the legal
capacity to so execute and deliver; you have received all documents you were to
receive under the Exchange Agreement; the Exchange Agreement is an obligation
binding upon you; and there are no extrinsic agreements or understandings among
the parties to the Exchange Agreement that would modify or interpret the terms
of the Exchange Agreement or the respective rights or obligations of the parties
thereunder.
Our opinion is expressed only with respect to the federal laws of the United
States of America and the laws of the State of California. We express no
opinion as to whether the laws of any particular jurisdiction apply and no
opinion to the extent that the laws of any jurisdiction other than those
identified above are applicable to the subject matter hereof. We are not
rendering any opinion as to compliance with any law, rule or regulation relating
to the sale or issuance of securities thereof, or as to compliance with any
antitrust law.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications and subject to the limitations and qualifications expressed
below, we are of the opinion that:
<PAGE>
1. Purchaser is duly organized and validly existing and in good standing
under the laws of the State of Delaware and has the requisite corporate power
and authority to own its properties and to conduct its businesses as it is
presently conducted.
2. Purchaser has the full corporate power and authority to enter into,
execute, deliver and perform the Exchange Agreement. The execution and delivery
of the Exchange Agreement, and the consummation of the transactions contemplated
therein, have been duly and validly authorized by all necessary corporate action
of the Board of Directors and stockholders of Purchaser. The Exchange Agreement
has been duly executed and delivered by an authorized officer of Purchaser and
constitutes a legal, valid and binding obligation of Purchaser, enforceable by
Seller against Purchaser in accordance with its terms, except as rights to
indemnity under Section 9 of the Exchange Agreement may be limited by applicable
laws and except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, arrangement, moratorium, fraudulent transfer and
other similar laws affecting the rights of creditors generally; and subject to
general equitable principles and limitations on availability of equitable
relief, including specific performance.
3. The shares of Purchaser's Common Stock to be issued pursuant to the
terms of the Exchange Agreement will be validly issued, fully paid and
nonassessable.
This opinion is intended solely for your benefit and is not to be made available
to or be relied upon by any other person, firm or entity without our prior
written consent.
Very truly yours,
COOLEY GODWARD LLP
Eric C. Jensen, Esq.
<PAGE>
EXHIBIT H
REGISTRATION RIGHTS AGREEMENT
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is made and entered into
as of March 31, 2000, by and among Alteon WebSystems, Inc., a Delaware
corporation ("Purchaser") and the stockholders of Pharsalia Technologies, Inc.,
a Delaware corporation ("Seller"). Certain capitalized terms used in this
Agreement and not otherwise defined shall have the meanings given to them in the
Exchange Agreement, dated March 31, 2000, by and between Purchaser, Seller and
the Key Stockholder (as defined therein) attached hereto as Exhibit A (the
"Exchange Agreement").
Recitals
A. Concurrently with the execution of this Agreement, and as a condition
and inducement to Purchaser's willingness to enter into the Exchange Agreement,
each Stockholder shall enter into with Purchaser a stockholder agreement, in the
form of Exhibit B (the "Stockholder Agreement") and an escrow agreement,
attached hereto as Exhibit C (the "Escrow Agreement").
B. Purchaser has agreed to provide the Stockholders with certain
registration rights as more fully described herein.
Agreement
The parties, intending to be legally bound, agree as follows:
SECTION 1: Registration.
1.1 Registrable Shares. As used in this Agreement, "Registrable Shares"
means the shares of Purchaser Common Stock issued to the Stockholders pursuant
to the Exchange Agreement and any shares of Purchaser Common Stock issued in
respect thereof as a result of any stock split, stock dividend, share exchange,
merger, consolidation or similar recapitalization; provided, however, that
Registrable Shares shall cease to be Registrable Shares when (i) a registration
statement covering such Registrable Shares shall have become effective under the
Securities Act of 1933, as amended (the "1933 Act"), and such Registrable Shares
shall have been disposed of in accordance with such registration statement, or
(ii) such Registrable Shares may be transferred pursuant to Rule 144 under the
1933 Act, as such rule may be amended from time to time, or any successor rule
or regulation ("Rule 144"); and provided further, that Registrable Shares shall
not include any shares of Purchaser Common Stock held in any "Escrow Account"
pursuant to the Escrow Agreement. The Stockholders desiring to sell shares of
Purchaser Common Stock received pursuant to the Exchange Agreement, in
accordance with Rule 144 shall provide such Rule 144 representation letters in
usual and customary form and other usual customary documents as may reasonably
be requested by Purchaser.
1.2 Registration.
(a) Within 10 days of the Closing Date, Purchaser shall prepare and
file with the Securities and Exchange Commission ("SEC") a registration
statement on Form S-3 (the "Registration Statement") covering the resale of the
Registrable Shares, which will be effective for a period of one (1) year
following the Closing Date. Purchaser shall use its best efforts to cause such
Registration Statement to be declared effective as soon as practicable after the
filing.
(b) The Stockholders shall furnish such information as Purchaser may
reasonably request in connection with the preparation of the Registration
Statement. Upon the effectiveness of the Registration Statement with the SEC,
pursuant to the terms of this Agreement, the Registrable Shares may
1.
<PAGE>
be sold in accordance with the Registration Statement under the 1933 Act.
Subject to the terms of this Agreement, including, without limitation, Sections
2.4, 3.2 and 4.1, Purchaser shall use reasonable efforts to cause the
Registration Statement to remain effective until the earliest of (i) the date on
which all Registrable Shares covered by the Registration Statement have been
sold to the public pursuant to the Registration Statement; and (ii) one year
after the Closing Date.
1.3 Other Shares. Purchaser may include in the Registration Statement
any other shares of Purchaser Common Stock (including issued and outstanding
shares of Purchaser Common Stock as to which the holders thereof have contracted
with Purchaser for "piggyback" registration rights).
SECTION 2: Purchaser's Obligations.
In connection with the Registration Statement referred to in Section
1.2, Purchaser shall:
2.1 Registration Statement. Prepare and file with the SEC the
Registration Statement with respect to the Registrable Shares and thereafter use
its reasonable efforts to cause the Registration Statement to become and remain
effective for the period as set forth in Section 1.2.
2.2 Amendments and Supplements. Prepare and file with the SEC such
amendments and supplements to the Registration Statement and the prospectus used
in connection therewith as may be necessary to keep the Registration Statement
effective for the period set forth in Section 1.2 and to comply with the
provisions of the 1933 Act with respect to the sale or other disposition of the
shares of Purchaser Common Stock covered by the Registration Statement.
2.3 Copies of Offering Documents. Furnish to the Stockholders such
numbers of copies of the Registration Statement, prospectus, and any amendments
and supplements thereto, in conformity with the requirements of the 1933 Act,
such documents incorporated by reference in the Registration Statement and such
other documents as the Stockholders reasonably request, in order to facilitate
the public sale or other disposition of the Registrable Shares.
2.4 Misleading Prospectus. Promptly notify each Stockholder, at any
time when a prospectus relating thereto covered by the Registration Statement is
required to be delivered under the 1933 Act, upon Purchaser becoming aware that
the prospectus included in the 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 immediately
thereafter, use reasonable efforts to prepare and file with the SEC as soon as
possible and furnish to each Stockholder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Shares, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they are made.
2.5 Rule 144. Use its reasonable efforts to file in a timely manner
any reports required to be filed by it under the 1933 Act and the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and take such further action
as the Stockholders may reasonably request, all from time to time to enable each
Stockholder to sell the Registrable Shares owned by it without registration
under the 1933 Act pursuant to the exemption provided by Rule 144.
2.6 Blue Sky Filings. Use its reasonable best efforts to register and
qualify the securities covered by the Registration Statement under the Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Stockholders,
provided that Purchaser shall not be required in connection
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therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
SECTION 3: The Stockholders' Obligations.
In connection with the Registration Statement referred to in Section
1.2, the Stockholders shall each:
3.1 Other Documents and Information. Complete, execute, acknowledge
and/or deliver such questionnaires, indemnification agreements, custody
agreements, underwriting agreements (if the registration is underwritten) and
other documents, certificates and instruments as are reasonably required by
Purchaser or any underwriter(s) or are otherwise necessary in connection with
the registration and offering. Each Stockholder shall promptly provide to
Purchaser such information concerning such Stockholder, their ownership of
Purchaser's securities, the intended method of distribution and such other
information as may be required by applicable law or regulation or as may be
reasonably requested by Purchaser.
3.2 Cessation of Offering. Upon receipt of any notice from Purchaser
of the happening of any event of the kind described in Section 2.4, immediately
discontinue disposition of the Registrable Shares pursuant to the Registration
Statement covering such shares until the Stockholders' receipt of the copies of
the supplemented or amended prospectus contemplated by Section 2.4, and, if so
directed by Purchaser, deliver to Purchaser all copies of the prospectus
covering such Registrable Shares in such Stockholder's possession at the time of
receipt of such notice.
3.3 No Preliminary Prospectus. No Stockholder and no person or entity
acting on any Stockholder's behalf (other than an underwriter selected by
Purchaser or approved by Purchaser) shall offer any Registrable Shares by means
of any preliminary prospectus.
SECTION 4: Limitations.
4.1 Other Transactions. Purchaser shall not be obligated to effect a
registration pursuant to Section 1, or to file any amendment or supplement
thereto, and may suspend the Stockholders' rights to make sales pursuant to an
effective registration pursuant to Section 1, at any time when Purchaser, in the
good faith judgment of its Board of Directors, reasonably believes that the
filing thereof at the time requested, or the offering of securities pursuant
thereto, would (i) materially and adversely affect a pending or proposed
acquisition, merger, recapitalization, consolidation, Exchange or similar
transaction, or negotiations, discussions or pending proposals related thereto
or (ii) be seriously detrimental to Purchaser and its stockholders, in which
event (under clause (i) or (ii) above) Purchaser's sole relief from its
registration obligations is the right to defer filing of a registration
statement (or to suspend the Stockholders' rights to make sales pursuant to an
effective registration pursuant to Section 1) for a period of not more than 60
days; provided, however, that (i) Purchaser shall only use the right described
in this Section 4.1 twice in any 12-month period and (ii) such right shall not
be used unless Purchaser has imposed similar restrictions on persons subject to
its window policy for insiders.
SECTION 5: Expenses and Indemnification.
5.1 Certain Fees and Commissions. Purchaser shall pay its own legal
and accounting fees and all printing fees in connection with the Registration
Statement. The Stockholders shall pay any additional fees and costs of their own
counsel and all underwriting discounts, commissions and expenses of underwriters
or brokers incurred in connection with the offering and sale of the Registrable
Shares.
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5.2 Other Expenses. Purchaser shall pay all registration and filing
fees attributable to the Registrable Shares and the listing fee payable to the
Nasdaq National Market or over-the-counter market, as the case may be.
5.3 Indemnification. In the event any Registrable Shares are included
in a registration statement under Section 1:
(a) Indemnification by Purchaser. To the extent permitted by
law, Purchaser will indemnify and hold harmless each Stockholder, such
Stockholder's heirs, successors and assigns, any underwriter (as defined in the
1933 Act) for such Stockholder (if selected by Purchaser or approved by
Purchaser), and each person, if any, who controls such Stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act, against any
losses, claims, damages, liabilities or actions to which they may become subject
under the 1933 Act, the 1934 Act or other federal or state law, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, including any preliminary
prospectus (not prohibited by Section 3.3) or final prospectus contained therein
or any amendments or supplements thereto, or arising out of or based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the context in
which made, not misleading; and Purchaser will reimburse each such Stockholder,
such Stockholder's heirs, successors and assigns, underwriter (if selected by
Purchaser or approved by Purchaser) or controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnification and other rights provided for in this Section 5.3(a)
shall not apply (i) to any such loss, claim, damage, liability, or action
insofar as it arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in the Registration
Statement, preliminary prospectus or final prospectus or any amendment or
supplement thereto, in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by any
Stockholder or (ii) if the person asserting any such loss, claim, damage,
liability or action who purchased the Registrable Shares which are the subject
thereof did not receive a copy of an amended preliminary prospectus or the final
prospectus (or the final prospectus as amended or supplemented) at or prior to
the written confirmation of the sale of such Registrable Shares to such person
because of the failure of such Stockholder or underwriter to so provide such
amended preliminary or final prospectus and the untrue statement or alleged
untrue statement or omission or alleged omission of a material fact made in such
preliminary prospectus was corrected in the amended preliminary prospectus or
the final prospectus (or the final prospectus as amended and supplemented). Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Stockholder, underwriter or controlling person and
shall survive the transfer of the Registrable Shares by such Stockholder.
(b) Indemnification by the Stockholders. To the extent set forth
in the Exchange Agreement, each Stockholder will severally (but not jointly and
pro rata with the other Stockholders) indemnify and hold harmless Purchaser, its
successors and assigns, its officers and directors, any underwriter (as defined
in the 1933 Act) with respect to the Registrable Shares, and each person, if
any, who controls Purchaser or any such underwriter within the meaning of the
1933 Act or the 1934 Act, against any losses, claims, damages, liabilities or
actions (joint or several) to which they may become subject under the 1933 Act,
the 1934 Act or other federal or state law, arising out of or based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, or arising out of or
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the context in which made, not misleading; provided that such untrue statement
or alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished by such Stockholder
expressly for use in such registration by such Stockholder, or (ii) the failure
of such
4.
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Stockholder or any underwriter with respect to the Registrable Shares held by
such Stockholder at or prior to the written confirmation of the sale of the
Registrable Shares held by such Stockholder to send or arrange delivery of a
copy of an amended preliminary prospectus or the final prospectus (or the final
prospectus as amended or supplemented) to the person asserting any such loss,
claim, damage, liability or action who purchased the Registrable Shares which is
the subject thereof and the untrue statement or alleged untrue statement or
omission or alleged omission of a material fact made in such preliminary
prospectus was corrected in the amended preliminary prospectus or the final
prospectus (or the final prospectus as amended and supplemented). Each
Stockholder will reimburse Purchaser and each such officer or director or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability, or action. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of Purchaser or any such
officer, director, underwriter or controlling person and shall survive the
transfer of the Registrable Shares by such Stockholder.
(c) Indemnification Procedures. Promptly after receipt by a
person who may be entitled to indemnification under this Section 5.3 (an
"indemnified party") of notice of the commencement of any action (including any
governmental action) for which indemnification may be available under this
Section 5.3, such indemnified party will, if a claim in respect thereof is to be
made against any person who must provide indemnification under this Section 5.3
(an "indemnifying party"), 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 notified, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party shall have the right to retain its own counsel (and
the reasonable fees of such counsel shall be paid by the indemnifying party) and
assume its own defense if (i) the retention of such counsel has been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party has failed to promptly assume the defense and employ
experienced counsel reasonably acceptable to the indemnified party after the
indemnifying party has received the notice of the indemnification matter from
the indemnified party, or (iii) the named parties to any such action include
both the indemnified party and the indemnifying party, and the representation of
both parties by the same counsel would be inappropriate due to a conflict of
interest between them. It is understood, however, that the indemnifying party
shall not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for all
indemnified parties unless the indemnified parties in good faith conclude and
are advised by their counsel that there is an actual or potential conflict of
interest among the indemnified parties. No indemnification provided for in
Section 5.3(a) or Section 5.3(b) shall be available to any party who shall fail
to give notice as provided in this Section 5.3(c) to the extent that the party
to whom notice was not given was unaware of the proceeding to which such notice
would have related and was materially prejudiced by the failure to give such
notice.
SECTION 6: Other Provisions.
6.1 Notices. Any notice or other communication required or permitted
to be delivered to any party under this Agreement shall be in writing and shall
be deemed properly delivered, given and received when delivered in the manner
and to the address or facsimile telephone number set forth in Section 10.5 of
the Exchange Agreement (or to such other address or facsimile telephone number
as such party shall have specified in a written notice given to the other
parties hereto).
6.2 Counterparts; Facsimile. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original and all of
which, when taken together, will be deemed to constitute one and the same
agreement. This Agreement may be executed by facsimile,
5.
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with such facsimile copy to serve as conclusive evidence of the consent and
ratification of the matters contained herein by the parties hereto.
6.3 Section Headings; Construction. The headings of sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation."
6.4 Successors and Assigns; Assignment. This Agreement shall be
binding upon the parties and their respective successors and assigns. This
Agreement shall inure to the benefit of the parties and the other Indemnitees
and their respective successors and assigns. Purchaser may freely assign any or
all of its rights under this Agreement, in whole or in part, in connection with
an Acquisition without obtaining the consent or approval of any other party
hereto or of any other Person. Other than in connection with an Acquisition,
Purchaser may not assign any of its rights under this Agreement without the
prior written consent of Seller, which consent shall not be unreasonably
withheld. Seller may not assign any of its rights under this Agreement without
the prior written consent of Purchaser.
6.5 Remedies Cumulative; Specific Performance. The rights and
remedies of the parties hereto shall be cumulative. Each Stockholder agrees that
in the event of any Breach or threatened Breach by a party of any covenant,
obligation or other provision set forth in this Agreement, Purchaser shall be
entitled (in addition to any other remedy that may be available to it) to (i) a
decree or order of specific performance or mandamus to enforce the observance
and performance of such covenant, obligation or other provision and (ii) an
injunction restraining such Breach or threatened Breach.
6.6 Waiver. No failure on the part of any Person to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of any Person in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. No Person shall be deemed to have waived any claim
arising out of this Agreement, or any power, right, privilege or remedy under
this Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such Person; and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given.
6.7 Exclusive Agreement; Modification; Severability. The
Transactional Agreements set forth the entire understanding of the parties
relating to the subject matter thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter thereof. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of each of the parties hereto. In the event that any
provision of this Agreement, or the application of any such provision to any
Person or set of circumstances, shall be determined to be invalid, unlawful,
void or unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or unenforceable, shall not
be impaired or otherwise affected and shall continue to be valid and enforceable
to the fullest extent permitted by law.
6.8 Governing Law; Venue. This Agreement shall be governed by the
internal laws of the State of Delaware, without regard to conflicts of law
principles. Any legal action or other legal proceeding relating to this
Agreement or the enforcement of any provision of this Agreement may be brought
or otherwise commenced in any state or federal court located in the County of
Santa Clara, California and the County of Fulton, Georgia.
6.
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6.9 Further Assurances. Each party hereto shall execute and/or cause
to be delivered to each other party hereto such instruments and other documents,
and shall take such other actions, as such other party may reasonably request
(prior to, at or after the Closing) for the purpose of carrying out or
evidencing the Exchange.
6.10 Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
6.11 Addition of Stockholders. Notwithstanding anything to the
contrary contained herein, if Seller shall issue additional shares of Purchaser
Common Stock, any purchaser of such shares may become a party to the Agreement
by executing and delivering an additional counterpart signature page to this
Agreement and shall be deemed a "Stockholder" hereunder.
The parties hereto have caused this Agreement to be executed and delivered
as of the date first written above.
Alteon WebSystems, Inc.
-------------------------------------
By: _________________________________
Title: ______________________________
Stockholders
By: _________________________________
Name:
7.
