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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 28, 1997
GTI CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
1-4289 05-0278990
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(Commission File Number) (IRS Employer Identification No.)
9715 Business Park Drive, San Diego, California 92131
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (619) 537-2500
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETSS
Asset Purchase Transaction:
On April 28, 1997 Promptus Communications, Inc. ("Promptus," GTI's majority
owned subsidiary) and VideoServer, Inc. ("VideoServer") (NASDAQ: VSVR) closed a
transaction ("NAC Transation") whereby VideoServer purchased from Promptus
certain assets and assumed certain liabilities known as the Network Access Cards
division ("NAC's") for $14.5 million in cash and 223,881 shares of VideoServer
common stock.
By the terms of the NAC Transaction, each of Promptus and VideoServer
contributed $250,000 cash into a working capital escrow account. By the terms of
the working capital escrow agreement, the purchase price will be adjusted either
up or down based on the change of the NAC's working capital amount from December
31, 1996 to the closing date. If the working capital increase or decrease is
greater than the party's $250,000 contribution to escrow, the responsible party
is required to pay in cash the balance of the increase or decrease .
Additionally, 29,851 shares of the 223,881 VideoServer common stock have been
contributed to an indemnification escrow account. By the terms of the escrow
agreement, if there are no claims against the indemnification escrow by
VideoServer, one-half of the shares will be released to Promptus in December
1997 and the remaining portion in April 1998.
The 223,881 shares received by Promptus as consideration in the NAC Transaction
are not registered with the Securities and Exchange Commission by VideoServer as
of the closing date. VideoServer is required to use their best efforts to
register the shares. Management expects that the shares will be registered
during the Company's quarter ended September 27, 1997.
Stock Purchase Transaction:
On April 28, 1997, subsequent to the NAC Transaction closing, GTI Corporation
(the "Company") and Promptus closed a Stock Purchase Agreement (the "Stock
Transaction") whereby Promptus purchased from the Company 100% of the Promptus
shares held by the Company. The Company received full payment for the
intercompany loan between Promptus and the Company, additional cash
consideration, and common stock of VideoServer. Total proceeds to the Company,
net of transaction costs and including repayment of the intercompany loan, was
$8.2 million in cash and 157,795 shares of VideoServer common stock.
By the terms of the Stock Transaction, GTI is required to pay Promptus in cash
approximately 72% of the working capital decrease, if any, in excess of the
$250,000 escrow contribution by Promptus mentioned above. If the working capital
increases, the Company will receive approximately 72% of the increase.
Of the 29,851 VideoServer shares placed into the indemnification escrow, 21,531
shares represent the Company's portion of these shares. As Promptus receives
these shares, as mention above, if there are no claims against the escrow, the
Company will receive approximately 72% of these shares.
When VideoServer registers the 223,881 shares, as mentioned above, the Company
intends to liquidate these shares. The ultimate proceeds to the Company is
subject to market volitility and fluctuations.
The information contained herein, including any forward looking statements
contained herein, should be reviewed in conjunction with the Company's Annual
Report on Form 10-K and other publicly available information regarding the
Company, copies of which are available from the Company upon request. Such
publicly available information sets forth certain risks and uncertainties
related to the Company's business and such statements.
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Item 7. Financial Statement, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired
Not applicable
(b) Pro Forma Financial Information
<TABLE>
<S> <C>
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 29, 1997 ....... Page F-1
Unaudited Pro Forma Condensed Consolidated Statements of Operations: *
Notes to Unaudited Pro Forma Condensed Consolidated Financial Information ........... Page F-2
</TABLE>
* - Not included herein because, the Company's Statements
of Operations for the year ended December 31, 1996 and for
the three-months ended March 29, 1997 have been presented
in the 1996 Annual Report and Form 10-Q, respectively,
reflecting Promptus as a discontinued operation.
(c) Exhibits
Exhibit 10.1 Asset Purchase Agreement
Exhibit 10.2 Stock Purchase Agreement (incorporated by reference
to the Company's Form 10-K for the year ended December 31, 1996)
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GTI CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
AS OF MARCH 29, 1997
(In thousands, except share data)
ASSETS
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 3,865 $ 8,989 (1) $12,854
Marketable securities 0 2,633 (1) 2,633
Accounts receivable, net of allowance of $195
and $201, respectively 11,861 11,861
Inventories 22,036 22,036
Prepaid expenses and other 6,484 6,484
Net assets of discontinued operations 11,622 (11,622)(1) 0
------- -------- -------
Total current assets 55,868 0 55,868
Property, plant and equipment, net 16,409 16,409
Goodwill, less amortization of $4,385 and $4,211,
respectively, and other assets 23,395 23,395
------- -------- -------
$95,672 $ 0 $95,672
======= ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term borrowings 7,195 0 7,195
Current portion of long-term debt due to affilitate 1,250 1,250
Accounts payable, accrued and other liabilities 16,767 16,767
------- -------- -------
Total current liabilities 25,212 0 25,212
Long-term debt due to affiliate 1,250 1,250
Deferred income taxes and other liabilities 1,896 1,896
Stockholders' equity:
Preferred stock, $35.00 cumulative convertible,
issued and outstanding 8,110 shares 8,110 8,110
Common stock, issued 8,973,475 and
8,973,475 shares, respectively 359 359
Additional paid in capital 44,082 44,082
Retained earnings 14,761 14,761
Cumulative translation adjustments 2 2
------- -------- -------
Total stockholders' equity 67,314 0 67,314
------- -------- -------
$69,210 $ 0 $69,210
======= ======== =======
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated pro forma financial statements.
F-1
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
Note 1 - Pro Forma Adjustments
The accompanying unaudited condensed consolidated pro forma financial statements
are presented in accordance with Article 11 of Regulation S-X.
The unaudited condensed consolidated pro forma financial information represents
the Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 29,
1997, giving effect to the disposal of Promptus as if the disposal was
consummated on that date. The pro forma information is based on the historical
consolidated financial statements of GTI Corporation giving effect to the
disposal and the assumptions and adjustments outlined in the accompanying Notes
to Unaudited Pro Forma Condensed Consolidated Financial Information.
The unaudited pro forma financial information is provided for comparative
purposes only. It does not purport to be indicative of the results that actually
would have occurred if the disposal had been consummated on the date indicated
or which may be obtained in the future. The unaudited condensed consolidated
financial information should be read in conjunction with the notes thereto and
the historical financial statements of GTI Corporation and notes thereto, as
previously filed.
The following unaudited pro forma adjustments have been made to the unaudited
condensed consolidated pro forma financial statements:
(1) - Amounts represent the disposal of Promptus, the removal of Promptus's net
assets, the receipt of $8,989 in cash, net of transaction costs, and the
157,795 shares of VideoServer common stock received.
F-2
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: May 13, 1997 GTI CORPORATION
By: /s/ BRUCE MYERS
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Bruce Myers
Vice President of Finance and
Chief Financial Officer
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EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is dated as of the 25 day of March 1997 by and
between (i) VideoServer, Inc., a Delaware corporation (the "Buyer"), and (ii)
Promptus Communications, Inc., a Rhode Island corporation (the "Seller".)
WHEREAS, the Seller is engaged in the research, development, marketing and sale
of products embodying its Network Access Card technology (the "NAC Business")
and its network access systems products business (the "Systems Business"); and
WHEREAS, the Buyer, and/or its wholly-owned subsidiary, VideoServer Acquisitions
Corp, a Delaware corporation ("VSVR Acquisitions"), desires to purchase the
assets owned by the Seller of its NAC Business or set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and
agreements set forth herein, the Buyer and Seller agree as follows:
Article 1
Purchase And Sale
1.1. Acquired Assets. Subject to the terms and conditions set forth in
this Agreement, at the Closing referred to in Article 4 hereof the Seller shall
sell, assign, transfer and deliver to the Buyer, and the Buyer shall purchase,
acquire and take assignment and delivery of all assets of the Seller that are
used exclusively in the NAC Business, or otherwise listed on one of the
Schedules described in Section 1.1, including but not limited to the following
assets (other than the Excluded Assets specified in Section 1.2) of the Seller
(all of which assets are hereinafter referred to collectively as the "Acquired
Assets"):
(a) Any and all machinery, installations, equipment,
furniture, tools, spare parts, supplies, materials and other personal property
items described on Schedule 1.1(a) hereto, with such additions thereto and
deletions therefrom as may hereafter arise in the ordinary course of business
prior to the Closing consistent with the Seller's obligations under Article 7
hereof (the "Equipment");
(b) All of the Seller's title to, interest in and rights under
the leases of personal property described on Schedule 1.1(b) hereto (the
"Personal Property Leases");
(c) All of the Seller's rights under the agreements with
respect to employees described on Schedule 1.1(c) hereto (collectively, the
"Employee Agreements");
(d) All of the Seller's rights under the purchase orders,
contracts and agreements described on Schedule 1.1(d) hereto, for the purchase
or sale of utilities, goods, materials and services (the contracts and
agreements referred to in this paragraph (d) being referred to collectively as
the "Other Contracts");
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(e) All of the Seller's trade accounts receivable, notes
receivable and miscellaneous receivables related to the NAC Business, (the
"Accounts Receivable");
(f) All of the Seller's inventories related to the NAC
Business, including raw materials, parts, work in process and finished goods
(the "Inventories");
(g) All of the Seller's transferable rights under the
operating authorities, licenses, permits and approvals, both governmental and
private, described on Schedule 1.1(g) hereto (the "Permits");
(h) All of the Seller's trade secrets, copyrights, designs,
patents, licenses (as licensee or licensor), other agreements and applications
with respect to the foregoing, production records, technical information,
manufacturing know-how, processes, customer lists, and other intangible assets
described on Schedule 1.1(h) hereto (the "Intangibles"); and
(i) All of the Seller's accounting books, records and ledgers,
employment and personnel records for all employees of the Seller relating to the
NAC Business and all other documents and records relating to the Acquired
Assets, in original or copy form, as the parties may agree prior to the Closing.
1.2. Excluded Assets. Notwithstanding the foregoing, the Seller is not
selling and the Buyer is not purchasing, pursuant to this Agreement, and the
term "Acquired Assets" shall not include, any of the following assets (the
"Excluded Assets"):
(a) all of the Seller's rights under the employee benefit
plans described on Schedule 1.2(a) hereto and all related plan assets and plan
sponsorships;
(b) all of the Seller's minute books, stock ledgers and other
corporate records;
(c) the consideration received by the Seller pursuant to this
Agreement;
(d) the rights of the Seller under this Agreement;
(e) any assets related solely to the business of the Seller in
marketing, selling, improving, developing, and distributing its "Systems
Products" as that term is understood and defined in the Technology License
Agreement and any rights to the name and work " Promptus," (other than the right
to dispose, in the ordinary course of business, of Inventories bearing the name
Promptus) including, without limitation, the assets described on Schedule 1.2(e)
hereto.
(f) any cash that is held by Promptus, whether as part of the
NAC Business or otherwise.
Article 2
Purchase Price
2.1. Delivery of Purchase Price. (a) At the Closing, the Buyer shall
pay to the Seller, as the aggregate purchase price for the Acquired Assets, (i)
fourteen and one-half million dollars
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($14,500,000.00) by bank cashiers check or by wire transfer of immediately
available funds (the "Cash Portion"), and (ii) seven and one-half million
dollars ($7,500,000.00) payable in shares of common stock of the Buyer, $.01 par
value per share ("VideoServer Common Stock"), as provided in paragraph (b) below
(the "Stock Portion"), each subject to the provisions of Section 2.2 below. The
sum of the Cash Portion and the Stock Portion is referred to hereinafter as the
"Purchase Price". The Purchase Price shall be allocated among the Acquired
Assets in the manner set forth on Schedule 2.1(a), which shall be delivered by
Buyer to Seller for its reasonable approval five days before the Closing.
(b) For purposes of calculating the number of shares of
VideoServer Common Stock to be delivered as the Stock Portion (the "Purchase
Shares"), each share of VideoServer Common Stock will be deemed to have a per
share value equal to the average of the closing prices (as listed in The Wall
Street Journal ) for VideoServer Common Stock on the ten trading days
immediately preceding the closing, (the "Share Price") provided, however, that
in no event shall the Share Price be lower than $33.50 per share or higher than
$53.00 per share. Should the actual average closing price be lower than the
minimum price or higher than the maximum price listed above, then the price
shall be deemed to be $33.50 or $53.00 per share respectively.
2.2. Escrow. One million dollars of the Purchase Price, in shares of
VideoServer Common Stock (at the Share Price determined pursuant to Section
2.1(b)), an additional $250,000 of the Purchase Price in cash and an additional
$250,000 not part of the Purchase Price deposited by VideoServer (the "Escrowed
Amount") shall be subject to an escrow arrangement pursuant to a Escrow
Agreement, substantially in the form of Exhibit B hereto (the "Escrow
Agreement") (subject to changes required by the Escrow Agent selected by the
parties before closing,) among the Buyer, the Seller and a mutually agreed upon
financial institution, as Escrow Agent (the "Escrow Agent"). The $250,000 in
cash from each party to be included in the Escrowed Amount will be used to
secure the obligations of such party to pay the WC Excess or the WC Shortfall as
provided in Section 2.3. The $250,000 deposited by the party not obligated to
make a payment under Section 2.3, plus any income thereon, shall be returned to
such party in the manner set forth in the Escrow Agreement.
2.3 Working Capital Adjustment (a) Seller has delivered an unaudited
balance sheet for the NAC Business, dated as of 12/31/96 (the "Baseline Balance
Sheet"). The Baseline Balance Sheet indicates a working capital amount of $3.031
million ($3,031,000.00). ("Working Capital," for purposes of this Agreement,
shall mean the amount of Current Assets - accounts receivable, inventory,
prepaid expenses and other current assets not including any cash, and excluding
fixed assets - minus the amount of Current Liabilities - accounts payable,
accruals, and other current liabilities, but excluding long term debt due in
greater than one year.) As soon as an audit is completed by Arthur Andersen
LLP., Seller shall deliver to Buyer an audited balance sheet for the NAC
Business as of 12/31/96 (the "Audited Baseline Balance Sheet"), which will
contain an audited working capital amount (the "Baseline Working Capital
Amount"). Within fifteen (15) days of the Closing, the Seller will prepare and
deliver to the Buyer, using the same accounting standards as were used for the
Audited Baseline Balance Sheet, a final closing balance sheet ("Final Closing
Balance Sheet,") including a Final Closing Working Capital amount, updating and,
if appropriate, adjusting the Audited Baseline Balance Sheet. When the Seller
delivers the Final Closing Balance Sheet, the Seller shall also deliver to the
Buyer a certificate of the President and Treasurer of the Seller certifying (i)
that the Final Closing Balance Sheet (A) was prepared in accordance with
generally accepted accounting principles applied on a basis consistent with the
Audited Baseline Balance Sheet (subject to the absence of footnotes and to
year-end audit adjustments) and (B)
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fairly presents in all material respects as of the date thereof, the financial
condition of the NAC Business and (ii) the Final Working Capital amount. The
parties agree that, immediately following the Closing, they will make available,
on a full time basis, the personnel who had previously been part of the Seller's
Finance and Accounting Department (whether they now work for Buyer or Seller) to
create the Final Closing Balance Sheet, under the supervision of the Seller. The
Final Closing Working Capital amount will be changed from the Audited Baseline
Working Capital amount by virtue of the conduct of the NAC Business between
12/31/96 and the Closing.
(b) When the Final Closing Balance Sheet and officer's certificate
described above is prepared and delivered to the parties, if the Buyer shall
dispute the Final Closing Working Capital amount as set forth therein, the
disputing party shall notify the other party in writing (the "Dispute Notice")
within 15 calendar days after delivery of the Final Closing Balance Sheet. Such
Dispute Notice shall set forth in appropriate detail the items disputed by the
party and the amount proposed by the party as the Final Closing Working Capital
amount. In the event of a Dispute Notice, the parties shall first use their best
efforts to resolve the dispute between themselves. If the parties are unable to
resolve the dispute within 15 calendar days after delivery of Dispute Notice,
the dispute shall be submitted to the accounting firm of KPMG Peat Marwick
("KPMG") for resolution. KPMG shall review the Final Closing Balance Sheet and
such underlying information as it deems appropriate and deliver within 45 days
after delivery of the Dispute Notice its written determination (the "KPMG
Determination"), which shall state whether the Final Closing Working Capital
amount as set forth in the Final Closing Balance Sheet, or as set forth in the
Dispute Notice, is more accurate. The charges of KPMG for its review and report
pursuant to this Section 2.3(c) shall be borne by the non-disputing party if the
Final Closing Working Capital amount as set forth in the Dispute Notice is
affirmed by the Accountant's Determination, and otherwise shall be borne by the
disputing party. The determination of the more accurate Final Closing Working
Capital amount as set forth in the Accountant's Determination shall be binding
and conclusive upon the parties hereto.
(c) When the Final Closing Balance Sheet has been finally determined, the
parties will adjust the Purchase Price based on the difference in Working
Capital between the Audited Baseline Balance Sheet and the Final Closing Balance
Sheets. If the Final Closing Working Capital amount exceeds the Audited Baseline
Working Capital amount (such excess, the "WC Excess"), the Seller shall make a
claim under the provisions of Escrow Agreement for payment, out of the WCA
Escrow Fund (as defined therein) , in an amount (up to the amount of $250,000
held in the WCA Escrow Fund) equal to the WC Excess plus all income earned on
such amount; and the Buyer shall pay to the Seller the amount by which the WC
Excess exceeds the amount so payable out of the WCA Escrow Fund. If the Final
Closing Working Capital amount is less than the Audited Baseline Working Capital
amount (such deficiency, the "WC Shortfall"), the Buyer shall make a claim under
the provisions of Escrow Agreement for payment, out of the WCA Escrow Fund, in
an amount (up to the amount OF $250,000 held in the WCA Escrow Fund) equal to
the WC Shortfall plus all income earned on such amount; and the Seller shall pay
to the Buyer the amount by which the WC Shortfall exceeds the amount so payable
out of the WCA Escrow Fund.
Article 3
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Assumption Of Certain Obligations
At the Closing, the Buyer shall assume, and agree to pay, perform,
fulfill and discharge, only the obligations of the Seller specifically set forth
on Schedule 3 hereto (the "Assumed Obligations"). Anything in this Agreement to
the contrary notwithstanding, the Buyer shall not assume, and shall not be
deemed to have assumed, any liability or obligation of the Seller whatsoever,
known or unknown, fixed or contingent, and including without limitation any
obligations arising out of the operation of the NAC Business prior to Closing,
other than as specifically set forth in this Article 3 (with all such unassumed
liabilities and obligations referred to herein as the "Excluded Liabilities").
Article 4
Closing
4.1. Time and Place. The closing of the transfer and delivery of all
documents and instruments necessary to consummate the transactions contemplated
by this Agreement (the "Closing") shall be held at the offices of Bingham, Dana
& Gould, 150 Federal Street, Boston, Massachusetts, or at such other place as
the Buyer and the Seller may agree at 10:00 a.m. on a mutually acceptable date,
not later than five days after the later of a) expiration of any
Hart-Scott-Rodino waiting period or b) all of the conditions in Section 9 and 10
have been fulfilled or waived. The date on which the Closing is actually held
hereunder is sometimes referred to herein as the "Closing Date".
4.2. Transactions at Closing. At the Closing:
(a) The Seller shall duly execute and deliver to the Buyer or
its nominee or nominees such deeds, certificates of title or other instruments
of assignment and transfer with respect to the Acquired Assets as the Buyer may
reasonably request and as may be necessary to vest in the Buyer good and valid
title to all of the Acquired Assets, in each case subject to no Encumbrance (as
defined in Section 5.10) except for the Encumbrances specified in Schedule
4.2(a) hereto (the "Permitted Encumbrances").
(b) The Buyer shall duly execute and deliver to the Seller
such instruments of assumption and other documents with respect to the Assumed
Obligations as the Seller may reasonably request.
(c) The Seller shall deliver or cause to be delivered to the
Buyer all of the Seller's leases, contracts and agreements included in the
Acquired Assets (except as shown on Schedule 4.2(c)), with such assignments
thereof and consents to assignments as are necessary to assure the Buyer of the
full benefit of the same, and all of the Seller's business records, books and
other data relating to the Acquired Assets (originals or copies, as the parties
reasonably agree). The Seller shall take all requisite steps to put the Buyer in
actual possession and operating control of the Acquired Assets.
(d) The Buyer shall deliver the Escrowed Amount to the Escrow
Agent. The Seller shall deliver to the Escrow Agent duly executed stock powers
relating to the escrowed Shares of VideoServer Common Stock, as described in the
Escrow Agreement
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(e) Subject to paragraph (f) below, the Buyer shall deliver
the Cash Portion and Stock Portion (other than the Escrowed Amount) to the
Seller.
(f) Upon request of the Buyer at Closing, the Seller shall
deliver to the Buyer pay-off letters and lien discharges (or agreements
therefor) from any Person with an Encumbrance on any of the Acquired Assets and
an executed written acknowledgment from Union Bank that Buyer and its Affiliates
shall have no liability or obligation in respect of Promptus' guaranty of GTI's
debt.
Article 5
Representations And Warranties Of The Seller
The Seller represents and warrants to the Buyer as follows:
5.1. Incorporation of Seller; Authority. The Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Rhode Island. The Seller is duly qualified and in good standing as a
foreign corporation in all jurisdictions in which the character of the
properties owned or leased or the nature of the activities conducted by it makes
such qualification necessary, except for jurisdictions in which failure to be
qualified or in good standing would not have a material adverse effect on the
NAC Business. The Seller has delivered to the Buyer complete and correct copies
of its Articles of Incorporation and By-Laws and all amendments thereto. The
Seller has no Subsidiaries (as defined in Article 14) except for those disclosed
in Schedule 5.1. The Seller has all requisite corporate power and authority to
own and hold the Acquired Assets owned or held by it, to carry on the NAC
Business as such business is now conducted and to execute and deliver this
Agreement and the other documents, instruments and agreements contemplated
hereby (collectively, the "Transaction Documents") to which it is a party and to
carry out all actions required of it pursuant to the terms of the Transaction
Documents.
5.2 Corporate Approval; Binding Effect. The Seller has obtained all
necessary authorizations and approvals from its Board of Directors and will,
before Closing, have obtained all necessary authorizations and approvals from
its stockholders required for the execution and delivery of the Transaction
Documents to which it is a party and the consummation of the transactions
contemplated hereby and thereby. This Agreement has been duly executed and
delivered by the Seller and constitutes, and when the Escrow Agreement
Registration Rights Agreement, and Software and Technology License Agreement are
executed and delivered by the Seller, they will constitute, the legal, valid and
binding obligation of the Seller enforceable against it in accordance with its
terms, except the enforceability thereof may be limited by any applicable
bankruptcy, reorganization, insolvency or other laws affecting creditors' rights
generally or by general principles of equity.
5.3. Non-Contravention. Except as set forth in Schedule 5.3 hereto, the
execution and delivery by the Seller of the Transaction Documents and the
consummation by the Seller of the transactions contemplated hereby and thereby
will not (a) violate or conflict with any provision of the Articles of
Incorporation or By-Laws of the Seller, each as amended to date; or (b)
constitute a violation of, or be in conflict with, or constitute or create a
default under, or result in the creation or imposition of any Encumbrance upon
any property of the Seller (including without limitation any of the Acquired
Assets) pursuant to (i) any material agreement or instrument to which the Seller
is a party or by which the Seller
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or any of its properties (including without limitation any of the Acquired
Assets) is bound or to which the Seller or any of such properties is subject, or
(ii) any statute, judgment, decree, order, regulation or rule of any court or
governmental or regulatory authority.
5.4. Governmental Consents; Transferability of Permits , Etc. Except as
set forth on Schedule 5.4, no consent, approval or authorization of, or
registration, qualification or filing with, any governmental agency or authority
("Governmental Consent") is required for the execution and delivery by the
Seller of the Transaction Documents to which it is a party or for the
consummation by the Seller of the transactions contemplated hereby or thereby,
except where the absence of such Governmental Consent would not have a material
adverse effect on the NAC Business. The Seller has and maintains, and the
Permits listed on Schedule 1.1(e) hereto include, all operating authorities,
licenses, permits and other authorizations from all governmental authorities as
are necessary for the conduct of the NAC Business or in connection with the
ownership or use of the Acquired Assets. Except as expressly designated on
Schedule 5.4, all of the Permits are transferable to the Buyer, except where the
absence of such Permits would not have a material adverse effect on the NAC
Business, and true and complete copies of such Permits have previously been
delivered to the Buyer.
5.5. Financial Statements. The Seller has delivered or will deliver the
following financial statements (the "Financial Statements") to the Buyer, of
which those listed in the following clauses (a) and (b) are or will be attached
as Schedule 5.5 hereto: (a) the Baseline Balance Sheet and (b) the Audited
Baseline Balance Sheet. Each of the Financial Statements fairly present in all
material respects as of the date thereof the financial condition of the NAC
Business and have been prepared in accordance with generally accepted accounting
principles (subject, in the case of the Baseline Balance Sheet, to the absence
of footnotes and to year-end audit adjustments);
5.6. Absence of Certain Changes. Except as set forth on Schedule 5.6,
since December 31, 1996 the Seller has carried on the NAC Business only in the
ordinary course, and there has not been with relation to the NAC Business, (a)
any change in the assets, liabilities, sales, income or business of the Seller
or in its relationships with suppliers, customers or lessors, other than changes
which were both in the ordinary course of business and have not been, either in
any case or in the aggregate, materially adverse; (b) any acquisition or
disposition by the Seller of any asset or property other than in the ordinary
course of business; (c) any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting, either in any case or in the
aggregate, the property or business of the Seller; (d) any increase in the
compensation, pension or other benefits payable or to become payable by the
Seller to any of its officers or employees, or any bonus payments or
arrangements made to or with any of them (other than pursuant to the terms of
any existing written agreement or plan of which the Buyer has been supplied
complete and correct copies of); (e) any forgiveness or cancellation of any debt
or claim by the Seller or any waiver of any right of material value other than
compromises of accounts receivable in the ordinary course of business; (f) any
entry by the Seller into any transaction other than in the ordinary course of
business; (g) any incurrence by the Seller of any obligations or liabilities,
whether absolute, accrued, contingent or otherwise (including, without
limitation, liabilities as guarantor or otherwise with respect to obligations of
others), other than obligations and liabilities incurred in the ordinary course
of business; or (h) any mortgage, pledge, lien, lease, security interest or
other charge or encumbrance on any of the assets, tangible or intangible, of the
Seller;
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5.7. Litigation, Etc. Except as set forth on Schedule 5.7 hereto, no
action, suit, proceeding or investigation is pending or, to Seller's knowledge,
threatened, relating to or affecting any of the Acquired Assets or the Seller,
or which questions the validity of the Transaction Documents or challenges any
of the transactions contemplated hereby or thereby, nor, is there any basis for
any such action, suit, proceeding or investigation.
5.8. Conformity to Law. Except as set forth on Schedule 5.8, the Seller
has, in all respects other than those that would not have a material effect on
the NAC Business or the Acquired Assets, complied with, and is in compliance
with (a) all laws, statutes, governmental regulations and all judicial or
administrative tribunal orders, judgments, writs, injunctions, decrees or
similar commands applicable to the Seller or any of the Acquired Assets
(including, without limitation, any labor, environmental, occupational health,
zoning or other law, regulation or ordinance) and (b) all unwaived terms and
provisions of all contracts, agreements and indentures to which the Seller is a
party, or by which the Seller or any of the Acquired Assets is subject. Except
as set forth on Schedule 5.8 hereto, the Seller has not committed, been charged
with, or, to Seller's knowledge, been under investigation with respect to, nor
does there exist, any violation of any provision of any federal, state or local
law or administrative regulation in respect of the Seller or any of the Acquired
Assets.
5.9. Title to Acquired Assets. Except as noted on Schedule 5.9, the
Seller is the lawful owner of and has valid title to all of the Acquired Assets,
and has the full right to sell, convey, transfer, assign and deliver the
Acquired Assets, without the need to obtain the consent or approval of any third
party. Except for liens described on Schedule 5.9 hereto which will be
discharged at Closing, and except for Permitted Encumbrances, all of the
Acquired Assets are entirely free and clear of any security interests, liens,
claims, charges, options, mortgages, debts, leases (or subleases), conditional
sales agreements, title retention agreements, encumbrances of any kind, material
defects as to title or restrictions against the transfer or assignment thereof
(collectively, "Encumbrances"). Except as otherwise disclosed in Schedule
4.2(c), at and as of the Closing, the Seller will convey the Acquired Assets to
the Buyer by deeds, bills of sale, certificates of title and other instruments
of assignment and transfer effective in each case to vest in the Buyer, and the
Buyer will have, valid title to all of the Acquired Assets, free and clear of
all Encumbrances other than Permitted Encumbrances.
5.10. Real Property; Safety, Zoning and Environmental Matters.
(a) Schedule 5.10(a) hereto sets forth a complete and correct
list of all leases pursuant to which the Seller holds any real property utilized
in the NAC Business, identifying each such leased property by address and
approximate size and type of the leased premises. The Seller owns no real
property which is used in the NAC Business.
(b) to Seller's knowledge, except as set forth on Schedule
5.10(b):
(i) neither the Seller nor any operator of any real
property presently or formerly owned, leased or operated by the Seller
is in violation or alleged violation of any judgment, decree, order,
law, license, rule or regulation pertaining to environmental matters,
including without limitation those arising under the Resource
Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980
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as amended ("CERCLA"), the Superfund Amendments and Reauthorization Act
of 1986 ("SARA"), the Federal Water Pollution Control Act, the Solid
Waste Disposal Act, as amended, the Federal Clean Water Act, the
Federal Clean Air Act, the Toxic Substances Control Act, or any
federal, state, local or foreign statute, regulation, ordinance, order
or decree relating to health, safety or the environment (hereinafter
"Environmental Laws");
(ii) the Seller has not received notice from any third
party, including without limitation, any federal, state, local or
foreign governmental authority, (A) that the Seller or any predecessor
in interest has been identified by the United States Environmental
Protection Agency ("EPA") as a potentially responsible party under
CERCLA with respect to a site listed on the National Priorities List,
40 C.F.R. Part 300 Appendix B (1986); (B) that any hazardous waste, as
defined by 42 U.S.C. ss.6903(5), any hazardous substance as defined by
42 U.S.C. ss.9601(14), any pollutant or contaminant as defined by 42
U.S.C. ss.9601(33) or any toxic substance, oil or hazardous material or
other chemical or substance regulated by any Environmental Laws
("Hazardous Substances") which the Seller or any predecessor in
interest has generated, transported or disposed of has been found at
any site at which a federal, state or local agency or other third party
has conducted or has ordered that the Seller or any predecessor in
interest conduct a remedial investigation, removal or other response
action pursuant to any Environmental Law; or (C) that the Seller or any
predecessor in interest is or shall be a named party to any claim,
action, cause of action, complaint, (contingent or otherwise) legal or
administrative proceeding arising out of any third party's incurrence
of costs, expenses, losses or damages of any kind whatsoever in
connection with the release of Hazardous Substances;
(iii) (A) no portion of any real property presently or
formerly owned, leased or operated by the Seller has been used for the
handling, manufacturing, processing, storage or disposal of Hazardous
Substances except in accordance with applicable Environmental Laws; and
no underground tank or other underground storage receptacle for
Hazardous Substances is located on such properties; (B) in the course
of any activities conducted by the Seller or operators of any real
property presently or formerly owned, leased or operated by the Seller,
no Hazardous Substances have been generated or are being used on such
properties except in accordance with applicable Environmental Laws; (C)
all real properties presently or formerly owned, leased or operated by
the Seller are free from contamination of every kind, including without
limitation, groundwater, surface water, soil, sediment and air
contamination, and such properties do not contain asbestos in any form,
urea formaldehyde foam insulation, transformers or other equipment
containing polychlorinated biphenyls or any other chemical, material or
substance, exposure to which is prohibited, limited or regulated by any
Environmental Law, or which poses a hazard to the health and safety of
the occupants of such properties or those adjacent thereto; (D) there
have been no releases (i.e., any past or present releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, disposing or dumping) or threatened releases of Hazardous
Substances on, upon, into or from any real property presently or
formerly owned, leased or operated by the Seller except in accordance
with applicable Environmental Laws; (E) there have been no releases on,
upon, from or into any real property in the vicinity of any real
property presently or formerly owned, leased or operated by the Seller
which, through soil or groundwater contamination, may have come to be
located on such real property; and (F) in addition, any Hazardous
Substances that have been generated on any real property presently or
formerly owned, leased or operated by the Seller have been transported
offsite only by carriers
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having identification numbers issued by the EPA and have been treated
or disposed of only by treatment or disposal facilities maintaining
valid permits as required under applicable Environmental Laws, which
transporters and facilities have been and are, to the best of the
Seller's knowledge, operating in compliance with such permits and
applicable Environmental Laws; and
(iv) no real property presently or formerly owned,
leased or operated by the Seller is or shall be subject to any
applicable environmental cleanup responsibility law or environmental
restrictive transfer law or regulation, by virtue of the transactions
set forth herein and contemplated hereby.
(c) Attached as part of Schedule 5.10(c) is a list of all,
reports and site assessments, in the Seller's possession or to which it has
access, which contain any material information with respect to potential
environmental liabilities associated with any real property presently or
formerly owned, leased or operated by the Seller and relating to compliance with
Environmental Laws or the environmental condition of such properties and
adjacent properties. The Seller has furnished to the Buyer complete and accurate
copies of all of the documents, reports, site assessments, data, communications
and other materials listed on Schedule 5.10(c) hereto.
5.11. Equipment. Schedule 1.1(a) hereto sets forth a complete and
accurate list of all of the Equipment. The Personal Property Leases listed on
Schedule 1.1(a) hereto include all leases by the Seller of any item of personal
property used exclusively in the NAC Business. Schedule 5.11 hereto includes a
list of all leased property otherwise used in the NAC Business. The Equipment,
and all personal property held by the Seller under the Personal Property Leases,
are utilized by the Seller in the ordinary course of business and taken as a
whole, are adequate for their present use in the NAC Business.
5.12. Insurance. Schedule 5.12 hereto lists all policies of fire,
liability, workmen's compensation, life, property and casualty and other
insurance owned or held by the Seller. All such policies (a) are in full force
and effect, (b) are sufficient for compliance by the Seller with all
requirements of law and all agreements to which the Seller is a party and (c)
provide that they will remain in full force and effect through the respective
dates set forth in such Schedule. The Seller is not in default with respect to
its obligations under any of such insurance policies and has not received any
notification of cancellation of any such insurance policies.
5.13. Contracts. Schedule 5.13 sets forth a complete and accurate list
of all contracts relating to the NAC Business to which the Seller is a party or
by which the Seller is bound or to which the Seller or any of the Acquired
Assets is subject and which either a) have an estimated total consideration to
either party with value of $25,000 or more, or b) represent the sole source of
supply for a component or part of any of the products that are part of the NAC
Business or c) include potential manufacturing rights for the products of the
NAC Business. As used in this Section 5.13, the word "contract" means and
includes every agreement or understanding of any kind, written or oral, which is
legally enforceable by or against the Seller and meets the threshold set forth
in the preceding sentence, and specifically includes (a) contracts and other
agreements with any current or former officer, director, employee, consultant or
shareholder or any partnership, corporation, joint venture or any other entity
in which any such person has an interest; (b) agreements with any labor union or
association representing any employee; (c) contracts and other agreements for
the provision of services by the Seller; (d) bonds or other security
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agreements provided by any party in connection with the business of the Seller;
(e) contracts and other agreements for the sale of any of the Seller's assets or
properties other than in the ordinary course of business or for the grant to any
person of any preferential rights to purchase any of the Seller's assets or
properties; (f) joint venture agreements relating to the assets, properties or
business of the Seller or by or to which it or any of its assets or properties
are bound or subject; (g) contracts or other agreements under which the Seller
agrees to indemnify any party, to share tax liability of any party, or to
refrain from competing with any party; (h) any contracts or other agreements
with regard to indebtedness for borrowed money; or (i) any other contract or
other agreement whether or not made in the ordinary course of business. The
Seller has delivered to the Buyer true, correct and complete copies of all such
contracts, together with all modifications and supplements thereto. Each of the
contracts listed on Schedule 5.13 hereto or any of the other Schedules hereto is
in full force and effect, the Seller is not in breach of any of the provisions
of any such contract, nor, to the knowledge of the Seller, is any other party to
any such contract in default thereunder, nor does any event or condition exist
which with notice or the passage of time or both would constitute a default
thereunder. The Seller has in all material respects performed all obligations
required to be performed by it to date under each such contract. Subject to
obtaining any necessary consents by the other party or parties to any such
contract (the requirement of any such consent being reflected on Schedule 5.13),
no contract includes any provision the effect of which may be to enlarge or
accelerate any obligations of the Buyer to be assumed thereunder or give
additional rights to any other party thereto or will in any other way be
affected by, or terminate or lapse by reason of, the transactions contemplated
by this Agreement.
5.14. Inventories. Since counting its inventory for preparation of the
Audited Baseline Balance Sheet, Seller has maintained its inventory in the
ordinary course of business consistent with past practices.
5.15. Accounts Receivable. All Accounts Receivable represent sales made
in the ordinary course of business, are valid obligations owing to the Seller
and have been collected or are collectible in the aggregate recorded amounts
thereof in accordance with their terms.
5.16. Compensation of and Contracts with Employees. Schedule 5.16
hereto sets forth a complete and accurate list of (a) each employee of the
Seller who has been identified as being part of the NAC Business and who will be
offered employment by the Buyer after this transaction, ("NAC Employees") and
the rate, character and amount of the compensation paid to such employee for the
fiscal year ended December 31, 1996, and (b) the rate, character and amount of
such compensation paid to each such employee through the Closing Date. There
have been no changes in such compensation since such date. Except as listed in
Schedule 1.1(c) hereto, the Seller has no employment agreement, written or oral,
with any currently active NAC Employee, including any agreement to provide any
bonus or benefit to any such employee. Except as set forth on Schedule 5.16,
since December 31, 1996, the Seller has not made any pension, bonus or other
payment, other than base salary, or become obligated to make any such payment,
to any NAC Employee. Except as set forth on Schedule 5.16, the Seller has no
outstanding loans or advances to NAC Employees.
5.17 Employee Benefit Plans.
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(a) Identification of Plans. Except for the arrangements set
forth on Schedule 5.17(a) (each an "Employee Benefit Plan"), Seller does not
maintain or contribute to any pension, profit-sharing, deferred compensation,
bonus, stock option, share appreciation right, severance, group or individual
health, dental, medical, life insurance, survivor benefit, or similar plan,
policy or arrangement, whether formal or informal, written or oral, for the
benefit of any NAC Employee (as defined in Section 5.17. Seller has heretofore
delivered to Buyer true, correct and complete copies of each Employee Benefit
Plan.
(b) Compliance with Terms and Law. Each Employee Benefit Plan
which is intended to qualify under Section 401(k) of the Code has been
determined to be so qualified by the Internal Revenue Service, nothing has
occurred since the date of the last such determination as to each which has
resulted or is likely to result in the revocation of such determination, and
each such Plan is and has heretofore been maintained and operated in compliance
in all material respects with the terms of such Plan and with the requirements
prescribed (whether as a matter of substantive law or as necessary to secure
favorable tax treatment) by any and all statutes, governmental or court orders,
or governmental rules or regulations in effect from time to time, including but
not limited to the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and the Internal Revenue Code of 1986, as amended ("Code").
(c) Absence of Certain Events and Arrangements. Except as set
forth on Schedule 5.17(c)
(1) no liability (contingent or otherwise) to the
Pension Benefit Guaranty Corporation ("PBGC") or
any multi-employer plan has been incurred by the
Seller or any affiliate thereof (other than
insurance premiums satisfied in due course); and
(2) no reportable event, or event or condition which
presents a material risk of termination by the
PBGC, has occurred with respect to any Employee
Benefit Plan, or any retirement plan of an
affiliate of the Seller, which is subject to
Title IV of ERISA.
(d) Definitions. For purposes of this Section 5.17,
"multi-employer plan" and "reportable event" have the same meaning assigned such
terms under Sections 3 or 4043(b) of ERISA, and "affiliate" means any entity
which under Section 414 of the Code is treated as a single employer with Seller.
5.18. Labor Relations. Except as set forth on Schedule 5.18, the Seller
is in compliance in all material respects with all federal and state laws
respecting employment and employment practices, terms and conditions of
employment, wages and hours and nondiscrimination in employment, and is not
engaged in any unfair labor practice. Except as set forth on Schedule 5.18,
there is no charge pending or, to Seller's knowledge, threatened against the
Seller alleging unlawful discrimination in employment practices before any court
or agency and there is no charge of or proceeding with regard to
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any unfair labor practice against the Seller pending before the National Labor
Relations Board. There is no labor strike, dispute, slow-down or work stoppage
actually pending or, to Seller's knowledge, threatened against or involving the
Seller. Except as set forth on Schedule 5.18, no one has petitioned within the
last three (3) years, and no one is now petitioning, for union representation of
any of the Seller's employees. Except as set forth on Schedule 5.18 hereto, no
grievance or arbitration proceeding arising out of or under any collective
bargaining agreement is pending against the Seller and no claim therefor has
been asserted. Except as described on Schedule 5.18 hereto, none of the
employees of the Seller is covered by any collective bargaining agreement, and
no collective bargaining agreement is currently being negotiated by the Seller.
Except as fully described on Schedule 5.18 hereto, the Seller has not
experienced any work stoppage during the last five years.
5.19 Trademarks, Patents, Etc. (a) Schedule 5.19(a) hereto sets forth a
complete and accurate list of (i) all patents, trademarks, trade names and
material copyrights owned by and registered in the name of the Seller, used by
the Seller in connection with the NAC Business, all applications therefor, and
all written licenses and other agreements relating thereto, and (ii) all written
agreements relating to Intellectual Property (as defined in Article 14) which
the Seller has licensed or authorized for use by others or which has been
licensed or authorized for use to the Seller in connection with the NAC
Business. Each of the agreements described on Schedule 5.19(a) is binding on the
Seller, and to the best of the Seller's knowledge, each other party to the
agreement and, at least as to Seller's rights to use any intellectual property
licensed by such agreement, any successors and assigns, including any successors
to the business of such entity through merger, sale of all or substantially all
of the stock, assets or other interest in or of such party. All of the Seller's
rights under such agreements are freely assignable, subject to obtaining the
consents listed in Schedule 4.2(c). True and complete copies of all such
agreements, and any amendments thereto, have been provided to the Buyer. All of
the Seller's patents, patent applications and registered copyrights have been
duly registered in, filed in or issued by the United States Patent and Trademark
Office, the United States Register of Copyrights, or the corresponding offices
of other jurisdictions as identified on Schedule 5.19(a) and have been properly
maintained and renewed in accordance with all applicable provisions of law and
administrative regulations of the United States and each such other
jurisdiction.
(b) Except to the extent set forth in Schedule 5. 19(b)
hereto, the Seller owns or has the sole and exclusive right to use all
Intellectual Property used or necessary for the ordinary course of the NAC
Business as presently conducted, and the consummation of the transactions
contemplated hereby will not alter or impair any such right. Schedule 5.19(b)
also lists all inventions (whether patentable or nonpatentable) and trade
secrets used by the Seller in connection with or necessary to the development,
manufacture, testing, production, use or sale of its current or proposed
products in the NAC Business, and for each such listed invention or trade secret
also lists the name and title of the person or persons responsible for the
creation of such invention or trade secret. Except as set forth in Schedule
5.19(b), (i) no royalties are paid or payable by the Seller on or with respect
to any of the patents or patent applications, inventions or trade secrets listed
in Schedule 5.19(b), and upon the consummation of the transactions contemplated
hereby, no additional royalties shall be payable with respect to such
Intellectual Property, and (ii) each of the inventions and trade secrets listed
in Schedule 5.19(b) hereto have, through assignment, agreement, operation of law
or otherwise, become the sole property of the Seller.
(c) Except as set forth in Schedule 5.19(c) hereto, neither
the Seller, nor to the Seller's knowledge, the other party or parties thereto,
is in material breach of any license, sublicense or other agreement relating to
Intellectual Property. The Seller has materially complied with all of its
obligations of
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confidentiality in respect of the Intellectual Property of others and knows of
no violation of such obligations of confidentiality as are owed to the Seller.
Except as set forth in Schedule 5.19(c), the Seller has required all of its
employees to execute agreements under which such employees are required to
convey to the Seller ownership of all inventions conceived or created by them in
the course of their employment with Seller and to maintain the confidentiality
of all of the Seller's non-public information. The Seller has not disclosed any
material trade secret information to any person other than employees of the
Seller except pursuant to written agreements requiring the recipients to
maintain the confidentiality of such information and appropriately restricting
the use thereof. To the best of the Seller's knowledge, no employee, agent or
consultant of the Seller is subject to confidentiality restrictions in favor of
any third Person the breach of which could subject the Seller to any material
liability or which could adversely affect the Seller's access to Intellectual
Property previously used by it. No claims have been asserted to Seller, and to
the Seller's knowledge no claims are pending, by any Person regarding the
manufacture, use or sale of any such Intellectual Property, or challenging or
questioning the validity or effectiveness of any license or agreement relating
to Intellectual Property, and to the Seller's knowledge there is no basis for
such claim. The present and contemplated use by the Seller of the Intellectual
Property listed in any part of Schedule 5.19(c) does not, to the best of the
Seller's knowledge, conflict with or infringe on the rights of any person and
the Seller has not received any claim or written notice from any Person to such
effect. To the knowledge of the Seller, no third party is infringing, violating
or otherwise using, in an unauthorized manner, any Intellectual Property of the
Seller used in the NAC Business.
(d) Except as set forth on Schedule 5.19(d), the Buyer's
ability to use any of the Intellectual Property set forth on any of the
schedules referred to in this Section 5.19(d) in the same manner as heretofore
used by the Seller will not be adversely affected by the consummation of the
transactions contemplated hereby.
5.20. Suppliers and Customers. Schedule 5.20 hereto sets forth the ten
(10) largest suppliers and ten (10) largest customers of the NAC Business as of
the date hereof. The relationships of the Seller with such suppliers and
customers are good commercial working relationships and, except as set forth on
Schedule 5.20,, no supplier or customer of material importance to the NAC
Business has canceled or otherwise terminated, or threatened to cancel or
otherwise to terminate, its relationship with the Seller or has during the last
twelve (12) months decreased materially, or threatened to decrease or limit
materially, its services, supplies or materials for use in the NAC Business or
its usage or purchase of the services or products of the Seller except for
normal cyclical changes related to customers' businesses. Except as set forth on
Schedule 5.20 hereto, since January 1, 1995, the Seller has not at any time been
placed on C.O.D. terms by any supplier, and it currently is not on C.O.D. terms
with any supplier in relation to the NAC Business. Attached as part of Schedule
5.20 are schedules that accurately present the amount and aging of the Seller's
accounts receivable and accounts payable at December 31, 1996 relating to the
NAC Business, as reflected in the Audited Baseline Balance Sheet. Seller has no
knowledge that any such ten-largest supplier or customer intends to cancel or
otherwise substantially modify its relationship with the Seller or to decrease
materially or limit its services, supplies or materials to the Seller, or its
usage or purchase of the Seller's services or products, and to the knowledge of
Seller, the communication of the transactions contemplated hereby will not
adversely affect the relationship of the Buyer with any such supplier or
customer.
5.21. Acquired Assets Complete. The Acquired Assets, when utilized with
a labor force substantially similar to that currently employed by the Seller and
generic equipment and supplies
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commonly used in a business and space similar to
that currently being occupied by the Seller are adequate and sufficient to
conduct the NAC Business as currently conducted by the Seller.
5.22. No Undisclosed Liabilities. Except to the extent (a) reflected or
reserved against in the Baseline Balance Sheet and the notes thereto, (b)
incurred in the ordinary course of business after the date of the Baseline
Balance Sheet and either discharged prior to Closing or described on Schedule
5.22 hereto or (c) described on any Schedule hereto, the Seller has no material
liabilities or obligations of any nature with regard to the NAC Business or the
Acquired Assets, whether accrued, absolute, contingent or otherwise (including
without limitation as guarantor or otherwise with respect to obligations of
others), other than performance obligations with respect to the Seller's
contracts that would not be required to be reflected or reserved against on a
balance sheet prepared in accordance with GAAP or in the footnotes thereto.
5.23. Tax Returns. The Seller has filed all tax returns and reports
which are required to be filed with any foreign, federal, state or local
governmental authority or agency, and has paid, or made adequate provision for
the payment of, all assessments received and all taxes which have or may become
due under applicable foreign, federal, state or local governmental law or
regulations with respect to all periods prior to the Closing Date. Seller knows
of no additional assessments since the date of such returns and reports.
5.24. Disclosure. No representation or warranty by the Seller in this
Agreement or in any exhibit, schedule, written statement, certificate or other
document delivered or to be delivered to the Buyer pursuant hereto or in
connection with the consummation of the transactions contemplated hereby
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact required to be stated therein or necessary to
make the statements contained therein not misleading or necessary in order to
provide the Buyer with proper and complete information as to the Seller and the
identity, value and usability of the Acquired Assets.
5.25. Investment Representations. The Seller is acquiring the Purchase
Shares for the purpose of investment and not with a view to distribution or
resale thereof. The Seller shall enter into a lock-up arrangement as part of the
Registration Rights Agreement referred to in Section 9.9, prohibiting Seller
from selling, transferring or otherwise disposing of the Purchase Shares for a
period of 30 days from the Closing or until a registration statement registering
the Purchase Shares, as contemplated by the Registration Rights Agreement, is
effective, whichever is later. The Seller further represents that it has been
furnished with copies of Buyers Annual Report on Form 10K for the year ended
December 31, 1995 and quarterly reports for the periods ending March 31, 1996,
June 30, 1996 and September 30, 1996, that it has read these documents and that
it has been afforded an opportunity to ask questions of and receive answers from
representatives of Buyer concerning the business and prospects of Buyer and the
purchase of the Purchase Shares pursuant to this Agreement. The Seller further
represents that it understands and agrees that, in addition to any legends
required pursuant to the terms of the Registration Rights Agreement referred to
in Section 9.9, until registered under the Securities Act of 1933, as amended,
or transferred pursuant to the provisions of Rule 144 thereunder, or any similar
provision as promulgated by the Securities and Exchange Commission, all
certificates evidencing any of the Purchase Shares, whether upon initial
issuance or upon any transfer thereof, shall bear a legend, prominently stamped
or printed thereon, reading substantially as follows:
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"The securities represented hereby have not been registered under the
Securities Act of 1933 or applicable state securities laws. These
securities have been acquired for investment and not with a view to
distribution or resale, and may not be mortgaged, pledged, hypothecated
or otherwise transferred without an effective registration statement
for such securities under the Securities Act of 1933 or applicable
state securities laws, or an opinion of counsel reasonably satisfactory
to the Issuer that registration is not required under such Act or
applicable state securities laws."
5.26. Broker. The Seller has not retained, utilized or been represented
by any broker, agent, finder or intermediary in connection with the negotiation
or consummation of the transactions contemplated by this Agreement, except for
Montgomery Securities, Inc. ("Montgomery"). Seller shall be solely responsible
for any payments to Montgomery, and shall indemnify Buyer from and against any
and all liability to or claims by Montgomery or any other broker, agent, finder
or intermediary claiming to act for or on behalf of the Seller.
Article 6
Representations And Warranties Of The Buyer
The Buyer represents and warrants to the Seller as follows:
6.1. Organization of Buyer; Authority. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Buyer has all requisite power and authority to execute and deliver
the Transaction Documents to which it is a party and to carry out all of the
actions required of it pursuant to the terms of such Transaction Documents.
6.2. Corporate Approval; Binding Effect. The Buyer has obtained all
necessary authorizations and approvals from its Board of Directors, and, if
necessary, stockholders, required for the execution and delivery of the
Transaction Documents to which it is a party and the consummation of the
transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by the Buyer and constitutes, and when the Escrow
Agreement, Registration Rights Agreement, and Software and Technology License
Agreement are executed and delivered by the Buyer, they will constitute, the
legal, valid and binding obligation of the Buyer, enforceable against the Buyer,
in accordance with their terms, except as enforceability thereof may be limited
by any applicable bankruptcy, reorganization, insolvency or other laws affecting
creditors' rights generally or by general principles of equity.
6.3. Non-Contravention. The execution and delivery by the Buyer of the
Transaction Documents to which it is a party and the consummation by the Buyer
of the transactions contemplated hereby and thereby will not (a) violate or
conflict with any provisions of the Certificate of Incorporation or By-Laws of
the Buyer, each as amended to date; or (b) constitute a violation of, or be in
conflict with, constitute or create a default under, or result in the creation
or imposition of any lien upon any property of the Buyer pursuant to (i) any
agreement or instrument to which the Buyer is a party or by which the Buyer or
any of its properties is bound or to which the Buyer or any of its properties is
subject, or (ii) any statute, judgment, decree, order, regulation or rule of any
court or governmental authority to which the Buyer is subject.
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6.4. Governmental Consents. Except as set forth in Schedule 6.4 hereto,
no consent, approval or authorization of, or registration, qualification or
filing with, any governmental agency or authority is required for the execution
and delivery by the Buyer of the Transaction Documents to which it is a party or
for the consummation by the Buyer of the transactions contemplated hereby or
thereby.
6.5. Issuance of Shares. Buyer has obtained all necessary
authorizations and approvals required for the issuance and delivery of the
Purchase Shares. When issued in accordance with the terms of this Agreement, the
Shares will be duly authorized, validly issued, fully paid and nonassessable.
6.6. Broker. The Buyer has not retained, utilized or been represented
by any broker, agent, finder or other intermediary in connection with the
negotiation or consummation of the transactions contemplated by this Agreement
except for Alex. Brown & Sons. ("Alex. Brown"). Buyer shall be solely
responsible for any payments to Alex Brown, and shall indemnify Seller from and
against any and all liability to or claims by Alex. Brown or any other broker,
agent, finder or intermediary claiming to act for or on behalf of the Buyer. .
6.7. Disclosure. The information regarding the Buyer contained in
Buyer's Annual Report on Form 10K for the year ended December 31, 1995 and
Quarterly Reports on Form 10Q for the periods ended March 31, 1996, June 30,
1996 and September 30, 1996, and its press release of January 15, 1997
announcing its fourth quarter financial results is true and correct in all
material respects, and the financial statements contained in such reports fairly
present the financial position and the results of operations of the Buyer
(subject, other than in the case of the Annual Report on Form 10K, to the
absence of footnotes and year-end audit adjustments), with respect to all of the
foregoing as of the respective dates of such reports and for the periods then
ended. Buyer has filed all reports and statements required to be filed by Buyer
with any governmental agency other than those filings which, the failure to file
would not have a material adverse effect on the Buyer. The substantive material
disclosed in such reports contained as of the date thereof all the material
disclosures required by the filing requirement. No representation or warranty by
the Buyer in this Agreement or in any certificate or other written statement
delivered or to be delivered to the Seller pursuant to the provisions of this
Agreement contains or will contain any untrue statement of a material fact (as
of the date of any such report or other written disclosure) or omits or will
omit to state a material fact required to be stated therein or necessary to make
the statements contained therein not misleading.
Article 7
Conduct Of Business By Seller Pending Closing
Seller covenants and agrees that, from and after the date of this
Agreement and until the Closing, except as otherwise specifically consented to
or approved by the Buyer in writing:
7.1. Full Access. The Seller shall afford to the Buyer and its
authorized representatives full access during normal business hours to all
properties, books, records, contracts and documents of the
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Seller and a full opportunity to make such reasonable investigations as they
shall desire to make of the Seller or with respect to the Acquired Assets, and
the Seller shall furnish or cause to be furnished to the Buyer and its
authorized representatives all such information with respect to the affairs and
businesses of the Seller and with respect to the Acquired Assets as the Buyer
may reasonably request.
7.2. Carry on in Regular Course. The Seller shall maintain the Acquired
Assets in their present condition, reasonable wear and tear excepted, and shall
carry on its the NAC Business diligently and substantially in the same manner as
heretofore and shall not make or institute any unusual or novel methods of
manufacture, purchase, sale, lease, management, accounting or operation.
7.3. No General Increases. The Seller shall not grant any general or
uniform increase in the rates of pay of NAC Employees , nor grant any general or
uniform increase in the benefits under any bonus or pension plan or other
contract or commitment to, for or with any such employees; and the Seller shall
not increase the compensation payable or to become payable to officers, key
salaried employees or agents, involved with the NAC Business, or increase any
bonus, insurance, pension or other benefit plan, payment or arrangement made to,
for or with any such officers, key salaried employees or agents.
7.4. Contracts and Commitments. The Seller shall not, with relation to
the NAC Business, enter into any contract or commitment or engage in any
transaction not in the usual and ordinary course of business and consistent with
the business practices of the Seller.
7.5. Purchase and Sale of Capital Assets. Other than pursuant to this
Agreement, the Seller shall not purchase or sell or otherwise dispose of any
capital asset related to the NAC Business, nor any other assets relating to the
NAC Business outside of the ordinary course of business.
7.6. Insurance. The Seller shall, with relation to the NAC Business,
maintain the same insurance as is presently in effect regarding the NAC
Business, and shall not permit any default to occur in such policies.
7.7. Preservation of Organization. The Seller shall, with relation to
the NAC Business, use reasonable commercial efforts to preserve its business
organization intact, to keep available to the Buyer the present NAC Employees
and to preserve for the Buyer the present relationships of the Seller's
suppliers and customers and others having business relations with the Seller.
7.8. No Default. The Seller shall, with relation to the NAC Business,
not do any act or omit to do any act, or permit any act or omission to act,
which will cause a breach of any contract, commitment or obligation of the
Seller, including without limitation any of the Personal Property Leases,
Employee Agreements or Other Contracts which could have a material adverse
affect on the NAC Business or the Acquired Assets.
7.9. Compliance with Laws. The Seller shall comply with all laws,
regulations and orders applicable with respect to the Seller or the Acquired
Assets to the extent that any noncompliance could have a material adverse affect
on the Acquired Assets or the NAC Business, and with all laws, regulations and
orders as may be required for the valid and effective transfer of the Acquired
Assets.
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7.10. Advice of Change. The Seller will promptly advise the Buyer in
writing of any adverse change in the condition of any of the Acquired Assets or
the NAC Business which could have a material adverse affect on the NAC Business
or the Acquired Assets.
7.11. No Shopping, Etc. The Seller shall not negotiate for, solicit,
disclose any confidential information, or enter into any agreement with respect
to the sale of the NAC Business or any substantial portion of the Acquired
Assets, or any merger or other business combination of the Seller, to or with
any entity other than the Buyer.
7.12. Consents of Stockholders' and Third Parties. The Seller will
employ its best efforts to secure, before the Closing Date, the consent, in form
and substance satisfactory to the Buyer and the Buyer's counsel, to the
consummation of the transactions contemplated by this Agreement by the
stockholders of the Seller and each party to any of the Personal Property
Leases, Employee Agreements, Other Contracts and Permits (except as disclosed in
Schedule 7.12) under which such transactions would constitute a default, would
accelerate obligations of the Seller or would permit cancellation of any such
contract.
7.13 Satisfaction of Conditions Precedent. The Seller will use its best
efforts to cause the satisfaction of the conditions precedent contained herein.
Article 8
Certain Transitional Matters
8.1. Buyer and Seller shall reasonably cooperate with one another
during the period following the Closing, to assure an orderly transition of the
NAC Business from Seller to Buyer. Each party shall provide such consultation,
primarily by telephone, to assist the other in the transition and in divesting
the Seller from and establishing Buyer in the NAC Business.
8.2. Certain Funding.
(a) The Buyer agrees to reimburse the Seller $19,100.00 for
accounting expenses incurred during the period from
January 10, 1997 to the Closing, for the incremental
expense incurred by Seller in having a separate audit
conducted of the NAC Business, beyond the year-end audit
of Seller's entire business.
(b) The Seller agrees to reimburse the Buyer for one-half of
the cost of the filing fee for the filing in respect of
this transaction under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, as amended.
(c) The Buyer and Seller shall each pay the amounts provided
for above in Paragraphs (a) and (b) at the Closing, or, if
this Agreement should terminate prior to Closing, within
five days of such Termination.
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(d) The Buyer shall pay the costs of obtaining any consents
needed to transfer the agreements listed on Schedule 5.3
to Buyer, or to obtain new agreements for such purposes,
to a maximum of $150.000.00. Should the expected costs of
obtaining such consents or new agreements (which, for
MicroTec shall be deemed to be $7,500.00 per year for
three years) exceed $150,000.00, then Buyer and Seller
shall each bear fifty percent of the costs in excess of
$150,000.00.
8.3 Employment Offers Buyer shall offer employment (as an employee at
will) to all of the persons listed in Schedule 5.16, with a salary equal to or
better than each such person's present salary with Seller, with other terms and
conditions of employment being Buyer's standard terms of employment. Buyer shall
recognize, for each employee so hired, his/her accrued vacation, as carried on
the books of Seller at Closing and reflected in the Final Closing Balance Sheet.
Prior to the Closing Seller shall encourage all employees listed on Schedule
5.16 to accept Buyer's employment offer. In addition, Seller shall not offer
continuing employment after the Closing nor shall Seller employ any such person,
as an employee, consultant or otherwise, during the period dating for one year
after the Closing. All employees accepting employment with Buyer shall be fully
vested in the employer match portion of their 401k account by Seller before such
employment change.
Article 9
Conditions Precedent To Buyer's Obligations
The obligation of the Buyer to consummate the Closing shall be subject
to the satisfaction at or prior to the Closing of each of the following
conditions (to the extent noncompliance is not waived in writing by the Buyer):
9.1. Representations and Warranties True at Closing. The
representations made by the Seller in or pursuant to this Agreement shall be
true and correct in all material respects at and as of the Closing Date with the
same effect as though such representations and warranties had been made or given
at and as of the Closing Date; provided, however, that, notwithstanding any
other provision of this Agreement, for purposes of the condition set forth in
this Section 9.1, all the prior representations and warranties the truth and
correctness of which are reaffirmed shall be read as if all materiality
qualifications contained therein had been deleted in their entirety. The Seller
reserves the right to modify any of the Seller's schedules referred to in this
Agreement prior to the Closing Date and any such modified schedule shall be
deemed substituted for the corresponding schedule as originally delivered by the
Seller pursuant to this Agreement for the purpose of the truth and correctness
of the Seller's representations and warranties as of the Closing Date and the
survival of the Seller's representations and warranties after the Closing
pursuant to Section 15.1 hereof; provided, however, that the Seller's right so
to modify its schedules prior to the Closing shall in no way prejudice either
(i) any Working Capital adjustments pursuant to Section 2.3 hereof in connection
with the matters occasioning the schedule modifications, or (ii) the Buyer's
right, in Buyer's sole election, not to consummate the Closing upon failure of
the Seller to satisfy (without regard to such modifications) the conditions
precedent set forth in this Article 9.
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9.2. Compliance with Agreement. the Seller shall have performed and
complied with, in all material respects, all of its obligations under this
Agreement to be performed or complied with by it on or prior to the Closing
Date.
9.3. No Change. The business, assets or properties of the Seller and
the Acquired Assets shall not have been, and shall not be threatened to be,
adversely affected in any way as a result of fire, explosion, earthquake,
disaster, labor trouble or dispute, change in business organization, any action
by the United States or any other governmental authority, change in technology,
obsolescence of product, flood, drought, embargo, riot, civil disturbance,
uprising, activity of armed forces or act of God or public enemy. Except as
disclosed in any of the Schedules hereto, since January 1, 1997, there shall not
have occurred any material adverse change in the condition (financial or
otherwise), operations, business, prospects or assets of the Seller or
imposition of any laws, rules or regulations which would materially adversely
affect the condition (financial or otherwise), operations, business, prospects
or assets of the Seller.
9.4. Seller's Certificate. The Seller shall have delivered to the Buyer
in writing, at and as of the Closing, a certificate duly executed by the Seller,
in form and substance satisfactory to the Buyer and the Buyer's counsel,
certifying that the conditions in each of Section 9.1, 9.2 and 9.3 have been
satisfied.
9.5. Approvals. All corporate, stockholder and other approvals in
connection with the transactions contemplated by this Agreement and the form and
substance of all certificates and other documents delivered hereunder shall be
reasonably satisfactory in form and substance to the Buyer and its counsel.
9.6. No Litigation. No restraining order or injunction shall prevent
the transactions contemplated by this Agreement and no action, suit or
proceeding shall be pending or threatened before any court or administrative
body in which it will be or is sought to restrain or prohibit or obtain damages
or other relief in connection with this Agreement or the consummation of the
transactions contemplated hereby.
9.7. Opinion. Kirkpatrick and Lockhart, LLP and Hinckley Allen &
Snyder, each counsel to the Seller, shall have delivered to the Buyer legal
opinions in the forms of Exhibits C1 hereto for Kirkpatrick and Lockhart LLP and
in a form to be agreed before Closing for Hinckley Allen & Snyder.
9.8. Employment Agreement. Substantially all of the persons listed in
Schedule 5.16 and all of the persons listed in Schedule 5.16 as "essential"
shall have accepted Buyer's offer of employment with Buyer. The Seller shall use
its best efforts to cause such persons to accept employment with Buyer. .
9.9. Registration Rights and Lock-up Agreement. The Seller and the
Buyer shall have entered into a Registration Rights Agreement in the form of
Exhibit D hereto (the "Registration Rights and Lock-up Agreement"), and the
Registration Rights and Lock-up Agreement shall be in full force and effect.
9.10. Escrow Agreement. The Seller shall have entered into the Escrow
Agreement, and the Escrow Agreement shall be in full force and effect.
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9.11. Releases From Creditors. The Buyer shall have received all lien
discharges, UCC termination statements and similar instruments required to
comply with the Seller's obligations under Section 4.2(a).
9.12. Consents of Third Parties. The Seller will have obtained the
consent, in form and substance reasonably satisfactory to the Buyer and the
Buyer's counsel, to the consummation of the transactions contemplated by this
Agreement by each party to any of the Personal Property Leases, Employee
Agreements, Other Contracts and Permits (except as disclosed in Schedule 9.13)
under which such transactions would constitute a default, would accelerate
obligations of the Seller or the Buyer or would permit cancellation of any such
contract.
9.13 Proceedings and Documents Satisfactory. All proceedings in
connection with the transactions contemplated by this Agreement and all
certificates and documents delivered to the Buyer in connection with the
transactions contemplated by this Agreement shall be satisfactory in all
reasonable respects to the Buyer and the Buyer's counsel, and the Buyer shall
have received the originals or certified or other copies of all such records and
documents as the Buyer may reasonably request.
9.14 Non Competition. The Seller shall have obtained from each of the
individuals referred to in Section 11.2, an executed agreement implementing that
individual's obligation described in that Section in the form attached hereto as
Exhibit A .
9.15 Parent Guarantee The Seller shall have obtained from its parent
corporation, GTI, a guarantee of Seller's indemnification obligations under the
first sentence of Paragraph 5.9 and clause (vi) of Section 12.1in the form
attached hereto as Exhibit G.
9.16 No Restraining Order; Hart-Scott-Rodino. No restraining order or
injunction shall prevent the transactions contemplated by this Agreement nor
shall the Federal Trade Commission or the Department of Justice have issued any
notice of delay or unfulfilled request for additional information under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and all waiting
periods thereunder shall have expired.
9.17 Stockholders Approval. All requisite approvals shall have been
obtained from the stockholders of the Seller to the consummation of the
transactions contemplated by this Agreement, and Buyer shall have received
appropriate evidence of such approvals.
Article 10
Conditions Precedent To Seller's Obligations
The obligation of the Seller to consummate the Closing shall be subject
to the satisfaction, at or prior to the Closing, of each of the following
conditions (to the extent noncompliance is not waived in writing by the Seller):
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10.1. Representations and Warranties True at Closing. The
representations and warranties made by the Buyer in this Agreement shall be true
and correct at and as of the Closing Date with the same effect as though such
representations and warranties had been made or given at and as of the Closing
Date.
10.2. Compliance with Agreement. The Buyer shall have performed and
complied with, in all material respects, all of its obligations under this
Agreement that are to be performed or complied with by it at or prior to the
Closing.
10.3. Closing Certificate. The Buyer shall have delivered to the Seller
in writing, at and as of the Closing, a certificate duly executed by each of the
President and Treasurer of the Buyer, in form and substance satisfactory to the
Seller and the Seller's counsel, to the effect that the conditions in each of
Sections 10.1 and 10.2 have been satisfied.
10.4. No Litigation. No restraining order or injunction shall prevent
the transactions contemplated by this Agreement and no action, suit or
proceeding shall be pending or threatened before any court or administrative
body in which it will be or is sought to restrain or prohibit or obtain damages
or other relief in connection with this Agreement or the consummation of the
transactions contemplated hereby.
10.5. Registration Rights and Lock-up Agreement. The Buyer shall have
executed and delivered the Registration Rights and Lock-up Agreement and the
Registration Rights and Lock-up Agreement shall be in full force and effect.
10.6. Escrow Agreement. The Buyer shall have entered into the Escrow
Agreement, and the Escrow Agreement shall be in full force and effect.
10.7. License Agreement The Buyer shall have entered into the
Software and Technology License Agreement attached hereto as Exhibit F
10.9. Opinion. Bingham, Dana & Gould LLP, counsel to the Buyer and
shall have delivered to the Seller a legal opinion in the form of Exhibit E
hereto.
10.10. Proceedings and Documents Satisfactory. All proceedings in
connection with the transactions contemplated by this Agreement and all
certificates and documents delivered to the Seller in connection with the
transactions contemplated by this Agreement shall be satisfactory in all
reasonable respects to the Seller and its counsel, and the Seller shall have
received the originals or certified or other copies of all such records and
documents as the Seller may reasonably request.
10.11 No Restraining Order; Hart-Scott-Rodino. No restraining order or
injunction shall prevent the transactions contemplated by this Agreement nor
shall the Federal Trade Commission or the Department of Justice have issued any
notice of delay or unfulfilled request for additional information under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and all waiting
periods thereunder shall have expired.
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10.12 Stockholders Approval. All requisite approvals shall have been
obtained from the stockholders of the Seller to the consummation of the
transactions contemplated by this Agreement.
Article 11
Certain Covenants
11.1. Confidential Information. Any and all information disclosed by
the Buyer to the Seller or by the Seller to the Buyer as a result of the
negotiations leading to the execution of this Agreement, or in furtherance
thereof, shall be subject to the Mutual Non-Disclosure Agreement, dated as of
March 25, 1997 (the "Non-Disclosure Agreement") between Buyer and the Seller.
11.2. Noncompetition.
(a) Each of the Seller and each of Mssrs. Al Lucci and Paul
Fredette, agrees for itself and its successors, that for a period of three years
with respect to any business entity, and two years, with respect to any
individual, after the Closing Date (the "Restricted Period"), such person or
entity shall not engage directly or indirectly in competition with the NAC
Business nor in the multipoint video conferencing server products business in
any manner substantially different than it does currently with its Systems
Products, whether individually or otherwise, including but not limited to as a
consultant, employee, joint venturer, partner, officer, director, owner or
equityholder or stockholder owning more than five percent (5%) of any class of
any business entity engaged in any business competitive with the NAC Business or
engaged in the multipoint videoconferencing server products business (in any
manner substantially different than Promptus does currently with its Systems
Products). Seller covenants that it shall obtain as part of any transaction
selling, distributing or otherwise disposing of any assets of Seller to, or
merging or consolidating Seller with or into its parent corporation, GTI, or any
other affiliate or stockholder of Seller, a covenant substantially similar to
this covenant, prohibiting such party from utilizing the assets of the Seller to
compete in the NAC Business or to engage in the multipoint videoconferencing
server products business (in any manner substantially different than Promptus
does currently with its Systems Products). Notwithstanding the foregoing, Seller
and the individuals referred to above shall be entitled to conduct the Systems
Business through manufacture, marketing, sales and distribution of its Systems
Products, and to design and build network access cards for use solely in
Seller's Systems Products (including spare and repair parts thereto) as provided
in the Software and Technology License Agreement. In addition to the foregoing,
at no time in the future will the Seller, or any person or entity referred to
above, represent to any person or entity that the Seller, or that person or
entity, still owns or operates the Seller's NAC Business or is the successor in
interest of the Seller's NAC Business. During the two year period with respect
to each individual referred to above, each such individual agrees that he shall
not divert or seek to divert any or all of the business of any customer of the
NAC Business to a competitor (including Seller.)
(b) It is recognized by the parties hereto that damages for
breaches of covenants of the nature contained in this Section 11.2(b) are
difficult if not impossible precisely to prove; therefore, it is agreed that
this Agreement not to compete shall be enforceable by mandatory injunction, in
addition to any other remedy available to the Buyer under this agreement or at
law or equity. If any of the restrictions contained in this Section 11.2 shall
be deemed to be unenforceable by reason of the extent,
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duration or geographical scope or other provision hereof, then the parties
hereto contemplate that the court shall reduce such extent, duration,
geographical scope or other provision hereof and enforce this Section 11.2 in
its reduced form for all purposes in the manner contemplated hereby.
11.3 For the period beginning upon the Closing and extending for two
years after, each party agrees to not solicit for or offer employment to any
employee of the other party, without the other party's prior written consent,
which shall not be unreasonably withheld. The preceding sentence shall not
prohibit either party from employing any person who has been terminated by the
other party, nor shall it prohibit Seller from employing any person who resigns
from Buyer because Buyer has requested that such person relocate more than 50
miles from their present work location.
Article 12
Indemnification
12.1. Indemnity by the Seller. The Seller agrees to indemnify and hold
the Buyer, VSVR Acquisitions, the directors, officers and all of the affiliates
of each, harmless from and with respect to any and all claims, liabilities,
losses, damages, costs and expenses, including without limitation the reasonable
fees and disbursements of counsel (collectively, the "Losses"), related to or
arising directly or indirectly out of any of the following:
(i) any failure or any breach by the Seller of any
representation or warranty, covenant, obligation or undertaking made by
Seller in or pursuant to this Agreement (including the Schedules and
Exhibits hereto) or any other statement, certificate or other
instrument delivered pursuant hereto;
(ii) any claim, liability, obligation or damage with
respect to the Excluded Liabilities, including without limitation the
following:
(A) any actual or alleged liability for the cleanup
or removal of, or for death or injury to person or property as
a result of the release, emission or discharge of, any
hazardous substance, hazardous waste, oil, toxic substance,
pollutants or other chemical by-products relating to or
affecting the Acquired Assets or the NAC Business, to the
extent such liability arises out of any matter or condition
that occurred or existed on or before the Closing Date;
(B) any actual or alleged liability for death or
injury to person or property as a result of any actual or
alleged defect in any product manufactured or services
rendered by the Seller on or prior to the Closing Date;
(C) any contractual product or service warranty
claims arising out of defects in any product manufactured or
services rendered by the Seller prior to the Closing Date,
provided, however, that Buyer shall be responsible for any
repair or replacement obligations within the contractual
warranty period, which are incurred in the ordinary course of
the operation of the NAC Business; or
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(D) any claim, obligation or liability arising in
connection with the employment or termination of employment of
any persons in the NAC Business before the Closing, including
any workmen's compensation claims, any employee grievances,
any liabilities with respect to pension, medical or other
employment benefits and any liabilities for accrued bonus
payments, or for severance payments arising as a result of the
consummation of the transactions contemplated by this
Agreement, but excluding liability for accrued vacation, as
reflected on the Final Closing Balance Sheet; or
(E) any actual or alleged tax liability imposed on
the Buyer with regard to the NAC Business or any other
operations of Seller in respect of any period prior to the
Closing Date.
(iii) except for the Assumed Obligations, any claim
or liability arising under the bulk sales laws of any jurisdiction in
connection with transactions contemplated by this Agreement (in view of
such indemnification obligation the Buyer hereby waives the Seller's
compliance with any such bulk sales laws as a condition to the Closing
hereunder);
(iv) Any liability with respect to the two verbal
threats of litigation disclosed in Schedule 5.7;
(v) any claim that the Seller does not own or have
the right to use, as the case may be, any of the Intellectual Property
listed on Schedule 1.1(h) or Schedule 5.18(a), or any claim that the
use of such Intellectual Property, as used in the NAC Business in a
manner similar to that of the Seller, infringes on the copyright or
trademark rights of any other Person or constitutes a misappropriation
of a trade secret of any other Person; and
(vi) any claim with respect to this transaction from
any shareholder of Seller, including, but not limited to a claim
challenging Seller's authority to enter into or complete the
transaction, any claim seeking appraisal or dissenters' rights or
challenging the fairness of the transaction or any claim for rescission
of the transaction.
12.2. Indemnity by the Buyer. The Buyer agrees to indemnify and hold
Seller harmless from and with respect to any and all Losses, related to or
arising directly or indirectly out of any failure or breach by the Buyer of any
representation or warranty, covenant, obligation or undertaking made by the
Buyer in this Agreement (including the Schedules and Exhibits hereto) or any
other statement, certificate or other instrument delivered pursuant hereto.
12.3. Claims.
(a) Notice. Any party seeking indemnification hereunder (the
"Indemnified Party") shall promptly notify the other party hereto (the
"Indemnifying Party") of any action, suit, proceeding, demand or breach (a
"Claim") with respect to which the Indemnified Party claims indemnification
hereunder, provided that failure of the Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations under this Article
12 except to the extent, if at all, that such Indemnifying Party shall have been
prejudiced thereby.
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(b) Third Party Claims. If such Claim relates to any action,
suit, proceeding or demand instituted against the Indemnified Party by a third
party (a "Third Party Claim"), the Indemnifying Party shall be entitled to
participate in the defense of such Third Party Claim after receipt of notice of
such claim from the Indemnified Party. Within thirty (30) days after receipt of
notice of a particular matter from the Indemnified Party, the Indemnifying Party
may assume the defense of such Third Party Claim, in which case the Indemnifying
Party shall have the authority to negotiate, compromise and settle such Third
Party Claim, if and only if the following conditions are satisfied:
(i) the Indemnifying Party shall have confirmed in
writing that it is obligated hereunder to indemnify the Indemnified
Party with respect to such Third Party Claim;
(ii) the Indemnifying Party provides evidence
satisfactory to the Indemnified Party that the Indemnifying Party has
(and will continue to have) adequate financial resources to satisfy and
discharge such action or claim; and
(iii) the Indemnified Party shall not have given the
Indemnifying Party written notice that it has determined, in the
exercise of its reasonable discretion, that matters of corporate or
management policy or a conflict of interest make separate
representation by the Indemnified Party's own counsel advisable.
The Indemnified Party shall retain the right to employ its own counsel and to
participate in the defense of any Third Party Claim, the defense of which has
been assumed by the Indemnifying Party pursuant hereto, but the Indemnified
Party shall bear and shall be solely responsible for its own costs and expenses
in connection with such participation.
(c) Claim Limitations. Notwithstanding any other provision of
this Section 12, any Claim made hereunder shall be subject to the following
limitations:
(i) except as provided below, no Claim for
indemnification may be made by an Indemnified Party after the expiry of
one year following the Closing Date;
(ii) except as provided below, Buyer's sole recourse
for satisfying any Claim shall be recovery from the Indemnification
Escrow Fund (as defined and described in the Escrow Agreement);
(iii) except as provided below, no Claim shall be
made against the Seller or the Buyer (as the case may be) until the
aggregate amount of Losses with respect to which all Indemnified
Parties are entitled to seek indemnification by such Indemnifying Party
exceeds $100,000 and no Claim shall be made against such Indemnifying
Party except to the extent that such aggregate Losses exceed $100,000;
and
(iv) except as provided below, no Claim shall be made
against either the Seller or the Buyer (as the case may be) which,
together with all other Claims paid by such Indemnifying Party, exceeds
the following amount, (a) with respect to claims for which the party
first provides notice prior to December 15, 1997 -- $1,000,000, and (b)
with respect to claims for which the party first provides notice
between December 16, 1997 and the first anniversary of the Closing Date
-- $500,000.00;
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provided, however, that (A) no limitation as to the time period for
making Claims hereunder nor as to the minimum or maximum amount, nor
the recourse for payment of Claims shall apply to any of the following,
and Claims relating to the following shall not count against the
$1,000,000 (nor $500,000) maximum: (x) Losses relating to or arising
directly or indirectly out of any failure or breach of any of the
representations and warranties of the Seller set forth in the first and
last sentence of Section 5.1, and/or Section 5.2, Section 5.9, and/or
Section 5.22, and/or (y) Losses referred to in Section 12.1(ii)(E),
12.1(v) and 12.1(vi); and (B), notwithstanding any other provision of
this Agreement, for purposes only of computing Losses with respect to
which Claims under this Section 12 may be made against Seller or Buyer
(as the case may be), all materiality qualifications of representations
and warranties, covenants, obligations or undertakings made by such
Indemnifying Party shall be ignored.
12.4. Method and Manner of Paying Claims. In the event of any claims
under this Article 12, the claimant shall advise the party or parties who are
required to provide indemnification therefor in writing of the amount and
circumstances surrounding such claim. With respect to liquidated claims, if
within thirty days the other party has not contested such claim in writing, the
other party will pay the full amount thereof within ten days after the
expiration of such period. Any amount owed by an Indemnifying Party hereunder
with respect to any Claim may be set-off by the Indemnified Party against any
amounts owed by the Indemnified Party to any Indemnifying Party. The unpaid
balance of a Claim shall bear interest at a rate per annum equal to the rate
announced by The First National Bank of Boston as its "Base Rate" plus two
percent (2%) from the date notice thereof is given by the Indemnified Party to
the Indemnifying Party.
Article 13
Termination
13.1 (a) This Agreement may be terminated by either the Buyer or the
Seller in writing, without liability to the terminating party on account of such
termination (provided the terminating party is not otherwise in default or in
breach of this Agreement), if the Closing shall not have occurred on or before
May 15, 1997, other than as a consequence of the intentional breach or the
intentional default by the terminating party.
(b) This Agreement may be terminated at any time prior to the Closing
by mutual action of the Seller and the Buyer.
(c) This Agreement may be terminated by either party for material
breach by the other party which remains uncured thirty days after notice thereof
by the non-breaching party,.
(d) In the event of the termination and abandonment of this Agreement
by the Seller or the Buyer, as herein provided, written notice thereof shall be
given to the other party or parties and this Agreement shall terminate without
any further action of the parties hereto. If this Agreement is terminated as
provided herein: (i) each party will redeliver all documents, work papers and
other
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material of the other party or parties relating to the transactions
contemplated hereby including such memoranda, notes, lists, records or other
documents compiled or derived from such material, whether so obtained before or
after the execution hereof, to the party furnishing the same; (ii) all
information received by any party hereto with respect to the business of the
other parties or their affiliated companies shall remain subject to the terms of
the Non-Disclosure Agreement; and (iii) no party shall have any liability or
further obligation to any other party to this Agreement except as provided by
this Article 13, and except that any termination of this Agreement pursuant to
the first sentence of this Article 13 or pursuant to Section 13(c) shall not
relieve a defaulting or breaching party from any liability to the other party
hereto. The provisions of Article 15 shall survive any termination of this
Agreement.
Article 14
Definitions
As used herein the following terms not otherwise defined have the
following respective meanings:
"Intellectual Property" means patents, inventions (whether patentable
or unpatentable), trade secrets, know-how, trademarks and associated goodwill,
service marks, trade dress, logos, trade names, copyrights, mask works and
registrations and applications for each of the foregoing, and computer software
programs, computer data bases and related documentation and materials.
"Person" means any corporation, association, partnership, organization,
business, individual, government or political subdivision thereof or
governmental agency.
"Subsidiary" with respect to any Person, means any corporation a
majority (by number of votes) of the outstanding shares of any class or classes
of which shall at the time be owned (directly or indirectly) of record or
beneficially by such Person or by a Subsidiary of such Person, if the holders of
the shares of such class or classes (a) are ordinarily, in the absence of
contingencies, entitled to vote for the election of a majority of the directors
(or persons performing similar functions) of the issuer thereof, even though the
right so to vote has been suspended by the happening of such a contingency, or
(b) are at the time entitled, as such holders, to vote for the election of a
majority of the directors (or persons performing similar functions) of the
issuer thereof, whether or not the right so to vote exists by reason of the
happening of a contingency.
Article 15
General
15.1 Payment of Buyer's Expenses. The Seller agrees that, in the event
that the Seller shall fail to satisfy the condition precedent set forth in
Section 9.17, the Seller shall promptly pay to the Buyer an amount equal to all
reasonable out-of-pocket expenses incurred by Buyer (including without
limitation all reasonable attorneys' fees and disbursements) in connection with
the negotiations, due diligence and preparation of documents relating to this
Agreement and the transactions contemplated hereby.
15.2 Survival of Representations and Warranties. The representations
and warranties of the parties hereto contained in this Agreement or otherwise
made in writing in connection with the
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transactions contemplated hereby (in each case except as affected by the
transactions contemplated by this Agreement) shall be deemed material and,
notwithstanding any investigation by the Buyer, shall be deemed to have been
relied on by the Buyer and shall survive the Closing, and the consummation of
the transactions contemplated hereby for the period and to the extent described
in Section 12.3.
15.3. Expenses. All sales and transfertaxes payable with respect to the
sale and conveyance of the Acquired Assets to the Buyer shall be paid by the
Buyer. All expenses of the preparation, execution and consummation of this
Agreement and of the transactions contemplated hereby, including without
limitation attorneys', accountants' and outside advisers' fees and
disbursements, shall be borne by the party incurring such expenses.
15.4. Notices. All notices, demands and other communications hereunder
shall be in writing or by written telecommunication, and shall be deemed to have
been duly given if delivered personally or if mailed by certified mail, return
receipt requested, postage prepaid, or if sent by overnight courier, or sent by
written telecommunication, as follows:
If to Seller, to:
Kirk D'Orazio
Promptus Communications, Inc.
207 High Point Ave.
Portsmouth Business Park
Portsmouth, RI 02871
with a copy sent contemporaneously to:
John Rodney, Esq.
Kirkpatrick & Lockhart LLP
1500 Oliver Building, Pittsburgh, Pa 15222
and to
Margaret D. Farrell, Esq.
Hinckley, Allen & Snyder
1500 Fleet Center
Providence, R. I. 02903
If to the Buyer, to:
Robert Castle
VideoServer, Inc.
63 Third Avenue
Burlington, MA 01803
with a copy sent contemporaneously to:
David L. Engel, Esq.
Bingham, Dana & Gould LLP
150 Federal Street
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Boston, Massachusetts 02110
Any such notice shall be effective (a) if delivered personally, when
received, (b) if sent by overnight courier, when receipted for, (c) if mailed,
five (5) days after being mailed as described above, and (d) if sent by written
telecommunication, when received.
15.5 Arbitration Provision. Any dispute, controversy or claim arising
out of or in connection with or relating to this Agreement and the Transaction
Documents or any breach or alleged breach hereof or thereof (other than any
action to obtain injunctive relief, specific performance or other equitable
remedy pursuant to the provisions of the License Agreement referred to in
Section 10.8, the Nondisclosure Agreement referred to in Section 11.1, or the
noncompetition provisions of Section 11.2 and the noncompetition agreements
referred to in Section 9.15) shall be submitted to and determined and settled by
arbitration in Boston, Massachusetts, or in such other location as the parties
may agree, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the "AAA"). The Board of Arbitration shall be composed
of one arbitrator, to be mutually agreed upon by the parties in good faith, or,
if the parties cannot agree, the arbitrator shall be selected by the AAA in
accordance with its standard procedures in such cases. The arbitration award
shall be final and binding on the parties to the arbitration and judgment
thereon may be entered in any court having jurisdiction, or application may be
made to any such court for confirmation of such award or a judicial acceptance
of such award or other legal remedy, as the case may be. If, under applicable
federal or state law, a claim or dispute shall not be subject to arbitration,
then either party may reject arbitration so that all claims and disputes shall
be subject to resolution in a single proceeding and a single forum.
15.6. Entire Agreement. This Agreement contains the entire
understanding of the parties, supersedes all prior agreements and understandings
relating to the subject matter hereof and shall not be amended except by a
written instrument hereafter signed by all of the parties hereto.
15.7. Governing Law. The validity and construction of this Agreement
shall be governed by the internal laws (and not the choice-of-law rules) of the
Commonwealth of Massachusetts.
15.8. Sections and Section Headings. The headings of sections and
subsections are for reference only and shall not limit or control the meaning
thereof.
15.9. Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors and
permitted assigns. Neither this Agreement nor the obligations of any party
hereunder shall be assignable or transferable by such party without the prior
written consent of the other party hereto; provided, however, that nothing
contained in this Section 15.7 shall prevent the Buyer, without the consent of
the Seller, (a) from transferring or assigning this Agreement or its rights or
obligations hereunder to another entity controlling, under the control of, or
under common control with the Buyer or (b) from assigning all or part of its
rights or obligations hereunder by way of collateral assignment to any bank or
financing institution providing financing for the acquisition contemplated
hereby, but no such transfer or assignment made pursuant to clauses (a) or (b)
shall relieve the Buyer of its obligation under this Agreement.
15.10. Severability. In the event that any covenant, condition, or
other provision herein contained is held to be invalid, void, or illegal by any
court of competent jurisdiction, the same shall be
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deemed to be severable from the remainder of this Agreement and shall in no way
affect, impair, or invalidate any other covenant, condition, or other provision
contained herein.
15.11. Further Assurances. The parties agree to take such reasonable
steps and execute such other and further documents as may be necessary or
appropriate to cause the terms and conditions contained herein to be carried
into effect.
15.12. Tax Treatment. The Buyer and the Seller shall treat and report
the transactions contemplated by this Agreement in all respects consistently for
purposes of any federal, state or local tax, including without limitation with
respect to calculation of gain, loss and basis with reference to the allocations
of the Purchase Price made pursuant to Article 2 hereof. The parties hereto
shall not take any actions or positions inconsistent with the obligations set
forth herein. Both the Buyer and the Seller agree to file with the Internal
Revenue Service an IRS Form 8594 (Asset Acquisition Statement under Section
1060) with respect to the acquisition by the Buyer of the Acquired Assets, with
their respective federal income tax returns for the year in which the Closing
Date occurs, consistent with the allocations made pursuant to Section 2.1.
15.13. No Implied Rights or Remedies. Except as otherwise expressly
provided herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or to give any person, firm or corporation, other than
the Seller and the Buyer and their respective shareholders, any rights or
remedies under or by reason of this Agreement.
15.14. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15.15. Satisfaction of Conditions Precedent. Each of the Seller and the
Buyer will use its best efforts to cause the satisfaction of the conditions
precedent contained in this Agreement; provided, however, that nothing contained
in this Section 15.13 shall obligate either party hereto to waive any right or
condition under this Agreement.
15.16. Public Statements or Releases. Each of the parties hereto agrees
that prior to the consummation of the Closing no party to this Agreement will
make, issue or release any public announcement, statement or acknowledgment of
the existence of, or reveal the status of, this Agreement or the transactions
provided for herein, without first obtaining the consent of the other party
hereto. Nothing contained in this Section 15.14 shall prevent either party from
making such disclosures as such party may consider necessary to satisfy such
party's legal or contractual obligations.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have caused this Agreement to be duly executed and delivered as a
sealed instrument as of the date and year first above written.
/S/ ROBERT CASTLE
------------------------------------
Attest:
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By: ROBERT CASTLE
- -------------------------------- ---------------------------------
Title: President - VideoServer
Attest: /S/ KIRK M. D'ORAZIO
------------------------------------
By: KIRK M. D'ORAZIO
- -------------------------------- ---------------------------------
Title: President & COO
Promptus Communications, Inc.
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ESCROW AGREEMENT
This Escrow Agreement (this "Agreement"), dated as of April 26, 1997,
is by and among VideoServer, Inc. (the "Buyer"), a Delaware corporation,
Promptus Communications, Inc. (the "Seller"), a Rhode Island corporation, and
Fleet National Bank, as Escrow Agent with offices at One Federal Street, Boston,
Massachusetts (the "Escrow Agent").
The Buyer and the Seller have entered into an Asset Purchase Agreement
(the "Purchase Agreement"), dated as of March 25, 1997, pursuant to which the
Buyer has agreed to purchase, and the Seller has agreed to sell, certain assets
of the Seller, all subject to the terms and conditions set forth in the Purchase
Agreement. Pursuant to the Purchase Agreement, the Buyer and the Seller have
agreed to enter into this Agreement to secure (i) certain working capital
adjustment obligations of the Seller and Buyer under Section 2.3 of the Purchase
Agreement, and (ii) certain indemnification obligations of the Seller under the
Purchase Agreement, and have requested Fleet National Bank to act as Escrow
Agent hereunder; and Fleet National Bank is willing to do so subject to the
terms and conditions set forth in this Agreement.
The parties hereby agree as follows:
1. CERTAIN DEFINED TERMS. Capitalized terms used and not otherwise
defined herein have the respective meanings ascribed to them in the Purchase
Agreement. In addition, as used in this Agreement:
"Escrow Agent" means Fleet National Bank, and any of its successors
appointed pursuant to Section 10 hereof, in its capacity as escrow agent
hereunder.
"Escrowed Money" means, collectively, the WCA Escrow Fund and any
Indemnification Escrowed Money.
"Escrow Funds" means the WCA Escrow Fund and the Indemnification Escrow
Fund.
"Escrowed Securities" means the common stock of the Buyer deposited in
escrow hereunder, any income earned thereon, and any other accessions thereto,
and any securities received in respect thereof (whether by dividend, upon
conversion, exchange, or redemption, or otherwise).
"Indemnification Escrow Fund" means the Escrowed Securities and any
Indemnification Escrowed Money, together with any other money, securities and
other property from time to time held in escrow pursuant to Section 3(b)
hereunder, and any income earned thereon and held in escrow hereunder.
"Indemnification Escrowed Money" means any money constituting
proceeds from the liquidation of any of the Escrowed Securities, whether held in
cash or in the form of any investment or reinvestment, and any income earned
thereon and held in escrow hereunder.
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"WCA Escrow Fund" means the money deposited in escrow pursuant to
Section 3(a)(i) hereof, in cash or in the form of any investment or
reinvestment, and any income earned thereon and held in escrow hereunder.
2. APPOINTMENT OF ESCROW AGENT. The Buyer and the Seller hereby appoint
Fleet National Bank to act as Escrow Agent hereunder, and Fleet National Bank
hereby accepts such appointment and agrees to serve in such capacity subject to
the terms and conditions set forth in this Agreement.
3. ESCROW FUNDS.
(a) Establishment of Working Capital Adjustment Escrow Fund.
(i) Upon execution of this Agreement, each of the Buyer and
Seller shall deposit in escrow with the Escrow Agent cash in an amount equal to
$250,000, to be held as the WCA Escrow Fund by the Escrow Agent until delivery
of the Final Closing Balance Sheet and final determination of the Final Closing
Working Capital amount pursuant to the provisions of Section 2.3 of the Purchase
Agreement.
(ii) The WCA Escrow Fund shall secure (A) the obligation of
the Buyer to pay to the Seller the excess (if any) of the Final Closing Working
Capital amount over the Audited Baseline Working Capital amount, and (B) the
obligation of the Seller to pay to the Buyer the excess (if any) of the Audited
Baseline Working Capital amount over the Final Closing Working Capital amount,
in each case promptly upon the delivery of the Final Closing Balance Sheet and
the final determination of the Final Closing Working Capital amount pursuant to
Section 2.3 of the Purchase Agreement.
(iii) The Escrow Agent shall hold the WCA Escrow Fund in a
segregated account and shall distribute the WCA Escrow Fund in accordance with
the terms of this Agreement.
(b) Establishment of Indemnification Escrow Fund.
(i) Upon execution of this Agreement, the Buyer and the Seller
shall deposit in escrow with the Escrow Agent 29,851 shares of VideoServer
Common Stock as described in Section 2.2 of the Purchase Agreement. In addition,
the Seller shall deposit into escrow six stock powers duly executed in blank for
transfer of the shares constituting the Escrowed Securities to the Buyer, with
the dates and numbers of shares covered by such stock powers left blank. The
Seller hereby irrevocably appoints the Escrow Agent, as its agent and
attorney-in-fact, in the name and on behalf of the Seller to complete and
deliver such stock powers to the Buyer, but only in strict accordance with the
terms and conditions of this Agreement, with the same legal force and effect as
if done by the Seller itself.
(ii) The Indemnification Escrow Fund shall secure all of the
Seller's indemnification obligations under Article 12 of the Purchase Agreement,
and shall be released as provided in Section 6 of this Agreement.
(iii) The Escrow Agent shall hold the Indemnification Escrow
Fund in a segregated account and shall distribute the Indemnification Escrow
Fund in accordance with the terms of this Agreement.
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(c) Investment of the Escrowed Money. The Escrow Agent from time to
time shall invest and reinvest the Escrowed Money at the mutual written
direction of the Buyer and the Seller in (i) debt securities for the payment of
which the full faith and credit of the United States of America is pledged
("U.S. Securities"), (ii) money market funds of major brokerage or mutual fund
firms (e.g., Fidelity Investments) or that invest exclusively in U.S.
Securities, (iii) repurchase agreements collateralized by U.S. Securities, (iv)
certificates of deposit, time deposits, and other interest-bearing deposits of
any commercial bank, provided, that such deposits are fully insured by the
Federal Deposit Insurance Corporation or Federal Savings and Loan Insurance
Corporation, and (v) such other types of investments as may be agreed to in
writing by the Buyer and the Seller from time to time. Initially, the Escrowed
Money shall be invested as set forth on Schedule 1 hereto. All income from such
investments shall be received by the Escrow Agent and held in escrow in the WCA
Escrow Fund or the Indemnification Escrow Fund, as the case may be, upon which
such income is earned; and all such income shall constitute Escrowed Money. For
tax and withholding purposes, all income upon the WCA Escrow Fund shall be
allocated 50% to the Buyer and 50% to the Seller, and all income earned upon the
Indemnification Escrow Fund shall be allocated to the Seller, in each case
unless actually distributed to the other party.
(d) Stop-Transfer Instructions. For so long as any Escrowed Securities
are held in escrow hereunder, except for transfers thereof specifically
contemplated by this Agreement (including Section 3(f) hereof), the Escrowed
Securities shall remain subject to "stop-transfer" instructions to the Buyer's
transfer agent for such securities.
(e) Dividends, Etc. on Escrowed Securities. Until such time, if any,
when the Escrowed Securities may be required hereunder to be delivered to a
Person entitled to indemnification under the Purchase Agreement, such Escrowed
Securities shall remain registered in the name of the Seller, and, subject to
the terms and conditions of this Agreement and the Registration Rights and
Lock-Up Agreement, the Seller may do any other thing that is lawful for a
registered holder of the Escrowed Securities to do (including voting). Any
dividends or other distributions in respect of the Escrowed Securities, and any
securities of the Buyer that are issued upon the conversion, redemption, or
exchange of the Escrowed Securities, shall be deposited with the Escrow Agent in
escrow hereunder immediately upon payment or issuance. For tax and withholding
purposes, all dividends and other distributions in respect of the Escrowed
Securities, and all securities of the Buyer that are issued upon the conversion,
redemption, or exchange of the Escrowed Securities, shall be allocable to the
Seller unless actually distributed to the Buyer.
(f) Sale of Escrowed Securities. The Escrowed Securities are
Registrable Securities as defined in the Registration Rights Agreement. At any
time or from time to time, the Seller shall have the right to sell any Escrowed
Securities, provided, that if any such sale is completed through a broker, the
Seller shall instruct such broker to deliver, and in any case the Seller shall
cause, the net proceeds received by the Seller from any such sale to be
deposited with the Escrow Agent immediately upon receipt thereof; and provided
further, that the Seller shall pay any taxes payable in connection with such
sale and such taxes shall not be deducted in calculating the net proceeds from
such sale to be deposited with the Escrow Agent. In connection with any such
sale, the Escrow Agent shall deliver any Escrowed Securities to such persons and
at such times as the Seller may direct in writing provided that such delivery is
accompanied by notice from each of the Seller and the Escrow Agent to such
person to deliver the proceeds thereof directly back to the Escrow Agent.
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(g) Valuation of the Escrowed Securities. For purposes of valuing
Escrowed Securities deliverable in payment of any claim by the Buyer for
indemnification under the Purchase Agreement, the Escrowed Securities shall be
valued at $33.50 per share, proportionately adjusted for stock splits, stock
dividends, and other changes in the Buyer's capitalization occurring after the
date hereof.
4. CLAIMS AGAINST WORKING CAPITAL ADJUSTMENT ESCROW FUND.
(a) Notice of WCA Claim. Following the delivery of the Final Closing
Balance Sheet and the final determination of the Final Closing Working Capital
amount pursuant to Section 2.3 of the Purchase Agreement, the Buyer or the
Seller, whichever is entitled to a working capital adjustment payment under said
Section 2.3 (the "WCA Claimant"), shall give written notice (a "Notice of WCA
Claim") to the Escrow Agent and the other party, which notice shall be signed by
the WCA Claimant's President and shall certify that (i) the Final Closing
Balance Sheet has been delivered, (ii) the Final Closing Working Capital amount
exceeded the Audited Baseline Working Capital amount, or the Audited Baseline
Working Capital amount exceeded the Final Closing Working Capital amount, (iii)
the WCA Claimant is entitled to payment, out of the WCA Escrow Fund, in respect
of the working capital adjustment under Section 2.3 of the Purchase Agreement,
in a specified amount (up to $250,000 of the WCA Escrow Fund), (iv) the WCA
Claimant is entitled to be paid all income earned on the portion of the WCA
Escrow Fund represented by such specified amount, and (v) the WCA Claimant is
entitled to the release from the WCA Escrow Fund of the $250,000 which it
deposited therein, together with all income earned on such portion of the WCA
Escrow Fund.
(b) Notice of No WCA Claim. In the event that the Final Closing Balance
Sheet shall be delivered and shall show that the Final Closing Working Capital
amount is the same as the Audited Baseline Working Capital amount, either Buyer
or Seller may give a written notice (the "Notice of No WCA Claim") to the Escrow
Agent and the other party stating that each of the Buyer and Seller are entitled
to refund of the $250,000 such party initially deposited in the WCA Escrow Fund,
together with all income earned on such amount.
(c) Distribution of WCA Escrow Fund. If the Escrow Agent is not in
receipt of a written notice from the party who is not the WCA Claimant within
ten business days after the date a Notice of WCA Claim is delivered to the
Escrow Agent in accordance with Section 4(a) hereof, the Escrow Agent shall
distribute to the WCA Claimant those portions of the WCA Escrow Fund described
in such Notice of WCA Claim as contemplated by clauses (iii), (iv) and (v) of
Section 4(a), in accordance with such Notice of WCA Claim, with the remainder of
any of the WCA Escrow Fund, if any, to be released to the party who is not the
WCA Claimant. If the Escrow Agent is not in receipt of a written notice from the
non-claiming party within ten business days after the date a Notice of No WCA
Claim is delivered to the Escrow Agent in accordance with Section 4(b), the
Escrow Agent shall distribute the WCA Escrow Fund as described in such Section
4(b). Except as expressly provided herein, if the Escrow Agent is in receipt of
a written notice as described in each of the foregoing sentences, the Escrow
Agent shall not release from escrow or deliver any part of the WCA Escrow Fund.
(d) Payment from WCA Escrow Fund. All deliveries of all or any portion
of the WCA Escrow Fund to the Buyer or the Seller shall be made by wire transfer
of immediately available funds to an account designated in writing by the
receiving party at least two business days before such delivery (or in the
absence of such designation, by certified or bank check sent to such party at
its address set forth in Section
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13 hereof). The Escrow Agent may liquidate any investment in the WCA Escrow Fund
as necessary to make the payments required by this Section 4.
(e) Rights Not Limited to WCA Escrow Fund. To the extent that pursuant
to the terms of Section 2.3 of the Purchase Agreement, any WCA Claimant is
entitled to receive an amount in excess of the other party's original $250,000
deposited into the WCA Escrow Fund, the rights of such WCA Claimant to recover
such amount from the other party shall not be limited to the rights of the WCA
Claimant under this Agreement.
5. CLAIMS AGAINST INDEMNIFICATION ESCROW FUND.
(a) Notice of Indemnification Claim. The Buyer shall give the Seller
and the Escrow Agent written notice (a "Notice of Indemnification Claim") of any
claim for indemnification by the Buyer and/or any "indemnified party" (as
defined in Section 12.3 of the Purchase Agreement) against the Seller to be paid
from the Indemnification Escrow Fund (a "Claim"), indicating the amount of
indemnification sought and specifying in reasonable detail the factual basis
therefor to the extent then known to the Buyer, as the case may be. If the
Damages for which indemnification is sought are liquidated, the Buyer's notice
of claim shall so state and a charge in such amount shall be deemed asserted
against the Indemnification Escrow Fund then held in escrow by the Escrow Agent
and available for the payment of such Claim. If such Damages are not liquidated,
the Buyer's notice of claim shall so state and shall contain the Buyer's
good-faith estimate of the maximum amount of such Claim, and in such event, a
charge in such amount shall be deemed asserted against the Indemnification
Escrow Fund then held in escrow by the Escrow Agent and available for the
payment of such Claim.
(b) Dispute of Claim. If within ten business days after the date a
Notice of Indemnification Claim is delivered to the Escrow Agent in accordance
with Section 5(a), the Seller advises the Escrow Agent in writing that it
objects to the Claim referred to in such Notice of Indemnification Claim,
stating in reasonable detail the basis of its objection, then unless and until
the Seller withdraws such objection in writing, such Claim shall be deemed to be
a "Disputed Claim"; otherwise, such Claim shall be deemed to be an "Allowed
Claim."
(c) Payment from Escrow. As promptly as is practicable after a Claim is
deemed to be an Allowed Claim, or if at the time a Notice of Indemnification
Claim with respect to such Claim was given in accordance with Section 5(a), such
Claim was not liquidated in amount, then as promptly as practicable after such
Claim is so liquidated and written notice thereof is given by the Buyer to the
Seller and the Escrow Agent, the Escrow Agent shall release from escrow and
deliver to the Buyer the amount of any Escrowed Money in the Indemnification
Escrow Fund or, at Seller's option, Escrowed Securities, up to the amount of the
Allowed Claim and, if such amount is not sufficient to satisfy the Allowed
Claim, a number of Escrowed Securities or, at Seller's option, Escrowed Money
sufficient to satisfy any remaining unpaid portion of such Allowed Claim,
together with a stock power dated and completed by the Escrow Agent pursuant to
Section 3(b)(i) hereof for transfer of such Escrowed Securities to the Buyer.
Seller may exercise any such option by written notice to Escrow Agent prior to
the first day on which Escrow Agent may deliver any such Escrowed Securities or
Escrowed Money to Buyer.
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(d) No Release for Disputed Claim. Except as otherwise expressly
provided herein, the Escrow Agent shall not release from escrow or deliver any
part of the Indemnification Escrow Fund in respect of any Disputed Claim.
(e) Distributions of Income. Except as otherwise expressly provided
herein, to the extent that any amount of the property originally deposited into
escrow hereunder pursuant to Section 3(b)(i) hereof (or any cash proceeds
thereof or reinvestments of such proceeds or properties) is distributed to the
Buyer or the Seller, all income and other accessions with respect to such amount
(including without limitation interest and dividends) shall be distributed to
the same party and at the same time.
6. RELEASE AND DELIVERY OF ESCROW FUNDS.
(a) Release Dates. (i) The Escrow Agent shall release the WCA Escrow
Fund in accordance with the terms of Section 4. (ii) On December 15, 1997, the
Escrow Agent shall release and deliver to the Seller from the Indemnification
Escrow Fund an amount equal to 50% of the originally Escrowed Securities and/or
the proceeds of any liquidation thereof and any income earned thereon, less an
amount (if any) thereof with respect to which the Buyer has asserted one or more
Claims in accordance with this Agreement (whether such Claims have been
theretofore paid out of the Indemnification Escrow Fund or are pending),
together with any income earned on such amount of the Indemnification Escrow
Fund. For this purpose, the Seller shall designate in accordance with Section
5(c), whether any pending Claims should be satisfied with cash or stock. (iii)
On April 26, 1998, the Escrow Agent shall release all of the remaining
Indemnification Escrow Fund from escrow and deliver it to the Seller, provided,
that the Escrow Agent shall retain and continue to hold in escrow such portion,
if any, of the Indemnification Escrow Fund with respect to which the Buyer has
asserted one or more Claims in accordance with this Agreement, which Claims have
not been paid in full or withdrawn in writing by the Buyer. At such time as such
Claims are resolved in accordance with the terms hereof, the amount of any
Allowed Claims not previously paid to the Buyer and the balance of the
Indemnification Fund shall be paid to the Seller. For this purpose, the Seller
shall designate in accordance with Section 5(c), whether any pending Claims
should be satisfied with cash or stock.
(b) As Directed by a Court. Except as otherwise specifically provided
herein, the Escrow Agent shall retain the Escrow Funds until such time or times
as it receives written notice that a judgment, order, or decree has been entered
or made by any court with respect to the disposition of the Escrow Funds that,
in the opinion of legal counsel chosen by the Escrow Agent, is binding upon the
Escrow Agent and not subject to further appeal or modification before compliance
is required therewith, in which case the Escrow Agent shall comply with such
judgment, order, or decree.
(c) As Directed by the Parties. Notwithstanding any other provision of
this Agreement, the Escrow Agent shall release all or any part of the Escrow
Funds and deliver it in accordance with written instructions duly executed (in
counterparts or otherwise) by the Buyer and the Seller.
(d) Deliveries of Escrowed Funds. All deliveries of Escrowed Money to
the Buyer or the Seller shall be made by wire transfer of immediately available
funds to an account designated in writing by the receiving party at least two
business days before such delivery (or in the absence of such designation, by
certified or bank check sent to such party at its address set forth in Section
13 hereof). Delivery of Escrowed Securities shall be made by delivery in
accordance with Section 13 of the stock certificates together with the related
stock powers.
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7. LIABILITY OF ESCROW AGENT. This Agreement is entered into by the
Escrow Agent as an accommodation to, and, subject to Section 19 hereof, solely
for the benefit of, the Buyer and the Seller and the other "indemnified
parties"; and no other Person shall have any right to enforce or receive the
benefits of this Agreement. The Escrow Agent shall be obligated to perform only
such duties as are expressly set forth in this Agreement, and shall be under no
obligation to review and interpret, or be deemed to have knowledge of, any other
agreement, including without limitation, the Purchase Agreement. The Escrow
Agent shall not be liable to any person or entity whatsoever, except for actual
damages caused by its own gross negligence or willful misconduct, and in any
event shall not be liable for any incidental or consequential damages, including
without limitation lost profits. The Escrow Agent shall not be liable for any
investment losses provided that the Escrowed Money is invested in accordance
with Section 3(c) above.
8. INDEMNIFICATION OF ESCROW AGENT. Each of the Buyer and the Seller
hereby severally agrees to indemnify and hold harmless the Escrow Agent (and its
officers, employees, agents, and other representatives) from and against all
damages arising or resulting from, relating to, or in connection with this
Agreement or the transactions hereby contemplated, excepting only such damages
as may be finally determined by a court of competent jurisdiction to have been
caused directly by the Escrow Agent's gross negligence or willful misconduct.
This indemnification shall survive termination of this Agreement.
9. RELIANCE BY ESCROW AGENT. In the absence of gross negligence or
willful misconduct, the Escrow Agent shall not incur any liability for (a)
acting or failing to act in reliance upon any written instruction, notice, or
other document required or permitted under this Agreement and believed by it to
be genuine and to have been signed by the proper Person(s), without any
obligation on its part to make any additional inquiry or investigation, and (b)
acting, or failing to act, in good faith reliance upon the advice of legal
counsel.
10. RESIGNATION OR REMOVAL OF ESCROW AGENT. The Escrow Agent shall have
the right to resign as Escrow Agent hereunder at any time, upon ten days prior
written notice to each of the other parties hereto; and the Escrow Agent may be
removed by a written agreement of the Buyer and the Seller delivered to the
Escrow Agent, which removal shall be effective no earlier than 30 days after
such delivery to the Escrow Agent, unless the Escrow Agent consents in writing
to an earlier effective time. Upon the effectiveness of any such resignation or
removal, the resigning or removed Escrow Agent shall be relieved of all further
obligations and all liability hereunder. Before the effectiveness of any such
resignation or removal, the Buyer and the Seller shall jointly appoint another
person to act in the resigning or removed Escrow Agent's stead hereunder. If the
Buyer and the Seller fail to agree upon and appoint such successor Escrow Agent
before the effectiveness of any such resignation or removal, then unless
otherwise instructed by written notice duly executed by the Buyer and the
Seller, the Escrow Agent shall deposit the Escrow Funds with a court of
competent jurisdiction and shall be relieved of all further obligations and all
liability hereunder.
11. TERMINATION, AMENDMENT, AND MODIFICATION. This Agreement shall
terminate when the entire Escrow Funds have been distributed and no Claim
remains pending. Prior to such time, this Agreement may be terminated, amended,
or modified only by a written agreement (in counterparts or otherwise) duly
executed and delivered by all of the parties hereto.
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12. DISPUTES. In the event that there arises any dispute with respect
to this Agreement or any transaction or matter in connection with this
Agreement, including without limitation the respective rights of the Buyer and
the Seller to the release or return of all or any part of the Escrow Funds, the
Escrow Agent is authorized (but shall not be required) (a) to retain possession
of all or any part of the Escrow Funds until such dispute is finally resolved,
including without limitation, resolution by mutual agreement of the disputants
or by the final judgment, order, or decree of a court of competent jurisdiction
after the time for appeal has expired and without any rights of appeal having
been perfected; and/or (b) to deposit all or any part of the Escrow Funds with a
court of competent jurisdiction and institute an interpleader proceeding against
the Buyer and the Seller, upon which the Escrow Agent's further obligations and
its liability under this Agreement shall immediately terminate. The Escrow Agent
is authorized (but shall not be required) to institute, prosecute, intervene in,
and/or defend any such proceedings.
13. NOTICES. All notices, requests, payments, instructions or other
documents to be given hereunder shall be in writing or by written
telecommunication, and shall be deemed to have been duly given if (i) delivered
personally (effective upon delivery), (ii) mailed by certified mail, return
receipt requested, postage prepaid (effective upon receipt), (iii) sent by a
reputable, established courier service that guarantees next business day
delivery (effective the next business day), or (iv) sent by telecopier followed
within 24 hours by confirmation by one of the foregoing methods (effective upon
receipt of the telecopy in complete, readable form), addressed as follows (or to
such other address as the recipient party may have furnished to the other party
for the purpose pursuant to this Section 13):
(a) If to the Buyer:
VideoServer, Inc.
63 Third Avenue
Burlington, MA 01803
Attention: Paul L. Criswell, Esq.
Telecopier No. 617-505-2101
with a copy to:
David L. Engel, Esq.
Bingham, Dana & Gould LLP
150 Federal Street
Boston, Massachusetts 02110.
Telecopier No. 617-951-8736
(b) If to the Seller:
Promptus Communications, Inc.
207 High Point Avenue
Portsmouth Business Park
Portsmouth, Rhode Island 02871
Attention: Chairman
Telecopier No. 401-683-6105
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with a copy to:
John Rodney, Esq.
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
Telecopier No. 412-355-6501
and to
Margaret D. Farrell, Esq.
Hinkley, Allen & Snyder
1500 Fleet Center
Providence, RI 02903
(c) If to the Escrow Agent, to:
Fleet National Bank
One Federal Street
Boston, MA 02110
Attention: Corporate Trust Department
Telecopier No.: 617-346-5501
14. GOVERNING LAW. This Agreement shall be governed by and interpreted
and construed in accordance with the internal laws of the Commonwealth of
Massachusetts (without reference to principles of conflicts or choice of law).
15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement. In pleading or proving this
Agreement, it shall not be necessary to produce or account for more than one
fully executed counterpart hereof.
16. ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement, contains the entire understanding and agreement among the parties,
and supersedes any prior understandings or agreements among them, or between or
among any of them, with respect to the subject matter hereof.
17. CAPTIONS. The captions of sections or subsections of this Agreement
are for reference only and shall not affect the interpretation or construction
of this Agreement.
18. EXPENSES. Each of the Buyer and the Seller shall be responsible for
and pay promptly one-half of the charges and expenses of the Escrow Agent, in
connection with the Escrow Agent's performance of its duties hereunder. To the
extent that the Escrow Agent is entitled to indemnification under Section 8
above or to fees and expenses which indemnification, fees and/or expenses are
not timely paid, the parties agree that the Escrow Agent may deduct such amounts
from the Escrowed Money without further authorization.
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19. NO ASSIGNMENT; BINDING EFFECT AND BENEFITS. No party may assign its
rights or (except as set forth herein) delegate its obligations hereunder
without the written consent of the other parties hereto, and any attempt to do
so shall be wholly void; provided that it is hereby acknowledged and agreed that
the Buyer may assign its rights to VSVR as contemplated by the Purchase
Agreement without any such consent and that the Seller may assign its right to
receive any portion of the Escrow Funds to GTI. This Agreement shall bind and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns (including, without limitation, VSVR). Nothing herein is
intended to or shall confer any rights or remedies on any Person other than the
parties hereto and VSVR. Notwithstanding the above, the parties agree that any
successor to the corporate trust business of the Escrow Agent, whether by
merger, acquisition, or otherwise, automatically shall become the Escrow Agent
hereunder without the need for further consent or documentation.
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IN WITNESS WHEREOF, each of the parties has executed and delivered this
Agreement as an agreement under seal as of the date first above written.
BUYER: SELLER:
VIDEOSERVER, INC. PROMPTUS COMMUNICATIONS, INC.
By /S/ PAUL CRISWELL By /S/ AURELEO LUCCI
------------------------------ -----------------------------------
Name: Paul Criswell Name: Aureleo Lucci
Title: General counsel Title: Promptus CEO
ESCROW AGENT:
FLEET NATIONAL BANK
By
------------------------------
Name:
Title:
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Schedule 1
United States Government Treasury Bills
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SOFTWARE AND TECHNOLOGY LICENSE AGREEMENT
This Software and Technology License Agreement (the "License Agreement") is
effective this __ day of ____, 1997, between VideoServer, Inc. with a principal
place of business at 63 Third Avenue, Burlington, MA, 01803 ("VideoServer"), and
Promptus Communications, Inc. with a principal place of business at 207 High
Point Avenue, Portsmouth, Rhode Island, 02871 ("Promptus").
WHEREAS, VideoServer, pursuant to that certain agreement between VideoServer and
Promptus styled Asset Purchase Agreement and dated as of , (the "Purchase
Agreement"), has purchased from Promptus and is now the owner of all of
Promptus' rights, title and interest in and to certain computer software
programs and other intellectual property rights in and to Network Access Card
business of Promptus, as further described in the Purchase Agreement
(hereinafter referred to as the "NAC Technology"), which includes the computer
software programs and associated documentation materials in existence as of the
Closing Date and generally known as Version 4.20 (the "Software"); and
WHEREAS, Promptus, as a condition of entering into the Purchase Agreement,
desires to license back from VideoServer the NAC Technology, for use in the
manufacturing, marketing, sublicensing and sale of the Promptus "Systems
Products" as that term is defined herein, and to permit Promptus to use, modify,
and reproduce the Software on the terms and conditions stated herein, and to
grant sublicenses to use the object code, of the Software to its customers in
conjunction with such Systems Products; and
WHEREAS, VideoServer is willing to grant to Promptus a license to the NAC
Technology, provided that 1) Promptus shall strictly comply with the field of
use restrictions and other terms and conditions set forth herein and 2)
VideoServer shall have no liability or ongoing maintenance or support
obligations to Promptus or its customers regarding the NAC Technology or the
Software;
NOW, THEREFORE, in consideration of the mutual promises and agreements set forth
herein, and other good and valuable consideration set forth in the Purchase
Agreement, the parties hereto, hereby agree as follows:
I. LICENSE GRANT
1. VideoServer hereby grants, and Promptus hereby accepts, a perpetual
personal, irrevocable non-transferable (except as expressly set
forth in Section XII, herein) and non-exclusive license to use
modify, reproduce and distribute the Software, strictly for the
purpose described below, and for no other purpose. In order to
enable the foregoing rights, Promptus shall retain one copy of the
Software, including one complete copy of the source code . Promptus
shall have the right to use the Software on any computer operated
and controlled by Promptus.
2. VideoServer hereby grants, and Promptus hereby accepts, a perpetual
personal, irrevocable non-transferable (except as expressly set
forth in Section XII, herein) and non-exclusive license to use,
modify, and reproduce the NAC Technology strictly for the purposes
set forth in Section II, herein, and for no other purpose.
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II. PURPOSE/RIGHT TO USE
1. Promptus and its subsidiaries may use the NAC Technology for the
sole purpose of developing improvements to the NAC Technology and
for creating, manufacturing and selling "Systems Products." As used
herein, "Systems Products" shall mean Promptus' present generation
of products (the "Products"), listed in Appendix A, attached hereto
and any future versions thereof which: (i) improve performance or
reliability; (ii) represent improvements or upgrades of the Products
without adding material new and different functionality beyond the
functionality available in the Products; or (iii) add new material
functionality, as part of the general advancement of technology (by
Promptus or others,) but only within the functionality areas of
switching and routing, call distribution, bandwidth management and
distribution, bandwidth aggregation, network backup/overflow systems
and terminal adapter systems such as the "Hot Link" product. Without
limiting the foregoing, in no case shall Promptus be entitled to use
the NAC Technology for use in connection with the sale of NAC cards
separate from the System Products, or the sale of any other product
which is a substitute for the NAC cards in that its sole function is
to connect an intelligent device to a digital network, telephone
circuit or similar structure. Moreover, all such systems products
shall be free-standing systems, and shall not be components intended
to be physically integrated into the chassis of another system in a
manner materially different from the current and customary practice
at Promptus with respect to the Products. It is further understood
that each Systems Product shall include significant function, value,
and cost in addition to the NAC card portion of the System Product.
The NAC Technology will not be disclosed to or referenced by persons
other than Promptus employees with a need to know, except as
permitted herein by way of sublicense of the Software or as is
inevitably disclosed by permitted manufacture and sale of Systems
Products in the ordinary course.
2. Promptus acknowledges and agrees that the license to it of the NAC
Technology is part of a larger transaction involving the sale of its
NAC Business to VideoServer, for which it has received significant
consideration, and that it is appropriate that the scope of its
permitted use of the NAC Technology be limited as provided herein,
and such limits be strictly construed.
III. RIGHT TO SUBLICENSE IN OBJECT CODE FORM
1. VideoServer grants to Promptus a perpetual personal, non-exclusive,
non-transferable (except as expressly set forth in Section XII,
herein) right and license to use, copy, improve, and modify the
Software internally in source or object code form, and to sublicense
and distribute the Software in object code form, to end users and/or
resellers, as part of or in conjunction with and as is necessary for
sales of the Systems Products.
2. Promptus shall not sublicense or otherwise distribute any of the
Software except to end-users and/or resellers who have entered into
a Sublicense Agreement, materially in the form of the sublicense
agreement that Promptus has used for its own software that it
licenses to that customer. A Sublicense Agreement may be either i) a
written license agreement signed by the end user or ii) included
with the documentation, in such a manner that the end user
reasonably indicates its acceptance of the sublicense agreement by
turning on and using the accompanying Software.
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IV. TITLE AND OWNERSHIP
1. Title to the NAC Technology as between VideoServer and Promptus
shall at all times remain and vest solely with VideoServer. Promptus
acknowledges VideoServer's claim that the NAC Technology is its
trade secret and confidential property, and shall treat it as such.
Except as expressly allowed under this License Agreement, Promptus
shall not sell, lease, license or sublicense or otherwise transfer
or distribute any of the NAC Technology in whole or in part, without
prior authorization, in writing, from VideoServer. Promptus shall
not remove or destroy any copyright, patent, trademark or other
proprietary mark or notice on the NAC Technology including, but not
limited to the Software, and shall reproduce any such marks on any
copies of the Software that it makes hereunder.
2. Notwithstanding the above, Promptus shall own, as between it and
VideoServer, all changes that it makes to the NAC Technology, and
any software that it adds to or creates to run in conjunction with
the NAC Technology, provided that such actions are in accordance
with this Agreement.
V. NO WARRANTY
VIDEOSERVER DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING (WITHOUT
LIMITATION) ANY WARRANTIES OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY OR ANY
WARRANTY AS TO THE SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF THE
SOFTWARE.
VI. LIMITATION OF LIABILITY
IN NO EVENT SHALL VIDEOSERVER BE LIABLE FOR ANY LOST OR ANTICIPATED PROFITS OR
SAVINGS, OR ANY OTHER DAMAGES UNDER THIS AGREEMENT OR ANY TRANSACTIONS UNDER
THIS AGREEMENT, OR ANY USE, SALE OR DISTRIBUTION OF THE NAC TECHNOLGY BY OR
THROUGH PROMPTUS, INCLUDING BUT NOT LIMITED TO ANY INCIDENTAL, EXEMPLARY,
PUNITIVE, INDIRECT, DIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, REGARDLESS OF THE
FORM OF ACTION, AND WHETHER OR NOT VIDEOSERVER WAS ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES.
VII. NO LICENSE FEE
THE PARTIES ACKNOWLEDGE THAT VIDEOSERVER IS LICENSING THE NAC TECHNOLOGY AT NO
CHARGE AS PART OF A GREATER TRANSACTION IN WHICH VIDEOSERVER IS ACQUIRING THE
NAC TECHNOLOGY FROM PROMPTUS. PROMPTUS ACKNOWLEDGES THAT THE TOTAL DISCLAIMERS
OF WARRANTY AND LIABILITY BY VIDEOSERVER HAVE BEEN SPECIFICALLY BARGAINED FOR
AND AGREED TO, AND REPRESENT, IN THE TOTALITY OF THE CIRCUMSTANCES, AN
APPROPRIATE AND FAIR ALLOCATION OF RISK.
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VIII. INDEMNIFICATION
Promptus shall indemnify and hold VideoServer harmless from and against any and
all claims, actions, or demands arising with respect to Promptus' use of the NAC
Technology and any Systems Products or other products it creates, sells or
otherwise distributes that use, incorporate, or are based upon the NAC
Technology.
IX. DISPUTE RESOLUTION
1. PRODUCT PRECLEARANCE In any situation where Promptus is uncertain
whether a new product is within its permissible scope of use of the
NAC Technology as set forth in Section II, Promptus may, but is not
required to, send to VideoServer a "Preclearance Notification,"
containing sufficient information about the product to allow
VideoServer to form an informed opinion about the purpose, use and
functionality of the new product. Within fifteen business days of
receiving such a notice, VideoServer shall either a) notify Promptus
that it agrees that the new product is within the allowed scope of
use, or b) notify Promptus that it does not believe that the new
product is within the allowed scope of use for the NAC Technology,
in which case it shall begin the dispute resolution mechanism as
follows: Within one week of VideoServer's response to Promptus, an
officer of each party, at the level of Vice President or above,
shall personally meet, at an agreed location, without others
present, except as follows. Should either party request, the parties
shall agree upon a neutral third party mediator to also attend the
meeting. At such meeting the parties shall decide, by consensus,
whether the new product is within or outside of the allowed scope of
use for the NAC Technology, or whether it is within the allowed
scope of use only with the imposition of certain restrictions. The
parties shall memorialize their decision in writing at that meeting.
Should the parties be unable to agree, then either party may resort
to the courts to finally determine their rights, and each party
shall agree to expedited scheduling of such a lawsuit. All
information exchanged as part of the foregoing process shall be
considered confidential information.
2. IRREPARABLE HARM Each party agrees and acknowledges that the
creation of market share and customer goodwill are essential goals
of each company's business, and that either 1) the sale, license or
transfer by Promptus of a product outside of its permitted scope of
use for the NAC Technology or any disclosure by Promptus of any
confidential information in contravention of its obligations
hereunder, or 2) VideoServer's prevention of Promptus from selling a
product within its allowed scope of use would defeat those essential
goals and cause irreparable harm to the other party. As such, either
party may seek preliminary injunctive relief preventing either of
the foregoing, and the other party shall not dispute the existence
of irreparable harm. The parties agree that it shall, however, be
appropriate for the party seeking the injunction to post a bond as a
condition of obtaining such injunction.
3. PRODUCT NOTIFICATION Promptus shall notify VideoServer and send to
VideoServer any publicly-available literature describing all new
products (including customized products) that it introduces that
contains, uses or is created by use of the NAC Technology.
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4. The parties agree that the Product Notification obligations
contained in the previous paragraph are intended to save VideoServer
from considerable costs and damages in monitoring Promptus'
compliance with its field of use restrictions hereunder. The parties
further agree that such costs and damages would be difficult or
impossible to accurately quantify. Therefore, the parties agree that
(a) should Promptus not fulfill its Product Notification obligations
for a particular product as set forth in the preceding paragraph and
(b) should the sale or licensing of such product constitute an
Unlawful Sale (as defined in Section X.1 below),then, in addition to
any other damages to which VideoServer may be entitled, Promptus
shall pay to VideoServer as liquidated damages and not as a penalty,
a one-time sum under this License Agreement of $40,000.
X. ENFORCEMENT
1. Should Promptus introduce, market, sublicense, sell or provide a
product or service in violation of the scope of its right to use the
NAC Technology ("Unlawful Sale"), Promptus agrees that VideoServer
shall be entitled to receive, as damages, the greater or a) the
profits that VideoServer lost by virtue of not making such sale or
sublicense itself, (for purposes of which, Promptus agrees that, had
Promptus not made such Unlawful Sale, VideoServer would have made
the sale or sublicense) or, b) the revenues that Promptus received
from such Unlawful Sale, less any costs of goods and direct
manufacturing costs that Promptus incurred in making the product for
the Unlawful Sale, or c) any other measure of damages provided by
law, including, but not limited to, statutory damages under the
Federal Copyright Law (it being agreed that Promptus has no right to
make a copy of the Software for purposes on an Unlawful Sale.)
XI. NO MAINTENANCE OR SUPPORT
VideoServer shall not provide Promptus with any ongoing maintenance
or support for the NAC Technology or Software whatsoever.
XII. ASSIGNMENT
This License Agreement and license rights granted herein are
personal to Promptus, and Promptus shall only have the right to
assign it to a party in connection with such party's purchase of all
or substantially all of the Promptus business, and only if such
party agrees, in writing, to be bound by the terms hereof, Provided,
however, that within three years of the Closing Date, Promptus may
only assign this License Agreement and license with VideoServer's
prior written consent, which consent VideoServer shall not
unreasonably withhold or delay; provided that it shall be deemed
unreasonable for VideoServer to withhold such consent if the
proposed assignee under this section, is not: (i) PictureTel, VTEL,
Lucent, Accord, MultiLink, Outreach, or Xircom; (ii) any party that
is, at the time of such proposed assignment, a designer, developer,
manufacturer, or seller of NAC cards (standing alone and not as part
of a systems product in which the NAC card is merely one component
part of the overall systems product, similar in nature to the
relationship of the NAC cards to the Systems Products); or (iii) any
other party that is, at the time of the proposed assignment, a
"significant" competitor to or customer of the NAC business, meaning
that such party is a purchaser of NAC cards
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or a manufacturer and seller of NAC cards (or products which are
recognized in the relevant market as functional substitutes for NAC
cards) at equivalent purchasing levels, or at equivalent
manufacturing and selling levels, as the case may be, for one of the
parties identified in subsection (i), above, as a "significant"
customer or competitor. No such action of withholding of consent,
hereunder, shall be valid unless VideoServer shall deliver written
notice of its decision to withhold such consent to Promptus within
ten (10) days following VideoServer's receipt of a written request
from Promptus for approval of such assignment. In order to protect
the confidentiality of any proposed sale of the Promptus business,
it is understood and acknowledged that Promptus may submit a list of
parties for whom it requests VideoServer's consent for assignment,
hereunder, most of whom may not be potential purchasers. VideoServer
shall have the right to substitute the parties listed in subsection
(i), above, with other such significant customers or competitors on
a one-for-one basis, effective upon written notice from VideoServer
to Promptus; provided, however, that no such substitution shall be
effective with respect to any party if VideoServer shall have, prior
to such written notification, received a written request from
Promptus within the previous six months identifying such party as a
party for whom Promptus seeks VideoServer's consent for assignment.
Otherwise, Promptus shall have no right to sublicense or assign this
license or Agreement, or any of the rights or obligations hereunder,
to any other party, including, but not limited to any assignment by
virtue of a sale of the stock or assets of Promptus, or as part of a
merger with any other party. In addition to the foregoing, Promptus
shall have no right to enter into any joint relationship with any
third party such as a joint venture or partnership where Promptus'
contribution to such joint relationship is NAC cards, separate and
apart from the Systems Products, which utilize the NAC technology.
XIII. GENERAL TERMS
1. FORCE MAJEURE Neither party shall be considered in default of
performance of its obligations under this Agreement to the extent
that performance of such obligations is delayed or prevented by
force majeure or contingencies or causes beyond the reasonable
control of such party.
2. NOTICES All notices shall be sufficient only if personally
delivered, delivered by telecopy, delivered by a major commercial
rapid delivery courier service or mailed by certified or registered
mail, return receipt requested, to either party at its address set
forth above or such other address as such party may provide by
notice pursuant to this Section. If not received sooner, notice by
mail shall be deemed received five (5) days after deposit in the
U.S. mails, properly addressed, with first class postage prepaid.
Notice by telecopy shall be deemed received at the time sent or the
next working day if such time is not during a working day.
3. GOVERNING LAW This Agreement shall be governed, controlled,
interpreted and defined by and under the laws of the Commonwealth of
Massachusetts.
4. WAIVERS AND AMENDMENTS No failure or delay by either party in
exercising any right, power or privilege hereunder shall operate as
a waiver thereof, nor shall any single or partial waiver thereof
include any other right, power or privilege. This Agreement may not
be amended, changed, discharged or terminated except by a written
document signed by duly authorized representatives of the parties.
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5. SEVERABILITY In the event that any provision of this Agreement shall
be unenforceable or invalid under any applicable law or be so held
by applicable court decision, such unenforceability or invalidity
shall only apply to such provision and shall not render this
Agreement unenforceable or invalid as a whole; and, in such event,
such provision shall be modified or interpreted so as to best
accomplish the objective of such unenforceable or invalid provision
within the limits of applicable law or applicable court decision and
the manifest intent of the parties hereto.
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6. ENTIRE AGREEMENT This Agreement, and the Appendices attached or
referenced herein, is the complete agreement between the parties
hereto concerning the subject matter of this Agreement, and replaces
any contemporaneous or prior written or oral communications between
the parties. There are no conditions, understandings, agreements,
representations or warranties, expressed or implied, which are not
specified herein.
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute the License Agreement as of the 25th day of April,
1997.
VideoServer, Inc. Promptus Communications, Inc.
By: /S/ PAUL CRISWELL By: /S/ AURELEO LUCCI
------------------------------ ------------------------------------
Name: Paul Criswell Name: Aureleo Lucci
---------------------------- ----------------------------------
Title: General Counsel Title: CEO
---------------------------- ---------------------------------
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GTI CORPORATION GUARANTY AGREEMENT
This GUARANTY AGREEMENT, dated as of April 25, 1997 (the
"Guaranty"), is among GTI Corporation, a Delaware corporation (the "Guarantor"),
VideoServer, Inc., a Delaware corporation (the "Purchaser") and VideoServer
Acquisitions Corp., a Delaware corporation and wholly-owned subsidiary of the
Purchaser ("VSVR").
WHEREAS, pursuant to an Asset Purchase Agreement, dated as of March
25, 1997 (the "Asset Purchase Agreement"), among the Purchaser, VSVR and
Promptus Communications, Inc., a Rhode Island corporation ("Promptus"), the
Purchaser and VSVR have agreed to purchase certain assets, and assume certain
liabilities, of Promptus on the terms and conditions set forth in the Asset
Purchase Agreement;
WHEREAS, Promptus is a subsidiary of the Guarantor; and
WHEREAS, the Purchaser and VSVR have required that the Guarantor, as
the holder of a majority of the issued and outstanding capital stock of
Promptus, guarantee all obligations of Promptus arising under or in connection
with Section 12.1(vi) of the Asset Purchase Agreement and Section 12.1(i) of the
Asset Purchase Agreement insofar as the relevant failure or breach arises in
respect of the representations and warranties contained in the first sentence of
Section 5.9 of the Asset Purchase Agreement (and subject to the limitations set
forth in Section 12.3(c) of the Asset Purchase Agreement), and the Guarantor has
agreed to provide such guaranty in connection therewith in order to induce the
Purchaser and VSVR to consummate the transactions contemplated by the Asset
Purchase Agreement and as consideration for the benefits accruing to the
Guarantor as a result of the transactions contemplated by the Asset Purchase
Agreement.
NOW, THEREFORE, in consideration of the premises contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
Section 1. GUARANTY OF PAYMENT AND PERFORMANCE OF OBLIGATIONS. The
Guarantor hereby unconditionally guaranties to the Purchaser and VSVR the
payment in full of each Obligation (as hereinafter defined), when and as such
Obligation becomes due and payable, including all Obligations which would become
due but for the operation of the automatic stay pursuant to (beta)362(a) of the
Federal Bankruptcy Code and the operation of (beta)(beta)502(b) and 506(b) of
the Federal Bankruptcy Code. As used herein, "Obligations" means all
indebtedness, obligations and liabilities of Promptus to the Purchaser, VSVR and
their Affiliates, existing on the date of this Guaranty or arising thereafter,
direct or indirect, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising under or pursuant to Section
12.1(vi) of the Asset Purchase Agreement or Section 12.1(i) of the Asset
Purchase Agreement insofar as the relevant failure or breach arises in respect
of the representations and warranties contained in the first sentence of Section
5.9 of the Asset Purchase Agreement (and subject to the limitations set forth in
Section 12.3(c) of the Asset Purchase Agreement). The Guarantor agrees that if
Promptus shall fail to pay any Obligation when and as such Obligation shall be
due and payable, then the Guarantor will make such payment of such Obligation in
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funds immediately available to the Purchaser and/or VSVR, as applicable. This
Guaranty is an absolute, unconditional and continuing guaranty of the full and
punctual payment by Promptus of the Obligations and not of their collectibility
only, and is in no way conditioned upon any requirement that the Purchaser
and/or VSVR first attempt to collect any of the Obligations from Promptus or
resort to any security or other means of obtaining payment of the Obligations
that the Purchaser and/or VSVR now have or may acquire after the date hereof, or
upon any other contingency whatsoever. Payments by the Guarantor hereunder may
be required by the Purchaser and/or VSVR on any number of occasions.
Section 2. GUARANTOR'S FURTHER AGREEMENTS TO PAY. The Guarantor
further agrees, as the principal obligor and not as the guarantor only, to pay
to the Purchaser and/or VSVR forthwith upon demand by such Person (as such term
is defined in the Asset Purchase Agreement) in funds immediately available to
such Person, all costs and expenses (including court costs and reasonable legal
expenses) incurred or expended by such Person in connection with collecting
under this Guaranty and the enforcement hereof, together with interest on
amounts recoverable under this Guaranty from the date that such amounts have
become due and payable under the Asset Purchase Agreement, as finally determined
in accordance with the provisions of the Asset Purchase Agreement, provided that
the maximum amount of interest that may be charged to or collected from the
Guarantor under this Guaranty shall be absolutely limited to, and shall in no
event exceed, the maximum amount of interest that could lawfully be charged or
collected under applicable law.
Section 3. TERMINATION OF GUARANTY. The obligations of the Guarantor
under this Guaranty shall continue in full force and effect until the
Obligations are finally paid and satisfied in full, provided that this Guaranty
shall continue to be effective or shall be reinstated, as the case may be, if at
any time payment of any of the Obligations is rescinded or must otherwise be
restored or returned upon the bankruptcy, insolvency, or reorganization of
Promptus, or otherwise, as though such payment had not been made or other
satisfaction occurred. No invalidity, irregularity or unenforceability by reason
of the federal Bankruptcy Code or any insolvency or other similar law, or any
law or order of any government or agency thereof purporting to reduce, amend or
otherwise affect the Obligations shall impair, affect, or be a defense to or
claim against the obligations of the Guarantor under this Guaranty.
Section 4. WAIVERS BY GUARANTOR; FREEDOM TO ACT OF PURCHASER AND
VSVR. The Guarantor agrees that the Obligations will be paid strictly in
accordance with their respective terms, regardless of any law, regulation or
order now or hereafter in effect in any jurisdiction affecting any of such terms
or the rights of the Purchaser and/or VSVR with respect thereto. The Guarantor
waives promptness, diligence, presentment, demand, protest, notice of
acceptance, notice of any Obligations incurred and all other notices of any
kind, other than demand for payment hereunder, and all defenses which may be
available by virtue of any valuation, stay, moratorium law or other similar law
now or hereafter in effect, any right to require the marshalling of assets of
Promptus or any other entity or other Person (as defined in the Asset Purchase
Agreement) primarily or secondarily liable with respect to any of the
Obligations, and all suretyship defenses generally. Without limiting the
generality of the foregoing, the Guarantor agrees to the provisions of any
instrument evidencing, securing or otherwise executed in connection with any
Obligation and agrees that the obligations of the Guarantor hereunder shall not
be released or discharged, in whole or in part, or otherwise affected by (i) the
failure of the Purchaser and/or VSVR to assert any claim or demand or to enforce
any right or remedy against Promptus or any other entity or other Person
primarily or secondarily liable with respect to any of the Obligations; (ii) any
extensions, compromise, consolidation or renewals of
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any Obligation; (iii) any change in the time, place or manner of payment of any
of the Obligations or any rescissions, waivers, compromise, consolidation,
amendments or modifications of any of the terms or provisions of the Asset
Purchase Agreement or any other agreement evidencing, securing or otherwise
executed in connection with any of the Obligations; (iv) the addition,
substitution or release of any entity or other Person primarily or secondarily
liable for any Obligation; (v) the adequacy of any rights which the Purchaser
and/or VSVR may have against any collateral security or other means of obtaining
repayment of any of the Obligations; (vi) the impairment of any collateral
securing any of the Obligations, including without limitation the failure to
perfect or preserve any rights which the Purchaser and/or VSVR might have in
such collateral security or the substitution, exchange, surrender, release, loss
or destruction of any such collateral security; or (vii) any other act or
omission which might in any manner or to any extent vary the risk of the
Guarantor or otherwise operate as a release or discharge of the Guarantor, all
of which may be done without notice to the Guarantor. Notwithstanding the
foregoing, the Guarantor shall not be bound by any amendment, waiver or
modification of any provision of the Asset Purchase Agreement which is made
without its consent. Any such consent shall not be unreasonably withheld or
delayed and such consent shall be deemed to have been given if Guarantor does
not respond to any request for consent within ten (10) days of receipt of such
request. To the fullest extent permitted by law, the Guarantor hereby expressly
waives any and all rights or defenses arising by reason of (A) any "one action"
or "anti-deficiency" law which would otherwise prevent the Purchaser and/or VSVR
from bringing any action, including any claim for a deficiency, or exercising
any other right or remedy (including any right of set-off), against the
Guarantor before or after the Purchaser's and/or VSVR's commencement or
completion of any action, whether judicially, by exercise of power of sale or
otherwise, or (B) any other law which in any other way would otherwise require
any election of remedies by the Purchaser and/or VSVR.
Section 5. PROMPTUS' DEFENSES AVAILABLE TO GUARANTOR.
Notwithstanding anything to the contrary contained herein, but without in any
way affecting the Guarantor's waiver of suretyship defenses generally pursuant
to Section 4, the Guarantor shall be entitled to rely on any defenses to the
payment of any Obligation that Promptus is entitled to rely on pursuant to the
Asset Purchase Agreement, other than any defenses that are personal to Promptus
such as lack of capacity or authority or discharge in bankruptcy.
Section 6. UNENFORCEABILITY OF OBLIGATIONS AGAINST PROMPTUS. If for
any reason Promptus has no legal existence or is under no legal obligation to
discharge any of the Obligations, or if any of the Obligations have become
irrecoverable from Promptus by reason of Promptus' insolvency, bankruptcy or
reorganization or by other operation of law or for any other reason, this
Guaranty shall nevertheless be binding on the Guarantor to the same extent as if
the Guarantor at all times had been the principal obligor on all such
Obligations. In the event that acceleration of the time for payment or
performance of any of the Obligations is stayed upon the insolvency, bankruptcy
or reorganization of Promptus, or for any other reason, all such amounts
otherwise subject to acceleration under the terms of the Asset Purchase
Agreement or any other agreement evidencing, securing or otherwise executed in
connection with any Obligation shall be immediately due and payable by the
Guarantor.
Section 7. SUBROGATION. Until the final payment and performance in
full of all of the Obligations: (i) the Guarantor shall not exercise any rights
against Promptus arising as a result of payment or performance by the Guarantor
hereunder, by way of subrogation, reimbursement, restitution, contribution or
otherwise, and will not prove any such claim in competition with the Purchaser
and/or VSVR in respect of any payment hereunder in any bankruptcy, insolvency or
reorganization case or proceedings of any nature;
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(ii) the Guarantor will not, as a result of payment or performance by the
Guarantor hereunder, claim any setoff, recoupment or counterclaim against
Promptus in respect of any liability of the Guarantor to Promptus; and (iii) the
Guarantor waives any benefit of and any right to participate in any collateral
security which may be held by the Purchaser and/or VSVR or in respect of which
the Purchaser and/or VSVR may have any rights.
Section 8. FURTHER ASSURANCES. The Guarantor agrees to do all such
things and execute all such documents as the Purchaser and/or VSVR may consider
necessary or desirable to give full effect to this Guaranty and to perfect and
preserve the rights and powers of the Purchaser and VSVR hereunder. The
Guarantor acknowledges and confirms that the Guarantor itself has established
its own adequate means of obtaining from Promptus on a continuing basis all
information desired by the Guarantor concerning the financial condition of
Promptus and that the Guarantor will look to Promptus and not to the Purchaser
or VSVR in order for the Guarantor to keep adequately informed of changes in the
financial condition of Promptus.
Section 9. REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR. The
Guarantor represents and warrants to the Purchaser and VSVR as follows:
Section 9.1. Organizations; Authority. The Guarantor is a
corporation validly existing and in good standing under the laws of its
jurisdiction of organization with corporate power and authority to enter into
this Guaranty and to perform its obligations hereunder.
Section 9.2. Binding Effect. This Guaranty has been duly
authorized, executed and delivered by the Guarantor and constitutes the legal,
valid and binding obligation of the Guarantor enforceable against it in
accordance with its terms, subject to bankruptcy, insolvency or similar laws
affecting creditors' rights generally or by equitable principles relating to the
availability of remedies.
Section 9.3. Non-Contravention. Neither the execution and
delivery of this Guaranty by the Guarantor nor the consummation by the Guarantor
of the transactions contemplated hereby will constitute a violation of, or be in
conflict with, or constitute or create a default under, or result in the
creation or imposition of any Encumbrance (as defined in the Asset Purchase
Agreement) upon any property of the Guarantor pursuant to any statute,
regulation, rule, judgment, order, decree, stipulation, injunction, charge or
other restriction of any government, governmental agency or court or other
tribunal or arbitral authority to which the Guarantor or any of its properties
is subject.
Section 10. NOTICES, ETC. All notices, demands and other
communications hereunder shall be in writing or by written telecommunication,
and shall be deemed to have been duly given if delivered personally or if mailed
by certified mail, return receipt requested, postage prepaid, or if sent by
overnight courier, or sent by written telecommunication, as follows:
If to the Purchaser and/or VSVR, to:
VideoServer, Inc.
63 Third Avenue
Burlington, MA 01803
Attention: Paul Criswell, Esq.
Telecopier No. 617-505-2101
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With a copy to:
David L. Engel, Esq.
Bingham, Dana & Gould LLP
150 Federal Street
Boston, MA 02110
Telecopier No. 617-951-8736
If to the Guarantor to:
GTI Corporation
9715 Business Park Avenue
San Diego, CA 92131
Attention: President
Telecopier No. 619-537-2519
With a copy to:
John Rodney, Esq.
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
Telecopier No. 412-355-6501
Any such notice shall be effective (a) if delivered personally, when
received, (b) if sent by overnight courier, when receipted for, (c) if mailed,
five (5) days after being mailed as described above, and (d) if sent by written
telecommunication, when received.
Section 11. ARBITRATION PROVISION. Any dispute, controversy or claim
arising out of or in connection with or relating to this Guaranty or any breach
or alleged breach hereof shall be submitted to and determined and settled by
arbitration in Boston, Massachusetts, or in such other location as the parties
may agree, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the "AAA"). The Board of Arbitration shall be composed
of one arbitrator, to be mutually agreed upon by the parties in good faith, or,
if the parties cannot agree, the arbitrator shall be selected by the AAA in
accordance with its standard procedures in such cases. The arbitration award
shall be final and binding on the parties to the arbitration and judgment
thereon may be entered in any court having jurisdiction, or application may be
made to any such court for confirmation of such award or a judicial acceptance
of such award or other legal remedy, as the case may be. If under applicable
federal or state law, a claim dispute shall not be subject to arbitration, then
either party may reject arbitration so that all claims and disputes shall be
subject to resolution in a single proceeding and a single forum.
Section 12. AMENDMENTS, WAIVERS, ETC. No provision of this Guaranty
can be changed, waived, discharged or terminated except by an instrument in
writing signed by the Purchaser, VSVR and the Guarantor expressly referring to
the provision of this Guaranty to which such instrument relates. No such waiver
shall extend to, affect or impair any right with respect to any Obligation that
is not expressly dealt
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with therein. No course of dealing or delay or omission on the part of the
Purchaser or VSVR in exercising any right shall operate as a waiver thereof or
otherwise be prejudicial thereto.
Section 13. WAIVER OF JURY TRIAL. THE GUARANTOR, THE PURCHASER AND
VSVR EACH HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR
CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS GUARANTY, ANY RIGHTS OR
OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY OF SUCH RIGHTS OR OBLIGATIONS.
Section 14. SURVIVAL OF BANKRUPTCY. This Guaranty shall survive the
insolvency of the Guarantor and the commencement of any case or proceeding by or
against THE Guarantor under the federal Bankruptcy Code or other federal, state,
provincial or other applicable bankruptcy, insolvency or reorganization
statutes.
Section 15. COUNTERPARTS. This Guaranty may be executed in any
number of counterparts, but all of such counterparts together shall constitute
but one and thE same agreement. In making proof of this Guaranty, it shall not
be necessary to produce or account for more than one counterpart hereof signed
by the party against whom enforcement is sought.
Section 16. HEADINGS; CONSTRUCTION. The descriptive section headings
have been inserted for convenience of reference only and do not define or limit
the provisions hereof. The language used in this Guaranty will be deemed to be
the language chosen by the parties to express their mutual intent, and no rule
of strict construction will be applied against any party.
Section 17. SEVERABILITY. In the event any provision of this
Guaranty shall for any reason be held to be invalid, illegal or unenforceable in
any respect, sUCH invalidity, illegality or unenforceability shall not affect
any other term or provision hereof, and this Guaranty shall be interpreted and
construed as if such provision to the extent the same shall have been invalid,
illegal or unenforceable had never been contained herein. The parties hereto
agree that they will negotiate in good faith to replace any provision hereof so
held invalid, illegal or unenforceable with a valid provision that is as similar
as possible in substance to the invalid, illegal or unenforceable provision.
Section 18. ACKNOWLEDGMENT. The Guarantor acknowledges receipt of a
copy of this Guaranty.
Section 19. GOVERNING LAW. THIS GUARANTY IS INTENDED TO TAKE EFFECT
AS A SEALED INSTRUMENT TO BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT GIVING EFFECT TO ITS CHOICE
OF LAW RULES).
Section 20. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
successorS and permitted assigns. Notwithstanding the foregoing, this Guaranty
may not be assigned (by operation of law or otherwise) by the Guarantor.
Notwithstanding the foregoing, this Guaranty may not be assigned (by operation
of law or otherwise) by the Purchaser or VSVR to a third party other than a
Subsidiary or Affiliate of the Purchaser or VSVR, and the Guarantor's
obligations under this Guaranty to any such Subsidiary or Affiliate shall cease,
without affecting the Guarantor's obligations under this Guaranty to the
Purchaser
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and VSVR, at such time as such Person ceases to be a Subsidiary or
Affiliate of the Purchaser or VSVR.
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to
be duly executed by their proper and duly authorized officers as of the day
first above written.
The Guarantor:
GTI CORPORATION
By: /S/ ALBERT J. HUGO-MARTINEZ
------------------------------------
Name: Albert J. Hugo-Martinez
Title: President & CEO
Accepted by the Purchaser and VSVR:
VIDEOSERVER, INC.
By: /S/ ROBERT CASTLE
--------------------------
Name: Robert Castle
Title: President & CEO
VIDEOSERVER ACQUISITIONS CORP.
By: /S/ ROBERT CASTLE
--------------------------
Name: Robert Castle
Title: President & CEO
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REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is made as of April 25, 1997, by and between Promptus
Communications, Inc., a Rhode Island corporation ("Promptus"), and VideoServer
Inc., a Delaware corporation (the "Company").
This Agreement is made pursuant to an Asset Purchase Agreement,
dated as of March 25, 1997 (as in effect from time to time, the "Asset
Agreement"), by and among Promptus, the Company, and VideoServer Acquisitions
Corp., a Delaware corporation and wholly-owned subsidiary of the Company
("VSVR"), whereunder Promptus has sold certain assets to VSVR, and the Company
has issued shares of its Common Stock to Promptus as part of the consideration
for such assets. Except as otherwise defined herein, the capitalized terms used
in this Agreement shall have the meanings ascribed to them in the Asset
Agreement.
In order to induce Promptus to enter into the Asset Agreement and to
consummate the transactions contemplated thereby, the Company has agreed to
provide the registration rights set forth in this Agreement.
The parties hereto agree as follows:
1. Definitions.
"Asset Agreement" has the meaning specified in the preamble.
"Business Day" means any day that the New York Stock Exchange is
open for trading.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Common Stock, $0.01 par value per share, of
the Company.
"Company" has the meaning specified in the preamble.
"Person" means an individual, partnership, corporation, limited
liability company, association, trust, joint venture, unincorporated
organization, or any government, governmental department or agency or political
subdivision thereof.
"Piggyback Registration" has the meaning specified in Section 3(a).
"Promptus" has the meaning specified in the preamble.
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"Registrable Securities" means (i) any Common Stock issued to
Promptus under the Asset Agreement and (ii) any securities issued with respect
to the securities referred to in clause (i) by way of a stock dividend or stock
split or in connection with a combination of shares, reclassification,
recapitalization, merger, consolidation or other reorganization. As to any
particular Registrable Securities, such securities will cease to be Registrable
Securities when they have been distributed to the public through a broker,
dealer or market purchaser in compliance with Rule 144 under the Securities Act
(or any similar rule then in force) or sold pursuant to an effective
registration statement under the Securities Act.
"Registration Expenses" has the meaning specified in Section 5.
"Registration Statement" has the meaning specified in Section 2.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended, or any successor federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
"Underwriter's Maximum Number" means, that number of securities to
which such registration should, in the opinion of the managing underwriters of
such registration in the light of marketing factors, be limited.
"VSVR" has the meaning specified in the preamble.
2. Registration on Form S-3. As promptly as possible following the
Closing (as defined in the Asset Agreement), the Company will prepare and file
with the Commission a registration statement on Form S-3 (or on Form S-1 (or
other comparable form adopted by the Commission) if registration on Form S-3 is
unavailable) (the "Registration Statement") covering all of the Registrable
Securities issued to Promptus on the Closing Date. The Registration Statement
will permit delayed or continuous offerings pursuant to Rule 415 under the
Securities Act. The Company will use its best efforts to cause the Registration
Statement to become effective as soon as practicable.
3. Piggyback Registrations.
(a) Rights to Piggyback.
(i) Subject to the provisions contained in paragraph (b) of this
Section 3, if the Company proposes to register any of its securities under the
Securities Act prior to the effectiveness of any registration pursuant to
Section 2 above either for the Company's own account or for the account of any
of its stockholders (other than Promptus) (each such registration not withdrawn
or abandoned prior to the effective date thereof being herein called a
"Piggyback Registration"), the Company will give written notice to Promptus of
such proposal not later than the earlier to occur of (A) the tenth day following
the receipt by the Company of notice of exercise of any registration rights by
any persons, and (B) the thirtieth day prior to the anticipated filing date of
such Piggyback Registration.
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(ii) Subject to the provisions contained in paragraph (b) of this
Section 3 and in the last sentence of this subparagraph (ii), (A) the Company
will be obligated and required to include in each Piggyback Registration all
Registrable Securities with respect to which the Company shall receive from
Promptus, within fifteen (15) days after the date on which the Company shall
have given written notice of such Piggyback Registration to Promptus pursuant to
Section 3(a)(i) hereof, the written request of Promptus for inclusion in such
Piggyback Registration, and (B) the Company will use its best efforts in good
faith to effect promptly the registration of all such Registrable Securities.
Promptus shall be permitted to withdraw all or any part of its Registrable
Securities from any Piggyback Registration at any time prior to the effective
date of such Piggyback Registration unless Promptus shall have entered into a
written agreement with the Company's underwriters establishing the terms and
conditions under which Promptus would be obligated to sell such securities in
such Piggyback Registration. The Company will not be obligated or required to
include any Registrable Securities in any registration effected solely to
implement an employee benefit plan or a transaction to which Rule 145 of the
Commission is applicable.
(b) Priority on Piggyback Registrations. If a Piggyback Registration
is an underwritten registration, and the managing underwriters shall give
written advice to the Company of an Underwriters' Maximum Number, then: (i) the
Company shall be entitled to include in such registration (A) that number of
securities which the Company proposes to offer and sell for its own account in
such registration and (B) that number of securities which shall have been
requested by any other holders thereof who have registration rights pursuant to
an agreement with the Company which is in effect on the date hereof to be
included in such registration and which securities in the aggregate do not
exceed the Underwriters' Maximum Number; and (ii) if the Underwriters' Maximum
Number exceeds the sum of the number of securities which the Company shall be
required to include in such registration pursuant to clause (i)(B) and the
number of securities which the Company proposes to offer and sell for its own
account in such registration, then the Company may include in such registration
that number of other securities (including Registrable Securities) which persons
(including Promptus) shall have requested be included in such registration and
which shall not be greater than such excess.
(c) Selection of Underwriters. In any Piggyback Registration, the
Company shall (unless the Company shall otherwise agree) have the right to
select the investment bankers and managing underwriters in such registration.
4. Registration Procedures. The Company agrees to use all
commercially reasonable efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof, and
pursuant thereto the Company will as expeditiously as possible:
(a) prepare and file with the Commission such amendments
and supplements to the Registration Statement and the prospectus
used in connection therewith as may be necessary to keep such
registration statement effective until the second anniversary of the
Closing, or such earlier time as all of the Registrable Securities
covered by such registration statement have been sold, and to comply
with the provisions of the Securities Act with respect to the
disposition of all securities covered by the Registration Statement
during such effective period in accordance with the intended methods
of disposition by Promptus set forth in the Registration Statement;
(b) furnish to Promptus such number of copies of the
Registration Statement, each amendment and supplement thereto, the
prospectus included in the Registration Statement (including
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each preliminary prospectus) and such other documents as Promptus
may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by Promptus;
(c) use reasonable efforts to register or qualify the
Registrable Securities under such other securities or blue sky laws
of such states of the United States as Promptus reasonably requests
and do any and all other acts and things which may be reasonably
necessary or advisable to enable Promptus to consummate the
disposition in such jurisdictions of the Registrable Securities
owned by Promptus; provided that the Company will not be required
(i) to qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subparagraph
(c), (ii) to subject itself to taxation in any such jurisdiction or
(iii) to consent to general service of process in any such
jurisdiction;
(d) notify Promptus, at any time when a prospectus
relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the
prospectus included in the Registration Statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of Promptus,
the Company will promptly prepare (and, when completed, give notice
to Promptus) a supplement or amendment to such prospectus so that,
as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not contain an untrue statement of
a material fact or omit to state any fact necessary to make the
statements therein not misleading; provided that upon such
notification by the Company, Promptus will not offer or sell
Registrable Securities until the Company has notified Promptus that
it has prepared a supplement or amendment to such prospectus and
delivered copies of such supplement or amendment to Promptus;
(e) cause all the Registrable Securities to be listed on
each securities exchange on which shares of Common Stock issued by
the Company are then listed;
(f) in connection with any underwritten offering enter
into such customary agreements (including underwriting agreements in
customary form) and take all such other actions as Promptus or the
underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of the Registrable Securities; and
(g) in the event of the issuance of any stop order
suspending the effectiveness of the Registration Statement, or of
any order suspending or preventing the use of any related prospectus
or suspending the qualification of any Registrable Securities
included in the Registration Statement for sale in any jurisdiction,
the Company will use reasonable efforts promptly to obtain the
withdrawal of such order.
5. Registration Expenses. All expenses incident to the Company's
performance of or compliance with this Agreement, including without limitation
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery expenses,
and fees and disbursements of counsel for the Company and all independent
certified public accountants and other Persons retained by the Company, the
Company's internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit or quarterly review, the expense of any
liability insurance for the Company and its board of directors and the expenses
and fees for listing the securities to be registered on
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each securities exchange on which similar securities issued by the Company are
then listed (all such expenses being herein called "Registration Expenses"),
will be borne by the Company. Notwithstanding the foregoing, in no event shall
the Registration Expenses borne by the Company include any underwriting
compensation or discount or any brokerage fees or sales commissions or any
filing fees required to be paid to the National Association of Securities
Dealers, Inc. (other than any fees payable in connection with listing shares of
Common Stock on the Nasdaq Stock Market).
6. Lock-Up Agreement. The Seller hereby agrees not to sell, transfer
or otherwise dispose of any Registrable Securities on or prior to the later of
(a) the date thirty (30) days after the Closing Date and (b) the date the
Registration Statement described in Section 2 hereof becomes effective.
7. Indemnification.
(a) The Company agrees to indemnify, to the extent permitted by law,
Promptus, its officers and directors and each Person who controls Promptus
(within the meaning of the Securities Act) against all losses, claims, damages
and liabilities caused by any untrue or alleged untrue statement of material
fact contained in the Registration Statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, except insofar as the same are
(i) caused by or contained in any information furnished to the Company by
Promptus for use therein, (ii) caused by Promptus' failure to deliver a copy of
the Registration Statement or prospectus or any amendments or supplements
thereto after the Company has furnished Promptus with a sufficient number of
copies of the same, or (iii) caused by Promptus' sale of Registrable Securities
in violation of the proviso to Section 4(d) hereof.
(b) In connection with the Registration Statement, Promptus will
furnish to the Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration statement
or prospectus and, to the extent permitted by law, will indemnify the Company,
its directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages and
liabilities resulting from any untrue or alleged untrue statement of material
fact contained in the Registration Statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue or alleged untrue statement or omission or alleged omission is
attributable (i) to the information furnished by Promptus to the Company in
writing expressly for use in such registration statement or prospectus or
supplement thereto, (ii) the failure by Promptus to deliver a copy of the
Registration Statement or prospectus or any amendments or supplements thereto
after the Company has furnished Promptus with a sufficient number of copies of
the same, or (iii) the sale by Promptus of Registrable Securities in violation
of the proviso to Section 4(d) hereof.
(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii), unless in the reasonable judgment of
such indemnified party's counsel set forth in a written opinion a conflict of
interest between such indemnified and indemnifying parties exists with respect
to such claim, permit such indemnifying party to assume the defense of such
claim with counsel reasonably satisfactory to the indemnified party. If such
defense is assumed, the indemnifying party will not be subject to any liability
for
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any settlement made by the indemnified party without its consent (but such
consent will not be unreasonably withheld). An indemnifying party who is not
entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim. Subject to
the foregoing terms and provisions of this Section 7(c), each indemnifying party
hereunder will reimburse the person entitled to indemnification hereunder for
all legal and other expenses reasonably incurred in connection with
investigating and defending the action or claim for which such indemnified party
seeks indemnification, as such expenses are incurred, provided that such
indemnified party shall have given to the Company a written undertaking to repay
all indemnification amounts paid by the Company to or for the account of such
indemnified party if such party shall be adjudicated to be not entitled to
indemnification under this Section 7.
(d) The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and will survive the transfer of securities.
8. Participation in Underwritten Registrations. No Person may
participate in any offering hereunder which is underwritten unless such Person
(i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements (as provided in Section 4(f)) and (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements; provided, that no holder of Registrable Securities included in any
underwritten registration shall be required to make any representations or
warranties to the Company or the underwriters other than representations and
warranties regarding such holder and such holder's intended method of
distribution.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with the
rights granted to the holders of Registrable Securities under this Agreement.
(b) No Implied Rights or Remedies. Except as otherwise expressly
provided herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or to give any Person, other than the parties hereto
and their respective shareholders, any rights or remedies under or by reason of
this Agreement.
(c) Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors and
permitted assigns. Neither this Agreement nor the obligations of any party
hereunder shall be assignable or transferable by such party without the prior
written consent of the other party hereto.
(d) Severability. In the event that any covenant, condition, or
other provision herein contained is held to be invalid, void, or illegal by any
court of competent jurisdiction, the same shall be deemed to be severable from
the remainder of this Agreement and shall in no way affect, impair, or
invalidate any other covenant, condition, or other provision contained herein.
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(e) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) Sections and Section Headings. The headings of sections and
subsections are for reference only and shall not limit or control the meaning
thereof.
(g) Governing Law. The validity and construction of this Agreement
shall be governed by the internal laws (and not the choice-of-law rules) of the
Commonwealth of Massachusetts.
(h) Waiver of Jury Trial. EACH PARTY HERETO WAIVES ITS RIGHT TO A
JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AGREEMENT, ANY AGREEMENT, CONTRACT OR OTHER DOCUMENT OR
INSTRUMENT EXECUTED IN CONNECTION HEREWITH, OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY.
(i) Waiver of Certain Damages. EACH OF THE PARTIES HERETO TO THE
FULLEST EXTENT PERMITTED BY LAW IRREVOCABLY WAIVES ANY RIGHTS THAT THEY MAY HAVE
TO PUNITIVE, SPECIAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES IN RESPECT OF ANY
LITIGATION BASED UPON, OR ARISING OUT OF, THIS AGREEMENT OR ANY RELATED
AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS OR ACTIONS OF
ANY OF THEM RELATING THERETO.
(j) Notices. All notices, demands and other communications hereunder
shall be in writing or by written telecommunication, and shall be deemed to have
been duly given if (i) delivered personally (effective upon delivery), (ii)
mailed by certified mail, return receipt requested, postage prepaid (effective
five business days after dispatch), (iii) sent by a reputable, established
courier service that guarantees next business day delivery (effective the next
business day), or (iv) sent by telecopier followed within 24 hours by
confirmation by one of the foregoing methods (effective upon receipt of the
telecopy in complete, readable form), addressed as follows (or to such other
address as the recipient party may have furnished to the other party for the
purpose pursuant to this Section 9(j):
If to the Company:
VideoServer, Inc.
63 Third Avenue
Burlington, MA 01803
Attention: Paul Criswell, Esq.
Telecopier No. 617-505-2101
With a copy to:
David L. Engel, Esq.
Bingham, Dana & Gould LLP
150 Federal Street
Boston, MA 02110
Telecopier No. 617-951-8736
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If to Promptus:
Promptus Communications, Inc.
207 High Point Avenue
Portsmouth Business Park
Portsmouth, RI 02871
Attention: Chairman
Telecopier No.
With a copy to:
John Rodney, Esq.
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
and to
Margaret D. Farrell, Esq.
Hinkley, Allen & Snyder
1500 Fleet Center
Providence, RI 02903
(k) Entire Agreement. This Agreement contains the entire
understanding of the parties, supersedes all prior agreements and understandings
relating to the subject matter hereof and shall not be amended except by a
written instrument hereafter signed by all of the parties hereto.
(l) Further Assurances. The parties agree to take such reasonable
steps and execute such other and further documents as may be necessary or
appropriate to cause the terms and conditions contained herein to be carried
into effect.
(m) Public Statements or Releases. Each of the parties hereto agrees
that prior to the Closing of the Asset Agreement no party to this Agreement will
make, issue or release any public announcement, statement or acknowledgment of
the existence of, or reveal the status of, this Agreement or the transactions
provided for herein, without first obtaining the consent of the other party
hereto. Nothing contained in this Section 9(m) shall prevent either party from
making such disclosures as such party may consider necessary to satisfy such
party's legal or contractual obligations.
(n) Expenses. Except as expressly set forth in this Agreement, all
expenses of the preparation, execution and consummation of this Agreement and of
the transactions contemplated hereby, including, without limitation, attorneys',
accountants' and outside advisers' fees and disbursements, shall be borne by the
party incurring such expenses.
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(o) Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rule of strict construction will be applied against any party.
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IN WITNESS WHEREOF, the parties hereto have executed this
Registration Rights Agreement as of the date first above written.
PROMPTUS:
PROMPTUS COMMUNICATIONS, INC.
By: /S/ AURELEO LUCCI
------------------------------
Name: Aureleo Lucci
Title: CEO
COMPANY:
VIDEOSERVER, INC.
By: /S/ PAUL CRISWELL
---------------------------------
Name: Paul Criswell
Title: General Counsel
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