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UNITED STATES
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 2, 2000
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CRAY INC.
(Exact name of registrant as specified in its charter)
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Washington 0-26820 93-0962605
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
411 First Avenue South, Suite 600
Seattle, WA 98104-2860
(Address of principal executive offices)
Registrant's telephone number, including area code: (206) 701-2000
Registrant's facsimile number, including area code: (206) 701-2500
Former Name: Tera Computer Company
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OF ASSETS
Cray Inc., formerly Tera Computer Company (the "Company"), has acquired
certain assets of the Cray Research business unit operations from Silicon
Graphics, Inc. ("SGI"). The tangible assets and operations acquired consists
primarily of three buildings and associated real property, inventory, furniture,
fixtures and equipment and collateral records and materials. In addition the
Company acquired certain related intellectual property rights, including
patents, know-how, trademarks and trade names, licenses to other patents and
know-how and rights under certain contracts and causes of action. The Company
assumed certain liabilities related to the assets acquired, including
obligations under certain contracts, certain employment and benefit obligations
and certain product liability claims. SGI has retained service contracts related
to Cray products until the contracts terminate or are assigned to the Company.
The Company has agreed to perform the obligations under these services contracts
in return for monthly fees from SGI. The Company did not acquire any cash or
trade receivables and did not assume any trade payables or indebtedness.
The Company intends to continue to offer and support the Cray business
unit's supercomputer products, to continue its current product development
programs and to integrate these operations with the Company's current
supercomputer operations.
The Company paid to SGI $15,000,000 in cash, issued 1,000,000 shares of
Common Stock and issued a nine-month non-interest bearing promissory note in the
amount of $36,318,000. The amount of the note is subject to post-closing
adjustment based upon an audit of the closing balance sheet. The cash paid at
closing was funded from the Company's available cash balances. The Company
expects to pay the promissory note from funds generated from business
operations. The amount of consideration paid in this acquisition was determined
in arms-length negotiations between the Company and SGI.
The closing documents were signed on April 2, 2000, with SGI responsible
for all operations of the Cray Research business unit through March 31, 2000 and
the Company responsible for all operations commencing April 1, 2000. The Company
will record the acquisition as of April 1, 2000.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
The Company will file the financial statements of the business acquired
with the Securities and Exchange Commission on or before June 16, 2000.
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(b) Pro Forma Financial Information.
The Company will file the pro forma financial information with the
Commission on or before June 16, 2000.
(c) Exhibits.
2.1 Asset Purchase Agreement between SGI and the Company, dated as
of March 1, 2000
2.2 Amendment No. 1 to the Asset Purchase Agreement, dated of March
31, 2000
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
TERA COMPUTER COMPANY
By: /s/ KENNETH W. JOHNSON
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Kenneth W. Johnson
Vice President - Finance
April 17, 2000
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EXHIBIT INDEX
Exhibits.
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2.1 Asset Purchase Agreement between SGI and the Company, dated as
of March 1, 2000
2.2 Amendment No. 1 to the Asset Purchase Agreement, dated of March
31, 2000
The following exhibits to the Asset Purchase Agreement have been omitted
and will be provided to the Commission upon request:
Exhibit A: Form of Promissory Note
Exhibit B: Form of Technology Agreement
Exhibit C: Form of Transition Services Agreement
Exhibit D: Form of Services Contract Agreement
Exhibit E: Form of Registration Rights Agreement,
The following schedules to the Asset Purchase Agreement have been
omitted and will be provided to the Commission upon request:
Schedule 2.1(a) -- Real Estate
Schedule 2.1(b) -- FF&E
Schedule 2.1(e) -- Contracts
Schedule 2.1(j) -- Causes of Action
Schedule 2.2(h) -- Other Excluded Assets
Schedule 3.3 -- Allocation of Purchase Price
Schedule 4.1 -- Adjustments to Current Balance Sheet Categories
Schedule 6.1 -- List of Offered Employees
Schedule 6.3 -- Severance Benefits (Buyer)
Schedule 10.2 -- Qualification to do Business Jurisdictions
Schedule 10.5 -- Conflicting Agreements
Schedule 10.6 -- Seller's Consents and Approvals
Schedule 10.7 -- Actions, Suits and Proceedings
Schedule 10.8 -- Material Violations
Schedule 10.9 -- Environmental Matters
Schedule 10.10 -- Employees
Schedule 10.11 -- Employee Benefit Plans
Schedule 10.14 -- Licenses and Permits
Schedule 10.17 -- Status of Contracts
Schedule 10.19 -- Changes or Events
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Schedule 11.5 -- Buyer's Consents
The following schedules to the Technology Agreement have been omitted
and will be provided to the Commission upon request:
Schedule A -- Assigned Patent Matters
Schedule B -- Licensed Patent Matters
Schedule C -- Non-Patent Intellectual Property Rights in CHVP
Assigned to Purchaser
Schedule D -- Non-Patent Intellectual Property Rights in
CHMPP Licensed to Purchaser
Schedule E -- Non-Patent Intellectual Property Rights in SV2
Assigned to Purchaser
Schedule F -- Non-Patent Intellectual Property Rights in
SV2/Non-Exclusive Development License
Schedule G -- Software and Documentation
Schedule H -- UNICOS
Schedule I -- IRIX
Schedule J -- Third Party Contracts
Schedule K -- Trademarks
Schedule L -- Excluded SGI Technology from SV2 License
Schedule M -- Confidentiality Provisions
The following schedules to the Transition Services Agreement have
been omitted and will be provided to the Commission upon request:
Schedule A -- Services Provided to Cray Inc.
Schedule B -- Services Provided to SGI
The following schedules to the Services Contract Agreement have been
omitted and will be provided to the Commission upon request:
Schedule A -- Services Contracts
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EXHIBIT 2.1
EXECUTION COPY
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ASSET PURCHASE AGREEMENT
BETWEEN
SILICON GRAPHICS, INC.
AND
TERA COMPUTER COMPANY
DATED AS OF MARCH 1, 2000
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<TABLE>
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TABLE OF CONTENTS
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1. DEFINITIONS 1
2. PURCHASE AND SALE OF ASSETS AND ASSUMPTION OF LIABILITIES 2
2.1 Generally 2
2.2 Excluded Assets 4
2.3 Assumption of Liabilities 4
3. PURCHASE PRICE 5
3.1 Generally 5
3.2 Payment of Purchase Price 5
3.3 Allocation of Purchase Price 6
4. NET ASSET VALUE DETERMINATION 7
4.1 Net Asset Categories 7
4.2 Procedures 7
5. CLOSING 8
6. LABOR AND EMPLOYMENT MATTERS 8
6.1 Offers of Employment 8
6.2 Offered Employees 9
6.3 Transferred Employees 10
7. PRORATIONS 11
8. OTHER AGREEMENTS 11
9. TITLE EXAMINATION 11
9.1 Delivery of Commitments 11
9.2 Survey 12
9.3 Title Objections 12
9.4 Investigations of Real Estate 12
9.5 Environmental Assessment Report 12
9.6 HazCon Survey 13
10. REPRESENTATIONS AND WARRANTIES OF SELLER 13
10.1 Corporate Organization 13
10.2 Qualification to do Business 13
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10.3 Corporate Power 13
10.4 Corporate Authorization 13
10.5 Conflicting Agreements 13
10.6 Consents and Approvals 14
10.7 Actions, Suits, Proceedings 14
10.8 No Material Violations 14
10.9 Environmental Matters 15
10.10 Employees 16
10.11 Employee Plans 16
10.12 Title to and Condition of Real Estate 16
10.13 Title to and Condition of Personal Property 16
10.14 Licenses and Permits 17
10.15 Brokers and Finders 17
10.16 Certification of Nonforeign Status 17
10.17 Status of Contracts 17
10.18 Current Balance Sheet 17
10.19 Absence of Certain Changes or Events 17
10.20 Intellectual Property Rights 18
10.21 Books and Records 18
10.22 Inventories 19
10.23 Reliance 19
10.24 Accuracy of Representations and Warranties 19
10.25 Limitation of Warranties 19
11. REPRESENTATIONS AND WARRANTIES OF BUYER 19
11.1 Corporate Organization 19
11.2 Corporate Power 19
11.3 Corporate Authorization 19
11.4 Conflicting Agreements 20
11.5 Consents and Approvals 20
11.6 Financial Information 20
11.7 Capital Stock 20
11.8 Brokers and Finders 21
12. COVENANTS OF SELLER 21
12.1 Access to Properties, Books and Records 21
12.2 Negative Covenants 21
12.3 Affirmative Covenants 22
12.4 No Negotiations With Others 22
13. JOINT COVENANTS 23
13.1 HSR Act Filing 23
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<TABLE>
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13.2 Other Governmental Consents 23
13.3 Best Efforts; No Inconsistent Action 23
13.4 Public Announcements 24
13.5. Future Technology 24
13.6 Supplements to Schedules 24
13.7 Identification of Contracts 24
14. CONDITIONS TO OBLIGATION OF BUYER TO CLOSE 25
14.1 Representations and Warranties 25
14.2 No Adverse Change 25
14.3 Compliance and Performance 25
14.4 Officer's Certificate 25
14.5 Instruments of Conveyance and Transfer 25
14.6 Consents of Third Parties 25
14.7 HSR Act and Governmental Approvals 25
14.8 Legal Opinion 26
14.9 Copies of Documents 26
14.10 No Legal Actions 26
14.11 Transaction Documents 26
14.12 Financial Statements 26
14.13 UCC Search 26
14.14 Environmental Assessment 26
15. CONDITIONS TO OBLIGATION OF SELLER TO CLOSE 27
15.1 Representations and Warranties 27
15.2 Compliance and Performance 27
15.3 Officer's Certificate 27
15.4 Consents of Third Party 27
15.5 HSR and Governmental Approvals 27
15.6 Qualification To Do Business 27
15.7 Legal Opinion 27
15.8 No Legal Actions 27
15.9 Transaction Documents 28
16. POST-CLOSING MATTERS 28
16.1 Post-Closing Access; Cooperation 28
16.2 Non-Solicitation 28
16.3 Restrictions on Sales of Assets 28
17. BULK TRANSFER LAW 30
18. TAXES, FEES AND OTHER EXPENSES 30
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<TABLE>
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18.1 Taxes and Fees 30
18.2 Expenses 30
19. INDEMNIFICATION BY SELLER 30
19.1 Generally 30
19.2 Limits on Indemnification by Seller 31
19.3 Exclusive Remedy 31
19.4 Procedures 32
19.5 Settlement and Compromise 32
20. INDEMNIFICATION BY BUYER 32
20.1 Generally 32
19.2 Limits on Indemnification by Seller 33
19.3 Exclusive Remedy 33
20.4 Procedures 33
20.5 Settlement and Compromise 34
21. TERMINATION OF AGREEMENT 34
21.1 Mutual Consent 34
21.2 Breach of Agreement 34
21.3 Governmental Approvals 34
21.4 Delayed Closing 34
21.5 Government Action 34
22. CONFIDENTIALITY 35
23. ASSIGNMENT 35
24. COVENANT OF FURTHER ASSURANCES 35
25. SURVIVAL OF REPRESENTATIONS AND WARRANTIES 35
26. ENTIRE AGREEMENT 35
27. AMENDMENT AND WAIVER 35
28. CHOICE OF LAW 36
29. RESOLUTION OF DISPUTES 36
29.1 Negotiation 36
29.2 Mediation 36
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29.3 Litigation 36
29.4 Confidentiality 36
30. SEVERABILITY 36
31. COUNTERPARTS 37
32. NOTICES 37
33. BREACH; EQUITABLE RELIEF 38
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EXHIBITS
Exhibit A -- Form of Promissory Note
Exhibit B -- Form of Technology Agreement
Exhibit C -- Form of Transition Services Agreement
Exhibit D -- Form of Services Contract Agreement
Exhibit E -- Form of Registration Rights Agreement
SCHEDULES
Schedule 2.1(a) -- Real Estate
Schedule 2.1(b) -- FF&E
Schedule 2.1(e) -- Contracts
Schedule 2.1(j) -- Causes of Action
Schedule 2.2(h) -- Other Excluded Assets
Schedule 3.3 -- Allocation of Purchase Price
Schedule 4.1 -- Adjustments for Closing Balance Sheet
Schedule 6.1 -- Offered Employees
Schedule 6.3(f) -- Severance Benefits
Schedule 10.2 -- Qualification to do Business
Schedule 10.5 -- Conflicting Agreements
Schedule 10.6 -- Seller's Consents and Approvals
Schedule 10.7 -- Actions, Suits, Proceedings
Schedule 10.8 -- Material Violations
Schedule 10.9 -- Environmental Matters
Schedule 10.10 -- Employees
Schedule 10.11 -- Employee Benefit Plans
Schedule 10.14 -- Licenses and Permits
Schedule 10.17 -- Material Defaults
Schedule 10.19 -- Certain Changes
Schedule 11.5 -- Buyer's Consents
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is dated as of March 1, 2000, by and
between TERA COMPUTER COMPANY, a Washington corporation ("Buyer"), and SILICON
GRAPHICS, INC., a Delaware corporation ("Seller").
RECITALS
WHEREAS, Seller designs, develops, markets and sells the Products (as
hereinafter defined) and provides support and maintenance services in connection
therewith (the "Business"); and
WHEREAS, Seller desires to sell and Buyer desires to purchase certain of
the assets of Seller utilized in the Business on the terms and subject to the
conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual covenants and conditions contained herein, the parties hereby agree as
follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the following meanings:
"FF&E" shall mean (i) office equipment used solely by the Transferred
Employees, (ii) office furniture located at the Real Estate, and (iii) all
equipment, including data center computers and equipment, used solely in the
development and manufacture of the Products.
"Intellectual Property Rights" shall have the meaning set forth in the
Technology Agreement.
"Inventory" shall mean all inventories of raw material, work in process,
finished goods, spare parts and replacement and component parts related solely
to the Products, wherever located, including finished goods delivered to
customers awaiting acceptance, and related replacement and component parts at
customer sites.
"knowledge" shall mean, as it relates to Seller, the actual knowledge of
Bob Bishop, Kenneth Coleman, Betsy Rafael, Jorge Helmer and Sandra Escher,
without investigation.
"Material Adverse Effect" means a material adverse effect on the results
of operations, financial position, Assets or prospects of the Business, and
"Material Adverse Change" means any change that has resulted, will result or is
likely to result in a Material Adverse Effect.
"Permits" shall mean all franchises, permits, licenses, qualifications,
municipal and other approvals, authorizations, orders, consents and other rights
from, and filings with, any governmental authority of any jurisdiction worldwide
relating to the conduct of the Business.
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"Products" shall mean the existing product lines for the CRAY Y-MP, CRAY
C90, CRAY J90, CRAY T3D, CRAY T3E, CRAY T90, CRAY SV1, and future CRAY SV2
computers.
"Subsidiary" means, as to Buyer or Seller, as the case may be, any
corporation, limited liability company, association or other business entity in
which Buyer or Seller, as the case may be, or one or more of its Subsidiaries,
or Buyer or Seller, as the case may be, and one or more of its Subsidiaries,
owns sufficient equity or voting interests to enable it or them (as a group)
ordinarily, in the absence of contingencies, to elect a majority of the
directors (or persons performing similar functions) of such entity, and any
partnership or joint venture if more than a 50% interest in the profits or
capital thereof is owned by Buyer or Seller, as the case may be, or one or more
of its Subsidiaries, or Buyer or Seller, as the case may be, and one or more of
its Subsidiaries.
2. PURCHASE AND SALE OF ASSETS AND ASSUMPTION OF LIABILITIES
2.1 Generally. On the terms and subject to the conditions of this
Agreement, Seller agrees to sell, transfer, convey and deliver (or cause its
Subsidiaries to sell, transfer, convey and deliver) to Buyer (or to Buyer's
Subsidiaries as Buyer may direct), and Buyer agrees to purchase (or cause its
Subsidiaries to purchase) from Seller (or Seller's Subsidiaries), on and as of
the Closing Date (as defined in Section 5 hereof), all of the Assets (as defined
below) other than the Excluded Assets (as defined in Section 2.2 hereof). The
Assets shall be defined as the following:
(a) The following facilities of Seller located in Chippewa Falls,
Wisconsin: (i) the real property located at 1050 Lowater Road as legally
described in Schedule 2.1(a), (ii) the real property located at 1100
Lowater Road as legally described in Schedule 2.1(a), and (iii) the real
property located at 1000 Halbleib Road as legally described in Schedule
2.1(a) (collectively, the "Real Estate"), and all buildings, structures,
installations, fixtures and other improvements situated thereon and all
easements, rights of way and other rights, interests and appurtenances
of Seller therein or thereunto pertaining (hereinafter collectively
referred to as the "Facilities");
(b) All FF&E existing as of the Closing Date, including without
limitation the FF&E listed on Schedule 2.1(b), other than any FF&E
disposed of pursuant to Section 12.2(b) after the date hereof;
(c) All rights of Seller under any warranty or guarantee by any
manufacturer, supplier or other transferor of any of the Assets;
(d) All Inventory, including without limitation the Inventory
reflected in the
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Closing Balance Sheet (as hereinafter defined);
(e) All rights of Seller under the contracts and agreements
related solely to the Products and identified on Schedule 2.1(e)
prepared in accordance with Section 13.7 hereof (together, the
"Contracts");
(f) The Intellectual Property Rights of Seller to the extent,
but only to the extent, assigned to Buyer in the Technology Agreement;
(g) All vendor lists, advertising materials, catalogs, product
brochures, mailing lists and distribution lists of Seller related solely
to the Products;
(h) The Permits existing as of the Closing Date of Seller related
solely to the Products, Offered Employees and other Assets described
herein, but only to the extent their transfer is permitted by applicable
law;
(i) All rights to the names "Cray," "Cray Research" and
derivatives thereof to the extent owned or controlled by the Seller, the
URL "Cray.com" and any goodwill associated therewith;
(j) All causes of action and other similar rights of Seller
relating solely to the Products and the other Assets described herein,
including without limitation all such items listed on Schedule 2.1(j);
(k) The prepaid and deferred items of Seller relating solely to
the Business to the extent reflected in the Closing Balance Sheet; and
(l) All records relating solely to the Products and the other
Assets described herein, including without limitation financial,
accounting and credit records, correspondence, budgets, engineering and
plant records and other similar documents and records, but excluding any
records relating to income, sales, use, property, and other taxes
payable by Seller (the "Books and Records").
The Assets will be transferred by Seller to Buyer in accordance with this
Agreement free and clear of all liens, security interests or encumbrances, other
than (i) liens for real property and personal property taxes not yet delinquent
and installments of special assessments not yet delinquent, and (ii) servitudes,
easements, restrictions, rights-of-way and other similar rights in real property
or any interest therein which do not materially and adversely interfere with the
current use and operation of the Facilities or require the payment of any taxes,
assessments or other amounts in connection therewith (collectively, the
"Permitted Encumbrances").
2.2 Excluded Assets. Notwithstanding the forgoing, the following
property and assets are excluded from sale to Buyer (the "Excluded Assets"):
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(a) Seller's rights under this Agreement or any other documents
or agreements delivered to or received by Seller in connection herewith;
(b) The existing telephone system, except for any items listed
on Schedule 2.1(b);
(c) Any office equipment or furniture not owned by Seller;
(d) All desktop computer, server and network equipment not
listed on Schedule 2.1(b);
(e) All software, including without limitation any software
running on any desktop computer, server or network equipment listed on
Schedule 2.1(b), except to the extent specifically assigned or licensed
in the Technology Agreement or listed on Schedule 2.1(b);
(f) All prepaid value added taxes and other tax credits, and any
rights to any refund of taxes;
(g) All employment records of Seller relating to the Transferred
Employees (as hereinafter defined); and
(h) The other assets set forth on Schedule 2.2(h) hereto.
2.3 Assumption of Liabilities. Except as hereinafter specifically
provided in this Agreement, Buyer shall not assume any liabilities or
obligations of Seller and Seller shall be solely liable for all liabilities and
obligations arising from or in connection with ownership of the Assets or
operation of the Business prior to the Closing Date, whether or not reflected in
its books and records. Subject to the conditions of this Agreement, on the
Closing Date Buyer shall assume the following liabilities and obligations of
Seller (collectively, the "Assumed Liabilities"):
(a) Obligations of Seller under the Contracts;
(b) Employment and benefit obligations of Seller in the manner
and only to the extent provided in Section 6 hereof;
(c) All (i) product liability claims (including, without
limitation, claims for bodily injury, damage to property and loss of use
thereof and economic damage of any kind) relating to the Products, and
(ii) all warranty obligations and obligations for service and support
for the Products, in the case of both clauses (i) and (ii), whether such
Products were manufactured or delivered prior to or after the Closing
Date;
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(d) All liabilities and obligations arising from or in connection
with the ownership of the Assets or operation of the Business after the
Closing Date; and
(e) Any other liabilities or obligations to the extent reflected
in the Closing Balance Sheet.
3. PURCHASE PRICE
3.1 Generally. The purchase price for the Assets (the "Purchase Price")
shall be (a) 1,000,000 shares of unregistered common stock of Buyer (the
"Shares"), plus (b) an amount equal to the sum of: (i) $25,000,000 plus (ii) the
amount of Seller's net book value, as of the Closing Date, of the Assets
described in Section 2.1, less Seller's reserve for warranty items and other
liabilities described in Section 2.3 ("Net Asset Value"), all as reflected in
the Closing Balance Sheet giving effect to any prorations in Section 7 hereof,
plus (iii) if the average per share last sales price of Buyer's common stock on
the Nasdaq National Market, as reported by Nasdaq, for the 10 consecutive
trading days immediately preceding the day that is one trading day prior to the
Closing Date (the "Per Share Price") is less than $10.00 per share, an amount
equal to (A) the absolute difference between the Per Share Price and $10.00
multiplied by (B) 1,000,000 (the "Additional Share Consideration").
(a) On or before the day before the Closing Date Seller shall
prepare and transmit to Buyer a closing statement that sets forth
Seller's good faith estimate of the Net Asset Value as of the Closing
Date. The estimated Net Asset Value, plus $20,000,000, plus the
Additional Share Consideration, if any, shall be referred to herein as
the "Initial Purchase Price."
(b) A balance sheet (the "Closing Balance Sheet") as of the
Closing Date shall be prepared and delivered pursuant to Section 4 that
sets forth the definitive calculation of the Net Asset Value. Any
differences between the Net Asset Value so determined and the estimated
Net Asset Value described in Section 3.1(a) is referred to as the "Net
Asset Value Adjustment."
3.2 Payment of Purchase Price. The Purchase Price shall be payable as
follows:
(a) On the date hereof, Buyer shall deposit with Seller the sum
of $5,000,000 as a deposit on the Purchase Price (the "Deposit"). The
Deposit shall be held in an interest bearing account pursuant to an
escrow agreement dated as of even date herewith (the "Escrow
Agreement").
(b) At the Closing (as hereinafter defined), Buyer shall deliver
a stock certificate or certificates representing the Shares registered
in the name of Seller or as directed by Seller in writing at least three
business days prior to the Closing Date.
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(c) At the Closing, Seller shall receive the principal amount of
the Deposit and the Buyer shall receive the interest thereon.
(d) At the Closing, Buyer shall pay to Seller $10,000,000 by wire
transfer of immediately available funds to such account or accounts as
shall be specified by Seller.
(e) At the Closing, Buyer shall deliver to Seller a promissory
note of Buyer in a principal amount equal to the Initial Purchase Price
less $15,000,000 in the form of Exhibit A hereto (the "Promissory
Note"). The Promissory Note shall be non-interest bearing, shall be
payable in three (3) equal quarterly installments commencing three (3)
months after the Closing Date, each in an amount equal to one-third of
the original principal amount of the Promissory Note, may be prepaid at
any time without penalty and shall be secured by a right of offset by
Seller against any amounts payable by Seller under the Contract Services
Agreement (as hereinafter defined). The principal amount of the Note
shall be increased or decreased, as the case may be, by the amount of
the Net Asset Value Adjustment promptly after such amount is determined.
Following any adjustment in the principal amount of the Promissory Note,
Buyer will issue a new Promissory Note in such adjusted principal amount
to Seller in exchange for the original Promissory Note, and the
remaining quarterly payments provided in Section 1.1 of the Promissory
Note shall be adjusted proportionally.
(f) On the date which is nine months after the Closing Date,
Buyer shall pay to Seller $5,000,000 by wire transfer of immediately
available funds to such account or accounts as shall be specified by the
Seller; provided, that if on or before such date the Buyer has paid the
Promissory Note in full, then Buyer shall not be required to make the
payment required by this Section 3.2(f), and the Purchase Price shall be
reduced by such amount. If Buyer fails to make the payment required by
this Section 3.2(f) when due, such payment shall thereafter bear
interest at the rate per annum equal to the lesser of (i) 18% or (ii)
the maximum rate allowed by applicable law.
3.3 Allocation of Purchase Price. For tax purposes only, the Purchase
Price shall be allocated among the Assets in accordance with Schedule 3.3 to be
prepared by Buyer and Seller at or before Closing in accordance with Internal
Revenue Code ss. 1060. Buyer and Seller agree to report the sale of the Assets
for tax purposes in accordance with such allocation.
4. NET ASSET VALUE DETERMINATION
4.1. Net Asset Categories. Within five (5) business days after the date
of this Agreement, Buyer and Seller shall agree to the provisions of Schedule
4.1 detailing the
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adjustments to be made to the categories on the Current Balance
Sheet (as hereinafter defined), in determining the Net Asset Value as of
the Closing Date (as hereinafter defined). If after five (5) business
days Buyer and Seller are unable to agree to such adjustments, then
either party may terminate this Agreement by notice to the other, in
which case the Deposit shall be returned to Buyer. It is the present
intention of the parties that the deferred service revenue accrued for
the first twelve (12) months following the Closing Date shall not be
included as a liability for this purpose, and shall be dealt with as
provided in the Service Contract Agreement.
4.2 Procedures.
(a) The Net Asset Value, except to the extent specifically
limited in this Section 4, shall be determined in accordance with
generally accepted accounting principles applied on a basis consistent
with past practices and the procedures and assumptions used in the
preparation of the audited financial statements of the Seller and the
Current Balance Sheet, and giving effect to the prorations set forth in
Section 7 hereof.
(b) Within thirty (30) days after the Closing Date, Seller shall
prepare the Closing Balance Sheet and a calculation of Net Asset Value.
In preparing the Closing Balance Sheet, Seller shall work with and keep
Buyer and Buyer's auditors regularly informed.
(c) After Seller has prepared the Closing Balance Sheet, Seller
will provide a copy along with its calculation of Net Asset Value to
Buyer and Buyer's auditors. Buyer's auditors shall audit the Closing
Balance Sheet and deliver a copy thereof, along with their calculation
of Net Asset Value to Buyer and Seller. If either party disagrees with
such audited Closing Balance Sheet and determination of the Net Asset
Value, such party shall deliver written notice thereof (an "Objection
Notice") to the other party within ten (10) days after receipt of the
audited Closing Balance Sheet and calculation of Net Asset Value. If
neither party so delivers an Objection Notice, then the audited Closing
Balance Sheet and determination of Net Asset Value shall be binding on
Seller and Buyer. Buyer and Seller shall make a good faith effort to
resolve any dispute within ten (10) business days. To the extent that
the parties do not reach agreement, Seller and Buyer shall submit the
dispute to "big five" public accounting firm (other than Buyer's
auditors and Seller's auditors) jointly selected by the Seller and the
Buyer (the "Independent Auditor"); if the parties cannot so jointly
select the Independent Auditor within five (5) business days after the
expiration of the ten (10) day period referred to above, the Buyer and
the Seller each may exclude one of the remaining "big five" firms and
the remaining firm shall be the Independent Auditor.
(d) Seller and Buyer shall use their respective best efforts to
cause the
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Independent Auditor to resolve all disagreements concerning the Net
Asset Value as soon as practicable, but in any event shall direct the
Independent Auditor to render a determination within 30 days of its
retention. The Independent Auditor shall consider only those items and
amounts in the Net Asset Value which are identified in the Objection
Notice as being items which Seller and Buyer are unable to resolve. In
resolving any disputed item, the Independent Auditor may not assign a
value to any item greater than the greatest value for such item claimed
by either party or less than the smallest value for such item claimed by
either party. The Independent Auditor's determination will not be based
on an independent review, but will instead be based solely on written
representations by Seller and Buyer and on the definition of Net Asset
Value included herein. The determination of the Independent Auditor will
be conclusive and binding upon the Seller and the Buyer. The fees and
expenses of the Independent Auditor shall be borne equally by the Buyer
and the Seller.
5. CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Faegre & Benson
LLP, Minneapolis, Minnesota, at 11 a.m. on March 31, 2000, or such other date as
Buyer and Seller may mutually agree (the "Closing Date"). At the Closing (a)
Buyer shall (i) pay to Seller the Initial Purchase Price as specified in Section
3.2 hereof, (ii) deliver to Seller the various agreements, certificates,
instruments and documents referred to in Section 15 hereof and (iii) deliver to
Seller such assumptions of the Assumed Liabilities as Seller may reasonably
request to evidence the assumption by Buyer of the Assumed Liabilities, and (b)
Seller shall (i) deliver to Buyer the deeds (in the form required by Section
14.5), bills of sale, assignments and other documents of transfer reasonably
required to transfer to Buyer the interest of Seller in the Assets described in
Section 2.1 hereof, (ii) deliver to Buyer the various agreements, certificates,
instruments and documents referred to in Section 14 hereof.
6. LABOR AND EMPLOYMENT MATTERS
6.1 Offers of Employment.
(a) Buyer will offer, subject to the closing of the transaction
contemplated by this Agreement, regular employment to each employee of
Seller listed on Schedule 6.1 (the "Offered Employees"), effective as of
the Employee Transfer Date (as defined below) with compensation
reasonably equivalent to the compensation of such Offered Employee in
effect immediately preceding the relevant Employee Transfer Date for
such Offered Employee and with the benefits which Buyer generally
provides to its employees with comparable positions and tenure; provided
that Buyer may elect not to make offers to up to five (5) Offered
Employees who are not members of senior management.
(b) "Employee Transfer Date" means (i) in respect of those
Transferred Employees (as hereinafter defined) who are on a medical
leave of absence from Seller
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on the Closing Date, the first business day on which any such
Transferred Employee (A) is capable of returning to work at Seller
full-time, such capability to be evidenced by a medical release
delivered to Seller, with a copy to Buyer, pursuant to Seller's medical
leave of absence policy, and (B) is capable of performing the essential
functions of the position to which such Transferred Employee is
returning at Seller, with or without reasonable accommodation; provided,
however, that, in the event that both of the foregoing conditions are
not satisfied by September 30, 2000 with respect to any Transferred
Employee on such a medical leave of absence, such employee shall not be
a Transferred Employee and the provisions of this Agreement with respect
to Transferred Employees shall not be applicable to such employee; and
(ii) in respect of those Transferred Employees who are not subject to
clause (i) of this definition of Employee Transfer Date, the first day
after the Closing Date.
(c) Buyer and Seller will cooperate in any consultations or other
actions required with worker councils or other similar entities involved
in employment matters in jurisdictions outside the Untied States in
connection with the termination by Seller, or the hiring by Buyer, of
Employees in such jurisdictions. If any Transferred Employees cannot be
terminated by Seller and hired by Buyer as of the Closing Date under the
laws of any such foreign jurisdiction, Buyer and Seller will cooperate
in effecting such transfer as soon as possible after the Closing Date.
6.2 Offered Employees.
(a) Seller shall continue to employ each of the Offered Employees
until the Employee Transfer Date for such employee except for any such
employee who, at any time prior to the Closing Date (i) is terminated
for cause, (ii) voluntarily resigns, (iii) retires, or (iv) dies.
(b) Subject to the consummation of the transactions contemplated
by this Agreement, Buyer shall hire all Offered Employees who accept
Buyer's offer of employment (the "Transferred Employees") in accordance
with the terms of such offers and of this Agreement effective as of the
Employee Transfer Date for each such Offered Employee; provided that
such employment shall be "at will" (subject to the provisions of Section
6.3(f) hereof).
6.3 Transferred Employees.
(a) Each of the Transferred Employees shall cease to accrue
benefits under Seller's Plans (as hereinafter defined) as of the
relevant Employee Transfer Date for such employee. However, Seller shall
continue the medical coverage of each Transferred Employee (and his/her
dependents, if applicable) under the group health plan of Seller through
the end of the month following the month of the Closing Date. Buyer
shall establish a group health plan by the date coverage ends under the
group
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health plan of Seller. Buyer shall reimburse Seller for all costs
incurred by Seller in connection with maintaining such medical coverage
of each Transferred Employee for said period within thirty (30) days
following Seller's written demand therefor, and shall indemnify, defend
and hold Seller harmless against any and all claims by the Transferred
Employees with respect to such medical coverage arising after the
Closing Date. For purposes of health continuation coverage under Section
4980B of the Code and Part 6 of Subtitle B of Title I of ERISA or state
law ("continuation coverage"), the continuation period shall commence on
the last day of the month following the Closing Date, and the Seller
shall be responsible for providing continuation coverage with respect to
any "qualifying event" (within the meaning of Section 4980B(f)(3) of the
Code) occurring on or before such date.
(b) Each of the Transferred Employees shall be eligible to
participate in, and benefits shall accrue under, Buyer's employee
benefit plans from the relevant Employee Transfer Date for such employee
in accordance with the terms of such employee benefit plans of Buyer.
Notwithstanding anything to the contrary in this Agreement, Buyer is not
assuming any obligation whatsoever with respect to any options to
purchase Seller's securities held by the Transferred Employees.
(c) For the purpose of determining the participation and vesting
of a Transferred Employee under Buyer's employee benefit plans, his or
her period of employment shall include employment with Seller. Buyer
shall not impose any waiting periods or preexisting condition exclusion
under Buyer's employee benefit plans with respect to any Transferred
Employee.
(d) Buyer will allow those Transferred Employees who have accrued
up to 80 hours (or such greater amount required to be transferred by the
laws of the jurisdiction in which such employee is located) of banked or
outstanding vacation pay in respect of the period prior to the relevant
Employee Transfer Date, to use such banked or outstanding vacation pay
after the Closing Date at Buyer's expense on the terms and conditions as
are provided for in Buyer's employee benefits plan relating to vacation
pay. Seller will pay within thirty (30) days after the Closing Date to
those Transferred Employees who have accrued more than 80 hours (or such
greater amount required to be transferred by the laws of the
jurisdiction in which such employee is located) of accrued vacation, an
amount equal to the value of the accrued vacation in excess of 80 hours
(or such greater amount required to be transferred by the laws of the
jurisdiction in which such employee is located).
(e) Any Transferred Employee who is on vacation or on leave of
absence at the Closing Date shall be deemed for the purpose of
participation in Seller's Plans and Buyer's employee benefit plans to
have actively reported for work with Buyer as of the first day after the
Closing Date. Buyer shall count the remaining period of such vacation or
leave of absence toward any waiting period or other service-based
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eligibility requirement under any of Buyer's employee benefit plans.
(f) For a period of one year from the Closing Date, Buyer agrees
to provide the severance benefits described on Schedule 6.3(f) (the
"Severance Benefits") to any Transferred Employee who is employed in the
United States and covered by the severance benefits provided by Seller
and provide similar severance benefits to Transferred Employees in
foreign jurisdictions.
7. PRORATIONS. Utility charges, rents under assumed leases, real and
personal property taxes, payments under any current development contracts and
other similar obligations to or from third parties shall be prorated between
Seller and Buyer as of the close of business on the Closing Date. Property taxes
shall be prorated based upon the actual 2000 taxes, if known; otherwise on the
current assessed value times the latest mill rate. Installments of special
assessments shall be prorated based upon the year in which assessments are due
and payable, determined in accordance with local law.
8. OTHER AGREEMENTS. On the terms and subject to the conditions of this
Agreement, on the Closing Date, Buyer and Seller will execute and deliver (i)
the Promissory Note, (ii) a Technology Agreement in the form of Exhibit B (the
"Technology Agreement"), (iii) a Transition Services Agreement in the form of
Exhibit C (the "Transition Services Agreement"), (iv) a Services Contract
Agreement in the form of Exhibit D (the "Services Contract Agreement"), and (v)
a Registration Rights Agreement in the form of Exhibit E (the "Registration
Rights Agreement"). This Agreement, together with the Escrow Agreement, the
Promissory Note, the Technology Agreement, the Transition Services Agreement,
the Services Contract Agreement and the Registration Rights Agreement are
collectively referred to as the "Transaction Documents."
9. TITLE EXAMINATION
9.1 Delivery of Commitments. Within twenty (20) days after mutual
execution of this Agreement, Seller shall, at its expense, cause to be prepared
and delivered to Buyer commitments for American Land Title Association ("ALTA")
Owner's Policy Form B-1992 title insurance policies by Chicago Title Insurance
Company covering the Real Estate and showing its willingness to issue title
insurance on the Real Estate, in form reasonably acceptable to Buyer, together
with full, legible copies of all exceptions shown in such commitments. Buyer
shall pay the premium for the policies if it elects to purchase title insurance.
9.2 Survey. Within twenty (20) days after the execution of this
Agreement, Seller shall, at its expense, furnish Buyer with current, accurate
surveys of the Real Estate, showing access, and the location of all points and
lines referred to in the legal description, and the location and dimension of
all easements, buildings, and improvements, together with the legal description
of said real estate, certified to Buyer and to Chicago Title Insurance Company
by a
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registered land surveyor acceptable to Buyer and to said title insurance
company, and otherwise in a form acceptable to Buyer and to said title insurance
company. The surveys will be in sufficient detail to provide the basis for an
ALTA extended coverage owner's policy of title insurance without boundary,
encroachment, or survey exceptions.
9.3 Title Objections. Buyer shall examine the commitment and exception
documents provided pursuant to Section 9.1 and the surveys provided pursuant to
Section 9.2 hereof, and shall be allowed five (5) business days after receipt of
the last thereof to notify Seller in writing of any objections to the legal
descriptions of the Real Estate or any exceptions shown in such commitments or
to such surveys. If any such objections are made, Seller shall use reasonable
efforts to cure such objections prior to Closing. In the event Seller is unable
to cure such objections, then Buyer shall have the right and option to terminate
this Agreement (in which case the Deposit will be promptly returned to Buyer),
or to waive its objections.
9.4 Investigations of Real Estate. Prior to Closing, Buyer shall have
the right to investigate the suitability and condition of the Facilities and
Real Estate. Buyer, its agents and contractors shall have the right, at
reasonable times and upon reasonable notice, to enter the Facilities and Real
Estate at Buyer's expense to perform reasonable tests, inspections and
feasibility studies on the Facilities and Real Estate as Buyer may deem
necessary. Buyer shall indemnify and hold Seller harmless from any liability or
damage arising from such access. If Buyer determines that it is not satisfied
with the suitability and condition of the Facilities and the Real Estate, Buyer
may, at any time on or before March 23, 2000, terminate this Agreement by giving
written notice to Seller (in which case the Deposit shall be promptly returned
to Buyer). If Buyer does not notify Seller that it is terminating this Agreement
on or before March 23, 2000, then the conditions in this Section 9.4 shall be
deemed waived.
9.5 Environmental Assessment Report. Seller shall cooperate with Buyer
in Buyer's obtaining, at Buyer's expense, of a current "level one" or "phase
one" environmental site assessment report prepared in accordance with ASTM E
1527 (1997) standards on the Real Estate from a qualified environmental firm
selected by Buyer and acceptable to Seller (who shall not unreasonably
disapprove such selection). Buyer shall promptly provide a copy of all such
reports to Seller.
9.6 HazCon Survey. Seller shall cooperate with Buyer in Buyer's
obtaining, at Buyer's expense, of a current asbestos and other hazardous
substance identification survey of the Facilities in accordance with federal and
state OSHA requirements performed by a certified industrial hygienist (or person
with equivalent qualifications) selected by Buyer and acceptable to Seller (who
shall not unreasonably disapprove such selection), addressing the potential
presence of any asbestos and other Hazardous Substances in the Facilities. Buyer
shall promptly provide a copy of all such reports to Seller.
10. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby
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represents and warrants to Buyer that, except as set forth in the disclosure
schedules accompanying this Agreement:
10.1 Corporate Organization. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and Seller has all necessary corporate power and authority to own, lease and
operate its properties and assets and to carry on its business as now being
conducted.
10.2 Qualification to do Business. Schedule 10.2 lists each state or
other jurisdiction in which, to Seller's knowledge, the Business as currently
conducted, whether though the presence of employees, the ownership or lease of
real property, the presence of Assets or otherwise, would require the
qualification to do business in such state or other jurisdiction.
10.3 Corporate Power. Seller has the corporate power and authority to
execute and deliver the Transaction Documents to which it is a party and to
consummate the transactions contemplated hereby and thereby.
10.4 Corporate Authorization. The execution and delivery by Seller of
the Transaction Documents and the other agreements, documents and instruments
contemplated hereby, and the consummation of the transactions contemplated
hereby or thereby, have been duly authorized by all necessary corporate action
of Seller. This Agreement has been duly and validly executed and delivered by
Seller. The Transaction Documents and all other instruments required hereby to
be executed and delivered by Seller are, or when delivered will be, duly and
validly executed and delivered and will be valid and binding obligations of
Seller, enforceable in accordance with their respective terms.
10.5 Conflicting Agreements. Except as set forth in Schedule 10.5, the
execution and delivery by Seller of the Transaction Documents and the other
agreements, documents and instruments contemplated hereby, the consummation of
the transactions contemplated hereby or thereby, and the performance or
observance by the Seller of any of the terms or conditions hereof or thereof,
will not conflict with, or result in a breach or violation of the terms or
conditions of, or constitute a default under, or result in the creation of any
lien or other encumbrance on any of the Assets pursuant to, the Articles of
Incorporation or By-Laws of Seller, any award of any arbitrator, or any
indenture, contract or agreement (including any agreement with stockholders),
instrument, order, judgment, decree, statute, law, rule or regulation to which
Seller or the Assets is subject.
10.6 Consents and Approvals. Except pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 ("HSR Act"), WARN, and the laws and
regulations of any foreign country or jurisdiction, and except as set forth in
Schedule 10.6, no filing or registration with, or any consent, approval or
authorization of, any court, regulatory authority, governmental body, or any
other entity or person not a party to this Agreement is required to be made or
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obtained by Seller for the consummation of the transactions described in this
Agreement by Seller.
10.7 Actions, Suits, Proceedings. Except as set forth in Schedule 10.7,
there are no requests, notices, investigations, claims, demands, actions, suits
or other legal or administrative proceedings pending or, to the knowledge of
Seller, threatened against Seller or any of its property in any court or before
any federal, state, municipal or other governmental agency which, (a) if decided
adversely to Seller, would have a Material Adverse Effect, (b) seek to restrain
or prohibit the transactions contemplated by this Agreement or obtain any
damages in connection therewith, or (c) in any way call into question the
validity of the Transaction Documents; nor is Seller in default with respect to
any order of any court or governmental agency entered against it in respect of
the Business or the Assets. Seller has not received notice of the initiation of
any condemnation proceeding with respect to the Real Estate, or offer or sale in
lieu thereof, or any judgments, orders, decrees, stipulations, settlement
agreements, liens or injunctions relating in any way to the Real Estate, which
have not been wholly and completely settled, complied with and discharged. To
the knowledge of Seller, there is no plan, study or effort by any governmental
authority or agency which in any way affects or would affect the present use or
zoning of the Real Estate, nor any existing, proposed or contemplated plan to
widen, modify or realign any street or highway adjoining the Real Estate.
10.8 No Material Violations. Except as set forth in Schedule 10.8,
Seller is not in violation of any applicable law, rule or regulation relating to
the Business or any of the Assets, other than violations which singly or in the
aggregate, do not, and, with the passage of time, will not, have a Material
Adverse Effect. There are no requests, notices, investigations, claims, demands,
actions, administrative proceedings, hearings or other governmental claims or
proceedings against Seller alleging or investigating the existence of any such
violation. Seller is not subject to any outstanding order, writ, injunction or
decree which materially and adversely affects the Business or the operations,
financial condition or prospects of the Business, and Seller has not been
charged with, or threatened with a charge of, a violation of any provision of
federal, state or local law or regulation pertaining to the Business. Seller has
provided to Buyer copies of all written field inspection reports in its
possession pertaining to the Business submitted to Seller by governmental
authorities in January 1, 1995.
10.9 Environmental Matters. Except as set forth on Schedule 10.9:
(a) With respect to the operation of the Business, Seller is and
has been in compliance in all material respects with all applicable
Environmental Laws, including without limitation, the possession of all
material permits, licenses and authorizations required under applicable
Environmental Laws (collectively "Environmental Permits"), and
compliance with their terms and conditions. Seller has made all reports
and given all notices required by Environmental Laws with respect to the
Business, copies of which have been delivered to Buyer. All
Environmental Permits necessary
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for the operation of the Business under Environmental Laws are listed on
Schedule 10.14.
(b) To the knowledge of Seller, no Hazardous Substances have ever
been buried, spilled, leaked, discharged, emitted, generated, stored,
used or released, and no Hazardous Substances are now present, in, on,
or under the Real Estate except for (i) quantities stored or used by the
Seller in the ordinary course of its business and in compliance with all
applicable Environmental Laws and (ii) in such forms or quantities as do
not create any liability or obligation under the common law or any
Environmental Law or reduce the value of the Real Estate.
(c) To the knowledge of Seller, there are not now and never have
been any underground or aboveground storage tanks or other containment
facilities of any kind on the Real Estate which contain or ever did
contain any Hazardous Substances.
(d) The Real Estate is not and never has been listed on the
National Priorities List, the Comprehensive Environmental Response,
Compensation and Liability Information System or any similar federal,
state or local list, schedule, log, inventory or database.
(e) Seller has delivered to Buyer true and complete copies of all
reports, authorizations, permits, licenses, disclosures and other
documents in its possession, custody or control describing or relating
in any way to the Real Estate which describe, mention or discuss the
status thereof with respect to any Environmental Law.
(f) For purposes of this Agreement,
(i) "Environmental Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601 et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 et seq., the Federal Water
Pollution Control Act, 33 U.S.C. Section 1201 et seq., the Clean
Water Act, 33 U.S.C. Section 1321 et seq., the Clean Air Act, 42
U.S.C. Section 7401 et seq., and any other federal, state, local
or other governmental statute, regulation, law or ordinance
dealing with the protection of human health, natural resources
or the environment; and
(ii) "Hazardous Substance" means any pollutant,
contaminant, hazardous substance or waste, solid waste,
petroleum or any fraction thereof, or any other chemical,
substance or material listed or identified in or regulated by
any Environmental Law;
(iii) "RCRA Hazardous Waste" means a hazardous waste, as
that term is defined in and pursuant to the Resource
Conservation and Recovery
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Act, 42 U.S.C. Section 6901 et seq..
10.10 Employees. Schedule 10.10 hereto lists all employees of Seller at
the date hereof engaged in operation of the Business and in the case of each
such employee sets forth the position, level of compensation, earned and accrued
vacation, date of employment, and years of employment recognized for determining
eligibility for participation in, and vesting and credited service under the
plans described in Schedule 10.11. Schedule 10.10 identifies all such employee
currently on medical leave of absence and, to the extent known, their expected
return dates.
10.11 Employee Plans. Set forth on Schedule 10.11 is a list of all
pension, profit sharing, retirement, stock purchase, stock option, bonus,
incentive compensation and deferred compensation plans, all life, health,
dental, accident or disability plans, workers' compensation and other insurance
plans, all severance or separation plans, and any other employee benefit plans,
practices, policies or arrangements of any kind, whether written or oral, which
are maintained by Seller for the benefit of (or under which Seller has any
obligations, whether absolute or contingent, to) any of its employees engaged in
the Business, including but not limited to any "employee benefit plan" which is
subject to the Employee Retirement Income Security Act of 1974 ("ERISA")
(hereinafter collectively referred to as "Seller's Plans"). Seller has never
maintained or contributed to, or been obligated to contribute to, any defined
benefit pension plan, including a multiemployer pension plan or a cash balance
pension plan, which could result in any liability to the Buyer.
10.12 Title to and Condition of Real Estate. Schedule 2.1(a) hereto
correctly identifies the Real Estate. Seller owns the Real Estate in fee simple,
free and clear of all mortgages, liens and encumbrances other than Permitted
Encumbrances. To Seller's knowledge, there are no material structural defects in
any of the Facilities. To Seller's knowledge, there are no special assessments
affecting the Real Estate. To Seller's knowledge, there are no leases affecting
the Real Estate.
10.13 Title to and Condition of Personal Property. Seller has good and
marketable title to all personal property included in the Assets, free and clear
of all mortgages, liens, pledges, charges and encumbrances, other than Permitted
Encumbrances. To Seller's knowledge, all FF&E and Inventory is in a good state
of maintenance and repair, ordinary wear and tear excepted.
10.14 Licenses and Permits. Schedule 10.14 hereto correctly describes
all Permits granted to or by Seller which relate solely to the Assets or the
Products. To its knowledge, Seller has all Permits required by law or otherwise
necessary for the proper operation of the Business. All Permits granted to
Seller are in full force and effect, and no action to terminate, withdraw, not
renew or materially limit or otherwise change any such license or permit is
pending or has been threatened by any governmental agency or other party.
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10.15 Brokers and Finders. Seller has not retained or engaged any
broker, finder or other financial intermediary in connection with the
transactions contemplated by this Agreement, and Seller shall indemnify and hold
Buyer harmless from any claims of any party purportedly acting on behalf of
Seller.
10.16 Certification of Nonforeign Status. Seller warrants that Seller is
not a "foreign person" as defined in Section 1445 of the Internal Revenue Code
of 1986, as amended, and that such warranty will be true as of the Closing Date.
10.17 Status of Contracts. Each of the Contracts is valid, binding and
enforceable by Seller in accordance with its terms (subject to applicable
bankruptcy, insolvency, fraudulent transfer and conveyance and similar laws
affecting creditors rights, and general principles of equity) and is in full
force and effect. To the knowledge of Seller, except as noted on Schedule 10.17,
no party is in default under any Contract and, to the knowledge of Seller, no
event has occurred which (whether with or without notice, lapse of time or both)
would constitute a material default under any Contract.
10.18 Current Balance Sheet. Seller has previously furnished to Buyer an
unaudited statement of the assets and liabilities of the Business as of December
31, 1999 (the "Current Balance Sheet"). To the knowledge of Seller, the Current
Balance Sheet presents fairly the financial position of the Business as of date
indicated and has been prepared on a basis consistent with the audited financial
statements of Seller.
10.19 Absence of Certain Changes or Events. Since the date of the
Current Balance Sheet, except as set forth in Schedule 10.19, there has not
been:
(a) Any Material Adverse Change;
(b) Any damage, destruction or casualty loss, whether insured
against or not, to any of the Assets;
(c) Any increase in the rate or terms of compensation payable or
to become payable by Seller to its officers or key employees; any
increase in the rate or terms of any bonus, insurance, pension or other
employee benefit plan, payment or arrangement made to, for or with any
such officers or key employees; any special bonus or remuneration paid;
or any written employment contract executed or amended;
(d) Any entry into any agreement, commitment or transaction
(including, without limitation, any borrowing, capital expenditure or
capital financing or any amendment, modification or termination of any
existing agreement, commitment or transaction) by Seller, which is
material to the results of operations, financial condition or prospects
of the Business, except agreements, commitments or transactions in the
ordinary course of business and consistent with past practices or as
expressly
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contemplated in this Agreement;
(e) Any conduct of the Business which is outside the ordinary
course of business or not substantially in the manner that Seller
previously conducted the Business;
(f) Any purchase or other acquisition of property, any sale,
lease or other disposition of property, or any expenditure, pertaining
to the Business except in the ordinary course of business;
(g) Any incurrence of any noncontract liability which, either
singly or in the aggregate, is material to the results of operations,
financial condition or prospects of the Business;
(h) Any encumbrance or consent to encumbrance of any Assets
except in the ordinary course of business; or
(i) Any change in the Assets or liabilities of Seller pertaining
to the Business, or in any agreement to which Seller is a party or is
bound pertaining to the Business, which has had or reasonably could be
expected to have a Material Adverse Effect.
10.20 Intellectual Property Rights. To the knowledge of Seller, Seller
has not received any written notice of infringement or misappropriation by the
Seller of any Intellectual Property Rights of any other individual or entity.
10.21 Books and Records. To the knowledge of Seller, the Books and
Records are complete and accurate in all material respects, and there have been
no transactions involving the Business which properly should have been set forth
therein and which have not been accurately so set forth.
10.22 Inventories. The Inventory reflected on the Current Balance Sheet
or thereafter acquired are all items of a quality usable or saleable in the
ordinary and usual course of Seller's business, except for inventory items that
are obsolete or not usable or saleable in the ordinary course of business and
that have been written down to an amount not in excess of realizable market
value or for which adequate reserves or allowances have been provided.
10.23 Reliance. Seller recognizes and agrees that, notwithstanding any
investigation by Buyer, Buyer is relying upon the representations and warranties
made by Seller in this Agreement.
10.24 Accuracy of Representations and Warranties. None of the
representations or warranties of Seller set forth herein contain any untrue
statement of any material fact or omit
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or misstate a material fact necessary to make the statements contained in this
Agreement, taken as a whole, not misleading.
10.25 Limitation of Warranties. Except for the express representations
and warranties made by Seller set forth in this Section 10, no further
representation or warranty is made concerning the Assets or the Business, all of
which are being accepted, except for the express warranties set forth in this
Section 10, "AS IS AND WHERE IS" by Buyer as of the Closing. EXCEPT AS SET FORTH
EXPRESSLY IN THIS AGREEMENT, SELLER DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTY
WITH RESPECT TO THE ASSETS, INCLUDING WITHOUT LIMITATION IMPLIED WARRANTIES OF
FITNESS, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Without limiting
the generality of the foregoing, no claims relating to the subject matter of
this Agreement may be brought by Buyer against any director, officer or employee
of Seller in his or her individual capacity.
11. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents and
warrants to Seller as follows:
11.1 Corporate Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Washington,
and Buyer has all necessary corporate power and authority to own, lease and
operate its properties and assets and to carry on its business as now being
conducted and proposed to be conducted.
11.2 Corporate Power. Buyer has the corporate power and authority to
execute and deliver the Transaction Documents to which it is a party and to
consummate the transactions contemplated hereby and thereby.
11.3 Corporate Authorization. The execution and delivery by Buyer of the
Transaction Documents and the other agreements, documents and instruments
contemplated hereby, and the consummation of the transactions contemplated
hereby or thereby, have been duly authorized by all necessary corporate action
of Buyer. This Agreement has been duly and validly executed and delivered by
Buyer. The Transaction Documents and all other instruments required hereby to be
executed and delivered by Buyer are, or when delivered will be duly and validly
executed and delivered and will be valid and binding obligations of Buyer,
enforceable in accordance with their respective terms.
11.4 Conflicting Agreements. The execution and delivery by Buyer of the
Transaction Documents and the other agreements, documents and instruments
contemplated hereby, the consummation of the transactions contemplated hereby or
thereby, and the performance or observance by the Buyer of any of the terms or
conditions hereof or thereof, will not conflict with, or result in a breach or
violation of the terms or conditions of, or constitute a default under, the
Articles of Incorporation or By-Laws of Buyer, any award of any arbitrator, or
any indenture, contract or agreement (including any agreement with
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stockholders), instrument, order, judgment, decree, statute, law, rule or
regulation to which Buyer is subject.
11.5 Consents and Approvals. Except pursuant to the HSR Act and the laws
and regulations of any foreign country or jurisdiction, and except as set forth
in Schedule 11.5, no filing or registration with, or any consent, approval or
authorization of, any court, regulatory authority, governmental body, or any
other entity or person not a party to this Agreement is required to be obtained
or made by Buyer for the consummation of the transactions described in this
Agreement by Buyer.
11.6 Financial Information. Prior to Closing, the Buyer will furnish
Seller a consolidated balance sheet, a statement of income and retained earnings
and statement of cash flows of Buyer and its subsidiaries for the fiscal year
ended December 31, 1999, certified by Deloitte & Touche LLP, independent
certified public accountants. Said financial statements will fairly present the
financial condition of the Buyer and its subsidiaries at the dates thereof and
the results of operations of the Buyer and its subsidiaries for the periods
indicated, all in conformity with generally accepted accounting principals
consistently followed through the periods involved.
11.7 Capital Stock. The authorized capital stock of Buyer consists of
50,000,000 shares of Common Stock, par value $.01 per share ("Buyer Common
Stock") of which, as of February 23, 2000, 31,498,223 shares were issued and
outstanding, and 5,000,000 shares of Preferred Stock, par value $.01 per share,
of which, as of February 23, 2000, no shares were issued and outstanding. All of
the issued and outstanding shares of Buyer Common Stock have been duly
authorized and are validly issued, fully-paid, non-assessable and free of
preemptive rights or similar rights created by statute, the Articles of
Incorporation or Bylaws of Buyer or any agreement to which Buyer is a party or
by which it is bound. There are no voting trusts or other agreements or
understandings to which Buyer is a party with respect to the voting of the
capital stock of Buyer. None of the shares of Buyer Common Stock have been
issued in violation of any preemptive or other rights of Buyer's shareholders.
The shares to be issued to Seller on the Closing Date will be duly authorized,
validly issued, fully paid and non-assessable.
11.8 Brokers and Finders. With the exception of the engagement of
Salomon Smith Barney Inc. by Buyer, Buyer has not retained or engaged any
broker, finder or other financial intermediary in connection with the
transactions contemplated by this Agreement, and Buyer shall indemnify and hold
Seller harmless from any claims of any party purportedly acting on behalf of
Buyer.
12. COVENANTS OF SELLER
12.1 Access to Properties, Books and Records. Prior to the Closing Date,
Seller shall, at Buyer's request, afford or cause to be afforded to the agents,
attorneys, accountants
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and other authorized representatives of Buyer reasonable access during normal
business hours to all employees, properties, books and records relating to the
Business and shall permit such persons, at Buyer's expense, to make copies of
such books and records. Seller shall deliver to Buyer monthly financial
statements of the Business promptly after they become available. Buyer shall
treat, and shall cause all of its agents, attorneys, accountants and other
authorized representatives to treat, all information obtained pursuant to this
Section 12.1 as confidential in accordance with Section 22 hereof. No
investigation by Buyer or any of its authorized representatives pursuant to this
Section 12.1 shall affect any representation, warranty or closing condition of
any party hereto.
12.2 Negative Covenants. Except as otherwise permitted by this Agreement
or with the prior written consent of Buyer, prior to the Closing, Seller shall
not:
(a) Mortgage, pledge, otherwise encumber or subject to lien any
of the Assets, or commit itself to do any of the foregoing, except for
Permitted Encumbrances;
(b) Except in the ordinary and usual course of the Business,
dispose of, or agree to dispose of, any of the Assets or lease or
license to others, or agree so to lease or license, any of the Assets;
(c) Acquire any material assets for the Business other then
assets acquired in the ordinary and usual course of its business and
consistent with past practices;
(d) Increase the wages, salaries, compensation and benefits
payable, or to become payable by it, to any of the Offered Employees,
including without limitation any bonus payments or severance or
termination pay, other than increases in wages and salaries required by
employment arrangements existing on the date hereof or otherwise in the
ordinary and usual course of its business;
(e) Implement or agree to any implementation of or amendment or
supplement to any employee profit sharing, stock option, stock purchase,
pension, bonus, commission, incentive, retirement, medical
reimbursement, life insurance, deferred compensation or any other
employee benefit plan or arrangement pertaining to Offered Employees; or
(f) Agree or commit to do any of the foregoing.
12.3 Affirmative Covenants. Except as otherwise permitted by this
Agreement or with the prior written consent of Buyer, prior to the Closing,
Seller shall:
(a) Operate the Business as presently operated and only in the
ordinary course and consistent with past practices;
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(b) Advise Buyer in writing of any litigation or administrative
proceeding that challenges or otherwise materially affects the
transactions contemplated hereby and of any Material Adverse Change or
any event, occurrence or circumstance which is likely to cause a
Material Adverse Change in the Assets or the Business, whether prior to,
at or after the Closing Date;
(c) When the consent of any third party to the transactions
contemplated by this Agreement is required under the terms of any
contract or agreement material to the Business to which Seller is a
party or by which it is bound, use its best efforts to obtain such
consent on terms and conditions not materially less favorable than those
in effect on the date hereof;
(d) Use its best efforts to maintain all of the tangible Assets
in good operating condition, reasonable wear and tear excepted,
consistent with past practices, and take all steps reasonably necessary
to maintain the intangible Assets;
(e) Use its best efforts to retain all Offered Employees so that
they will be available for employment by Buyer pursuant to the terms of
this Agreement;
(g) Maintain the Books and Records in accordance with past
practices;
(h) Pay and discharge all taxes, assessments, governmental
charges and levies imposed upon it with respect to any of the Assets or
the Business in all cases prior to the date on which penalties attach
thereto; and
(i) Comply with all laws, rules and regulations applicable to
the Business.
12.4 No Negotiations With Others. Except as otherwise permitted by this
Agreement or with the prior written consent of Buyer, Seller shall refrain, and
shall cause its officers, directors and employees and any investment banker,
attorney, accountant or other agent retained by it to refrain, from initiating
or soliciting any inquiries or making any proposals with respect to, or engaging
in negotiations concerning, or providing any confidential information or data to
or having any discussions with any person relating to, any acquisition, business
combination or purchase of all or any significant portion of the Assets. Seller
will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing.
13. JOINT COVENANTS. Buyer and Seller covenant and agree that they will
act in accordance with the following:
13.1 HSR Act Filing. Seller and Buyer will each file within ten (10)
days after the execution of this Agreement a "Notification and Report Form for
Certain Mergers and
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Acquisitions," and any additional information or documentary material, with the
Pre-Merger Notification Office of the Federal Trade Commission and with the
Antitrust Division of the United States Department of Justice as required by the
HSR Act and rules promulgated thereunder, seeking to obtain Approval of the
transactions described in this Agreement. The term "Approval" includes (i) a
determination not to challenge the transactions, (ii) the denial of any request
by such government agencies to enjoin or stay the transactions and the
expiration of the time for any appeals therefrom, or (iii) the expiration of the
applicable waiting period (without suit having been filed by government agencies
to enjoin the transaction). Seller and Buyer shall take all actions reasonably
necessary to obtain such Approval. Buyer and Seller shall use all reasonable
efforts to obtain early termination of such review.
13.2 Other Governmental Consents. Promptly following the execution of
this Agreement, the parties will proceed to prepare and file with the
appropriate governmental authorities all filings and all other requests for
approval or waiver, if any, that are required from governmental authorities
(including any foreign governments or jurisdictions) in connection with the
transactions contemplated hereby, and the parties shall diligently and
expeditiously prosecute and cooperate fully in the prosecution of such requests
for approval or waiver and all proceedings necessary to secure such approvals
and waivers.
13.3 Best Efforts; No Inconsistent Action. Each party will use its best
efforts to effect the transactions contemplated by this Agreement and to fulfill
the conditions to the obligations of the opposing parties set forth in Sections
14 or 15 of this Agreement; provided, that, except as otherwise provided herein,
neither party shall be required to file any lawsuit or take any legal action
against a third party, waive any rights, pay any amount (other than normal
filing fees) or agree to any restriction in connection therewith. No party will
take any action inconsistent with its obligations under this Agreement or that
could hinder or delay the consummation of the transactions contemplated by this
Agreement.
13.4 Public Announcements. The Seller and Buyer shall cooperate and
coordinate with each other with respect to all press releases and public
announcements with respect to the transactions contemplated by this Agreement.
Seller and Buyer shall each designate certain employees with authority to speak
to the press or make other public announcements. Nothing herein shall prevent
either Seller or Buyer from supplying such information or making statements as
required by government authorities or in order for a party to satisfy its legal
obligations under the federal securities laws or otherwise (prompt notice of
which shall be given to the other party).
13.5. Future Technology. The parties recognize that development of
successors to the Products may require additional technology rights and licenses
not conveyed under this Agreement or the Technology Agreement. The Seller and
Buyer shall negotiate in good faith for such rights and licenses as may be
required from time to time; provided that, nothing herein shall require Seller
or Buyer to license any additional technology rights to or from the
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other party.
13.6 Supplements to Schedules.
(a) At any time within five (5) business days after the
date of this Agreement, Seller may deliver to Buyer supplemental or
amended schedules containing information that supplements or amends any
schedule or the representations, warranties and/or disclosures of this
Agreement, and any schedule, representation, warranty or disclosure of
Seller herein that is affected by such supplemental or amended
information shall be deemed to have been amended accordingly.
(b) At any time after the five (5) business day period set
forth in Section 13.6(a) and on or prior to the Closing Date, Seller may
deliver to Buyer supplemental or amended schedules containing
information that supplements or amends any schedule or the
representations, warranties and/or disclosures in this Agreement in
order to make the information set forth therein timely, complete and
accurate. Buyer shall have five (5) business days to inspect such
supplemental or amended schedules and, to the extent the amended or
supplemental information is material, determine in its discretion
whether to accept such schedules or elect to terminate this Agreement,
in which event the Deposit shall be returned to the Buyer. If Buyer does
not elect to terminate this Agreement, any schedule, representation,
warranty or disclosure of Seller herein which is affected by such
supplemental or amended information shall be deemed to have been amended
accordingly.
13.7 Identification of Contracts. Prior to Closing, Seller shall prepare
a definitive Schedule 2.1(e) listing the Contracts for purposes of Section
2.1(e) and review such list with Buyer. Buyer and Seller agree that no customer
service contracts which are governed by the Services Contract Agreement shall be
included on such list. Buyer and Seller shall in good faith attempt to resolve
any differences over the list of Contracts. If Buyer and Seller are unable to
agree to such list, either party may terminate this Agreement, in which case the
Deposit shall be returned to Buyer.
14. CONDITIONS TO OBLIGATION OF BUYER TO CLOSE. The obligation of Buyer
to effect the closing of the transactions contemplated by this Agreement is
subject to the satisfaction prior to or at the Closing of the following
conditions:
14.1 Representations and Warranties. The representations and warranties
of Seller contained in this Agreement, or in any certificate delivered pursuant
hereto, shall be true and correct on and as of the Closing Date, as if made on
and as of the Closing Date.
14.2 No Adverse Change. There shall not have occurred any Material
Adverse Change.
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14.3 Compliance and Performance. Seller shall have complied with and
performed all terms, covenants, conditions and agreements required by this
Agreement to be complied with or performed by Seller on or prior to the Closing
Date.
14.4 Officer's Certificate. Seller shall have delivered to Buyer a
certificate executed by a responsible officer of Seller, dated the Closing Date,
with respect to the matters set forth in Sections 14.1, 14.2 and 14.3 above.
14.5 Instruments of Conveyance and Transfer. Seller shall have delivered
to Buyer limited warranty deeds to the Real Estate warranting against any liens
or encumbrances created or suffered by Seller, subject only to Permitted
Encumbrances, and bills of sale, endorsements, assignments and other instruments
of conveyance and transfer with respect to the other Assets, in all cases
satisfactory in form and substance to counsel to Buyer, effecting the sale,
transfer, assignment and conveyance of the Assets to Buyer. Such instruments of
transfer and conveyance of the Assets (other than the limited warranty deeds for
the Real Estate) shall warrant to Buyer that the Assets are transferred to Buyer
free and clear of all debts, liens, security interests, mortgages, trusts,
claims or other liabilities or encumbrances whatsoever except for the Permitted
Encumbrances.
14.6 Consents of Third Parties. Buyer shall have received duly executed
copies of any material consents necessary to permit the assignment of the
Contracts, without breach thereof, and such consents shall not have required any
change to the terms and conditions of such Contracts other than changes
consented to in writing by Buyer.
14.7 HSR Act and Governmental Approvals. The covenants in Section 13.1
shall have been satisfied and the transactions contemplated by this Agreement
shall have received appropriate Approval. All other authorizations, consents and
approvals of all governmental agencies and authorities (including any foreign
governmental agencies and authorities) required to be obtained in order to
permit consummation of the transactions contemplated by this Agreement shall
have been obtained and be reasonably satisfactory in form and content to Buyer.
14.8 Legal Opinion. Buyer shall have received an opinion, dated the
Closing Date, from Faegre & Benson LLP, counsel to Seller, as to the
organization and good standing of Seller, the due authorization, execution and
delivery of the Transaction Documents by Seller, the enforceability of the
Transaction Documents against Seller, and such other matters incident to the
transactions contemplated by this Agreement as Buyer may reasonably request.
14.9 Copies of Documents. Buyer shall have received accurate and
complete copies of all documents and instruments listed in any of the exhibits
to this Agreement (and of any amendments, waivers or similar supplementary
materials related thereto).
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14.10 No Legal Actions. No court or governmental authority of competent
jurisdiction shall have issued an order restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated by this Agreement,
and no person, firm, corporation or governmental agency shall have instituted an
action or proceeding which shall not have been previously dismissed seeking to
restrain, enjoin or prohibit the consummation of the transactions contemplated
by this Agreement, and no such action or proceeding shall have been threatened.
14.11 Transaction Documents. Seller shall have executed and delivered
the Transaction Documents to which it is a party.
14.12 Financial Statements. Deloitte & Touche LLP shall have advised
Buyer that it will be able to deliver within 70 days after the Closing Date an
opinion on the audited financial statements for the Business for each of the
three (3) appropriate fiscal years, as required under Regulation S-X promulgated
under the Securities Exchange Act of 1934, as amended ("Regulation S-X"), and
prepared in accordance with such regulation (the "Financial Statements").
14.13 UCC Search. Seller shall have provided to Buyer certificates of
appropriate state officials dated not earlier than ten (10) days prior to the
Closing Date, indicating that no financing statements are on file pertaining to
any interest under the Uniform Commercial Code in the FF&E and other personal
property included in the Assets being transferred pursuant to this Agreement.
14.14 Environmental Assessment. Any Phase I Environmental Site
Assessment obtained by Buyer in accordance with Section 9.5 shall not identify
or conclude that there are any "recognized environmental conditions" per ASTM
1527-97 standards, and shall not recommend any further investigation with
respect to the Real Estate unless Buyer waives this condition by written notice
to Seller.
15. CONDITIONS TO OBLIGATION OF SELLER TO CLOSE. The obligation of
Seller to effect the transactions contemplated by this Agreement is subject to
the satisfaction prior to or at the Closing of the following conditions:
15.1 Representations and Warranties. The representations and warranties
of Buyer contained in this Agreement, or in any certificate delivered pursuant
hereto, shall be true and correct on and as of the Closing Date, as if made on
and as of the Closing Date.
15.2 Compliance and Performance. Buyer shall have complied with and
performed all terms, covenants, conditions and agreements required by this
Agreement to be complied with or performed by Buyer on or prior to or at the
Closing Date.
15.3 Officer's Certificate. Buyer shall have delivered to Seller a
certificate executed
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by a responsible officer of Buyer dated the Closing Date with respect to the
matters set forth in Sections 15.1 and 15.2 above.
15.4 Consents of Third Party. Seller shall have received consents
necessary to permit the assignments of the Contracts.
15.5 HSR and Governmental Approvals. The covenants in Section 13.1 shall
have been satisfied and the transactions contemplated by this Agreement shall
have received appropriate Approval. All other authorizations, consents and
approvals of all governmental agencies and authorities (including any foreign
governmental agencies and authorities) required to be obtained in order to
permit consummation of the transactions contemplated by this Agreement shall
have been obtained and be reasonably satisfactory in form and content to Seller.
15.6 Qualification To Do Business. Buyer shall be qualified to do
business as a foreign corporation in the States of Wisconsin and Minnesota.
15.7 Legal Opinion. Seller shall have received an opinion, dated the
Closing Date, from Stoel Rives LLP, counsel to Buyer, as to the organization and
good standing of Buyer, the due authorization, execution and delivery of the
Transaction Documents by Buyer, the enforceability of the Transaction Documents
against Buyer, and such other matters incident to the transactions contemplated
by this Agreement as Seller may reasonably request.
15.8 No Legal Actions. No court or governmental authority of competent
jurisdiction shall have issued an order restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated by this Agreement,
and no person, firm, corporation or governmental agency shall have instituted an
action or proceeding which shall not have been previously dismissed seeking to
restrain, enjoin or prohibit the consummation of the transactions contemplated
by this Agreement, and no such action or proceeding shall have been threatened.
15.9 Transaction Documents. Buyer shall have executed and delivered the
Assumption Agreement and the Transaction Documents to which it is a party.
16. POST-CLOSING MATTERS.
16.1 Post-Closing Access; Cooperation. Buyer agrees that all books and
records delivered to Buyer by Seller pursuant to the provisions of this
Agreement shall be open for inspection by representatives of Seller at any time
during regular business hours for a period of eighteen (18) months (six (6)
years in the case of information required by Seller in connection with
preparation or audits of tax returns) following the Closing Date and that Seller
during such period at its expense may make such excerpts therefrom as it may
deem desirable. Seller agrees that all documents, records and other materials
retained by Seller that
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are related to the Assets or the Business shall be open for inspection by
representatives of Buyer at any time during regular business hours for a period
of eighteen (18) months (six (6) years in the case of information required by
Buyer in connection with preparation or audits of tax returns) following the
Closing Date, and that during such period Buyer may make such excerpts therefrom
at its expense as it may deem desirable. In particular, Seller shall provide
access to the Buyer's independent auditors for, and shall cooperate in the,
preparation of the Financial Statements described in Section 14.12, including
without limitation work papers and other documents in the possession of the
Seller's independent auditors. Buyer and Seller agree to maintain and not
destroy all such records for a period of six (6) years following the Closing
Date. Thereafter, each party shall offer to the other an opportunity to copy any
such documents and materials prior to the destruction thereof.
16.2 Non-Solicitation. For a period commencing on the date hereof and
ending on the third anniversary of the Closing Date, neither party shall
initiate contact with the intent to recruit and hire any then current employee
of the other party, other than contacts by Buyer with respect to the Offered
Employees; provided that neither party shall be restricted from placing general
advertisements, accepting unsolicited applications for employment, responding to
those seeking employment to initiate contact with such party, or otherwise
employing any employee of the other party other than in express contravention of
this Section 16.2.
16.3 Restrictions on Sales of Assets.
(a) Named Parties. For the Restrictive Period (as defined below),
Buyer shall not transfer, whether by sale, assignment, merger, operation
of law or otherwise, any or all of the Products, any rights under the
Technology Agreement and the other Transaction Documents, service and
maintenance on the Products or the related customer relationships
(herein collectively called the "Restricted Business") to
Hewlett-Packard Company, Sun Microsystems, Inc., International Business
Machines Corporation, Compaq Computer Corporation, NEC Corporation,
Gores Technology Group or any of their respective subsidiaries or other
affiliates (the "Named Parties").
(i) The restriction in Section 16.3(a) applies to any
sale of the Restricted Business by Buyer or any of its
Subsidiaries, any merger, consolidation or sale of majority
control of Buyer and, if the Restricted Business, in whole or in
part, is held in a Subsidiary of Buyer, any merger,
consolidation or sale of majority control of such Subsidiary, or
any joint venture involving the Restricted Business with any of
the Named Parties.
(ii) If Buyer receives an offer for a merger,
consolidation, sale of assets or issuance of stock that would
result in majority control of Buyer by any of the Named Parties,
Buyer may proceed with such a transaction only if the Restricted
Business is not transferred in such transaction and is disposed
of
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by Buyer in accordance with this Agreement prior to the
consummation of any such transaction.
(b) Non-Named Parties. For the Restrictive Period, Buyer shall
not transfer, whether by sale, assignment, merger, operation of law or
otherwise, the Restricted Business to any person other than a Named
Party without providing Seller with a right of first refusal.
(i) The restriction in Section 16.3(b) applies to any sale
of the Restricted Business and, if the Restricted Business is
held in a Subsidiary or other entity controlled by Buyer, any
merger, consolidation or sale of majority control of such
Subsidiary or entity, or any joint venture involving the
Restricted Business with any party other than a Named Party.
(ii) If Buyer wishes to so sell, assign or otherwise
transfer any or all of the Restricted Business to a person other
than a Named Party, it shall provide the terms of the transaction
to Seller in writing, and Seller shall have ten (10) business
days to accept such terms. The terms shall include a good faith
valuation of the cash value of any non-cash item. If Seller has
not accepted those terms in writing within such period, Buyer may
proceed with such a transaction on such terms or terms more
favorable to Buyer provided that such transaction is consummated
within six months of the date that Buyer provided the terms to
Seller. If the transaction is not so consummated, or if the terms
are less favorable to Buyer than those originally offered to
Seller, then Buyer must re-offer the transaction to Seller.
(iii) The provisions of this subparagraph (b) shall not
apply to a merger, consolidation, sale of all or substantially
all of the assets of Buyer or other transaction involving a
change of control of Buyer with any party other than a Named
Party.
(iv) If Buyer completes any transaction covered by this
Section 16.3 (b), it shall include as a condition thereof the
prohibition in Section 16.3 (a) above.
(c) Restrictive Period. The Restrictive Period shall begin as of
the Closing Date and shall end on the earliest of (i) three years from
the Closing Date, (ii) the date on which Seller is sold, whether by
merger, consolidation, sale of all or substantially all of the assets or
similar transaction and, (iii) with respect to the provisions of Section
16.3(b), if for a period of over the preceding four fiscal quarters, the
revenues from the sale of the Products is less than 50% of total revenue
of Buyer.
(d) Exclusions. Nothing in this Section 16.3 shall restrict Buyer
from
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selling any computers covered by the definition of "Products" to any
person or party on an end-user basis in the ordinary course of business.
17. BULK TRANSFER LAW. Buyer hereby waives compliance by Seller with the
requirements of any applicable laws relating to bulk sales and transfers and
Seller agrees to indemnify Buyer and hold Buyer harmless from any and all
claims, liabilities or costs arising with respect thereto, including reasonable
attorneys' fees.
18. TAXES, FEES AND OTHER EXPENSES
18.1 Taxes and Fees. Buyer shall be responsible for and shall pay all
sales, value added or similar taxes or governmental charges, if any, and all
recording fees with respect to the sale and purchase of the Assets, whether
levied against the Assets, Seller or Buyer. Seller shall be responsible for
paying any transfer or real estate conveyance tax.
18.2 Expenses. Each party shall pay all of the costs and expenses
incurred by it in negotiating and preparing this Agreement (and all other
agreements, certificates, instruments and documents executed in connection
herewith), in performing its obligations under this Agreement, and in otherwise
consummating the transactions contemplated by this Agreement, including without
limitation its attorneys' fees and accountants' fees.
19. INDEMNIFICATION BY SELLER
19.1 Generally. Seller hereby agrees to defend, indemnify and hold
harmless Buyer against and with respect to:
(a) Subject to the limitations of Section 19.2 hereof, any loss,
injury, damage or deficiency resulting from any breach of any
representation or warranty of Seller contained in this Agreement;
(b) Any and all liabilities and obligations of Seller, except to
the extent assumed and agreed to be paid by Buyer pursuant to Section
2.3 hereof;
(c) Any and all loss, injury, damage or deficiency resulting from
any breach or non-fulfillment of any covenant or agreement on the part
of Seller under this Agreement, including, without limitation, any
failure by Seller to indemnify Buyer as expressly required by any other
provision of this Agreement; and
(d) Any and all demands, claims, actions, suits, proceedings,
assessments, judgments, costs and legal and other expenses incident to
any of the foregoing.
19.2 Limits on Indemnification by Seller.
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(a) Notwithstanding the foregoing, Buyer shall be entitled to
indemnification under Section 19.1(a) (and Section 19.1(d) to the extent
it relates to Section 19.1(a)) with respect to any breach of any
representation or warranty made by Seller, only if Seller had actual
knowledge that such representation or warranty was materially false when
made or was made with the intent to deceive.
(b) The right to indemnity under Section 19.1(a) shall terminate
on the first anniversary of the Closing Date, except that with respect
to any pending claim for indemnity hereunder which shall have been made
prior to such first anniversary, the right to indemnity shall not
terminate until the final determination and satisfaction of such claim.
(c) In no event shall the aggregate liability of Seller for all
claims for indemnification under Section 19.1(a) (and 19.1(d) to the
extent it relates to Section 19.1(a)) exceed $5,000,000.
19.3 Exclusive Remedy. Buyer acknowledges and agrees that its sole and
exclusive remedy with respect to any and all claims relating to the subject
matter of this Agreement shall be pursuant to the indemnification provisions set
forth in this Section 19; provided, that the foregoing shall not prevent Buyer
from seeking equitable relief in accordance with Section 33 hereof in the event
of any breach or non-fulfillment of any covenant or agreement on the part of
Seller under this Agreement. In furtherance of the foregoing, Buyer waives, to
the fullest extent permitted under applicable law, any and all rights, claims
and causes of action that it may have against Seller arising under or based upon
any Federal, state or local statute, law, ordinance, rule or regulation
(including, without limitation, those relating to asbestos, petroleum products,
hazardous materials, PCB's or any hazardous substances), or arising under or
based upon common law or otherwise, except to the extent provided in this
Section 19.
19.4 Procedures. In the event any demands or claims are asserted against
Buyer or any actions, suits or proceedings are commenced against Buyer for which
Seller is obligated to indemnify Buyer under this Section 19, then Buyer shall
give notice thereof to Seller with reasonable promptness after obtaining
knowledge thereof in order to give Seller the necessary time to evaluate the
merits of such demand, claim, action, suit or proceeding and defend, settle or
compromise the same. The failure of Buyer to give such notice shall not affect
Seller's duty or obligations under this Section 19, except to the extent Seller
is prejudiced thereby. Within 10 business days after such notice, Seller shall
assume the defense thereof with counsel chosen by Seller or its insurer and
reasonably acceptable to Buyer. Seller shall not be liable for any costs or
expenses incurred by Buyer in connection with any demand, claim, action, suit or
proceeding for which Seller is obligated to indemnify Buyer under this Section
19, provided that Seller shall have assumed the defense thereof in accordance
with this Section 19.
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19.5 Settlement and Compromise. Seller shall not settle or compromise
any demands, claims, actions, suits or proceedings for which Buyer has sought
indemnification from Seller unless it shall have given Buyer not less than 15
days prior written notice of the proposed settlement or compromise and afforded
Buyer an opportunity to consult with Seller regarding the proposed settlement or
compromise.
20. INDEMNIFICATION BY BUYER
20.1 Generally. Buyer hereby agrees to defend, indemnify and hold
harmless Seller against and with respect to:
(a) Subject to the limitations of Section 20.2 hereof, any loss,
injury, damage or deficiency resulting from any breach of any
representation or warranty of Buyer contained in this Agreement;
(b) Any and all liabilities and obligations of Seller assumed by
Buyer pursuant to Section 2.3 hereof and any and all liabilities and
obligations arising from or in connection with ownership of the Assets
or operation of the Business after the Closing Date;
(c) Without limiting the generality of the foregoing, any and all
products liability claims or similar claims in respect of the Products,
whether manufactured or delivered before or after the Closing Date;
(d) Any and all loss, injury, damage or deficiency resulting from
any breach or non-fulfillment of any covenant or agreement on the part
of Buyer under this Agreement, including, without limitation, any
failure by Buyer to indemnify Seller as expressly required by any other
provision of this Agreement; and
(e) Any and all demands, claims, actions, suits or proceedings,
assessments, judgments, costs and legal and other expenses incident to
any of the foregoing.
20.2 Limits on Indemnification by Buyer.
(a) Notwithstanding the foregoing, Seller shall be entitled to
indemnification under Section 20.1(a) (and Section 20.1(e) to the extent
it relates to Section 20.1(a)) with respect to any breach of any
representation or warranty made by Buyer, only if Buyer had actual
knowledge that such representation or warranty was materially false when
made or was made with the intent to deceive.
(b) The right to indemnity under Section 20.1(a) shall terminate
on the first anniversary of the Closing Date, except that with respect
to any pending claim for indemnity hereunder which shall have been made
prior to such first anniversary, the
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right to indemnity shall not terminate until the final determination and
satisfaction of such claim.
(c) In no event shall the aggregate liability of Buyer for all
claims for indemnification under Section 20.1(a) (and 20.1(e) to the
extent it relates to Section 20.1(a)) exceed $5,000,000.
20.3 Exclusive Remedy. Seller acknowledges and agrees that its sole and
exclusive remedy with respect to any and all claims relating to the subject
matter of this Agreement shall be pursuant to the indemnification provisions set
forth in this Section 20; provided, that the foregoing shall not prevent Seller
from seeking equitable relief in accordance with Section 33 hereof in the event
of any breach or non-fulfillment of any covenant or agreement on the part of
Buyer under this Agreement. In furtherance of the foregoing, Seller waives, to
the fullest extent permitted under applicable law, any and all rights, claims
and causes of action that it may have against Buyer arising under or based upon
any Federal, state or local statute, law, ordinance, rule or regulation
(including, without limitation, those relating to asbestos, petroleum products,
hazardous materials, PCB's or any hazardous substances), or arising under or
based upon common law or otherwise, except to the extent provided in this
Section 20.
20.4 Procedures. In the event any demands or claims are asserted against
Seller or any actions, suits or proceedings are commenced against Seller for
which Buyer is obligated to indemnify Seller under this Section 20, then Seller
shall give notice thereof to Buyer with reasonable promptness after obtaining
knowledge thereof in order to give Buyer the necessary time to evaluate the
merits of such demand, claim, action, suit or proceeding and defend, settle or
compromise the same. The failure of Seller to give such notice shall not affect
Buyer's duty or obligations under this Section 20, except to the extent Buyer is
prejudiced thereby. Within 10 business days after such notice, Buyer shall
assume the defense thereof with counsel chosen by Buyer and reasonably
acceptable to Seller. Buyer shall not be liable for any costs or expenses
incurred by Seller in connection with any demand, claim, action, suit or
proceeding for which Buyer is obligated to indemnify Seller under this Section
20, provided that Buyer shall have assumed the defense hereof in accordance with
this Section 20.
20.5 Settlement and Compromise. Buyer shall not settle or compromise any
demands, claims, actions, suits or proceedings for which Seller has sought
indemnification from Buyer unless it shall have given Seller not less than 15
days prior written notice of the proposed settlement or compromise and afforded
Seller an opportunity to consult with Buyer regarding the proposed settlement or
compromise.
21. TERMINATION OF AGREEMENT. This Agreement may be terminated at any
time prior to the Closing Date:
21.1 Mutual Consent. By mutual consent of Buyer and Seller.
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21.2 Breach of Agreement. By Buyer giving written notice to Seller if
Seller is in breach, or by Seller giving written notice to Buyer if Buyer is in
breach, in any material respect of any representation, warranty or covenant
contained in this Agreement.
21.3 Governmental Approvals. By Buyer, if any of the authorizations,
consents, approvals, filings or registrations described in Sections 13.1 and
13.2 hereof shall have been denied, not permitted to go into effect or obtained
on terms not reasonably satisfactory to Buyer and all reasonable final appeals
shall have been exhausted.
21.4 Delayed Closing. By Buyer giving written notice to Seller, or by
Seller giving written notice to Buyer, if the transactions contemplated by this
Agreement shall not have been consummated by March 31, 2000, unless such failure
shall be due to the failure of the party seeking to terminate this Agreement to
perform or observe the covenants, agreements and conditions hereof to be
performed or observed by such party at or before the Closing Date.
21.5 Government Action. By Buyer or Seller if any court of competent
jurisdiction in the United States or other United States governmental body shall
have issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and non-appealable.
If this Agreement is terminated under any of the circumstances set forth above,
other than because Buyer, and only Buyer, is in breach as set forth in Section
21.2, the Deposit shall immediately be returned to Buyer. If the Agreement is
terminated pursuant to Section 21.2 above as a result of the breach of Buyer,
and solely Buyer, Seller shall retain the Deposit, which shall constitute the
exclusive damages to which Seller is entitled.
22. CONFIDENTIALITY. The Mutual Nondisclosure Agreement, dated as of
August 4, 1999, between the Buyer and Seller shall remain in effect pursuant to
its terms and shall not be affected by the Closing. The provisions of Amendment
No. 1, effective as of December 13, 1999, are replaced by the provisions of
Section 16.2 hereof.
23. ASSIGNMENT. This Agreement may not be assigned by either party
hereto without the prior written consent of the other, except that either party
may assign this Agreement to an entity controlled by or under common control
with such party, provided that (i) it gives the other party prior written notice
of such assignment and (ii) the assigning party shall remain liable for its
obligations. This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto, their successors and permitted assigns, and no person,
firm or corporation other than the parties, their successors and permitted
assigns, shall acquire or have any rights under or by virtue of this Agreement.
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24. COVENANT OF FURTHER ASSURANCES. From time to time after the Closing,
at the request of Buyer and without further consideration, Seller will execute
and deliver such other instruments of transfer and take such other actions as
Buyer may reasonably require to transfer the Assets to, and vest title of the
Assets in, Buyer, and to put Buyer in possession of the Assets. In the event
that it shall be necessary for Seller to qualify to do business as a foreign
corporation in any state after the Closing in order for Buyer to enforce any
material claim, Seller shall so qualify promptly upon written request of Buyer.
25. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained herein, and all other written representations and
warranties of Buyer and Seller contained in the instruments executed in
connection with the consummation of the transactions provided for herein, shall
not survive the Closing Date.
26. ENTIRE AGREEMENT. This Agreement, including the exhibits and
schedules attached to this Agreement, constitutes the entire agreement and
understanding between Seller and Buyer with respect to the sale and purchase of
the Assets and the other transactions contemplated by this Agreement. All prior
representations, understandings and agreements between the parties with respect
to the purchase and sale of the Assets and the other transactions contemplated
by this Agreement are superseded by the terms of this Agreement.
27. AMENDMENT AND WAIVER. Any provision of this Agreement may be amended
or waived only by a writing signed by the party against which enforcement of the
amendment or waiver is sought. Any waiver of any term or condition of this
Agreement or any breach hereof shall not operate as a waiver of any other such
term, condition or breach, and no failure to enforce any provision hereof shall
operate as a waiver of such provision or of any other provision hereof.
28. CHOICE OF LAW. This Agreement shall be construed and performed in
accordance with the laws of the State of Washington (except for the choice of
law provisions thereof).
29. RESOLUTION OF DISPUTES.
29.1 Negotiation. The parties shall attempt in good faith to resolve any
dispute arising out of or relating to this Agreement promptly by negotiation
between executives who have authority to settle the controversy. Any party may
give the other party written notice of any dispute not resolved in the normal
course of business. Within fifteen (15) days after delivery of the disputing
party's notice, the executives of both parties shall meet at a mutually
acceptable time and place, and thereafter as often as they reasonably deem
necessary, to attempt to resolve the dispute. All reasonable requests for
information made by one party to the other will be honored. If the matter has
not been resolved by these persons within fifteen (15) days of the first
meeting, the dispute shall be referred to more senior executives of both
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parties who have authority to settle the dispute and who shall likewise meet to
attempt to resolve the dispute.
29.2 Mediation. If the parties are unable to resolve the matter within
thirty (30) days of the delivery of the disputing party's notice, or if the
parties fail to meet within twenty (20) days, the parties shall endeavor to
settle the dispute by mediation. The parties shall select a neutral mediator
that is acceptable to both parties. The parties shall have 45 days from the date
a neutral mediator is selected to gather information and perform discovery
relating to the dispute (the "Discovery Period"). The costs of mediation shall
be split evenly by the parties.
29.3 Litigation. If the parties are unable to resolve the dispute after
a reasonable period of mediation, either party may seek resolution through the
judicial process, consistent with the terms of this Agreement.
29.4 Confidentiality. All discussions and negotiations pursuant to this
Section are confidential and shall be treated as compromise and settlement
discussions for purposes of the applicable rules of evidence. Notwithstanding
the foregoing, materials gathered during the Discovery Period shall not be
excluded from any subsequent litigation in the event that mediation is not
successful.
30. SEVERABILITY. The provisions of this Agreement shall, where
possible, be interpreted so as to sustain their legality and enforceability, and
for that purpose the provisions of this Agreement shall be read as if they cover
only the specific situation to which they are being applied. The invalidity or
unenforceability of any provision of this Agreement in a specific situation
shall not affect the validity or enforceability of that provision in other
situations or of other provisions of this Agreement.
31. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be considered an original.
32. NOTICES. All notices given pursuant to this Agreement shall be in
writing and shall be delivered personally, including by means of telecopy, or
sent by United States registered mail, postage prepaid, addressed as follows (or
to another address or person as a party may specify on notice to the other):
(a) If to Seller:
Silicon Graphics, Inc.
100 North Cashman Drive
Chippewa Falls, Wisconsin 54729-1402
Attention: Senior Division Counsel
Telecopier: (715) 726-7674
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with a copy to:
Silicon Graphics, Inc.
2011 North Shoreline Boulevard
Mountain View, California 94043-1389
Attention: Legal Services
Telecopier: (650) 932-0652
(b) If to Buyer:
Tera Computer Company
411 First Avenue South, Suite 600
Seattle, Washington 98104-2860
Attention: Kenneth W. Johnson
Telecopier: (206) 701-2218
with a copy to:
Robert J. Moorman
Stoel Rives LLP
900 SW Fifth Avenue, Suite 2600
Portland, Oregon 97204
Telecopier: (503) 220-2480
33. BREACH; EQUITABLE RELIEF. The parties acknowledge that the Assets
and rights of the parties described in this Agreement are unique and that money
damages alone for breach of this Agreement would be inadequate. Any party
aggrieved by a breach of the provisions hereof may bring an action at law or
suit in equity to obtain redress, including specific performance, injunctive
relief or any other available equitable remedy. Time and strict performance are
of the essence in this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date and year
first above written.
BUYER: TERA COMPUTER COMPANY
By: /s/ James E. Rottsolk
Its: President
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SELLER: SILICON GRAPHICS, INC.
By: /s/ Kenneth L. Coleman
Its: Senior Vice President - Global
Sales, Service and Marketing
[Signature Page to Asset Purchase Agreement]
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Exhibit 2.2
AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 (this "Amendment") is dated as of March 31, 2000,
by and between TERA COMPUTER COMPANY, a Washington corporation ("Buyer"), and
SILICON GRAPHICS, INC., a Delaware corporation ("Seller").
RECITALS
WHEREAS, Buyer and Seller have entered into an Asset Purchase Agreement
dated as of March 1, 2000 (the "Asset Purchase Agreement"); and
WHEREAS, Buyer and Seller desire to amend certain provisions of the
Asset Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual covenants and conditions contained herein, the parties hereby agree as
follows:
1. Definitions. For purposes of this Amendment, capitalized terms used
herein and not otherwise defined shall have the meaning set for in the Asset
Purchase Agreement.
2. Closing. The Closing shall be effective as of 11:59 p.m. on March 31,
2000.
3. Assets.
(a) Paragraph (e) of Section 2.1 of the Asset Purchase Agreement
shall be amended and restated in its entirety to read as follows:
(e) All rights of Seller under (i) the contracts and agreements
related solely to the Products that are identified on Schedule 2.1(e)
prepared in accordance with Section 13.7 hereof (together, the
"Contracts"), (ii) open purchase orders for Inventory and Products, and
(iii) any contract or agreement with executory provisions for the sale
of Products by Seller, but only to the extent of those provisions, and
excluding any such contracts or agreements that the Buyer and Seller
have excluded from the Closing Balance Sheet (such purchase orders,
contracts and agreements in clauses (ii) and (iii) are referred to as
the "Customer Contracts"), and provided that in the case of clauses (ii)
and (iii) the transfer to Buyer shall become effective only when any
required consent of the other party to any such contract or agreement
has been obtained;
(b) Section 2.1 of the Asset Purchase Agreement shall be amended
by deleting the word "and" at the end of paragraph (k) thereof, deleting the
period at the end of clause (l) and adding "; and", and adding the following new
clause (m):
<PAGE> 2
(m) 300,000 shares of common stock of Computational Engineering
International, Inc., a North Carolina corporation.
(c) Section 2.2(e) of the Asset Purchase Agreement shall be
amended by adding the words at the end of the clause "or covered by the
Transition Services Agreement."
4. Desktop Computers. Buyer and Seller have excluded the desktop
computers currently being used by the Transferred Employees on their individual
desktops from Schedule 2.1(b) of the Asset Purchase Agreement (the "Desktop
Computers"). Buyer and Seller have made arrangements for Buyer to use the
Desktop Computers on a temporary basis under the Transition Services Agreement
pending the receipt by Buyer of appropriate licenses from third parties for the
third party software products installed on such computers. After Buyer has
obtained all such third party software licenses, Seller shall convey the Desktop
Computers to Buyer without further consideration. This provision amends Section
2.2(d) of the Asset Purchase Agreement.
5. Assumption of Liabilities.
(a) The lead in paragraph of Section 2.3 of the Asset Purchase
Agreement shall be amended and restated in its entirety to read as follows:
2.3 Assumption of Liabilities. Except as hereinafter specifically
provided in this Agreement, Buyer shall not assume any liabilities or
obligations of Seller and its Subsidiaries, and Seller and its
Subsidiaries shall be solely liable for, all liabilities and obligations
arising from or in connection with ownership of the Assets or operation
of the Business prior to the Closing, whether or not reflected in their
books and records. Subject to the conditions of this Agreement, as of
the Closing Buyer and its Subsidiaries shall assume the following
liabilities and obligations of Seller and its Subsidiaries
(collectively, the "Assumed Liabilities"):
(b) Subparagraph (a) of Section 2.3 of the Asset Purchase
Agreement shall be amended and restated in its entirety to read as follows:
(a) Obligations of Seller and its Subsidiaries under the
Contracts, and subject to the receipt of any required consent by the
other parties thereto, all obligations of Seller and its Subsidiaries
under the Customer Contracts;
(c) Subparagraph (b) of Section 2.3 of the Asset Purchase
Agreement shall be amended by adding the words "and its Subsidiaries" after the
word "Seller" in the first line
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thereof.
6. Closing Balance Sheet.
(a) Section 4.1 of the Asset Purchase Agreement shall be amended
by deleting the phrase "for the first twelve (12) months following the Closing
Date" in the last sentence thereof.
(b) Buyer and Seller agree that solely for purposes of the final
Closing Balance Sheet and the computation of the Net Asset Value, the amount of
the T90 liability (long term and current) shall be fixed at an aggregate amount
of $39,500,000.
7. Accrued Vacation Pay. Notwithstanding the restrictions of Section 6
of the Asset Purchase Agreement, the Buyer shall assume all accrued vacation of
the Transferred Employees (including the portion in excess of 80 hours), and
such amount shall be reflected as a liability in the Closing Balance Sheet.
8. Taxes and Fees. Section 18.1 of the Asset Purchase Agreement shall be
amended and restated in its entirety to read as follows:
18.1 Taxes and Fees. Buyer shall be responsible for and shall pay
all sales, value added, transfer or similar taxes or governmental
charges, if any, and all recording fees with respect to the sale and
purchase of the Assets, whether levied against the Assets, Seller or
Buyer. Notwithstanding the foregoing, Seller shall be responsible for
paying any Wisconsin real estate transfer or conveyance tax with respect
to the Real Estate.
9. Indemnification.
(a) Notwithstanding the limitations of Section 23 of the Asset
Purchase Agreement, the indemnification obligations of Seller in Section 19 of
the Asset Purchase Agreement shall extend to any Subsidiaries of Buyer.
(b) Notwithstanding the limitations of Section 23 of the Asset
Purchase Agreement, the indemnification obligations of Buyer in Section 20 of
the Asset Purchase Agreement shall extend to any Subsidiaries of Seller.
(c) Paragraph (b) of Section 19.1 of the Asset Purchase Agreement
shall be amended and restated in its entirety to read as follows:
(b) Any and all liabilities and obligations of Seller or
any of its Subsidiaries, except to the extent assumed and agreed
to be paid by Buyer or any of its Subsidiaries pursuant to
Section 2.3 hereof;
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<PAGE> 4
(d) Paragraph (b) of Section 20.1 of the Asset Purchase Agreement
shall be amended and restated in its entirety to read as follows:
(b) Any and all liabilities and obligations of Seller or
any of its Subsidiaries assumed by Buyer or any of its
Subsidiaries pursuant to Section 2.3 hereof, and any and all
liabilities and obligations arising from or in connection with
ownership of the Assets or operation of the Business after the
Closing Date;
10. Assignment. Section 23 of the Asset Purchase Agreement shall be
amended by inserting the phrase "subject to the restrictions in Section 16.3
hereof" in the second line after the word "that" and before the word "either."
11. Customer Contracts. Buyer and Seller will cooperate and work with
each other in good faith to obtain any consent required to transfer the Customer
Contracts to Buyer. If a customer orders any Products under a Customer Contract
before any required consent is obtained, Buyer shall supply such Products to
Seller pursuant to the terms of a supply agreement to be entered into between
Buyer and Seller.
12. Miscellaneous. Except as specifically set forth herein, all terms
and provisions of the Asset Purchase Agreement shall remain in full force and
effect with no other modification or waiver. This Amendment may be executed in
two or more counterparts, each of which shall be considered an original.
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date and year first above written.
TERA COMPUTER COMPANY
By:/s/ James E. Rottsolk
Its:President
SILICON GRAPHICS, INC.
By: /s/ Kenneth L. Coleman
Its: Senior Vice President - Global Sales,
Service and Marketing
[Amendment No. 1 to Asset Purchase Agreement]
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