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Exhibit 2.1
ASSET PURCHASE AGREEMENT
dated as of
February 12, 2005
between
NetScout Systems, Inc.
and
Quantiva, Inc.
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TABLE OF CONTENTS
Page
----
ARTICLE I --
DEFINITIONS.....................................................1
1.01.
Definitions........................................................1
ARTICLE II - PURCHASE AND
SALE...............................................5
2.01. Purchase and
Sale..................................................5
2.02. Excluded
Assets....................................................6
2.03. Assumption of
Liabilities..........................................6
2.04. Excluded
Liabilities...............................................7
2.05. Assignment of Contracts and
Rights.................................7
2.06. Purchase Price;
Closing............................................8
2.07. Allocation of Purchase
Price.......................................9
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF
SELLER......................10
3.01. Corporate Existence and
Power.....................................10
3.02. Corporate
Authorization...........................................10
3.03. Governmental
Authorization........................................11
3.04.
Non-Contravention.................................................11
3.05. Financial
Statements..............................................11
3.06. Absence of Certain
Changes........................................12
3.07. Personal
Property.................................................13
3.08. Real
Property.....................................................14
3.09. Sufficiency of Purchased
Assets...................................14
3.10. Title to Purchased
Assets.........................................14
3.11. No Undisclosed
Liabilities........................................14
3.12.
Litigation........................................................15
3.13. Material
Contracts................................................15
3.14. Technology and Intellectual
Property..............................16
3.15. Insurance
Coverage................................................18
3.16. Compliance with
Laws..............................................18
3.17.
Employees.........................................................19
3.18. Environmental
Compliance..........................................20
3.19. Customers and
Suppliers...........................................22
3.20. Transactions with Affiliates; Intercompany
Arrangements...........23
3.21. Finders'
Fees.....................................................23
3.22. Other
Information.................................................23
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF
BUYER........................23
4.01. Organization and
Existence........................................23
4.02. Corporate
Authorization...........................................23
4.03. Governmental
Authorization........................................23
4.04.
Non-Contravention.................................................24
4.05.
Litigation........................................................24
4.06. Finders'
Fees.....................................................24
ARTICLE V - COVENANTS OF
SELLER.............................................24
5.01. Conduct of the
Business...........................................24
5.02. Access to
Information.............................................25
5.03. Notices of Certain Events; Continuing
Disclosure..................25
5.04. Trademarks;
Tradenames............................................26
5.05. Required
Payments.................................................26
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5.06. Financial
Statements...............................................26
5.07 End-user
Licenses..................................................27
5.08 Other
Agreements...................................................27
ARTICLE VI - COVENANTS OF BOTH
PARTIES......................................27
6.01. Further
Assurances................................................27
6.02. Certain
Filings...................................................28
6.03. Public
Announcements..............................................28
ARTICLE VII - TAX
MATTERS...................................................28
7.01. Tax
Definitions....................................................28
7.02. Tax
Matters........................................................29
7.03. Tax Cooperation; Allocation of
Taxes...............................30
ARTICLE VIII - EMPLOYEE
BENEFITS............................................31
8.01. Employee Benefits
Definitions......................................31
8.02. ERISA
Representations..............................................32
8.03. Employees and Offers of
Employment.................................33
8.04. Seller's Employee Benefit
Plans....................................33
8.05. No Third Party
Beneficiaries.......................................34
ARTICLE IX - CONDITIONS TO
CLOSING..........................................34
9.01. Conditions to the Obligations of Each
Party.......................34
9.02. Conditions to Obligation of
Buyer.................................34
9.03. Conditions to Obligations of
Seller...............................36
ARTICLE X - SURVIVAL;
INDEMNIFICATION.......................................36
10.01.
Survival..........................................................36
10.02.
Indemnification...................................................36
10.03 Limitation of
Indemnification.....................................37
10.04
Procedures........................................................37
10.05. No
Waiver.........................................................38
ARTICLE XI --
TERMINATION...................................................38
11.01. Grounds for
Termination..........................................38
11.02. Effect of
Termination............................................38
11.03. Break-Up
Fee.....................................................38
ARTICLE XII --
MISCELLANEOUS................................................39
12.01.
Notices..........................................................39
12.02. Amendments; No
Waivers...........................................39
12.03.
Expenses.........................................................40
12.04. Successors and
Assigns...........................................40
12.05. Governing
Law....................................................40
12.06. Counterparts;
Effectiveness......................................40
12.07. Entire
Agreement.................................................40
12.08.
Captions.........................................................40
12.09.
Jurisdiction.....................................................40
12.10. Acquisition
Sub..................................................40
ii
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ASSET PURCHASE AGREEMENT
AGREEMENT dated as of February 12, 2005 between NetScout
Systems, Inc.,
a Delaware corporation ("Buyer"), and Quantiva, Inc., a Delaware
corporation
("Seller").
RECITALS:
WHEREAS, Seller conducts a business (the "Business") that
designs,
develops, manufactures, licenses and markets software products
for the
performance of automated analytics for application performance
management on
computer networks, provides hosted or online services as well as
maintenance and
other related services; and
WHEREAS, Buyer desires to purchase substantially all of the
assets of
the Business from Seller, and Seller desires to sell
substantially all of the
assets of the Business to Buyer, upon the terms and subject to
the conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein
contained, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01. Definitions. (a) The following terms, as used herein, have
the
following meanings:
"Affiliate" means, with respect to any Person, any Person
directly or
indirectly controlling, controlled by, or under common control
with such other
Person.
"Ancillary Agreements" means the Assignment and Assumption
Agreement,
and the Patent Assignment Agreement.
"Balance Sheet" means the unaudited balance sheet of the
Business as of
December 31, 2004 found in Schedule 3.05.
"Balance Sheet Date" means December 31, 2004.
"Business's Intellectual Property" means all Intellectual
Property that
is owned or held by or on behalf of Seller for use, or that is
being, and/or has
been, used, or is currently under development for use, in the
Business as it has
been, is currently or is currently planned to be conducted.
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"Closing Date" means the date of the Closing.
"Intellectual Property" means all tangible or intangible
proprietary
information and materials, including without limitation:
(a) (i) all inventions (whether patentable or unpatentable
and
whether or not reduced to practice), all improvements
thereon,
and all patents, patent applications and patent disclosures,
together with all reissuances, continuations,
continuations-in-part, divisions, revisions, extensions and
re-examinations thereof, (ii) all trademarks, services
marks,
trade dress, logos, trade names, domain names, and corporate
names, together with all translations, adaptations,
derivations
and combinations thereof and including all goodwill
associated
therewith, and all applications, registrations and renewals
in
connection therewith, (iii) all copyrights and all
applications,
registrations and renewals in connection therewith, (iv) all
mask works and all applications, registrations and renewals
in
connection therewith, (v) all trade secrets and confidential
business information (including without limitation ideas,
research and development, know-how, formulas, algorithms,
compositions, manufacturing and production process and
techniques, methods, schematics, technology, technical data,
designs, drawings, flowcharts, block diagrams,
specifications,
customer and supplier lists, pricing and cost information
and
business and marketing plans and proposals), and (vi) all
software and firmware (including data, databases, design
documents, object code, source code and related
documentation);
(b) all documents, records and files relating to design, end
user
documentation, manufacturing, quality control, sales,
marketing
or customer support for, and tangible embodiments of, all
intellectual property described herein; and
(c) all licenses, agreements and other rights in any third
party
product or any third party intellectual property described
in
(a) and (b) above.
"Leased Real Property" means all Real Property that is leased
or
subleased by Seller.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge,
charge, security interest, restriction or encumbrance of any
kind in respect of
such asset.
"Material Adverse Change" means a material adverse change in
the
business, assets, financial condition or results of operations
of Seller or the
Business taken as a whole; provided, that none of the following
shall be deemed,
by itself or by themselves, either alone or in combination, to
constitute a
Material Adverse Change: (a) any change in the market price or
trading volume of
the stock of the Buyer or of any publicly traded companies
comparable to the
Buyer, or relating to or resulting from the US or international
securities
markets in general; (b) any change arising out of conditions
affecting the
economy or industry of the Seller or the Buyer in general,
including changes in
technology direction for the performance of automated
analytics
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for application performance management on computer networks
caused by published
industry standards or caused by current or prospective market
demand, other than
changes relating to intellectual property rights or the
enforcement or licensing
thereof; (c) with respect to the Seller, delays or cancellations
of customer
projects (or contracts) or project implementations involving the
Seller and any
third party (including any delay or pause in negotiations with
such third party)
which is attributable to the announcement of the transaction
contemplated
hereby; or (d) the acquisition, change of control or initial
public offering of
any competitor of the Buyer deemed to be a Material Adverse
Change.
"Material Adverse Effect" means a material adverse effect on
the
business, assets, financial condition or results of operations
of Seller or the
Business taken as a whole; provided, that none of the following
shall be deemed,
by itself or by themselves, either alone or in combination, to
constitute a
Material Adverse Effect: (a) any change in the market price or
trading volume of
the stock of the Buyer or of any publicly traded companies
comparable to the
Buyer, or relating to or resulting from the US or international
securities
markets in general; (b) any change arising out of conditions
affecting the
economy or industry of the Seller or the Buyer in general,
including changes in
technology direction for the performance of automated analytics
for application
performance management on computer networks caused by published
industry
standards or caused by current or prospective market demand,
other than changes
relating to intellectual property rights or the enforcement or
licensing
thereof; (c) with respect to the Seller, delays or cancellations
of customer
projects (or contracts) or project implementations involving the
Seller and any
third party (including any delay or pause in negotiations with
such third party)
which is attributable to the announcement of the transaction
contemplated
hereby; or (d) the acquisition, change of control or initial
public offering of
any competitor of the Buyer.
"1934 Act" means the Securities Exchange Act of 1934, as
amended, and
the rules and regulations promulgated thereunder.
"Owned Real Property" means all Real Property except for Leased
Real
Property.
"Person" means an individual, corporation, limited liability
company,
partnership, association, trust or other entity or organization,
including a
government or political subdivision or an agency or
instrumentality thereof.
"to Seller's Knowledge", "Known to Seller" and words of similar
import
means the knowledge of Seller and the knowledge of each of
Seller's officers,
employees and directors, in each case after reasonable
inquiry.
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(b) Each of the following terms is defined in the Section set
forth
opposite such term:
Term Section Term Section
------------------------- -----------
--------------------------- -------
Allocation Statement 2.07 Excluded Liabilities 2.04
Apportioned Obligation 7.03 Financial Statements 3.05
Assumed Liabilities 2.03 Hazardous Substance 3.18
Indemnified Party 10.04
Benefit Arrangement 8.01 Indemnifying Party 10.04
Business Recitals Initial Cash Payment 2.06
Closing 2.06 Interested Person 3.21
Code 7.01 IRS 7.03
CoEmployer 8.01 Leases 3.08
Consent 3.05 Multiemployer Plan 8.01
Contracts 2.01 Patent Assignment Agreement 2.06
Conveyance Documents 2.06 Permitted Real Estate Liens 3.08
COBRA 8.03 Personal Property 3.07
COBRA Coverage 8.04 Petty Cash 2.01
Damage 10.02 Post-Closing Tax Period 7.01
Disclosure Schedule Article III Pre-Closing Tax Period 7.01
Employee 8.01 Purchased Assets 2.01
Employee Plan 8.01 Purchase Price 2.06
Environment 3.18 Real Property 2.01
Environmental Law 3.18 Release 3.18
Environmental Liabilities 3.18 Tax 7.01
Environmental Permits 3.18 Tax Return 7.01
ERISA 8.01 Third Party Claim 10.02
ERISA Affiliate 8.01 Transferred Employee 8.01
Escrowed Cash 2.06 Third Party Claim 10.02
Excluded Assets 2.02
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ARTICLE II
PURCHASE AND SALE
2.01. Purchase and Sale. Upon the terms and subject to the
conditions of
this Agreement, Buyer agrees to purchase from Seller and Seller
agrees to sell,
transfer, assign and deliver, or cause to be sold, transferred,
assigned and
delivered, to Buyer at Closing all of the assets, properties and
business, other
than the Excluded Assets, of every kind and description,
wherever located, real,
personal or mixed, tangible or intangible, owned, held or used
in the conduct of
the Business by Seller or any Affiliate of Seller as the same
shall exist on the
Closing Date, including all assets shown on the Balance Sheet
and not disposed
of in the ordinary course of business since the Balance Sheet
Date, and all
assets of the Business acquired by Seller between the Balance
Sheet Date and the
Closing Date (the "Purchased Assets"), and including without
limitation all
right, title and interest of Seller and its Affiliates in, to
and under such of
the foregoing as are more specifically described below:
(a) the Quantiva(R) Analysis System product, software and
technology, the trade name "Quantiva", and all of the
Business's
Intellectual Property, including without limitation the
items
listed on Schedule 3.14;
(b) all real property and leases and subleases of, and other
interests in real property used by or on behalf of Seller or
held by or on behalf of Seller for use in connection with
the
Business, in each case, together with all buildings,
fixtures,
and improvements erected thereon, including without
limitation
those properties listed on Schedule 3.08 (the "Real
Property");
(c) all personal property and interests therein used by or on
behalf
of Seller or held by or on behalf of Seller for use in
connection with the Business, including without limitation,
equipment, furniture, office equipment, computer equipment,
communications equipment, and other tangible property,
including
without limitation the items listed on Schedule 3.07;
(d) all raw materials, work-in-process, finished goods, supplies
and
other inventories, wherever situated used by or on behalf of
Seller or held by or on behalf of Seller for use in
connection
with the Business;
(e) all rights under all contracts, agreements, leases,
licenses,
commitments, sales and purchase orders and other instruments
used by or on behalf of Seller or held by or on behalf of
Seller
for use in connection with the Business, including without
limitation the items listed on Schedule 3.13 (collectively,
the
"Contracts");
(f) all accounts, notes and other receivables used by or on
behalf
of Seller or held by or on behalf of Seller for use in
connection with the Business;
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(g) all prepaid expenses and deposits used by or on behalf of
Seller
or held by or on behalf of Seller for use in connection with
the
Business, including without limitation ad valorem taxes,
leases,
license fees and rentals;
(h) all petty cash, not to exceed $1,000, located at
operating
facilities of the Business ("Petty Cash"), as well as
customer
deposits;
(i) all of Seller's rights, claims, credits, causes of action
or
rights of set-off against third parties relating to the
Business, including, without limitation, unliquidated rights
under manufacturers', licensors' and vendors' warranties and
indemnities;
(j) all transferable licenses, permits or other governmental
authorizations affecting, or relating in any way to, the
Business, including without limitation the items listed on
Schedule 3.03;
(k) all books, records, files and papers, whether in hard copy
or
computer format used by or on behalf of Seller or held by or
on
behalf of Seller for use in connection with the Business,
including, without limitation, engineering information,
sales
and promotional literature, manuals and data, sales and
purchase
correspondence, lists of present and former suppliers, lists
of
present and former customers, personnel and employment
records,
and all information relating to Taxes imposed on or with
respect
to the Business; provided, that Seller may retain under
confidentiality one copy of information relating to tax and
other governmental filings and proceedings solely for the
purpose of Seller's preparation of Tax returns and other
governmental filings required by Seller following the
Closing;
and
(l) all goodwill associated with the Business or the
Purchased
Assets, together with the right to represent to third
parties
that Buyer is the successor to the Business.
2.02. Excluded Assets. Buyer expressly understands and agrees
that the
following assets and properties of Seller (the "Excluded
Assets") shall be
excluded from the Purchased Assets:
(a) all of Seller's cash and cash equivalents on hand and in
banks,
less outstanding checks or transfers, except for Petty Cash,
and
notes receivable from shareholders of Seller.
2.03. Assumption of Liabilities. Upon the terms and subject to
the
conditions of this Agreement, Buyer agrees, effective at the
Closing, to assume
the following liabilities (the "Assumed Liabilities"):
(a) all liabilities and obligations expressly scheduled to
be
performed after the Closing Date under the Contracts
specifically assumed by Buyer and identified as assumed
Contracts on Schedule 2.03 (other than liabilities or
obligations
6
<PAGE>
attributable to any failure by Seller prior to the Closing
to
comply with the terms thereof).
2.04. Excluded Liabilities. Notwithstanding any provision in
this
Agreement or any other writing to the contrary, Buyer is
assuming only the
Assumed Liabilities and is not assuming any other liability or
obligation of
Seller or any Affiliate of Seller (or any predecessor owner of
all or part of
its business and assets) of whatever nature whether presently in
existence or
arising or asserted hereafter. All such other liabilities and
obligations shall
be retained by and remain obligations and liabilities of Seller
or its
Affiliates (all such liabilities and obligations not being
assumed being herein
referred to as the "Excluded Liabilities"). Without limiting the
foregoing, none
of the following shall be Assumed Liabilities for the purposes
of this
Agreement:
(a) all liabilities and obligations arising out of or relating
to
the Business or the operations or affairs of Seller on or
prior
to the Closing Date, including without limitation any
liabilities and obligations arising out of or relating to
any
facts, conditions or circumstances which occurred or existed
prior to the Closing, including without limitation any claims
by
security holders or former security holders of Seller;
(b) any and all liabilities and obligations of Seller for
Taxes,
including without limitation any Taxes that arise as a result
of
the transactions contemplated by this Agreement and Taxes
described on Schedule 3.12;
(c) any and all liabilities and obligations of Seller relating
to
employee or consultant benefits or compensation
arrangements,
including, without limitation, any liabilities or
obligations
for accrued vacation time or pay and any liabilities and
obligations under any of Seller's employee benefit
agreements,
plans or other arrangements listed on Schedule 8.02;
(d) any Environmental Liabilities;
(e) any liability or obligation relating to an Excluded
Asset;
(f) all warranty, sales returns and allowance claims or expenses
of
Seller in respect of products sold or licensed or services
rendered by the Business prior to the Closing;
(g) any liability or obligation relating to the Contracts
not
specifically assumed by the Buyer, including without
limitation
those Contracts listed on Schedule 2.04; and
(h) any liability or obligation under any equity or
equity-like
securities of Seller, including without limitation stock
options, rights and warrants and stock plans.
2.05. Assignment of Contracts and Rights. Anything in this
Agreement to
the contrary notwithstanding, this Agreement shall not
constitute an agreement
to assign any Purchased Asset
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or any claim or right or any benefit arising thereunder or
resulting therefrom
if an attempted assignment thereof, without consent of a third
party thereto,
would constitute a breach or other contravention thereof or
adversely affect in
any material respect the rights of Buyer or Seller thereunder.
Seller and Buyer
will use their commercially reasonable efforts (but without any
payment of money
by Seller or Buyer) to obtain the consent of the other parties
to any such
Purchased Asset or claim or right or any benefit arising
thereunder for the
assignment thereof to Buyer as Buyer may reasonably request. If
such consent is
not obtained, or if an attempted assignment thereof would be
ineffective or
would adversely affect the rights of Seller thereunder so that
Buyer would not
in fact receive all such rights, Seller and Buyer will cooperate
in a mutually
agreeable arrangement under which Buyer would obtain the
benefits and assume, to
the extent provided under this Agreement, obligations thereunder
in accordance
with this Agreement, including subcontracting, sub-licensing, or
subleasing to
Buyer, or under which Seller would enforce for the benefit of
Buyer, with Buyer
assuming Seller's obligations, any and all rights of Seller
against a third
party thereto. Seller will promptly pay to Buyer when received
all monies
received by Seller under any Purchased Asset or any claim or
right or any
benefit arising thereunder. In such event, Seller and Buyer
shall, to the extent
the benefits therefrom and obligations thereunder have not been
provided by
alternate arrangements satisfactory to Buyer, negotiate in good
faith an
adjustment in the consideration paid by Buyer for the Purchased
Assets.
2.06. Purchase Price; Closing. (a) The purchase price for the
Purchased
Assets (the "Purchase Price") shall be as follows:
(i) At the Closing, Buyer shall pay to Seller the amount of
$7,980,491, less the amounts set forth on Schedule 2.06
(Schedule 2.06 to be amended at the Closing pursuant to
Section 5.07 to reflect certain payments by licensees
and on-line customers to Seller from January 1, 2005 to
the Closing Date), in cash (the "Initial Cash Payment"),
and shall assume the Assumed Liabilities.
(ii) For the purpose of securing Seller's obligations under
Article X, Buyer shall hold back an additional One
Million Three Hundred Thirty Thousand Dollars
($1,330,000) in cash to be used to satisfy claims and
obligations under Article X (the "Escrowed Cash"). Buyer
shall withhold the Escrowed Cash in a separate,
interest-bearing account and shall apply such funds in
accordance with Article X to make payments due under
Article X, or to the extent of the remaining Escrowed
Cash to make an additional payment to Seller following
the 16-month anniversary of the Closing and the
resolution and satisfaction of all claims and
obligations under Article X.
(iii) Buyer shall reserve the amount (in cash, restricted
stock or otherwise) of $789,509 for the employees and
consultants of Seller continuing in the Business with
Buyer following the Closing, on the terms and subject to
the conditions set forth in the Retention Agreements.
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(b) The closing (the "Closing") of the purchase and sale of
the
Purchased Assets and the assumption of the Assumed
Liabilities
hereunder shall take place at the offices of Choate, Hall
&
Stewart LLP, Exchange Place, 53 State Street in Boston,
Massachusetts, as soon as possible, but in no event later
than
three (3) business days after satisfaction of the conditions
set
forth in Article IX, or at such other time or place as Buyer
and
Seller may agree. At the Closing,
(i) Buyer shall pay to Seller the Initial Cash Payment to an
account maintained by Seller, such account to be
designated by Seller by written notice to Buyer not
later than two (2) business days prior to the Closing
Date.
(ii) Seller and Buyer shall enter into an Assignment and
Assumption Agreement substantially in the form attached
hereto as Exhibit A, and Seller shall deliver to Buyer
such bills of sale, endorsements, consents, assignments
and other good and sufficient instruments of conveyance
and assignment (the "Conveyance Documents") as the
parties and their respective counsel shall deem
reasonably necessary or appropriate to vest in Buyer all
right, title and interest in, to and under the Purchased
Assets, including without limitation a Patent Assignment
Agreement in the form reasonably requested by Buyer (the
"Patent Assignment Agreement").
(iii) Each of Seller and Buyer shall execute and deliver
each
of the Ancillary Agreements to be entered into by it at
the Closing, in each case substantially in the form
attached as an Exhibit to this Agreement.
(iv) Without prejudice to Buyer's rights under Section 9.02
and Articles X and XI, Seller shall deliver to Buyer
revised schedules to this Agreement updating the
information shown thereon to the Closing Date.
(v) Seller and Buyer shall execute and deliver all such
instruments, documents and certificates as may be
reasonably requested by the other party that are
necessary, appropriate or desirable for the consummation
at the Closing of the transactions contemplated by this
Agreement.
2.07. Allocation of Purchase Price. (a) After the Closing, Buyer
shall
deliver to Seller a statement (the "Allocation Statement"),
setting forth the
value of the Purchased Assets, which shall be used for the
allocation of the
Purchase Price and the Assumed Liabilities among the Purchased
Assets. The
Allocation Statement shall be prepared in accordance with
Section 1060 of the
Internal Revenue Code of 1986, as amended, and the regulations
thereunder. The
Allocation Statement shall reflect that the value of each
Purchased Asset is its
book value as of the then most recent fiscal year end of the
Seller, and any
excess of the Purchase Price over the sum of such book values
shall be allocated
to goodwill.
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(b) Seller and Buyer agree to report an allocation of such
Purchase
Price among the Purchased Assets in a manner entirely consistent
with the
Allocation Statement, and agree to act in accordance with such
Allocation
Statement in the preparation of financial statements and filing
of all Tax
Returns (including, without limitation, filing Form 8594 with
its Federal income
Tax Return for the taxable year that includes the date of the
Closing) and in
the course of any Tax audit, Tax review or Tax litigation
relating thereto.
(c) No later than 10 days prior to the filing of their
respective
Forms 8594 relating to this transaction, each party shall
deliver to the other
party a copy of its Form 8594.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the disclosure schedules dated as of the
date
hereof and delivered herewith to Buyer (which disclosure
schedules identify the
section and subsection to which each disclosure therein relates;
provided, that
any matter disclosed pursuant to one section or subsection of
Article III is
deemed disclosed for all other sections or subsections of
Article III, if such
matter relates to more than one section or subsection of Article
III and the
level of particularity and manner of disclosure of the matter
expressly
disclosed in one section or subsection of the disclosure
schedules would make a
reasonable person aware that such disclosure is relevant to such
other sections
or subsections), Seller hereby represents and warrants to Buyer
as of the date
hereof and as of the Closing Date that:
3.01. Corporate Existence and Power. Seller is a corporation
duly
incorporated, validly existing and in good standing under the
laws of its
jurisdiction of incorporation, and has all corporate powers and
all governmental
licenses, authorizations, consents and approvals required to
carry on the
Business as now conducted. Seller is duly qualified to do
business as a foreign
corporation and is in good standing in each jurisdiction where
the character of
the property owned or leased by it or the nature of its
activities makes such
qualification necessary, except for those jurisdictions where
the failure to be
so qualified would not, individually or in the aggregate, have a
Material
Adverse Effect. Seller has heretofore delivered to Buyer true
and complete
copies of the corporate charter and bylaws of Seller as
currently in effect.
Seller has no subsidiaries and does not own or control, directly
or
indirectly, any shares or any right to acquire shares of capital
stock of any
other corporation or any interest in any partnership, joint
venture or other
non-corporate business enterprise.
3.02. Corporate Authorization. The execution, delivery and
performance
by Seller of this Agreement and each of the Ancillary
Agreements, and the
consummation by Seller of the transactions contemplated hereby
and thereby are
within Seller's corporate powers have been duly authorized by
all necessary
corporate action on the part of Seller. Each of this Agreement
and each
Ancillary Agreement to which Seller is a party has been duly
executed and
delivered by
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Seller and constitutes a valid and binding agreement of Seller,
enforceable in
accordance with its terms.
3.03. Governmental Authorization; Consents. (a) The execution,
delivery
and performance by Seller of this Agreement and each of the
Ancillary Agreements
to which Seller is a party require no action by or in respect
of, or filing
with, any governmental body, agency, official or authority.
(b) Except as set forth in Schedule 3.03, no consent,
approval,
waiver or other action (a "Required Consent") by any Person
(other than any
governmental body, agency, official or authority referred to in
(a) above) under
any contract, agreement, indenture, lease, instrument or other
document to which
Seller is a party or is bound is required or necessary for the
execution,
delivery and performance by Seller of this Agreement and each
Ancillary
Agreement to which Seller is a party, or for the consummation of
the
transactions contemplated hereby or thereby.
3.04. Non-Contravention. The execution, delivery and performance
by
Seller of this Agreement and each Ancillary Agreement to which
Seller is a
party, and the consummation of the transactions contemplated
hereby and thereby,
do not and will not (i) contravene or conflict with the
corporate charter or
bylaws of Seller, (ii) assuming compliance with the matters
referred to in
Section 3.03(a), contravene or conflict with any provision of
any law,
regulation, judgment, injunction, order, Permit or decree
binding upon or
applicable to Seller or the Business; (iii) assuming the receipt
of all Required
Consents, constitute a default (with or without notice or lapse
of time, or
both) under or give rise to any right of termination,
cancellation or
acceleration of any right or obligation of Seller, or to a loss
of any benefit,
relating to the Business to which Seller is entitled under any
provision of any
agreement, contract or other instrument binding upon Seller or
(iv) result in
the creation or imposition of any Lien on any Purchased
Asset.
3.05. Financial Statements. (a) Attached as Schedule 3.05 are
true and
complete copies of:
(i) the audited balance sheets as of December 31, 2001 and
2002 and the related audited statements of operations,
shareholders' equity and cash flows of Seller for each
of the 12 months ended December 31, 2001 and 2002;
(ii) the unaudited balance sheet of Seller as of December
31,
2003 and the related unaudited statements of operations,
shareholders' equity and cash flows of Seller for the 12
months then ended; and
(iii) the Balance Sheet of Seller as of December 31, 2004
and
the related unaudited statements of operations,
shareholders' equity and cash flows of Seller for the 12
months then ended ((i), (ii) and (iii), collectively,
the "Financial Statements").
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(b) Each of the balance sheets included in the Financial
Statements
fairly presents in all material respects the financial position
of Seller as of
its date, and the other statements included in the Financial
Statements fairly
present in all material respects the results of operations,
shareholders' equity
and cash flows, as the case may be, of Seller for the periods
therein set forth,
in each case in accordance with generally accepted accounting
principles
consistently applied.
(c) Seller's audited balance sheets as of December 31, 2003 and
2004
and the related audited statements of operations, shareholders'
equity and cash
flows of Seller for each of the 12 months ended December 31,
2003 and 2004, as
delivered to Buyer pursuant to Section 5.06, shall fairly
represent in all
material respects the financial position of Seller as of its
date and the
results of operations, shareholders' equity and cash flows, as
the case may be,
of Seller for the periods therein set forth, in each case in
accordance with
generally accepted accounting principles consistently
applied.
(d) Buyer's internal controls over financial reporting are
effective
in ensuring Buyer's ability to record, process, summarize and
report financial
information, as well as the accuracy and completeness of the
Financial
Statements. Buyer's auditors are independent for all purposes of
the
Sarbanes-Oxley Act of 2002, the 1934 Act and the rules and
regulations of the
Securities and Exchange Commission, and are registered with the
Public Company
Accounting Oversight Board.
3.06. Absence of Certain Changes. Since the Balance Sheet Date,
except
as set forth in Schedule 3.06, Seller has conducted the Business
in the ordinary
course consistent with past practices, and there has not been,
with respect to
Seller, any:
(a) Material Adverse Change or any event, occurrence,
development or
state of circumstances or facts which could reasonably be
expected to result in a Material Adverse Change, or any
condition, event or occurrence which, individually or in the
aggregate, could reasonably be expected to prevent or
materially
delay Seller's ability to consummate the transactions
contemplated by this Agreement or perform its obligations
hereunder or under the Ancillary Agreements;
(b) payment or grant of any right relating to the Business by
Seller
to any Interested Person, or any charge by any Interested
Person
to Seller relating to the Business, or other transaction
between
Seller relating to the Business and any Interested Person,
except in any such case for employee compensation payments
in
the ordinary course of business of Seller consistent with
past
practice.
(c) incurrence, assumption or guarantee by Seller of any
indebtedness for borrowed money with respect to the
Business;
(d) creation or assumption by Seller of any Lien on any
Purchased
Asset;
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(e) damage, destruction or other casualty loss (whether or
not
covered by insurance) affecting the Business or any
Purchased
Asset;
(f) transaction or commitment made, or any contract or
agreement
entered into, by Seller relating to the Business or any
Purchased Asset (including the acquisition or disposition of
any
assets) or any relinquishment by Seller of any contract or
other
right, in either case, material to the Business;
(g) change in any method of Tax or financial accounting or
accounting practice or any making of a Tax election or change
of
an existing election by Seller with respect to the Business;
(h) (i) grant of any severance or termination pay to any
employee of
the Business, (ii) entering into of any employment, deferred
compensation or other similar agreement (or any amendment to
any
such existing agreement) with any employee of the Business,
(iii) change in benefits payable under existing severance or
termination pay policies of Seller relating to the Business
or
employment agreements to which any employee of the Business is
a
party or (iv) change in compensation, bonus or other
benefits
payable to employees of the Business;
(i) labor dispute or grievance, or any activity or proceeding by
a
labor union or representative thereof to organize any
employees
of the Business, or any lockouts, strikes, slowdowns, work
stoppages or threats thereof by or with respect to any such
employees;
(j) employee terminations and/or layoffs, and Seller has
preserved
intact and kept available the services of present employees,
in
each case in accordance with past practice,
(k) capital expenditure, or commitment for a capital
expenditure,
for additions or improvements to property, plant and
equipment;
(l) action which, if it had been taken or occurred after the
execution of this Agreement, would have required the consent
of
Buyer pursuant to this Agreement;
(m) waiver, termination or loss by Seller of any material right
or
benefit; or
(n) agreement, undertaking or commitment to do any of the
foregoing.
3.07. Personal Property. (a) Seller has good and marketable
title to, or
in the case of leased personal property has valid leasehold
interests in, all
personal property (including without limitation equipment,
inventory,
receivables and furniture) (whether tangible or intangible) used
in the Business
(the "Personal Property"). Schedule 3.07 lists all Personal
Property. None of
such Personal Property is subject to any Liens, other than Liens
disclosed on
Schedule 3.07.
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(b) The Personal Property has no material defects, is in
good
operating condition and repair (ordinary wear and tear
excepted), and is
generally adequate for the uses to which it is being put.
(c) Schedule 3.07 completely and accurately describes all leases
and
subleases for Personal Property.
3.08. Real Property. (a) None of the Real Property is owned by
Seller.
All of the Real Property is leased by Seller as lessee or
sublessee.
(b) Schedule 3.08 completely and accurately describes all leases
and
subleases of Real Property (the "Leases"), together with a
description of all
buildings and material fixtures and improvements erected
thereon.
(c) The Leases are in good standing and are valid, binding
and
enforceable in accordance with their respective terms, and there
does not exist
under any such Lease any default by Seller or, to Seller's
Knowledge, by any
other Person, or any event that, with notice or lapse of time or
both, would
constitute a default by Seller or, to Seller's Knowledge, by any
other Person.
Seller has delivered to Buyer complete and accurate copies of
all Leases,
including all amendments and agreements related thereto. All
rent and other
charges currently due and payable under the Leases have been
paid.
(d) Seller is the holder of the lessee's interest under the
Leases
and has neither assigned the Leases nor subleased all or any
portion of the
premises leased thereunder. Seller has not made any alterations,
additions or
improvements to the premises leased under the Leases that are
required to be
removed (or of which lessor could require removal) at the
termination of the
respective Lease terms.
3.09. Sufficiency of Purchased Assets. As of the date of this
Agreement,
the Purchased Assets and the Excluded Assets together
constitute, and on the
Closing Date will constitute, all of the assets or property used
or held for use
in the Business as of each such date. On the Closing Date, the
Purchased Assets
will be generally adequate to conduct the Business as currently
conducted;
provided, however, that Buyer acknowledges that Seller has been
incurring
operating losses since its inception.
3.10. Title to Purchased Assets. Upon consummation of the
transactions
contemplated hereby, Buyer will have acquired good and
marketable title in and
to, or a valid leasehold interest in, each of the Purchased
Assets, free and
clear of all Liens.
3.11. No Undisclosed Liabilities. Except as disclosed in the
Financial
Statements or set forth in Schedule 3.11, there are no
liabilities of the
Business of any kind whatsoever relating to the Purchased Assets
or the Business
to be conducted by Buyer, whether accrued, contingent, absolute,
determined,
determinable or otherwise, and there is no existing condition,
situation or set
of circumstances which could reasonably be expected to result in
such a
liability, other than
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liabilities incurred in the ordinary course of business
consistent with past
practices since the Balance Sheet Date, which in the aggregate
are not material
to the Business, taken as a whole.
3.12. Litigation. Except as disclosed in Schedule 3.12 of the
Disclosure
Schedule, there is no claim, action, suit, investigation or
proceeding (or any
basis therefor) pending against, or to the Seller's Knowledge,
threatened
against or affecting, Seller, the Business, any Purchased Asset
or any employee
of Seller (in his capacity as such), or to Seller's Knowledge,
any Affiliate,
consultant or security holder of Seller (in his or its capacity
as such), or the
transactions contemplated hereby before any court or arbitrator
or any
governmental body, agency, official or authority. Neither Seller
nor to Seller's
Knowledge any Affiliate, employee, consultant or security holder
of Seller (in
his or its capacity as such) has pending or to Seller's
Knowledge is threatening
or contemplating any claim, action, suit, investigation or
proceeding relating
to or affecting Seller, the Business or the transactions
contemplated hereby.
3.13. Material Contracts. (a) Except for the Contracts disclosed
in
Schedule 3.13, as of the date of this Agreement, with respect to
the Business,
Seller is not a party to or subject to any:
(i) lease;
(ii) contract for the purchase of materials, supplies,
goods,
services, equipment or other assets providing for annual
payments by Seller of, or pursuant to which in the last
year Seller paid, in the aggregate $5,000 or more;
(iii) purchase order, license agreement or sales,
maintenance,
development, OEM, value added reseller, distribution,
reseller, teaming, co-marketing or other similar
agreement providing for the sale or license by Seller of
materials, supplies, goods, services, equipment,
software products or other assets;
(iv) partnership, joint venture or other similar contract
arrangement or agreement;
(v) contract relating to indebtedness for borrowed money or
the deferred purchase price of property (whether
incurred, assumed, guaranteed or secured by any asset);
(vi) employment or consulting agreement;
(vii) license, technology transfer, franchise or other
agreement in respect of any Intellectual Property or
other property owned or used by Seller;
(viii) agency, dealer, sales representative or other similar
agreement;
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(ix) contract or other document that limits the freedom of
Seller to compete in any line of business or with any
Person or in any area to own, operate, sell, transfer,
pledge or otherwise dispose of or encumber any Purchased
Asset;
(x) contract or commitment with or for the benefit of any
Interested Person; or
(xii) other contract or commitment that is material to the
Business taken as a whole.
(b) Each Contract disclosed in any Schedule to this Agreement
or
required to be disclosed pursuant to Section 3.13(a) is a valid
and binding
agreement of Seller and is in full force and effect, and neither
Seller nor, to
Seller's Knowledge, any other party thereto is in default in any
material
respect under the terms of any such Contract, nor, to Seller's
Knowledge, has
any event or circumstance occurred that, with notice or lapse of
time or both,
would constitute an event of default thereunder.
3.14. Technology and Intellectual Property. (a) Schedule 3.14(a)
lists:
(i) all patents and all trademarks, service marks, copyrights
and mask works,
and any applications and renewals for any of the foregoing used
by or on behalf
of Seller for the benefit of the Business; (ii) all hardware
products and tools,
software and firmware products and tools and services that are
currently sold,
published, offered, or under development by or on behalf of
Seller for the
benefit of the Business; and (iii) all licenses (in and out),
sublicenses and
other agreements to which Seller is a party and pursuant to
which Seller or any
other Person is authorized to use any of the Business's
Intellectual Property or
exercise any other right with regard thereto. The disclosures
described in
clause (iii) of the preceding sentence include the identities of
the parties to
the relevant agreements, a brief description of the nature and
subject matter
thereof, the term thereof and the applicable payment terms (or
summary of any
formula or procedure for determining such payment terms).
(b) Each item of the Business's Intellectual Property is either:
(i)
owned solely by Seller free and clear of any liens; or (ii)
rightfully used and
authorized for use by Seller and its successors pursuant to a
valid, enforceable
and transferable (without consent) written license. All of the
Business's
Intellectual Property that is used by Seller pursuant to a
license or other
grant of a right by a third party to use its propriet
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