ASSET PURCHASE AGREEMENT
By and Between
CENTENNIAL TECHNOLOGIES, INC.
and
INTEL CORPORATION
Dated as of December 29, 1999
i
CONFIDENTIAL
TABLE OF CONTENTS
ARTICLE I DEFINITIONS 1
1.01. Definitions 1
1.02. Index of Other Defined Terms 5
ARTICLE II PURCHASE AND SALE 6
2.01. Purchased Assets 6
2.02. Excluded Assets 7
2.03. Assumption of Liabilities 7
2.04. Excluded Liabilities 8
2.05. Assignment of Contracts and Rights 8
2.06. Purchase Price 8
2.07. Closing 10
2.08. Employee Matters 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER 11
3.01. Existence and Good Standing 11
3.02. Authorization and Enforceability 11
3.03. Governmental or Other Authorization 11
3.04. Non-Contravention 11
3.05. Financial Information; Undisclosed 12
Liabilities; Books and Records
3.06. Absence of Certain Changes 12
3.07. Properties: Material Leases; Tangible 13
Assets
3.08. Inventories 13
3.09. Litigation 14
3.10. Contracts 14
3.11. Required Consents 14
3.12. Compliance with Applicable Laws 15
3.13. Advisory Fees 15
3.14. Tax Matters 15
3.15. Product Warranties 15
3.16. Customers 15
3.17. Investment Representations 15
3.18. Intellectual Property 16
3.19. License Agreements 17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER 17
4.01. Existence and Good Standing 17
4.02. Authorization and Enforceability 17
4.03. Governmental or Other Authorization 17
4.04. Non-Contravention 18
4.05. Capitalization 18
4.06. Valid Issuance 18
4.07. Litigation 19
4.08. Compliance with Applicable Laws 19
4.09. SEC Documents 19
ii CONFIDENTIAL
4.10. Absence of Changes Since Balance Sheet Date 20
4.11. Intellectual Property 20
4.12. Advisory Fees 21
4.13. Purchaser Rights Agreement 21
ARTICLE V COVENANTS OF SELLER 21
5.01. Access to Information 21
5.02. Customer Introductions 21
5.03. Post-Closing Transition Services 22
5.04. Non-Competition 22
ARTICLE VI SELLER LICENSE 22
6.01. Grant of License 22
6.02. No Other Rights 22
6.03. No Implied Obligation 23
6.04. No Implied Warranties 23
ARTICLE VII COVENANTS OF PURCHASER 23
7.01. Compliance with Terms of Governmental 23
Approvals and Consents
7.02. Use of Marks 24
7.03. Audit Rights 24
ARTICLE VIII COVENANTS OF ALL PARTIES 24
8.01. Further Assurances 24
8.02. Public Announcements 24
8.03. Tax Matters 25
8.04. Allocation of Purchase Price 27
8.05. Confidentiality 27
8.06. Waiver of Bulk Sales Laws 27
ARTICLE IX CONDITIONS TO CLOSING 27
9.01. Conditions to Obligations of Purchaser 27
9.02. Conditions to Obligations of Seller 29
ARTICLE X INDEMNIFICATION 30
Section 10.1. General Survival 30
Section 10.2. Indemnification 31
Section 10.3. Manner of Indemnification 32
Section 10.4. Third-Party Claims 32
Section 10.5. Exclusive Remedy 33
ARTICLE XI MISCELLANEOUS 33
11.01. Notices 33
11.02. Amendments; Waivers 35
11.03. Expenses 35
11.04. Successors and Assigns 35
11.05. Governing Law 35
iii CONFIDENTIAL
11.06. Counterparts; Effectiveness 35
11.07. Entire Agreement 36
11.08. Captions 36
11.09. Severability 36
11.10. Construction 36
11.11. Dispute Resolution 36
11.12. Submission to Jurisdiction; Waiver of Jury 37
Trial
11.13. Meaning of Include and Including 38
11.14. Cumulative Remedies 38
11.15. Third Party Beneficiaries 38
11.16. Specific Performance 38
11.17. Survival 38
iv CONFIDENTIAL
EXHIBITS
Exhibit 1.01A Form of Assignment and Assumption Agreement
Exhibit 1.01B Form of Bill of Sale
Exhibit 2.06A Form of Certificate of Designation of
Series B Preferred Stock
Exhibit 3.05 Financial Information
Exhibit 3.10 Form of Customer Contract
Exhibit 9.01 Matters to be Covered by Opinion of Legal
Counsel to Seller
Exhibit 9.02 Matters to be Covered by Opinion of Legal
Counsel to Purchaser
SCHEDULES
Schedule 1.01A Seller Individuals With Knowledge
Schedule 1.01B Purchaser Individuals With Knowledge
Schedule 2.01(a) Inventory
Schedule 2.01(c) Equipment
Schedule 2.01(d) Backlog
Schedule 2.01(e) Designs and Documentation
Schedule 2.01(f) Assumed Contracts
Schedule 2.02(b) Excluded Contracts Relating to the Business
Schedule 3.03 Seller Approvals
Schedule 3.04 Non-Contravention Exceptions
Schedule 3.06 Ordinary Course Exceptions
Schedule 3.19 License Agreements
Schedule 3.10 Contracts
Schedule 3.11(a) Permits and Approvals
Schedule 3.11(b) Required Contractual Consents
Schedule 3.15 Product Warranties
Schedule 3.16 Customers
Schedule 4.03 Purchaser Approvals
Schedule 4.04 Non-Contravention Exceptions
Schedule 4.07 Litigation
Schedule 4.10 Ordinary Course Exceptions
Schedule 8.04 Allocation of Purchase Price
Schedule 9.01(b) Required Seller Closing Consents
Schedule 9.02(b) Required Purchaser Closing Consents
1 CONFIDENTIAL
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of December 29,
1999 (the "Agreement"), is by and between Intel Corporation, a
Delaware corporation ("Seller") and Centennial Technologies,
Inc., a Delaware corporation ("Purchaser"). All capitalized
terms have the meanings ascribed to such terms in Article I or as
otherwise defined herein.
W I T N E S S E T H:
WHEREAS, Seller desires to sell to Purchaser, and Purchaser
desires to purchase from Seller the assets of the Business;
WHEREAS, Purchaser desires to license from Seller, and
Seller desires to license to Purchaser, certain Intellectual
Property rights not included in the Purchased Assets;
WHEREAS, Purchaser and Seller are entering into a Supply
Agreement and a Rights Agreement simultaneously herewith; and
WHEREAS, in connection with the sale of the Purchased Assets
to Purchaser by Seller, Seller has agreed to enter into a non-
competition agreement in favor of Purchaser.
NOW, THEREFORE, in consideration of the foregoing premises,
the mutual representations, warranties, covenants and agreements
hereinafter set forth, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01 Definitions. The following terms, as used herein, have
the following meanings:
"Acquisition Documents" means this Agreement, the
Rights Agreement, the Supply Agreement, the Bill of Sale, the
Assignment and Assumption Agreement, the Transition Services
Agreement, the Note and the Security Agreement and any other
document or agreement executed in connection with any of the
foregoing, together with any Exhibits and Schedules thereto, and
in each case as modified, amended, supplemented, restated or
renewed from time to time.
"Affiliate" means, with respect to any Person, any
Person directly or indirectly controlling, controlled by or under
direct or indirect common control with such other Person.
"Applicable Law" means, with respect to any Person, any
federal, state, local or foreign statute, law, ordinance, rule,
administrative interpretation, regulation, order, writ,
injunction, directive, judgment, decree or other requirement of
any Governmental Authority applicable to such Person or any of
its Affiliates or ERISA Affiliates or any of their respective
properties, assets, officers, directors, employees, consultants
or agents.
2 CONFIDENTIAL
"Assignment and Assumption Agreement" means that
certain Assignment and Assumption Agreement dated as of the
Closing Date, to be entered into by Purchaser and Seller, in
substantially the form attached hereto as Exhibit 1.01A.
"Associate" or "Associated With" means, when used to
indicate a relationship with any Person, (a) any other Person of
which such first Person is an officer, director or partner or is,
directly or indirectly, the beneficial owner of ten percent (10%)
or more of any class of equity securities, partnership or
membership interests or other comparable ownership interests
issued by such other Person, (b) any trust or other estate in
which such first Person has a ten percent (10%) or more
beneficial interest or as to which such first Person serves as
trustee or in a similar fiduciary capacity and (c) any relative
or spouse of such first Person who has the same home as such
first Person.
"Bill of Sale" means that certain Bill of Sale dated as
of the Closing Date, to be executed by Seller in favor of
Purchaser, in substantially the form attached hereto as Exhibit
1.01B.
"Business" means the flash memory card business of
Seller, which produces and sells flash memory cards, including
the PCMCIA card families (Series 2, Value Series 100 and 200) and
the Miniature card families (Series 100 and 200), as heretofore
or currently conducted by Seller, including all standard and
custom products.
"Business Day" means each day other than a Saturday,
Sunday or other day on which commercial banks in San Francisco,
California or Boston, Massachusetts are authorized or required by
law to close.
"Closing Date" means the date of the Closing.
"Contracts" means all contracts, agreements, options,
leases, licenses, sales and purchase orders, commitments and
other instruments of any kind, whether written or oral, to which
Seller is a party or is otherwise bound.
"Damages" means all demands, claims, actions or causes
of action, assessments, losses, damages (whether direct or
indirect but excluding consequential damages), deficiencies,
costs, expenses, Liabilities, judgments, settlements, awards,
fines, response costs, sanctions, Taxes, penalties, charges and
amounts paid in settlement, including reasonable out-of-pocket
costs, fees and expenses (including costs, fees and expenses of
attorneys, accountants and auditors and other agents of, or other
Persons retained by, such Person).
"Equipment" means all machinery, jigs and fixtures used
in connection with the Business.
"GAAP" means generally accepted accounting principles
in the United States of America applied on a consistent basis.
"Governmental Approval" means an authorization,
consent, approval, permit or license issued by, or a registration
or filing with, or notice to, or waiver from, any Governmental
Authority.
3 CONFIDENTIAL
"Governmental Authority" means any foreign or domestic
federal, territorial, state or local governmental authority,
quasi-governmental authority, instrumentality, court, government
or self-regulatory organization, commission, tribunal or
organization or any regulatory, administrative or other agency,
or any political or other subdivision, department or branch of
any of the foregoing.
"Intellectual Property" means intellectual property
rights arising from or in respect of the following, whether
protected, created or arising under the laws of the United States
or any other jurisdiction:
(1) copyrights and registrations and applications
therefor (collectively, "Copyrights") and mask work rights; and
(2) know-how, inventions, discoveries, concepts,
ideas, methods, processes, designs, formulae, technical data,
drawings, specifications, data bases and other proprietary and
confidential information, including customer lists, in each case
excluding any rights in respect of any of the foregoing that
comprise or are protected by Copyrights, mask work rights or
Patents (collectively, "Trade Secrets"); and
(3) patents and applications therefor, including
continuation, divisional, continuation-in-part, or reissue patent
applications and patents issuing thereon (collectively,
"Patents").
"IRS" means the Internal Revenue Service.
"Knowledge" means, with respect to any Person, the
actual knowledge of such Person, after reasonable inquiry.
Without limiting the generality of the foregoing, with respect to
any Person that is a corporation, limited liability company,
partnership or other business entity, actual knowledge shall be
deemed to include the actual knowledge of all directors,
officers, partners and members of any such Person; provided that
with respect to Seller, actual knowledge shall be deemed to be
the actual knowledge of the individuals identified on Schedule
1.01A; provided, further that with respect to Purchaser, actual
knowledge shall be deemed to be the actual knowledge of the
individuals identified on Schedule 1.01B.
"Liability" means, with respect to any Person, any
liability or obligation of such Person of any kind, character or
description, whether known or unknown, absolute or contingent,
accrued or unaccrued, liquidated or unliquidated, secured or
unsecured, joint or several, due or to become due, vested or
unvested, executory, determined, determinable or otherwise and
whether or not the same is required to be accrued on the
financial statements of such Person.
"Lien" means, with respect to any asset, any mortgage,
title defect or objection, lien, pledge, charge, security
interest, encumbrance or hypothecation in respect of such asset.
"Material Adverse Effect" means, with respect to any
Person, any circumstance of, change in, or effect on, or group of
such circumstances of, changes in or effects on, the operations,
financial condition, earnings, or results of operations,
prospects, assets or Liabilities of the Person, that results in
or would reasonably be expected to result in, a material adverse
4 CONFIDENTIAL
effect on, or a material adverse change in, the operations,
financial condition, earnings, results of operations, prospects,
assets or Liabilities of such Person.
"Permitted Liens" means (a) Liens for Taxes or
governmental assessments, charges or claims the payment of which
is not yet due and (b) statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen and other similar
Persons and other Liens imposed by Applicable Law incurred in the
ordinary course of business for sums not yet delinquent or
immaterial in amount and being contested in good faith.
"Person" means an individual, corporation, partnership,
association, limited liability company, trust, estate or other
similar business entity or organization, including a Governmental
Authority.
"Post-Closing Tax Period" means any Tax period (or
portion thereof) ending after the Closing Date.
"Pre-Closing Tax Period" means any Tax period (or
portion thereof) ending on or before the close of business on the
Closing Date.
"Products" means flash memory components and cards
manufactured, distributed or sold by the Business.
"Seller License" means that certain license, granted by
Seller to Purchaser in accordance with the terms of Article VI of
this Agreement.
"Subsidiary" means, with respect to any Person, (a) any
corporation as to which more than fifty percent (50%) of the
outstanding stock having ordinary voting rights or power (and
excluding stock having voting rights only upon the occurrence of
a contingency unless and until such contingency occurs and such
rights may be exercised) is owned or controlled, directly or
indirectly, by such Person and/or by one or more of such Person's
direct or indirect Subsidiaries and (b) any partnership, joint
venture or other similar relationship between such Person (or any
Subsidiary thereof) and any other Person (whether pursuant to a
written agreement or otherwise).
"Supply Agreement" means that certain Supply Agreement
of even date herewith, by and between Seller and Purchaser.
"Taxes" means (a) all foreign, federal, state, local
and other net income, gross income, gross receipts, sales, use,
ad valorem, value added, intangible, unitary, capital gain,
transfer, franchise, profits, license, lease, service, service
use, withholding, backup withholding, payroll, employment,
estimated, excise, severance, stamp, occupation, premium,
property, prohibited transactions, windfall or excess profits,
customs, duties or other taxes, fees, assessments or charges of
any kind whatsoever, together with any interest and any
penalties, additions to tax or additional amounts with respect
thereto, (b) any Liability for payment of amounts described in
clause (a) whether as a result of transferee Liability, of being
a member of an Affiliated, consolidated, combined or unitary
group for any period, or otherwise through operation of law and
(c) any Liability for the payment of amounts described in clause
(a) or (b) as a result of any tax sharing, tax indemnity or tax
allocation agreement or any other express or
5 CONFIDENTIAL
implied agreement to indemnify any other person for Taxes; and
the term "Tax" means any one of the foregoing Taxes.
"Tax Returns" means all returns, declarations, reports,
statements, information statement, forms or other documents filed
or required to be filed with respect to any Tax.
"Transition Services Agreement" means that certain
Transition Services Agreement dated as of the Closing Date,
executed by Seller and Purchaser.
"Tort Claim" means any claim, on any grounds or basis,
under any statute or common law, for personal injury, wrongful
death, defamation, property damage, product liability, wrongful
interference with economic interests or other tortious conduct of
a Person (whether or not Liability is predicated on negligence,
intentional or reckless conduct, breach of contract or strict
liability).
1.02 Index of Other Defined Terms. In addition to these
terms defined above, the following terms shall have the
respective meanings given thereto in the sections indicated
below:
Defined Term Section
- ------------ -------
Agreement Preamble
Assumed Contracts Section 2.01(f)
Assumed Liabilities Section 2.03
Audited Financial Information Section 5.05
Audited Purchaser Financial Section 4.09(b)
Statements
Balance Sheet Date Section 4.09(b)
Cisco Section 2.06(a)
Certificate of Designation Section 2.07(c)
Closing Section 2.07
CNDA Section 5.01
Common Stock Section 4.05
Contingent Consideration Section 2.06(a)
Customer Contract Section 3.10(a)
Exchange Act Section 4.09(b)
Excluded Assets Section 2.02
Excluded Liabilities Section 2.03
Financial Information Date Section 3.05(a)
Financial Information Section 3.05(a)
Floor Section 10.2(d)
Indemnitee Section 10.2(b)
Indemnitor Section 10.2(b)
Inventory Section 2.01(a)
Losses Section 10.2(c)
Measurement Period Section 2.06(a)
Non-Competition Period Section 5.04
Notice of Claim Section 10.3(b)
Proceedings Section 3.09
6 CONFIDENTIAL
Purchase Price Section 2.06(a)
Purchased Assets Section 2.01
Purchased Intellectual Property Section 3.18(a)
Purchaser Preamble
Purchaser Approvals Section 4.03
Purchaser Indemnitees Section 10.2(a)
Required Contractual Consent Section 3.11(b)
Retained Marks Section 7.02
Sales Tax Section 8.03(e)
SEC Section 4.09(a)
SEC Documents Section 4.09(a)
Securities Act Section 3.17(a)
Seller Preamble
Seller Approvals Section 3.03
Seller Indemnitees Section 10.2(b)
Series B Preferred Stock Section 2.06(a)
ARTICLE II
PURCHASE AND SALE
2.01 Purchased Assets. Upon the terms and subject to the
conditions of this Agreement, at the Closing, Purchaser agrees to
purchase from Seller, and Seller agrees to sell, transfer, assign
and deliver to Purchaser, free and clear of all Liens other than
Permitted Liens, the assets, properties and business of the
Business, of every kind and description, wherever located,
tangible or intangible, owned, held, licensed, leased or
otherwise used in connection with the Business and specified
herein, as the same shall exist on the Closing Date
(collectively, the "Purchased Assets"). Without limiting the
generality of the foregoing, the Purchased Assets shall include
all of Seller's right, title and interest in, to and under:
(a) all items of inventory relating to the Business
(the "Inventory"), including all raw materials, finished goods
and work-in-process, as listed on Schedule 2.01(a);
(b) all collateral materials, manuals, promotional
materials, sales materials, display materials and product
information materials used in the operation of the Business;
(c) all of the fixed and other tangible personal
property used in connection with the operation of the Business
and all Equipment, all as described on Schedule 2.01(c);
(d) all backlog of the Business, as set forth on
Schedule 2.01(d);
(e) all board designs, tooling, fixtures, layouts,
schematics and product manufacturing documentation owned by
Seller and used in connection with the Business, as listed on
Schedule 2.01(e);
(f) all contracts listed on Schedule 2.01(f) (the
"Assumed Contracts"); and
(g) all Products.
7 CONFIDENTIAL
2.02 Excluded Assets. Subject to Section 2.01, Purchaser
and Seller expressly understand and agree that all assets of
Seller, other than those listed above (the "Excluded Assets")
shall be excluded from the Purchased Assets, including but not
limited to:
(a) all assets, tangible or intangible, real or
personal, that are not specifically identified in Section 2.01
and listed on the Schedules thereto;
(b) all Contracts that are not Assumed Contracts,
including the Contracts relating to the Business listed on
Schedule 2.02(b);
(c) the minute books, stock ledgers, accounting
records and Tax Returns of Seller, provided that Purchaser shall
have reasonable access to and be provided with copies of all
accounting records and Tax Returns relating to the Business
pursuant to Section 5.01;
(d) all cash and accounts receivable related to the
Business;
(e) all employee benefit plans;
(f) all insurance contracts in effect as of the date
of this Agreement insuring the Purchased Assets; and
(g) all leasehold or ownership interests in real
property or any improvements thereon.
2.03 Assumption of Liabilities. Upon the terms and subject
to the conditions of this Agreement, effective at the time of
Closing, Purchaser agrees to assume all Liabilities: (a) arising
out of the Assumed Contracts; (b) relating to any warranty or
similar claims with respect to any Inventory purchased by
Purchaser hereunder; and (c) arising out of Purchaser's operation
of the Business and ownership of the Purchased Assets following
the Closing, but, in the case of this clause (c), only to the
extent such Liabilities first accrue after the Closing Date and
are a result of actions taken or omitted to be taken by Purchaser
following the Closing (the "Assumed Liabilities"). The
assumption of said Liabilities by Purchaser shall not enlarge any
rights of third parties under contracts or arrangements with
Seller and nothing herein shall prevent Purchaser from contesting
in good faith with any third party any of said Liabilities. All
other Liabilities are referred to herein as "Excluded
Liabilities".
2.04 Excluded Liabilities. Except for those Liabilities
expressly assumed by Purchaser pursuant to Section 2.03 and
Section 8.03, the Purchaser shall not assume and shall not be
liable for, and Seller shall retain and remain solely liable for
and obligated to discharge and indemnify and hold Purchaser
harmless for, all of the debts, expenses, contracts, agreements,
commitments, obligations and other Liabilities of any nature
whatsoever of Seller, the Business or the Purchased Assets
through and on the Closing Date, whether known or unknown,
accrued or not accrued, fixed or contingent, including the
following:
(a) Breaches of Contracts. Any Liability for breaches
by Seller or any Affiliates of Seller prior to the Closing Date
of any instrument, purchase order or Contract or any Liability
for payments or amounts due under any instrument, purchase order
or Contract on or prior to the Closing Date;
8 CONFIDENTIAL
(b) Taxes. Except as otherwise provided in Section
8.03, any Liability for Taxes attributable to or imposed upon
Seller or any Affiliates of Seller, or attributable to or imposed
upon the Business or the Purchased Assets for any period (or
portion thereof) through the Closing Date;
(c) Indebtedness. Any Liability for or in respect of
any loan or other indebtedness for money borrowed of Seller or
any Affiliates or Associates of Seller on or prior to the Closing
Date; and
(d) Employee Obligations. Any Liability that may arise
or have arisen from the employment of employees with, or the
termination of their employment by, Seller on or prior to the
Closing Date, including, without limitation, accrued vacation
pay, holiday pay, sick pay, bonuses earned, and/or pensions or
profit sharing.
2.05 Assignment of Contracts and Rights. Anything in this
Agreement or any other Acquisition Document to the contrary
notwithstanding, this Agreement shall not constitute an agreement
to assign any Purchased Asset or any claim or right or any
benefit arising thereunder or resulting therefrom if an attempted
assignment thereof, without the consent of a party thereto, would
constitute a breach or other contravention thereof or in any way
adversely affect the rights of Purchaser or Seller thereunder.
2.06 Purchase Price.
(a) The aggregate purchase price payable by Purchaser
to Seller for the Purchased Assets (the "Purchase Price") shall
consist of: (i) sixty thousand (60,000) shares of Purchaser's
Series B Preferred Stock, having rights, preferences and
privileges as set forth in the Certificate of Designation of
Series B Preferred Stock attached as Exhibit 2.06A to this
Agreement (the "Series B Preferred Stock"); (ii) cash in the
amount of two million dollars ($2,000,000); (iii) a subordinated
promissory note in the principal amount of four million dollars
($4,000,000), secured by the collateral set forth in Exhibit A to
the Security Agreement; and (iv) a future payment of up to four
million five hundred thousand dollars ($4,500,000) in cash (the
"Contingent Consideration"), if Cisco Corporation ("Cisco")
orders at least one hundred thousand (100,000) flash cards for
shipment during the period, net of any quantities originally
scheduled for shipment during the Measurement Period cancelled by
Cisco for its convenience, between the one hundred eighty-fifth
(185th) day and the three hundred sixty-fifth (365th) day after
the Closing Date (the "Measurement Period").
(b) The Contingent Consideration shall be payable in
cash within thirty (30) days after the one-year anniversary of
the Closing Date. The Contingent Consideration shall be payable
based upon flash cards ordered for shipment during the
Measurement Period. If the quantity of flash cards ordered for
shipment during the Measurement Period is less than thirty
thousand (30,000), no Contingent Consideration shall be payable.
If at least thirty thousand (30,000) flash cards are ordered for
shipment during the Measurement Period then the amount of the
Contingent Consideration payable shall be equal to four million
five hundred thousand dollars ($4,500,000) multiplied by a
fraction, the numerator of which shall be the number of flash
cards over thirty thousand (30,000) actually ordered for shipment
and the denominator shall be seventy thousand (70,000).
9 CONFIDENTIAL
(c) Seller and Purchaser have agreed that the Business
should be transferred to Purchaser with a "Normal Inventory"
which the parties have agreed is an inventory as defined below
with a value of approximately Five Million Two Hundred Ten
Thousand Dollars ($5,210,000) and have agreed that the Purchase
Price should be adjusted for certain fluctuations in the Normal
Inventory. For purposes of this paragraph 2.06(c), "Normal
Inventory" means all finished goods related to the Business owned
by Seller at Seller's facilities, any finished goods in transit
between XeTel and Seller for which Seller has paid XeTel, any
finished goods at XeTel for which Seller has paid XeTel, and any
components related to the Business and owned by Seller and
consigned to XeTel at XeTel's facilities or in transit from
Seller to XeTel, valued using the same valuation methods as
Seller used at the end of September 1999, including reserves,
costing, percentage complete for work-in-process and other
standards. The term "Normal Inventory" does not include raw
materials, work-in-process or finished goods which Purchaser
would have to pay a third party for after the Closing Date.
Commencing on the Termination Date, as defined in the Transition
Services Agreement, Purchaser shall perform a physical inventory
and test of the Normal Inventory and shall allow a representative
of Seller to be present at all times. If it is determined (with
such determination to be made no later than ninety (90) days
following the Termination Date) that the actual value of the
Normal Inventory as of the Closing Date is less than Five Million
Sixty Thousand Dollars ($5,060,000), then Seller shall, within
thirty (30) days, pay the difference between the actual value of
the Normal Inventory and Five Million Sixty Thousand Dollars
($5,060,000) to Purchaser; provided, however, that if the actual
value of the Normal Inventory as of the Closing Date is less than
Three Million Sixty Thousand Dollars ($3,060,000), at Seller's
option, (i) Seller shall pay Two Million Dollars ($2,000,000) to
Purchaser, and (ii) Seller and Purchaser shall amend the Note to
reduce Purchaser's obligations thereunder by the difference
between the actual value of the Normal Inventory and Three
Million Sixty Thousand Dollars ($3,060,000). If it is determined
that the actual value of the Normal Inventory as of the Closing
Date is greater than Five Million Three Hundred Sixty Thousand
Dollars ($5,360,000), then Purchaser shall, within thirty (30)
days, pay the difference between the actual value of the Normal
Inventory and Five Million Three Hundred Sixty Thousand Dollars
($5,360,000) to Seller. No payment shall be made by either party
if the actual value of the Normal Inventory as of the Closing
Date is between Five Million Sixty Thousand Dollars ($5,060,000)
and Five Million Three Hundred Sixty Thousand Dollars
($5,360,000). Any dispute concerning the physical inventory,
testing methods or valuation procedures shall be resolved in
accordance with the provisions of this Agreement. The provisions
of this Section 2.06(c) shall provide the exclusive remedy with
respect to fluctuations in the value of the Normal Inventory.
2.07 Closing. The closing of the purchase and sale of the
Purchased Assets hereunder (the "Closing") shall take place at
the offices of Gibson, Dunn & Crutcher LLP, 1530 Page Mill Road,
Palo Alto, California, as soon as possible, but in no event later
than five (5) days after satisfaction of the conditions set forth
in Article IX, or at such other time or place as the parties may
agree. At the Closing:
(a) Seller shall deliver to Purchaser the Bill of Sale
and such other endorsements, consents, assignments, instruments
of conveyance and transfer documents (including the Assignment
and Assumption Agreement) as Purchaser may reasonably request to
vest in Purchaser all right, title and interest in, to and under
the Purchased Assets and the Business. Simultaneously with the
consummation of the transactions contemplated hereby,
10 CONFIDENTIAL
Seller, through its officers, agents and employees, will put
Purchaser into full possession and enjoyment of all tangible
Purchased Assets, terms FOB Seller. Seller shall pay all costs
for packing the Purchased Assets for shipping to the Purchaser's
headquarters in Wilmington, Massachusetts. Purchaser shall pay
all costs for shipping the Purchased Assets to the Purchaser's
headquarters in Wilmington, Massachusetts.
(b) Seller and Purchaser shall execute and deliver the
Assignment and Assumption Agreement;
(c) Purchaser shall file the Certificate of
Designation of Series B Preferred Stock attached as Exhibit 2.06A
to this Agreement (the "Certificate of Designation") with the
Secretary of State of the State of Delaware;
(d) Seller and Purchaser shall execute and deliver the
Rights Agreement, the Supply Agreement and the Transition
Services Agreement; and
(e) Purchaser shall pay the Purchase Price to Seller,
through a wire transfer of the cash portion of the Purchase Price
(other than the Contingent Consideration), delivery of a
certificate representing the Series B Preferred Stock, and
delivery of the Note, the Security Agreement and appropriate UCC-
1 financing statements.
2.08 Employee Matters. No employees of Seller will be
transferred to Purchaser in connection with the transactions
contemplated by this Agreement and the Acquisition Documents.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement
and to consummate the transactions contemplated herein, Seller
represents and warrants to Purchaser as follows:
3.01 Existence and Good Standing. Seller is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all corporate power and
authority required to carry on its business as now conducted and
to own and operate the businesses as now owned and operated by it
(including the Business). Seller is qualified to conduct
business in each state or states where the failure to be so
qualified, whether singly or in the aggregate, could reasonably
be expected to have a Material Adverse Effect. Copies of
Seller's Certificate of Incorporation as amended to date,
certified by the Secretary of State of the State of Delaware and
of Seller's by-laws as amended to date, certified by Seller's
Assistant Secretary, have been delivered to Purchaser and all
such copies are complete and correct and no amendments thereto
are pending. Seller is not in violation of any term of its
Certificate of Incorporation or by-laws.
3.02 Authorization and Enforceability. The execution,
delivery and performance by Seller of this Agreement and the
other Acquisition Documents, and the consummation of the
transactions contemplated hereby and thereby, are within Seller's
powers and have been duly authorized by all necessary corporate
action on its part. This Agreement, the Rights Agreement
11 CONFIDENTIAL
and the Supply Agreement have been and, when executed at the
Closing, the other Acquisition Documents will have been, duly and
validly executed by Seller and, assuming the due execution and
delivery of this Agreement and the other Acquisition Documents to
which it is a party by Purchaser, as applicable, will constitute
legal, valid and binding obligations of Seller, enforceable
against Seller in accordance with their respective terms, subject
to any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to
creditors' rights generally or to general principles of equity.
3.03 Governmental or Other Authorization. Except as set
forth on Schedule 3.03, the execution, delivery and performance
by Seller of this Agreement and the other Acquisition Documents,
and the consummation by it of the transactions contemplated
hereby and thereby, require no Governmental Approval from any
Governmental Authority or any consent, waiver or approval of any
other Person (such required consents and approvals, the "Seller
Approvals").
3.04 Non-Contravention. Except as set forth on Schedule
3.04, the execution, delivery and performance of this Agreement
and the other Acquisition Documents by Seller, and the
consummation of the transactions contemplated hereby and thereby,
do not and will not (a) contravene or conflict with the
certificate of incorporation or bylaws of Seller, (b) assuming
receipt of the Seller Approvals that are Governmental Approvals,
contravene or conflict with or constitute a material violation of
any provision of any Applicable Law binding upon or applicable to
Seller, the Purchased Assets or the Business or (c) assuming
receipt of the Seller Approvals that are not Governmental
Approvals and of the Required Contractual Consents, constitute a
default under, give rise to any right of termination,
cancellation, modification, or acceleration of, or to a loss of
any material benefit to which the Business is entitled, or result
in the creation or imposition of any Lien on the Purchased Assets
(other than Permitted Liens), or any permit relating to the
Business or by which Seller, any of the Purchased Assets or the
Business may be bound or materially affected.
3.05 Financial Information; Undisclosed Liabilities; Books
and Records.
(a) Attached hereto as Exhibit 3.05 is financial data
and other financial information of the Business as of December
25, 1999 (the "Financial Information Date") and for the twenty-
four (24) month period then ended (collectively, the "Financial
Information"). The Financial Information has been prepared
internally by Seller and has not been audited by any independent
certified public accountants or auditors.
(b) The Financial Information has been prepared based
on the books and records of Seller and includes items accounted
for in accordance with GAAP consistent with the methods used for
the purpose of preparing the accounting for such items in
connection with the Seller's financial statements for prior
periods and presents fairly the financial condition and results
of operations of the Business as of the dates indicated or for
the periods indicated.
3.06 Absence of Certain Changes. Except as set forth on
Schedule 3.06, since the Financial Information Date, the Business
has been conducted in the ordinary course consistent with past
practice, and there has not been:
12 CONFIDENTIAL
(a) any event, occurrence, state of circumstances or
facts or change in the Business that has had or that may be
reasonably expected to have, either alone or together, a Material
Adverse Effect on the Business;
(b) any change in any Liabilities of Seller that has
had, or that may be reasonably expected to have, a Material
Adverse Effect on the Business;
(c) any creation, assumption or sufferance of (whether
by action or omission) the existence of any Lien on any of the
Purchased Assets, other than Permitted Liens;
(d) any waiver, amendment, termination or cancellation
of any Assumed Contract or any relinquishment of any material
rights thereunder by Seller, other than, in each such case,
actions taken in the ordinary course of business consistent with
past practice that are not material with respect to any such
Assumed Contract;
(e) any change by Seller in its accounting principles,
methods or practices or in the manner it keeps its accounting
books and records relating to the Business, except any such
change required by a change in GAAP;
(f) any sale, assignment, transfer, lease or other
disposition of or agreement to sell, assign, transfer, lease or
otherwise dispose of, any Purchased Asset, other than sales of
Inventory in the ordinary course of business consistent with past
practice;
(g) any material damage, destruction or other casualty
loss with respect to any Purchased Asset or any other material
asset or property owned, leased or otherwise used by Seller in
the Business, whether or not covered by insurance;
(h) any adverse business or regulatory condition
presently existing or threatened in connection with the Business
or the Purchased Assets;
(i) any write-down or write-up of the value of any
inventory of the Business or of the Purchased Assets;
(j) any change in Seller's pricing, delivery or other
terms to any customer of Products;
(k) any material change or amendment to, or any waiver
of any material right under a material contract, license or
arrangement which the Business or the Purchased Assets is bound
by or subject to, except for changes, amendments or waivers that
are expressly provided for or disclosed in this Agreement;
(l) any other Business-related transaction entered
into by Seller other than transactions in the ordinary course of
business; or
(m) any agreement or understanding, whether in writing
or otherwise, for Seller to take any of the actions specified in
paragraphs (a) through (l) above.
13 CONFIDENTIAL
3.07 Personal Property. Seller has good and marketable
title to all of its tangible personal property and assets that
are Purchased Assets. None of such personal property or assets
is subject to any mortgage, pledge, lien, conditional sale
agreement, security agreement, encumbrance or other charge.
Except for inventory and as otherwise specified on Schedule
2.01(c), all of such personal property and assets are in good
operating condition and repair (subject, only in the case of the
property listed on Schedules 2.01(c) and 2.01(e), to normal wear
and tear), are adequate for the uses to which they are put.
Other than inventory, no material personal properties or assets
necessary for the conduct of the Business in substantially the
same manner as the Business has heretofore been conducted are in
need of replacement, maintenance or repair except, only in the
case of the property listed on Schedules 2.01(c) and 2.01(e), for
routine replacement, maintenance and repair. Schedule 2.01(c)
sets forth a correct and complete list of all Equipment owned by
Seller and used in connection with the Business.
3.08 Inventories. Schedule 2.01(a) sets forth all
inventories of raw materials, work-in-process and finished goods
included in the Purchased Assets as of the Closing Date. The
value at which Inventories are carried in the Financial
Information reflect the normal inventory valuation policy of
Seller in accordance with GAAP and on a basis consistent with
that of preceding periods. All finished goods inventory is free
from defects, is in good operating condition and meets all
applicable product specifications, requirements and performance
criteria. Except as disclosed in Schedule 2.01(a), said
inventories do not include items which are below standard quality
or have become obsolete, slow moving or unsaleable (except at
prices less than cost) through regular distribution channels in
the ordinary course of the Business as conducted by Seller.
Since October 31, 1999, no inventory items have been sold or
disposed of except through sales in the ordinary course of
business.
3.09 Litigation. There are no actions, suits, claims,
charges, hearings, arbitrations, audits, proceedings (public or
private) or, to the Knowledge of Seller, investigations
(collectively, "Proceedings") that have been brought or initiated
by or against any Governmental Authority or any other Person, or
are pending or, to the Knowledge of Seller, threatened (a) by or
against Seller relating to any of the Purchased Assets or the
Business or (b) that seeks to prevent, enjoin, alter or delay the
transactions contemplated by this Agreement or any of the other
Acquisition Documents. There are no existing orders, judgments
or decrees of any Governmental Authority relating to the Business
or any of the Purchased Assets.
3.10 Contracts.
(a) Schedule 3.10 lists each contract, agreement,
lease, license, or commitment (other than contracts with
distributors of the products), written or oral, including,
without limitation, Seller's contracts with its customers (the
"Customer Contracts"), requiring payments in excess of $25,000
annually and related exclusively to the Business to which Seller
is a party or by which the assets of the Business are bound.
True and complete copies of each of such contracts have been
delivered to Purchaser.
(b) Each Assumed Contract is a legal, valid and
binding obligation of Seller and, to the Knowledge of Seller,
each other Person who is a party thereto, enforceable against
Seller and each such Person in accordance with its terms, and
neither Seller nor, to the Knowledge of Seller, any other party
thereto is in material default thereunder.
14 CONFIDENTIAL
(c) Except for sales where the terms and conditions
are determined to be made, in whole or in part, upon the terms
and conditions contained in a customer's purchase order and
supporting documents, all sales to be made by Purchaser with
respect to the Business pursuant to the Assumed Contracts for any
period beginning after July 1, 2000 will be made pursuant to
standard terms and conditions set forth in the Form of Customer
Contract attached to this Agreement as Exhibit 3.10 without
material modification as to assignability, return rights,
discounts, volume incentives or other material modifications.
3.11 Required Consents.
(a) Schedule 3.11(a) sets forth all approvals,
authorizations, certificates, consents, licenses, orders and
permits and other similar authorizations of all Governmental
Authorities (and all other Persons) necessary for the operation
of the Business in substantially the same manner as currently
operated by Seller. Seller holds all material Permits and
approvals of Governmental Authorities necessary for the lawful
conduct of the Business.
(b) Schedule 3.11(b) lists each contract with respect
to which the consent of the other party or parties thereto must
be obtained by Seller by virtue of the execution and delivery of
this Agreement and the other Acquisition Documents, or the
consummation of the transactions contemplated hereby and thereby
to avoid the loss of any material benefit under, or any material
modification to, any such contract ("Required Contractual
Consent").
3.12 Compliance with Applicable Laws. Seller has no
Knowledge that it has not complied in all material respects with
any Applicable Laws relating to the Business or the Purchased
Assets, except where the failure to comply would not, singly or
in the aggregate, have a Material Adverse Effect on the Business.
Seller is not subject to any order, writ, injunction or decree of
any Governmental Authority relating to the Business or the
Purchased Assets.
3.13 Advisory Fees. There is no investment banker, broker,
finder or other intermediary or advisor that has been retained by
or is authorized to act on behalf of Seller, who might be
entitled to any fee, commission or reimbursement of expenses from
Seller, or any Affiliate or Associate of Seller, upon
consummation of the transactions contemplated by this Agreement.
3.14 Tax Matters. Seller has filed on a timely basis all
Tax Returns required to have been filed by it with respect to the
Business or the Purchased Assets and has paid on a timely basis
all Taxes required to be shown thereon as due. Seller has not
received any notice that it is or may be subject to additional
Tax with respect to the Business or the Purchased Assets There
are no Liens for Taxes (other than for current Taxes not yet due
and payable) upon any of the Purchased Assets.
3.15 Product Warranties. Schedule 3.15 sets forth copies of
Seller's standard Product warranties currently in effect with
respect to the Products. To the Knowledge of Seller, no Tort
Claims, claims with respect to Product warranties or facts upon
which a claim of such nature could be based exist or are
threatened.
3.16 Customers. Schedule 3.16 sets forth all customers of
the Business as conducted by Seller. The accounts of all such
customers with Seller are in good standing and all Customer
15 CONFIDENTIAL
Contracts are valid contracts entered into in the ordinary course
of business. To the Knowledge of Seller, Seller has not received
written notice from any of the customers listed on Schedule 3.16
indicating that they intend to stop purchasing flash cards from
Seller. Seller has not been paid nor does it hold deposits
relating to any Customer Contract.
3.17 Investment Representations.
(a) Purchase for Own Account. The Series B Preferred
Stock is being acquired for investment for Seller's own account,
not as a nominee or agent, and not with a view to the public
resale or distribution thereof within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), and
Seller has no present intention of selling, granting any
participation in, or otherwise distributing the same. Seller
also represents that it has not been formed for the specific
purpose of acquiring the Series B Preferred Stock.
(b) Investment Experience. Seller understands that
the acquisition of the Series B Preferred Stock involves
substantial risk. Seller has experience as an investor in
securities of companies and acknowledges that it is able to fend
for itself, can bear the economic risk of its investment in the
Series B Preferred Stock and has such knowledge and experience in
financial or business matters that it is capable of evaluating
the merits and risks of this investment in the Series B Preferred
Stock and protecting its own interests in connection with this
investment.
(c) Accredited Investor Status. Seller is an
"accredited investor" within the meaning of Regulation D
promulgated under the Securities Act.
(d) Restricted Securities. Seller understands that
the Series B Preferred Stock and the Common Stock issued upon
conversion thereof are characterized as "restricted securities"
under the Securities Act, inasmuch as they are being acquired
from Purchaser in a transaction not involving a public offering
and that under the Securities Act and applicable regulations
thereunder such securities may be resold without registration
under the Securities Act only in certain limited circumstances.
Seller is familiar with Rule 144 of the Securities Act, as
presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act.
(e) Legends. Seller agrees that the certificates for
the Series B Preferred Stock and the Common Stock issuable upon
conversion thereof may bear a legend in substantially the
following form:
"The shares represented by this
certificate have not been registered under
the Securities Act of 1933 or with any
state securities commission, and may not be
transferred or disposed of by the holder in
the absence of a registration statement
which is effective under the Securities Act
of 1933 and applicable state laws and
rules, or, unless, immediately prior to the
time set for transfer, such transfer may be
effected without violation of the
Securities Act of 1933 and other applicable
state laws and rules."
16 CONFIDENTIAL
In addition, Seller agrees that Purchaser may place
stop transfer orders with its transfer agents with respect to
such certificates. The appropriate portion of the legend and the
stop transfer orders will be removed promptly upon delivery to
Purchaser of such satisfactory evidence as reasonably may be
reasonably required by Purchaser that such legend or stop orders
are not required to ensure compliance with the Securities Act.
3.18 Intellectual Property.
(a) Ownership or Right to Use. Except as set forth on
Schedule 3.18(a), Seller has sole title to and owns the items
listed on Schedule 2.01(e) to this Agreement (the "Purchased
Intellectual Property").
(b) No Infringement. Seller's flash products division
operations counsel has not received any written communications
alleging that the Purchased Intellectual Property violates or
infringes any Intellectual Property of any other Person.
3.19 License Agreements. Schedule 3.19 sets forth, to the
best of Seller's Knowledge, all parties to whom Seller has
granted a license to any Purchased Intellectual Property owned by
Seller that is specific to the Business. True and complete
copies of each of the license agreements referenced in this
Section 3.19 have been provided to Purchaser.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to Seller to enter into this Agreement and
to consummate the transactions contemplated herein, Purchaser
hereby represents and warrants to Seller as follows:
4.01 Existence and Good Standing. Purchaser is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all corporate
power and authority required to carry on its business as now
conducted and to own and operate its businesses as now owned and
operated by it. Purchaser is qualified to conduct business in
each state or states where the failure to be so qualified,
whether singly or in the aggregate, could reasonably be expected
to have a Material Adverse Effect. Purchaser has heretofore
delivered to Seller complete and correct copies of its
certificate of incorporation and bylaws as currently in effect.
4.02 Authorization and Enforceability. The execution,
delivery and performance by Purchaser of this Agreement and the
other Acquisition Documents, and the consummation of the
transactions contemplated hereby and thereby, are within
Purchaser's powers and have been duly authorized by all necessary
corporate action on its part. This Agreement, the Rights
Agreement and the Supply Agreement have been and, when executed
at the Closing, the other Acquisition Documents to which it is a
party will have been, duly and validly executed by Purchaser,
and, assuming the due execution and delivery of this Agreement
and the other Acquisition Documents by Seller, will constitute
legal, valid and binding obligations of Purchaser, enforceable
against Purchaser in accordance with their respective terms,
subject to any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to
creditors' rights generally or to general principles of equity.
17 CONFIDENTIAL
4.03 Governmental or Other Authorization. Except as set
forth on Schedule 4.03, the execution, delivery and performance
by Purchaser of this Agreement and the other Acquisition
Documents to which it is a party, and the consummation by it,
respectively, of the transactions contemplated hereby and
thereby, require no Governmental Approval from any Governmental
Authority or any consent, waiver or approval of any other Person
(such required consents and approvals, the "Purchaser
Approvals").
4.04 Non-Contravention. Except as set forth on Schedule
4.04, the execution, delivery and performance of this Agreement
and the other Acquisition Documents by Purchaser, where
applicable, and the consummation of the transactions contemplated
hereby and thereby, do not and will not (a) contravene or
conflict with the certificate of incorporation or bylaws of
Purchaser, (b) assuming receipt of the Purchaser Approvals that
are Governmental Approvals, contravene or conflict with or
constitute a material violation of any provision of any
Applicable Law binding upon or applicable to Purchaser,
respectively, or (c) assuming receipt of the Purchaser Approvals
that are not Governmental Approvals, contravene or constitute a
default under any material agreement to which Purchaser is a
party.
4.05 Capitalization. The capitalization of Purchaser,
without giving effect to the transactions contemplated by this
Agreement, is as follows. The authorized stock of Purchaser
consists only of 6,250,000 shares of Common Stock, par value $.01
per share, (the "Common Stock") of which 3,167,529 shares were
issued and outstanding as of December 15, 1999, and 1,000,000
shares of preferred stock, par value $.01 per share, none of
which is issued or outstanding on the date hereof. All such
shares of Common Stock have been duly authorized, and all such
issued and outstanding shares of Common Stock have been validly
issued, are fully paid and nonassessable and are free and clear
of all liens, claims and encumbrances, other than any liens,
claims or encumbrances created by or imposed upon the holders
thereof. As of the date hereof, Purchaser also has reserved
1,787,500 shares of Common Stock for issuance upon exercise of
options or other stock awards granted to officers, directors,
employees or independent contractors or Affiliates of Purchaser
under Purchaser's employee benefit or incentive plans. As of
December 15, 1999, of the shares of Common Stock reserved for
issuance upon exercise of options, 1,311,974 shares remained
subject to outstanding options and 475,526 shares were reserved
for future grants. All shares of Common Stock subject to
issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and
nonassessable. Except as disclosed in SEC Documents, there are
no other equity securities, options, warrants, calls, rights,
commitments or agreements of any character to which Purchaser is
a party or by which it is bound obligating Purchaser to issue,
deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of the
capital stock of Purchaser or obligating Purchaser to grant,
extend or enter into any such equity security, option, warrant,
call, right, commitment or agreement.
4.06 Valid Issuance of Stock.
(a) Valid Issuance. The Series B Preferred Stock will
be, upon delivery of
