ASSET PURCHASE AGREEMENT
BY AND BETWEEN
CENTENNIAL TECHNOLOGIES, INC.
AND
INTEL CORPORATION
DATED AS OF DECEMBER 29, 1999
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..............................................10
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 Liabilities; Books
and Records.....................12
3.06. Absence of Certain
Changes............................................................12
3.07. Properties: Material Leases; Tangible
Assets..........................................13
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....................................................................16
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...................................................................
..17
4.05.
Capitalization..................................................................
......18
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4.06. Valid
Issuance........................................................................
18
4.07.
Litigation......................................................................
......18
4.08. Compliance with Applicable
Laws.......................................................19
4.09. SEC
Documents.......................................................................
..19
4.10. Absence of Changes Since Balance Sheet
Date...........................................19
4.11. Intellectual
Property.................................................................20
4.12. Advisory
Fees.........................................................................20
4.13. Purchaser Rights
Agreement............................................................20
ARTICLE V COVENANTS OF
SELLER...................................................................21
5.01. Access to
Information.................................................................21
5.02. Customer
Introductions................................................................21
5.03. Post-Closing Transition
Services......................................................21
5.04. Non-
Competition.....................................................................
..21
ARTICLE VI SELLER
LICENSE........................................................................2
2
6.01. Grant of
License......................................................................22
6.02. No Other
Rights.......................................................................22
6.03. No Implied
Obligation.................................................................22
6.04. No Implied
Warranties.................................................................22
ARTICLE VII COVENANTS OF
PURCHASER................................................................23
7.01. Compliance with Terms of Governmental Approvals and
Consents..........................23
7.02. Use of
Marks..........................................................................2
3
7.03. Audit
Rights..........................................................................
23
ARTICLE VIII COVENANTS OF ALL
PARTIES..............................................................24
8.01. Further
Assurances....................................................................24
8.02. Public
Announcements..................................................................2
4
8.03. Tax
Matters.........................................................................
..24
8.04. Allocation of Purchase
Price..........................................................26
8.05.
Confidentiality.................................................................
......26
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...................................................28
ARTICLE X
INDEMNIFICATION.................................................................
......30
Section 10.1. General
Survival.............................................................30
Section 10.2.
Indemnification..............................................................30
Section 10.3. Manner of
Indemnification....................................................31
Section 10.4. Third-Party
Claims...........................................................32
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Section 10.5. Exclusive
Remedy.............................................................32
ARTICLE XI
MISCELLANEOUS...................................................................
......32
11.01.
Notices.........................................................................
......32
11.02. Amendments;
Waivers...................................................................34
11.03.
Expenses........................................................................
......34
11.04. Successors and
Assigns................................................................34
11.05. Governing
Law.........................................................................35
11.06. Counterparts;
Effectiveness...........................................................35
11.07. Entire
Agreement......................................................................3
5
11.08.
Captions........................................................................
......35
11.09.
Severability....................................................................
......35
11.10.
Construction....................................................................
......35
11.11. Dispute
Resolution....................................................................35
11.12. Submission to Jurisdiction; Waiver of Jury
Trial......................................36
11.13. Meaning of Include and
Including......................................................37
11.14. Cumulative
Remedies...................................................................37
11.15. Third Party
Beneficiaries.............................................................37
11.16. Specific
Performance..................................................................37
11.17.
Survival........................................................................
......37
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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
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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.
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"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.
2
"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.
"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.
3
"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
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
4
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
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 Statements Section 4.09(b)
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)
5
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
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);
6
(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.
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".
7
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;
(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
8
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).
(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,
9
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, 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:
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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 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.
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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:
(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;
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(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.
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.
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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.
(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").
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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 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.
15
(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."
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.
16
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
