ASSET PURCHASE AGREEMENT Dated as of January 9, 2008 Between KYOCERA MITA CORPORATION As Buyer and PEERLESS SYSTEMS CORPORATION As Seller TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

 

 

			PAGE
ARTICLE 1		DEFINITIONS	1
1.1		Specific Definitions	1
1.2		Other Terms and Dollar Amounts	9
ARTICLE 2		PURCHASE, SALE AND TRANSFER OF SPECIFIED ASSETS	10
2.1		Purchased Assets	10
2.2		Excluded Assets	10
2.3		Purchase Price	11
2.4		Payment of Purchase Price	11
2.5		Assumed Liabilities	12
2.6		Retained Liabilities	12
2.7		Allocation of Purchase Price	12
ARTICLE 3		REPRESENTATIONS AND WARRANTIES OF SELLER	13
3.1		Organization; Directors and Officers	13
3.2		Authority	13
3.3		Financial Information.	14
3.4		Absence of Liabilities, Changes and Events	14
3.5		Litigation and Claims	14
3.6		Compliance with Law	15
3.7		Consents	15
3.8		Title to and Condition of Specified Assets	15
3.9		Intellectual Property.	16
3.10		Seller’s Products.	19
3.11		WARN Act and Other Employee Matters	20
3.12		Contracts and Commitments	20
3.13		Employment and Labor Matters	21
3.14		Employee Benefit Matters.	21
3.15		Insurance	22
3.16		No Finders	23
3.17		Fairness Opinion	23
3.18		Disclosure	23
ARTICLE 4		REPRESENTATIONS AND WARRANTIES OF BUYER	23
4.1		Organization of Buyer and KTD	23
4.2		Authority	23
4.3		Litigation and Claims	24
4.4		No Finders	24
4.5		Electronic Delivery	24

 

 

ARTICLE 5		CERTAIN COVENANTS AND AGREEMENTS	25
5.1		Approvals and Consents/Stockholder Approval.	25
5.2		Cooperation by Buyer.	26
5.3		Accuracy of Representations and Warranties	27
5.4		Pre-Closing Access to Information, Records and Employees	27
5.5		Further Assurances	28
5.6		No Solicitation of Other Offers.	28
5.7		Maintenance of Specified Assets	30
5.8		Enforcement of Agreement(s).	30
5.9		Bulk Sales	30
5.10		Termination of Existing Agreements	31
5.11		Employees and Employee Benefit Matters.	31
5.12		Employee Files	32
5.13		Past Service Credit	32
5.14		Affirmative Covenants of Seller.	33
5.15		Negative Covenants of Seller	33
5.16		Covenant Not to Solicit.	34
5.17		Engineering Fees	34
5.18		Supplementation and Amendment of Schedules	35
ARTICLE 6		CONDITIONS TO BUYER’S OBLIGATIONS	35
6.1		Representations, Warranties and Covenants	35
6.2		Approvals and Consents	35
6.3		No Injunction, etc	35
6.4		Transfer Documents	36
6.5		Other Transaction Documents	36
6.6		Secretary’s Certificate	36
6.7		Stockholder Approval	36
6.8		Employees	36
6.9		No Material Adverse Effect	36
6.10		Opinion	36
ARTICLE 7		CONDITIONS TO SELLER’S OBLIGATIONS	36
7.1		Representations, Warranties and Covenants	37
7.2		Approvals; Consents	37
7.3		No Injunction, etc	37
7.4		Other Transaction Documents	37
7.5		Secretary’s Certificate	37
7.6		Stockholder Approval	37
7.7		Opinion	37
ARTICLE 8		CLOSING	37
8.1		Closing Date	37

 

 

8.2		Software Deliveries	38
8.3		Proceedings	38
ARTICLE 9		INDEMNIFICATION	38
9.1		Indemnification of Buyer	38
9.2		Indemnification of Seller	39
9.3		Third-Party Claims and Other Claims.	40
9.4		Indemnification Limitations.	41
9.5		Cooperation as to Indemnified Liability	43
9.6		Nature of Indemnification	43
9.7		Calculation of Damages	43
9.8		Tax Treatment	43
ARTICLE 10		TERMINATION	43
10.1		Termination Prior to Closing	43
10.2		Effect of Termination	45
ARTICLE 11		MISCELLANEOUS	45
11.1		Complete Agreement	45
11.2		Survival of Representations and Warranties	45
11.3		Waiver, Discharge, Amendment, Etc	45
11.4		Notices	46
11.5		Transfer and Sales Taxes, Expenses and Termination Fee	47
11.6		Governing Law; Consent to Jurisdiction and Venue.	48
11.7		Public Announcement	49
11.8		Successors and Assigns	49
11.9		Titles and Headings; Construction	49
11.10		Severability	50
11.11		Counterparts	50
11.12		Confidentiality	50
11.13		Specific Performance	51

 

Exhibit A	Escrow Agreement
Exhibit B	License Agreement
Exhibit C	Sublease and Guaranty of Sublease
Exhibit D	Sublicense Agreements

 

Schedule 1.1(a)	Anticipated Transferred Employees
Schedule 1.2	Key Employees
Schedule 2.1	Transferred Contracts
Schedule 2.1(a)	Transferred Intellectual Property
Schedule 2.1(b)	Fixed Assets
Schedule 2.7	Purchase Price Allocation
Schedule 3.4	Absence of Changes
Schedule 3.5	Litigation
Schedule 3.6	Compliance with Laws
Schedule 3.7	Consents
Schedule 3.9(a)	Exceptions to Transferred Intellectual Property
Schedule 3.9(b)	Licensed IP
Schedule 3.9(c)	Other IP
Schedule 3.9(d)	Owned IP
Schedule 3.9(e)	Licenses
Schedule 3.9(f)	Restrictions on Licensed IP or Other IP
Schedule 3.9(g)	Exceptions to IP Applications
Schedule 3.9(k)	Non-Disclosure Agreements
Schedule 3.10(a)	Seller’s Tools
Schedule 3.10(c)	Rights to Seller’s Tools
Schedule 3.12	Contracts and Commitments
Schedule 3.13	Employment Matters
Schedule 3.14	Employee Benefit Matters
Schedule 3.15	Insurance
Schedule 6.10	Opinion of Seller’s Counsel
Schedule 7.7	Opinion of Buyer’s Counsel

 

 

 

THIS ASSET PURCHASE AGREEMENT is made and entered into as of January 9, 2008 (this “Agreement”), by and among KYOCERA MITA CORPORATION, a Japanese corporation (“Buyer”), and PEERLESS SYSTEMS CORPORATION, a Delaware corporation (“Seller”).

 

 

WHEREAS, the parties hereto desire that Seller sell, transfer and assign to Buyer, and Buyer purchase from Seller, all of the Specified Assets (as defined herein) of Seller on the terms and for the consideration hereinafter provided;

 

WHEREAS, the Board of Directors of Seller has approved, and deems it advisable and in the best interests of its stockholders to consummate the transactions provided for herein; and

 

WHEREAS, the Board of Directors of Buyer has approved the acquisition of the Specified Assets and the other transactions contemplated hereby are consistent with, and will further, its business strategies and goals.

 

NOW, THEREFORE, in consideration of the respective representations, warranties, covenants and agreements contained herein, and subject to the terms and conditions set forth herein, the parties hereto agree as follows:

 

 

1.1  Specific Definitions. As used in this Agreement, the following terms shall have the meanings set forth or referenced below:

 

“Acquisition” shall mean the sale by Seller and acquisition by Buyer of the Specified Assets as contemplated by this Agreement.

 

“Acquisition Proposal” shall mean any offer or proposal, relating to any transaction or series of related transactions involving: (A) any purchase from Seller or acquisition by any Person or “Group” (as defined under Section 13(d) of the Exchange Act and the rules and regulations thereunder) of more than a fifteen percent (15%) interest in the total outstanding voting securities of Seller or any tender offer or exchange offer that if consummated would result in any Person or Group beneficially purchasing fifteen percent (15%) or more of the total outstanding voting securities of Seller, or any acquisition, consolidation, change of control business combination merger, consolidation or similar transaction involving a change of control of Seller, or (B) any sale, lease (other than in the ordinary course of business), exchange, transfer, license (other than in the ordinary course of business), acquisition or disposition of more than fifteen percent (15%) of the assets of Seller; provided, however, that an offer or proposal shall not be deemed to be an Acquisition Proposal if upon receipt of an unsolicited Acquisition Proposal and prior to any additional discussions, Seller informs such party of the requirements for a Permitted Acquisition Proposal, and such party agrees to pursue such transaction in accordance with the criteria set forth in the definition of a Permitted Acquisition Proposal.

 

 

“Affiliate” of a specified person (natural or juridical) means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. For purpose of this definition, “control” shall mean ownership of more than ten percent (10%) of the shares of stock entitled to vote for the election of directors in the case of a corporation, and more than ten (10%) percent of the voting power in the case of a business entity other than a corporation.

 

“Anticipated Transferred Employee” means an employee of Seller on the date hereof who is listed on Schedule 1.1(a), or any other employee of Seller who is hereafter designated as an Anticipated Transferred Employee in a writing signed both by Buyer and Seller, whether or not such employee commences or agrees to commence employment with Buyer on the Closing Date or thereafter.

 

“Assignment and Assumption Agreement” means an agreement in form satisfactory to Seller and Buyer under which Seller shall assign to Buyer and Buyer shall assume from Seller all of Seller’s rights and obligations, to the extent such rights and obligations arise following the Closing, under the Transferred Contracts.

 

“Assumed Liabilities” means the liabilities described in Section 2.5.

 

“Bill of Sale” means the document delivered by Seller to Buyer under which Seller shall convey to Buyer, unencumbered title to the Specified Assets, in form satisfactory to Buyer and Seller.

 

“Block License Agreement” means the agreement by Seller to license Buyer certain third party rights pursuant to Licensed Software Addendum #4, as amended, and Licensed Software Addendum #6 (“LSA #6”) and Licensed Software Addendum #7 (“LSA #7”), as LSA # 6 and LSA #7 have been amended in connection with Buyer’s products as described in that certain “Amendment #1 to Licensed Software Addendum #6 and Amendment #1 to Licensed Software Addendum #7 to Master Technology License Agreement (MTLA) dated April 1, 1997, for the per unit license fee set forth therein which is to be applied in accordance with Section 2 therein, and all of Buyer’s obligations thereunder with respect to such license.

 

 

“Buyer” means Kyocera Mita Corporation or one or more of its Affiliates to which it assigns rights under this Agreement.

 

“Business Day” means a day other than a Saturday, Sunday or any other day on which commercial banks in Japan or California are authorized or obligated by law to close.

 

“Buyer Indemnified Parties” has the meaning set forth in Section 9.1.

 

“Closing” and “Closing Date” have the meanings set forth in Section 8.1.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Confidential Information” means any and all information disclosed by or on behalf of one of the parties (the “disclosing party”) to the other party (the “receiving party”), whether previously delivered, generated in connection with this Agreement, or otherwise learned by the receiving party from the disclosing party, excluding information which:

 

(a)  has been independently developed by or for the receiving party without breach of this Agreement or use of any Confidential Information of the other party (provided that the receiving party is able to provide the disclosing party with written proof thereof);

 

(b)  is or becomes available to the receiving party from a source other than the disclosing party which source has rightfully obtained such information and has no direct or indirect obligation of non-disclosure or confidentiality to the disclosing party with respect thereto;

 

(c)  is or becomes part of the public domain by reason of acts not attributable to the receiving party; or

 

(d)  was already in the possession of the receiving party prior to its original receipt from the disclosing party (provided that the receiving party is able to provide the disclosing party with written proof thereof and, if received from a third party, that such information was acquired without any party’s breach of a confidentiality or non-disclosure obligation to the disclosing party related to such information).

 

“Consents” has the meaning set forth in Section 3.7.

 

“Contract(s)” means contracts, instruments, loans, permits, leases, licenses, commitments and other agreements in each case, whether written or oral, proposed, contingent or otherwise.

 

 

“Copyrights” means all copyrights, including all renewals and extensions thereof, copyright registrations and applications for registration thereof, non-registered copyrights and all works of authorship and embodiments whether or not the subject of the forgoing.

 

“DGCL” means the General Corporation Law of the State of Delaware, as amended.

 

“Engineering Fee” has the meaning set forth in Section 5.17.

 

“Environmental Laws” means any one or more Laws that relates to or deals with safety, Hazardous Substances, human health or the environment, all as they may be amended from time to time and to the extent that they apply specifically to Seller, judgments, orders, decrees, injunctions, permits, concessions, grants, franchises, licenses or agreements that relate to safety, human health, the environment or emissions, discharges, or releases of Hazardous Substances into the environment including ambient air, surface water, ground water, facilities, structures, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, Hazardous Substances, or wastes or the investigation, clean-up, or other remediation thereof.

 

“Escrow Agent” shall mean the escrow agent mutually selected by Buyer and Seller and who shall serve pursuant to the Escrow Agreement.

 

“Escrow Agreement” means an escrow agreement to be entered into on the Closing Date between the Escrow Agent, Buyer and Seller, in the form of Exhibit A, and which provides, among other things, that the Holdback Amount shall be deposited into an interest-bearing account for the benefit of Seller, that interest thereon shall be paid to Seller from time to time and that the Holdback Amount shall be released to Seller pursuant to Section 2.4(b) and (c) or applied pursuant to Article 9.

 

“Escrow Fund” shall have the meaning set forth in the Escrow Agreement.

 

“Escrow Termination Date” shall have the meaning set forth in the Escrow Agreement.

 

“Excluded Assets” has the meaning set forth in Section 2.2.

 

“Existing Agreements” means the Memorandum of Understanding, the Master Development Agreement and the Master Maintenance and Support Agreement, each between Buyer and Seller (and/or their respective Subsidiaries) effective as of February 1, 2005 and the Master Development Agreement and the Master Technology License Agreement between Buyer and Seller effective April 1, 1997 and any addendums, amendments or other agreements related thereto (including any non disclosure agreements), but shall not include the Non-Disclosure Agreement and the portion of the Existing Agreements that constitute the Block License Agreement.

 

 

“Fixed Assets” means other than the Excluded Assets, all of the Seller’s fixed assets, including without limitation, computers, work stations, third party software licensed for such computers or work stations, electronic files, multi-function printers and copiers, copiers, office furniture and other tangible assets presently used principally by and necessary for each of the Anticipated Transferred Employees, which are necessary for each of such Transferred Employees to continue to perform their respective duties for the Buyer after the Closing without interruption. Subject to adjustment at Closing to reflect the actual Transferred Employees, the Fixed Assets are listed on Schedule 2.1(b) based on the Anticipated Transferred Employees presently listed on Schedule 1.1(a).

 

“Hazardous Substance” means asbestos, urea formaldehyde, polychlorinated biphenyls, nuclear fuel or materials, chemical waste, radioactive materials, explosives, known carcinogens, petroleum products, pesticides, fertilizers, or any other pollutant, contaminant, chemical, material or substance defined as hazardous or as a pollutant or contaminant in, or the use, transportation, storage, release or disposal of which is regulated by, any Environmental Laws.

 

“Holdback Amount” has the meaning set forth in Section 2.4(b).

 

“Indemnified Parties” has the meaning set forth in Section 9.2.

 

“Initial Payment” has the meaning set forth in Section 2.4(a).

 

“Intellectual Property” means Patents, Know-How, Copyrights and Software.

 

“Key Employee” means an Anticipated Transferred Employee listed on Schedule 1.1(b) hereto.

 

“Know-How” means all trade secrets, confidential technical and business information and other proprietary technical and business information including designs, research and development information, technical information, specifications, operating and maintenance manuals, sources of supply, methods, engineering drawings, know-how, data, discoveries, inventions, industrial designs and other proprietary rights, including ideas, discoveries, improvements, concepts (whether or not patentable or subject to copyright or trade secret protection).

 

“Knowledge” of Seller means, whether or not capitalized, actual knowledge of the following individuals at the Seller after reasonable investigation: Richard Roll, John Rigali, Elliot Shirwo and Robert Westervelt.

 

 

“KTD” means Kyocera Technology Development, Inc., a California corporation and an indirectly wholly owned subsidiary of the Buyer.

 

“Law” or “Laws” means any constitutional provision, specified statute, code or other law, rule, regulation, ordinance, Order, decree, or interpretation of any of the foregoing, of any governmental entity or authority or having the effect of law in the United States or any other country or jurisdiction, or any state, county, city or other political subdivision, including common law and, including, without limitation rules imposed by Nasdaq or any other authority (whether or not governmental).

 

“Lease” means the lease by Seller of space located at 2381 Rosecrans Avenue, El Segundo, California 90245.

 

“License Agreement” means the License Agreement to be executed between Buyer as licensor and Seller as licensee and effective as of the Closing Date substantially in the form of Exhibit B.

 

“Liens” means any liens, security interests, collateral assignments, pledges or other encumbrances.

 

“LSA #7” has the meaning set forth in the definition of Block License Agreement. 

 

“Material Adverse Effect” means any fact, event, series of events, change, effect or circumstance that, individually or in the aggregate with any other facts, events, series of events, changes, effects or circumstances, has or would reasonably be expected to have a material adverse effect on the Specified Assets, on the ability of Buyer to hire Transferred Employee Amount or on the ability to consummate the transactions contemplated by the Transaction Documents; provided, however, that Material Adverse Effect shall not include any fact, event, series of events, change, effect or circumstance resulting from (a) this Agreement, the transactions contemplated hereby, the announcement thereof or the filing of a proxy statement by Seller, (b) an act or omission by Buyer or its Affiliates or any of their employees or representatives, or (c) changes in general economic or political conditions or the securities markets in general (whether as a result of acts of terrorism, war (whether or not declared), armed conflicts or otherwise) that do not materially and disproportionately adversely affect the Specified Assets or the ability of Buyer to hire the Minimum Transferred Employee Amount.

 

“Minimum Transferred Employee Amount” means not less than thirty (30) of the individuals designated as an Anticipated Transferred Employee.

 

“Non-Disclosure Agreement” means the Non-Disclosure Agreement dated September 21, 2007 between Buyer and Seller.

 

“Notice of Dispute” has the meaning set forth in Section 11.6(b).

 

 

“Other IP” has the meaning set forth in Section 3.9(c).

 

“Patents” means all foreign and domestic patents, patent applications, industrial rights and the inventions, discoveries, designs and improvements described and claimed therein, patentable inventions, and other patent rights (including any divisionals, continuations, continuations-in-part, renewals, substitutions, reexaminations or reissues thereof, whether or not patents are issued on any such applications and whether or not any such applications are amended modified, withdrawn or refiled).

 

“Permitted Acquisition Proposal” shall mean an acquisition for fifteen percent (15%) or more of the total outstanding voting securities of Seller if (a) the potential acquirer has agreed in writing to be bound by the provisions of this Agreement and the other Transaction Documents and to vote any shares of Seller Common Stock it holds in favor of this Agreement, (b) no stockholder vote on such proposed transaction is held prior to the Stockholders’ Meeting, and (c) such proposed transaction does not have any adverse impact on the timing or probability of the consummation of the Acquisition and the transactions contemplated hereby, including the filing of the proxy statement or any other closing conditions contained in Article 6 hereof.

 

“Person” means any individual, corporation, association, partnership (general or limited), limited liability company, joint venture, trust, association, unincorporated organization, business, governmental entity or other entity.

 

“Purchase Price” has the meaning set forth in Section 2.3.

 

“Retained Liabilities” has the meaning set forth in Section 2.6.

 

“Seller Common Stock” means common stock of the Seller.

 

“Seller Indemnified Parties” has the meaning set forth in Section 9.2.

 

“Seller Intellectual Property” has the meaning set forth in Section 3.9.

 

“Seller Product Information” means all records, reports (internal and external), submissions (internal and external), data, files, marketing materials, specifications, manufacturing documentation and quality assurance information associated with any products or concepts, or development or manufacturing thereof, that have been created, initiated and/or conducted by Seller relating to the Specified Assets.

 

“Seller’s Products” means products developed by Seller for Buyer pursuant to the Existing Agreements.

 

“Seller Recommendation” has the meaning set forth in Section 5.1(d).

 

 

“Seller Regulatory Information” means all authorizations, permits, licenses, records, reports (internal and external), submissions (internal and external), data and files associated with regulatory requirements and communications between Seller and regulatory or governmental bodies worldwide relating to the Specified Assets.

 

“Seller’s Stockholders” means the holders of Seller Common Stock.

 

“Software” means all computer software programs and software systems, including all libraries, code of any kind, web programs (whether in HTML, XML or other form), application program interfaces and software programs that interface with third-party APIs, data structures, databases, compilations, tool sets, compilers, higher level or “proprietary” languages, and all related Technical Documentation and information, whether in source code, object code, binary or other form.

 

“Specified Assets” means the Transferred Intellectual Property and the Fixed Assets to be acquired by Buyer pursuant to the terms hereof and as set forth on Schedule 2.1(a) and, subject to adjustment, on Schedule 2.1(b).

 

“Sublease” means the sublease by KTD of a portion of Seller’s premises at 2381 Rosecrans Avenue, El Segundo, California 90245, to be executed and effective as of the Closing Date and, subject to the terms thereof, to be in effect for a forty (40) month period from the Closing Date and the Guaranty thereof by the Buyer, in the form of Exhibit C.

 

“Sublicense Agreement” means the Sublicense Agreements to be executed by Seller as sublicensor and Buyer as sublicensee with respect to the Other IP and effective as of the Closing Date substantially in the form of Exhibit D.

 

“Subsidiary” means with respect to any Person any corporation or other Person of which securities or other interests having the power to elect a majority of that corporation’s or other Person’s board of directors or similar governing body, or otherwise having the power to direct the business and policies of that corporation or other Person (other than securities or other interests having such power only upon the happening of a contingency that has not occurred), are held by the owner or one or more of its Subsidiaries.

 

“Superior Offer” shall mean an unsolicited, bona fide offer made by a third party to acquire, directly or indirectly, pursuant to a merger, tender offer, exchange offer, acquisition, consolidation or other business combination, either the Specified Assets or substantially all of the assets of Seller or more than 50% of the total outstanding voting securities of Seller on the terms that the Board of Directors of Seller has in good faith concluded (following the receipt of advice of its outside legal counsel and consultation with its financial adviser of recognized reputation), taking into account, among other things, all legal, financial, regulatory and other aspects of the offer and the Person making the offer, to be more favorable, from a financial point of view, than the terms of the Acquisition and is reasonably capable of being consummated.

 

 

“Taxes” and “Tax” means all taxes, additions to tax, penalties, interest, fines, duties, withholdings, assessments, and charges assessed or imposed by any governmental authority, including but not limited to all national, federal, state, county, local and foreign income, profits, gross receipts, import, ad valorem, real and personal property, franchise, license, sales, use, value added, stamp, transfer, withholding, payroll, employment, excise, custom, duty, and any other taxes, obligations and assessments of any kind whatsoever; the foregoing shall include, but not be limited to, any liability arising as a result of being (or ceasing to be) a member of any affiliated, consolidated, combined, or unitary group as well as any liability under any Tax allocation, Tax sharing, Tax indemnity or similar agreement.

 

“Technical Documentation” means any and all technical and descriptive materials relating to the acquisition, design, development, testing, fixing, use, or maintenance of, and the program documentation and materials for, Seller’s Products.

 

“Transaction Documents” means this Agreement, the License Agreement, the Sublease, the Bill of Sale, the Assignment and Assumption Agreement, the Escrow Agreement, the Sublicense Agreement, and all documents ancillary thereto.

 

“Transfer and Sales Taxes” means all sales tax, use taxes, stamp taxes, conveyance taxes, transfer taxes, filing fees and other similar duties, taxes and fees, if any, imposed upon, or resulting from, the transfer of the Specified Assets.

 

“Transferred Contracts” means the Contracts listed on Schedule 2.1 to be transferred to Buyer.

 

“Transferred Employee” means an employee of Seller on the date hereof who is an Anticipated Transferred Employee and who accepts employment with Buyer commencing as of the Closing Date.

 

“Transferred Intellectual Property” means Seller’s Patents, Know-How, Copyrights and Software, other than any Know-How, Copyrights and Software which are part of the Excluded Assets.

 

1.2  Other Terms and Dollar Amounts. Other terms may be defined elsewhere in the text of this Agreement and shall have the meanings indicated throughout this Agreement. All dollar amounts shall refer to the lawful currency of the United States of America. 

 

 

 

2.1  Purchased Assets. Upon the terms and subject to the conditions set forth in this Agreement, effective as of the Closing, Seller agrees to irrevocably sell, transfer, assign and convey to Buyer, and Buyer agrees to purchase from Seller the assets listed on Schedules 2.1(a) (Transferred Intellectual Property) and 2.1(b) (Fixed Assets) hereto (the “Specified Assets”) free and clear of all Liens. At the Closing, Seller shall deliver the Bill of Sale to Buyer and the Buyer and Seller shall execute the Assignment and Assumption Agreement and such other documents and instruments of assignment and transfer as Buyer shall reasonably request.

 

2.2  Excluded Assets. Buyer is not acquiring any of Seller’s cash, cash equivalents, receivables, fixed assets not described as part of the Specified Assets or any other asset of Seller that is not within the definition of Specified Assets. Additionally, Specified Assets, as such term is used herein, also shall not include any of the following assets of Seller (the “Excluded Assets”):

 

(i)  all rights of Seller under its licenses or agreements with Adobe Systems Incorporated and Novell Inc.;

 

(ii)  all rights and obligations of Seller under all existing agreements with all of its other vendors, independent contractors or licensors, including, without limitation, license agreements, maintenance and service agreements and engineering service agreements; provided none of which transfer title to any Intellectual Property owned by Seller;

 

(iii)  all of Seller’s customized Intellectual Property that has been previously integrated into products or services licensed or otherwise provided by Seller to third parties or specifically created for customers of the Seller after December 7, 2007 other than Buyer and, which, in either case, (i) has not also been provided to or integrated into products or services licensed to Buyer, or (ii) developed pursuant to or in connection with the Existing Agreements;

 

(iv)  all rights and obligations of Seller under all existing agreements with all of its customers, including, without limitation, license agreements, maintenance and service agreements and engineering service agreements with all of its customers, provided none of which transfer title to any Intellectual Property owned by Seller;

 

(v)  all rights of Seller under the Lease (except to the extent and subject to the terms of the Sublease);

 

 

(vi)  the telephone system, telephones, telephone lines, cables, wiring, servers, leasehold improvements (except to the extent rights of ownership or use are granted under the Sublease) and any other tangible assets that are used on a company wide basis by Seller;

 

(vii)  any third-party software listed on Schedules 2.1(b) and 2.2(c) hereto that is presently licensed to Seller for the computers and work stations which are part of the Fixed Assets (except to the extent that consent can be obtained without cost to Seller and without delay in the Closing or as may be otherwise agreed to by Buyer and Seller, in which case Schedules 2.1(b) and 2.2(c) will be appropriately amended);

 

(viii)  all of Seller’s trademarks, service marks, trade names, trademark and service mark applications, domain names and websites;

 

(ix)  any Intellectual Property developed or created after December 7, 2007 that has not been developed, created or utilized for the Buyer or integrated into products or services licensed to Buyer or developed pursuant to or in connection with the Existing Agreements; and

 

(x)  any Intellectual Property purchased after December 7, 2007, except to the extent such Intellectual Property is provided to or integrated into products or services licensed to Buyer.

 

2.3  Purchase Price. The total consideration to be paid to Seller from Buyer for the Specified Assets (the “Purchase Price”) shall be Thirty Seven Million Dollars ($37,000,000), subject to Section 9.8.

 

2.4  Payment of Purchase Price. The Purchase Price shall be paid as follows:

 

(a)  On the Closing Date, Buyer shall pay (i) to Seller by wire transfer of immediately available funds, to a bank account designated in writing by Seller, an amount equal to Thirty Three Million Dollars ($33,000,000) (the “Initial Payment”) and (ii) to the Escrow Agent by wire transfer of immediately available funds, to a bank account designated in writing by the Escrow Agent, an amount equal to Four Million Dollars ($4,000,000) (the “Holdback Amount”).

 

(b)  On the date that is the first Business Day after fifteen (15) months following the Closing Date, in accordance with the terms of the Escrow Agreement, the Escrow Agent shall release to Seller by wire transfer of immediately available funds, to a bank account designated in writing by Seller, an amount equal to Two Million Dollars ($2,000,000), less any reductions thereto permitted pursuant to Article 9.

 

 

(c)  On the date that is the first Business Day after twenty-four (24) months following the Closing Date, in accordance with the terms of the Escrow Agreement, the Escrow Agent shall pay to Seller by wire transfer of immediately available funds, to a bank account designated in writing by Seller, an amount equal to the remaining portion of the Holdback Amount, less any reductions thereto permitted pursuant to Article 9.

 

2.5  Assumed Liabilities. At the Closing, Buyer shall only assume and agree to pay, perform and discharge in due course only the following liabilities and obligations of the Seller (the “Assumed Liabilities”): (a) accrued and unpaid vacation, sick and leave time of the Transferred Employees prior to Closing in accordance with the policies of Seller in effect prior to the execution of this Agreement as disclosed on Schedule 3.14; (b) the payment of any filing and maintenance fees required to be paid after the Closing Date to maintain the effectiveness of any filings made with respect to the Intellectual Property; (c) all obligations of Buyer under the Sublease; and (d) all obligations arising from and after the Closing Date under the Transferred Contracts. 

 

2.6  Retained Liabilities. The parties agree that Buyer is not, nor shall be considered, the successor to Seller, and that Buyer does not hereby agree to assume or become liable to pay, perform or discharge any of Seller’s obligations, undertakings or liabilities of any kind or nature whatsoever, whether known or unknown, fixed or contingent, determined or determinable, due or not yet due, or otherwise, that is not expressly assumed by Buyer under Section 2.5 (the “Retained Liabilities”) or payable by Buyer under Section 11.5.

 

2.7  Allocation of Purchase Price. Subject to adjustment to reflect the actual Fixed Assets to be transferred at Closing, Buyer and Seller have agreed to allocate the Purchase Price among the Specified Assets, the Assumed Liabilities and the licenses granted under the License Agreement in accordance with Schedule 2.7. The allocation has been agreed to by Seller and Buyer after arm’s-length negotiations and in accordance with Section 1060 of the Code and other applicable laws. Seller and Buyer will, to the extent permitted by applicable law, adopt and utilize the amounts allocated to each asset or class of assets, as such allocations may be adjusted pursuant to this Agreement, for purposes of all foreign, federal, state, local and other tax returns or reports, in any claim for refund, or otherwise with respect to such tax returns or reports. Each party agrees to timely file an IRS Form 8594 or other applicable form reflecting the allocation of the Purchase Price for the taxable year that includes the Closing and to timely file any comparable or similar forms required by applicable federal, state, local, and foreign tax laws.

 

 

 

Seller represents and warrants to Buyer as follows:

 

3.1  Organization; Directors and Officers. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Seller has all necessary power and authority to own its properties and assets and conduct the business presently being conducted by it. Seller is duly licensed or qualified to do business as a corporation and is in good standing in the jurisdictions where the conduct or nature of the business or the ownership, leasing, holding or use of any property or asset related to or used in connection with the business makes such qualification necessary, except for those jurisdictions where the failure to be so qualified would not have a Material Adverse Effect.

 

3.2  Authority. Seller has full power and authority to enter into this Agreement and the Transaction Documents and, subject to the receipt of the affirmative vote of the holders of a majority in voting power of the outstanding capital stock of Seller in respect of this Agreement and the Acquisition (“Seller Stockholder Approval”), the Seller will have full power and authority to perform its obligations hereunder and under the other Transaction Documents. This Agreement has been duly authorized, executed and delivered by all necessary corporate action of Seller, other than Seller Stockholder Approval and, subject to receiving Seller Stockholder Approval, constitutes a legal, valid and binding agreement of Seller enforceable against it in accordance with its terms, subject to (a) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles and (b) laws relating to the availability of specific performance, injunctive relief or other equitable remedies. The other Transaction Documents have been duly authorized, other than Seller Stockholder Approval, and, subject to receiving Seller Stockholder Approval, upon due execution and delivery will constitute legal, valid and binding agreements of Seller enforceable against it in accordance with its terms, subject to (a) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles and (b) laws relating to the availability of specific performance, injunctive relief or other equitable remedies. Except for the Seller Stockholder Approval, no further proceeding on the part of Seller is necessary to authorize this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby. Neither the execution and delivery of this Agreement or the other Transaction Documents nor compliance by Seller with the terms and provisions hereunder and thereunder will (i) violate or conflict with any provision of the certificate of incorporation, bylaws or other governing instruments of Seller, (ii) subject to obtaining the Consents as set forth of Schedule 3.7, require any consent under or violate or conflict with any Contract of Seller, or (iii) other than any export licenses or permits, violate or conflict with any Law to which Seller or any of the Specified Assets is subject or (iv) create any Lien upon any of the Specified Assets or any other assets of the Seller.

 

 

3.3  Financial Information.

 

(a)  Seller has delivered or made available to Buyer (through reference to documents filed by EDGAR or otherwise) copies of all forms, reports and documents filed by Seller with the Securities and Exchange Commission (“SEC”) since December 31, 2005.

 

(b)  Seller and each of its Subsidiaries is able to pay its debts generally as they become due and is solvent (determined by the fair market value of its assets exceeding its liabilities) and will not be rendered insolvent as a result of the transactions contemplated by the Transaction Documents. Seller has not either voluntarily or involuntarily, (i) admitted in writing that it is or may become unable to pay its debts generally as they become due, (ii) filed or consented to the filing against it of a petition in bankruptcy or a petition to take advantage of an insolvency act, (iii) made an assignment for the benefit of its creditors, (iv) consented to the appointment of a receiver for itself or for the whole or any substantial part of its property, (v) had a petition in bankruptcy filed against it, (vi) been adjudged bankrupt or filed a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws or any Law, or (vii) incurred, or believed or reasonably should have believed it would incur, debts that are or will be beyond its ability to pay as such debts mature. Seller is not engaged nor currently contemplates being engaged in a business or transaction for which any property remaining would be insufficient to continue to operate its businesses.

 

3.4  Absence of Liabilities, Changes and Events. Since December 31, 2006, except as set forth on Schedule 3.4 hereto, Seller has not (a) incurred any debts, liabilities, claims against or obligations, and to Seller’s Knowledge, there is no reasonable legal basis therefor, that may adversely affect Seller’ ability to perform its obligations hereunder or under the other Transaction Documents or may adversely affect the ownership of the Specified Assets or the use thereof by Buyer in the manner currently used by Seller, whether accrued, absolute, contingent or otherwise, and whether due or to become due, including but not limited to liabilities on account of taxes, other governmental charges, duties, penalties, interest or fine; (b) sold, assigned or transferred any tangible or intangible asset of Seller other than in the ordinary course of business; or (c) increased any salaries, wages or employee benefits or made any arrangement for payment of any bonus or special compensation for any Anticipated Transferred Employee other than in the ordinary course of business; or (d) agreed to take any action described in (a) through (c) above.

 

 

3.5  Litigation and Claims. Except as set forth on Schedule 3.5, there are no actions, suits, claims, or proceedings pending or, to Seller’s Knowledge, threatened against or by Seller or the Specified Assets, at law, in equity or otherwise, in, before, or by, any court, arbitrator, or governmental agency or authority which could have a Material Adverse Effect, and, to the Knowledge of Seller, no reasonable basis for any such claim exists. There are no unsatisfied judgments or outstanding orders, injunctions, decrees, stipulations or awards (whether rendered by a court or administrative agency or by arbitration) against or affecting Seller or its assets.

 

3.6  Compliance with Law. The use of the Specified Assets as currently conducted by Seller has not violated and is not in violation of any applicable Law. Other than any export licenses or permits, all governmental approvals, registrations, notifications, permits, licenses and other permissions or authorizations required in connection with the use of Specified Assets as currently conducted by Seller have been obtained and are in full force and effect and are being complied with. In the three (3) years prior to the date hereof, Seller has not received any written notification of any asserted past or present violation of any applicable Law, or any written complaint, inquiry or request for information from any governmental entity relating thereto in connection with the Specified Assets or the use of the Specified Assets. Other than as specified in Schedule 3.6, the Seller has received no written notice that any of the Specified Assets is the subject of any federal, state or local enforcement action or other investigation. All documentation, correspondence, reports, data, analysis and certifications relating to or regarding the Specified Assets filed or delivered (or, if amended, as of the date for which such amendment speaks) by or on its behalf to any governmental authority, agency or body were true and accurate when so filed or delivered and remain, to the extent required by any applicable Laws.

 

3.7  Consents. Other than any export licenses or permits, Schedule 3.7 hereto lists each consent, approval, notice, permit, exemption, waiver or authorization (collectively, the “Consents”), that is legally or contractually required to duly and validly transfer or assign to Buyer the Specified Assets or Assumed Liabilities, pursuant to the terms hereof or pursuant to the other Transaction Documents.

 

3.8  Title to and Condition of Specified Assets. Seller has full right, title and interest to the intangible Specified Assets and good and valid title to the tangible Specified Assets, free and clear of all Liens and will convey the same to Buyer at the Closing, except that to the extent that Seller will license its rights to Other IP pursuant to the Sublicense Agreements (the “Sublicensed IP”). The tangible Specified Assets are in normal operating condition and free from any significant defects, ordinary wear and tear excepted. Seller has paid or will have paid all filing and maintenance fees with respect to the Patents due and payable prior to the Closing Date. All of the Specified Assets are in the possession and/or control of Seller and no Subsidiary has any other right or interest in the Specified Assets.

 

 

3.9  Intellectual Property.

 

(a)  Except for the Patents, Know-How, Copyrights and Software which are part of the Excluded Assets, the Transferred Intellectual Property and the Sublicensed IP contain all Patents, Know-How, Copyrights and Software of or used by Seller and its Subsidiaries from December 31, 2003 to the Closing Date and no other Patents, Know-How, Copyrights and Software (other than those which are part of the Excluded Assets) are necessary to or used in the conduct of Seller’s business. Except as set forth on Schedule 3.9(a) hereto, Seller owns the Transferred Intellectual Property (the “Owned IP”), or is licensed or authorized or otherwise has the right to use the Transferred Intellectual Property (the “Licensed IP”). All Transferred Intellectual Property is either Owned IP or Licensed IP.

 

(b)  Schedule 3.9(b) hereto lists all Licensed IP specifying to each item, as applicable: (i) the nature of the item, including the title, (ii) the owner of the item, (iii) the title of the Contract or other arrangements pursuant to which Seller has the right to use such Intellectual Property, (iv) whether the license is exclusive or non-exclusive and any limitations on the right to use such Intellectual Property, and (v) any royalties or other consideration payable thereunder (collectively the “Licensed IP Licenses”).

 

(c)  Schedule 3.9(c) hereto lists all Intellectual Property (other than any Intellectual Property that is the subject of the Block License Agreement) that is licensed to Seller, incorporated in the Owned IP and is not Licensed IP (collectively the “Other IP”), specifying as to each such Other IP, as applicable: (i) the nature of the Other IP, (ii) the Transferred Intellectual Property into which such Other IP is incorporated, (iii) the owner of such Other IP, (iv) the title of any license agreement relating to the Other IP (collectively, the “Other IP Licenses”), (v) any limitations on the right to use such Intellectual Property, and, (vi) any royalties or other consideration payable thereunder.

 

(d)  Schedule 3.9(d) hereto lists all Owned IP specifying as to each item, as applicable: (i) the nature of the item, including the title, (ii) the jurisdictions in which the item is issued or registered or in which an application for issuance or registration has been filed, and (iii) the issuance, registration or application numbers and dates.

 

(e)  Seller owns, free and clear of all Liens, has, to the Seller’s Knowledge, valid and enforceable rights in, and has the unrestricted right to use, sell, license, transfer or assign, all Owned IP and at the Closing, will transfer the same to Buyer. Seller has not transferred its title in or to any Owned IP, and no Owned IP has been licensed or supplied by Seller to any Person since December 31, 2003 except as set forth in Schedule 3.9(e).

 

 

(f)  Except as set forth on Schedule 3.9(f), Seller has a valid and enforceable license or other right to use all Licensed IP and Other IP and at the Closing, will transfer the right to use the Licensed IP to Buyer pursuant to the Assignment and Assumption Agreement or license to Buyer the right to use the Other IP pursuant to the Sublicense Agreement. Seller has performed all obligations imposed on it in the Licensed IP Licenses and the Other IP Licenses, has made all payments required to date, and is not in breach or default thereunder in any respect, nor to the Seller’s Knowledge, is there any event which with notice or lapse of time or both would constitute a default or breach thereunder by Seller.

 

(g)  Except as set forth on Schedule 3.9(g), all Owned IP which are granted and issued Patents are subsisting and unexpired and have not been abandoned and all filing, renewal or other fees have been timely and fully paid by Seller when due, and all such Owned IP is, to Seller’s Knowledge, valid and enforceable. Except as set forth on Schedule 3.9(g), all Owned IP which are applications for Patent registrations (collectively, the “IP Applications”) are pending, active, subsisting and have not been abandoned and all filing, renewal or other fees have been timely and fully paid when due by Seller. To Seller’s Knowledge, Seller has timely and fully responded to all office actions or other comments, actions or filings of any kind made by any governmental entity with respect to any IP Application to full satisfaction of the applicable governmental entity. To Seller’s Knowledge, there is no currently existing reason or basis why any pending IP Application which has not been abandoned by Seller should not be granted or any Seller’s Patent should not be held valid or enforceable. To Seller’s Knowledge, neither Seller nor any officer, employee or agent of Seller has made an untrue statement of a material fact or fraudulent statement to any governmental authority, failed to disclose a material fact required to be disclosed to any governmental authority, or committed an act, made a statement, or failed to make a statement that would provide a basis to invalidate or hold unenforceable any Patent, whenever granted. Buyer has been provided with copies of the files for all Owned IP which are granted and issued Patents or IP Applications and, all such files are true, accurate and complete in all material respects. The Owned IP does not consist of any registered Copyrights or applications to register Copyrights.

 

(h)  To Seller’s Knowledge, Seller’s rights in the Transferred Intellectual Property are valid and enforceable and there is no current event or circumstance that would impair the validity or enforceability thereof. No claim or action is pending or, to Seller’s Knowledge, threatened and Seller has no Knowledge of any basis for any claim that challenges the validity, enforceability, ownership, or right to use, sell, license or sublicense any Transferred Intellectual Property, and no Transferred Intellectual Property is subject to any outstanding order, ruling, decree, stipulation, charge or agreement restricting in any manner the use, the licensing, or the sublicensing thereof.

 

 

(i)  None of the Owned IP is, to Seller’s Knowledge, being infringed by others, or is subject to any outstanding order, decree, judgment, or stipulation. No litigation (or other proceeding in or before any governmental authority or arbitral body) relating to the Owned IP is pending, or to Seller’s Knowledge, threatened, nor, to Seller’s Knowledge, is there any basis for any such litigation or proceeding. To Seller’s Knowledge, none of the Licensed IP is being infringed by others or is subject to any outstanding order, decree, judgment, or stipulation. To Seller’s Knowledge, no litigation (or other proceeding in or before any governmental authority or arbitral body) relating to the Licensed IP is pending or threatened nor is there any basis for any such litigation or proceeding.

 

(j)  Except as set forth on Schedule 3.5, the Transferred Intellectual Property does not infringe, and Seller has not made unlawful use of the Intellectual Property of another Person. Except as set forth on Schedule 3.5, no litigation (or other proceeding in or before any governmental authority or arbitral body) charging Seller with infringement or unauthorized or unlawful use of any Transferred Intellectual Property is pending, or to Seller’s Knowledge, threatened.

 

(k)  Seller maintains commercially reasonable security measures for the preservation of the secrecy and proprietary nature of the Transferred Intellectual Property. All Anticipated Transferred Employees have executed and delivered to Seller non-disclosure agreements that are in full force and effect and, to Seller’s Knowledge, fully enforceable by Seller. All of such Contracts are listed in Schedule 3.9(k) and copies thereof have been delivered to Buyer. To Seller’s Knowledge there have been no breaches of such agreements or of any of Seller’s security measures.

 

(l)  Each present employee, officer, consultant to the Seller or any Person who was an employee, officer or consultant to the Seller at any time after January 1, 2001 or any other Person who developed any part of any Transferred Intellectual Property, either: (i) is a party to a Contract that conveys or obligates such Person to convey to Seller any and all right, title and interest in and to all such Transferred Intellectual Property Rights developed by such Person, (ii) as to copyrighted or copyrightable material created in the course of such Person’s employment with or engagement on behalf of Seller is a party to a “work made for hire” Contract pursuant to which Seller is deemed as a matter of Law to be the original owner/author of all proprietary rights in such material, or (iii) otherwise has by operation of Law vested in Seller any and all right, title and interest in and to all such Transferred Intellectual Property developed by such Person. To Seller’s Knowledge, at no time during the conception or reduction to practice of any Transferred Intellectual Property was any developer, inventor or other contributor to such Transferred Intellectual Property operating directly or indirectly under any grants from any governmental authority or subject to any employment agreement, invention assignment, nondisclosure agreement or other Contract with any Person that could adversely affect the rights of Seller, and upon the Acquisition, Buyer to such Transferred Intellectual Property.

 

 

(m)  The execution and performance by Seller of this Agreement and the other Transaction Documents will not result in the loss or impairment of the rights of Buyer to own or use any of the Transferred Intellectual Property and Seller is not, nor as a result of the execution and delivery of this Agreement or the other Transaction Documents or the performance of its obligations hereunder or thereunder will be, in violation of any IP License.

 

3.10  Seller’s Products.

 

(a)  Schedule 3.10(a) hereto contains a complete list and description of all products (other than Seller’s Products) used by Seller to develop the Seller’s Products (“Seller’s Tools”) specifying to each item, as applicable: (i) the nature and purpose of the item, including the title, (ii) the owner of the item, (iii) if Seller is not the owner thereof, the title of the licenses or other Contracts or arrangements pursuant to which Seller has the right to use such Seller’s Tool (which information shall be provided by Seller to Buyer prior to the Closing), and (iv) if Seller is not the owner thereof, whether such Seller’s Tool is part of the Licensed IP or the Other IP or whether Buyer will need to obtain its own rights to use Seller’s Tool from the owner thereof.

 

(b)  True and correct copies of the Technical Documentation that presently exists for all Seller’s Products have been delivered to Buyer. True and correct copies of the Technical Documentation that presently exists for all Seller’s Tools have been delivered to Buyer except to the extent that Seller is restricted from providing any or all of such Technical Documentation pursuant to agreements with the owners of such Seller’s Tools. The Technical Documentation for Seller’s Products includes the documentation, statements of principal of operation, and schematics, as well as any pertinent commentary or explanation that may be necessary to render such materials understandable and usable by Buyer.

 

(c)  Except as set forth on Schedule 3.10(c), Seller owns all rights, title and interest in and to, or otherwise has the sole and exclusive right to use, without the payment of royalties or other consideration, all of Seller’s Products and those of Seller’s Tools owned by Seller and Technical Documentation for both of the foregoing contain no other programming or materials in which any third party may claim superior, joint, or common ownership, including any right or license. Seller’s Products and those of Seller’s Tools owned by Seller and Technical Documentation for both of the foregoing do not contain derivative works of any programming or materials not owned in their entirety by Seller.

 

 

3.11  WARN Act and Other Employee Matters. Seller has not taken and does not intend to take any action that could constitute a “mass layoff,” “mass termination” or “plant closing” within the meaning of the Worker Adjustment and Retraining Notification Act, as amended, and the rules and regulations promulgated thereunder or otherwise trigger notice requirements or liability under any federal, local, state or foreign plant closing notice law in connection with the transactions contemplated by this Agreement. 

 

3.12  Contracts and Commitments. Schedule 3.12 hereto contains a complete and accurate list of all material Contracts of the Seller (the “Seller Agreements”) concerning the following matters:

 

(i) the employment or engagement of any Anticipated Transferred Employee;

 

(ii) any covenant not to compete or confidentiality agreement affecting an Anticipated Transferred Employee;

 

(iii) any arrangement limiting the freedom of Seller to use the Transferred Intellectual Property in any manner;

 

(iv) any arrangement that could reasonably be anticipated to have a Material Adverse Effect;

 

(v) any agreement restricting the Seller’s transfer or sale of Transferred Intellectual Property or the other Specified Assets;

 

(vi) any royalty agreement which requires a payment by Seller with respect to the Owned IP;

 

(vii) any contract for the sale of any Specified Assets or the business of Seller; and

 

(viii) any license, as licensee, of the Licensed IP or Other IP.

 

The Seller Agreements are valid and, to Seller’s Knowledge, enforceable in accordance with their terms, and there is not under any of such Seller Agreements (i) any existing or claimed default by any Seller or, to Seller’s Knowledge, any event which, with the notice or lapse in time, or both, would constitute a default by any Seller or (ii) to the Knowledge of Seller, any existing or claimed default by any other party or event which with notice or lapse of time, or both, would constitute a material default by any such party. Except as indicated on Schedule 3.12, the continuation, validity and effectiveness of the Seller Agreements will not be affected by the Acquisition, and the Acquisition will not result in a breach of or default under, or require the Consent of any other party to, any of the Seller Agreements. There is no actual or, to the Knowledge of Seller, threatened termination, cancellation or limitation of any Seller Agreements. To Seller’s Knowledge, there is no pending or threatened bankruptcy, insolvency or similar proceeding with respect to any other party to the Seller Agreements.

 

 

3.13  Employment and Labor Matters. The Seller has withheld and reported all amounts required by Law to be withheld and reported with respect to wages, salaries and other payments to the Anticipated Transfer Employees. Except as disclosed on Schedule 3.13, with respect to the Anticipated Transferred Employees:

 

(i)  except for routine government inquiries, examinations and inspections which Seller has no reason to believe are material, there are no charges, governmental audits, investigations, administrative proceedings or complaints, grievances or actions concerning the employment practices of Seller pending, nor has Seller been expressly notified of any such matter being threatened, before any federal, state or local agency or court and, to the Knowledge of Seller, no basis for any such matter exists;

 

(ii)  Seller is not a party to any union or collective bargaining agreement, no union attempts to organize its employees have been made, nor are any such attempts now threatened;

 

(iii)  Seller has not experienced any organized slowdown, work interruption, strike, or work stoppage by any such employees; and

 

(iv)  Seller will not violate any applicable Laws respecting employment and employment practices relating to such employees as a result of the transactions contemplated by this Agreement.

 

3.14  Employee Benefit Matters.

 

(a)  A true, correct and complete list of the names, titles, base salaries, bonus information (including retention if payments made by Seller after December 7, 2007), date of hiring, sick and vacation leave that is accrued and unused and all other benefits of the Anticipated Transferred Employees as of the date hereof is included on Schedule 3.14. To Seller’s Knowledge as of the date hereof, except as contemplated by this Agreement (a) it is not expected that any of the Anticipated Transferred Employees will be terminating employment with the Seller prior to the Closing Date or will not commence employment with Buyer as of the Closing Date, (b) none of the Anticipated Transferred Employees have violated any confidentiality agreement with Seller and (c) none of the Anticipated Transferred Employees have, in the course of their duties as employees of Seller, violated any Laws or Seller company policies.

 

 

(b)  The Anticipated Transferred Employees receive benefits or are eligible under only the employee pension benefit plans, as defined in Section 3(2) of ERISA, as are listed in Schedule 3.14 hereto (the “Pension Plans”). Except as disclosed on Schedule 3.14, Seller has maintained or contributed within the last six (6) years to any other employee pension benefit plan, as defined in Section 3(2) of ERISA, which was subject to Title IV of ERISA.

 

(c)  The Anticipated Transferred Employees receive benefits or are eligible under only the employee welfare benefit plans, as defined in Section 3(1) of ERISA (including but not limited to, life insurance, medical, hospitalization, holiday, vacation, disability dental and vision plans) as are listed on Schedule 3.14 (the “Welfare Plans”).

 

(d)  The Anticipated Transferred Employees receive benefits or are eligible under the incentive compensation, material fringe benefit, material payroll or employment practice, bonus, option, stock purchase, severance, sick pay, salary continuation, deferred compensation, supplemental executive compensation plans, employment agreements (other than those terminable at will without severance) and consulting agreements listed in Schedule 3.14 (the “Compensation Programs”).

 

(e)  Each Pension Plan and Welfare Plan has been operated and administered in substantial compliance with ERISA and the Code; each Pension Plan which is intended to be qualified under Section 401(a) of the Code has been determined by the IRS to be so qualified or a request for such determination has been timely filed with theirs or the Pension Plan is a prototype plan for which the prototype sponsor has obtained a favorable IRS opinion letter (and to Seller’s Knowledge, no event has occurred between the date of the last such determination and the Closing Date that would reasonably be expected to cause the Internal Revenue Service to revoke such determination).

 

(f)  All amounts required to be paid by any Seller with respect to any Anticipated Transferred Employee under each Pension Plan, Welfare Plan and Compensation Program on or before the Closing Date have or will be paid.

 

(g)  Except as set forth in Schedule 3.14, neither the execution and delivery of this Agreement nor the consummation of any of the transactions contemplated hereby or by the Transaction Documents will (i) result in any severance, golden parachute or comparable payment becoming due to any Anticipated Transferred Employee, or (ii) increase any benefits otherwise payable under any Pension Plan, Welfare Plan or Compensation Program to any Anticipated Transferred Employee.

 

 

3.15  Insurance. Seller maintains insurance policies that it considers adequate, including, without limitation, general liability, employer’s liability, business liability and errors and omissions policies. All such insurance policies are listed on Schedule 3.15 and are in full force and effect and, to Seller’s Knowledge, enforceable in accordance with their terms. All of the Specified Assets and the use of the Specified Assets of an insurable nature are insured by Seller in such amounts and against such losses or risks as it considers adequate.

 

3.16  No Finders. Neither Seller nor any of its Affiliates is obligated to pay a brokerage commission, finder’s fee or other like payment to any third party (which excludes any director, officer, employee or consultant of Seller who may receive a bonus or success fee) in connection with the transactions contemplated hereby or by the other Transaction Documents.

 

3.17  Fairness Opinion. Seller has received the opinion of Morgan Joseph & Co., Inc. dated January 2, 2008 to the effect that as of the date of this Agreement, the consideration to be received by Seller in the Acquisition is fair, from a financial point of view, to Seller.

 

3.18  Disclosure. Neither the representations and warranties of Seller contained in this Article 3 nor in any statement, schedule, exhibit, certificate or instrument to be furnished to Buyer by Seller pursuant to or in connection with this Agreement contain an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading.

 

 

Buyer represents and warrants to Seller as follows:

 

4.1  Organization of Buyer and KTD. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the Japan. KTD is a corporation duly organized, validly existing and in good standing under the laws of California. Each of Buyer and KTD has all necessary power and authority to own its properties and assets and conduct the business presently being conducted by it.

 

 

4.2  Authority. Buyer has full power and authority to enter into this Agreement and the other Transaction Documents to which it is a party and to perform its obligations hereunder or thereunder. KTD has full power and authority to enter into the Sublease and to perform its obligations thereunder.This Agreement has been duly authorized, executed and delivered by all necessary corporate action of Buyer, and constitutes a legal, valid and binding agreement of Buyer, enforceable against Buyer in accordance with its terms, subject to (a) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles and (b) laws relating to the availability of specific performance, injunctive relief or other equitable remedies. The other Transaction Documents have been duly authorized, and upon due execution and delivery, will constitute legal, valid and binding agreements of Buyer (and KTD in the case of the Sublease), enforceable against it in accordance with their terms, subject to (a) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles and (b) laws relating to the availability of specific performance, injunctive relief or other equitable remedies. No further proceeding on the part of Buyer is necessary to authorize this Agreement or the other Transaction Documents (or on the part of KTD in the case of the Sublease) and the transactions contemplated hereby or thereby. Neither the execution and delivery of this Agreement or the other Transaction Documents nor compliance by Buyer with the terms and provisions hereof or thereof will (i) violate or conflict with any provision of the applicable corporate organizational documents of Buyer, (ii) violate or conflict with any Contract of Buyer, (iii) violate or conflict with any Law to which Buyer is subject, or (iv) create any Lien upon any of the assets of Buyer. Neither the execution and delivery of the Sublease nor compliance by KTD with the terms and provisions thereof will (i) violate or conflict with any provision of the applicable corporate organizational documents of KTD, (ii) violate or conflict with any Contract of KTD, (iii) violate or conflict with any Law to which KTD is subject, or (iv) create any Lien upon any of the assets of KTD.

 

4.3  Litigation and Claims. As of the date of this Agreement, there are no actions, suits, claims, or proceedings pending or, to Buyer’s knowledge, threatened against or by Buyer or KTD in connection with or relating to the transactions contemplated by this Agreement or the other Transaction Documents, at law, in equity or otherwise, in, before, or by, any court, arbitrator, or governmental agency or authority, and, to the knowledge of Buyer, no reasonable basis for any such claim exists.

 

4.4  No Finders. No act of Buyer or KTD or any of their Affiliates has given or will give rise to any claim against any of the parties hereto for a brokerage commission, finder’s fee or other like payment in connection with the transactions contemplated by this Agreement.

 

4.5  Electronic Delivery. Buyer acknowledges that any and all Software of the Seller transferred pursuant to this Agreement has been received by electronic transmission. 

 

 

 

5.1  Approvals and Consents/Stockholder Approval.

 

(a)  As promptly as practicable after the execution of this Agreement, Seller will use commercially reasonable efforts to obtain, at its cost and expense, all approvals and Consents of all third parties (other than the Governmental Consents required to be obtained by Buyer pursuant to Section 5.2(c) necessary for the transactions contemplated herein. Without limiting the generality of the foregoing, subject to Section 5.6, Seller agrees to take all reasonable action necessary or advisable in accordance with the DGCL, the Exchange Act and all applicable Laws and Seller’s Certificate of Incorporation and Bylaws to obtain the approval of the Seller’s Stockholders of this Agreement and the Acquisition at a meeting of the Seller’s Stockholders as soon as practicable after the SEC has cleared a proxy statement to be prepared and filed by Seller in accordance with the Exchange Act. Seller will, prior to filing the proxy statement, or amendments or supplements thereto, with the SEC, consult with Buyer and give Buyer a reasonable opportunity to comment thereon. With respect to any supplements or other proxy communication (other than press releases) that Seller may file with the SEC, Seller shall, to the extent and only to the extent that Seller believes that it is reasonable under the circumstances then existing, shall consult with Buyer prior to such filings and give Buyer a reasonable opportunity to comment thereon.

 

(b)  None of the information supplied or to be supplied by or on behalf of Seller for inclusion or incorporation by reference in the proxy statement will, at the time such incorporated documents are filed with the SEC or will, at the time the proxy statement is mailed to the Seller’s Stockholders, or at the time of the Seller’s Stockholders’ Meeting (hereinafter defined), contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. The proxy statement will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations promulgated by the SEC thereunder, except that no representation or warranty is made by Seller with respect to statements made or incorporated by reference therein which are by or about Buyer or based on information supplied by Buyer for inclusion or incorporation by reference in the proxy statement.

 

 

(c)  Seller shall promptly take all action necessary in accordance with the DGCL and its Certificate of Incorporation and Bylaws and other applicable Laws to call, hold and convene a meeting of its stockholders to consider the adoption and approval of this Agreement and the Acquisition (“Stockholders’ Meeting”) to be held as promptly as practicable after the proxy statement has been cleared by the SEC and that all proxies are voted at such Stockholder’s Meetings in accordance with their instructions. Subject to Section 5.6, Seller shall use commercially reasonable efforts to solicit from its stockholders proxies in favor of the adoption and approval of this Agreement and the Acquisition. Notwithstanding anything to the contrary contained in this Agreement, Seller may adjourn or postpone its Stockholders’ Meeting to the extent necessary to ensure that any necessary supplement or amendment to the proxy statement is provided to its stockholders in advance of a vote on this Agreement or the Acquisition, or if as of the time for which the Stockholders’ Meeting is originally scheduled (as set forth in the proxy statement) there are insufficient shares of Seller Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of such Stockholders’ Meeting or in response to an Acquisition Proposal if the Board of Directors of Seller determines, after consultation with its outside legal counsel and financial advisors, that there is a reasonable likelihood that such Acquisition Proposal could lead to a Superior Offer and that the failure to do so would result in a breach of the Board of Directors’ fiduciary obligations under applicable Law.

 

(d)  Subject to Section 5.6: (i) the Board of Directors of Seller shall recommend that its stockholders vote in favor of adoption and approval of this Agreement and the Acquisition, at its Stockholder’s Meeting, (ii) the proxy statement shall include a statement to the effect that the Board of Directors of Seller has recommended that Seller’s Stockholders vote in favor of the adoption and approval of this Agreement and approval of the Acquisition, and (iii) neither the Board of Directors of Seller nor any committee thereof designated by the Board of Directors of Seller shall withdraw, amend or modify, or propose or resolve to withdraw, amend or modify in a manner adverse to Buyer, the recommendation of the Board of Directors of Seller that Seller’s Stockholders vote in favor of adoption and approval of this Agreement and the Acquisition (the “Seller Recommendation”) For purposes of this Agreement, references to the “Board of Directors of Seller” shall refer to actions taken or approved by Seller’s Board of Directors in accordance with Seller’s Certificate of Incorporation, Bylaws and the DGCL, and shall not refer to the actions taken by one or more members of such Board of Directors who do not constitute a majority of the members of such Board of Directors. Buyer acknowledges and agrees that any acts taken, or filings made, by one or more members of Seller’s Board of Directors in his or their individual capacities as a director or stockholder, which have not been approved by the Board of Directors of Seller or a committee thereof designated by the Board of Directors of Seller, shall not be considered acts of Seller, and Seller shall have no liability under this Agreement for any such actions.

 

5.2  Cooperation by Buyer.

 

(a)  Buyer shall execute and deliver such instruments, documents, conveyances or assurances and take such other actions as shall be necessary, or otherwise reasonably requested by Seller, to confirm and assure the rights and obligations provided for in this Agreement or the other Transaction Documents and render effective the consummation of the transactions contemplated hereby and thereby.

 

 

(b)  None of the information supplied or to be supplied by or on behalf of Buyer for inclusion or incorporation by reference in the proxy statement will, at the time such incorporated documents are filed with the SEC or will, at the time the proxy statement is mailed to the Seller’s Stockholders, or at the time of the Stockholders’ Meeting contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading except that no representation or warranty is made by Buyer with respect to statements made or incorporated by reference therein based on information supplied by Seller for inclusion or incorporation by reference in the proxy statement.

 

(c)  Consistent with the provisions of Section 13 of the MDA, if the transfer of any Transferred Intellectual Property, or the sublicense of any Other IP, to Buyer requires any consent, approval, notice, permit, exemption, waiver or authorization from any governmental, regulatory or administrative body, agency or authority as a result of Buyer being a foreign entity (“Governmental Consent”), Buyer shall promptly either (i) if no Governmental Consent would be required if a United States Affiliate acquired the Transferred Intellectual Property and received the sublicense of the Other IP, assign its rights, but not its obligations, hereunder to such Affiliate, or (ii) use its reasonable best efforts to obtain, at its cost and expense, all Governmental Consents necessary to transfer the Transferred Intellectual Property to Buyer and sublicense the Other IP to Buyer. Seller shall provide Buyer with reasonable assistance in obtaining any such Governmental Consents.

 

5.3  Accuracy of Representations and Warranties. Seller shall refrain from taking any action or inaction, except with the prior written consent of Buyer, that would rendered any representation, warranty, covenant, or agreement of Seller in this Agreement inaccurate, or breached, in any material respect as of the Closing. At all times prior to the Closing, Seller will promptly inform Buyer in writing with respect to any matters hereafter arising that, if existing or occurring at the date of this Agreement, would have render any representation, warranty, covenant or agreement contained in this Agreement as inaccurate, or breached, in any material respect or would have been required to be set forth or described on a Schedule hereto.

 

5.4  Pre-Closing Access to Information, Records and Employees. Subject to Section 11.12, prior to the Closing Seller shall permit Buyer and such persons as it may designate, at Buyer’s expense, to visit and inspect any of the Specified Assets, and to examine the Seller Product Information and Seller Regulatory Information and take copies and extracts therefrom, all at reasonable times and upon reasonable notice. Prior to Closing, Seller shall make the Anticipated Transferred Employees, available for meetings and/or interviews with Buyer at such time and with such frequency as may be reasonably requested by Buyer without unreasonably disrupting Seller’s operations in order to assist Buyer in consummating the transactions contemplated by this Agreement.

 

 

5.5  Further Assurances. At such times and from time to time on and after the Closing Date, upon reasonable request by Buyer, Seller will execute, acknowledge and deliver, or will cause to be done, executed, acknowledged and delivered, all such further acts, deeds, assignments, transfers, conveyances, powers of attorney, and assurances that may reasonably be required for the better conveying, transferring, assigning, delivering and confirming ownership to, or reducing to the possession of, Buyer or its respective successors and assigns all of the Specified Assets and to otherwise carry out the purposes of this Agreement; provided, that such documents shall not increase the liability or obligations of Seller beyond those set forth in this Agreement. The cost of any filing or recording fees for any of the foregoing shall be paid by Buyer.

 

5.6  No Solicitation of Other Offers.

 

(a)  From the date of this Agreement to the Closing Date, Seller agrees that it shall not, and shall not authorize or permit any of its officers or authorized agents or representatives to directly or indirectly: (i) solicit, initiate, knowingly facilitate or induce or encourage any Acquisition Proposal, (ii) participate in any discussions or negotiations with, or furnish any nonpublic information to, any Person that has made an Acquisition Proposal, (iii) approve, endorse or recommend any Acquisition Proposal (except to the extent specifically permitted pursuant to this Section 5.6), or (iv) enter into any letter of intent or agreement with respect to any Acquisition Proposal. Seller shall, and shall instruct its officers and authorized agents and representatives to, immediately cease any and all existing activities, discussions or negotiations with any third parties conducted heretofore with respect to any Acquisition Proposal. Nothing in this Section 5.6(a) shall be deemed to restrict Seller from having the discussions referred to in the definition of Acquisition Proposal to determine whether an Acquisition Proposal constitutes a Permitted Acquisition Proposal and, if an Acquisition Proposal constitutes a Permitted Acquisition Proposal, to engage in any discussions, negotiations or other activities with respect to such Permitted Acquisition Proposal, the provisions of this Section 5.6 being inapplicable to any Permitted Acquisition Proposal.

 

 

(b)  Notwithstanding anything to the contrary contained in Section 5.6(a), in the event that Seller receives an unsolicited Acquisition Proposal from a Person that the Board of Directors of Seller has in good faith concluded (after consultation with its financial advisor), will lead to a Superior Offer, it may then take the following actions but only if and to the extent that the Board of Directors of Seller concludes in good faith, following consultation with its outside legal counsel, that the failure to do so would be inconsistent with its fiduciary obligations under applicable Law: (i) furnish nonpublic information to the third party making such Acquisition Proposal, provided that (A)(1) concurrently with furnishing any such nonpublic information to such party, it gives Buyer written notice that it is furnishing nonpublic information in accordance with this Section 5.6 and (2) it receives from the third party an executed confidentiality agreement containing customary limitations on the use and disclosure of all nonpublic written and oral information furnished to such third party on its behalf, the terms of which are at least as restrictive as the terms contained in the Non-Disclosure Agreement between Buyer and Seller in anticipation of this Agreement (but which shall not, in any event, contain restrictions on Seller’s ability to renegotiate with Buyer) and (B) contemporaneously with furnishing any such nonpublic information to such third party, it furnishes such nonpublic information to Buyer (to the extent such nonpublic information has not been previously so furnished); and (ii) engage in negotiations with the third party with respect to the Acquisition Proposal, provided that concurrently with entering into negotiations with such third party, it gives Buyer written notice that it is entering into negotiations with such third party. Notwithstanding anything to the contrary contained in this Agreement, Seller shall be permitted to (i) effect a change in the Seller Recommendation or enter into an agreement with respect to an Acquisition Proposal if Seller has complied with this Section 5.6 and the other provisions of this Agreement and has received an Acquisition Proposal from a third party and the Board of Directors of Seller, after consultation with its outside legal counsel and a financial advisor of recognized reputation, determines that such Acquisition Proposal constitutes a Superior Offer, or (ii) outside of the context of an Acquisition Proposal, effect a change in the Seller Recommendation if Seller’s Board of Director’s determines, after consultation with its outside legal counsel, that the failure to do so would constitute a breach of its fiduciary duties under applicable law.

 

(c)  Upon receipt of any Acquisition Proposal, Seller shall provide Buyer as promptly as practicable oral and written notice setting forth all such information as is reasonably necessary to keep Buyer informed in all material respects of the status and details (including material amendments or proposed material amendments) of any such Acquisition Proposal and shall promptly provide to Buyer a copy of all written materials subsequently provided in connection with such Acquisition Proposal, request or inquiry (to the extent such materials of Seller has not previously been provided to Buyer). Seller shall provide Buyer with forty-eight (48) hours notice of any meeting of its Board of Directors at which its Board of Directors is reasonably expected to consider any Acquisition Proposal and prior to effecting a change in the Seller Recommendation or terminating this Agreement during which time it shall be afforded the opportunity to propose to revise the terms of the Acquisition or match the terms and conditions of the Superior Offer.

 

(d)  It shall be understood that any violation of the restrictions contained in Section 5.6 by any officer or authorized agent or representative of Seller shall be deemed a breach by Seller.

 

 

(e)  Nothing contained in this Agreement shall prohibit the Board of Directors of Seller from taking and disclosing to Seller’s Stockholders a position contemplated by Rule 14d-9 and Rule 14e-2(a) promulgated under the Exchange Act.

 

5.7  Maintenance of Specified Assets. Until Seller shall have effected the transfer of the Specified Assets pursuant to this Agreement, Seller shall (i) maintain the insurance on the Specified Assets that it presently maintains; and (ii) maintain the condition of the Specified Assets so that such Specified Assets continue to be in normal operating condition and free from any significant defects, ordinary wear and tear excepted, including the usual and customary service and maintenance of such Specified Assets. With respect to the Transferred Intellectual Property, until Seller shall have effected the transfer of the Specified Assets (and without further consideration therefore), Seller shall take any and all action as may be reasonably necessary, desirable or appropriate to protect, maintain, keep confidential, defend and enforce the Transferred Intellectual Property (other than those that Seller decided to abandon), including, without limitation, to bring any infringement or other proceeding, prosecute all claims related to the Transferred Intellectual Property, timely and fully pay all fees, respond to all inquiries and actions and to take any and all of such other actions available in law or equity, consistent with Seller’s past practice (but in any event, not less than reasonable measures under the circumstances), to maintain the Transferred Intellectual Property (other than those that Seller decided to abandon). Without limiting the generality of the foregoing, and for the avoidance of any doubt, Seller shall ensure that it is able to continue to make the representations and warranties contained in Section 3.9 and that such remain true and accurate through the Closing Date.

 

5.8  Enforcement of Agreement(s). In the event that prior to Closing, Seller obtains Knowledge or any reason to believe that any employee, former employee or other Person has used confidential information of Seller with respect to the Specified Assets in violation of the terms of any agreement between such Person and Seller, then Seller shall immediately notify Buyer in writing of such violation. Prior to Closing, Seller shall use its reasonable best efforts to enforce its rights under such agreement. Following the Closing, Seller shall use reasonable best efforts to seek to enforce any rights of Seller, its successors or assigns available under such agreements for the benefit of Buyer and Seller shall consult with and permit Buyer to participate in any such enforcement action; provided that all costs and expenses incurred by Seller after the Closing Date in connection with such enforcement activities shall be borne solely by Buyer.

 

5.9  Bulk Sales. Seller shall indemnify Buyer for any non-compliance with any applicable “Bulk Sales” laws as they pertain to Seller in connection with the sale of the Specified Assets to Buyer.

 

 

5.10  Termination of Existing Agreements. Other than the Block License Agreement and the obligation of the Buyer to make payments under Section 2.5 of LSA #7, all Existing Agreements shall terminate as of the Closing; provided, however, (i) all terms in the Existing Agreements which by their terms shall survive termination, shall survive this termination in accordance with their terms, and (ii) and for a period of six (6) months after the Closing, either the Buyer or Seller may bring claims under the Existing Agreements against the other party that such party has defaulted in its obligations under any of the Existing Agreements. At the Closing, each of Buyer and Seller shall execute and deliver the Assignment and Assumption Agreement, License Agreement, Sublease Agreement, Sublicense Agreement and Escrow Agreement. Buyer shall cause KTD to execute and deliver the Sublease at the Closing. 

 

5.11  Employees and Employee Benefit Matters.

 

(a)  Buyer will offer employment agreements or employment offer letters, as the case may be, to the Anticipated Transferred Employees to be effective only upon Closing, upon terms and conditions that are substantially similar as those provided by Seller on the date hereof, subject to changes in the ordinary course of business (other than annual salary increases or bonuses that are not atypical from those awarded in prior years) between the date hereof and the Closing, as consented to by Buyer and such modifications as are agreed to between each such Anticipated Transferred Employee and the Buyer (including, without limitation, that the Anticipated Transferred Employee will not receive equity or options to acquire equity in the Buyer or its Affiliates) and authorizing Buyer to assume the liabilities and obligations of Seller described in clause (a) of Section 2.5 in lieu of Seller fulfilling such obligations. Each Transferred Employee shall, prior to commencement of employment with Buyer (a) execute an agreement agreeing to provide services to Buyer for a period of 24 months from the Closing, subject to customary termination provisions and (b) execute an employment agreement with each such Transferred Employee restricting such employee to the extent permitted by applicable law from competing, or being employed by an entity which competes with the Buyer or disclosing or using confidential information or soliciting customers or employees of Buyer during or after termination of his or her employment with Buyer and execute such other agreements assigning to Buyer any such similar agreements in effect with Seller. Prior to delivering any employment agreements or employment offer letter to any Anticipated Transferred Employee, Buyer shall provide a true and correct copy thereof to Seller for its review and comment. Prior to Closing, Buyer shall not delete, terminate or waive any provision in an employment agreement or employment offer letter with respect to Buyer’s assumption of the liabilities and obligations of Seller described in clause (a) of Section 2.5. In connection with each offer of employment by Buyer, Buyer shall offer to each Anticipated Transferred Employee at Closing a retention package providing for payments to be made within a specified period after Closing, as determined by Buyer and for which Buyer will be responsible for each Transferred Employee remaining an employee of Buyer on the specified date.

 

 

(b)  Seller shall cooperate with Buyer and use reasonable efforts to assist Buyer in obtaining the acceptance of offers of employment by all Anticipated Transferred Employees.

 

(c)  Except as otherwise expressly provided herein, nothing contained herein shall restrict Buyer in the future in the exercise of its independent business judgment as to the terms and conditions under which such employment shall continue, the duration of such employment, the basis on which such employment is terminated or the benefits provided to Transferred Employees.

 

(d)  Except as expressly provided in Section 2.5 or Section 5.11(a) Buyer shall not assume or be liable for or be required to maintain any Welfare Plan, Pension Plan or Compensation Program that Seller sponsors, contributes to, or participates in on the date hereof, or for which Seller has or may have, whether or not disclosed under this Agreement or in a Schedule.

 

(e)  Other than as specifically set forth in Section 2.5 or Section 5.11(a), Seller shall be responsible for the payment of any amounts due to its employees pursuant to its Welfare Plan, Pension Plan and Compensation Plans or any other employee benefit plans of Seller as a result of the employment of the Transferred Employees prior to the Closing Date.

 

5.12  Employee Files. To the extent authorized by an Anticipated Transferred Employee, on or prior to the Closing Date, Seller shall deliver to a designee of Buyer a copy of all historical personnel and medical records of such Anticipated Transferred Employee, including, but not limited to, employment agreements, confidentiality and noncompete agreements, employment applications, disciplinary reports, other similar documents and all medial records. Buyer acknowledges that no Anticipated Transferred Employee has any obligation to provide such authorization, that Seller has any obligation to obtain any such authorization, and, if such authorization is provided, Buyer shall be solely responsible for any unlawful use or disclosure by it of any such personnel or medical records.

 

5.13  Past Service Credit. For purposes of eligibility, waiting periods and vesting, Buyer shall, with respect to each benefit plan, policy, program or arrangement maintained by the Buyer after the Closing Date, credit each Transferred Employee with all service credited to such Transferred Employees under Seller’s corresponding plan, policy, program or arrangement applicable to such Transferred Employee as of the Closing Date, except that the case of KTD’s 401(k) plan, such vesting credit as to the matching employer contribution shall be only to the extent permissible under such plan.

 

 

5.14  Affirmative Covenants of Seller.

 

(a)  From the date hereof until the earlier of the Closing Date or the termination of this Agreement, unless the prior written consent of Buyer shall have been obtained, and except as otherwise expressly contemplated herein, Seller shall:

 

(i) with respect to the Specified Assets and the Existing Agreements, operate its business in the ordinary and usual course of business, consistent with the past practices;

 

(ii) use reasonable best efforts to preserve intact and maintain its business organization, licenses and permits;

 

(iii) use reasonable best efforts to maintain the services of the Anticipated Transferred Employees on substantially the terms and conditions as those existing prior to the date hereof and to prevent any material or adverse changes to relations with those employees;

 

(iv) keep and maintain the Fixed Assets in their present condition, repair and working order, except for normal depreciation and wear and tear, and maintain its insurance, rights and licenses;

 

(v) use reasonable best efforts to maintain and protect the Transferred Intellectual Property, keep confidential all information regarding the Transferred Intellectual Property and enforce the provisions of all confidentiality agreements with all persons;

 

(vi) perform in all material respects all obligations under this Agreement; and

 

(vii) notify Buyer of (i) any event or circumstance of which Seller has Knowledge which would reasonably be expected to constitute a Material Adverse Effect or would cause or constitute a breach of any representations, warranties or covenants of Seller contained herein or (ii) any material change in the Specified Assets.

 

5.15  Negative Covenants of Seller. From the date hereof until the earlier of the Closing Date or the termination of this Agreement, Seller will not do any of the following without the prior written consent of Buyer:

 

(i) take any action which would (a) adversely affect the Seller’s ability of obtain any Consents required for the transactions contemplated thereby, or (b) adversely affect the ability of any party hereto to perform its covenants and agreements under the Transaction Documents or (c) cause any of the Seller’s representations to become untrue or inaccurate;

 

 

(ii) amend any of its organization or governing documents;

 

(iii) impose, or suffer the imposition, on any Specified Asset any Lien or permit any such Lien to exist;

 

(iv) other than pursuant to the Transaction Documents, sell, pledge or encumber, or enter into any contract to sell, pledge or encumber, any interest in the Specified Asset; or

 

(v) alter the compensation or benefits to any Anticipated Transferred Employee as described on Schedule 3.14, except in accordance with past practice; or pay any severance or termination pay or any bonus to any Anticipated Transferred Employee other than pursuant to written policies or written contracts in effect as of the date hereof and disclosed on Schedule 3.14 or the provisions of Section 5.11(b); or enter into or amend any agreements with any Anticipated Transferred Employee.

 

5.16  Covenant Not to Solicit.

 

(a)  For two (2) years from and after the Closing Date, neither Seller nor any of its Affiliate will directly or indirectly, solicit to hire (other than a solicitation by general advertisement), hire, divert, entice away (or in any manner persuade or attempt to do any of the foregoing), any Transferred Employee or any employee of KTD other than a Transferred Employee who is terminated by Buyer or KTD as part of a reduction in workforce or lay-off.

 

(b)  From the date hereof until April 30, 2010, neither Buyer nor any of its Affiliates will, directly or indirectly, without the prior written approval of Seller, solicit to hire (other than a solicitation by general advertisement), hire, divert, entice away (or in any manner persuade or attempt to do any of the foregoing) any Anticipated Transferred Employee or other current employee of Seller, or encourage any Transferred Employee or other current employee of Seller to terminate his or her employment with Seller, except as described in Section 5.11(a) or with respect to an employee who is terminated by Seller as part of a reduction in workforce or lay-off.

 

(c)  The parties agree that the covenants contained herein are reasonable under the circumstances and further agree that the covenants contained in this Section 5.16(a) should be interpreted in such a manner as to be effective and valid under applicable Law.

 

 

5.17  Engineering Fees. For the period commencing on February 1, 2008 and continuing until the earlier of Closing or termination of this Agreement, Buyer agrees that it will pay to Seller for the continued provision by Seller of the services described under the Memorandum of Understanding and the Master Development Agreement which are part of the Existing Agreements and such provision of services to be performed in a manner consistent with past practice, a monthly fee (prorated for the actual number of days in any incomplete month) of $625,000 (the “Engineering Fee”). The Engineering Fee is based on the number of engineers presently working on Buyer’s projects spending 14,500 hours per quarter (prorated for the actual number of days in any incomplete quarter), and, to the extent services are provided at Buyer’s request which result in more than 14,500 hours of service as in any quarter on Buyer’s projects, as documented with reasonable specificity, the Engineering Fee shall be proportionately increased at an hourly rate to be agreed upon by Buyer and Seller, but which shall not be less than the current hourly rate.

 

5.18  Supplementation and Amendment of Schedules. From time to time prior to the Closing, the Seller shall have the right to supplement and amend, and Buyer shall have the right to comment upon and approve such supplementation and amendment of, the Schedules to this Agreement with respect to any matter; provided, however, that for purposes of determining whether the conditions set forth in Section 6.1 have been fulfilled, the Schedules shall be deemed to exclude all information contained in any amendment or supplement thereto delivered pursuant to this Section 5.18 to the extent that any such supplements or amendments individually or in the aggregate reflects a Material Adverse Effect.

 

 

The obligations of Buyer under this Agreement shall, at its option, be subject to the satisfaction, on or prior to the Closing Date, of all of the following conditions:

 

6.1  Representations, Warranties and Covenants. The representations and warranties of Seller herein that are qualified by materiality shall be true on the Closing Date with the same effect as though made at such time, and any such representations and warranties that are not so qualified shall be true in all material respects. Seller shall in all material respects have performed all of its obligations and complied with all of its covenants herein prior to or as of the Closing Date. Seller shall have delivered to Buyer a certificate in form and substance satisfactory to Buyer dated as of the Closing Date and executed by its chief executive officer to all such effects.

 

6.2  Approvals and Consents. All permissions, releases, Consents, approvals, governmental or otherwise (other than necessary Governmental Consents for which Buyer is responsible under the terms of this Agreement), on the part of Seller to consummate the transactions contemplated hereunder shall have been obtained.

 

6.3  No Injunction, etc. Consummation of the transactions contemplated by this Agreement or any of the Transaction Documents shall not have been restrained, enjoined or otherwise prohibited by any order, injunction, decree or judgment of any court or other governmental authority. No court or other governmental authority shall have determined that any applicable Law makes illegal the consummation of the transactions contemplated by the Transaction Documents.

 

 

6.4  Transfer Documents. Buyer shall have received from Seller such instruments of transfer, assignment, conveyance and other instruments sufficient to convey, transfer and assign to Buyer all right, title and interest in the Specified Assets, free and clear of all Liens, all in form and substance reasonably satisfactory to the parties, including but not limited to the Assignment and Assumption Agreement, the Bill of Sale and patent assignments.

 

6.5  Other Transaction Documents. Seller shall have executed and delivered the License Agreement, the Sublease, the Escrow Agreement and the Sublicense Agreement.

 

6.6  Secretary’s Certificate. Buyer shall have received from Seller a certificate, dated as of the Closing Date, executed by the Secretary of Seller, certifying the incumbency of the Seller’s executive officers who are executing the Transaction Documents and any certificates, and the authenticity of the resolutions authorizing the transactions contemplated by this Agreement and the other Transaction Documents.

 

6.7  Stockholder Approval. Seller shall have obtained the Seller Stockholder Approval.

 

6.8  Employees. Buyer shall have reached agreement with the Key Transferred Employees and the Minimum Transferred Employee Amount shall have agreed to accept employment by Buyer and agreed to commence employment with Buyer as of the Closing Date in accordance with the terms of Section 5.11 and such Key Transferred Employees and Minimum Transferred Employee Amount shall commence employment with Buyer as of the Closing Date.

 

6.9  No Material Adverse Effect. No Material Adverse Effect shall have occurred with respect to any of the Specified Assets and no material loss or damage to all or any material portion of the Specified Assets shall have occurred.

 

6.10  Opinion. Buyer shall have received an opinion of counsel to Seller with respect to the matters set forth in Schedule 6.10.

 

 

 

The obligations of Seller under this Agreement shall, at its option, be subject to the satisfaction, on or prior to the Closing Date, of all of the following conditions:

 

7.1  Representations, Warranties and Covenants. The representations and warranties of Buyer herein that are qualified by materiality shall be true on the Closing Date with the same effect as though made at such time and any such representations and warranties that are not so qualified shall be true in all material respects. Buyer shall in all material respects have performed all of its obligations and complied with all of its covenants herein prior to or as of the Closing Date. Buyer shall have delivered to Seller a certificate in form and substance satisfactory to Seller dated as of the Closing Date and executed by an authorized officer to all such effects.

 

7.2  Approvals; Consents. All Consents and Governmental Consents, governmental or otherwise, necessary on the part of Buyer to consummate the transactions contemplated hereunder shall have been obtained.

 

7.3  No Injunction, etc. Consummation of the transactions contemplated by this Agreement or any of the other Transaction Documents shall not have been restrained, enjoined or otherwise prohibited by any order, injunction, decree or judgment of any court or other governmental authority. No court or other governmental authority shall have determined that any applicable Law makes illegal the consummation of the transactions contemplated by the Transaction Documents.

 

7.4  Other Transaction Documents. Buyer shall have executed and delivered the Assignment and Assumption Agreement, License Agreement, Sublease, Sublicense Agreement and Escrow Agreement, and KTD shall have executed and delivered the Sublease.

 

7.5  Secretary’s Certificate. Seller shall have received from Buyer a certificate, dated as of the Closing Date, executed by the Secretary of Buyer, certifying the incumbency of the Buyer’s executive officers who are executing the Transaction Documents and any certificates, and the authenticity of the resolutions authorizing the transactions contemplated by this Agreement and the other Transaction Documents.

 

7.6  Stockholder Approval. Seller shall have obtained the Seller Stockholder Approval.

 

7.7  Opinion. Seller shall have received an opinion of counsel to Buyer with respect to the matters set forth in Schedule 7.7.

 

 

 

8.1  Closing Date. The consummation of the transactions provided for herein (the “Closing”) shall take place at 9:00 a.m. (California time) on the third Business Day after all conditions to Closing have been satisfied or waived, or on such other date and/or at such other time as the parties may agree upon (the “Closing Date”). The Closing shall take place at such place or in such other manner (e.g., by telecopy exchange of signature pages with originals to follow by overnight delivery) as the parties hereto may agree.

 

8.2  Software Deliveries. Delivery of all Software which is included in the Specified Assets shall be made solely by Buyer electronically accessing an online site designated by Seller, and shall not be accomplished by delivery of any physical tangible property.

 

8.3  Proceedings. All proceedings taken and all documents executed and delivered by the parties hereto at the Closing shall be deemed to have been taken and executed simultaneously and no proceedings shall be deemed taken nor any documents executed or delivered until all have been taken, executed and delivered.

 

 

9.1  Indemnification of Buyer. Seller shall indemnify, defend and hold harmless Buyer and each of its Subsidiaries, divisions, officers, directors, and employees (the “Buyer Indemnified Parties”) from and against and in respect of any and all demands, claims, actions or causes of action, assessments, losses, damages, liabilities, interest and penalties, costs and expenses (including, without limitation, reasonable legal fees and disbursements incurred in connection therewith and in seeking indemnification therefore, and any amounts or expenses required to be paid or incurred in connection with any action, suit, proceeding, claim, appeal, demand, assessment or judgment) whether or not involving a third-party claim, but excluding any punitive, special, incidental or consequential damages (collectively “Indemnifiable Losses”), directly or indirectly resulting from, arising out of, or imposed upon or incurred by any Buyer Indemnified Party from and after the Closing, by reason of any one or more of the following:

 

(a)  Any breach of any representation or warranty of Seller contained in this Agreement, or any agreement, certificate or document executed and delivered by Seller pursuant hereto or in connection with any of the transactions contemplated by this Agreement;

 

(b)  Any breach of any covenant or obligation of Seller contained in this Agreement, or any agreement, certificate or document executed and delivered by Seller pursuant hereto or in connection with any of the transactions contemplated by this Agreement;

 

(c)  Any failure by Seller to satisfy, perform, pay, discharge or resolve any liabilities and obligations of, or claims against, Seller not included within the Assumed Liabilities;

 

 

(d)  Except as set forth on Schedule 3.9(g), the failure by Seller as of the Closing to have had valid and enforceable rights in the Owned IP, which are granted and issued Patents, and the remainder of the Transferred Intellectual Property;

 

(e)  The failure of the Seller to have timely and fully responded to all office actions or other comments, actions or filings of any kind made by any governmental entity with respect to any IP Application to the full satisfaction of the applicable governmental entity;

 

(f)  Any of Seller’s Patents is invalidated or is held unenforceable as a result of Seller or any officer, employee or agent of Seller having made (i) an untrue statement of a material fact or fraudulent statement to any governmental authority, or (ii) having failed to disclose a material fact required to be disclosed to any governmental authority; or

 

(g)  Any and all actions, suits, proceedings, claims or demands by third parties, or assessments or judgments in their favor, directly resulting or arising from any of the foregoing or any allegations thereof.

 

9.2  Indemnification of Seller. Buyer shall indemnify, defend and hold harmless Seller and each of its subsidiaries, divisions, officers, directors and employees (the “Seller Indemnified Parties” and together with the Buyer Indemnified Parties, the “Indemnified Parties”) from and against and in respect of any and all Indemnifiable Losses resulting from, arising out of, or imposed upon or incurred by any Seller Indemnified Party from and after the Closing by reason of the following:

 

(a)  Any breach of any representation or warranty of Buyer contained in this Agreement or any agreement, certificate or document executed and delivered by Buyer pursuant hereto or in connection with the transactions contemplated by this Agreement;

 

(b)  Any breach of any covenant or obligation of Buyer contained in this Agreement or any agreement, certificate or document executed and delivered by Buyer pursuant hereto or in connection with the transactions contemplated by this Agreement;

 

(c)  Any and all Indemnifiable Losses arising out of the use of the Specified Assets by Buyer after the Closing Date (but excluding for this purpose any such use of Specified Assets by Seller under the License Agreement);

 

(d)  Buyer’s failure to satisfy, perform, pay, discharge or resolve any Assumed Liability; or

 

 

(e)  Any and all actions, suits, proceedings, claims or demands by third parties, or assessments or judgments in their favor, directly resulting or arising from any of the foregoing or any allegations thereof.

 

9.3  Third-Party Claims and Other Claims.

 

(a)  If a claim by a third party is made against any Indemnified Party, and if the Indemnified Party intends to seek indemnity with respect thereto under this Article 9, such Indemnified Party shall promptly notify the indemnifying party of such claim; provided, however, that failure to give timely notice shall not affect the rights of the Indemnified Party so long as the failure to give timely notice does not adversely affect the indemnifying party’s ability to defend such claim against a third party and the indemnifying party shall be entitled to settle or assume the defense of such claim, including the employment of counsel reasonably satisfactory to the Indemnified Party. If the indemnifying party elects to settle or defend such claim, the indemnifying party shall notify the Indemnified Party within thirty (30) days (but in no event less than ten (10) days before any pleading, filing or response on behalf of the Indemnified Party is due) of the indemnifying party’s intent to do so. If the indemnifying party elects not to settle or defend such claim or fails to notify the Indemnified Party of the election within thirty (30) days (or such shorter period provided above) after receipt of the Indemnified Party’s notice of a claim of indemnity hereunder, the Indemnified Party shall have the right to contest, settle or compromise the claim without prejudice to any rights to indemnification hereunder. Regardless of which party is controlling the settlement of defense of any claim, (i) both the Indemnified Party and indemnifying party shall act in good faith, (ii) the indemnifying party shall not thereby permit to exist any lien, encumbrance or other adverse charge upon any asset of any Indemnified Party or of its subsidiaries, (iii) the indemnifying party shall permit the Indemnified Party to participate in such settlement or defense through counsel chosen by the Indemnified Party, with all fees, costs and expenses of such counsel borne by the Indemnified Party, unless the indemnifying party and Indemnified Party have available inconsistent defenses to such third-party claim, in which case such fees, costs and expenses shall be borne by the indemnifying party, (iv) no entry of judgment or settlement of a claim may be agreed to without the written consent of the Indemnified Party, which consent shall not be unreasonably withheld, and (v) the indemnifying party shall promptly reimburse the Indemnified Party for the indemnified amount as incurred by the Indemnified Party pursuant to this Article 9. So long as the indemnifying party is reasonably contesting any such third party claim in good faith as permitted herein, the Indemnified Party shall not pay or settle any such claim (or, if it does, it shall not be indemnified for such settlement amount). Notwithstanding anything to the contrary contained herein, if the claim could result in a judgment which could adversely affect Seller’s licenses or business relationships with any of its customers, Seller may control the defense of the claim even if Seller is the Indemnified Party. The controlling party shall upon request deliver, or cause to be delivered, to the other party copies of all correspondence, pleadings, motions, briefs, appeals or other written statements relating to or submitted in connection with the settlement or defense of any such claim, and timely notices of any hearing or other court proceeding relating to such claim.

 

 

(b)  A claim for indemnification for any matter not involving a third-party claim may be asserted by notice to the party from whom indemnification is sought. Such notice shall state the amount of Indemnifiable Losses, if known, the method of computation thereof, and contain a reference to the provisions of the Agreement in respect to which such right of indemnification is claimed or arises.

 

9.4  Indemnification Limitations.

 

(a)  Except with respect to claims based on fraud and except for other remedies specifically provided for elsewhere in this Agreement (including with respect to specific performance), the rights of the Buyer Indemnified Parties under this Article 9 shall be the sole and exclusive post-Closing remedies of the Buyer Indemnified Parties with respect to claims resulting from or relating to any breach of a representation or warranty by Seller contained in this Agreement or the other Transaction Documents or any claim for indemnification under Sections 9.1(d), (e) and (f).

 

(b)  Neither party shall have liability with respect to claims under this Article 9 until the total of all Indemnifiable Losses with respect to such matters exceeds One Hundred Thousand Dollars ($100,000) in which case, the Indemnified Parties shall be entitled to indemnification to the full amount of Indemnifiable Losses incurred by them for the amount of Indemnifiable Losses in excess of One Hundred Thousand Dollars ($100,000).

 

(c)  (i) Subject to the limitations set forth in this Article 9, if Buyer believes that it has a claim for indemnification pursuant to Section 9.1 (a “Buyer Claim”), the amount of which is then known, the Buyer shall, as soon as reasonably practicable after it becomes aware of such Buyer Claim, notify the Seller of such Buyer Claim by means of a written notice describing the Buyer Claim in reasonable detail and setting forth the Buyer’s good faith calculation of the Indemnifiable Losses incurred by the Buyer with respect thereto (a “Buyer Claim Notice”). If, by the thirtieth (30^th) day following receipt of a Buyer Claim Notice by the Seller and others identified in the Notice section of this Agreement (the “Indemnification Dispute Period”), (x) the Buyer has not received from the Seller notice in writing that the Seller objects to the Buyer Claim Notice (or the amount of Indemnifiable Losses set forth therein) asserted in such Buyer Claim Notice (an “Indemnification Dispute Notice”), and (y) if such Buyer Claim shall have been made prior to the Escrow Termination Date, the Buyer and the Seller shall deliver a joint written instruction to the Escrow Agent instructing the Escrow Agent to pay to the Buyer or to reserve from the Escrow Fund the amount of Indemnifiable Losses specified in the Buyer Claim Notice subject to the limitations contained in this Article 9. If the Indemnifying Party is the Seller, the Seller will be entitled to defend, settle or compromise a Buyer Claim using the Escrow Fund, and the Seller and the Buyer shell jointly instruct the Escrow Agent to release funds held under by the Escrow Agreement for this purpose in accordance with the provisions of the Escrow Agreement.

 

 

(ii) f the Seller delivers an Indemnification Dispute Notice to the Buyer within the Indemnification Dispute Period, the Buyer and the Seller shall promptly meet and use their reasonable efforts to settle the dispute as to whether and to what extent the Buyer Indemnitees are entitled to reimbursement on account of such Buyer Claim Notice. If the Buyer and the Seller are able to reach agreement within thirty (30) days after the Buyer receives such Indemnification Dispute Notice, and if such Buyer Claim Notice shall have been made prior to the Escrow Termination Date, the Buyer and the Seller shall deliver a joint written instruction to the Escrow Agent setting forth such agreement and instructing the Escrow Agent to pay the Buyer or to reserve from the Escrow Fund an amount in accordance with such agreement. If the Buyer and the Seller are unable to reach agreement within thirty (30) days after the Buyer receives such Indemnification Dispute Notice, then either the Buyer or the Seller may resort to other legal remedies. For all purposes of this Section 9.4, the Buyer and the Seller shall cooperate with an make available to the other Party and its respective representatives all information, records and data, and shall permit reasonable access to its facilities and personnel, as may be reasonably required in connection with the resolution of such disputes.

 

(d)  Notwithstanding anything to the contrary in the Agreement, the total amount of Indemnifiable Losses that either party shall be obligated to pay to the other party shall not exceed Four Million Dollars ($4,000,000).

 

(e)  The provisions of this Section 9.4 shall not apply to Indemnifiable Losses resulting from, arising out of, or based upon (i) any fraud or intentional misrepresentation by Seller or Buyer; (ii) any failure by Seller to deliver to Buyer all Specified Assets in accordance with this Agreement; (iii) any failure by Seller to satisfy, perform, pay, discharge or resolve the liabilities and obligations of, and claims against, Seller included within the Retained Liabilities; (iv) any failure by Buyer to satisfy, perform, pay, discharge or resolve the liabilities and obligations of, and claims against, Buyer included within the Assumed Liabilities; (v) a breach by Seller of any covenant or agreement (other than those contained in this Article 9) to be performed by Seller after the Closing under this Agreement or any other Transaction Document, or (vi) a breach by Buyer of any covenant or agreement (other than those contained in this Article 9) to be performed by Buyer after the Closing under this Agreement or any other Transaction Document; or (vii) a breach by Seller of any of the representations and warranties contained in the first sentence of Section 3.8. For purposes of determining the amount of any Indemnifiable Losses, any breach of or inaccuracy in any representation or warranty shall be determined without regard to any materiality qualifier set forth in such representation or warranty, and all references to materiality qualifiers shall be ignored for purposes of determining whether such representation or warranty was true and correct when made.

 

 

9.5  Cooperation as to Indemnified Liability. Each party hereto shall reasonably cooperate with the other parties with respect to access to books, records, or other documentation within such party’s control that is not confidential information of a third party, if deemed reasonably necessary or appropriate by any party in the defense of any claim that may give rise to indemnification hereunder.

 

9.6  Nature of Indemnification. The Indemnified Party’s right to indemnification and payment of Indemnifiable Losses, or other remedy, based on the Indemnified Party’s representations, warranties, covenants and obligations, shall not be affected by any investigation conducted by the Indemnified Party or any knowledge acquired (or capable of being acquired) at any time by the indemnified party, whether before or after the execution and delivery of this Agreement or the Closing, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant or obligation, provided, however, that the Indemnified Party shall be obligated to disclose to the indemnifying party any such information uncovered by the Indemnified Party and allow the indemnifying party a reasonable time to cure such inaccuracy or non-compliance with, any such representation, warranty, covenant or obligation. The parties recognize and agree that the parties’ respective knowledge, and the waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, shall not affect the right to indemnification or payment of Indemnifiable Losses pursuant to this Article 9, or other remedy, based on such representations, warranties, covenants, and obligations.

 

9.7  Calculation of Damages. The amount of any Indemnifiable Losses for which indemnification is provided under this Article 9 shall be reduced by any insurance proceeds that the Indemnified Party actually is entitled to receive (and does receive) pursuant to any insurance policy on account of the matter resulting in such Indemnifiable Loss.

 

9.8  Tax Treatment. The parties shall report any indemnification payment made pursuant to this Article 9 as a purchase price adjustment unless otherwise required by law.

 

 

10.1  Termination Prior to Closing. Notwithstanding any contrary provisions of this Agreement, the respective obligations of the parties hereto to consummate the Closing may be terminated and abandoned at any time at or before the Closing only as follows:

 

 

(a)  By and at the option of Buyer if the Closing shall not have occurred by June 30, 2008; provided that Buyer shall not have breached in any material respect its obligations under this Agreement in any manner that shall have been the proximate cause of, or resulted in, the failure to consummate the Closing.

 

(b)  By and at the option of Seller if the Closing shall not have occurred by June 30, 2008, provided that Seller shall not have breached in any material respect its obligations under this Agreement in any manner that shall have been the proximate cause of, or resulted in, the failure to consummate the Closing.

 

(c)  At any time, without liability of any party to the others, upon the mutual written consent of Buyer and Seller.

 

(d)  By either Buyer or Seller in the event the Seller Stockholder Approval of the Acquisition is not obtained at the Seller’s Stockholder Meeting at which such matters were presented to such stockholders for approval and voted upon; provided, however, that the right to terminate this Agreement under this Section 10.1(d) shall not be available to Seller where the failure to obtain the Seller Stockholder Approval shall have been caused by the action or failure to act by Seller and such action or failure to act constitutes a material breach by Seller of this Agreement; or

 

(e)  By Buyer in the event that (i) the Board of Directors of Seller shall have failed to include in the proxy statement the Seller Recommendation, without modification or qualification, or (ii) the Board of Directors of Seller shall have made a change in the Seller Recommendation; or

 

(f)  By Seller (provided that Seller has complied with Sections 5.1 and 5.6 hereof), if (i) the Board of Directors of Seller accepts a Superior Offer; and (ii) Seller shall have rendered to Buyer payment in full of the amount specified in Section 11.5 concurrently with delivery of its final notice of termination pursuant to this Section 10.1(f); or

 

(g)  By either Buyer or Seller (provided that the terminating Party is not then in material breach of any representation, warranty, covenant, or other agreement contained in this Agreement) in the event that any of the conditions precedent to the obligations of such Party (as contained in Article 6 and 7, as applicable) to consummate the Acquisition is incapable of being satisfied or fulfilled by June 30, 2008; or

 

 

(h)  By either Buyer or Seller, if the other party has materially breached any representations, warranty, covenant or agreement contained herein and has not cured within five (5) Business Days or it is unable to be cured.

 

10.2  Effect of Termination. In the event of the termination of this Agreement as provided in Section 10.1, written notice thereof shall forthwith be given to the other party specifying the provision hereof pursuant to which such termination is made, and this Agreement shall forthwith become null and void (except for the provisions of Section 5.16(a) and (b), this Section 10.2, and Article 11 of this Agreement, which shall survive such termination) and there shall be no liability on the part of Buyer or Seller, except (i) as set forth in Section 11.5, and (ii) for damages resulting from any breach by Buyer or Seller of this Agreement. 

 

 

11.1  Complete Agreement. The Schedules and Exhibits to this Agreement shall be construed as an integral part of this Agreement to the same extent as if they had been set forth verbatim herein. This Agreement and the Schedules and Exhibits hereto, the other Transaction Documents and the Non-Disclosure Agreement constitute the entire agreement between the parties hereto with respect to the subject matter hereof and supersede all prior agreements whether written or oral relating hereto and thereto.

 

11.2  Survival of Representations and Warranties. The representations and warranties contained in this Agreement and certificates delivered in connection therewith shall survive and remain in full force and effect for twenty-four (24) months after the Closing Date (the end of such period is referred to as the “Survival Date”). Except for claims related to the representations and warranties contained in the first sentence of Section 3.8 and claims based on fraud (which claims shall survive for the applicable statute of limitations), neither party nor any other Indemnified Party shall have any right under Article 9 or otherwise to bring a claim against the other party with respect to any representations and warranties contained in this Agreement or any certificate delivered in connection therewith unless it shall have given the indemnifying party notice of the Indemnifiable Losses for which it seeks indemnification on or before the Survival Date. Except as provided in Section 5.18, no independent investigation by Seller or Buyer, its counsel, or any of its agents or employees shall in any way limit or restrict the scope of the representations and warranties made by Seller or Buyer in this Agreement or either party’s entitlement to indemnification under Article 9.

 

11.3  Waiver, Discharge, Amendment, Etc. The failure of any party hereto to enforce at any time any of the provisions of this Agreement, shall in no way be construed to be a waiver of any such provision, nor in any way to affect the validity of this Agreement or any part thereof or the right of the party thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to be a waiver of any other or subsequent breach. Any amendment to this Agreement shall be in writing and signed by the parties hereto

 

 

11.4  Notices. All notices hereunder shall be deemed given if in writing and delivered personally or sent by facsimile (with confirmation of transmission) or certified mail (return receipt requested) or reputable courier service to the parties at the following addresses (or at such other addresses as shall be specified by like notice):

 

if to Buyer, to:

 

Kyocera Mita Corporation

2-28, 1-Chome, Tamatsukuri

Chuo-Ku, Osaka ###-###-#### Japan

Attention: Katsumi Komaguchi

Facsimile: 81-6-6764-6492

 

with separate copies thereof addressed to:

 

Kyocera Mita America, Inc.

225 Sand Road

Fairfield, New Jersey 07004

Attention: Calvin Rosen, Esq.

Facsimile: 973 ###-###-####

 

with a separate copy thereof addressed to:

 

Cole, Schotz, Meisel,

Forman & Leonard, P.A.

Court Plaza North

25 Main Street

P.O. Box 800

Hackensack, NJ ###-###-####

Facsimile: 201 ###-###-####

Attention: Marc Press, Esq.

 

and if to Seller, to:

 

Peerless Systems Corporation

2381 Rosecrans Avenue

El Segundo, California 90245

Facsimile: 310 ###-###-####

Attention: President and CEO

 

 

with separate copies thereof addressed to:

 

Loeb & Loeb LLP

10100 Santa Monica Boulevard

Suite 2200

Los Angeles, California 90067

Facsimile: 310 ###-###-####

Attention: Allan B. Duboff, Esq.

 

Any party may change the above specified recipient and/or mailing address by notice to all other parties given in the manner herein prescribed. All notices shall be deemed given on the day when actually delivered as provided above (if delivered personally, by telecopy or by reputable courier service) or on the date that is three (3) Business Days after the date shown on the return receipt (if delivered by mail).

 

11.5  Transfer and Sales Taxes, Expenses and Termination Fee. Any filing and recording fees for the transfer of the Specified Assets and any Transfer Taxes payable with respect to the Fixed Assets, not to exceed $12,500 shall be paid by Buyer. Within three (3) Business Days of a notice from Seller, Buyer shall pay, or reimburse Seller for the payment of, such Transfer Taxes in an amount reasonably documented and not to exceed $12,500. Any other Transfer Taxes, if any, with respect to the sale of the Specified Assets shall be the responsibility of Seller. Except as otherwise expressly provided herein, Buyer and Seller shall each pay their own expenses (including, but not limited to, all compensation and expenses of counsel, financial advisors, consultants, actuaries and independent accountants) incident to this Agreement and the preparation for, and consummation of, the transactions provided for herein; provided, however, in the event this Agreement is terminated (a) by Seller pursuant to Section 10.1(h), Buyer shall promptly reimburse Seller for its reasonable out-of-pocket expenses with respect to the transactions contemplated by this Agreement, not to exceed $200,000, and pay to Seller an amount equal to $125,000 per month (and prorated for any partial months), from February 1, 2008 to the date of termination, by wire transfer of same day funds to an account designated by Seller or (b) by Buyer pursuant to Section 10.1 (e), (f) or (h), Seller shall promptly reimburse Buyer for its reasonable out-of-pocket expenses, not to exceed $200,000 by wire transfer of same day funds to an account designated by Buyer and in the case of termination pursuant to Sections 10.1(e) or 10.1(f) promptly pay Buyer a termination fee of $400,000 by wire transfer of same day funds to an account designated by Buyer. Notwithstanding the foregoing, (i) the obligation of Buyer to make the payments to Seller described in clause (a) above shall be in addition to and not in lieu of any rights and remedies available to Seller, and (ii) the non-terminating shall not be required to pay such fees or expenses described in clause (a) or (b) above in the event the terminating party is in material breach of its representations, covenants or agreements contained in this Agreement, such that the non-terminating party would have been able to terminate the Agreement pursuant to Section 10.1(h).

 

 

11.6  Governing Law; Consent to Jurisdiction and Venue.

 

(a)  This Agreement shall be governed by and interpreted in accordance with the laws of the State of Delaware, including all matters of construction, validity, performance and enforcement, without giving effect to principles of conflicts of laws.

 

(b)  EACH OF THE PARTIES HERETO HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF DELAWARE OR THE UNITED STATES DISTRICT COURT FOR DELAWARE, AS WELL AS TO THE JURISDICTION OF ALL COURTS TO WHICH AN APPEAL MAY BE TAKEN FROM SUCH COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE CONTEMPLATED TRANSACTIONS. EACH PARTY HEREBY EXPRESSLY WAIVES ANY AND ALL RIGHTS TO BRING ANY SUIT, ACTION OR OTHER PROCEEDING IN OR BEFORE ANY COURT OR TRIBUNAL OTHER THAN THE COURTS DESCRIBED ABOVE AND COVENANTS THAT IT SHALL NOT SEEK IN ANY MANNER TO RESOLVE ANY DISPUTE OTHER THAN AS SET FORTH IN THIS SECTION 11.6 OR TO CHALLENGE OR SET ASIDE ANY DECISION, AWARD OR JUDGMENT OBTAINED IN ACCORDANCE WITH THE PROVISIONS HEREOF.

 

(c)  EACH OF THE PARTIES HERETO HEREBY EXPRESSLY WAIVES ANY AND ALL OBJECTIONS IT MAY HAVE TO VENUE, INCLUDING THE INCONVENIENCE OF SUCH FORUM, IN ANY OF SUCH COURTS. IN ADDITION, EACH OF THE PARTIES CONSENTS TO THE SERVICE OF PROCESS BY PERSONAL SERVICE OR ANY MANNER IN WHICH NOTICES MAY BE DELIVERED HEREUNDER IN ACCORDANCE WITH SECTION 11.6 OF THIS AGREEMENT.

 

(d)  EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR ANY RELATED AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, OR IN CONNECTION WITH, THIS AGREEMENT, THE RELATED AGREEMENTS OR ANY OF THE CONTEMPLATED TRANSACTIONS. EACH PARTY HERETO CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE SUCH WAIVER, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (C) IT MAKES SUCH WAIVER VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.6.

 

 

11.7  Public Announcement. The parties agree that prior to issuing any press release or public announcement concerning any provisions of this Agreement or the transactions contemplated hereby, each party shall so advise the other party hereto, and the parties shall use their reasonable efforts to cause a mutually agreeable release or announcement to be issued. Notwithstanding the foregoing, and, to the extent applicable, subject to Section 5.1(a) : (a) Seller may file a Form 8-K, preliminary proxy statement, revisions thereto, a final proxy statement, or any other filings under the Exchange Act, together with a copy of this Agreement and such other agreements referred to herein as it deems appropriate, (b) each party may make any other public disclosure it believes in good faith is required by applicable law or any listing or trading agreement concerning its publicly-traded securities and (c) Seller may correspond with third parties in writings with respect to obtaining Consents. In furtherance of the foregoing sentence, the parties agree and acknowledge that Buyer and Seller will each issue a press release following the execution and delivery of this Agreement by the parties in the form previously agreed to by the parties.

 

11.8  Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and the successors or assigns of the parties hereto; provided that the rights and obligations of Seller herein may not be assigned and the rights of Buyer may be assigned only to one or more Affiliates of Buyer or to such business organization that shall succeed to the business of Buyer or of such subsidiary to which this Agreement relates.

 

11.9  Titles and Headings; Construction. The titles and headings to Sections herein and to the Exhibits and Schedules hereto are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. This Agreement shall be construed without regard to any presumption or other rule requiring construction hereof against the party causing this Agreement to be drafted. The words “include”, “includes”, “included”, “including” and “such as” do not limit the preceding words or terms and shall be deemed to be followed by the words “without limitation”. All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require. All terms defined in this Agreement in their singular or plural forms, have correlative meanings when used herein in their plural or singular forms, respectively. All references herein to a Section, Article, Exhibit or Schedule are to a Section, Article, Exhibit or Schedule of or to this Agreement, unless otherwise indicated. The inclusion of any information in a Schedule shall not be deemed to be an admission or acknowledgment by Seller in and of itself, that such information is required to be listed on such Schedules or is material to or outside the ordinary course of the business of Seller. Any disclosure made in any Schedule which could, based on the substance of such disclosure, be reasonably applied to another Schedule to this Agreement and is reasonably apparent that it would so apply, shall be deemed to be made with respect to such other Schedule regardless of whether or not a specific reference is made thereto.

 

 

11.10  Severability. If any provision of this Agreement is held invalid, unenforceable or void by a court of competent jurisdiction, the remaining provisions shall not for that reason alone be unenforceable or invalid. In such case, the parties agree to negotiate in good faith to create an enforceable contractual provision to achieve the purpose of the invalid provision. Further, if any provision is held to be overbroad as written, such provision shall be deemed amended to narrow its application to the extent necessary to make the provision enforceable according to applicable law and shall be enforced as amended.

 

11.11  Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which when taken together shall constitute one and the same instrument.

 

11.12  Confidentiality. Each party will, for a period of five (5) years, (i) keep secret and confidential and not disclose to others, all Confidential Information of the other party, and (ii) not use any of the other party’s Confidential Information for its own direct or indirect benefit, or the direct or indirect benefit of any third party. The foregoing shall not prohibit disclosures: (x) made to the receiving party’s employees or agents who have a “need to know” the other party’s Confidential Information to the extent such disclosure is necessary to perform such party’s duties and obligations, or to enforce such party’s rights, under this Agreement, provided that such employees or agents agree in writing or are otherwise compelled to comply with the obligations of this Section 11.12, and the receiving party remains directly responsible to the disclosing party for their compliance; or (y) compelled to be made by any requirement of law or pursuant to any legal, regulatory or investigative proceeding before any court, or governmental or regulatory authority, agency or commission so long as the party so compelled to make disclosure of Confidential Information of the other party provides prior written notice to such other party so that the other party may seek a protective order or other remedy to protect the confidentiality of the Confidential Information and/or waive the compelled party’s compliance with this Section 11.12, provided that all such information so disclosed (other then in a way which makes it generally available to the public) shall remain Confidential Information for all other purposes. If such protective order, other remedy or waiver is not obtained by the time the compelled party is required to comply, the compelled party may furnish only that portion of the Confidential Information of the other party that it is legally compelled, in the opinion of counsel, to disclose and shall request, at the other party’s expense, that such Confidential Information be accorded confidential treatment (if such procedure is available), including redaction of any payment terms specified herein. Each party further agrees to take appropriate measures to prevent any such prohibited disclosure of Confidential Information by its present and future employees, officers, agents, subsidiaries, or consultants. Notwithstanding the foregoing, this Section 11.12 shall not reduce, eliminate, terminate or otherwise modify any of Buyer’s obligations under the Non-Disclosure Agreement.

 

 

11.13  Specific Performance. The parties recognize and acknowledge that in the event that all of the conditions set forth in Article 6 or Article 7, as the case may be, to a party’s performance of its obligations have been satisfied on a timely basis and such party shall fail to perform its obligations under the terms of this Agreement, money damages alone will not be adequate to compensate the other party. It is expressly understood and agreed that in such event, irreparable injury to the other party shall result and that therefore the other party will be entitled to specific performance of the terms of this Agreement and of the covenants and obligations hereunder including temporary, preliminary and permanent injunctive relief.

 

(Remainder of page intentionally blank; signatures follow on next page)

 

IN WITNESS WHEREOF, each of the parties has caused this Asset Purchase Agreement to be executed in the manner appropriate for each, as of the date first above written.

 

	PEERLESS SYSTEMS CORPORATION
	By:	/s/ Richard L. Roll
		Name: Richard L. Roll Title: President and Chief Executive Officer

 

	KYOCERA MITA CORPORATION
	By:	/s/ Katsumi Komaguchi
		Name: Katsumi Komaguchi Title: President