<PAGE>
Exhibit 2.1.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
MCDOWELL RESEARCH, LTD.,
THOMAS HAUKE, EARL MARTIN, SR.,
JAMES EVANS, FRANK ALEXANDER
AND
ULTRALIFE BATTERIES, INC.
AND
MR ACQUISITION CORPORATION
DATED AS OF MAY 1, 2006
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TABLE OF CONTENTS
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ARTICLE I.
DEFINITIONS...................................................
1
Section 1.1
Certain
Definitions..................................... 1
Section 1.2
Interpretation..........................................
7
Section 1.3
Accounting
Conventions.................................. 8
ARTICLE II. PURCHASE AND
SALE............................................ 8
Section 2.1
Purchase and
Sale of Assets............................. 8
Section 2.2
Excluded
Assets......................................... 10
Section 2.3
Inability to
Assign Assumed Contracts................... 11
Section 2.4
Excluded
Liabilities.................................... 12
Section 2.5
Assumption of
Certain Liabilities....................... 12
Section 2.6
Purchase
Price.......................................... 13
Section 2.7
Closing.................................................
14
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF
SELLER.................... 14
Section 3.1
Organization and
Power; Stock Ownership................. 14
Section 3.2
Authorization...........................................
14
Section 3.3
Approvals...............................................
15
Section 3.4
Non-Contravention.......................................
15
Section 3.5
Binding
Effect.......................................... 15
Section 3.6
Seller
Subsidiaries..................................... 15
Section 3.7
Financial
Statements and 2006 Forecast.................. 15
Section 3.8
Title...................................................
16
Section 3.9
Transferred
Assets...................................... 16
Section 3.10
Compliance With
Laws.................................... 17
Section 3.11
Litigation and
Claims................................... 17
Section 3.12
Intellectual
Property................................... 17
Section 3.13
Adequacy of Technical
Documentation..................... 20
Section 3.14
Intellectual Property
Rights Granted to Seller.......... 20
Section 3.15
Third-Party Interests
in Intellectual Property.......... 21
Section 3.16
Major Vendors and
Customers............................. 21
Section 3.17
Assumed
Contracts....................................... 21
Section 3.18
Warranties..............................................
22
Section 3.19
Taxes...................................................
22
Section 3.20
Employment
Matters...................................... 24
Section 3.21
Employee
Benefits....................................... 25
Section 3.22
Environmental
Matters................................... 27
Section 3.23
Insurance...............................................
27
Section 3.24
Subsequent
Changes...................................... 27
Section 3.25
Related-Party
Transactions.............................. 28
Section 3.26
Inventory...............................................
28
Section 3.27
Finders'
Fees........................................... 28
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Section 3.28
Disclosure..............................................
29
Section 3.29
Convertible Note and
Shares............................. 29
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF
BUYER...................... 29
Section 4.1
Organization and
Power.................................. 29
Section 4.2
Authorization...........................................
29
Section 4.3
Approvals...............................................
30
Section 4.4
Non-Contravention.......................................
30
Section 4.5
Binding
Effect.......................................... 30
Section 4.6
Finders'
Fees........................................... 30
Section 4.7
Disclosure..............................................
30
ARTICLE V. CERTAIN
COVENANTS............................................. 31
Section 5.1
Access..................................................
31
Section 5.2
Conduct of
Business..................................... 31
Section 5.3
Reasonable
Efforts; Further Assurances.................. 32
Section 5.4
Business Name
Change.................................... 33
Section 5.5
Exclusivity.............................................
33
Section 5.6
Confidentiality.........................................
34
Section 5.7
Public
Disclosure....................................... 34
Section 5.8
Bulk
Sales.............................................. 35
Section 5.9
Taxes...................................................
35
Section 5.10
Determination and
Allocation of Consideration........... 36
Section 5.11
Non-Competition.........................................
36
Section 5.12
Covenants Not to Sue
or Assert Rights................... 37
Section 5.13
Certain
Contracts....................................... 37
Section 5.14
Risk of
Loss............................................ 38
Section 5.15
Real Estate
Matters..................................... 38
Section 5.16
Statement of
Transaction Expenses....................... 38
Section 5.17
Accounts
Receivable..................................... 38
Section 5.18
Excess Warranty
Claims.................................. 38
Section 5.19
Registration
Rights..................................... 39
Section 5.20
Split-Up of
Convertible Note............................ 39
Section 5.21
Kalmus
Litigation....................................... 39
Section 5.22
RF
Amplifiers........................................... 39
ARTICLE VI. COVENANTS AS TO CERTAIN EMPLOYMENT
MATTERS................... 40
Section 6.1
Employees...............................................
40
Section 6.2
Enforcement of
Rights................................... 41
Section 6.3
Non-Solicitation........................................
41
Section 6.4
Minimum
Termination..................................... 41
ARTICLE VII. CONDITIONS TO
CLOSING....................................... 41
Section 7.1
Conditions to
the Obligations of Buyer, Acquisition Sub
and Seller..............................................
41
Section 7.2
Further
Conditions to the Obligation of Buyer and
Acquisition Sub.........................................
42
Section 7.3
Further
Conditions to the Obligation of Seller.......... 45
ARTICLE VIII.
INDEMNIFICATION............................................
46
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Section 8.1
Indemnification
by Seller and Seller Shareholders....... 46
Section 8.2
Indemnification
by Buyer................................ 47
Section 8.3
Right of
Offset......................................... 48
Section 8.4
Indemnification
Procedures.............................. 48
Section 8.5
Indemnification
Limitations............................. 49
ARTICLE IX.
TERMINATION..................................................
50
Section 9.1
Termination.............................................
50
Section 9.2
Effect of
Termination................................... 51
ARTICLE X. IN
GENERAL....................................................
51
Section 10.1
Notices.................................................
51
Section 10.2
Amendment;
Waiver....................................... 52
Section 10.3
No Assignment or
Benefit to Third Parties............... 52
Section 10.4
Survival................................................
52
Section 10.5
Expenses................................................
53
Section 10.6
Schedules, Exhibits,
Etc................................ 53
Section 10.7
Governing
Law........................................... 53
Section 10.8
Alternate Dispute
Resolution............................ 53
Section 10.9
Remedies
Cumulative..................................... 54
Section 10.10
Inferences..............................................
54
Section 10.11
Severability............................................
54
Section 10.12
Entire Agreement........................................
54
Section 10.13
Headings................................................
54
Section 10.14
Counterparts............................................
55
Section 10.15
Facsimiles..............................................
55
TABLE OF EXHIBITS AND
SCHEDULES.......................................... 1
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<PAGE>
ASSET PURCHASE AGREEMENT
THIS
AGREEMENT is made as of May 1,2006 by and among McDowell
Research,
Ltd., a Texas limited partnership ("SELLER"), Thomas Hauke
("Hauke"), Earl
Martin, Sr. ("Martin"), James Evans ("Evans"), Frank Alexander
("Alexander"),
Ultralife Batteries, Inc., a Delaware corporation ("BUYER"), and MR
Acquisition
Corporation, a Delaware corporation ("ACQUISITION SUB").
RECITALS
Seller is engaged in the business of designing and developing power
systems
and battery chargers for sale to a variety of commercial customers
(the
"BUSINESS").
The
parties desire that Seller sell, transfer, assign and license
to
Acquisition Sub, and that Acquisition Sub purchase, license and
assume from
Seller certain specified assets and liabilities related to the
Business, all as
more specifically provided herein.
NOW,
THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and undertakings contained
herein, and
for other good and valuable consideration, the receipt and
sufficiency of which
are hereby acknowledged, the parties agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.1 CERTAIN DEFINITIONS.
The
following terms will, when used in this Agreement, have the
following
respective meanings:
"2005 AUDIT" means the audited combined balance sheet, statement
of
operations and statement of cash flows of Seller as of and for the
fiscal year
ended December 31, 2005, including the notes and schedules thereto,
certified by
Pattillo, Brown & Hill, L.L.P.
"2005 BALANCE SHEET" means the audited balance sheet of Seller as
of
December 31, 2005 which is part of the Financial Statements and
Schedule 3.7(a).
"2006 FORECAST" means the unaudited projected statement of
operations of
Seller for the fiscal year ended December 31, 2006.
"AFFILIATE" means, with respect to a Person, any other Person
directly or
indirectly controlling, controlled by, or under common control
with, such Person
at any time during the period for which the determination of
affiliation is
being made. For purposes of this definition, the term "control"
means, with
respect to any Person, the possession, directly or indirectly, of
the power to
direct or cause the direction of management policies of such
Person, whether
through the ownership of voting securities or by contract or
otherwise.
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"AGREEMENT" means this Asset Purchase Agreement, as the same may be
amended
or supplemented from time to time in accordance with the terms
hereof, together
with the exhibits and schedules thereto.
"ANCILLARY AGREEMENTS" means, collectively, the Convertible Note
attached
to this Agreement as Exhibit A, the Employment Agreements attached
to this
Agreement as Exhibits B-1, B-2 and B-3, the Lease Agreement
attached to this
Agreement as Exhibit C and the Registration Rights Agreement
attached to this
Agreement as Exhibit D, each as more fully described herein.
"APPLICABLE EMPLOYEES" is defined in Section 6.1(a)(i) of this
Agreement.
"APPROVALS" means, collectively, the consents, approvals,
waivers,
authorizations, novations, notices and filings required in
connection with the
consummation of the Transaction (or of any portion of the
Transaction), which
are listed on Schedule 1.1.
"ASSUMED CONTRACTS" is defined in Section 2.1(c) of this
Agreement.
"ASSUMED LIABILITIES" is defined in Section 2.5 of this
Agreement.
"ASSUMED LICENSE AGREEMENTS" is defined in Section 2.1(c)(i) of
this
Agreement.
"BENEFITS PLANS" is defined in Section 3.21(a) of this
Agreement.
"BOOKS AND RECORDS" means books, ledgers, files (including
personnel
files), reports, operating records, accounting records, price
lists,
correspondence and other forms of information, in any form or
medium, relating
in any manner to the business, operations or financial or
statistical history of
a Person.
"BUYER INDEMNIFIED PARTIES" is defined in Section 8.1 of this
Agreement.
"BUYER LOSSES" is defined in Section 8.1 of this Agreement.
"CLAIM" means any pending or threatened contest, claim, charge,
demand,
assessment, action, cause of action, complaint, litigation,
proceeding, hearing
or notice involving any Person.
"CLAIM NOTICE" is defined in Section 8.4(b) of this Agreement.
"CLOSING" means the closing and consummation of the
Transaction.
"CLOSING DATE" is defined in Section 2.7 of this Agreement.
"CLOSING DOCUMENTS" means: (a) with respect to Seller, all
agreements,
documents and instruments, including the Ancillary Agreements,
required to be
delivered by Seller at Closing, as set forth in Section 7.2; and
(b) with
respect to Buyer and Acquisition Sub, all agreements, documents and
instruments,
including the Ancillary Agreements, required to be delivered by
Buyer and
Acquisition Sub at Closing, as set forth in Section 7.3.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985,
as amended, section 4980B of the Code and Title I, Part 6 of ERISA,
and any
similar state group
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health plan continuation law, together with all regulations and
proposed
regulations promulgated thereunder.
"CODE" means the Internal Revenue Code of 1986, as amended and all
Treasury
Regulations promulgated thereunder.
"COMMON STOCK" means the $.10 par value common stock of the
Buyer.
"CONFIDENTIAL INFORMATION" means all information of any kind
concerning the
Disclosing Party (as defined in Section 5.6) or any of its
Affiliates obtained
directly or indirectly from the Disclosing Party or any of its
Affiliates,
employees, representatives or agents in connection with the
transactions
contemplated by this Agreement, except information (a)
ascertainable or obtained
from public or published sources, (b) received from a third party
who is under
no obligation to keep such information confidential, (c) which is
or becomes
known to the public (other than through a breach of this
Agreement), or (d)
which was in the Receiving Party's (as defined in Section 5.6)
possession prior
to disclosure thereof to the Receiving Party and which was not
subject to any
obligation to keep such information confidential. Any information
relating to
the Transferred Assets and any other confidential or proprietary
business
information transferred to Buyer hereunder shall, upon Closing, be
deemed the
sole and exclusive Confidential Information of the Buyer.
"CONVERTIBLE NOTE" means that certain Senior Subordinated
Convertible Note
to be issued by Buyer to Seller at Closing, substantially in the
form attached
hereto as Exhibit A.
"DISCLOSING PARTY" is defined in Section 5.6(a) of this
Agreement.
"EFFECTIVE TIME" is defined in Section 2.7 of this Agreement.
"EMPLOYMENT AGREEMENTS" means those certain employment agreements
by and
between Buyer or Acquisition Sub and Hauke, Evans, Alexander and
Ray Pixley
substantially in the forms attached hereto as Exhibits B-1, B-2,
B-3 and B-4,
respectively.
"EMPLOYMENT LAWS" is defined in Section 3.20 of this Agreement.
"ENCUMBRANCES" means liens, charges, encumbrances, security
interests,
options or any other restrictions or third party rights.
"ENVIRONMENTAL LAW" means, collectively, all federal, state and
local
statutes, common law, authorizations, regulations, ordinances,
codes, published
guidelines and policies, directives, judgments, injunctions,
decrees and orders
(including all amendments thereto) pertaining to environmental
matters including
but not limited to: (A) the protection, investigation or
restoration of the
environment, health, safety or natural resources, (B) the handling,
use,
presence, disposal, release or threatened release of any Hazardous
Substance, or
(C) air, indoor air, noise, employee exposure, water vapor, surface
water,
groundwater, soil, natural resources, chemical use, health, safety
and
sanitation, or threat of injury to persons or property relating to
any Hazardous
Substance. Without limiting the generality of the foregoing,
"Environmental
Laws" include the Comprehensive Environmental Response,
Compensation and
Liability Act, the Medical Waste Tracking Act, the Resource
Conservation and
Recovery Act, the Clean Air Act, the Federal Water Pollution
Control
<PAGE>
Act, the Safe Water Drinking Act, the Toxic Substance Control Act
and the
Occupational Safety and Health Act.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as
amended.
"ERISA AFFILIATE" is defined in Section 3.21(l) of this
Agreement.
"EXCLUDED ASSETS" is defined in Section 2.2 of this Agreement.
"EXCLUDED LIABILITIES" is defined in Section 2.4 of this
Agreement.
"FINAL BALANCE SHEET" means the audited consolidated balance sheet
of
Seller as of the Closing Date, certified by such independent
auditor selected by
Buyer, which will be prepared within thirty (30) days of Closing,
will be
presented to Seller for review and will be added to and deemed to
be part of the
Financial Statements and Schedule 3.7(a) if Seller has not
reasonably objected
to such balance sheet within fifteen (15) days after Seller's
receipt.
"FINANCIAL STATEMENTS" means: (a) the audited combined balance
sheet,
statement of operations and statement of cash flows of Seller as of
and for the
fiscal years ended December 31, 2004 and 2005, including the notes
and schedules
thereto, certified by Pattillo, Brown & Hill, L.L.P. (b) the
unaudited combined
balance sheet, statement of operations and statement of cash flows
of Seller for
the fiscal years ended December 31, 2001, 2002 and 2003, including
the notes and
schedules thereto, compiled by Pattillo, Brown & Hill, L.L.P.;
(c) the Interim
Financial Statement; and (d) the Final Balance Sheet, which will be
prepared
within thirty (30) days of Closing, will be presented to Seller for
review and
will immediately thereafter be added to and deemed to be part of
the Financial
Statements and Schedule 3.7(a) if Seller has not reasonably
objected to such
balance sheet within fifteen (15) days after Seller's receipt but
which shall
not be deemed to be part of the Financial Statements and Schedule
3.7(a) until
so completed and so added; all of which shall comprise Schedule
3.7(a).
"GAAP" means generally accepted accounting principles, methods
and
practices set forth in the opinions and pronouncements of the
Accounting
Principles Board and the American Institute of Certified Public
Accountants, and
statements and pronouncements of the Financial Accounting Standards
Board, the
Securities and Exchange Commission or of such other Person as may
be approved by
a significant segment of the U.S. accounting profession, in each
case as of the
date or period at issue, and as applied in the U.S. to U.S.
companies.
"GOVERNMENTAL AUTHORIZATIONS" means all licenses, permits,
certificates and
other authorizations and approvals of any Governmental Entity
required under any
Law to carry on the Business as currently conducted or anticipated
in the
Ordinary Course.
"GOVERNMENTAL ENTITY" means any U.S. or non-U.S. local, state,
federal or
other government, including each of their respective branches,
departments,
agencies, courts, instrumentalities or other subdivisions.
"HAZARDOUS SUBSTANCE" means and includes: (a) any hazardous
materials,
hazardous wastes, hazardous substances and toxic substances as
those or similar
items are defined under any Environmental Law; (b) any asbestos or
any material
that contains any hydrated mineral silicate,
<PAGE>
including chrysolite, amosite, crocidolite, tremolite, anthophylite
and/or
actinolite, whether friable or non-friable; (c) any polychlorinated
biphenyls or
polychlorinated biphenyl-containing materials or fluids; (d) radon;
(e) any
other hazardous, explosive, flammable, infectious, carcinogenic,
mutagenic,
radioactive, toxic or noxious substance, material, pollutant,
contaminant or
solid, liquid or gaseous waste; (f) any petroleum, petroleum
hydrocarbons,
petroleum products, crude oil or any fractions thereof, natural gas
or synthetic
gas; and (h) any substance that, whether by its nature or its use,
is or becomes
subject to regulation under any Environmental Laws or with respect
to which any
Environmental Laws or Governmental Entity requires or will require
environmental
investigation, monitoring or remediation.
"HIRED EMPLOYEES" is defined in Section 6.1(a)(ii) of this
Agreement.
"INDEMNIFIED PARTIES" means, as appropriate in the context, either
the
Buyer Indemnified Parties or the Seller Indemnified Parties, which
terms are
defined in Article VIII.
"INDEMNIFYING PARTY" means a party obligated to provide
indemnification
pursuant to Article VIII.
"INTELLECTUAL PROPERTY" means patents, inventions, trade secrets,
concepts,
know-how, inventions, discoveries, disclosures, copyrights (whether
registered
or unregistered), works of authorship, trademarks (whether
registered or
unregistered), service marks (whether registered or unregistered),
mask works,
trade names, trade dress, product names, slogans, logos and
Internet domain
names, including registrations and applications for any of the
foregoing,
software, firmware, object code, source code, specifications,
processes,
drawings, designs, technology, methods, techniques, formulae, work
papers, and
proprietary information and documents incorporating any similar
rights,
including technical reports and laboratory data (in all media).
"INTERIM FINANCIAL STATEMENT" means the unaudited combined balance
sheet,
statement of operations and statement of cash flows of Seller for
the three
months ended March 31, 2006.
"INVENTORY" is defined in Section 2.1(d) of this Agreement.
"KALMUS LITIGATION" means that litigation currently entitled AR
Kalmus
Corp. v. Thomas Russell, Terry Perdue, Alan Chandler and McDowell
Research
Corporation, pending in the Court of Common Pleas of Montgomery
County in the
Commonwealth of Pennsylvania (Civil Action No. 03-24185) and all
disputes,
claims, litigations and suits arising out of the facts upon which
the pending
matter is based.
"LAW" means any applicable law (including common law), statute,
ordinance,
rule, regulation, code, order, judgment, injunction, decree or
judicial or
administrative doctrine that is promulgated or issued by any
Governmental
Entity.
"LEASE AGREEMENT" means that certain Lease Agreement substantially
in the
form attached hereto as Exhibit C.
"LIABILITY" means any direct or indirect indebtedness, liability,
Claim,
damage, deficiency, obligation or responsibility, fixed or unfixed,
choate or
inchoate, liquidated or unliquidated, secured or unsecured,
accrued, absolute,
contingent or otherwise.
<PAGE>
"LOSSES" means Liabilities, losses, interest, penalties and
reasonable
costs and expenses associated therewith (including attorneys' fees,
litigation
costs, fines, penalties and expenses of investigation), whether
asserted by a
party to this Agreement or by a third party, but in no event
includes incidental
or consequential damages.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
condition
(financial or otherwise), results of operations or assets of the
Business or on
Seller's ability to perform its obligations under this
Agreement.
"NO-SHOP PERIOD" is defined in Section 5.5(a) of this
Agreement.
"NOTICE PERIOD" is defined in Section 8.4(c) of this Agreement.
"ORDINARY COURSE" means the ordinary course of business of the
Business,
consistent with past practices.
"PATENTS" is defined in Section 2.1(a)(ii) of this Agreement.
"PERMITTED ENCUMBRANCES" means Encumbrances that secure or
constitute an
Assumed Liability that is recorded on the Books and Records of
Seller as of the
Closing Date.
"PERSON" means an individual, a corporation, a partnership, a
limited
liability company, an association, a trust or any other entity or
organization.
"PRODUCTS" is defined in Section 2.1(b) of this Agreement.
"PURCHASE PRICE" is defined in Section 2.6(a) of this
Agreement.
"PURCHASE TRANSACTION" is defined in Section 5.5(b) of this
Agreement.
"RECEIVING PARTY" is defined in Section 5.6(a) of this
Agreement.
"REGISTRATION RIGHTS AGREEMENT" means that certain Registration
Rights
Agreement substantially in the form attached hereto as Exhibit
D.
"SEC" means the United States Securities and Exchange
Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER INDEMNIFIED PARTIES" is defined in Section 8.2 of this
Agreement.
"SELLER LOSSES" is defined in Section 8.2 of this Agreement.
"SELLER SHAREHOLDERS" means Hauke, Martin, Evans and Alexander.
"SHARES" means the shares of Buyer's Common Stock issuable upon
conversion
of the Convertible Note.
"SOFTWARE" is defined in Section 2.1(a)(i) of this Agreement.
<PAGE>
"SUBSIDIARY" means any Person, fifty percent (50%) or more of
the
outstanding equity interests of which are owned, directly or
indirectly, by
another Person.
"TAXES" means all taxes levied or imposed by any Governmental
Entity,
including income, gross receipts, windfall profits, value added,
severance,
production, sales, use, license, excise, franchise, employment,
environmental,
real property, personal property, transfer, alternative minimum,
estimated,
withholding or other taxes, together with any interest, additions
or penalties
with respect thereto and any interest in respect of such additions
or penalties,
whether or not disputed or contested.
"TAX
RETURNS" means all U.S. and non-U.S. reports and returns required
to
be filed with respect to Taxes, including all attachments
thereto.
"TECHNICAL DOCUMENTATION" is defined in Section 2.1(e) of this
Agreement.
"TRADEMARKS" is defined in Section 2.1(a)(iii) of this
Agreement.
"TRANSFERRED ASSETS" is defined in Section 2.1 of this
Agreement.
"TRANSFERRED INTELLECTUAL PROPERTY" is defined in Section 2.1(a) of
this
Agreement.
"TRANSACTION" means, collectively, the purchase and sale of the
Transferred
Assets, the assumption of the Assumed Liabilities and the execution
and delivery
of the Closing Documents and the other transactions, all as herein
provided.
"U.S." means the United States of America.
SECTION 1.2 INTERPRETATION.
In
this Agreement, unless the express context otherwise requires:
(A) the
words "HEREIN," "HEREOF" and "HEREUNDER" and words of similar
import refer to this Agreement as a whole and not to any particular
provision of
this Agreement;
(B) references to "ARTICLE" or "SECTION" are to the respective
Articles and Sections of this Agreement, and references to
"EXHIBIT" or
"SCHEDULE" are to the respective Exhibits and Schedules annexed
hereto;
(C) references to a "PARTY" mean a party to this Agreement and
include
references to such party's permitted successors and permitted
assigns;
(D) references to a "THIRD PARTY" mean a Person not a party to
this
Agreement;
(E) the terms "DOLLARS" and "$" means U.S. dollars;
(F) terms defined in the singular have a comparable meaning when
used
in the plural, and vice versa;
<PAGE>
(G) references to a party's "KNOWLEDGE" or any similar phrase
means
with respect to any Person, the actual knowledge of such Person. In
the case of
Seller, knowledge shall include only the actual collective
knowledge of Hauke,
Martin, Evans and Alexander after due inquiry, as well as such
knowledge as
should have been obtained by these individuals in the exercise of
due inquiry
(determined in light of their roles and responsibilities
generally);
(H)
the masculine pronoun includes the feminine and the neuter, and
vice versa, as appropriate in the context; and
(I) wherever the word "INCLUDE," "INCLUDES" or "INCLUDING" is used
in
this Agreement, it will be deemed to be followed by the words
"without
limitation."
SECTION 1.3 ACCOUNTING CONVENTIONS.
Except as expressly provided otherwise herein, all references in
this
Agreement to financial terms will be deemed to refer to such terms
as they are
defined under GAAP, consistently applied.
ARTICLE II. PURCHASE AND SALE
SECTION 2.1 PURCHASE AND SALE OF ASSETS.
On
the terms and subject to the conditions set forth herein, at
Closing,
Seller will sell, convey, transfer, assign and deliver to
Acquisition Sub, and
Acquisition Sub will purchase from Seller, all of Seller's right,
title and
interest in and to the following listed assets owned by Seller that
are used or
useful in, related to or arise out of the Business (except for
those assets that
are defined in Section 2.2 as Excluded Assets), in each such case
as the same
exist on the Closing Date (collectively, the "TRANSFERRED
ASSETS"):
(A) all Intellectual Property, including the following
(collectively,
the "TRANSFERRED INTELLECTUAL PROPERTY"):
(I) all source code, object code, design documentation and
procedures for product generation and testing of all computer
software
and firmware, including that listed on Schedule 2.1(a)(i) and
including the software rules and algorithms, flowcharts, trade
secrets, know-how, inventions, patents, copyrights, designs,
technical
processes, works of authorship, Technical Documentation, included
in
or relating to the same (collectively, the "SOFTWARE");
(II) all patents and patent applications, including those
listed
on Schedule 2.1(a)(ii), together with any division,
continuation,
continuation-in-part, continuing prosecution application,
continued
examination application, reinstatement, reexamination, revival,
reissue, extension or substitution of any thereof, and
corresponding
foreign applications, patents and rights thereto, including, in
all
cases, the right to sue for past infringement thereof and to
collect
any past or future royalties or other payments in connection
therewith
(collectively, the "PATENTS");
<PAGE>
(III) all trademarks, service marks, trade names, trade dress,
product names, slogans and logos, including those listed on
Schedule
2.1(a)(iii), and corresponding foreign applications, marks and
rights
thereto, including, in all cases, the right to sue for past
infringement thereof and to collect any past or future royalties
or
other payments in connection therewith (collectively, the
"TRADEMARKS");
(IV) all product development projects, including those listed
on
Schedule 2.1(b);
(V) all Internet, intranet and World Wide Web content, sites,
domain names and pages, and all HTML and other code related
thereto,
including those listed on Schedule 2.1(a)(v); and
(B) all products related to or incorporating any Intellectual
Property, including those listed on Schedule 2.1(b) and including
all proposed
or unimplemented developments or improvements thereof, and the
trade secrets,
know-how, inventions, patents, copyrights, mask works, designs,
technical
processes, works of authorship and technical data included in or
relating to the
same (the "PRODUCTS");
(C) only the following contracts and instruments, and no others
(collectively, the "ASSUMED CONTRACTS"):
(I) those contracts, agreements, licenses (whether granted to
or
by a third party) and other commitments and arrangements, oral
or
written, with any Person respecting the ownership, license,
acquisition, design, development, distribution, marketing, use,
maintenance, support or enhancement of Intellectual Property,
related
technical or user documentation or databases (including
royalty,
work-for-hire, consulting, employment, dealership and franchise
agreements), which are listed on Schedule 2.1(c)(i) (the
"ASSUMED
LICENSE AGREEMENTS"); and
(II) those other agreements, contracts, subcontracts, leases
and
subleases of personal property, arrangements, commitments,
licenses
and sublicenses, with customers, suppliers, resellers,
distributors,
current, former or prospective employees, employee groups, or
other
third parties, which are listed on Schedule 2.1(c)(ii);
(III) subject to the insurer's acceptance and any limitations
imposed by law, Seller's health insurance plan with United
Health
Insurance and Seller's dental plan, in each instance as of the
Closing
Date;
(D) all inventories of (i) Products; (ii) computer program code
(in
all media) and materials; (iii) program documentation, including
user materials;
and (iv) all other unused or reusable materials, stores and
supplies, including
those of the nature or type reflected on the Preliminary Final
Balance Sheet or
on Schedule 2.1(d) (the "INVENTORY");
(E) all technical and descriptive materials in all media (other
than
Inventory) relating to the acquisition, design, development, use or
maintenance
of Intellectual Property or the
<PAGE>
Products, including any compilers, tools, libraries, debuggers and
higher level
or proprietary language (the "TECHNICAL DOCUMENTATION");
(F) all of the furniture, fixtures, equipment, computer equipment
and
hardware, Seller-owned 1996 Dodge pickup truck, machinery,
apparatus, media,
tools, appliances, implements, supplies and other tangible personal
property of
Seller wherever located including that listed on Schedule 2.1(f),
along with all
rights under related product warranties, including any leasehold
improvements
owned by Seller for the Seller's leased premises located in
Waco;
(G) all customer lists and documentation (in all media) relating
to
the customers of the Business;
(H) as the same relate to the other Transferred Assets
enumerated
herein, all Books and Records, and all proprietary and
non-proprietary business
information, including marketing and sales materials and
publications, product
literature, reports, plans, records, pricing, cost and other
manuals,
advertising materials, catalogues, sales, service and maintenance
records, and
training materials;
(I) to the extent their transfer is permitted by Law, all
Governmental
Authorizations which are required for the conduct of the Business,
and all
applications therefor;
(J) all Claims that Seller may have against any Person relating to
or
arising out of any Transferred Asset or any Hired Employee,
including rights to
recover damages, settlements, rights to refunds, Claims for
compensation or
benefits, insurance Claims, Claims of infringement or past
infringement of any
Intellectual Property rights and royalty or similar rights related
to any
Transferred Intellectual Property;
(K) the assets, if any, that are listed on Schedule 2.1(k);
(L) all accounts receivable of Seller; and
(M) all goodwill of the Business associated with the foregoing
enumerated Transferred Assets.
SECTION 2.2 EXCLUDED ASSETS.
Notwithstanding anything herein to the contrary, from and after
Closing,
Seller will retain all of its existing right, title and interest in
and to, and
there will be excluded from the sale, conveyance, assignment or
transfer to
Acquisition Sub hereunder, and the Transferred Assets will not
include, the
following, in each case as the same exists on the Closing Date
(collectively,
the "EXCLUDED ASSETS"):
(A) all other agreements, instruments, contracts, subcontracts,
leases, subleases, arrangements, commitments, licenses, sublicenses
and
independent contractor agreements, written or oral, and sales
representative
agreements, written or oral, that are not Assumed Contracts;
<PAGE>
(B) all employee compensation, retirement, pension, severance,
deferred compensation, health, welfare or benefit plans and
programs, and all
funds and accounts held thereunder;
(C) all real property, including land, buildings, structures
and
improvements thereon, appurtenances thereto and interests therein
(including
leasehold or possessory interests), and all fixtures constituting
part of such
real property, except as provided in Section 2.1(f);
(D) all refunds, overpayments and prepayments of Taxes and duties
paid
by Seller,
(E) all Tax Returns of Seller and all other Books and Records
related
thereto;
(F) all corporate minute books and stock records of Seller;
(G) the capital stock of any Subsidiary;
(H) the Convertible Note and the Seller's rights under this
Agreement;
(I) cash
and cash equivalents; and
(J) the assets, if any, that are set forth on Schedule 2.2(j).
SECTION 2.3 INABILITY TO ASSIGN ASSUMED CONTRACTS.
(A) Notwithstanding anything to the contrary contained in this
Agreement or in any Closing Document, to the extent that the
assignment or
attempted assignment to Acquisition Sub of any Assumed Contract, or
any Claim,
right or benefit arising thereunder or resulting therefrom, is
prohibited by any
Law, or would require any consent, approval, waiver, authorization
or novation
by a Governmental Entity or a Person and such consent, approval,
waiver,
authorization or novation has not been obtained prior to Closing
and in a form
acceptable to Acquisition Sub in its sole discretion, or with
respect to which
any attempted assignment would be ineffective or would materially
adversely
affect the rights of Seller or Acquisition Sub thereunder, then
this Agreement
will not constitute an assignment or attempted assignment thereof,
and the same
will not be assigned at Closing.
(B) Both prior and subsequent to Closing, the parties will use
commercially reasonable efforts, and cooperate with each other, to
obtain
promptly all consents, approvals, waivers, authorizations or
novations,
including all Approvals, for the Assumed Contracts on terms
acceptable to Buyer
and Acquisition Sub in its sole discretion. Buyer will bear and pay
the cost of
all filing, recordation and similar fees and Taxes incurred after
the date
hereof and payable to Governmental Entities in connection with
assignment of the
Assumed Contracts, and any additional fees or charges (howsoever
denominated)
required by any Persons in connection with the assignment of any
Assumed
Contract or obtaining any consent, approval, waiver, authorization
or novation,
including any Approval.
<PAGE>
(C) If any consent, approval, waiver, authorization or
novation,
including any Approval, which is necessary for the effective
assignment to
Acquisition Sub of any Assumed Contract, cannot be obtained or made
and, as a
result, the full benefits of use of such Assumed Contract cannot be
provided to
Acquisition Sub following Closing otherwise in accordance with this
Agreement,
then Seller will use its best efforts to provide Acquisition Sub
the economic
(taking into account all burdens and benefits, including Tax costs
and benefits)
and operational equivalent, to the extent permitted, of obtaining
or making such
consent, approval, waiver, authorization or novation, as the case
may be, and to
permit Acquisition Sub to perform Seller's obligations and enforce
Seller's
rights under such Assumed Contract as if such Assumed Contracts had
been sold,
conveyed, assigned and delivered to Acquisition Sub, including (i)
enforcing, at
the Acquisition Sub's request and at the expense of Seller, any
rights of Seller
arising with respect thereto, including the right to terminate in
accordance
with the terms thereof upon the advice of Acquisition Sub and (ii)
permitting
Acquisition Sub to enforce any rights arising with respect thereto.
Seller will
pay to Acquisition Sub, when received, all income, proceeds and
other monies
received by Seller from third parties to the extent related to
Acquisition Sub's
intended rights under any Assumed Contract, as contemplated by this
Section
2.3(c). Once any such consent, approval, waiver, authorization or
novation is
obtained or made in a form acceptable to Acquisition Sub in its
sole discretion,
Seller will assign such Assumed Contract to Acquisition Sub at no
additional
cost. Any expenses incurred by Seller, and any reasonable expenses
incurred by
Acquisition Sub, in connection with the arrangements contemplated
by this
Section 2.3(c) will be borne by Buyer.
(D) The provisions of this Section 2.3 shall not affect the right
of
the Buyer and Acquisition Sub to elect not to consummate the
Transaction
contemplated by this Agreement if the conditions to its obligations
hereunder
contained in Article VII hereof have not been otherwise
fulfilled.
SECTION 2.4 EXCLUDED LIABILITIES.
It
is expressly understood and agreed that neither Buyer nor
Acquisition
Sub (nor any of their Affiliates) will assume, nor will any of them
be liable
for, any Liability of Seller, any Seller Subsidiary, any Affiliate
of Seller or
the Business, of any kind or nature, at any time existing or
asserted, howsoever
arising, whether or not accrued, whether fixed, contingent or
otherwise, whether
known or unknown, liquidated or unliquidated, due or to become due,
and whether
or not recorded on the Books and Records of any Person, unless such
Liability is
expressly within the definition of Assumed Liabilities under
Section 2.5. All
Liabilities that are not expressly within the definition of Assumed
Liabilities
under Section 2.5 are referred to collectively as the "EXCLUDED
LIABILITIES."
SECTION 2.5 ASSUMPTION OF CERTAIN LIABILITIES.
On
the terms and subject to the conditions set forth herein,
Acquisition
Sub will assume and agree to satisfy and discharge or perform when
due only the
following Liabilities of Seller (and no others) (collectively, the
"ASSUMED
LIABILITIES"):
(A) all Liabilities identified on the Final Balance Sheet
arising
under the Assumed Contracts to the extent that the rights and
benefits of Seller
thereunder are effectively transferred
<PAGE>
or assigned to Acquisition Sub, or novated for the benefit of
Acquisition Sub,
subject to Section 2.3(c) hereof;
(B) all Liabilities that arise out of or relate to the
Transferred
Assets (other that the Assumed Contracts) to the extent such
Liabilities are
attributable to occurrences and circumstances arising after
Closing;
(C) all Liabilities for accounts payable, Deferred Revenue and
Central
National Bank Notes Payable (Nos. 4420600 and 4491500) identified
on the Final
Balance Sheet, but only up to the amount of such Liabilities set
forth on the
Final Balance Sheet;
(D) that amount of the $2,500,000 Revolving Line of Credit Note
with
Central National Bank (No. 4885400) which the Presidents of Seller
and Buyer
agree prior to Closing represents amounts borrowed by Seller to
support
shipments of Product after Closing to Seller's customers;
(E) that amount paid by Seller for RF amplifiers pursuant to
Section
5.22 which the Presidents of Seller and Buyer agree prior to
Closing relates to
the purchase of amplifier inventory, the sale of which will be made
by Buyer
after Closing; and
(F) all Liabilities for post-Closing occupancy of the apartment
leased
premises at Apartment 301, South 4th Street, in Waco, Texas.
SECTION 2.6 PURCHASE PRICE.
(A) On the terms and subject to the conditions set forth in
this
Agreement, and subject to adjustment, if any, as provided by
Section 2.6(c) and
Section 2.6(d), the purchase price for the Transferred Assets is
Twenty-Five
Million Dollars ($25,000,000) (the "PURCHASE PRICE"). The Purchase
Price shall
consist of (i) Five Million Dollars ($5,000,000); and (ii) the
Convertible Note,
the original principal amount of which shall be Twenty Million
Dollars
($20,000,000).
(B) On the terms and subject to the conditions set forth in
this
Agreement, at Closing, Buyer shall pay the Purchase Price as
follows:
(I) by wire transfer of immediately-available funds in the
amount
of Five Million and no/100 Dollars ($5,000,000); and
(II) by delivery of the Convertible Note.
(C) To the extent the total of the accounts receivable plus
inventory
minus accounts payable on the Final Balance Sheet is less than
$3,000,000, the
principal amount of the Convertible Note shall be decreased, and to
the extent
the total of the accounts receivable plus inventory minus accounts
payable on
the Final Balance Sheet is greater than $3,000,000, that amount
will be
distributed to Seller as collected. The amount distributed to
Seller, if any,
shall be computed and paid on a monthly basis within thirty (30)
days of month
end. Schedule 2.6(c) sets forth the manner in which the cash
resulting from the
post-Closing collection of accounts
<PAGE>
receivable will be allocated between Seller and Buyer if any
distributions are
owed Seller pursuant to this Section 2.6(c).
(D) To the extent the Presidents of Seller and Buyer agree that
there
are Assumed Liabilities pursuant to Section 2.5(d) and Section
2.5(e), the
Purchase Price shall be deemed adjusted upward by the amount of
those Assumed
Liabilities.
SECTION 2.7 CLOSING.
Closing will take place at the offices of Buyer's counsel, Harter,
Secrest
& Emery LLP, 1600 Bausch & Lomb Place, Rochester, New York,
at 9:00 a.m., local
time, on July 31, 2006, or on such other date, or at such other
time or place,
as the parties may mutually agree. The date on which Closing occurs
is called
the "CLOSING DATE" and Closing will be effective (the "EFFECTIVE
TIME") as of
the time of day (in Rochester, New York) set forth in a certificate
to be
executed by the Buyer and Seller on the Closing Date. The required
deliveries at
Closing are set forth in Article VII.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER
As
of the date hereof and (except as otherwise expressly stated
herein) as
of the Closing, each of Seller, and each Seller Shareholder,
jointly and
severally, represents and warrants to Buyer as follows:
SECTION 3.1 ORGANIZATION AND POWER; STOCK OWNERSHIP.
(A) Seller is a limited partnership duly organized, validly
existing
and in good standing under the Laws of the State of Texas. Seller
has all
requisite partnership power and authority to enter into this
Agreement and the
Closing Documents, to perform its obligations hereunder and
thereunder, to own,
lease, operate and transfer the Transferred Assets, and to carry on
the Business
as now being conducted. Seller is duly qualified to do business and
is in good
standing as a foreign limited partnership in each jurisdiction
where its
ownership or operation of the Transferred Assets or its conduct of
the Business
requires such qualification, which jurisdictions are listed on
Schedule 3.1(a).
(B) The total capital of Seller consists of 99% limited partner
interest and 1% general partner interest. There are no preemptive
or other
outstanding rights, options, warrants, conversion rights or
agreements or
commitments to issue or sell any securities or obligations
convertible into or
exchangeable for, or giving any Person a right to subscribe for or
acquire, any
equity interest in Seller, and no securities or obligations
evidencing such
rights are outstanding.
SECTION 3.2 AUTHORIZATION.
Seller has full partnership power and authority to execute and
deliver this
Agreement and each Closing Document and to perform its obligations
hereunder and
thereunder. The execution, delivery and performance by Seller of
this Agreement
and each Closing Document have been duly and validly authorized by
Seller's
general partner and by the limited partner of Seller and, if
<PAGE>
necessary, by the other Persons listed on Schedule 3.1(b), and no
additional
partnership authorization or consent is required in connection
therewith.
SECTION 3.3 APPROVALS.
Except for the Approvals, no consent, approval, waiver,
authorization or
novation is required to be obtained by Seller and no notice or
filing is
required to be given by Seller to, or made by Seller with, any
Governmental
Entity or other Person in connection with the execution, delivery
and
performance by Seller of this Agreement and each Closing Document
and the
consummation of the Transaction.
SECTION 3.4 NON-CONTRAVENTION.
The
execution, delivery and performance by Seller of this Agreement
and
each Closing Document, and the consummation of the Transaction, do
not and will
not: (a) violate any provision of the Certificate of Limited
Partnership or the
Limited Partnership Agreement or other organizational documents of
Seller; (b)
assuming the receipt or making of all Approvals, conflict with, or
result in the
breach of, or constitute a default under, or result in the
termination,
cancellation or acceleration (whether after the filing of notice or
the lapse of
time or both) of any right or obligation of Seller under, or a loss
of any
benefit to which Seller is entitled under, any Assumed Contract or
any contract
to which Seller is a party, or result in the creation of any
Encumbrance (other
than a Permitted Encumbrance) upon any of the Transferred Assets;
or (c)
assuming the receipt or making of all Approvals, violate or result
in a breach
of or constitute a default under any Law, judgment, injunction,
order, decree or
other restriction of any Governmental Entity to which Seller is
subject.
SECTION 3.5 BINDING EFFECT.
This
Agreement and each Closing Document, when executed and delivered
by
Buyer and Seller, will constitute valid and legally binding
obligations of
Seller, enforceable against it in accordance with their respective
terms,
subject to bankruptcy, insolvency, reorganization, moratorium and
similar laws
of general applicability relating to or affecting creditors' rights
and to
general equity principles.
SECTION 3.6 SELLER SUBSIDIARIES.
Seller has no Subsidiaries.
SECTION 3.7 FINANCIAL STATEMENTS AND 2006 FORECAST.
(A) Annexed hereto as Schedule 3.7(a) are each of the Financial
Statements. The Financial Statements fairly present the financial
position and
the results of the operations of the Business for the respective
periods therein
stated, and reflect adequate reserves for all known Liabilities, as
of the
respective dates therein stated. The Final Balance Sheet will be
prepared and
the Financial Statements for the years ended December 31, 2004 and
December 31,
2005
<PAGE>
have been prepared in accordance with GAAP consistently applied,
except as noted
in the footnotes and except with respect to inventory valuation for
the year
ended December 31, 2004.
(B) The Business does not have any Liability of any nature that is
not
reflected or reserved against on the Financial Statements except
for: (i)
Liabilities of a similar nature as those reflected or reserved
against on the
Financial Statements that were incurred in the Ordinary Course
since December
31, 2005; and (ii) those Liabilities set forth on Schedule 3.7(b).
Accounts
payable reflected in the Financial Statements have arisen from bona
fide
transactions and are usual and normal in amount both individually
and in the
aggregate. Except as set forth on Schedule 3.7(b), all Liabilities
of the
Business incurred after December 31, 2005 were incurred in the
Ordinary Course,
arose from bona fide transactions, and are usual and normal in
amount both
individually and in the aggregate. Except as set forth on Schedule
3.7(b), all
Liabilities of the Business can be prepaid without penalty at any
time. Except
as set forth on Schedule 3.7(b), all proceeds of the $2,500,000
borrowing
pursuant to the Revolving Line of Credit with Central National Bank
have been
used by Seller to support inventory purchases for the benefit of
and shipments
of Product to Seller's customers.
(C) Annexed hereto as Schedule 3.7(c) is the 2006 Forecast. The
2006
Forecast has been prepared in good faith by Seller to the best of
Seller's
ability and is based on certain assumptions and Seller's analysis
of information
available as of the date of this Agreement. All material
assumptions are
identified on the Schedule of Assumptions which accompanies the
2006 Forecast,
and all such assumptions are reasonable in the context
presented.
SECTION 3.8 TITLE.
With
respect to all of the Transferred Assets, Seller has and will have
at
Closing: (i) good title to all tangible property included in the
Transferred
Assets, free and clear of all Encumbrances except for Permitted
Encumbrances;
and (ii) all right, title and interest in and to all intangible
property
included in the Transferred Assets, free and clear of all
Encumbrances except
for Permitted Encumbrances and, in the case of the Assumed
Contracts, subject to
the rights of third parties thereunder. Seller will effectively
transfer such
title to all of the Transferred Assets to Buyer at Closing.
SECTION 3.9 TRANSFERRED ASSETS.
(A) The Transferred Assets, when taken together with the
Excluded
Assets, constitute all properties, assets and leasehold estates,
real, personal
and mixed, tangible and intangible, comprising, used or useful in
the operation
of the Business on the date hereof and immediately prior to
Closing.
(B) Except as set forth in Schedule 3.9(b), those Transferred
Assets
that are tangible and are presently being used by Seller for
manufacturing
Products, are in a good state of repair and condition, ordinary
wear and tear
excepted.
<PAGE>
(C) All of the Inventory is good and marketable and, except as
set
forth in Schedule 3.9(c), all of the Software and Products included
in the
Inventory are the respective current versions thereof.
(D) All of the accounts receivable (including the accounts,
obligations, contracts and instruments which underlie such accounts
receivable)
set forth on the Financial Statements, net of the reserve for
doubtful accounts
shown thereon, and those accounts receivable arising subsequent to
December 31,
2005 and prior to the Closing Date will be good and collectible on
the Closing
Date at their respective full amounts. All of such accounts
receivable are owned
by Seller free of all claims and encumbrances. Seller has not
rescinded,
cancelled, settled, modified or otherwise compromised any accounts
receivable,
or any indebtedness due thereunder, or any guaranty or repurchase
obligation
related thereto, except in the Ordinary Course.
SECTION 3.10 COMPLIANCE WITH LAWS.
(A) The Business has been and is being conducted in compliance
with
all Laws, except for any non-compliance that would not,
individually or in the
aggregate have a Material Adverse Effect. The Seller has all
Governmental
Authorizations necessary for the conduct of the Business as
currently conducted,
except for those Governmental Authorizations the absence of which
would not,
individually or in the aggregate, have a Material Adverse
Effect.
(B) To Seller's knowledge, each of the premises of the Business
conforms to and complies with all covenants, conditions,
restrictions,
reservations, land use, zoning, health, fire, water and building
codes and other
similar Laws, and no such Laws prohibit or limit or condition the
use or
operation of such premises as currently used and operated. There is
no pending,
or to Seller's knowledge, contemplated, threatened or anticipated
change in the
zoning classification of any of such premises. Seller has operated
and
maintained such premises in accordance with applicable Laws.
SECTION 3.11 LITIGATION AND CLAIMS.
Except as set forth on Schedule 3.11: (a) there is no civil,
criminal or
administrative Claim or investigation pending or, to Seller's
knowledge,
threatened, against Seller or any Seller Affiliate with respect to
or relating
to the Business, any of the Transferred Assets or Assumed
Liabilities; and (b)
neither the Business, nor any of the Transferred Assets nor any
Assumed
Liability is subject to any order, writ, judgment, award,
injunction or decree
of any Governmental Entity or of any arbitrator.
SECTION 3.12 INTELLECTUAL PROPERTY.
(A) Seller owns or has the right to use pursuant to written
license,
sublicense, agreement or permission all of the Transferred
Intellectual
Property. Each item of Transferred Intellectual Property and
Seller's rights
under the Assumed License Agreement will be owned or available for
use by right
by Buyer immediately upon Closing, without the payment of any
additional amounts
to any third party, other than applicable Assumed Liabilities. Upon
Closing,
<PAGE>
to the Seller's knowledge, all available patent rights as to any of
the
Transferred Intellectual Property or any of the Products may be
pursued
exclusively by Buyer.
(B) Seller owns and Buyer will receive at Closing, free and clear
of
all Encumbrances (except for Permitted Encumbrances), all
Intellectual Property
and other proprietary information, processes and formulae used in,
related to or
arising from the Business or otherwise necessary for the ownership,
maintenance
and use of the Transferred Assets and the conduct of the
Business.
(C) Except as set forth in Schedule 3.12(c), Seller has not
interfered
with, infringed upon, misappropriated or otherwise violated
(whether through the
use of the Transferred Intellectual Property or otherwise) any
Intellectual
Property rights of any third party, and no Claim has been asserted
by any Person
as to the use of the Transferred Intellectual Property or alleging
any such
interference, infringement, misappropriation or violation
(including any Claim
that Seller must license or refrain from using any Intellectual
Property rights
of any third party), and Seller does not know of any valid basis
for any such
Claim. Except as set forth in Schedule 3.12(c), to Seller's
knowledge, no third
party has interfered with, infringed upon, misappropriated or
otherwise violated
any rights of Seller with respect to the Transferred Intellectual
Property.
Seller has made available to Buyer all infringement studies,
including opinions
of counsel, prepared by or on behalf of Seller.
(D) Schedule 2.1(a)(i) identifies all Software of Seller. Seller
has
made available to Buyer correct and complete copies of all such
items of
Transferred Intellectual Property, as amended to date, and has made
available to
Buyer correct and complete copies of all other written
documentation evidencing
ownership and prosecution (if applicable) of each such item. Except
as set forth
in Schedule 3.12(d), with respect to each such item of Transferred
Intellectual
Property:
(I) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge nor, to Seller's
knowledge, is any of
the foregoing threatened;
(II) no Claim or investigation is pending or, to Seller's
knowledge, threatened, which challenges the legality, validity,
enforceability,
use or ownership of the item; and
(III) Seller has not agreed to indemnify any Person for or
against any interference, infringement, misappropriation or other
violation with
respect to the item.
(E) Schedule 2.1(a)(ii) and Schedule 2.1(a)(iii) identify each
Patent
and Trademark of Seller. Seller has made available to Buyer correct
and complete
copies of all items related to such Transferred Intellectual
Property, as
amended to date, and has made available to Buyer correct and
complete copies of
all other written documentation evidencing ownership and
prosecution (if
applicable) of each such item, including all applications,
registrations and
prosecution materials. Except as set forth in Schedule 3.12(e),
with respect to
each such item of Transferred Intellectual Property:
<PAGE>
(I) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge nor, to Seller's
knowledge, is any of
the foregoing threatened;
(II) no Claim or investigation is pending or, to Seller's
knowledge, threatened, which challenges the legality, validity,
enforceability,
use or ownership of the item;
(III) Seller has not agreed to indemnify any Person for or
against any interference, infringement, misappropriation or other
violation with
respect to the item; and
(IV) Seller has not taken, nor does it know of, any actions,
including a sale or offer for sale, the disclosure of which could
lead to the
invalidity of any resulting patent.
(F) Schedule 2.1(b) identifies each Product and Seller has made
available to Buyer correct and complete copies of all items related
to the same,
as amended to date, and has made available to Buyer correct and
complete copies
of all other written documentation evidencing ownership and
prosecution (if
applicable) of each such item, including all applications,
registrations and
prosecution materials. Except as set forth in Schedule 3.12(f),
with respect to
each Product:
(I) the Product is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge nor, to Seller's
knowledge, is any of
the foregoing threatened;
(II) no Claim or investigation is pending or, to Seller's
knowledge, threatened, which challenges the legality, validity,
enforceability,
use or ownership of the Product;
(III) Seller has not agreed to indemnify any Person for or
against any interference, infringement, misappropriation or other
violation with
respect to the Product; and
(G) with respect to
each Assumed License Agreement:
(I) the Assumed License Agreement is legal, valid, binding,
enforceable and in full force and effect with respect to Seller and
any other
party thereto;
(II) the Assumed License Agreement will continue to be legal,
valid, binding, enforceable and in full force and effect with
respect to Buyer
and any other party thereto following the consummation of the
Transaction;
(III) neither Seller nor any other party to the Assumed License
Agreement is in breach or default, and no event has occurred which
with notice
or lapse of time would constitute a breach or default or permit
termination,
modification or acceleration thereunder;
(IV) neither Seller nor any other party to the Assumed License
Agreement has repudiated any material provision thereof or
threatened any breach
thereof;
<PAGE>
(V) to the Seller's knowledge, (i) with respect to each Assumed
License Agreement that is a sublicense of Intellectual Property
owned by a third
party, the representations and warranties set forth in Sections
3.12(g)(i)
through 3.12(g)(iv) are true and correct with respect to the
underlying license;
and (ii) no Claim or investigation is pending or threatened that
challenges the
legality, validity or enforceability of the Intellectual Property
owned by a
third party underlying the Assumed License Agreement, and there is
no basis for
any such Claim.
(H) Schedule 3.12(h) sets forth the form and placement of the
proprietary legends and copyright notices displayed in or on the
Software. To
Seller's knowledge, in no instance has the eligibility of the
Software for
protection under applicable copyright law been forfeited to the
public domain by
omission of any required notice or any other action.
(I) Seller has promulgated and used its commercially reasonable
efforts to enforce the trade secret protection program set forth in
Schedule
3.12(i). To Seller's knowledge, there has been no material
violation of such
program by any Person. The Transferred Intellectual Property
(including any
source code and system documentation relating to the Software): (i)
has at all
times been maintained in confidence; and (ii) has been disclosed by
Seller only
to employees and consultants having a "need to know" the contents
thereof in
connection with the performance of their duties to Seller.
(J) All personnel, including employees, agents, consultants and
contractors, who have contributed to or participated in the
conception,
reduction to practice or development of the Technical
Documentation, Transferred
Intellectual Property and Products on behalf of Seller either: (i)
have been
party to a "work-for-hire" arrangement or agreement with Seller, in
accordance
with applicable federal and state law, that has accorded Seller
full, effective,
exclusive and original ownership of, and all right, title and
interest in and
to, all tangible and intangible property thereby arising; or (ii)
have executed
appropriate instruments of assignment in favor of Seller as
assignee that have
conveyed to Seller full, effective and exclusive ownership of all
right, title
and interest in and to all tangible and intangible property arising
thereby.
SECTION 3.13 ADEQUACY OF TECHNICAL DOCUMENTATION.
The
Technical Documentation includes the source code, system
documentation,
statements of principles of operation and schematics for all of the
Intellectual
Property, as well as any pertinent commentary or explanation,
including any
commentary contained in any source code, that may be necessary to
render such
materials understandable to Buyer and, with respect to any
Software, usable by a
trained computer programmer.
SECTION 3.14 INTELLECTUAL PROPERTY RIGHTS GRANTED TO SELLER.
(A) Schedule 3.14(a) lists each license, sublicense, agreement
and
permission by which Seller uses or has right, prospective rights to
such rights
or interests in any Intellectual Property owned by a third party.
Seller has
made available to Buyer correct and complete copies of all such
licenses,
sublicenses and agreements (as amended to date). The Seller has
not
<PAGE>
obtained any such rights in any Intellectual Property under any
oral license,
sublicense, agreement or permission.
(B)
Seller has obtained the full, unrestricted and legal right and
license to use, make, have made, copy, publicly display, publicly
perform,
modify and distribute the third-party Intellectual Property
contained in the
Transferred Intellectual Property and Technical Documentation
pursuant to the
Assumed License Agreements. Except as set forth on Schedule
3.14(b), to Seller's
knowledge, the Transferred Intellectual Property and the Technical
Documentation
contain no other programming, materials or Intellectual Property in
which any
third party may claim superior, joint or common ownership,
including any right
or license. The Transferred Intellectual Property and the
Technical
Documentation do not contain derivative works, reproductions or
copies of any
programming or materials not owned in their entirety by Seller and
included in
the Transferred Assets.
SECTION 3.15 THIRD-PARTY INTERESTS IN INTELLECTUAL PROPERTY.
Schedule 3.15 identifies each license, sublicense, agreement and
permission
by which a third-party uses or has rights, prospective rights to
such rights or
interests in any Intellectual Property or Technical Documentation
owned by
Seller. Seller has made available to Buyer correct and complete
copies of all
such agreements (as amended to date). The Seller has not granted
any such rights
in any Intellectual Property under any oral license, sublicense,
agreement or
permission. The licenses and sublicenses set forth on Schedule 3.15
constitute
only end-user agreements, each in a standard form previously
disclosed to Buyer
and each of which grants the end-user thereunder solely the
non-exclusive right
and license to use an identified Intellectual Property and related
user
documentation, for internal purposes only. There are no contracts,
agreements,
licenses and other commitments and arrangements in effect with
respect to the
marketing, distribution, licensing, or promotion of the Inventory,
the Technical
Documentation, the Transferred Intellectual Property or the
Products by any
independent sales person, distributor, sublicensor or other
re-marketer or sales
organization.
SECTION 3.16 MAJOR VENDORS AND CUSTOMERS.
Schedule 3.16 lists each third-party licensor, developer,
re-marketer,
distributor and supplier of property or services to, and each
licensee, end-user
or customer of, the Business to whom Seller paid or billed in the
aggregate
$5,000 (in cash, stock, services, debt or other consideration) or
more during
2005, together with, in each case, the amount paid or billed during
such period.
The consummation of the Transaction will not result in the
