TABLE OF CONTENTS

 

		Page
ARTICLE I  — DEFINITIONS		1
1.1	Definitions	1
ARTICLE II  — PURCHASE AND SALE		12
2.1	Purchase and Sale of Purchased Assets	12
2.2	Excluded Assets	14
2.3	Assumed Liabilities	15
2.4	Excluded Liabilities	15
2.5	Purchase Price	16
2.6	Allocation of Purchase Price	16
2.7	Closing Matters	17
2.8	Local Transfer Documents	18
2.9	Assignment of Contracts and Rights	19
2.10	Purchase Price Adjustment	19
ARTICLE III  — REPRESENTATIONS AND WARRANTIES OF BUYER		20
3.1	Corporate Organization	21
3.2	Authority	21
3.3	Consents and Approvals	21
3.4	Broker’s Fees	21
3.5	Legal Proceedings	22
3.6	Available Funds	22
3.7	Proxy Statement; Buyer Information	22
3.8	Intentionally Omitted	23
3.9	Ownership of Seller Common Stock	23
3.10	Definition of Buyer’s Knowledge	23
3.11	No Other Representations or Warranties	23
ARTICLE IV  — REPRESENTATIONS AND WARRANTIES OF SELLER		23
4.1	Corporate Organization	23
4.2	Authority	24
4.3	No Violation; Required Filings and Consents	24
4.4	Business Financial Statements	25
4.5	Broker’s Fees	26
4.6	Absence of Certain Changes or Events	26
4.7	Legal Proceedings	27
4.8	Reports	27
4.9	Absence of Undisclosed Liabilities	27
4.10	Compliance with Applicable Laws and Reporting Requirements	27
4.11	Title and Condition of Purchased Assets; Sufficiency	28
4.12	Taxes and Tax Returns	28
4.13	Employee Benefit Programs	29
4.14	Labor and Employment Matters	30

 

 

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4.15	Material Contracts	30
4.16	Properties	32
4.17	Environmental Liability	33
4.18	State Takeover Laws	34
4.19	Intellectual Property	34
4.20	Opinion of Financial Advisor	39
4.21	Proxy Statement; Seller Information	39
4.22	Illegal Payments or Activities	39
4.23	Product Warranties	39
4.24	Insurance Coverage	40
4.25	Privacy of Customer Information	40
4.26	Suppliers	40
4.27	Inventory	40
4.28	Accounts Receivable	40
4.29	Customers; Distributors	40
4.30	Government Contracts	41
4.31	Foreign Assets Control Regulations, Etc.	41
4.32	No Other Representations or Warranties	41
4.33	Definition of Seller’s Knowledge	41
ARTICLE V  — COVENANTS RELATING TO CONDUCT OF BUSINESS		42
5.1	Conduct of Business Pending the Closing	42
5.2	Advice of Changes	44
ARTICLE VI  — ADDITIONAL AGREEMENTS		44
6.1	Proxy Statement	44
6.2	Seller Stockholders’ Meeting	44
6.3	Third Party Consents and Regulatory Approvals	45
6.4	No Solicitation	46
6.5	Access to Information	48
6.6	Employment and Benefit Matters	49
6.7	Taxes	50
6.8	Bulk Sales Laws	51
6.9	Additional Agreements	51
6.10	Publicity	51
6.11	Other Actions by the Parties	52
6.12	Audit Assistance	52
6.13	Non-Solicitation of Employees	52
6.14	Financing	53
6.15	Use of Business Names by Seller	53
6.16	Collection of Accounts Receivable and Deposits	53
6.17	Confidentiality	53
6.18	Non Compete	54
6.19	Excluded Subsidiaries	54
6.20	Transition Services Agreement	54
6.21	Sublease	54
6.22	Severance Policy	55

 

 

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ARTICLE VII  — CONDITIONS PRECEDENT		55
7.1	Conditions to Each Party’s Obligations	55
7.2	Conditions to the Obligations of Buyer	55
7.3	Conditions to the Obligations of Seller	56
7.4	Frustration of Closing Conditions	56
ARTICLE VIII  — TERMINATION, AMENDMENT AND WAIVER		56
8.1	Termination	56
8.2	Effects of Termination	57
8.3	Amendment	58
8.4	Extension; Waiver	59
ARTICLE IX  — INDEMNIFICATION		59
9.1	Survival	59
9.2	Indemnification By Seller	59
9.3	Indemnification By Buyer	60
9.4	Procedures for Indemnification	60
9.5	Third Party Claims	63
9.6	Treatment of Indemnity Payments	64
9.7	Limitation on Indemnification	64
9.8	Remedies Exclusive	65
ARTICLE X  — MISCELLANEOUS		65
10.1	Expenses	65
10.2	Notices	65
10.3	Interpretation	66
10.4	Counterparts	66
10.5	Entire Agreement	67
10.6	Governing Law; Jurisdiction and Venue	67
10.7	Severability	67
10.8	Assignment; Reliance of Other Parties	67
10.9	Specific Performance	67

 

 

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ASSET PURCHASE AGREEMENT

 

ASSET PURCHASE AGREEMENT (the “ Agreement ”), dated as of September 12, 2008, by and between Dialogic Corporation, a British Columbia corporation (“ Buyer ”) and NMS Communications Corporation, a Delaware corporation (“ Seller ”).

 

WHEREAS , Seller conducts the Business (as defined below);

 

WHEREAS , Buyer desires to purchase all of the assets that relate to or are used in connection with the Business and assume Liabilities (as defined below) of Seller arising from or otherwise related to the Business, and Seller desires to sell all of the assets of the Business to Buyer, upon the terms and subject to the conditions hereinafter set forth; and

 

WHEREAS , the parties desire to make certain representations, warranties and agreements in connection with the transactions contemplated hereby and to prescribe certain conditions to the transactions contemplated hereby.

 

NOW, THEREFORE , in consideration of the foregoing and the mutual covenants, representations, warranties and agreements contained herein, and intending to be legally bound hereby, the parties agree as follows:

 

ARTICLE I  —  DEFINITIONS

 

1.1          Definitions .   Except as otherwise provided herein or as otherwise clearly required by the context, the following terms shall have the respective meanings indicated when used in this Agreement:

 

“ AAA ” shall mean the American Arbitration Association.

 

“ Accounting Referee ” shall have the meaning ascribed thereto in Section 2.6 hereof.

 

“ Acquisition Agreement ” shall have the meaning ascribed thereto in Section 6.4(e)  hereof.

 

“ Acquisition Proposal ” shall have the meaning ascribed thereto in Section 6.4(i)  hereof.

 

“ Adverse Recommendation Change ” shall have the meaning ascribed thereto in Section 6.4(d)  hereof.

 

“ Affiliate ” shall mean, with respect to any Person, any other Person controlling, controlled by or under common control with such Person.  As used in this definition, “ control ” (including, with its correlative meanings, “ controlled by ” and “ under common control with ”) means the possession, directly or indirectly, of power to direct or cause the direction of the management and policies of a Person whether through the ownership of voting securities, by contract or otherwise.

 

“ Agreement ” shall have the meaning ascribed thereto in the recitals.

 

“ Allocation ” shall have the meaning ascribed thereto in Section 2.6 hereof.

 

“ Antitrust Laws ” shall have the meaning ascribed thereto in Section 6.3(b)  hereof.

 

“ Antitrust Order ” shall have the meaning ascribed thereto in Section 6.3(b)  hereof.

 

 

“ Assumed Liabilities ” shall have the meaning ascribed thereto in Section 2.3 hereof.

 

“ Bid ” shall mean any outstanding quotation, bid or proposal by Seller or a Subsidiary of Seller which, if accepted or awarded, would lead to a contract with a Governmental Authority or a prime contractor or higher tier subcontractor to a Governmental Authority, for the design manufacture, sale or provision of Customer Offerings by Seller or a Subsidiary of Seller.

 

“ Business ” shall mean Seller’s “NMS Communications division” through which Seller and its Subsidiaries develop, market, license, sell and distribute embedded technology and platforms that enable the rapid creation and deployment of a broad range of value-added services for mobile and converged networks, including, but not limited to, voice mail and interactive voice response solutions, video portals and mobile TV, and multi-media messaging systems; provided , however , that, notwithstanding the foregoing, the term “ Business ” shall not include any business, activities, operations or prospects of any Excluded Subsidiary.

 

“ Business Benefit Plans ” shall have the meaning ascribed thereto in Section 4.13(a)  hereof.

 

“ Business Balance Sheets ” shall have the meaning ascribed thereto in Section 4.4(a)  hereof.

 

“ Business Copyrights ” shall mean all Copyrights owned by Seller or a Subsidiary of Seller and used in the Business.

 

“ Business Day ” shall mean any day other than (a) a Saturday or Sunday, or (b) a day on which banking and savings and loan institutions are authorized or required by law to be closed in the Commonwealth of Massachusetts.

 

“ Business Domain Names ” shall have the meaning ascribed thereto in Section 2.1(q) .

 

“ Business Employees ” shall have the meaning ascribed thereto in Section 6.6(a)  hereof.

 

“ Business Financial Statements ” shall have the meaning ascribed thereto in Section 4.4(a)  hereof.

 

“ Business Intellectual Property Assets ” shall mean, individually and collectively, the Owned Intellectual Property Assets and the Licensed Intellectual Property Assets.

 

“ Business Intellectual Property Contracts ” shall mean (a) licenses of Business Intellectual Property Assets by Seller or any Subsidiary of Seller to any third party or any other instruments or other arrangements to which Seller or any Subsidiary of Seller is a party, pursuant to which any third party has obtained any right, title or interest in any Business Intellectual Property Assets, (b) licenses of Business Intellectual Property Assets by any third party to Seller or any Subsidiary of Seller, or any other Contracts pursuant to which Seller or any Subsidiary of Seller has obtained any right, title or interest in Business Intellectual Property Assets, (c) Contracts between Seller or any Subsidiary of Seller and any third party relating to the use, protection of, development, prosecution, enforcement or commercialization of Business Intellectual Property Assets, and (d) consents, settlements, decrees, orders, injunctions, judgments or rulings governing the use, validity or enforceability of Owned Intellectual Property Assets.

 

“ Business Marks ” shall mean all Marks owned by Seller or a Subsidiary of Seller and used in the Business. For clarity, “Business Marks” shall not include the Inactive Marks.

 

“ Business Material Adverse Effect ” shall mean, with respect to the Business, a change, event or effect (an “ Effect ”) that, individually or in the aggregate, has a material adverse effect on the business,

 

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operations, assets, results of operations, or financial condition of the Business taken as a whole, other than (a) any Effect resulting from (i) general changes in the economy or financial markets of the United States or any other region outside of the United States; provided, that such changes do not affect the Business in a materially disproportionate manner, (ii) changes in general legal, regulatory, political, economic or business conditions (including the commencement, continuation or escalation of a war or material armed hostilities, acts of terrorism, or the occurrence of natural disasters) that generally affect industries in which Seller and its Subsidiaries conduct the Business; provided , that such changes do not affect the Business in a materially disproportionate manner, (iii) changes in GAAP that generally affect industries in which Seller and its Subsidiaries conduct the Business; provided , that such changes do not affect the Business in a materially disproportionate manner, (iv) the announcement of this Agreement or pendency or consummation of the transactions contemplated hereby, (v) the identity of Buyer or any of its Affiliates as the acquiror of the Business, or (vi) compliance with the terms of, or the taking of any action required by this Agreement or consented to by Buyer, or (b) any decline in the market price, or change in trading volume, of the capital stock of Seller; provided , that the underlying causes of such failure shall be considered in determining whether there was a Business Material Adverse Effect.

 

“ Business Patents ” shall mean all Patents owned by Seller or a Subsidiary of Seller and used in the Business. For clarity, “Business Patents” shall not include the Inactive Patents.

 

“ Business Permits ” shall have the meaning ascribed thereto in Section 4.10 hereof.

 

“ Business Software ” shall mean all Software (a) used in the Business or (b) manufactured, distributed, sold, licensed or marketed by Seller or any Subsidiary of Seller in connection with the Business, including but not limited to Software embodied in Customer Offerings.

 

“ Business Trade Secrets ” shall have the meaning ascribed thereto in Section 4.19(g)  hereof.

 

“ Buyer ” shall have the meaning ascribed thereto in the recitals.

 

“ Buyer’s Calculation ” shall have the meaning ascribed thereto in Section 2.10(b)  hereof.

 

“ Buyer Disclosure Schedule ” shall have the meaning ascribed thereto in Article III hereto.

 

“ Buyer Indemnified Party ” shall have the meaning ascribed thereto in Section 9.2(a)  hereof.

 

“ Buyer Material Adverse Effect ” means, with respect to Buyer, an effect, event or change that has a material adverse effect on Buyer’s ability to consummate the transactions contemplated by this Agreement or perform its obligations hereunder or would reasonably be expected to prevent or materially delay the consummation of the transactions contemplated by this Agreement or prevent or materially impair or delay the ability of Buyer to perform its obligations under this Agreement.

 

“ Buyer Indemnification Cap ” shall have the meaning ascribed thereto in Section 9.3(c)  hereof.

 

“ Closing ” shall have the meaning ascribed thereto in Section 2.7(a)  hereof.

 

“ Closing Date ” shall have the meaning ascribed thereto in Section 2.7(a)  hereof.

 

“ Closing Date Balance Sheet ” shall mean the balance sheet of the Business as of the close of business on the day before the Closing Date.

 

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“ Closing Date Cash Payment ” shall mean an amount in cash equal to (i) twenty-eight million dollars ($28,000,000), plus (ii) any Severance Obligation Amount, plus (iii) any Estimated Closing Working Capital Adjustment, minus (iv) the Escrow Amount, minus (v) the Working Capital Escrow Amount.

 

“ Closing Date Payroll Payment ” shall be an amount equal to all of Seller’s and its Subsidiaries’ payroll (which shall solely include base salary, sales commissions and any employer national insurance contributions or any similar contributions, and shall not include any bonus payments, severance payments, retention payments or any other special payments) for the Business Employees for any payroll that becomes due for payment on the Closing Date, in connection with the Closing or otherwise in connection with the termination of employment of the Business Employees on the Closing Date.  Seller shall cause to be prepared and delivered to Buyer, no later than three days prior to the Closing Date, a summary of the Closing Date Payroll Payment together with data that supports the calculation of the Closing Date Payroll Payment.

 

“ Closing Working Capital ” means the difference between Current Assets and Current Liabilities as of the close of business on the day before the Closing Date.

 

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

 

“ Commitment Letters ” shall have the meaning ascribed thereto in Section 3.6(a)  hereof.

 

“ Comparable Offer ” shall mean an offer of regular employment made by Buyer or a Subsidiary of Buyer to a Business Employee commencing on the Closing Date which offers a non-commissioned Business Employee a base salary equal to or greater than the base salary he or she was paid by Seller or a Subsidiary of Seller as of the date hereof or offers a commissioned Business Employee an on-target earnings opportunity equal to or greater than the on-target earnings opportunity he or she had with Seller or a Subsidiary of Seller as of the date hereof.  Furthermore, to constitute a “Comparable Offer,” the terms of an offer must be substantially similar to the terms which Buyer or the applicable Subsidiary of Buyer, as the case may be, would normally offer to a new employee being hired for the same position with similar education and experience and located in the same geographic location, and Buyer or the applicable Subsidiary of Buyer, as the case may be, must (i) offer a Business Employee a position where, immediately following the Closing, the Business Employee’s principal place of work will be within thirty-five miles of the Business Employee’s principal place of work with Seller or a Subsidiary of Seller as of the date hereof, (ii) recognize the Service Date of such Business Employee for any benefits offered by Buyer or the applicable Subsidiary of Buyer, as the case may be, that relate to a start date of employment, (iii) provide credit for all vacation time and paid time off that such Business Employee accrued pursuant to the policies of Seller or a Subsidiary of Seller but did not forfeit or use prior to the Closing Date, and (iv) terms that comply with the provisions of Section 6.6(b)  of this Agreement.

 

“ Confidentiality Agreement ” shall mean that certain Confidentiality Agreement by and between Buyer and Seller dated as of July 5, 2008.

 

“ Contract ” shall mean any agreement, contract, obligation, promise, or undertaking (whether written or oral and whether express or implied) that is legally binding.

 

“ Copyrights ” shall have the meaning ascribed thereto in Section 4.19(a)(iii)  hereof.

 

“ Current Assets ” shall mean the sum of, without double counting, the line items and accounts under the heading of “Assets” on the form of balance sheet attached hereto as Schedule I .  Such line items

 

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and accounts shall relate to the Business and shall be determined in accordance with the accounting policies, practices and procedures used in the preparation of the Business Balance Sheets.

 

“ Current Liabilities ” shall mean the sum of, without double counting, the line items and accounts under the heading of “Liabilities” on the form of balance sheet attached hereto as Schedule I .  Such line items and accounts shall relate to the Business and shall be determined in accordance with the accounting policies, practices and procedures used in the preparation of the Business Balance Sheets.  Notwithstanding anything to the contrary set forth in this Agreement, in no event shall “Current Liabilities” include any Liabilities arising out of the termination of the employment of any Business Employee nor any Liabilities in respect of Taxes.

 

“ Customer Offerings ” shall mean (a) the products of the Business (including software and documentation) that Seller or any Subsidiary of Seller (i) currently develops, manufactures, markets, distributes, makes available, sells or licenses to third parties, or (ii) has developed, manufactured, marketed, distributed, made available, sold or licensed to third parties within the previous three (3) years, and (b) the services of the Business that Seller and the Subsidiaries of Seller (i) currently provide or make available to third parties, or (ii) have provided or made available to third parties within the previous three (3) years.

 

“ Damages ” shall mean any and all losses, liabilities, damages, claims, awards, judgments, diminution in value, costs and expenses (including, without limitation, reasonable attorneys’ fees) actually suffered or incurred by such Person, but in no event shall “Damages” include any consequential, special, indirect, exemplary or punitive damages, lost profits or any multiple of damages.

 

“ December 2007 Balance Sheet ” shall have the meaning ascribed thereto in Section 4.4 hereof.

 

“ Delaware Courts ” shall have the meaning ascribed thereto in Section 10.6 hereof.

 

“ Dispute ” shall have the meaning ascribed thereto in Section 2.10(c)  hereof.

 

“ Effect ” shall have the meaning ascribed thereto in the definition of Business Material Adverse Effect.

 

“ Encumbrances ” shall mean liens that secure the payment of money, mortgages or deeds of trust, monetary charges that are liens, security interests or other encumbrances on title that secure the payment of money, in any case, whether arising by contract or by operation of law.

 

“ Environmental Laws ” shall mean any and all applicable federal, state, county, regional, local or foreign laws, statutes, directives, regulations, codes, plans, orders, decrees, judgments, notices, licenses, permits, rules, or ordinances relating to Hazardous Substances (as hereinafter defined), natural resources, pollution or protection of human health or the environment, including, without limitation, laws relating to emissions, discharges, Releases or threatened Releases of Hazardous Substances into ambient air, surface water, groundwater, or land or otherwise relating to the manufacture, labeling, processing, distribution, use, production, treatment, storage, disposal, transport, or handling of Hazardous Substances, including, but not limited to, the Federal Water Pollution Control Act (33 U.S.C. §1251 et seq.), Resource Conservation and Recovery Act (42 U.S.C. §6901 et seq.), Safe Drinking Water Act (42 U.S.C. §3000(f) et seq.), Toxic Substances Control Act (15 U.S.C. §2601 et seq.), Clean Air Act (42 U.S.C. §7401 et seq.), Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. §9601 et seq.) (“ CERCLA ”), the RoHS Directive, the European Union’s Waste Electrical and Electronic Equipment Directive (2002/96/EC) and other similar foreign, state and local statutes and directives and any regulations promulgated thereto.

 

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“ Epidemic Failure ” shall mean two percent (2%) of the then current total installed base of any Customer Offering or any specific batch of a Customer Offering (a) materially failing to meet its published specifications in substantially the same manner or (b) causing any material personal injury or physical damage or being found by Buyer in good faith to have the reasonable likelihood of doing so due to a design or manufacturing flaw; provided , however , that in no event shall the matters set forth on Section 4.23 of the Seller Disclosure Schedule constitute an “Epidemic Failure.”

 

“ Equity Investment ” shall have the meaning ascribed thereto in Section 3.6(a)  hereof.

 

“ Equity Sponsor ” shall have the meaning ascribed thereto in Section 3.6(a)  hereof.

 

“ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended.

 

“ Escrow Adjustment Amount ” shall have the meaning ascribed thereto in Section 9.6 hereof.

 

“ Escrow Agent ” shall have the meaning ascribed thereto in Section 2.7(b)(ii)  hereof.

 

“ Escrow Agreement ” shall have the meaning ascribed thereto in Section 2.7(b)(v)  hereof.

 

“ Escrow Amount ” shall mean two million eight hundred thousand dollars ($2,800,000).

 

“ Escrow Fund ” shall mean all amounts held pursuant to the Escrow Agreement, other than the Working Capital Escrow Fund.

 

“ Estimated Closing Working Capital Adjustment ” shall equal:

 

(i)            if Estimated Closing Working Capital is less than four million two hundred thousand dollars ($4,200,000) (the “ Minimum Working Capital ”), the amount by which Estimated Closing Working Capital is less than the Minimum Working Capital (which shall be treated as a negative number);

 

(ii)           if Estimated Closing Working Capital is less than or equal to five million dollars ($5,000,000) (the “ Maximum Working Capital ”) but greater than or equal to the Minimum Working Capital, zero; and

 

(iii)          if Estimated Closing Working Capital is greater than the Maximum Working Capital, the amount by which Estimated Closing Working Capital is greater than Maximum Working Capital (which shall be treated as a positive number).

 

“ Estimated Closing Working Capital ” shall have the meaning ascribed thereto in Section 2.10(a)  hereof.

 

“ Estimated Purchase Price ” shall mean (a) twenty eight million dollars ($28,000,000) plus (b) any Severance Obligation Adjustment, plus (c) any Estimated Closing Working Capital Adjustment plus (d) the assumption of the Assumed Liabilities (to the extent they are Liabilities for Tax purposes).

 

“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.

 

“ Excluded Assets ” shall have the meaning ascribed thereto in Section 2.2 hereof.

 

“ Excluded Contracts ” shall have the meaning ascribed thereto in Section 2.2(j)  hereof.

 

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“ Excluded Environmental Liabilities ” shall mean any and all Liabilities (including costs for cleanup, investigation, monitoring, reporting, remediation, removal, treatment, encapsulation and other response actions), Damages (including natural resource damages, property damage, and injuries to Persons), proceedings, investigations, liens, and notices of violation arising out of or relating to (i) any actual or alleged violations of applicable Environmental Laws by Seller or any Subsidiary of Seller to the extent occurring, arising or existing on or prior to the Closing, (ii) the presence, Release or threat of Release of or exposure to any Hazardous Substances at, on, under or migrating to or from any real property currently or formerly owned, leased or operated by Seller or any Subsidiary of Seller occurring, arising or existing on or prior to the Closing, (iii) the transportation, storage, treatment, disposal, generation, manufacturing, recycling, reclamation, use or other handling of any Hazardous Substances by or on behalf of Seller or any Subsidiary of Seller or in connection with the operation of the Business occurring, arising or existing on or prior to the Closing, or (iv) the presence, existence or human exposure to asbestos in any form at, on, under or within any Acquired Assets.

 

“ Excluded Leases ” shall have the meaning ascribed thereto in Section 2.2(l)  hereof.

 

“ Excluded Liabilities ” shall have the meaning ascribed thereto in Section 2.4 hereof.

 

“ Excluded Matters ” shall have the meaning ascribed thereto in Section 9.1 hereof.

 

“ Excluded Subsidiary ” shall mean each Person set forth on Schedule II attached hereto.

 

“ Final Closing Adjustment ” shall have the meaning ascribed thereto in Section 2.10(f)  hereof.

 

“ Final Closing Working Capital ” shall have the meaning ascribed thereto in Section 2.10(d)  hereof.

 

“ Final Working Capital Adjustment Amount ” shall have the meaning ascribed thereto in Section 2.10(e)  hereof.

 

“ GAAP ” shall mean generally accepted accounting principles and practices in effect from time to time within the United States applied consistently throughout the period involved.

 

“ Governmental Authority ” shall mean any United States or foreign, federal, state or local governmental commission, board, body, bureau, or other regulatory authority, agency, including courts and other judicial bodies, or any self-regulatory body or authority, including any instrumentality or entity designed to act for or on behalf of the foregoing.

 

“ Government Contract ” shall mean any prime contract, subcontract, basic ordering agreement or other written contractual commitment to which Seller or any Subsidiary of Seller is a party or otherwise bound that directly or, to the knowledge of Seller, indirectly through a prime contractor or subcontractor, involves the sale or provision of Customer Offerings by Seller or any Subsidiary of Seller to any Governmental Authority.

 

“ Hazardous Substance ” shall mean any hazardous substance as defined in 42 U.S.C. § 9601(14), any hazardous waste as defined by 42 U.S.C. §6903(5), any pollutant or contaminant as defined by 42 U.S.C. §9601(33) or any toxic substance, oil or hazardous material or other chemical or substance (including, without limitation, asbestos in any form, urea formaldehyde, perchlorate or polychlorinated biphenyls) regulated by or forming the basis of liability under any Environmental Laws.

 

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“ Inactive Patents ” shall mean the abandoned, expired or otherwise inactive Patents owned by Seller listed on Schedule 2.1(s) .

 

“ Inactive Marks ” shall mean the abandoned, expired or otherwise inactive Marks owned by Seller listed on Schedule 2.1(s) .

 

“ Indemnified Party ” shall have the meaning ascribed thereto in Section 9.4(a)  hereof.

 

“ Indemnifying Party ” shall have the meaning ascribed thereto in Section 9.4(a)  hereof.

 

“ Information ” shall have the meaning ascribed thereto in Section 6.17 hereof.

 

“ Intellectual Property Assets ” shall have the meaning ascribed thereto in Section 4.19(a)(i)  hereof.

 

“ IRS ” shall mean the Internal Revenue Service.

 

“ IT Assets ” shall mean computer systems, networks, hardware, computer software and databases, routers, hubs, switches, data communication lines and all other information technology equipment used in connection with the Business as currently conducted.

 

“ Key Employee ” shall mean, as of the date hereof, each of Robert Schechter, Herb Shumway, Dianne Callan, Steve Gladstone, George Kontopodis, Brough Turner and Tina Robidoux.

 

“ Laws ” shall mean each applicable statute, law, ordinance, decree, order, rule or regulation of any Governmental Authority.

 

“ Lender ” shall have the meaning ascribed thereto in Section 3.6(a)  hereof.

 

“ Liability ” and “ Liabilities ” shall mean any liability, debt, obligation, deficiency, Tax, penalty, assessment, fine, claim, cause of action or other loss, fee, cost or expense of any kind or nature whatsoever, whether asserted or unasserted, absolute or contingent, known or unknown, accrued or unaccrued, liquidated or unliquidated, and whether due or to become due and regardless of when asserted.

 

“ Licensed Intellectual Property Assets” shall mean Intellectual Property Assets licensed by or to Seller and/or its Subsidiaries pursuant to the Business Intellectual Property Contracts.

 

“ Loan ” shall have the meaning ascribed thereto in Section 3.6(a)  hereof.

 

“ Local Transfer Documents ” shall have the meaning ascribed thereto in Section 2.8(a)  hereof.

 

“ Marks ” shall have the meaning ascribed thereto in Section 4.19(a)(ii)  hereof.

 

“ Material Contract ” shall have the meaning ascribed thereto in Section 4.15(a)  hereof.

 

“ Most Recent Balance Sheet ” shall have the meaning ascribed thereto in Section 4.4(a)  hereof.

 

“ Notice of Claim ” shall have the meaning ascribed thereto in Section 9.4(a)  hereof.

 

“ Owned Intellectual Property Assets” shall mean the Intellectual Property Assets owned by Seller or any Subsidiary of Seller that are (i) used in the Business or, (ii) included in the Customer Offerings,

 

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(iii) Business Copyrights, (iv) Business Trade Secrets, (v) Business Patents or (vi) Business Marks. For clarity, “Owned Intellectual Property Assets” shall not include the Inactive Patents or Inactive Marks.

 

“ Patents ” shall have the meaning ascribed thereto in Section 4.19(a)(i)  hereof.

 

“ Permitted Encumbrances ” shall mean (i) Encumbrances reflected in the Business Financial Statements, (ii) Encumbrances or imperfections of title that do not materially detract from the value or materially interfere with the present use of the assets subject thereto or affected thereby, (iii) Encumbrances for current Taxes not yet due and payable, (iv) Encumbrances on a landlord’s interest in a subject premises, (v) a lessor’s interest in a subject property and (vi) the Encumbrances described in Schedule 7.2(d) .

 

“ Person ” shall mean any individual, corporation, partnership, joint venture, association, trust, unincorporated organization or other legal entity or any Governmental Authority.

 

“ Post-Closing Period ” shall have the meaning ascribed thereto in Section 6.7(b)  hereof.

 

“ Pre-Closing Period ” shall have the meaning ascribed thereto in Section 6.7(b)  hereof.

 

“ Proxy Statement ” shall mean the proxy statement filed by Seller with the SEC relating to the Seller Stockholders’ Meeting to be held to consider, among other things, the approval of this Agreement and the sale of the Purchased Assets contemplated hereby.

 

“ Publicly Available Software ” shall mean any Software that requires as a condition of use, modification and/or distribution of such Software that such Software or other Software incorporated into, derived from or distributed with such Software (i) be disclosed or distributed in source code form, (ii) be licensed for the purpose of making derivative works, or (iii) be redistributable at no charge.

 

“ Purchase Price ” shall have the meaning ascribed thereto in Section 2.5 hereof.

 

“ Purchased Assets ” shall have the meaning ascribed thereto in Section 2.1 hereof.

 

“ Purchased Contracts ” shall have the meaning ascribed thereto in Section 2.1(i)  hereof.

 

“ Purchased Furniture ” shall have the meaning ascribed thereto in Section 2.1(h) hereof.

 

“ Purchased Leases ” shall have the meaning ascribed thereto in Schedule 2.1(e) hereof.

 

“ Qualified Bidder ” shall have the meaning ascribed thereto in Section 6.4(c) hereof.

 

“ Registered Marks ” shall have the meaning ascribed thereto in Section 4.19(e)(i) .

 

“ Recall ” shall mean any recall by Buyer or a Subsidiary of Buyer of a Customer Offering after the Closing Date as a result of the order of any Governmental Authority or due to the material failure of such Customer Offering to comply with applicable Law or such Customer Offering causing any material personal injury or property damage or being found by Buyer in good faith to have the reasonable likelihood of causing any material personal injury or property damage; provided , however , that in no event shall the matters set forth on Section 4.23 of the Seller Disclosure Schedule constitute a “Recall.”

 

“ Release ” shall mean “release” as defined in CERCLA.

 

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“ Representatives ” shall mean the directors, officers, employees, Affiliates, agents, investment bankers, financial advisors, attorneys, accountants, brokers, finders, consultants or representatives of Seller, Buyer or any of their respective Subsidiaries, as the case may be.

 

“ Retained Severance Obligations ” shall mean all Liabilities arising out of the termination of the employment of up to 25 Business Employees identified by Buyer on Schedule IV , which Schedule IV shall be completed by Buyer at Closing.

 

“ RoHS Directive ” shall have the meaning ascribed thereto in Section 4.11(d) .

 

“ SEC ” shall mean the Securities and Exchange Commission.

 

“ Section 1060 Forms ” shall have the meaning ascribed thereto in Section 2.6(a) hereof.

 

“ Securities Act ” shall mean the Securities Act of 1933, as amended.

 

“ Seller ” shall have the meaning ascribed thereto in the recitals.

 

“ Seller Common Stock ” shall mean Seller’s Common Stock, $0.01 par value per share.

 

“ Seller Disclosure Schedule ” shall have the meaning ascribed thereto in Article IV hereof.

 

“ Seller Fees and Expenses ” shall have the meaning ascribed thereto in Section 4.5 .

 

“ Seller Indemnification Cap ” shall have the meaning ascribed thereto in Section 9.2(c) hereof.

 

“ Seller Indemnified Parties ” shall have the meaning ascribed thereto in Section 9.3(a) hereof.

 

“ Seller Recommendation ” shall have the meaning ascribed thereto in Section 6.2(b) hereof.

 

“ Seller SEC Reports ” shall have the meaning ascribed thereto in Section 4.8 hereof.

 

“ Seller Specified Account ” shall mean the bank account specified by Seller in writing at least one (1) Business Day prior to the anticipated Closing Date.

 

“ Seller Stockholders ” shall mean the holders of Seller Common Stock.

 

“ Seller Stockholders’ Approval ” shall have the meaning ascribed thereto in Section 7.1(a) hereof.

 

“ Seller Stockholders’ Meeting ” shall have the meaning ascribed thereto in Section 4.2 hereof.

 

“ Seller’s Advisor ” shall have the meaning ascribed thereto in Section 4.5 hereof.

 

“ Service Date ” shall have the meaning ascribed thereto in Section 6.6(a) hereof.

 

“ Severance Obligation Adjustment ” shall mean the aggregate amount of Liabilities set forth in Schedule V arising out of the termination of the employment of the Business Employees identified in Schedule V , which Schedule V shall be completed as mutually agreed between Buyer and Seller at Closing, to the extent such Liabilities are not Retained Severance Obligations.

 

“ Severance Policy ” shall have the meaning ascribed thereto in Section 6.22 hereof.

 

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“ Software ” shall have the meaning ascribed thereto in Section 4.19(a)(v) hereof.

 

“ Straddle Period ” shall have the meaning ascribed thereto in Section 6.7(b) hereof.

 

“ Sublease Space ” shall have the meaning ascribed thereto in Section 6.21 hereof.

 

“ Subsequent Determination Notice ” shall have the meaning ascribed thereto in Section 6.4(e) hereof.

 

“ Subsidiaries ” shall mean, when used with reference to a party, any corporation or other organization, whether incorporated or unincorporated, of which such party or any other subsidiary of such party is a general partner (excluding partnerships the general partnership interests of which held by such party or any subsidiary of such party do not have a majority of the voting interests in such partnership) or serves in a similar capacity, or, with respect to such corporation or other organization, at least 50% of the securities or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions is directly or indirectly owned or controlled by such party or by any one or more of its subsidiaries, or by such party and one or more of its subsidiaries; provided , however , that, notwithstanding the foregoing, for the purposes of this Agreement, no Excluded Subsidiary shall be deemed a Subsidiary of Seller.

 

“ Superior Proposal ” shall have the meaning ascribed thereto in Section 6.4(h) hereof.

 

“ Tax ” shall mean any and all taxes, customs, duties, tariffs, deficiencies, assessments, levies or other like governmental charges, including, without limitation, income, gross receipts, excise, real or personal property, ad valorem, value added, estimated, alternative minimum, stamp, sales, withholding, social security, occupation, use, service, service use, license, net worth, payroll, franchise, transfer and recording taxes and charges, imposed by the IRS or any other taxing authority (whether domestic or foreign including, without limitation, any state, county, local or foreign government or any subdivision or taxing agency thereof (including a United States possession)), whether computed on a separate, consolidated, unitary, combined or any other basis; and such term shall include any interest, fines, penalties or additional amounts attributable to, or imposed upon, or with respect to, any such amounts.

 

“ Tax Return ” shall mean any report, return, document, declaration, election or other information or filing required to be supplied to any taxing authority or jurisdiction (foreign or domestic) with respect to Taxes, including, without limitation, information returns and any documents with respect to or accompanying payments of estimated Taxes or requests for the extension of time in which to file any such report, return, document, declaration or other information.

 

“ Termination Amount ” shall have the meaning ascribed thereto in Section 8.2(b) hereof.

 

“ Termination Date ” shall have the meaning ascribed thereto in Section 8.1(c) hereof.

 

“ Terrorism Order ” shall have the meaning ascribed thereto in Section 4.31 hereof.

 

“ Third Party Claim ” shall have the meaning ascribed thereto in Section 9.5 hereof.

 

“ Threshold Amount ” shall have the meaning ascribed thereto in Section 9.2(b) hereof.

 

“ Trade Secrets ” shall have the meaning ascribed thereto in Section 4.19(a)(iv) hereof.

 

“ Transferred Employees ” shall have the meaning ascribed thereto in Section 6.6(a) hereof.

 

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“ Transfer Taxes ” shall have the meaning ascribed thereto in Section 6.7(a) hereof.

 

“ Transition Services Agreement ” shall have the meaning ascribed thereto in Section 6.20 hereof.

 

“ U.S. ” shall mean the United States.

 

“ Working Capital Escrow Amount ” shall mean four hundred forty thousand dollars ($440,000).

 

“ Working Capital Escrow Fund ” shall mean the Working Capital Escrow Amount held pursuant to the Escrow Agreement.

 

ARTICLE II  —  PURCHASE AND SALE

 

2.1          Purchase and Sale of Purchased Assets .   On the terms and subject to the conditions contained in this Agreement, at the Closing, Buyer shall purchase and take, and Seller shall sell, convey, assign, transfer and deliver, and Seller shall cause its Subsidiaries to sell, convey, assign, transfer and deliver, to Buyer or a Subsidiary of Buyer designated by Buyer, free and clear of any Encumbrances (except for any Permitted Encumbrances) by appropriate instruments of conveyance reasonably satisfactory to Buyer, all of the rights, titles and interests of Seller and its Subsidiaries in, to and under all of the tangible and intangible assets, properties and rights (of every kind and description) other than Excluded Assets that (i) are owned or licensed by Seller and/or its Subsidiaries as of the Closing Date and (ii) relate to or are used in connection with the Business (the “ Purchased Assets ”), including, without limitation, the following tangible and intangible assets, properties and rights:

 

(a)           the Business as a going concern;

 

(b)           the goodwill of Seller and the Subsidiaries of Seller relating to or associated with the Business;

 

(c)           all billed and unbilled accounts receivable and all correspondence with respect thereto, including without limitation, all trade accounts receivable, notes receivable from customers, vendor credits and all other obligations from customers with respect to sales of goods or services or otherwise, whether or not evidenced by a note, in each case, that relate to or are used in connection with the Business;

 

(d)           all prepayments, prepaid expenses and other assets, in each case, that relate to or are used in connection with the Business;

 

(e)           all interests in the leased or subleased real estate listed in Schedule 2.1(e) (the “ Purchased Leases ”) and the deposits related thereto, if any, and at least 15 days before the anticipated Closing Date, Buyer shall notify Seller of Buyer’s decision to have the lease associated with the location (and the deposit related thereto, if any) identified with one asterisk (*) or two asterisks (**) on Schedule 2.1(e) be considered a Purchased Lease hereunder (and Schedule 2.1(e) shall be updated at Closing to reflect such decision);

 

(f)            all inventories, work in progress and supplies, in each case, that relate to or are used in connection with the Business;

 

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(g)           all machinery, equipment, automobiles and other vehicles, spare parts and supplies, computers and all related equipment, telephones, fixtures and all related equipment and all other tangible personal property, in each case, that are listed or described in Schedule 2.1(g) ;

 

(h)           all furniture listed and/or described in Schedule 2.1(h) (collectively, the “ Purchased Furniture ”);

 

(i)            except for any Excluded Contract and subject to Section 2.9 , all rights existing under all contracts, agreements or arrangements to which Seller or any Subsidiary is a party, in each case, that relate to or are used in connection with the Business, including, without limitation (A) any software license or maintenance agreement relating to the Business and (B) each other contract, agreement or arrangement set forth in Section 4.15 of the Seller Disclosure Schedule (collectively, the “ Purchased Contracts ”);

 

(j)            all rights to make offers of employment to the Business Employees and, except as provided in Section 2.2(d), the records associated with Transferred Employees;

 

(k)           all lists, records, sales data, books, ledgers, files and documents pertaining to customer accounts (whether past or current), suppliers, distributors, prospective customers, prospective suppliers and prospective distributors, in each case, that relate to or are used in connection with the Business;

 

(l)            all claims, deposits, prepayments, warranties, guarantees, refunds, causes of action, rights of recovery, rights of set-off and rights of recoupment of every kind and nature, in each case, relating to the Business; provided , however , that, notwithstanding the foregoing, none of the foregoing shall constitute a part of the Purchased Assets to the extent they relate to Excluded Assets or Excluded Liabilities;

 

(m)          all Business Intellectual Property Assets, including, but not limited to, the Business Software and Customer Offerings, the Business Patents, the Business Trade Secrets, the Business Copyrights and the Business Marks;

 

(n)           all Business Permits;

 

(o)           all insurance, warranty and condemnation net proceeds received after the Closing Date with respect to damage, non-conformance of or loss to the Purchased Assets;

 

(p)           except as provided in Section 2.2(c) below and to the extent that they relate to Excluded Assets or Excluded Liabilities, all books, records, ledgers, files, documents, correspondence, lists, studies and reports and other printed or written materials, provided that Seller shall be given copies of the general ledger and accounting records as such documents exist as of the Closing Date;

 

(q)           the internet domain names that form part of the Business Marks, including, without limitation, those listed in Schedule 2.1(q) (the “ Business Domain Names ”), other than those specifically set forth in Schedule 2.2(p) ; provided , that Buyer grants Seller an exclusive, worldwide limited term license to those Business Domain Names identified with an asterisk (*) on Schedule 2.1(q) until such time as Seller is able to change its name and its ticker symbol; provided , further , that notwithstanding the foregoing, in no event shall the term of this limited term license exceed six (6) months from the Closing Date;

 

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(r)            all other assets of any kind or nature of each of Seller and each of its Subsidiaries, other than the Excluded Assets, in each case, that relate to or are used in connection with the Business; and

 

(s)           all Inactive Patents and Inactive Marks listed on Schedule 2.1(s) to the extent Seller or any Subsidiary of Seller has any rights, title or interest therein.

 

2.2          Excluded Assets .   Notwithstanding the foregoing, the following assets are expressly excluded from the purchase and sale contemplated hereby (the “ Excluded Assets ”) and, as such, are not included in the assets conveyed hereby:

 

(a)           all cash, cash equivalents, certificates of deposit, cash held in escrow described in Schedule 2.2(a) and securities owned or otherwise held by Seller, any Subsidiary of Seller or any Excluded Subsidiary including bank deposits, investments in so-called “money market” funds, commercial paper funds, Treasury bills and accrued interest on any of the foregoing;

 

(b)           Seller’s rights under or pursuant to this Agreement and the documents, instruments and agreements executed in connection herewith and therewith;

 

(c)           Seller’s and its Subsidiaries’ general ledger, accounting records, minute books, statutory books and corporate seal, provided that Buyer shall be given copies of the general ledger and accounting records of the Business as such documents exist as of the Closing Date;

 

(d)           Seller’s and its Subsidiaries’ personnel records that they are not allowed by applicable Law to provide to Buyer;

 

(e)           any right to receive mail and other communications addressed to Seller, its Subsidiaries and any Excluded Subsidiary relating to the Excluded Assets or the Excluded Liabilities;

 

(f)            any intercompany receivables;

 

(g)           the capital stock of each Subsidiary of Seller and of each Excluded Subsidiary and all assets, properties and rights of each Excluded Subsidiary;

 

(h)           the Business Benefit Plans and other benefit plans maintained by Seller or a Subsidiary of Seller and all documentation and materials related thereto and assets thereunder;

 

(i)            all Tax refunds, Tax credits and Tax adjustments of Seller, any Subsidiary of Seller or any Excluded Subsidiary (other than such refunds, credits or adjustments related to an Assumed Liability, subject to Section 6.7(b) );

 

(j)            all rights existing under each contract, agreement or arrangement set forth in Schedule 2.2(j) (collectively, the “ Excluded Contracts ”);

 

(k)           the personal property listed in Schedule 2.2(k) ;

 

(l)            all interests in the leased or subleased real estate of Seller, any Subsidiary of Seller or any Excluded Subsidiary listed in Schedule 2.2(l) other than the Purchased Leases (collectively, the “ Excluded Leases ”), including any deposits with respect to any Excluded Leases;

 

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(m)          all bank accounts maintained by or on behalf of Seller, the Subsidiaries of Seller and the Excluded Subsidiaries;

 

(n)           except as set forth in Section 2.1(o) , all insurance policies of Seller, the Subsidiaries of Seller and the Excluded Subsidiaries.

 

(o)           other than the Purchased Furniture, all furniture of Seller, the Subsidiaries of Seller and the Excluded Subsidiaries;

 

(p)           all internet domain names owned by or on behalf of Seller, the Subsidiaries of Seller and the Excluded Subsidiaries that are not Business Domain Names; and

 

(q)           any assets and rights of any nature whatsoever in respect, related to or resulting from any of the items described in Sections 2.2(a) — 2.2(p) inclusive or any Excluded Liability.

 

2.3          Assumed Liabilities .   Upon the terms and subject to the conditions of this Agreement, Buyer shall assume, effective as of the Closing, and from and after the Closing Buyer shall pay, discharge and perform when due, as appropriate, all Liabilities of Seller and Subsidiaries of Seller relating to or otherwise in connection with the Business (individually and collectively, the “ Assumed Liabilities ”), including, without limitation, the following Liabilities:

 

(a)           all Liabilities accrued on the Business Financial Statements and not discharged as of the Closing Date, in each case, that relate to or were incurred in connection with the operation of the Business in the ordinary course;

 

(b)           all Liabilities (other than Taxes) incurred in the ordinary course of the Business;

 

(c)           except as otherwise provided in Section 2.4(i) or Section 2.4(j) , all Liabilities (other than Taxes) under each Purchased Contract;

 

(d)           except as otherwise provided in Section 2.4(i) , all warranty claims or expenses of Seller and its Subsidiaries in respect of products sold or services rendered through the Closing Date, in each case, that relate to or were incurred in connection with the operation of the Business in the ordinary course, including, without limitation, the warranty matters described in Section 4.23 of the Seller Disclosure Schedule ;

 

(e)           except as otherwise provided in Section 2.4(k) , all Liabilities (other than Taxes) relating to the Transferred Employees incurred in the ordinary course of the Business, including Seller’s and its Subsidiaries’ obligation to provide vacation time and vacation pay to the Transferred Employees; and

 

(f)            all Liabilities related to Transfer Taxes pursuant to Section 6.7(a) hereof, Buyer’s proportionate share of real or personal property Taxes or other ad valorem Taxes imposed with respect to the Purchased Assets, determined utilizing the principles set forth in Section 6.7(b) , and all other Taxes arising with respect to the Business after the Closing.

 

2.4          Excluded Liabilities .   Notwithstanding Section 2.3 above, Seller shall retain, and shall be responsible for paying, performing and discharging when due, and Buyer shall not assume or have any responsibility for, the following Liabilities other than the Assumed Liabilities (individually and collectively, the “ Excluded Liabilities ”):

 

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(a)           all Liabilities relating to or arising out of the Excluded Assets;

 

(b)           all Liabilities relating to or arising out of any Excluded Subsidiary;

 

(c)           all Liabilities of the Subsidiaries of Seller not relating to or otherwise in connection with the Business;

 

(d)           all Excluded Environmental Liabilities;

 

(e)           all Retained Severance Obligations and obligations related to any employee of Seller or any Subsidiary of Seller who is not a Business Employee;

 

(f)            all Liabilities under the Business Benefit Plans and other benefit plans maintained by Seller or a Subsidiary of Seller, other than Liabilities under the Business Benefit Plans set forth on Schedule 2.4(f) ;

 

(g)           any Liability related to or arising out of Seller’s LiveWire Mobile business;

 

(h)           any Liabilities of Seller or any Subsidiary of Seller for Taxes (other than Taxes constituting an Assumed Liability);

 

(i)            all Liabilities associated with an Epidemic Failure or Recall to the extent the Customer Offerings concerned were manufactured and/or distributed prior to the Closing Date;

 

(j)            all Liabilities related to a claim that a Customer Offering or the Business infringed or misappropriated a third party Intellectual Property Asset prior to the Closing Date;

 

(k)           all Liabilities related to claims related to the Transferred Employees to the extent such Liabilities arose (1) outside the ordinary course of the Business prior to the Closing Date, (2) from Seller’s breach of a Law prior to the Closing Date or (3) from a breach of an employment agreement prior to the Closing Date

 

(l)            all Liabilities of Seller or any Subsidiary of Seller for the Taxes of any other Person for which Buyer or any of its Affiliates could be held liable after the Closing Date by reason of applicable Law, as a transferee or successor by contract or otherwise; and

 

(m)          all Seller Fees and Expenses.

 

2.5          Purchase Price .   The purchase price (the “ Purchase Price ”) for the Purchased Assets shall be (a) twenty eight million dollars ($28,000,000) in cash, plus (b) any Severance Obligation Adjustment, plus or minus (c) any Estimated Closing Adjustment, plus or minus (d) any Final Working Capital Adjustment Amount, plus or minus (e) any Escrow Adjustment Amount, plus (f) the assumption of the Assumed Liabilities.

 

2.6          Allocation of Purchase Price .

 

(a)           As soon as practicable after the Closing, (but in no event later than thirty (30) days after Closing), Buyer shall allocate the Estimated Purchase Price and all other capitalizable costs pursuant to Section 1060 of the Code and the Treasury Regulations promulgated thereunder, as well as any other applicable Tax laws among the Purchased Assets (the “ Allocation ”) and deliver a statement to

 

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Seller setting forth the Allocation.  If within thirty (30) days after the delivery of such statement, Seller notifies Buyer in writing that Seller objects to the Allocation, Buyer and Seller shall use commercially reasonable efforts to resolve such dispute within thirty (30) days.  In the event that Buyer and Seller are unable to resolve such dispute within thirty (30) days, Buyer and Seller shall jointly retain a nationally recognized accounting firm (the “ Accounting Referee ”) to resolve the disputed items.  Upon resolution of the disputed items, the Allocation shall be adjusted to reflect such resolution.  The costs, fees and expenses of the Accounting Referee shall be borne equally by Buyer and Seller.  Except as otherwise required by applicable Law, Buyer and Seller shall file all Tax Returns (such as IRS Form 8594 or any other forms or reports required to be filed pursuant to Section 1060 of the Code or any comparable provisions of applicable Law (“ Section 1060 Forms ”)) in a manner that is consistent with the Allocation (as may be adjusted pursuant to this Section 2.6 ) and refrain from taking any action inconsistent therewith.  Buyer and Seller shall file such Section 1060 Forms timely and in the manner required by applicable Law.

 

(b)           If an adjustment is made with respect to the Purchase Price as a result of a Final Working Capital Adjustment Amount or Escrow Adjustment Amount, the Allocation shall be adjusted in accordance with Section 1060 of the Code and as mutually agreed by Buyer and Seller.  In the event that an agreement is not reached within thirty (30) days after the adjustment to the Purchase Price, any disputed items shall be resolved in the manner described in Section 2.6(a) .  Buyer and Seller agree to file any additional information return required to be filed pursuant to Section 1060 of the Code.

 

(c)           Buyer and Seller agree that the amount allocable to inventory, receivables and any depreciable assets pursuant to this Section 2.6 shall be the adjusted tax basis of Seller, or its Subsidiaries (as applicable), in such property as of the Closing Date.

 

2.7          Closing Matters .

 

(a)           Subject to the terms and conditions of this Agreement, the closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at the offices of Goodwin Procter LLP, Exchange Place, Boston, MA 02109, at 10:00 a.m. (Eastern time) on the third Business Day following the satisfaction or waiver of the conditions set forth in Article VII or at such other place or at such other time or on such other date as may be mutually agreeable to Buyer and Seller.  The date of the Closing is herein referred to as the “ Closing Date .”

 

(b)           Subject to the conditions set forth in this Agreement, the Parties shall consummate the following on the Closing Date:

 

(i)            Seller and each of its Subsidiaries shall deliver to Buyer the Purchased Assets;

 

(ii)           Buyer shall deposit or cause to be deposited (i) the Closing Date Cash Payment in immediately available funds by wire transfer in the Seller Specified Account, (ii) the Escrow Amount in immediately available funds by wire transfer to an account maintained by Mellon Trust of New England, N.A. (the “ Escrow Agent ”), and (iii) the Working Capital Escrow Amount in immediately available funds by wire transfer to an account maintained by the Escrow Agent;

 

(iii)          Buyer shall assume the Assumed Liabilities;

 

(iv)          Buyer shall deposit or cause to be deposited the Closing Date Payroll Payment in immediately available funds by wire transfer in the Seller Specified Account;

 

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(v)           Buyer, Seller and the Escrow Agent shall enter into the Escrow Agreement substantially in the form attached hereto as Exhibit B (the “ Escrow Agreement ”); and

 

(vi)          the parties shall deliver or cause to be delivered the Local Transfer Documents (as per Section 2.8 ) and certificates and other documents and instruments required to be delivered by or on behalf of a party hereof under Article VII .

 

(c)           The Working Capital Escrow Fund and the Escrow Fund shall be governed by the Escrow Agreement.  The Working Capital Escrow Fund and the Escrow Fund shall be held in escrow and shall be available to settle certain contingencies as provided in Sections 2.10 and Article IX of this Agreement and will be distributed to Seller and/or Buyer in accordance with the Escrow Agreement. Buyer and Seller agree for all tax purposes that: (i) the right of Seller to the Working Capital Escrow Fund and the Escrow Fund shall be treated as deferred contingent purchase price eligible for installment sale treatment under Section 453 of the Code and any corresponding provision of foreign, state or local law, as appropriate; (ii) if and to the extent any amount of the Working Capital Escrow Fund and/or the Escrow Fund is actually distributed to Seller, interest may be imputed on such amount, as required by Section 483 or 1274 of the Code which for all purposes of this Agreement shall be treated as having been paid to Seller; (iii) Buyer shall be treated as the owner of the Working Capital Escrow Fund and the Escrow Fund, and all interest and earnings earned from the investment and reinvestment of the Escrow Fund, or any portion thereof, shall be allocable to Buyer pursuant to Section 468B(g) of the Code; and (iv) in no event shall the total amount of the Working Capital Escrow Fund and the Escrow Fund and any interest and earnings earned thereon paid to Seller under this Agreement exceed an amount to be designated by Seller prior to the Closing.  Clause (iv) of the preceding sentence is intended to ensure that the right of Seller to the Working Capital Escrow Fund and the Escrow Fund and any interest and earnings earned thereon is not treated as a contingent payment without a stated maximum selling price under Section 453 of the Code and the Treasury Regulations promulgated thereunder.

 

2.8          Local Transfer Documents .

 

(a)           Seller and its Subsidiaries, on the one hand, and Buyer, on the other hand, shall, pursuant to and in accordance with the terms and conditions of this Agreement, enter into, or cause their respective Subsidiaries to enter into, on the Closing Date, separate bills of sale, assignment and assumption agreements and intellectual property transfer or assignment documents (collectively, the “ Local Transfer Documents ”) documenting the purchase and sale of each portion of the Purchased Assets and the Assumed Liabilities to be conveyed separately to Buyer.  Such individual Local Transfer Documents will be used merely to memorialize the transfer of the Purchased Assets to Buyer and Buyer’s assumption of the Assumed Liabilities.

 

(b)           The Local Transfer Documents shall be in substantially the form attached hereto as Exhibit C , with such modifications as are necessary and appropriate as a result of differences in local Laws or customs, in order to maintain substantially the same legal meaning and effect as provided for in this Agreement.

 

(c)           In the event of any conflict or inconsistency between the terms and conditions of this Agreement and any Local Transfer Document, the terms and conditions of this Agreement shall prevail.

 

(d)           At or after the Closing, and without further consideration, Seller and its Subsidiaries shall execute and deliver to Buyer such further instruments of conveyance and transfer, and take all other actions as Buyer may reasonably request in order to more effectively convey and transfer the Purchased Assets to Buyer and put Buyer in operational control of the Purchased Assets.

 

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2.9          Assignment of Contracts and Rights .   Anything in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement to assign any Purchased Contract if an attempted assignment thereof, without consent of a third party thereto, would constitute a breach or other contravention thereof or in any way adversely affect the rights of Buyer or Seller thereunder.  Seller and Buyer will use their commercially reasonable efforts (but without the requirement of any payment of money by Seller or Buyer) to obtain the consent of the other parties to any such Purchased Contract for the assignment thereof to Buyer as Buyer may reasonably request.  Unless and until such consent is obtained, or if an attempted assignment thereof would be ineffective or would materially adversely affect the rights of Seller thereunder so that Buyer would not in fact receive all rights under such Purchased Contract, Seller and Buyer will cooperate in an arrangement under which Buyer would obtain the benefits and assume the obligations thereunder in accordance with this Agreement, including subcontracting, sub-licensing, or subleasing to Buyer, or under which Seller would enforce, at Buyer’s expense, for the benefit of Buyer, with Buyer assuming at Buyer’s expense Seller’s obligations, any and all rights of Seller against a third party thereto.  Seller will promptly pay to Buyer when received all monies received by Seller under any Purchased Contract, and Buyer shall pay, defend, discharge and perform all Liabilities under such Purchased Contracts.

 

2.10        Purchase Price Adjustment .

 

(a)           Seller shall cause to be prepared and delivered to Buyer, no later than three days prior to the Closing Date, a Closing Date Balance Sheet prepared in good faith including an estimate of Closing Working Capital (the “ Estimated Closing Working Capital ”), together with worksheets and data that support the calculation of the Estimated Closing Working Capital.  The Estimated Closing Working Capital shall (i) accurately reflect the Closing Working Capital of the Business as of close of business on the day before the Closing Date, (ii) be based upon balance sheet line items and accounts of Seller calculated in accordance with GAAP applied consistently in accordance with the accounting policies, practices and procedures used in the preparation of the Business Balance Sheets and (iii) otherwise be prepared in accordance with this Agreement.

 

(b)           Within forty-five (45) days after the Closing, Buyer shall prepare a good faith calculation of the Closing Working Capital (the “ Buyer’s Calculation ”) setting forth, in reasonable detail and to the extent practicable, each item or amount differing from the Estimated Closing Working Capital.  Buyer’s Calculation shall (i) accurately reflect the Closing Working Capital of the Business as of close of business on the day before the Closing Date, (ii) be based upon balance sheet line items and accounts set forth on Schedule II hereto calculated in accordance with GAAP applied consistently in accordance with the accounting policies, practices and procedures used in the preparation of the Business Balance Sheets and (iii) otherwise be prepared in accordance with this Agreement.

 

(c)           If Seller disagrees in good faith with Buyer’s Calculation, Buyer and Seller shall use commercially reasonable efforts to reach agreement on the disputed items or amounts in order to determine the Closing Working Capital.  If Buyer and Seller are unable to reach such agreement within thirty (30) days after the date on which Seller notifies Buyer of such disagreement (such event, a “ Dispute ”), then the amount of the Closing Working Capital shall be determined in accordance with Section 2.10(d) below.

 

(d)           In the event of a Dispute, Buyer and Seller shall promptly thereafter cause the Accounting Referee promptly to review this Agreement and the disputed items or amounts for the purpose of calculating Closing Working Capital.  In making such calculation, the Accounting Referee shall consider only those items or amounts in the Buyer’s Calculation as to which there is disagreement.  The Accounting Referee shall deliver to Buyer and Seller, as promptly as practicable, a report setting forth the calculation of the Closing Working Capital (as calculated in accordance with the terms and

 

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conditions of this Agreement).  Such report shall be final and binding upon Buyer and Seller.  If such a review is conducted, then the party (i.e., Buyer, on the one hand, or Seller, on the other hand) whose last proposed offer for the settlement of the items in dispute, taken as a whole, was farther away from the final determination by the Accounting Referee, shall pay all fees and expenses associated with such review.  Buyer and Seller agree that they will, and agree to cause their respective independent accountants to, cooperate and assist in the preparation of the Closing Date Balance Sheet and the calculation of Closing Working Capital and in the conduct of the audits and reviews referred to in this Section 2.10 , including making available to the extent necessary books, records, work papers and personnel.  The “ Final Closing Working Capital ” shall be (i) the Buyer’s Calculation if Seller does not object to such calculation, (ii) the Closing Working Capital as determined in accordance with Section 2.10(c) if Buyer and Seller are able to agree or (iii) the Closing Working Capital as determined by the Accounting Referee in accordance with Section 2.10(d) .

 

(e)           Within three (3) Business Days following the determination of the Final Closing Working Capital, either Buyer or Seller, as applicable, shall effect the payment in accordance with the provisions below, if any (the “ Final Working Capital Adjustment Amount ”):

 

(i)            if the Estimated Closing Working Capital Adjustment is more than the Final Closing Adjustment, then Buyer and Seller shall submit joint written instructions to the Escrow Agent directing the Escrow Agent to pay to Buyer the amount of such difference out of the Working Capital Escrow Fund and the Escrow Fund (to the extent the Working Capital Escrow Fund is exhausted), and the remainder of the Working Capital Escrow Fund, if any, shall be distributed to Seller;

 

(ii)           if the Estimated Closing Working Capital Adjustment is less than the Final Closing Adjustment, then Buyer shall pay the amount of such difference by wire transfer of immediately available funds to Seller, and Buyer and Seller shall submit joint written instructions to the Escrow Agent directing the Escrow Agent to pay to Seller the amount of the Working Capital Escrow Fund; and

 

(iii)          if the Estimated Closing Working Capital Adjustment equals the Final Closing Adjustment, then there shall be no adjustments hereunder, the Final Working Capital Adjustment shall equal zero (0), and Buyer and Seller shall submit joint written instructions to the Escrow Agent directing the Escrow Agent to pay to Seller the amount of the Working Capital Escrow Fund.

 

(f)            For purposes of this Section 2.10 , the “ Final Closing Adjustment ” shall be either (i) the amount by which the Final Closing Working Capital exceeds the Maximum Working Capital (which shall be treated as a positive number), (ii) the amount by which the Final Closing Working Capital is less than the Minimum Working Capital (which shall be treated as a negative number) or (iii) an amount equal to zero if the Final Closing Working Capital is both equal to or more than the Minimum Working Capital and equal to or less than the Maximum Working Capital.

 

ARTICLE III  —  REPRESENTATIONS AND WARRANTIES
OF BUYER

 

Except as set forth in the disclosure schedule delivered concurrently with the execution of this Agreement to Seller (the “ Buyer Disclosure Schedule ”), which shall identify any exceptions to the representations, warranties and covenants contained in this Agreement (with specific reference to the particular Section or subsection to which such information relates; provided , that an item disclosed in any

 

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Section or subsection shall be deemed to have been disclosed for each other Section or subsection of this Agreement to the extent the relevance is reasonably apparent on the face of such disclosure), Buyer hereby represents and warrants to Seller as follows:

 

3.1          Corporate Organization .   Buyer is a British Columbia corporation validly existing and in good corporate standing under the laws of British Columbia.  Buyer has all requisite corporate power and authority and all necessary governmental approvals to own, lease and operate all of its properties and assets and to carry on its business as it is now being conducted.  Buyer is duly licensed or qualified to do business and is in corporate good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned, leased or operated by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified and in corporate good standing would not, either individually or in the aggregate, reasonably be expected to have a Buyer Material Adverse Effect.  The Articles of Association and bylaws of Buyer, copies of which have previously been provided to Seller, are true, correct, and complete copies of such documents as currently in effect.

 

3.2          Authority .   Buyer has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby and perform its obligations hereunder.  The execution, delivery and performance of this Agreement and the approval of the consummation of the transactions contemplated hereby have, as of the date hereof, been, and are, duly and validly authorized by all necessary action of Buyer.  No corporate or similar proceedings (including shareholder action or limited partner consent) on the part of Buyer are necessary to authorize the execution, delivery and performance of this Agreement or to consummate the transactions contemplated hereby.  This Agreement has been duly and validly executed and delivered by Buyer, and (assuming due authorization, execution and delivery by Seller), constitutes the valid and binding obligations of Buyer, enforceable against Buyer in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors’ rights and general principles of equity.

 

3.3          Consents and Approvals .   Except (a) for filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the Exchange Act, (b) government clearances or approvals contemplated by Section 6.3(b) , and (c) as otherwise set forth in Section 3.3 of the Buyer Disclosure Schedule , none of the execution, delivery or performance of this Agreement by Buyer, the consummation by Buyer and, to the extent applicable, the Subsidiaries of Buyer, of the transactions contemplated hereby and compliance by Buyer and, to the extent applicable, the Subsidiaries of Buyer, with any of the provisions hereof will (i) conflict with or result in any breach of any provision of the organizational documents of Buyer, (ii) require any filing with, notice by, or permit, authorization, consent or approval of, any Governmental Authority, (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which Buyer or, to the extent Buyer designates any Subsidiary of Buyer to be the assignee of the Purchased Assets, any such Subsidiary of Buyer, is a party or by which it or any of its respective properties or assets may be bound, or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Buyer or any of its respective properties or assets, excluding from the foregoing clauses (ii) , (iii) and (iv) such filings, notices, permits, authorizations, consents, approvals, violations, breaches, defaults, rights or losses that would not, individually or in the aggregate, have a Buyer Material Adverse Effect.

 

3.4          Broker’s Fees .   Neither Buyer nor any of its officers, directors, employees or agents has employed any broker, finder or financial advisor or incurred any Liability for any fees or commissions in connection with any of the transactions contemplated by this Agreement, except for legal, accounting and

 

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other professional fees payable in connection with the transactions contemplated hereby, all of which will be paid by Buyer.

 

3.5          Legal Proceedings .   There are no civil, criminal or administrative actions, suits, claims, hearings, investigations or proceedings pending or, to the knowledge of Buyer, threatened in writing against Buyer that seek to enjoin, or would reasonably be expected to have the effect of preventing, making illegal, or otherwise interfering with, any of the transactions contemplated by this Agreement, except as would not, individually or in the aggregate, reasonably be expected to prevent or materially delay the ability of Buyer to consummate the transactions contemplated by this Agreement.

 

3.6          Available Funds .

 

(a)           Buyer has provided true, correct, and complete copies of the executed commitment letters (the “ Commitment Letters ”) pursuant to which Special Value Opportunities Fund, LLC, Special Value Expansion Fund, LLC and Tennenbaum Opportunities Partners V, LP (collectively, the “ Lender ”) has committed to loan the cash amounts set forth therein subject to the terms therein (the “ Loan ”) and Investcorp Technology Ventures II, L.P. (the “ Equity Sponsor ”) has committed to purchase equity securities of Buyer on the terms set forth therein subject to the terms therein (the “ Equity Investment ”).

 

(b)           The Commitment Letters are in full force and effect and, to the extent stated in the Commitment Letters, are legal, valid, binding and enforceable obligations of Buyer and the other parties thereto, and have not been withdrawn, terminated or supplemented or otherwise amended or modified in any respect.  Except as set forth in the Commitment Letters, there are no (i) conditions precedent to the respective obligations of Lender to fund the full amount of the Loan, (ii) conditions precedent to the respective obligations of Equity Sponsor to fund the full amount of the Equity Investment or (iii) contractual contingencies under any agreements, side letters or arrangements relating to the Commitment Letters to which either Buyer or any of its Subsidiaries is a party that would permit Lender or Equity Sponsor to reduce the total amount of the Loan or the Equity Investment, as the case may be, or that would materially affect the availability of the Loan or the Equity Investment.  No event has occurred which, with or without notice, lapse of time or both, would constitute a default or breach on the part of Buyer under any term or condition of the Commitment Letters and, subject to the satisfaction of the conditions set forth in Article VII hereof, (A) Buyer has no reason to believe that it will be unable to satisfy on a timely basis any term or condition of closing to be satisfied by it contained in the Commitment Letters and (B) Buyer has no reason to believe, as of the date of this Agreement, that any portion of the Loan or the Equity Investment to be made thereunder will otherwise not be available to Buyer on a timely basis to consummate the transactions contemplated hereby.  Buyer has fully paid any and all commitment fees or other fees required by the Commitment Letter to be paid on or before the date of this Agreement and shall in the future pay any such fees as they become due.  Assuming the satisfaction of the conditions set forth in Sections 7.1 and 7.2 hereof, the Loan and the Equity Investment, when funded in accordance with the Commitment Letters, will provide Buyer with funds sufficient to satisfy all of its obligations under this Agreement, including the payment of the Closing Date Cash Payment and the payment of all associated costs and expenses.  The obligations to make the Loan and the Equity Investment available to Buyer pursuant to the terms of the Commitment Letters are not subject to any conditions other than the conditions set forth in the Commitment Letters.

 

3.7          Proxy Statement; Buyer Information .   The information relating to Buyer and its Subsidiaries to be contained in the Proxy Statement and any other documents filed with the SEC in connection herewith, will not, on the date the Proxy Statement is first mailed to Seller Stockholders or at the time of the Seller Stockholders’ Meeting, contain any untrue statement of any material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not false or misleading at the time and in light of the circumstances under which such statement is made.

 

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3.8          Intentionally Omitted .

 

3.9          Ownership of Seller Common Stock .   Buyer does not beneficially own (within the meaning of Section 13 of the Exchange Act and the rules and regulations promulgated thereunder), and shall not prior to the Closing Date beneficially own, any shares of Seller Common Stock, and is not a party, and shall not prior to the Closing Date become a party, to any contract, arrangement or understanding (other than this Agreement) for the purpose of acquiring, holding, voting or disposing of any shares of Seller Common Stock following due inquiry of those individuals who are primarily responsible for such matters.

 

3.10        Definition of Buyer’s Knowledge .   As used in this Agreement, the phrase “to the knowledge of Buyer” or any similar phrase means the actual knowledge (and not constructive) of the persons set forth on Section 3.10 of the Buyer Disclosure Schedule after due inquiry of those employees of Buyer who are primarily responsible for the matter in question.

 

3.11        No Other Representations or Warranties .   Except for the representations and warranties contained in this Article III , Seller acknowledges that neither Buyer nor any other Person on behalf of Buyer makes any other express or implied representation or warranty with respect to Buyer or with respect to any other information provided or made available to Seller in connection with the transactions contemplated hereby.  Notwithstanding the foregoing or any other provision of this Agreement or otherwise, nothing herein shall relieve Buyer or any other Person from Liability for fraud.

 

ARTICLE IV  —  REPRESENTATIONS AND WARRANTIES OF SELLER

 

Except as set forth in the Seller SEC Reports filed since December 31, 2007 (solely with respect to the representations and warranties set forth in Sections 4.6 , 4.12 , and 4.13 ) or as set forth in the disclosure schedules delivered concurrently with the execution of this Agreement to Buyer (the “ Seller Disclosure Schedule ”), which shall identify any exceptions to the representations, warranties and covenants contained in this Agreement (with specific reference to the particular Section or subsection to which such information relates; provided , that an item disclosed in any Section or subsection shall be deemed to have been disclosed for each other Section or subsection of this Agreement to the extent the relevance is reasonably apparent on the face of such disclosure), Seller hereby represents and warrants to Buyer as follows:

 

4.1          Corporate Organization .

 

(a)           Seller is a corporation, validly existing and in good corporate standing under the laws of the State of Delaware.  Seller has all requisite corporate power and authority to own, lease and operate all of its properties and assets and to carry on its business as it is now being conducted.  Seller is duly licensed or qualified to do business and is in corporate good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned, leased or operated by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified and in corporate good standing would not, either individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect.

 

(b)           Section 4.1(b) of the Seller Disclosure Schedule lists each Subsidiary of Seller on the date of this Agreement and indicates for each such Subsidiary as of such date: (i) the percentage and type of equity securities owned or controlled, directly or indirectly, by Seller; and (ii) the jurisdiction of incorporation or organization.  Each Subsidiary of Seller is a corporation or legal entity, validly existing and, if applicable, in good standing under the laws of the jurisdiction of its organization.  Each Subsidiary

 

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of Seller has all requisite corporate power or other power and authority to own, lease and operate all of its properties and assets and to carry on its business as it is now being conducted.  Each Subsidiary of Seller is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned, leased, or operated by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified and in good standing would not, either individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect.

 

(c)           The certificate of incorporation and bylaws or equivalent organizational documents of Seller and each Subsidiary of Seller, copies of which have previously been provided to Buyer, are true, correct, and complete copies of such documents as currently in effect.

 

(d)           Except as set forth in Section 4.1(d) of the Seller Disclosure Schedule , no Subsidiary of Seller has or is bound by any outstanding subscriptions, options, warrants, calls, commitments, rights agreements or agreements of any character calling for it to issue, deliver or sell, or cause to be issued, delivered or sold any of its equity securities or any securities convertible into, exchangeable for or representing the right to subscribe for, purchase or otherwise receive any such equity security or obligating such Subsidiary to grant, extend or enter into any such subscriptions, options, warrants, calls, commitments, rights agreements or other similar agreements.  There are no outstanding contractual obligations of Seller or any Subsidiary of Seller to repurchase, redeem or otherwise acquire any of its capital stock or other equity interests.  All of the shares of capital stock of each of the Subsidiaries of Seller held, directly or indirectly, by Seller are validly issued, fully paid (to the extent required under the applicable governing documents) and nonassessable and are owned by Seller free and clear of any claim, lien, Encumbrance or agreement with respect thereto

 

4.2          Authority .   Seller has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby and perform its obligations hereunder, subject to approval of this Agreement and the sale of the Purchased Assets contemplated hereby by the Seller Stockholders holding a majority of the outstanding shares of Seller Common Stock entitled to vote on such matters at a stockholders’ meeting duly called and held for such purpose (the “ Selling Stockholders’ Meeting ”).  The execution, delivery and performance of this Agreement and the approval of the consummation of the sale of the Purchased Assets and the other transactions contemplated hereby have, as of the date hereof, been unanimously recommended by, and are duly and validly adopted and approved by a vote of, the board of directors of Seller.  The board of directors of Seller has unanimously deemed the terms and conditions of this Agreement expedient and in the best interests of Seller and has directed that this Agreement and the sale of the Purchased Assets contemplated hereby be submitted to the Seller Stockholders for approval at the Seller Stockholders’ Meeting and, except for the approval of this Agreement and the sale of the Purchased Assets contemplated hereby by the Seller Stockholders, no other corporate proceedings on the part of Seller is necessary to authorize the execution, delivery and performance of this Agreement, the consummation of the sale of the Purchased Assets or the other transactions contemplated hereby.  This Agreement has been duly and validly executed and delivered by Seller and (assuming due authorization, execution and delivery by Buyer) constitutes the valid and binding obligations of Seller, enforceable against Seller in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors’ rights and general principles of equity.

 

4.3          No Violation; Required Filings and Consents .   Assuming the approval of this Agreement and the sale of the Purchased Assets contemplated hereby by the Seller Stockholders and except (a) for filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the Exchange Act, (b) government clearances or approvals contemplated by Section 6.3(b) , and (c) as otherwise set forth in Section 4.3 of the Seller Disclosure Schedule , none of the

 

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execution, delivery or performance of this Agreement by Seller, the consummation by Seller of the transactions contemplated hereby and compliance by Seller with any of the provisions hereof will (i) conflict with or result in any breach of any provision of the organizational documents of Seller or any of the Subsidiaries of Seller, (ii) require any filing with, notice by, or permit, authorization, consent or approval of, any Governmental Authority, (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which Seller or any of the Subsidiaries of Seller is a party or by which it or any of its respective properties or assets may be bound, or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Seller or any of the Subsidiaries of Seller or any of its or their respective properties or assets, excluding from the foregoing clauses (ii) , (iii) and (iv) such filings, notices, permits, authorizations, consents, approvals, violations, breaches or defaults that would not, individually or in the aggregate, (A) prevent or materially delay consummation of the transactions contemplated hereby, (B) otherwise prevent or materially delay performance by Seller of its material obligations under this Agreement, or (C) have a Business Material Adverse Effect.

 

4.4          Business Financial Statements .

 

(a)           True and complete copies of (i) the unaudited consolidated balance sheet of the Business as of December 31, 2007 (the “ December 2007 Balance Sheet ”) and June 30, 2008 (the “ Most Recent Balance Sheet ;” the December 2007 Balance Sheet and the Most Recent Balance Sheet are collectively referred to as the “ Business Balance Sheets ”); and (ii) the related unaudited consolidated statement of income for the twelve (12) month period ended December 31, 2007 and six (6) month period ended June 30, 2008 (collectively with the Business Balance Sheets, the “ Business Financial Statements ”) have been provided to Buyer.  The Business Balance Sheets have been prepared in accordance with GAAP.  The Business Financial Statements present fairly in all material respects the consolidated financial condition of the Business and consolidated results of the Business’s operations at and for the periods presented, except for the absence of footnotes and year-end adjustments that did not and would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect.  The Business Financial Statements do not contain any items of special or non-recurring income or other income not earned in the ordinary course of the Business, except as would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect.  The Business Financial Statements do not reflect the operations of any entity or business other than the Business.

 

(b)           Seller and each Subsidiary of Seller maintains accurate books and records reflecting its assets and liabilities and maintains proper and adequate internal control over financial reporting which provide assurance that (i) transactions are executed with management’s authorization, (ii) transactions are recorded as necessary to permit preparation of the financial statements of Seller and to maintain accountability for Seller’s consolidated assets, (iii) access to assets of Seller and the Subsidiaries of Seller is permitted only in accordance with management’s authorization, (iv) the reporting of assets of Seller and the Subsidiaries of Seller is compared with existing assets at regular intervals, and (v) accounts, notes and other receivables and inventory were recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis.

 

(c)           Since December 31, 2007, there have been no material changes in the accounting policies of Seller or any Subsidiary of Seller (including any change in depreciation or amortization policies or rates, or policies with respect to reserves for uncollectible accounts receivable or excess or obsolete inventory).  Seller has delivered to Buyer true and complete copies of all management letters, if any, relating to the Business Financial Statements.  There has been no incidence of fraud, whether or not

 

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material, involving management or other employees of Seller or any Subsidiary of Seller who have a role in the internal controls of Seller or any Subsidiary of Seller.

 

4.5          Broker’s Fees .   Neither Seller, any Subsidiaries of Seller nor any of their respective officers, directors, employees, or agents has employed any broker, finder or financial advisor or incurred any Liability for any fees or commissions in connection with any of the transactions contemplated by this Agreement, except for fees and commissions incurred in connection with the engagement of Cantor Fitzgerald & Co. (the “ Seller’s Advisor ”) and for legal, accounting and other professional fees payable in connection with the transactions contemplated hereby, all of which will be payable by Seller (collectively, “ Seller Fees and Expenses ”).

 

4.6          Absence of Certain Changes or Events .

 

(a)           Since December 31, 2007, except as disclosed in the Seller SEC Reports filed after such date and prior to the date of this Agreement and except as disclosed in the Business Financial Statements, (a) Seller and each of its Subsidiaries have conducted the Businesses in all material respects in the ordinary course consistent with past practice, and (b) there has not been any change, circumstance or event that has had, or would reasonably be expected to have, a Business Material Adverse Effect.

 

(b)           Since the date of the Most Recent Balance Sheet, except as set forth in Section 4.6 of the Seller Disclosure Schedule , there has not been:

 

(i)            any revaluation by a Seller or any Subsidiary of Seller of any of the Purchased Assets, including the writing down or off of notes or accounts receivable, other than in the ordinary course of business;

 

(ii)           any entry by Seller or any Subsidiary of Seller into any material commitment or transaction, including incurring or agreeing to incur capital expenditures related to the Business in excess of, or any entry into any lease obligations with aggregate payments in excess of, one hundred thousand dollars ($100,000), individually or five hundred thousand dollars ($500,000) in the aggregate;

 

(iii)          any theft, condemnation or eminent domain proceeding or any damage, destruction or casualty loss affecting any asset material to the Business, whether or not covered by insurance;

 

(iv)          any sale, assignment, lease or transfer of any asset material to the Business, except in the ordinary course of business;

 

(v)           any waiver by Seller or any Subsidiary of Seller of any material rights related to the Business or the Purchased Assets;

 

(vi)          any mortgage, pledge or other encumbrance of any Purchased Asset, other than Permitted Encumbrances; or

 

(vii)         any declaration, setting aside or payment of any dividend by a Subsidiary of Seller, or the marking of any other distribution in respect of the capital stock of a Subsidiary of Seller, or any direct or indirect redemption, purchase or other acquisition by a Subsidiary of Seller of its own capital stock.

 

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4.7          Legal Proceedings .   Except for such matters individually and specifically described in the Seller SEC Reports filed prior to the date of this Agreement or in Section 4.7 of the Seller Disclosure Schedule , (a) there is no suit, claim, action, proceeding or investigation pending or, to the knowledge of Seller, threatened against Seller or any of its Subsidiaries, and (b) neither Seller nor any Subsidiary is subject to any outstanding order, writ, judgment, injunction or decree of any Governmental Authority, that, in each case, relate to the Business and which would, individually or in the aggregate, (i) prevent or materially delay the consummation of the transactions contemplated hereby, (ii) otherwise prevent or materially delay performance by Seller of any of its material obligations under this Agreement, or (iii) have a Business Material Adverse Effect.

 

4.8          Reports .   Since December 31, 2007, Seller has filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that were and are required to be filed with the SEC, including, but not limited to, Forms 10-K, Forms 10-Q and Forms 8-K (collectively, the “ Seller SEC Reports ”).  As of their respective effective dates (in the case of Seller SEC Reports that are registration statements filed pursuant to the requirements of the Securities Act) and as of their respective SEC filing dates (in the case of all other Seller SEC Reports), or in each case, if amended prior to the date hereof, as of the date of the last such amendment, the Seller SEC Reports complied and, with respect to filings made after the date of this Agreement, will at the date of filing comply, in all material respects with all of the statutes, rules and regulations enforced or promulgated by the regulatory authority with which they were filed and did not contain and, with respect to filings made after the date of this Agreement, will not at the date of filing contain, any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  None of Seller’s Subsidiaries is required to file periodic reports with the SEC pursuant to the Exchange Act.  Seller has provided to Buyer true, correct, and complete copies of all amendments and modifications that have not been filed by Seller with the SEC to all agreements, documents and other instruments that previously had been filed by Seller with the SEC and are currently in effect.

 

4.9          Absence of Undisclosed Liabilities .   Since December 31, 2007, except for those Liabilities that are fully reflected or reserved against on the Business Financial Statements and for Liabilities incurred in the ordinary course of the Business consistent with past practice, the Business has not incurred any Liability of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable, known or unknown or otherwise that, either alone or when combined with all similar Liabilities, either individually or in the aggregate, has had, or would reasonably be expected to have, a Business Material Adverse Effect.

 

4.10        Compliance with Applicable Laws and Reporting Requirements .   Seller and its Subsidiaries hold and maintain, in full force and effect, all material permits, licenses, variances, authorizations, exemptions, orders, consents, registrations and approvals of all Governmental Authorities or private telephone companies that are required for the operation of the Business (the “ Business Permits ”), and Seller and each of its Subsidiaries is in material compliance with the terms of the Business Permits and all applicable laws and regulations relating to the operation of the Business (including, without limitation, applicable Environmental Laws).  Except as set forth in Section 4.10 of the Seller Disclosure Schedule , Seller has not operated the Business in violation of any Law (including but not limited to the USA PATRIOT Act of 2001 and export Laws), except for possible violations, which, individually or in the aggregate, do not have, and would not reasonably be expected to have, a Business Material Adverse Effect.  Except as set forth in Section 4.10 of the Seller Disclosure Schedule , to the knowledge of Seller, no investigation by any Governmental Authority with respect to the Business is pending or threatened, other than, in each case, those the outcome of which, individually or in the aggregate, would not reasonably be expected to have a Business Material Adverse Effect.

 

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4.11        Title and Condition of Purchased Assets; Sufficiency .

 

(a)           Except as set forth in Section 4.11(a) of the Seller Disclosure Schedule , Seller and its Subsidiaries own good title, free and clear of all Encumbrances (other than Permitted Encumbrances) to all personal property included in the Purchased Assets and other non-real estate assets included in the Purchased Assets.

 

(b)           The tangible Purchased Assets are in good operating condition, working order and repair, subject to ordinary wear and tear, free from material defects, are usable in the ordinary course of the Business and are suitable for the purposes for which they are currently being used.

 

(c)           Other than the Excluded Assets, the Purchased Assets constitute all of the assets and properties of Seller and its Subsidiaries that are related to or used or held for use in connection with the Business and are necessary to permit Buyer to carry on the Business immediately following the Closing in the same manner as presently conducted.

 

(d)           Customer Offerings as currently marketed by Seller and the Subsidiaries of Seller comply with the European Union Directive on the Restriction of the Use of Certain Hazardous Substance in Electrical and Electronic Equipment (2002/95/EC) (the “ RoHS Directive ”).  All finished Customer Offerings or work in process or components conveyed and transferred to Buyer or a designated Subsidiary of Buyer hereunder are compliant with the RoHS Directive or may be used in Customer Offerings that as finished goods would be compliant with the RoHS Directive.  To the knowledge of Seller, except as set forth in Section 4.11(d) of the Seller Disclosure Schedule , its Customer Offerings have been compliant with the RoHS Directive since such RoHS Directive came into force in each European Union member state.

 

4.12        Taxes and Tax Returns .

 

(a)           Seller and each Subsidiary of Seller has timely filed (or has caused to be timely filed on its behalf) (after taking into account any extension of time within which to file) all material Tax Returns required to be filed by it.  All non-income Tax Returns filed by Seller and each Subsidiary of Seller with respect to the Purchased Assets (but only to the extent relating to Assumed Liabilities) were, when filed, and continue to be, true, correct and complete.  Seller and each Subsidiary of Seller have timely paid (or have caused to be timely paid on its behalf) all material Taxes payable by any of them (whether or not shown on any Tax Return), other than Taxes that are being contested in good faith pursuant to appropriate proceedings.  To the knowledge of Seller, no deficiencies for any material amount of Taxes have been proposed, asserted or assessed against Seller or any of its Subsidiaries as of the date hereof.  No requests for waivers of the time to assess any such material Taxes of Seller or any Subsidiary are pending.  There are no liens for Taxes (other than Taxes not yet due and payable) on the Purchased Assets.

 

(b)           None of Seller or any Subsidiary of Seller is a “foreign person” within the meaning of Section 1445(f)(2) of the Code.

 

(c)           None of the Assumed Liabilities is an obligation to make a payment that would not be deductible pursuant to Section 280G, Section 162(m) or Section 404 of the Code (or any corresponding provision of state, local or foreign Law).

 

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4.13        Employee Benefit Programs .

 

(a)           Section 4.13(a) of the Seller Disclosure Schedule sets forth a list of each material “employee benefit plan” (within the meaning of Section 3(3) of ERISA), each “multiemployer” plan (within the meaning of Section 4001 of ERISA, and each other bonus, incentive compensation, deferred compensation, profit sharing, severance, equity plan, award or arrangement (such as an option plan, stock, restricted stock, stock options, stock purchase, stock appreciation right or performance share), or any other similar plan, agreement, policy or understanding (whether written or oral, qualified or nonqualified), which provides benefits, or describes policies or procedures sponsored or maintained by Seller or any of its Subsidiaries in which the Business Employees participate in any country in the world (collectively, the “ Business Benefit Plans ”).

 

(b)           Seller has provided to Buyer complete and accurate copies of each of the following with respect to each of the Business Benefit Plans:  (i) plan document and any amendment thereto; (ii) trust agreement or insurance contract (including any fiduciary liability policy or fidelity bond), if any; (iii) most recent IRS determination or opinion letter, if any; (iv) most recent annual report on Form 5500 required to be filed with the IRS (if any such report was required); and (v) summary plan description.

 

(c)           Except as set forth in Section 4.13(c) of the Seller Disclosure Schedule , each of the Business Benefit Plans, which are maintained or contributed to by Seller or any of its Subsidiaries, has been and is administered in compliance with its terms in all material respects and has been and is in compliance in all material respects with the applicable provisions of ERISA, the Code and all other applicable Laws, except as would not, individually or in the aggregate, have a Business Material Adverse Effect.

 

(d)           Each of the Business Benefit Plans that is intended to be a qualified plan within the meaning of Code Section 401(a) has received a favorable determination or opinion letter from the IRS regarding its qualification thereunder.

 

(e)           Except as set forth in Section 4.13(e) of the Seller Disclosure Schedule , neither Seller nor any of its Subsidiaries provides or has agreed to provide healthcare or any other non-pension benefits to any Business Employees after their employment is terminated (other than as required by Part 6 of Subtitle B of Title I of ERISA or state health continuation laws).

 

(f)            Except with respect to the agreements disclosed in Section 4.13(f) of the Seller Disclosure Schedule , neither Seller nor any of its Subsidiaries is a party to any written (i) agreement with any director, or Key Employee of Seller or any of its Subsidiaries with respect to the Business (A) the benefits of which are contingent, or the terms of which are materially altered, upon the occurrence of a transaction involving Seller or any of its Subsidiaries of the nature of any of the transactions contemplated by this Agreement, (B) providing any term of employment or compensation guarantee, or (C) providing severance benefits or other benefits after the termination of employment of such director or Key Employee; (ii) agreement or plan binding Seller or any of its Subsidiaries, including any stock option plan, stock appreciation right plan, restricted stock plan, stock purchase plan or severance benefit plan, any of the benefits of which shall be increased, or the vesting of the benefits of which shall be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which shall be calculated on the basis of any of the transactions contemplated by this Agreement; or (iii) any agreement, plan or other arrangement with any Key Employee of Seller or its Subsidiaries that could reasonably be expected to give rise directly or indirectly to the payment of any amount that would not be deductible by Buyer under Section 280G of the Code.

 

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4.14        Labor and Employment Matters .

 

(a)           With respect to the Business, Seller and its Subsidiaries are in material compliance with all federal, state, and foreign laws respecting employment and employment practices, terms and conditions of employment, and wages and hours, including but not limited to Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, the Americans with Disabilities Act, as amended, and the related rules and regulations adopted by those federal agencies responsible for the administration of such laws (except such non-compliance as would not reasonably be expected to have a Business Material Adverse Effect), and other than normal accruals of wages during regular payroll cycles, there are no arrearages in the payment of wages, salaries, commissions, bonuses or other direct or indirect compensation or amounts required to be reimbursed except for possible violations or arrearages, which, individually or in the aggregate, do not have, and would not reasonably be expected to have, a Business Material Adverse Effect.  To the knowledge of Seller, there is no organizational effort currently being made or threatened in writing by or on behalf of any labor union with respect to employees of Seller or any Subsidiary of Seller.  Neither Seller nor any Subsidiary of Seller has experienced, and, to the knowledge of Seller, there is no basis for, any strike, material labor dispute, work stoppage, slow down or other interference with or impairment of the Business.

 

(b)           Neither Seller nor any of its Subsidiaries is a party to, or otherwise bound by, any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization.  To the knowledge of Seller neither Seller nor any of its Subsidiaries is subject to any charge, demand, petition or representation proceeding seeking to compel, require or demand it to bargain with any labor union or labor organization nor, to the knowledge of Seller, is there pending or threatened, any labor strike or lockout involving Seller or any of its Subsidiaries.

 

(c)           To the knowledge of Seller, each Seller and each Subsidiary of Seller is, and at all times has been, in material compliance with the applicable requirements of the Immigration Reform Control Act of 1986.

 

(d)           To the knowledge of Seller, each Seller and each Subsidiary of Seller is, and at all times has been in compliance with the applicable requirements of Executive Order 11246, the Rehabilitation Act of 1973, the Vietnam Veterans Readjustment Act and the Fair Labor Standards Act.

 

(e)           Seller and each Subsidiary of Seller has complied with all garnishment of wages required by any Government Authority or applicable Law.

 

4.15        Material Contracts .

 

(a)           Except as set forth on the Seller Disclosure Schedule, as of the date of this Agreement, with respect to the Business, none of Seller or its Subsidiaries is a party to or bound by any contract:

 

(i)            that would be required to be filed by Seller as a “material contract” pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act other than those contracts filed as exhibits to the Seller SEC Reports;

 

(ii)           containing covenants binding upon Seller or its Subsidiaries that (A) restrict the ability of Seller or any of its Subsidiaries to cause the Business to compete in any line of business or with any Person or in any geographic area, or to own, operate, sell, transfer, pledge or otherwise dispose of or encumber any Purchased Asset, (B) grant

 

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“most favored nation” status to any Person, or (C) would otherwise restrict in any material respect the development, manufacture, marketing or distribution of Customer Offerings;

 

(iii)          (A) with a customer or providing marketing, resale, distribution, sales representative or similar arrangement relating to any product or service, that, taken in the aggregate with any related contracts, could reasonably be expected to account for revenues in excess of two hundred fifty thousand dollars ($250,000) in the twelve (12) month period ending December 31, 2008, and (B) with a supplier, that, taken in the aggregate with any related contracts, could reasonably be expected to account for payments in excess of one hundred thousand dollars ($100,000) in the twelve (12) month period ending December 31, 2008;

 

(iv)          with any Affiliate;

 

(v)           containing any standstill or similar agreement pursuant to which Seller or any of its Subsidiaries has agreed not to acquire assets or securities of another Person that, following the Closing, would apply to Buyer and its Subsidiaries;

 

(vi)          providing for indemnification by Seller or any of its Subsidiaries of any Person, except for contracts which are not material to the Business as a whole and entered into in the ordinary course of the Business that, following the Closing, would apply to Buyer and its Subsidiaries;

 

(vii)         that is a lease of personal property providing for annual rentals of twenty-five thousand dollars ($25,000) or more or fifty thousand dollars ($50,000) or more over the term of such lease;

 

(viii)        providing for a partnership, joint venture, collaboration or other similar agreement or arrangement;

 

(ix)           relating to the acquisition or disposition of any business (whether by merger, sale of stock, sale of assets or otherwise);

 

(x)            relating to indebtedness for borrowed money or the deferred purchase price of property (in either case, whether incurred, assumed, guaranteed or secured by any asset) or under which a lien has or could be imposed on any of Seller’s or a Subsidiary of Seller’s material assets, tangible or intangible, including deposit account control agreements and similar restrictive agreements;

 

(xi)           that is an option, license, franchise or similar agreement, other than in the ordinary course of business;

 

(xii)          that is an agency, dealer, sales representative, marketing or other similar agreement, other than in the ordinary course of business ;

 

(xiii)         that is a material “single source” supply or development contract;

 

(xiv)        granting a third party any license to any material Business Intellectual Property Assets that is not limited to the internal use of such third party, other than in the ordinary course of business;

 

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(xv)         pursuant to which Seller or any of its Subsidiaries has been granted by a third party any license to any Intellectual Property Assets that is material to Seller, other than in the ordinary course of business;

 

(xvi)        (A) providing for any license or franchise granted by Seller or any of its Subsidiaries pursuant to which Seller or any of its Subsidiaries has agreed or is required to provide any third party with access to source code or to provide for such source code to be put into escrow or (B) containing a provision having the effect of providing that the consummation of any of the transactions contemplated hereby or the execution, delivery or effectiveness of this Agreement will require that a third party be provided with access to source code or that any such source code be released from escrow and provided to any third party;

 

(xvii)       pursuant to which Seller or any of its Subsidiaries receives consulting or maintenance services that involves payments by Seller or any of its Subsidiaries in excess of fifty thousand dollars ($50,000) per year or two hundred fifty thousand dollars ($250,000) over the term of such contract and is either not terminable by Seller or such Subsidiary on notice of ninety (90) days or less or has a term of more than one (1) year;

 

(xviii)      any agreement or instrument providing for any payment or benefit in excess of ten thousand dollars ($10,000) (or the acceleration or vesting of any rights with a value in excess of ten thousand dollars ($10,000)) upon execution of this Agreement or consummation of the transactions contemplated hereby; or

 

(xix)         not made in the ordinary course of business that is material to the Business.

 

Each such contract described in clauses (i) through (xviii) is referred to herein as a “ Material Contract ”.

 

(b)           Seller has provided to Buyer a copy of each written Material Contract.  Except as described in Section 4.15(b) of the Seller Disclosure Schedule : (i) each Material Contract is valid, binding and in full force and effect and enforceable in accordance with its terms and each such Material Contract has not expired or terminated in accordance with its terms (as of the date of this Agreement), by act or omission of any party or otherwise, (ii) Seller and each Subsidiary of Seller has performed all of its obligations under each Material Contract, and there exists no breach or default (or event that with notice or lapse of time would constitute a breach or default) on the part of Seller or such Subsidiary of Seller or, to the knowledge of Seller, on the part of any other Person under any Material Contract and (iii) there has been no termination or written notice of default or, to the knowledge of Seller, any termination or threatened termination under any Material Contract.

 

4.16        Properties .

 

(a)           Neither Seller nor any of its Subsidiaries owns any real property.  Section 4.16(a) of the Seller Disclosure Schedule lists all real property leased or subleased to or by Seller or any of its Subsidiaries in connection with the Business (other than the Excluded Leases).  Seller has provided Buyer true, correct, and complete copies of the leases and subleases (each as amended to date) of the properties listed in Section 4.16(a) of the Seller Disclosure Schedule .  With respect to each such lease and sublease of the properties listed in Section 4.16(a) of the Seller Disclosure Schedule :

 

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(i)            the lease or sublease is a valid, binding and enforceable obligation of Seller or its Subsidiary, as the case may be, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors’ rights and general principles of equity;

 

(ii)           neither Seller nor any of its Subsidiaries, nor to the knowledge of Seller, any other party, is in breach or violation of, or default under, any such lease or sublease, and no event has occurred, is pending or, to the knowledge of Seller, is threatened, which, after the giving of notice or the lapse of time or both, would constitute a breach or default by Seller or any of its Subsidiaries, or to the knowledge of Seller, any other party under such lease or sublease;

 

(iii)          neither Seller nor any of its Subsidiaries has assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in such leasehold or subleasehold; and

 

(iv)          there are no Encumbrances, easements, covenants or other restrictions applicable to the real property subject to such lease or sublease, except for recorded easements, covenants and other restrictions, which do not, individually or in the aggregate, materially impair the current uses or the occupancy by Seller or its Subsidiaries, as the case may be, of the property subject thereto.

 

(b)           Seller and its Subsidiaries, as lessees, have the right under valid and subsisting leases to use, possess and control all personal property (other than the Excluded Assets) leased by Seller or its Subsidiaries as now used, possessed and controlled by Seller or its Subsidiaries, as applicable, in connection with the Business.

 

4.17        Environmental Liability .

 

(a)           With respect to the Business and the Purchased Assets, there are no legal, administrative, arbitral or other proceedings, claims, demands, actions, causes of action, or governmental investigations or remediation activities of any nature seeking to impose, or that are reasonably likely to result in the imposition, on Seller, the Subsidiaries of Seller or the Business of any material Liability arising under common law or under applicable Environmental Law pending or, to the knowledge of Seller, threatened against Seller, the Subsidiaries of Seller or the Business.  To the knowledge of Seller, there is no reasonable basis for any such proceeding, claim, demand, action, cause of action or governmental investigation or remediation action with respect to the Business or Purchased Assets that would be reasonably likely to impose any material Liability on Seller, the Subsidiaries of Seller or the Business.  None of Seller, the Subsidiaries of Seller or the Business is subject to any agreement, order, judgment, decree, demand, request for information, notice of violation, or notice of noncompliance, by or with any Governmental Authority or third party imposing or alleging any material Liability with respect to the presence, Release, threat of Release of or exposure to Hazardous Substances or violation or alleged violation of Environmental Laws.

 

(b)           Except as set forth in Section 4.17(b) of the Seller Disclosure Schedule , (i) no portion of any real property presently owned, leased or operated by Seller or the Subsidiaries of Seller has been used by Seller or Subsidiaries of Seller for the handling, manufacturing, processing, generation, storage or disposal of Hazardous Substances, except as is customary for the operation of the Business and in material compliance with applicable Environmental Laws, and no underground tank or other underground storage receptacle for Hazardous Substances is located on such properties, and (ii) there have been no Releases of Hazardous Substances by Seller or the Subsidiaries of Seller or, to the

 

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knowledge of Seller, any third party on, upon, into or from any real property presently owned, leased or operated by Seller or the Subsidiaries of Seller.

 

(c)           No real property presently used by Seller or Subsidiaries of Seller for the operation of the Business is subject to any applicable environmental cleanup responsibility law or environmental restrictive transfer law or regulation, by virtue of the transactions set forth herein and contemplated hereby.

 

(d)           Notwithstanding any other provision of this Agreement, Section 4.10 and this Section 4.17 constitute the sole representations of Seller relating to Environmental Laws, Hazardous Substances Excluded Environmental Liabilities or other environmental matters.

 

4.18        State Takeover Laws .   The board of directors of Seller has approved this Agreement and taken all other requisite action such that the restrictions of any antitakeover laws and regulations of any Governmental Authority will not apply to this Agreement or any of the transactions contemplated hereby, subject to the accuracy of the representations and warranties set forth in Section 3.9 hereof.

 

4.19        Intellectual Property .

 

(a)           The term “Intellectual Property Assets” means:

 

(i)            all United States, foreign and international patents, patent applications , and statutory inventions registrations, reissues, divisions, continuations, continuations-in-part, extensions and reexaminations thereof, and all rights therein provided by international treaties and conventions and discoveries that may be patentable (collectively, “ Patents ”);

 

(ii)           all fictional business names, trade names, trade dress, logos, slogans, corporate names, uniform resource locator addresses, Internet domain names and symbols, , registered and unregistered trademarks and service marks including the goodwill of the business symbolized thereby or associated therewith, common law rights thereto, registrations and applications for registration thereof throughout the world, all rights therein provided by international treaties and conventions, and all other rights associated therewith (collectively, “ Marks ”);

 

(iii)          all rights in mask works (as defined in 17 U.S.C §901) and in both published and unpublished works of authorship of any type, including without limitation all Software, compilations, all registrations and applications for registration thereof throughout the world, all rights therein provided by international treaties and conventions, all moral and common law rights thereto, and all other rights associated therewith (collectively, “ Copyrights ”);

 

(iv)          all know-how, trade secrets, inventions (including all invention disclosures) and other confidential or proprietary information, including, customer and supplier lists and information, technical information, manufacturing and production processes and techniques, research and development information, financial, marketing and business data, pricing and cost information, data, process technology, specifications, designs, plans, drawings, proposals, and blue prints, and all rights in any jurisdiction to limit the use or disclosure thereof (collectively, “ Trade Secrets ”); and

 

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(v)           means computer software, programs and databases in any form, including source code, object code, operating systems and specifications, data, databases, database management code, utilities, graphical user interfaces, menus, images, icons, forms, methods of processing, software engines, platforms, data formats, internet web sites, web content and links, all versions, updates, corrections, enhancements and modifications thereof, and all related documentation, developer notes, comments and annotations (collectively, “ Software ”).

 

(b)           Section 4.19(b) of the Seller Disclosure Schedule contains a complete and accurate list of all Business Patents, all registered and material unregistered Business Marks, and all registered Business Copyrights.

 

(c)           Except as set forth in Section 4.19(c) of the Seller Disclosure Schedule , Seller or a Subsidiary of Seller exclusively owns all right, title and interest in and to the Owned Intellectual Property Assets listed in Section 4.19(b) of the Seller Disclosure Schedule , free and clear of all Encumbrances other than Permitted Encumbrances.

 

(d)           Patents .

 

(i)            Each of the Business Patents properly identifies each and every inventor of the claims thereof as determined in accordance with applicable Law.  All of the issued Business Patents have been registered and/or filed with the appropriate Governmental Authority in the jurisdiction listed in Section 4.19(b) of the Seller Disclosure Schedule , are not subject to any maintenance fees or taxes or actions falling due within ninety (90) days after the Closing Date, are currently in compliance with formal legal requirements (including payment of filing, examination, and maintenance fees and proofs of working or use), and, to the knowledge of Seller, are valid and enforceable, except for such issuances, registrations or applications that Seller has permitted to expire or has cancelled or abandoned in its reasonable business judgment.  In each case where a Large Entity Fee was supposed to be paid to any Governmental Authority for any Business Patent, the Large Entity Fee was paid.

 

(ii)           No Business Patent has been or is now involved in any interference, reissue, reexamination, or opposition proceeding, including ex parte and post-grant proceedings, in the United States Patent and Trademark Office or in any Governmental Authority, nor, to the knowledge of Seller, is there any basis for any such proceeding.  None of the Business Patents have been declared invalid, in whole or in part, by any Governmental Authority.

 

(iii)          To the knowledge of Seller, no Business Patent is being infringed by a third party.

 

(e)           Marks .

 

(i)            All Business Marks that have been registered or for which an application has been filed with a Governmental Authority (the “ Registered Marks ”) in the jurisdiction listed in Section 4.19(b) of the Seller Disclosure Schedule , are not subject to any maintenance fees or taxes or actions falling due within ninety (90) days after the Closing Date, are currently in compliance with all applicable legal requirements (including the post-registration filing of affidavits of use and incontestability and renewal applications), and are valid and enforceable, except for such issuances, registrations or

 

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applications that Seller has permitted to expire or has cancelled or abandoned in its reasonable business judgment..

 

(ii)           No Registered Mark has been or is now involved in any opposition, invalidation, or cancellation and, to the knowledge of Seller, no such action is threatened with the respect to any of such Marks.

 

(iii)          To the knowledge of Seller, no Business Mark is infringed by any third party.  None of the Business Marks infringe any Mark of any third party.

 

(f)            Copyrights .

 

(i)            All Business Copyrights have been registered with each appropriate Governmental Authority in the jurisdiction listed in Section 4.19(b) of the Seller Disclosure Schedule , and are currently in compliance with formal legal requirements, are valid and enforceable, and are not subject to any maintenance fees or taxes or actions falling due within ninety (90) days after the Closing Date.  None of the Business Copyrights have been abandoned by Seller or expired or declared invalid, in whole or in part,