ASSET PURCHASE AGREEMENT

Exhibit 2.1

 

ASSET PURCHASE AGREEMENT

 

By and Among

COMARCO WIRELESS TECHNOLOGIES, INC.,

COMARCO, INC.,

ASCOM HOLDING AG

and

ASCOM INC.

Dated as of September 26, 2008

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This ASSET PURCHASE AGREEMENT (this “ Agreement ”), is dated as of September 26, 2008 (the “ Effective Date ”), by and among Comarco Wireless Technologies, Inc., a Delaware corporation (“ CWT ”), Comarco, Inc., a California corporation (“ Comarco ,” and collectively with CWT, the “ Seller ”) and Ascom Inc., a California corporation (the “ Purchaser ”), Ascom Holding AG, a corporation organized under the laws of Switzerland (“ Parent ”). CWT, Comarco, Purchaser and Parent may each be referred to herein individually, as a “ Party ,” and collectively, as the “ Parties .”

WHEREAS, the Seller is engaged in the business of designing, developing, manufacturing, marketing, licensing, selling and supporting drive test and air interface test equipment to operators, carriers, regulators and infrastructure manufacturers throughout the world (the “ Business ”); and

WHEREAS, the Seller desires to sell to the Purchaser, and the Purchaser desires to purchase from the Seller, the Purchased Assets (as defined below), and in connection therewith the Purchaser is willing to assume from the Seller the Assumed Liabilities (as defined below), and to induce Seller to enter into this Agreement Parent agrees to indemnify Seller against certain Losses (as defined below), all upon the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the promises and the mutual agreements and covenants hereinafter set forth, and intending to be legally bound, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01 Certain Defined Terms . For purposes of this Agreement:

“ 401(k) Payments ” shall mean all payments, including, without limitation, tax-deferred contributions, matching contributions and discretionary contributions, required to be made by the Seller pursuant to the terms of the Comarco, Inc. Savings & Retirement Plan.

“ Acquisition Proposal ” shall mean any bona fide offer, proposal or indication of interest (other than an offer, proposal or indication of interest by Purchaser or Parent or an Affiliate thereof) contemplating or otherwise relating to any Acquisition Transaction.

“ Acquisition Transaction ” shall mean any transaction or series of transactions involving:

(a) any merger, consolidation, share exchange, business combination, direct or indirect acquisition of securities, recapitalization, tender offer, exchange offer or other similar transaction in which a Person or “group” (as defined in the Exchange Act and the rules promulgated thereunder) of Persons directly or indirectly acquires beneficial or record ownership of securities representing more than 50% of the outstanding voting securities of Comarco, in each case, excluding any merger, consolidation, share exchange, business combination, direct or indirect acquisition of securities, recapitalization, tender offer, exchange offer or other similar transaction which does not contemplate including the Purchased Assets as part of Comarco at the time of the transaction;

 

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(b) any sale, lease, exchange, transfer, exclusive license, acquisition or disposition of all or substantially all of the Purchased Assets, other than in the Ordinary Course of Business;

(c) any liquidation or dissolution of Comarco which would materially and adversely impact the transfer and sale of the Purchased Assets as contemplated hereby; or

(d) any combination of the foregoing;

and in each case, other than the Transactions (as defined below).

“ Action ” means any claim, action, suit, arbitration, inquiry, proceeding or investigation that is pending by or before any Governmental Authority.

“ Affiliate ” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.

“ Ancillary Agreements ” means the Bill of Sale, the Assignment of Trademarks, Assignment of Patent Rights, the Transition Services Agreement, the Assignment and Assumption Agreement, the Ascom Termination Agreement, the Management Agreement, the Assignment and Assumption of Lease, the Sublease (subject to the terms and conditions herein), and the Trademark License Agreement.

“ Ascom Agreement ” means the Development and Sales Agreement between Comarco and Ascom (Schweiz) AG, dated November 8, 2006 and any amendments, modifications and supplements thereto.

“ Ascom Termination Agreement ” means the Ascom Termination Agreement terminating the Ascom Agreement to be executed and delivered by the Ascom (Schweiz) AG and the Seller at the Closing, in the form of Exhibit A .

“ Assignment and Assumption Agreement ” means the Assignment and Assumption Agreement to be executed and delivered by the Purchaser and the Seller at the Closing, in the form of Exhibit B .

“ Assignment and Assumption of Lease ” means the Assignment and Assumption of the International Real Property Lease to be executed and delivered by the Purchaser and the Seller at the Closing, in the form of Exhibit C .

“ Assignment of Patent Rights ” means the Assignment of Patent Rights to be executed and delivered by Seller at the Closing, in the form of Exhibit D .

“ Assignment of Trademarks ” means the Assignment of Trademarks to be executed and delivered by the Seller at the Closing, in the form of Exhibit E .

 

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“ Bill of Sale ” means the Bill of Sale to be executed by the Purchaser and Seller at the Closing, in the form of Exhibit F .

“ Business Day ” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in the City of Los Angeles, California or Zurich, Switzerland.

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

“ Comarco Board ” means the board of directors of Comarco, Inc. as in effect from time to time.

“ control ” (including the terms “ controlled by ” and “ under common control with ”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly or as trustee, personal representative or executor, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee, personal representative or executor, by contract, credit arrangement or otherwise.

“ Conveyance Taxes ” means all excise, value added, registration, stamp, property, documentary, transfer, sales, use, gains and similar Taxes, real estate transfer Taxes, levies, charges and fees arising from the consummation of the Transactions.

“ Copyrights ” shall mean all copyrights, including in and to works of authorship and all other rights corresponding thereto throughout the world, whether published or unpublished, including, without limitation, rights to prepare, reproduce, perform, display and distribute copyrighted works and copies, compilations and derivative works thereof.

“ Disclosure Schedule ” means the Disclosure Schedule(s) of a Party attached hereto.

“ Encumbrance ” means any lien, pledge, hypothecation, charge, mortgage, security interest, encumbrance, claim, preference, right of possession, encroachment, right of first refusal, preemptive right, or imperfection of title, other than any licenses of Intellectual Property.

“ Environmental Law ” means any and all federal, state, local and foreign statutes, regulations, ordinances and similar provisions having the force or effect of Law, all judicial and administrative orders and determinations, all contractual obligations and all common law concerning public health and safety, worker health and safety and pollution or protection of the environment, including, without limitation, all such standards of conduct and bases of obligations relating to the presence, use, production, generation, handling, transport, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control, or cleanup of any hazardous materials, substances or wastes, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum products or by-products, asbestos, polychlorinated biphenyls (or PCBs), noise or radiation.

 

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“ Environmental Permits ” means any Permit, approval, identification number, license and other authorization, as applicable, required under or issued pursuant to any applicable Environmental Law.

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

“ ERISA Affiliate ” means any corporation, partnership, limited liability company, sole proprietorship, trade, business or other entity that, together with Seller, is treated as a single employer under Section 414(b), (c) or (m) of the Code.

“ Excluded Taxes ” means all Taxes relating to the Purchased Assets or the Business for any Pre-Closing Period. For purposes of this Agreement, in the case of any Straddle Period, (i) Property Taxes relating to the Purchased Assets allocable to the Pre-Closing Period shall be equal to the amount of such Property Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days during the Straddle Period that fall within the Pre-Closing Period and the denominator of which is the number of days in the entire Straddle Period, and (ii) Taxes (other than Property Taxes) relating to the Purchased Assets for the Pre-Closing Period shall be computed as if such taxable period ended as of the close of business on the date of the Closing.

“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder from time to time.

“ GAAP ” means United States generally accepted accounting principles and practices in effect from time to time applied consistently throughout the periods involved.

“ Governmental Approval ” shall mean any: (a) Permit, license, certificate, concession, approval, consent, ratification, permission, clearance, confirmation, exemption, waiver, franchise, certification, designation, rating, registration, variance, qualification, accreditation or authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Authority or pursuant to any Legal Requirement; or (b) right under any contract with any Governmental Authority.

“ Governmental Authority ” means any federal, foreign, national, supranational, state, provincial, local or other government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body.

“ Governmental Order ” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

“ Insider ” means any officer, director or executive employee, as applicable, of Seller at issue or to the Knowledge of Seller, any spouse or immediate family member of any such individual or any entity in which any of the foregoing persons owns a 5% or greater direct or indirect beneficial interest.

“ Intellectual Property ” shall mean any or all rights in and to intellectual property and intangible industrial property rights, including, without limitation, (i) Patents, Trade Secrets, Copyrights, Mask Works, Trademarks, (ii) Trade Information, and (iii) any rights similar, corresponding or equivalent to any of the foregoing anywhere in the world.

 

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“ International Real Property Lease ” means the Contrato de Arrendamiento dated February 1, 2008 between CWT and Bienes Inmuebles Maya, S.A. de C.V. for the premises located at Paseo de la Reforma 234 Juarez, Mexico.

“ Inventory ” means all inventory, finished goods, work in progress, samples, packaging, service parts, purchased parts and goods and raw materials related to the Business and owned, held or stored by or for the Seller (wherever located), as of the Closing, and any and all rights to market and sell all such Inventory.

“ IRS ” means the Internal Revenue Service of the United States.

“ Landlord ” means Palm Terrace Office Company, LP, the landlord under the Lake Forest Lease.

“ Lake Forest Lease ” means the Office Lease originally between Metropolitan Life Insurance Company and Comarco, dated May 9, 2006, for the preemies located at 25541 Commercentre Drive, Lake Forest, California.

“ Law ” means any federal, national, supranational, foreign, international, state, provincial, local or similar statute, law, ordinance, regulation, rule, code, order, requirement or rule of law (including, without limitation, common law).

“ Lease ” shall mean the lease, to the extent executed in connection with the Closing between Purchaser and the Landlord with respect to the facilities located at 25541 Commercentre Drive, Lake Forest, California, in form and substance reasonably satisfactory to Purchaser and Seller and consistent with the terms set forth in Section 5.13 of this Agreement.

“ Legal Requirement ” shall mean any federal, state, local, municipal, foreign or other law, statute, legislation, constitution, principle of common law, resolution, ordinance, code, order, edict, decree, proclamation, treaty, convention, rule, regulation, permit, ruling, directive, pronouncement, requirement (licensing or otherwise), specification, determination, decision, opinion or interpretation that has been put into effect before or after the Effective Date by or under the authority of any Governmental Authority.

“ Liabilities ” means any and all debts, liabilities (including, without limitation, any unmatured or contingent liability) and obligations including those arising under any Law, Action or Governmental Order and those arising under any contract, agreement, arrangement, commitment or undertaking.

“ Loss ” means, with respect to any Person, any damage, demand, claim, cause of action, cost, damage, deficiency, Tax, penalty, fine or other loss or expense, whether or not arising out of a third party claim, net of (i) any insurance proceeds actually received or to be received by such Person (or which such Person is entitled to receive) relating to such Loss and (ii) Tax benefits actually realized by such Person (or which such Person is entitled to realize ) as a result of the facts giving rise to such Loss, including, without limitation, all interest, penalties,

 

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reasonable out-of-pocket attorneys’ fees and expenses and all of the foregoing amounts to the extent paid or incurred in connection with any action, demand, proceeding, investigation or claim by any third party (including, without limitation, any governmental entity or any department, agency or political subdivision thereof) against or affecting such Person and the investigation, defense or settlement of any of the foregoing.

“ Management Agreement ” means the Agreement in the form attached hereto as Exhibit G .

“ Mask Works ” shall mean all mask works, mask work registrations and applications therefor, and any equivalent or similar rights in masks, layouts, architectures or topology.

“ Material Adverse Effect ” means (a) with respect to the Seller, any event, change, circumstance, effect or state of facts such that when taken individually or together with all other events, changes of circumstance, developments, effects or state of facts, is materially adverse to the Business (taken as a whole) or the ability of the Seller to perform its obligations under this Agreement or to consummate the Transactions; provided , however , that “Material Adverse Effect” shall not include the effect of any event, change, circumstance, effect or state of facts arising out of or attributable to any of the following, either alone or in combination: (i) the markets in which the Business operates generally, except to the extent any such condition has a materially disproportionate effect on the Business, taken as a whole, relative to other Persons principally engaged in the same industry as the Business, (ii) general economic or political conditions (including, without limitation, those affecting the securities or commodities markets), except to the extent any such condition has a materially disproportionate effect on the Business, taken as a whole, relative to other Persons principally engaged in the same industry as the Business, (iii) the announcement of the execution of this Agreement or the pendency of the consummation of the Transactions, (iv) acts of war (whether or not declared), sabotage or terrorism, military actions or the escalation thereof or other force majeure events occurring after the Effective Date, (v) the failure, in and of itself, to meet any published or internally prepared estimates of revenues, earnings or other financial projections, performance measures or operating statistics; provided further , however , that the facts and circumstances underlying the failure enumerated in subpart (v) of this definition may be considered in determining whether a Material Adverse Effect has occurred with respect to the Business, (vi) compliance with the terms of, and taking any action required by, this Agreement, or taking or not taking any actions at the request of, or with the consent of, Purchaser or Parent, (vii) any change in applicable Law, rule or regulation or GAAP or in the interpretations thereof after the Effective Date, so long as such changes do not adversely affect the Business, taken as a whole, in a materially disproportionate manner relative to other Persons principally engaged in the same industry as the Business, or (viii) acts or omissions of Purchaser or Parent after the date of this Agreement, and (b) with respect to Purchaser or Parent, any event, change, circumstance, effect or state of facts that is materially adverse to the ability of Purchaser or Parent to perform their respective obligations under this Agreement or to consummate the Transactions.

“ Ordinary Course of Business ” means actions taken in the ordinary course of the Business that are consistent with past practice (including, without limitation, the collection of Receivables, offers and deliveries to customers, purchases of supplies, repairs and maintenance, payment of accounts payable and accrued expenses, terms of sale, levels of capital expenditures, and operation of cash management practices generally) of the normal operations of the Seller.

 

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“ Patents ” shall mean all United States and foreign patents and utility models and applications therefor and all reissues, divisions, re-examinations, renewals, extensions, provisionals, continuations and continuations-in-part thereof, and equivalent or similar rights anywhere in the world in inventions and discoveries.

“ Permitted Encumbrances ” means (a) statutory liens for current Taxes not yet due or the validity or amount of which is being contested in good faith by appropriate proceedings, (b) mechanics’, carriers’, workers’, repairers’ and other similar liens arising or incurred in the Ordinary Course of Business relating to obligations as to which there is no default on the part of the Seller or the validity or amount of which is being contested in good faith by appropriate proceedings, or pledges, deposits or other liens securing the performance of bids, trade contracts, leases or statutory obligations (including workers’ compensation, unemployment insurance or other social security legislation), (c) zoning, entitlement, exceptions, consents, rights-of-way, conservation restriction and other land use and environmental regulations by Governmental Authorities which do not materially interfere with the present use of the Purchased Assets, and (d) all covenants, imperfections of title, conditions, restrictions, easements, charges, rights-of-way, other Encumbrances or other matters of record set forth in any state, local or municipal franchise under which the Business is conducted which do not materially interfere with the present use of the Purchased Assets.

“ Person ” means any individual, partnership, firm, corporation, limited liability company, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Exchange Act.

“ Pre-Closing Period ” means any taxable period (or portion thereof) ending on or prior to the date of the Closing.

“ Prime Rate ” means the interest rate per annum reported from time to time by The Wall Street Journal.

“ Product Liabilities ” means, with respect to any products designed, manufactured, tested, marketed, distributed or sold by the Seller to the extent relating to the Business, all Liabilities resulting from actual or alleged harm, injury, damage or death to persons, property or business, irrespective of the legal theory asserted.

“ Property Taxes ” means real and personal ad valorem property Taxes and any other Taxes imposed on a periodic basis and measured by the level of any item.

“ Purchase Price Bank Account ” means a bank account in the United States to be designated by the Seller in a written notice to the Purchaser at least two Business Days before the Closing.

“ Real Property ” means all land, buildings, structures, appurtenances, improvements and fixtures erected thereon and all appurtenances related thereto.

 

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“ Receivables ” means any and all accounts receivable from third parties, arising solely from the conduct of the Business outstanding as of the Closing, whether or not in the Ordinary Course of Business, together with any unpaid financing charges accrued thereon.

“ Regulations ” means the Treasury Regulations (including, without limitation, Temporary Regulations) promulgated by the United States Department of Treasury with respect to the Code or other federal tax statutes.

“ Representatives ” means directors, officers, employees, investment bankers, financial advisors, attorneys, accountants, agents and other representatives.

“ Required Shareholder Vote ” means the approval in accordance with the California Corporations Code of the principal terms of the transactions contemplated by the Agreement by the affirmative vote of the holders of a majority of the shares of Comarco’s voting stock outstanding on the record date for Shareholder Meeting and entitled to vote therein.

“ Restraint ” means any Action pending or threatened before any Governmental Authority or before any arbitrator wherein an unfavorable judgment, decree, injunction, order, or ruling would prevent the performance of this Agreement or any of the Transactions, declare unlawful the Transactions, cause such Transactions to be rescinded, or materially and adversely affect the right of the Purchaser to own, operate, or control the Business and/or the Purchased Assets.

“ SEC ” shall mean the United States Securities and Exchange Commission.

“ Seller’s Knowledge ”, “ Knowledge of the Seller ” or similar terms used in this Agreement mean the actual (but not constructive or imputed) knowledge of the Persons listed in Exhibit H as of the date of this Agreement (or, with respect to a certificate delivered pursuant to this Agreement, as of the date of delivery of such certificate).

“ Significance Threshold ” means an amount of $127,500.

“ Straddle Period ” means any taxable period beginning on or prior to and ending after the date of the Closing.

“ Sublease ” means the Sublease in the form of Exhibit I .

“ Superior Offer ” shall mean a bona fide written Acquisition Proposal that was unsolicited and made by a third party after the Effective Date, which is not subject to a financing contingency and which is otherwise on terms and conditions which the Comarco Board determines in its good faith judgment (after consultation with a financial advisor) to be more favorable to Comarco’s shareholders from a financial point of view than the Transactions contemplated under this Agreement, taking into account at the time of determination any changes to the terms of this Agreement that as of that time had been proposed by Purchaser in writing (and not withdrawn).

“ SwissQual Agreements ” means the Distribution and Sales Agreement dated December 15, 2005, the Intellectual Property Agreement dated December 15, 2005, the

 

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Termination Agreement dated December 15, 2005 and the Support Agreement dated December 15, 2005, and any amendments, modifications and supplements thereto which are made expressly in compliance with the terms of this Agreement.

“ SwissQual Litigation ” means the pending litigation referred to as SwissQual AG v. Comarco Wireless Technologies, Inc. (case 0V07-07819).

“ Tax ” or “ Taxes ” means any and all taxes, however denominated, including, without limitation, any interest, penalties or other additions to tax that may become payable in respect thereof, (a) imposed by any Governmental Authority, which taxes shall include, without limiting the generality of the foregoing, all income or profits taxes (including, without limitation, federal, state and foreign income taxes), payroll and employee withholding taxes, unemployment insurance contributions, social security taxes, sales and use taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts taxes, withholding taxes, business license taxes, occupation taxes, real and personal property taxes, stamp taxes, environmental taxes, transfer taxes, workers’ compensation, Pension Benefit Guaranty Corporation premiums and other governmental charges, which are required to be paid, withheld or collected, (b) any Liability for the payment of amounts referred to in (a) as a result of being a member of any affiliated, consolidated, combined or unitary group, or (c) any Liability for amounts referred to in (a) or (b) as a result of any obligations to indemnify another person or as a result of being a successor in interest or transferee of another person.

“ Tax Returns ” means all reports, estimates, declarations of estimated tax, information statements and returns (including, without limitation, elections, declarations, amendments, schedules, information returns or attachments thereto) required to be filed with a Governmental Authority with respect to Taxes, including, without limitation, information returns with respect to backup withholding and other payments to third parties.

“ Termination Fee ” means an amount, in cash, equal to $500,000.

“ Trademark License Agreement ” means the Trademark License Agreement to be executed between the Seller and the Purchaser at the Closing, substantially in the form of Exhibit J .

“ Trademarks ” shall mean any and all trademarks, service marks, logos, trade names, corporate names, Internet domain names and addresses and general-use e-mail addresses, and all goodwill associated therewith throughout the world.

“ Trade Information ” shall mean all Trade Secrets under applicable law and other rights in know-how and confidential or proprietary information, processing, manufacturing or marketing information, new developments, inventions, processes, ideas or other proprietary information that provide Seller with advantages over competitors who do not know or use it and documentation thereof (including related papers, customer and vendor lists, product design and manufacturing information, blueprints, drawings, diaries, notebooks, specifications, designs, methods of manufacture and data processing software, compilations of information).

“ Trade Secrets ” shall mean any information which (i) (a) derives independent economic value, actual or potential, from not being generally known to, and not being readily

 

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ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy, or (ii) otherwise qualifies as trade secrets under applicable law.

“ Transactions ” refers collectively to this Agreement, the Ancillary Agreements and the transactions contemplated hereby and thereby, including the purchase and sale of the Purchased Assets and the assumption of Assumed Liabilities.

“ Transferred Intellectual Property ” means the Transferred Patents and any and all other Intellectual Property (excluding Patents that are not Transferred Patents) owned by Seller that relates solely to the conduct of the Business, including the Intellectual Property owned by Seller relating to the Seven.Five and Symphony products and services.

“ Transferred IP Agreements ” means any and all licenses to the Seller of Intellectual Property that expressly permit the Seller, or to which the licensor consents in writing, to transfer such licenses at no cost to Seller (unless otherwise agreed to in writing by the Parties) and which are (i) used exclusively in connection with the Business, or (ii) used in connection with the Business and in any other business of the Seller, but only to the extent such licenses can be partially transferred for use with the Business, and licenses of any Transferred Intellectual Property by the Seller to third parties. For the avoidance of doubt, the Ascom Agreement shall not be included in the definition Transferred IP Agreement.

“ Transferred Patents ” means the patents, patent applications, and invention disclosures listed on Section 1.01 of the Disclosure Schedule.

“ Transition Services Agreement ” means the Transition Services Agreement to be negotiated and executed by the Parties as contemplated by Section 5.18 below.

“ Triggering Event ” shall be deemed to have occurred if (i) the Comarco Board shall have failed to recommend that the Comarco shareholders vote to approve the principal terms of the transactions contemplated by this Agreement or shall have withdrawn or modified in a manner adverse to Purchaser the Comarco Board Recommendation; (ii) Seller shall have failed to include in the Proxy Statement the Comarco Board Recommendation; (iii) the Comarco Board shall have approved or recommended any Acquisition Proposal; and/or (iv) Seller shall have executed any letter of intent, memorandum of understanding or similar contract relating to any Acquisition Proposal other than a confidentiality agreement as permitted in Section 5.06(a) of this Agreement.

 

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SECTION 1.02 Definitions . The following terms have the meanings set forth in the Sections set forth below:

 

 

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SECTION 1.03 Interpretation and Rules of Construction . In this Agreement, except to the extent otherwise provided or except to the extent the context otherwise requires:

(a) when a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated;

(b) the table of contents and headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement;

(c) whenever the words “include,” “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without limitation”;

(d) the words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement;

(e) all terms defined in this Agreement have the defined meanings when used in any certificate or other document made or delivered pursuant hereto, unless otherwise defined therein;

(f) the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms;

 

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(g) references to a Person are also to its successors and permitted assigns; and

(h) the use of “or” is not intended to be exclusive unless expressly indicated otherwise.

ARTICLE II

PURCHASE AND SALE

SECTION 2.01 Purchase and Sale of Assets .

(a) Upon the terms and subject to the conditions of this Agreement, at the Closing, the Seller shall sell, assign, transfer, convey and deliver, or cause to be sold, assigned, transferred, conveyed and delivered, to the Purchaser, and the Purchaser shall purchase from Seller, all of Seller’s right, title and interest in, to and under the following assets, properties and rights of Seller relating to and/or used in the conduct of the Business (the “ Purchased Assets ”):

(i) the hardware, computers, telephones, and computer screens, copiers, facsimile machines, scanners, projectors, servers, furniture, tools, machinery and other fixed assets listed in Section 2.01(a)(i) of the Disclosure Schedule (the “ Fixed Assets ”);

(ii) the Inventory, including the inventory of Seller as of July 31, 2008 listed in Section 2.01(a)(ii) of the Disclosure Schedule to the extent such inventory is still in existence as of the Closing;

(iii) the Receivables, including (x) the receivables of Seller as of July 31, 2008 listed in Section 2.01(a)(iii) of the Disclosure Schedule to the extent such receivables remain uncollected and on the books of Seller as of the Closing, except as expressly provided in the Ascom Termination Agreement, and (y) any and all reserves for doubtful accounts pertaining to the Receivables;

(iv) all originals and copies in Seller’s possession of the databases, information systems, specifications, descriptions, computer programs, software code (including, assemblers, applets, compilers, source code, object code, image and sound data), diagrams, design tools, and documentation thereof listed in Section 2.01(a)(iv) of the Disclosure Schedule, but, unless otherwise agreed to in writing by the Parties, only to the extent solely dedicated to the Business (excluding any Intellectual Property rights therein and only to the extent transferable if owned by a third party);

(v) copies of the books of account, general, financial, tax records, invoices, shipping records, supplier lists, partner and distributor lists, personnel records of the Transferred Employees (to the extent permitted by Applicable Law) and independent contractors, correspondence and other documents, records and files and any rights, but, unless otherwise agreed to in writing by the Parties, only to the extent solely dedicated to the Business (the “ Books and Records ”) (it being understood that (i) Seller shall deliver the Books and Records to Purchaser in a reasonable time after the Closing (considering the urgency of any request by Purchaser) and (ii) Seller shall retain copies of such Books and Records it deems necessary or advisable for purposes of financial, tax or accounting compliance);

 

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(vi) the goodwill relating solely to the Business and/or the Purchased Assets as of the Closing Date;

(vii) the Transferred Intellectual Property (to the extent transferable);

(viii) the Transferred IP Agreements (to the extent transferable);

(ix) originals and all copies of the sales and promotional literature, customer lists and other sales-related materials of the Seller related solely to the Business;

(x) except for those Material Contracts listed in Section 2.01(a)(x) of the Disclosure Schedule which are not to be transferred to Purchaser, the rights of the Seller under the Material Contracts (to the extent such contracts are transferable), other than Transferred IP Agreements (such Material Contracts to be transferred are referred to herein as the “ Transferred Material Contracts ”);

(xi) all rights in, to and under the International Real Property Lease, together with all of Seller’s related leasehold interest to the related office space, leasehold improvements and other improvements (including construction in progress) and fixtures located thereon as provided in such lease;

(xii) all rights in, to and under leases of personal property to which Seller is a party, listed on Section 2.01(a)(xii) of the Disclosure Schedule;

(xiii) all rights of Seller in, to and under the Business Names;

(xiv) all rights in, to and under claims for refunds, rebates or other discounts due from suppliers or vendors (and rights to offset in respect thereof) listed on Section 2.01(a)(xiv) of the Disclosure Schedule to the extent in existence at the Closing;

(xv) all insurance proceeds or claims to insurance proceeds related to loss, destruction or damage to a Fixed Asset, item of Inventory, or other tangible personal property (but only to the extent it would otherwise be included in the Purchased Assets ) between the Effective Date and the Closing, but only to the extent such lost, destroyed or damaged Fixed Asset, item of Inventory, or other tangible property has not been replaced by Seller prior to Closing;

(xvi) unfilled purchase orders relating solely to the Business obtained by Seller in the Ordinary Course of Business prior to the Closing; and

(xvii) Demonstration and Test Units (as defined in the Ascom Agreement), Harmonized Products (as defined in the Ascom Agreement), Symphony, Upgrades (as defined in the Ascom Agreement) and other Intellectual Property (as defined in the Ascom Agreement) related to the Business that were jointly developed by Seller and Purchaser under the Ascom Agreement, subject to the rights licensed by Seller to third parties in accordance with the Ascom Agreement.

 

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(b) Notwithstanding anything in Section 2.01(a) or elsewhere in this Agreement to the contrary, the Seller shall not sell, convey, assign, transfer or deliver, nor cause to be sold, conveyed, assigned, transferred or delivered, to the Purchaser, and the Purchaser shall not purchase, and the Purchased Assets shall not include, the Seller’s right, title and interest to any of the assets of Seller not expressly included in the Purchased Assets listed above in Section 2.01(a) (collectively, the “ Excluded Assets ”) including, without limitation:

(i) the Purchase Price Bank Account;

(ii) all cash and cash equivalents, securities, and negotiable instruments of the Seller on hand, in lock boxes, in financial institutions or elsewhere, including, without limitation, all cash residing in any collateral cash account securing any obligation or contingent obligation of the Seller or any Affiliate as of the Closing Date;

(iii) any rights to Tax refunds, credits, net operating loss carry forwards, or similar benefits attributable to Excluded Taxes;

(iv) the company seal, minute books, charter documents, stock or equity record books and such other books and records as pertain to the organization, existence or capitalization of the Seller, as well as financial records and accounts and any other records or materials not related solely to the Purchased Assets or not relating solely to the operations of the Business;

(v) all rights of the Seller under this Agreement and the Ancillary Agreements;

(vi) Tax Returns of the Seller;

(vii) all contracts that have terminated or expired prior to the date of the Closing in the Ordinary Course of Business, whether or not related to the Purchased Assets or the operations of the Business;

(viii) the rights, property, assets, equipment (including, without limitation, computers, telephones, computer screens, copiers, facsimile machines, scanners, projectors and servers), furniture, machinery, vehicles and other tangible property specifically listed in Section 2.01(b)(viii) of the Disclosure Schedule;

(ix) all rights under, and interests in, the SwissQual Litigation, any and all appeals thereof, and any and all recoveries, benefits and awards therefrom; and

(x) all documents (and any portion thereof) related to the matters listed on Section 2.01(b)(x) of the Disclosure Schedule and all documents that include information protected under any privilege recognized under applicable Laws, including the attorney-client privilege, including, without limitation, any document, record or agreement related to the SwissQual Litigation. To the extent a document (or portion thereof) which is not listed on Section 2.01(b)(x) of the Disclosure Schedule and relates solely to the Purchased Assets or the Assumed Liabilities, or portions thereof, and includes information protected under any privilege recognized under Applicable Laws, including the attorney-client privilege, as applicable, such

 

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document shall be sold, conveyed, assigned, transferred and delivered to the Purchaser following delivery by the Purchaser and Parent of a joint defense or similar agreement that is reasonably determined by the Seller, upon advice of its outside counsel, to be sufficient to maintain such privilege despite such sale, conveyance, assignment, transfer and delivery.

SECTION 2.02 Assumption and Exclusion of Liabilities .

(a) Upon the terms and subject to the conditions set forth in this Agreement and other than the Excluded Liabilities (including for this purpose Section 2.02(b)(iv)) set forth in Section 2.02(b) below, the Purchaser shall assume, and agree to pay, perform and discharge when due, the following Liabilities of the Seller to the extent directly and solely relating to the Business and/or the Purchased Assets (the “ Assumed Liabilities ”):

(i) all Liabilities solely related to the Business set forth on the Closing Date Balance Sheet;

(ii) all Liabilities of the Seller under the Transferred Material Contracts assumed by, or transferred to, the Purchaser to the extent they accrue after the Closing;

(iii) all Liabilities for product warranty and service claims relating to products designed, manufactured or sold in the Business existing as of, or arising after, the Closing, and all Product Liabilities arising after the Closing;

(iv) all Taxes relating to the Purchased Assets and/or the Business arising after the Closing other than Excluded Taxes;

(v) all Liabilities for accrued but unpaid vacation for each Transferred Employee;

(vi) any and all trade accounts related solely to the Business and existing as of the Closing, except as expressly provided in the Ascom Termination Agreement;

(vii) all Liabilities, contracts and obligations specifically set forth in Section 2.02(a)(vii) of the Disclosure Schedule; and

(viii) all Liabilities for unfilled purchase orders relating solely to the Business obtained by Seller in the Ordinary Course of Business and consistent with commercially reasonable business practices prior to the Closing.

(b) The Seller shall retain, and shall be responsible for paying, performing and discharging when due, and the Purchaser shall not assume or have any responsibility for, any and all Liabilities, whether known or unknown, fixed or contingent, certain or uncertain, that are not expressly set forth in Section 2.02(a), including, without limitation (such items, other than item 2.02(b)(iv) below being referred to as the “ Excluded Liabilities ”):

(i) all Excluded Taxes;

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

 

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(iii) any and all accrued trade accounts payable which are past due as of the Closing and which have not been paid in full by Seller in the Ordinary Course of Business prior to the Closing Date, and any and all trade accounts payable that do not relate to the Business, the Purchased Assets and/or the Assumed Liabilities;

(iv) the Seller’s obligations under this Agreement and the Ancillary Agreements;

(v) other than the Purchaser’s obligations with respect to the Transferred Employees set forth in Section 2.02(a)(v), any and all obligations under any employment (including, but not limited to, temporary employment), consulting or non-competition agreement or severance policy whether written or oral incurred or arising prior to the Closing Date and any Liabilities or obligations arising out of the termination by the Seller of any of its employees (including, but not limited to, temporary employees) and consultants in anticipation or as a consequence of, or following, consummation of the Transactions;

(vi) any Liabilities relating to indebtedness for borrowed money;

(vii) any and all Liabilities arising out of the SwissQual Litigation, except as expressly agreed by the Parties;

(viii) other than Purchaser’s obligations set forth in Section 2.02(a)(iii) above, any claims or demands made pursuant to Actions, suits or legal proceedings that have been asserted or threatened against the Seller, the Business and/or the Purchased Assets prior to the Closing Date relating to (i) the Seller’s operation of the Business and/or the ownership or use of the Purchased Assets prior to the Closing Date, and/or (ii) any other business or non-business activities of the Seller not related to the Business and/or the Purchased Assets, including those Actions or other proceedings as set forth in Section 2.02(b)(viii) of the Disclosure Schedule (collectively, the “ Outstanding Disputes ”);

(ix) any Liabilities relating to or arising out of a breach or failure of Seller to perform under a Material Contract prior to the Closing Date, but only to the extent Seller’s performance was due prior to the Closing Date and such Material Contract is transferred by Seller to Purchaser in accordance with the terms of this Agreement;

(x) any Liability of Seller to indemnify or guaranty the Liability of any third party, except for such indemnifications and guaranties that are expressly set forth in the Material Contracts (to the extent such contracts are transferred);

(xi) any other Liability that is not an Assumed Liability; and

(xii) Liabilities for payments required under the Consolidated Omnibus Budget Reconciliation Act (“ COBRA ”) for any employee who is not a Transferred Employee.

(c) If and to the extent a Liability related solely to the Business is not expressly included in the Assumed Liabilities set forth in Section 2.02(a) nor the Excluded Liabilities (including for this purpose Section 2.02(b)(iv)) set forth in Section 2.02(b) and is not otherwise expressly contemplated by the other provisions of this Agreement, such Liability shall

 

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(i) be assumed by the Purchaser if the event, circumstance, effect or state of facts giving rise to such Liability arose after Closing, or (ii) be retained by the Seller if the event, circumstance, effect or state of facts giving rise to such Liability arose prior to or at Closing.

(d) Non-Assignable Assets .

(i) Notwithstanding the foregoing, if any of the Transferred Material Contracts or Purchased Assets are not assignable or transferable (each, a “ Non-Assignable Asset ”) without the consent of, or waiver by, a third party (each, an “ Assignment Consent ”), either as a result of the provisions thereof or applicable Legal Requirements, and any of such Assignment Consents are not obtained by Seller on or prior to the Closing Date, Purchaser may elect to either (i) have Seller permanently retain the Non-Assignable Asset and all Liabilities relating thereto at the Closing; or (ii) have Seller continue its efforts to obtain the Assignment Consents after Closing, and, in either case, this Agreement and the related instruments of transfer shall not constitute an assignment or transfer of such Non-Assignable Assets, and Purchaser shall not assume Seller’s rights or obligations under such Non-Assignable Asset (and such Non-Assignable Asset shall not be included in the Purchased Assets). If Purchaser elects item (ii) above, Seller shall use its reasonable best efforts to obtain all such Assignment Consents as soon as reasonably practicable after the Closing Date and thereafter assign to Purchaser such Non-Assignable Assets. Following any such assignment, such assets shall be deemed Purchased Assets for purposes of this Agreement.

(ii) After the Closing, Seller shall cooperate with Purchaser in any reasonable arrangement designed to provide Purchaser with all of the benefits of the Non-Assignable Assets as if the appropriate Assignment Consents had been obtained, including by granting subleases and establishing arrangements whereby Purchaser shall undertake the work necessary to perform under the Transferred Material Contracts pursuant to the Transition Services Agreement or such other agreement to be mutually agreed upon by the Parties.

(iii) Seller and Purchaser shall pay equal portions when due of any out-of-pocket costs, fees or expenses incurred in connection with obtaining such Assignment Consents.

SECTION 2.03 Purchase Price; Allocation of Purchase Price .

(a) The aggregate purchase price for Purchaser’s acquisition of the Purchased Assets shall be (i) $12,750,000 (the “ Cash Purchase Price ”) and (ii) assumption of the Assumed Liabilities (collectively, the “ Aggregate Purchase Price ”). At the Closing, the Purchaser shall deposit $1,775,000 of the Cash Purchase Price (the “ Escrow Amount ”) into an escrow account (the “ Escrow Account ”), pursuant to the terms of an escrow agreement substantially in the form attached hereto as Exhibit K (the “ Escrow Agreement ”). The Escrow Amount shall be distributed from the Escrow Account pursuant to the terms and conditions of the Escrow Agreement.

(b) The Parties agree that the Transactions are intended to be and shall be treated for federal income Tax purposes as an “applicable asset acquisition” within the meaning of Section 1060 of the Code. The Parties agree to allocate, in accordance with all applicable

 

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Treasury Regulations promulgated under Section 1060 of the Code and other applicable Laws and accounting regulations, the aggregate consideration paid by Purchaser (consisting of the Aggregate Purchase Price, the Assumed Liabilities and all other relevant items that are properly includible in determining the amount realized by Seller for federal income Tax purposes (the “ Total Tax Consideration ”)) among the Purchased Assets. Such allocation shall be made in a manner consistent with the fair market values of the Purchased Assets as are agreed between the Parties. Seller and Purchaser shall complete an allocation schedule of the Aggregate Purchase Price within 60 calendar days after the Closing Date that the Parties agree to use in making such allocation. Purchaser then will deliver to the Seller a draft IRS Form 8594 as proposed to be included by Purchaser with its Tax Returns for the taxable year of the Closing (the “ Allocation Form ”). If the Seller disagrees with any aspect of the proposed Allocation Form, the Seller shall, within 15 calendar days after receipt thereof, furnish to Purchaser a written statement of such disagreement, together with the reasons therefor. If, within such 15 calendar day period, Purchaser does not receive such a written statement of disagreement from the Seller, the Seller shall be deemed to have accepted the proposed Allocation Form and the proposed Allocation Form shall be final and binding upon the Seller. If Purchaser does receive such a written statement of disagreement from the Seller within such 15 calendar day period, then within 10 calendar days of such receipt the Seller and Purchaser shall discuss in person, by telephone, or by videoconference, their disagreement in order to attempt to resolve it through good faith negotiations. If the Seller and Purchaser are unable to resolve their disagreement within 20 calendar days after receipt by Purchaser of the written statement of disagreement from the Seller, the disagreement shall be submitted for determination to a mutually agreed upon independent nationally recognized accounting firm (the “ Accountant ”), which determination, absent manifest error, shall be final and binding upon the Seller and Purchaser and not subject to appeal. Such determination by the Accountant shall be made in accordance with this Agreement. The expenses incurred due to retention of the Accountant in making such determination shall be borne equally by the Seller and Purchaser.

SECTION 2.04 Closing . Subject to the terms and conditions of this Agreement, the sale and purchase of the Purchased Assets and the assumption of the Assumed Liabilities contemplated by this Agreement shall take place at a closing (the “ Closing ”) to be held at the offices of Paul, Hastings, Janofsky & Walker LLP, 695 Town Center Drive, Costa Mesa, California 92626 at 10:00 A.M. California time on January 5, 2009, or as soon as possible thereafter after the satisfaction or waiver of the conditions to the obligations of the Parties hereto set forth in Article VII, or at such other place or at such other time or on such other date as the Seller and the Purchaser may mutually agree upon in writing (the “ Closing Date ”).

SECTION 2.05 Closing Deliveries by the Seller . At the Closing, the Seller shall deliver or cause to be delivered to the Purchaser:

(a) the Bill of Sale duly executed by the Seller;

(b) the Sublease duly executed by Comarco, but only if the Lease has not been executed and delivered by Landlord and Purchaser by the time all other conditions to the obligations of the Parties hereto set forth in Article VII have been satisfied or waived;

 

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(c) the Assignment of Trademarks and the Assignment of Patent Rights duly executed by the Seller;

(d) the Assignment and Assumption Agreement duly executed by the Seller;

(e) the Assignment and Assumption of Lease duly executed by the Seller;

(f) the Escrow Agreement duly executed by the Seller;

(g) the Trademark License Agreement duly executed by the Seller;

(h) the Transition Services Agreement duly executed by the Seller, to the extent not duly executed and delivered prior to the Closing as contemplated by Section 5.18;

(i) the Management Agreement duly executed by the Seller (to the extent still applicable);

(j) the Ascom Termination Agreement duly executed by Seller;

(k) the Books and Records;

(l) a receipt for the Cash Purchase Price; and

(m) a certificate of a duly authorized officer of the Seller dated as of the Closing Date certifying that the conditions set forth in Section 7.03(a) and 7.03(b) have been satisfied.

SECTION 2.06 Closing Deliveries by the Purchaser . At the Closing, the Purchaser shall deliver to the Seller:

(a) the Cash Purchase Price (less the Escrow Amount to be paid by Purchaser to the Escrow Agent under the Escrow Agreement) by wire transfer in immediately available funds to the Purchase Price Bank Account;

(b) the Bill of Sale duly executed by the Purchaser;

(c) the Assignment of Trademarks and the Assignment of Patent Rights duly executed by the Purchaser;

(d) the Assignment and Assumption Agreement duly executed by the Purchaser;

(e) the Assignment and Assumption of Lease duly executed by the Purchaser;

(f) the Escrow Agreement duly executed by the Purchaser;

(g) the Sublease duly executed by the Purchaser and Parent, but only if the Lease has not been executed and delivered by Landlord and Purchaser by the time all other conditions to the obligations of the Parties hereto set forth in Article VII have been satisfied or waived;

 

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(h) the Transition Services Agreement duly executed by Purchaser, to the extent not duly executed and delivered prior to the Closing as contemplated by Section 5.18;

(i) the Management Agreement duly executed by Purchaser and Parent (to the extent still applicable);

(j) the Ascom Termination Agreement duly executed by Ascom (Schweiz) Ltd;

(k) the Resale Certificate duly executed by Purchaser, and

(l) a certificate of a duly authorized officer of the Purchaser and Parent, as applicable, dated as of the Closing Date certifying that the conditions set forth in Sections 7.02(a) and 7.02(b).

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE SELLER

Except as set forth in the Disclosure Schedule, each of CWT and Comarco hereby jointly and severally represent and warrant to the Purchaser and Parent, as of the Effective Date or, if a representation or warranty is made as of a specified date, as of such date, as follows:

SECTION 3.01 Organization, Authority and Qualification of CWT and Comarco .

(a) Each of CWT and Comarco is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware and California, respectively, and, except for the Seller Shareholder Approval (as defined below), has all necessary corporate power and authority to enter into this Agreement and the Ancillary Agreements, to carry out its obligations hereunder and thereunder and to consummate the Transactions. Each of CWT and Comarco is duly licensed or qualified to do business and is in good standing in each jurisdiction which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary, except to the extent that the failure to be so licensed, qualified or in good standing would not (a) adversely affect the ability of such corporation to carry out its obligations under, and to consummate the Transactions, or (b) result in a Loss to the Business that exceeds the Significance Threshold.

(b) Except for the Seller Shareholder Approval and subject to Section 5.06, the execution and delivery of this Agreement and the Ancillary Agreements by each of CWT and Comarco, the performance by each of CWT and Comarco of its obligations hereunder and thereunder and the consummation by each of CWT and Comarco of the Transactions have been duly authorized by all requisite action on the part of CWT and Comarco. The board of directors of each Seller has as of the date of this Agreement (i) duly approved this Agreement, the

 

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Ancillary Agreements and the Transactions, (ii) duly authorized the execution and delivery of this Agreement, the Ancillary Agreements, the performance of the Sellers’ obligations thereunder and the consummation of the Transactions and (iii) resolved to recommend that the shareholders of each Seller adopt and approve this Agreement. The unanimous written consent of the holder of all the outstanding shares of common stock of CWT consenting to the adoption of this Agreement and the Required Shareholder Vote in the case of Comarco (the “ Seller Shareholder Approval ”) are the only votes or approvals of the holders of any class or series of capital stock of the Seller which is necessary to adopt this Agreement and approve the Transactions.

(c) Except for the Seller Shareholder Approval and subject to Section 5.06, this Agreement has been, and upon their execution the Ancillary Agreements shall have been, duly executed and delivered by the Seller, and (assuming due authorization, execution and delivery by the Purchaser) this Agreement constitutes, and upon their execution the Ancillary Agreements shall constitute, legal, valid and binding obligations of CWT and Comarco, enforceable against them in accordance with their respective terms.

SECTION 3.02 No Conflict . Assuming that the Seller Shareholder Approval and all consents, approvals, authorizations and other actions described in Section 3.03 have been obtained, all filings and notifications listed in Section 3.03 of the Disclosure Schedule have been made and any applicable waiting period has expired or been terminated, and except as may result from any facts or circumstances relating solely to the Purchaser, the execution, delivery and performance of this Agreement and the Ancillary Agreements by the Seller do not and will not (a) violate, conflict with or result in the breach of the articles of incorporation or bylaws of Comarco or the certificate of incorporation or bylaws of CWT, in each case as amended, (b) conflict with or violate any Law or Governmental Order applicable to the Seller or (c) except as set forth in Section 3.02(c) of the Disclosure Schedule, conflict with, result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, acceleration or cancellation of, any Material Contract, the Lease or other material agreement concerning the Business or the Purchased Assets, except, in the case of clauses (b) and (c), as would not (i) materially and adversely affect the ability of the Seller to carry out its obligations under, and to consummate the Transactions or (ii) result in a Loss to the Business that exceeds the Significance Threshold.

SECTION 3.03 Governmental Consents and Approvals . The execution, delivery and performance of this Agreement and each Ancillary Agreement by the Seller do not and will not require any consent, approval, authorization or other order of, action by, filing with or notification by Seller to, any Governmental Authority, except (a) as described in Section 3.03 of the Disclosure Schedule, (b) where failure to obtain such consent, approval, authorization or action, or to make such filing or notification, would not prevent or materially delay the consummation by the Seller of the Transactions and would not result in a Loss to the Business that exceeds the Significance Threshold or (c) as may be necessary as a result of any facts or circumstances relating solely to the Purchaser or any of its Affiliates.

 

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SECTION 3.04 Financial Statements .

(a) True and complete copies of (i) the audited consolidated balance sheet of Comarco and CWT for the fiscal year ended as of January 31, 2008, and the audited consolidated statements of income and cash flows of Comarco and CWT for the twelve months ended January 31, 2008 (collectively, the “ Financial Statements ”) and (ii) the unaudited balance sheet of the Business as of July 31, 2008, and the related unaudited statements of income of the Business for the six months ended July 31, 2008 attached hereto as Section 3.04(a) of the Disclosure Schedule (collectively, the “ Interim Financial Statements ”).

(b) The Financial Statements (i) were prepared in accordance with the books of account and other financial records of the Seller, (ii) present fairly, in all material respects, the financial condition and results of operations of the Seller as of the dates thereof or for the periods covered thereby and (iii) were prepared in all material respects in accordance with GAAP applied on a basis consistent with the past practices of the Seller.

(c) The Interim Financial Statements and the Closing Date Balance Sheet (i) were prepared, or will be prepared, respectively, in accordance with the books of account and other financial records of the Seller applicable to the Business (except as may be indicated in the notes thereto or in Section 3.04(c) of the Disclosure Schedule), (ii) present or will present, respectively, fairly, in all material respects, the financial condition and results of operations of the Business as of the dates thereof or for the periods covered thereby and (iii) were prepared or will be prepared, respectively, in all material respects in accordance with GAAP applied on a basis consistent with the past practices of the Seller, subject in each case to the absence of notes and, in the case of the Interim Financial Statements and the Closing Date Balance Sheet, to normal recurring year-end adjustments, the effect of which are not, individually or in the aggregate, material. Comarco and CWT have established, documented and maintains, adheres to and enforces a system of internal accounting controls with respect to the Business which are effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP.

SECTION 3.05 Absence of Undisclosed Material Liabilities . There are no Liabilities of the Seller relating to the Business of a nature required to be reflected on a balance sheet prepared in accordance with GAAP, other than (a) Liabilities reflected or reserved against on the Financial Statements or the notes thereto or the Interim Financial Statements or which will be reflected or reserved on the Closing Date Balance Sheet, (b) Liabilities as set forth in Section 3.05 of the Disclosure Schedule, (c) Liabilities in the Ordinary Course of Business arising after the date of the balance sheet in the Interim Financial Statements, or (d) Liabilities that, individually or in the aggregate, do not exceed $200,000.

SECTION 3.06 Conduct in the Ordinary Course . Since January 31, 2008 through the Effective Date, except as set forth in Section 3.06 of the Disclosure Schedule, there has not occurred any Loss to the Business in excess of the Significance Threshold outside the Ordinary Course of Business, the Business has been conducted in the Ordinary Course of Business, and Seller has not:

(a) sold, pledged, leased, transferred, or assigned any of its material assets related to the Business, other than in the Ordinary Course of Business;

 

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(b) entered into any Material Contract outside the Ordinary Course of Business or accelerated, terminated, made modifications to, or cancelled any Material Contract, in each case outside the Ordinary Course of Business;

(c) made any capital expenditure related to the Business (or series of related capital expenditures) either involving more than $50,000 individually or $250,000 in the aggregate;

(d) suffered any extraordinary losses or waived any rights of material value related primarily to the Business, whether or not in the Ordinary Course of Business;

(e) suffered any material damage, destruction or loss with respect to the material assets of the Business or any other real or tangible personal property used in the Business, whether or not covered by insurance;

(f) made any material change in the Tax or accounting principles, methods, practices or procedures followed by the Seller with respect to the Business or any change in the depreciation or amortization policies or rates theretofore adopted by Seller with respect to the Business, except as required by GAAP or disclosed to Purchaser in writing;

(g) made any delay or postponement of payment of accounts payable or other Liabilities of Seller arising out of the operation of the Business outside of the Ordinary Course of Business;

(h) discounted or delayed the collection of Receivables or otherwise sold Receivables outside the Ordinary Course of Business;

(i) ordered or failed to order, or disposed or failed to dispose of, Inventory outside the Ordinary Course of Business; or

(j) committed to do any of the foregoing actions.

SECTION 3.07 Litigation . Except as set forth in Section 3.07 of the Disclosure Schedule, as of the Effective Date there is no Action by or against the Seller, or to the Seller’s Knowledge by or against any of the Seller’s officers or directors (in their capacities as such), which is pending or, to the Knowledge of Seller which is threatened, that relates to the Business, the Purchased Assets or the Assumed Liabilities, that would result in a Loss to the Business that exceeds the Significance Threshold or would affect the legality, validity or enforceability of this Agreement, any Ancillary Agreement or the consummation of the Transactions.

SECTION 3.08 Compliance with Laws . Except as set forth in Section 3.08 of the Disclosure Schedule or as would not result in a Loss to the Business that exceeds the Significance Threshold, the Seller has conducted and continues to conduct the Business in accordance with all Laws and Governmental Orders applicable to the Business and has obtained all necessary Governmental Approvals to conduct the Business as presently conducted. Seller is

 

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not required to obtain a Permit or other Governmental Approval from the Federal Trade Commission to conduct the Business as currently conducted. No representation and warranty is made under this Section 3.08 with respect to ERISA, employment matters or employee benefits or environmental matters.

SECTION 3.09 Environmental Matters .

(a) Except as disclosed in Section 3.09 of the Disclosure Schedule or as would not result in a Loss to the Business that exceeds the Significance Threshold, (i) the Seller is in compliance with all Environmental Laws applicable to the Business and has obtained and is in compliance with all Environmental Permits applicable to the Business, (ii) there are no written claims pursuant to any Environmental Law applicable to the Business pending or, to the Seller’s Knowledge, threatened, against the Seller and (iii) the Seller has provided the Purchaser with copies of any and all written environmental assessment or audit reports or other similar studies or analyses generated within the last two years and in the Seller’s possession relating to the Business (to the extent there are any).

(b) To the Knowledge of Seller, none of the following exists at any property or facility occupied, or operated by Seller: (i) underground storage tanks or surface impoundments; (ii) asbestos-containing material in any form or condition; (iii) materials or equipment containing polychlorinated biphenyls; or (iv) landfills.

(c) To the Knowledge of Seller, Seller has never treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled, or Released (as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended “ CERCLA ”) pursuant to the conduct of the Business any substance (including, without limitation, any hazardous substance) or owned, occupied, or operated any facility or property used in the conduct of the Business, so as to give rise to material Liabilities of the Seller for response costs, natural resource damages, or attorneys’ fees pursuant to CERCLA or any other Environmental Law.

(d) Without limiting the generality of the foregoing and except as would not result in a Loss to the Business that exceeds the Significance Threshold, to the Knowledge of Seller no facts, events, or conditions relating to the past or present properties or facilities used in the conduct of the Business, or operations of the Seller in the conduct of the Business shall give rise to any corrective, investigatory, or remedial obligations pursuant to Environmental Law, or give rise to any other Liabilities (whether accrued, absolute, contingent, unliquidated, or otherwise) pursuant to Environmental Law, including, without limitation, those Liabilities relating to onsite or offsite Releases or threatened Releases of hazardous materials, substances or wastes, personal injury, property damage, or natural resources damage.

(e) To the Knowledge of Seller, Seller has not, either expressly or by operation of law, assumed or undertaken any Liability or corrective investigatory or remedial obligation of any other Person in connection with the conduct of the Business relating to any Environmental Law.

 

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(f) The Purchaser and Parent acknowledge that (i) the representations and warranties contained in this Section 3.09 are the only representations and warranties being made with respect to compliance with or liability under Environmental Laws or with respect to any environmental matter, including natural resources, related in any way to the Business, including the Purchased Assets, or to this Agreement or its subject matter, and (ii) no other representation contained in this Agreement shall apply to any such matters and no other representation or warranty, express or implied, is being made with respect thereto.

SECTION 3.10 Permits . The Seller owns or possesses from each appropriate Governmental Authority all permits, licenses, authorizations, approvals, quality certifications, franchises or rights issued by any Governmental Authority that are necessary to conduct the Business as presently conducted, except where the failure to obtain or have such permits would not result in a Loss to the Business that exceeds the Significance Threshold (collectively “ Permits ”). Each Permit is described in Section 3.10 of the Disclosure Schedule. Except as set forth on Section 3.10 of the Disclosure Schedule, no loss or expiration of any such Permit is pending or, to the Knowledge of the Seller, threatened, other than expiration in accordance with the terms of such Permits that Seller reasonably believes may be renewed in the Ordinary Course of Business.

SECTION 3.11 Intellectual Property .

(a) Section 3.11(a) of the Disclosure Schedule sets forth a list of all patents and patent applications, registered trademarks and trademark applications, and registered copyrights and copyright applications included in the Transferred Intellectual Property (“ Transferred Registered Intellectual Property ”). To the Knowledge of the Seller and except as disclosed in Schedule 3.11(a), (i) no Person is engaging in any activity that infringes any Transferred Intellectual Property and Seller has made no claim against any Person asserting infringement of any Transferred Intellectual Property that has not yet been resolved; and (ii) no claim has been asserted against the Seller and the Seller has not received any communication alleging that in conducting the Business, the Seller has violated any of the Intellectual Property of any other Person or entity, nor to the Knowledge of Seller, is Seller aware that there is any reasonable basis with respect to the foregoing.

(b) All necessary application, registration, maintenance, renewal and other fees, and all necessary documents and certificates, in connection with such Transferred Registered Intellectual Property have been timely paid and filed, respectively, with the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of perfecting, prosecuting and maintaining such Transferred Registered Intellectual Property. To Seller’s Knowledge, each U.S. patent application and U.S. patent included in the Transferred Patents was filed within one year of a printed publication, public use, or offer for sale of each invention described in such U.S. patent application or U.S. patent.

(c) To the Knowledge of the Seller, the Transferred Intellectual Property, third party Intellectual Property licensed pursuant to the Transferred IP Agreements, and any Intellectual Property provided under the Transition Services Agreement consists of all Intellectual Property material to the conduct of the Business as presently conducted. To the Knowledge of the Seller, the Transferred Patents are the only Patents owned by Seller that are material to the conduct of the Business as presently conducted.

 

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(d) Except as disclosed in Section 3.11(d) of the Disclosure Schedule, the Seller is not obligated to pay royalties or other payments to third parties in excess of a total of $25,000 per year with respect to any Transferred IP Agreement containing a license or right to use any third party Intellectual Property used in connection with the operation of the Business as presently conducted.

(e) The Seller has taken commercially reasonable steps to maintain the patent applications included in the Transferred Patents. To the Knowledge of Seller, the Seller has obtained executed proprietary information and inventions assignment agreements (the “ Proprietary Information Agreements ”), that assign to Seller all rights, title and interest in and to Transferred Intellectual Property that is material to the conduct of the Business and/or the Transferred Intellectual Property relating to Symphony products and services from each prior and current employee, consultant and independent contractor who or that has contributed in any material way to such Transferred Intellectual Property. Other than under an appropriate confidentiality or nondisclosure agreement or contractual provision relating to confidentiality and nondisclosure, to the Knowledge of the Seller, there has been no disclosure to any third party of Trade Secrets of the Seller included in the Transferred Intellectual Property and the Seller has taken reasonable precautions to protect (i) the secrecy, confidentiality and value of the Trade Secrets included in the Transferred Intellectual Property and (ii) the confidentiality of the Trade Information that is material to the conduct of the Business and included in the Transferred Intellectual Property. To the extent material to the Transferred Intellectual Property, assignments to the Seller of the patent and patent applications included in the Transferred Intellectual Property have been duly executed and filed with the United States Patent and Trademark Office.

(f) Except as set forth in Section 3.11(f) of the Disclosure Schedule, neither the execution of this Agreement nor the consummation by the Seller of the Transactions will result in any violation, loss or impairment of, or payment of any additional amounts with respect to, any Transferred Intellectual Property, nor require Seller to obtain the consent of any Governmental Authority or other Person with respect to any Transferred Intellectual Property. Except as set forth in Section 3.11(f) of the Disclosure Schedule, the Seller is not a party to any contract under which a third party would have or would be entitled to receive a license or any other right to any Transferred Intellectual Property material to the conduct of the Business as a result of the execution of this Agreement or the consummation of the Transactions, nor would the consummation of such Transactions result in the material amendment or adverse alteration of any Transferred IP Agreement.

(g) Other than third party customers to whom Seller has granted Licenses in the Ordinary Course of Business or as set forth in Section 3.11(g) of the Disclosure Schedule, no third party has any ownership or inventorship claim or license or other rights to the Transferred Intellectual Property and the Seller is the owner of the entire right, title and interest in and to such Transferred Intellectual Property, in each case where the failure to have such rights, claims or interest would not result in a Loss to the Business that exceeds the Significance Threshold.

 

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(h) To the Knowledge of the Seller, no government funding or personnel was used in the development of any Transferred Intellectual Property. To the Knowledge of the Seller, Seller has not received any claim from any university, college, other educational institution or research center that any Transferred Intellectual Property is owned by such entity as a result of being developed at such entity’s facility or by personnel who performed services for such entity at the same time such personnel developed the Transferred Intellectual Property for the Seller.

(i) To the Knowledge of the Seller, the software products which are part of the Purchased Assets do not contain any “viruses”, “worms”, “time-bombs”, “key-locks” or any other similar devices that are designed to disrupt or interfere with the operation of the products, provide unauthorized access to equipment upon which the products operate, or alter the integrity of the data residing on such equipment.

(j) Except as disclosed in Section 3.11(j) of the Disclosure Schedule, no software included in the Purchased Assets (“ Transferred Software ”) is subject to any “copyleft” or other obligation or condition (including any obligation or condition under any “open source” license such as the GNU General Public License, GNU Lesser General Public License or any other restrictive license arrangement to which Seller is a party that would require the disclosure, licensing, or distribution of any material portion of source code for the Transferred Software.

(k) The Purchaser and the Parent acknowledge that the representations and warranties set forth in this Section 3.11 shall be the sole and exclusive representations and warranties