ASSET PURCHASE AGREEMENT

EXHIBIT 10.25

 

 

ASSET PURCHASE AGREEMENT

between

SENSUS METERING SYSTEMS INC.,

as Purchaser

and

ADVANCED METERING DATA SYSTEMS, L.L.C.,

as Seller

June 2, 2006

 

TABLE OF CONTENTS

 

 

i

TABLE OF CONTENTS

(continued)

 

 

ii

TABLE OF CONTENTS

(continued)

 

 

iii

TABLE OF CONTENTS

(continued)

 

 

iv

Exhibits

 

 

v

 

 

vi

ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT is entered into on this 2nd day of June, 2006 by SENSUS METERING SYSTEMS INC., a corporation organized and existing under the laws of the State of Delaware, having its principal place of business located at 8601 Six Forks Road, Suite 300, Raleigh, North Carolina 27615 (“ Purchaser ”), and ADVANCED METERING DATA SYSTEMS, L.L.C., a limited liability company organized and existing under the laws of the State of Louisiana, having its principal place of business located at 19411 Helenberg Road, Suite 103, Covington, Louisiana 70433 (“ Seller ”).

RECITALS

WHEREAS, Purchaser desires to acquire the Purchased Assets (as defined herein) from Seller;

WHEREAS, Seller desires to sell to Purchaser such Purchased Assets, all as more particularly set forth in this Agreement; and

NOW, THEREFORE, in consideration of the covenants, agreements, representations and warranties set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Purchaser and Seller agree as follows:

AGREEMENT

ARTICLE 1

DEFINITIONS

1.1 Certain Defined Terms . The following terms used in this Agreement have the following meanings:

“ Accounts Payable ” means trade accounts payable of Seller (including payables owing pursuant to Open Supplier Orders), excluding payables owing to any Affiliate of Seller.

“ Accounts Receivable ” means (i) all trade accounts receivable and other rights to payment from customers of Seller and the full benefit of all security for such accounts or rights of payment, including all trade accounts receivable representing amounts receivable in respect of goods shipped or products sold or services rendered to customers of Seller, (ii) all other accounts or notes receivable of Seller and the full benefit of all security for such accounts or notes and (iii) any claim, remedy or other right related to any of the foregoing.

“ Adjusted Closing Current Assets ” has the meaning set forth in Schedule 2.4(b)(ii) .

“ Affiliate ” means, as to any Person, any other Person that directly or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) means possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities, or partnership or other

ownership interests, by contract or otherwise), provided, that without limiting the foregoing: (a) any Person that owns directly or indirectly securities or ownership interests having more than fifty percent (50%) of the voting power for the election of directors or other members of the governing body of any other Person will be deemed to control such other Person; (b) each director, executive officer, limited liability company manager, or general partner of a Person shall be deemed to be an Affiliate of such Person; (c) spouses of any natural persons contemplated by clause (b)  and any persons related to natural persons contemplated by clause (b)  or their spouses to the second degree, by blood or marriage, shall be deemed to be Affiliates of the Person of which the persons contemplated by clause (b)  is a director, executive officer, limited liability company manager, or general partner; and (d) if such Affiliate is an officer, director, limited liability company manager, or general partner of a corporation, company or partnership, such corporation, company or partnership shall be deemed to be an Affiliate of such Person. Anything to the contrary notwithstanding, Axonn L.L.C. and Axonn Corporation shall be considered Affiliates of Seller for purposes hereof.

“ Aggregate Consideration ” means, as of any particular date, the aggregate of (i) the Closing Cash Payment, (ii) the product of the total number of Vested Shares (as defined in the Subscription Agreement) on such date multiplied by $1,000 and (iii) all Earnout Payments made on or prior to such date.

“ Agreement ” means this Asset Purchase Agreement, as it may be amended from time to time.

“ Bulk Sales Laws ” means the Laws of any jurisdiction relating to bulk sales that are applicable to the sale of the Purchased Assets by Seller hereunder.

“ Business ” means Seller’s business and operations, as presently conducted or proposed to be conducted, including the provision of technology, equipment, applications, software or monitoring services in respect of (i) automatic meter reading, as well as interfaces to electricity, water and gas meters; (ii) radio frequency monitoring or control of equipment or devices; (iii) tower-based telemetry; (iv) sub-metering; and (v) equipment monitoring software-based value-added services relating to any of the foregoing.

“ Business Day ” means any day that is not a Saturday, a Sunday or a day on which commercial banks in New York, New York are required or permitted to be closed for business.

“ CERCLA ” has the meaning set forth in the definition of “Environmental Laws.”

“ Code ” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute.

“ Consideration Shares ” means 30,000 shares of Purchaser Parent’s Series C Convertible Redeemable Preference Shares.

“ Contract ” means any contract, agreement, lease, commitment, understanding, whether oral or written, which is intended by the parties thereto or purports to be legally binding and enforceable.

 

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“ Controlled Affiliate ” means, as to any Person, any other Person that directly or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) means possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities, or partnership or other ownership interests, by contract or otherwise), provided , that without limiting the foregoing: (a) any Person that owns directly or indirectly securities or ownership interests having more than fifty percent (50%) of the voting power for the election of directors or other members of the governing body of any other Person will be deemed to control such other Person; (b) each director, executive officer, limited liability company manager, or general partner of a Person shall be deemed to be an Affiliate of such Person; and (c) spouses of any natural persons contemplated by clause (b)  and any persons related to natural persons contemplated by clause (b)  or their spouses to the second degree, by blood or marriage, shall be deemed to be Affiliates of the Person of which the persons contemplated by clause (b)  is a director, executive officer, limited liability company manager, or general partner.

“ Copyrights ” means all United States and foreign copyrights, including all copyright registrations and applications therefor, works of authorship (whether or not copyrightable), and Software.

“ Current Assets ” means the book value of the current assets of the Company included among the Purchased Assets, which current assets shall include only the assets which would be classified as current assets under GAAP.

“ Distribution ” means (i) any and all dividends or distributions of any nature made or paid in respect of any of Seller’s membership interests or other equity interests, whether in cash or property or any combination thereof, or (ii) the aggregate amount paid by Seller in respect of any and all membership interests or other equity interests of Seller redeemed, repurchased or otherwise acquired, directly or indirectly, by Seller.

“ Distribution Amount ” shall mean the aggregate value of all Distributions during the period from December 31, 2004 until Closing.

“ Dollars ” and “ $ ” mean the lawful money of the United States of America.

“ Earnout Payments ” means the payments to Seller contemplated by Section 2.5 .

“ Earnout Term ” has the meaning set forth in Schedule 2.5 .

“ Employee Benefit Plan ” means any of the following which is sponsored, maintained or contributed to by Seller or any ERISA Affiliates, in which Seller or an ERISA Affiliate is a party or a participant, or pursuant to which Seller or any ERISA Affiliate has any Liability:

(i) any employee benefit plan as defined in Section 3(3) of ERISA;

(ii) any other pension; profit sharing; retirement; deferred compensation; stock purchase, stock option, stock appreciation, phantom stock or other equity-based; incentive; bonus; performance; vacation; termination; retention; change of control; severance; “golden

 

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parachute;” disability; hospitalization; medical; life insurance; cafeteria; flexible spending account; fringe benefit; or other employee benefit plan, program, policy, or arrangement.

“ Environmental Laws ” means all Laws relating to pollution or protection of human health or the environment (including ambient air, surface water, ground water, land surface, or subsurface strata), including, without limitation (i) the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. §§9601 et seq., as amended (“ CERCLA ”); (ii) the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, as amended, 42 U.S.C. §§6901 et seq.; (iii) the Emergency Planning and Community Right to Know Act (42 U.S.C. §§11001 et seq.); (iv) the Clean Air Act (42 U.S.C. §§ 7401 et seq.); (v) the Clean Water Act (33 U.S.C. §§1251 et seq.); (vi) the Toxic Substances Control Act (15 U.S.C. §§2601 et seq.); (vii) the Hazardous Materials Transportation Act (49 U.S.C. §§5101 et seq.); (viii) the Safe Drinking Water Act (41 U.S.C. §§300f et seq.); (ix) any state, county, municipal or local statutes, laws or ordinances similar or analogous to the federal statutes listed in parts (i)-(viii) of this subparagraph, and (x) any rules, regulations, guidelines, directives, orders or the like adopted by governmental agencies pursuant to or implementing the statutes, laws, ordinances and amendments listed in parts (i)-(ix) of this subparagraph.

“ Environmental Permits ” means all permits, licenses, approvals, consents, orders and authorizations which are required under or issued pursuant to Environmental Laws.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor statute.

“ ERISA Affiliate ” means, with respect to any Person, any trade or business (whether or not incorporated) which is a member of a controlled group with such Person , or which is under common control with such Person within the meaning of Section 414 of the Code or Section 4001 of ERISA.

“ Excluded Assets ” means, collectively, all assets of Seller not included within the definition of “Purchased Assets,” including:

(i) all Contracts other than the Assigned Contracts;

(ii) Seller’s corporate charter, qualifications to conduct business as a foreign corporation, arrangements with registered agents relating to foreign qualifications, taxpayer and other identification numbers, seals, minute books, stock transfer books, blank stock certificates, and other documents relating to the organization, maintenance, and existence of Seller as a limited liability company, as well as photocopies of any Records transferred to Purchaser reasonably necessary for Seller to file Tax Returns or administer its affairs after the Closing;

(iii) all Tax Returns of Seller;

(iv) all refunds, rebates or similar payments in respect of Taxes to the extent they relate to events or periods prior to Closing;

(v) all of Seller’s rights under this Agreement and the other Transaction Documents;

 

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(vi) all rights in connection with and assets of the Employee Benefit Plans;

(vii) all insurance policies and rights thereunder, including all insurance proceeds which Seller has a right to receive based upon events, circumstances or occurrences prior to the Closing; and

(viii) all of the assets listed on Schedule A attached hereto.

“ FCC ” means the United States Federal Communications Commission.

“ FCC Expenses ” means all Liabilities owed to the FCC incurred by Purchaser or Seller as a result of the assignments of the FCC Licenses as contemplated by this Agreement, including filing fees and any “unjust enrichment” or similar payment required to be made in connection therewith, but excluding any fees or expenses related to Seller’s Modification Application.

“ Furniture and Fixtures ” means furniture, fixtures and leasehold improvements and any and all assignable warranties covering such furniture, fixtures and leasehold improvements owned by Seller or in which Seller has an interest.

“ GAAP ” means generally accepted accounting principles in the United States, as promulgated in the official publications of the American Institute of Certified Public Accountants, consistently applied for all relevant periods presented.

“ Governmental Authority ” means the government of the United States of America, the government of any State therein, the government of any municipality therein, the government of any political subdivision therein and any department, division, commission, board, bureau, agency, judicial or administrative tribunal, or instrumentality of any of the foregoing.

“ Hazardous Materials ” means any chemical, waste, by-product, pollutant, contaminant, compound, product, substance, equipment or fixture defined as or deemed hazardous, carcinogenic, ignitable, corrosive, reactive or toxic under, or otherwise subject to regulation, control or remediation under, any Environmental Law. Without limiting the generality of the foregoing, the term Hazardous Materials includes, but is not limited to, petroleum and petroleum products.

“ Health and Safety Laws ” means any Law pertaining to the worker safety or workplace conditions, including, without limitation, the Occupational Safety and Health Act, as amended.

“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

“ Indebtedness ” of any Person at any date means, without duplication, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services which, in accordance with GAAP, would be required to be shown as a liability on the face of a balance sheet of such Person on such date (other than trade liabilities and accrued expenses, in each case to the extent incurred in the ordinary course of business and payable in accordance with customary practices), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all obligations of such Person under capitalized

 

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lease obligations, (d) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (e) the principal balance outstanding under any synthetic lease, off-balance sheet loan or similar off-balance sheet financing product, (f) all indebtedness referred to in clauses (a) through (e) above to the extent secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness and (g) any obligation of the type described in clauses (a) through (f) above of another Person for which and to the extent such Person has or may become liable pursuant to a guarantee of payment or performance.

“ Intellectual Property ” means any Trademark, Patent, Copyright, Trade Secret, domain name or any other similar type of intellectual property right under any law, statutory provision or common law doctrine in the United States or any other country.

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

“ Law ” means any code, law (including, without limitation, common law), ordinance, regulation, reporting or licensing requirement, rule or statute applicable to a Person or its assets, Liabilities or business, including, without limitation, those promulgated, interpreted or enforced by any Governmental Authority, in each case as amended or in effect prior to or on the Closing Date, including, in the case of Seller, the FCC Licenses.

“ Liabilities ” means liabilities or obligations of any nature, whether absolute, accrued, contingent or otherwise, whether due or to become due and whether or not required to be reflected or reserved against on a balance sheet under GAAP.

“ Licensed Intellectual Property ” means all Intellectual Property throughout the world that is licensed by third parties to Seller, including Software licensed to Seller pursuant to any Open Source Software licenses, and that is embodied by or embedded in the Seller Products or used or held for use in connection with the Purchased Assets or the conduct of the Business.

“ Lien ” means any mortgage, pledge, security interest, encumbrance, lien, claim, option, easement, deed of trust, right-of-way, encroachment, restriction on transfer (such as a right of first refusal or other similar rights), defect of title or charge of any kind, whether voluntary or involuntary, including any conditional sale or other title retention agreement, any lease in the nature thereof and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code of any jurisdiction.

“ Losses ” means any damages, dues, penalties, fines, costs, reasonable amounts paid in settlement, liabilities, obligations, taxes, Liens, losses, fees and expenses (including costs of investigation and defense, court costs, reasonable attorneys’ fees) or diminution of value, whether or not involving a third-party claim.

“ Material Adverse Effect ” means any circumstance, change or effect (i) on the Purchased Assets or the operations of the Business that, individually, or when taken together with all other

 

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related circumstances, changes to or effects on the Purchased Assets or the operations of the Business, is materially adverse to the condition (financial or otherwise), prospects, or results of operations of the Purchased Assets or the Business, taken as a whole, or (ii) which impairs or could reasonably be expected to impair Seller’s or its applicable Affiliates’ ability to timely consummate the transactions contemplated by this Agreement or timely perform their material obligations under this Agreement in accordance with the terms hereof; provided that none of the following (or the results thereof) shall be, or shall be deemed to result in, a Material Adverse Effect: (A) any change in Law or accounting standards or interpretations thereof applicable to the Business or the Purchased Assets, (B) any change in prevailing economic or general business conditions in the United States or internationally, or (C) any change in financial market conditions generally.

“ Metrocall Assignment and Assumption Agreement ” means an Assignment and Assumption Agreement, substantially in the form of Exhibit C hereto.

“ Metrocall Obligations ” has the meaning set forth in the form of the Metrocall Assignment and Assumption Agreement attached hereto as Exhibit C .

“ Metrocall Rights ” has the meaning set forth in the form of the Metrocall Assignment and Assumption Agreement attached hereto as Exhibit C .

“ Modification Application ” means the modification application filed with the FCC by Seller on May 1, 2006 and amended on May 23, 2006 (FCC File No. 0002587670), seeking to convert Seller’s Nationwide Narrowband PCS station license (KNKV203) to non-common carrier status, under Section 20.9(b) of the FCC’s rules.

“ Ordinary Course of Business ” means the ordinary course of Seller’s business and operations, consistent with Seller’s past custom and practice (including with respect to quantity and frequency).

“ Owned Intellectual Property ” means all Purchased Intellectual Property that is not (i) Licensed Intellectual Property, or (ii) freely available for use in the public domain.

“ Patents ” means all United States and foreign patents and patent applications, including all provisional, utility, continuation, continuation-in-part or divisional applications and all reissues thereof and all reexamination certificates issuing therefrom.

“ Permits ” means permits, certificates, licenses, orders, franchises, authorizations and approvals issued or granted by Governmental Authorities, other than the FCC Licenses.

“ Permitted Liens ” means (i) liens for Taxes not yet due and payable (other than taxes arising out of the transactions contemplated by the Agreement); (ii) mechanics’, materialmen’s, workers’, repairmen’s or other similar common law or statutory Liens arising or incurred in the Ordinary Course of Business and which secure obligations not yet due and payable, and (iii) other Liens or minor imperfections of title that do not adversely detract from the value of, and do not adversely interfere with the present use of, any of the Purchased Assets.

 

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“ Person ” means and includes natural persons, corporations, limited partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, business trusts and other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof.

“ Proceeding ” means any action, arbitration, audit, hearing, investigation, claim, litigation or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Authority or arbitrator.

“ Purchase Price ” means, collectively, the Closing Cash Payment, the Consideration Shares, Seller’s right to receive the Earnout Payments, and the Assumed Liabilities assumed by Purchaser pursuant hereto.

“ Purchaser Loan ” means Purchaser’s loan to Seller, in the principal amount of $2,250,000, made pursuant to the Purchaser Loan Agreement.

“ Purchaser Parent ” means Sensus Metering Systems (Bermuda 1) Ltd., a Bermuda limited company.

“ Purchaser Products ” has the meaning set forth in Schedule 2.5 .

“ Purchaser Services ” has the meaning set forth in Schedule 2.5 .

“ Registered Intellectual Property ” means all Owned Intellectual Property that is registered or applied for with the applicable Governmental Authority in the United States and/or registered or applied for with any applicable governmental authority abroad and all domain names owned by Seller.

“ Release ” shall have the same meaning ascribed thereto under CERCLA Section 101(22), except that it shall apply to any and all Hazardous Materials, not just CERCLA hazardous substances.

“ Seller’s Knowledge ” means the actual knowledge, after reasonably diligent investigation of the applicable subject matter, of any of H. Britton Sanderford, Jr., Mohamad Motahari, Rick Rees, Gregg Larson, Phil Franklin, Marc Reed and Robert Davis.

“ Seller Products ” means any product manufactured, marketed, offered for sale or sold, or proposed to be manufactured, marketed, offered for sale or sold, from time to time by or on behalf of Seller.

“ SMS (Bermuda 2) ” means Sensus Metering Systems (Bermuda 2) Ltd., a Bermuda limited company.

“ Software ” means any computer program, including, without limitation, all application software, databases, compilations, tool sets, compilers, higher level or proprietary languages, related documentation and materials, whether in source code, object code or human readable form.

 

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“ Southern Telecom Agreement ” means that certain Agreement, dated as of August 24, 2004, between STI and Seller, as amended, restated or otherwise modified from time to time.

“ STI ” means Southern Telecom, Inc., a Delaware corporation.

“ STI Assignment and Assumption Agreement ” means an Assignment and Assumption Agreement, substantially in the form of Exhibit D hereto.

“ STI Lease Obligations ” has the meaning set forth in the form of the Metrocall Assignment and Assumption Agreement attached hereto as Exhibit D .

“ STI Lease Rights ” has the meaning set forth in the form of the Metrocall Assignment and Assumption Agreement attached hereto as Exhibit D .

“ Target Current Assets ” means $975,000.

“ Tax ” means any federal, state, county, local, franchise or foreign income, payroll, employment, excise, environmental, customs, franchise, windfall profits, withholding, social security (or similar), unemployment, real property, personal property (tangible or intangible), sales, use, transfer, registration, value added, gross receipts, net proceeds, turnover, license, ad valorem, capital stock, disability, stamp, leasing, lease, excess profits, occupational and interest equalization, fuel, severance, alternative or add-on minimum or estimated tax, charge, fee, levy, duty or other assessment, and other obligations of the same or of a similar nature to any of the foregoing due or claimed to be due by or to any Governmental Authority, including any interest, penalty or addition thereto, whether disputed or not.

“ Tax Return ” means any return, report, declaration, form, claim for refund or information return or statement required to be supplied to any Tax authority with respect to Taxes, including any schedule or attachment thereto, and including any amendment thereof, that includes any information relating to the business or assets of Seller.

“ TGB ” means any Tower Gateway Base Station built, used or operated in connection with the Business before or after the Closing.

“ Trade Secrets ” means all know-how, trade secrets and confidential or proprietary information, including concepts, methods, practices, processes, designs, customer lists, technical information, inventions and discoveries, in each case, in any form or medium.

“ Trademarks ” means all United States and foreign trade names, trade dress, registered and unregistered trademarks, service marks, logos and other source-identifying designations, including all registrations and applications therefor and all of the goodwill of the business connected with the use of and symbolized by the same.

“ Transaction Documents ” means this Agreement, the Bills of Sale, the Metrocall Assignment and Assumption Agreement, the Intellectual Property Assignments, the Subscription Agreement, the Noncompetition Agreement and any other agreements, documents, assignments or instruments to be executed and delivered pursuant to this Agreement.

 

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“Vehicles” means all motor vehicles and all assignable warranties of third parties related thereto.

1.2 Other Defined Terms . The following terms are defined in the sections indicated.

 

 

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1.3 Accounting Terms . For purposes of this Agreement, all accounting terms not otherwise defined herein have the meanings assigned to them in conformity with GAAP.

1.4 Other Definitional Provisions .

(a) Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular and vice versa. The term “including” is not limiting, and the words “hereof,” “herein,” “hereunder” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. References to “Sections,” “Exhibits” and “Schedules” are to Sections, Exhibits and Schedules, respectively, of this Agreement, unless otherwise specifically provided. Terms defined herein may be used in the singular or the plural. Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.

(b) Accounting principles and practices are “consistently applied” when the accounting principles and practices observed in a current period are comparable in all material respects to the accounting principles and practices applied in the preceding period.

(c) Any representations or warranties concerning the enforceability of agreements shall in all cases be limited by the effects of bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights and remedies of creditors, and the effects of general principles of equity, whether applied by a court of law or equity.

ARTICLE 2

PURCHASE AND SALE OF ASSETS

2.1 Purchase and Sale of the Purchased Assets . Upon the terms and subject to the conditions contained herein, Purchaser agrees to purchase from Seller at the Closing, and Seller agrees to sell, grant, convey, assign, transfer and deliver to Purchaser or Purchaser Parent, as contemplated by the Bills of Sale, at the Closing, all of Seller’s right, title and interest, as of the Closing, in and to all of Seller’s property and assets, real personal or mixed, tangible and

 

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intangible, of every kind and description, wherever located (the “ Purchased Assets ”) including the following (but excluding the Excluded Assets):

(a) Inventory, Raw Materials and Supplies . To the extent owned by Seller on the Closing Date, all inventories of Seller, including all finished goods, work-in-process, raw materials, parts, components and supplies (the “ Inventory ”);

(b) Equipment , All of Seller’s machinery, equipment, Furniture and Fixtures, office equipment, computer equipment and peripherals, telephone equipment, parts, fixed assets, Vehicles and all other personal property used in the operations of the Business, together with all assignable warranties by the manufacturers or sellers of those items, and all maintenance records, brochures, catalogues and other documents relating to those items or to the installation or functioning of those items (the “ Equipment ”);

(c) Contracts . All of Seller’s right, title and interest in and to (i) those Contracts identified on Schedule 2. 1(c) , (ii) all purchase orders evidencing Open Customer Orders contemplated by Section 2.1(1)(i) , Accounts Receivable contemplated by Section 2.1(i) , or Accounts Payable contemplated by Section 2.3(c) , (iii) all other Contracts entered into by Seller in the Ordinary Course of Business that involve payments or other consideration not in excess of $25,000, in the aggregate, or that are accepted in writing by Purchaser prior to the Closing Date, and in each case, any security or similar deposits relating to such Contracts (the Contracts contemplated by clauses (i) through (iii) are referred to herein as the “ Assigned Contracts ”), (iv) the Metrocall Rights, and (v) the STI Lease Rights;

(d) Personal Property Leases . All leases for all leased personal property of Seller, as listed on Schedule 2.1(d) , and any security or similar deposits relating to those leases (the “ Personal Property Leases ”);

(e) Real Property Leases . All leases for all leased real property of Seller, as listed on Schedule 2.1 (e) , and any security or similar deposits relating to those leases (the “ Real Property Leases ”);

(f) Intellectual Property . All of Seller’s right, title and interest in and to all Intellectual Property throughout the world that is owned, possessed, used or licensed (as licensor or licensee) by or to Seller, including all of the Registered Intellectual Property, the Licensed Intellectual Property and the other Intellectual Property identified on Schedule 2.1(f) (the “ Purchased Intellectual Property ”);

(g) Records . All production records, product files, technical information, specifications, designs, drawings, maintenance and production records, test records, laboratory notebooks, confidential information, price lists, marketing plans and strategies, sales records, product development techniques or plans, customer lists and files (including customer credit and collection information), details of client or consultant contracts, operational methods, operating taxes, historical and financial records and files, and other proprietary information (the “Records ”);

(h) Permits; FCC Licenses . All Permits held by or issued to Seller (the “ Transferred Permits ”) and all of the FCC Licenses;

 

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(i) Accounts Receivable . All Accounts Receivable that are owing as of the close of business on the Closing Date;

(j) Cash . Seller’s cash and marketable securities, if any, as of the Closing (the “ Cash ”);

(k) Intangible Property Rights . All choses in action, claims, rights to sue, and intangible property rights or rights to recovery or offset of any kind or character arising from or concerning the Business, the other Purchased Assets, or the Assumed Liabilities, including confidentiality obligations and similar obligations (“ Intangibles ”);

(l) Open Orders .

(i) To the extent not fulfilled prior to Closing, all open orders for goods and services with customers listed on Schedule 2.1(l)(i) and any additional open orders for goods and services with customers received by Seller in the Ordinary Course of Business after the date hereof (the “ Open Customer Orders ”); and

(ii) The right to receive all goods or services to be provided to Seller pursuant to open orders for goods and services with suppliers that are listed on Schedule 2.1(l)(ii) which remain unfulfilled as of the Closing Date, or pursuant to any additional open orders for goods and services with suppliers in respect of goods or services to be provided to Seller placed by Seller between the date hereof and the Closing Date (the “ Open Supplier Orders ”);

(m) Goodwill . All goodwill of the Business as a going concern, and all information and documents related thereto, including the exclusive right to represent itself as carrying on the Business in succession to Seller (“ Goodwill ”); and

(n) Pre-Paid Expenses . All pre-paid expenses, including all utility deposits, rental deposits, equipment deposits and prepaid taxes relating to the Business (“ Pre-Paid Expenses ”).

Notwithstanding the foregoing, the transfer of the Purchased Assets pursuant to this Agreement shall not include any Excluded Assets or the assumption of any Liability related to the Purchased Assets unless Purchaser expressly assumes the Liability pursuant to Section 2.3 .

The Consideration Shares constitute consideration for the Purchased Assets sold, granted, conveyed, assigned and transferred to Purchaser Parent as contemplated hereby. The remaining portion of the Purchase Price constitutes consideration for the Purchased Assets sold, granted, conveyed, assigned and transferred to Purchaser as contemplated hereby. The Purchased Assets shall be transferred to Purchaser and Purchaser Parent pursuant to a Bill of Sale and a Bill of Sale and Assignment and Assumption Agreement substantially in the applicable form attached hereto as Exhibit A (together, the “ Bills of Sale ”), or, in the case of the Metrocall Rights, the Metrocall Assignment and Assumption Agreement, or, in the case of the STI Lease Rights, the STI Assignment and Assumption Agreement, or, in the case of Registered Intellectual Property, an assignment substantially in the form of the applicable forms of assignment attached as Exhibit B hereto (the “ Intellectual Property Assignments ”). The Bills of Sale will specify which Purchased

 

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Assets are purchased by Purchaser and which Purchased Assets are purchased by Purchaser Parent.

2.2 Non-Transferable Contracts and Permits . Anything in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement to assign or transfer any Assigned Contract (or any other Contract rights specified in Section 2.1(c)) , Permit or FCC License or any claim or right or any benefit or obligation thereunder or resulting therefrom if an assignment or transfer thereof is prohibited or, without the consent of a third party thereto, would constitute a breach or violation thereof or is otherwise prohibited and such consent has not been obtained. If such a consent is required and has not been obtained or if an attempted assignment or transfer is ineffective or prohibited, Seller shall use its commercially reasonable efforts to cooperate with Purchaser in any reasonable arrangement requested and approved by Purchaser to provide for Purchaser the benefits under any such Assigned Contract or Transferred Permit. In connection with any such arrangement, (i) Seller shall bear the expense of structuring and implementing the arrangement and (ii) Purchaser shall honor Seller’s commitments under any such Assigned Contract or Transferred Permit to the extent arising following the close of Business on the Closing Date in connection with Purchaser’s use of any such Assigned Contract or Transferred Permit that is the subject of such arrangement (or assets or rights relating thereto) and not pertaining to any prior period.

2.3 Assumption of Liabilities . Subject to the terms and conditions of this Agreement, including Section 9.2(a)(iv) hereof, on the Closing Date, Purchaser agrees to irrevocably assume and become exclusively responsible for all of the following Liabilities of Seller related to the Business pursuant to the Bill of Sale (collectively, the “ Assumed Liabilities ”):

(a) all Liabilities arising under the Assigned Contracts, the Personal Property Leases and the Real Property Leases, in each case to the extent assigned to Purchaser, to the extent arising following the close of business on the Closing Date and to the extent not constituting a Liability relating to a breach by Seller under such Assigned Contracts, Personal Property Leases or Real Property Leases prior to Closing;

(b) without duplication, all obligations of Seller to deliver products or provide services pursuant to the Open Customer Orders or to purchase products or services pursuant to Open Supplier Orders;

(c) without duplication, to the extent owing as of the close of business on the Closing Date, the Accounts Payable and accrued expenses listed on Schedule 2.3(c) and any other Accounts Payable and accrued expenses arising after the date hereof in the Ordinary Course of Business, in each case to the extent that such accounts payable and accrued expenses relate to goods or services for which Purchaser will derive benefits after Closing;

(d) the Metrocall Obligations;

(e) the STI Lease Obligations;

(f) all other Liabilities arising out of or relating to Purchaser’s operation of the Business or Purchaser’s use, ownership or operation of the Purchased Assets on and after the Closing Date that do not pertain to the period prior to the Closing Date.

 

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All Liabilities of Seller or the Business or relating to the Purchased Assets other than the Assumed Liabilities (the “ Excluded Liabilities ”) are expressly not assumed by Purchaser pursuant to this Agreement.

2.4 Closing Date Consideration; Adjustment of Closing Date Consideration .

(a) Closing Date Consideration . The cash portion of the Purchase Price payable to Seller at Closing (the “ Closing Cash Payment ”) shall equal (i) forty-five million four-hundred thousand Dollars ($45,400,000), plus (ii) interest on $45,000,000, calculated at a rate of seven and one-half percent (7.5%) per annum from May 1, 2006 through the Closing Date, minus (iii) the Distribution Amount, minus (iv) one-half of the aggregate amount of all FCC Expenses incurred prior to Closing or agreed in good faith by Purchaser and Seller, as of Closing, to be incurred, minus (v) $22,500 (representing one-half of the HSR Act filing fee to be reimbursed by Seller pursuant to Section 5.5(a)) , minus (vi) the outstanding principal amount and accrued and unpaid interest through the Closing Date on the Purchaser Loan, and plus or minus, as applicable (vii) the Closing Date Adjustment Amount. On the Closing Date, Purchaser shall (x) pay or cause to be paid the Closing Cash Payment, by wire transfer of immediately available funds, to an account designated by Seller in writing to Purchaser at least two (2) Business Days prior to Closing and shall (y) cause Purchaser Parent to deliver to Seller the Consideration Shares.

(b) Adjustment of Purchase Price .

(i) No later than two (2) Business Days prior to the Closing Date, Seller, at its sole cost, shall prepare and deliver to Purchaser a reasonably detailed good faith written estimate (“ Seller’s Estimated Current Assets ”) of the Current Assets as of the close of business on the Closing Date (the “ Closing Current Assets ”). At Closing, the Closing Cash Payment shall be (A) increased, dollar for dollar, by the amount by which Seller’s Estimated Current Assets exceeds the Target Current Assets, or (B) decreased, dollar for dollar, by the amount by which the Seller’s Estimated Current Assets is less than the Target Current Assets. The amount by which the Closing Cash Payment is to be increased or decreased is referred to herein as the Closing Date Adjustment Amount. Each determination of Current Assets pursuant to this Section 2.4(b) shall be made in accordance with GAAP. An example such determination as of December 31, 2005 is set forth in Schedule 2.4(b)(i).

(ii) Within sixty (60) days after the Closing Date, Purchaser, at its sole cost, shall prepare and deliver to Purchaser a reasonably detailed good faith written determination (“ Purchaser’s Current Asset Calculation ”) of Adjusted Closing Current Assets (as defined in Schedule 2.4(b)(ii) . Seller shall have thirty (30) days from the date of receipt of Purchaser’s Current Asset Calculation to agree or disagree therewith. If Seller agrees with Purchaser’s Current Asset Calculation, the amount of Adjusted Closing Current Assets shown thereon shall be final and conclusive. If Seller does not agree with Purchaser’s Current Asset Calculation, Seller shall, within such thirty (30) day period, deliver a written objection (the “ Objection ”) to Purchaser which shall specify in reasonable detail the basis for the objection and set forth an alternative computation of Adjusted Closing Current Assets (the “ Seller’s Current Asset Calculation ”). If Seller does not deliver an Objection within such thirty (30) day period, then Purchaser’s Current Asset Calculation shall be final and conclusive. Upon Purchaser’s

 

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receipt of an Objection, Purchaser and Seller shall negotiate in good faith to resolve the Objection. If Purchaser and Seller resolve the Objection, the amount they agree upon shall be final and binding, but if the Objection cannot be resolved by such negotiation within thirty (30) days after Purchaser’s receipt of the Objection, either Purchaser or Seller may submit Purchaser’s Current Asset Calculation and Seller’s Current Asset Calculation, the Objection, and all work papers related thereto (collectively, the “ Determination Materials ”), to PricewaterhouseCoopers LLP or another nationally recognized accounting firm reasonably acceptable to Seller and Purchaser (the “ Accounting Arbiter ”), which shall review the Determination Materials and shall determine the amount of Adjusted Closing Current Assets, which may not be outside the range of Purchaser’s Current Asset Calculation and Seller’s Current Asset Calculation. The Accounting Arbiter shall notify the parties of its determination within thirty (30) days following the receipt of the Determination Materials, which determination shall be final and conclusive and binding on Purchaser and Seller. The fees and expenses of the Accounting Arbiter shall be borne by Purchaser and Seller in proportion to the degree to which their determinations of the Adjusted Closing Current Assets are determined by the Accounting Arbiter to be incorrect, as determined by the Accounting Arbiter. The calculation of Adjusted Closing Current Assets finally determined in accordance with this Section 2.4(b)(ii) is referred to herein as the “ Final Closing Current Assets ”.

(iii) If the Final Closing Current Assets is greater than the Estimated Closing Current Assets, Purchaser shall pay the amount of such difference (together with interest thereon as provided below) to Seller in cash by wire transfer of immediately available funds. If the Final Closing Current Assets is less than the Estimated Closing Current Assets, Seller shall pay the amount of such difference (together with interest thereon as provided below) to Purchaser by wire transfer of immediately available funds. The parties shall make any deliveries or payment required by this Section 2.4(b)(iii) within five (5) days after the earlier to occur of the date (A) the parties agree in writing as to the Final Closing Current Assets in accordance with Section 2.4(b)(ii) hereof or (B) the Accounting Arbiter notifies the parties in writing of its determination of the Final Closing Current Assets according to the provisions of Section 2.4(b)(ii) hereof. The payment, whether to or from Purchaser, shall bear interest from the Closing Date until the date of payment at an annual interest rate (calculated on the basis of a 365-day year) equal to the prime rate published by The Wall Street Journal on the Closing Date.

2.5 Earnout . The provisions set forth in Schedule 2.5 are incorporated herein by this reference.

2.6 Withholding and Transfer Taxes .

(a) Any transfer taxes, use or sales taxes, stamp duties, filing fees, registration fees, recordation expenses or other similar taxes, fees, charges or expenses incurred in connection with the transfer of the Purchased Assets to Purchaser or in connection with any of the other transactions contemplated by this Agreement, including, without limitation, any interest or penalties in respect thereof (the “ Transfer Taxes ”), shall be shared one-half by Purchaser and one-half by Seller. Seller and Purchaser shall cooperate with each other to use their commercially reasonable efforts to minimize the Transfer Taxes attributable to the transfer of the Purchased Assets.

 

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(b) Purchaser shall be entitled to deduct and withhold from the consideration otherwise payable to any person pursuant to this Article such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of federal, state, local or foreign tax law. If Purchaser so withholds amounts, such amounts shall be treated for all purposes of this Agreement as having been paid to Seller.

2.7 Purchase Price Allocation . Not later than October 31, 2006, Purchaser shall prepare and deliver to Seller Purchaser’s proposed draft of IRS Form 8594 to be filed with the IRS. Seller and Purchaser shall cooperate in good faith to finalize a mutually agreeable Form 8594 before December 31, 2006. Seller and Purchaser acknowledge that the allocation of the Purchase Price set forth in such form shall be binding upon the parties for all applicable federal, state, local and foreign tax purposes. Seller and Purchaser covenant (i) to report gain or loss or cost basis, as the case may be, in a manner consistent with such allocation; (ii) not to voluntarily take any position inconsistent therewith in any Proceeding relating to such returns; and (iii) to use commercially reasonable efforts to sustain such allocation in any subsequent Tax audit or Tax dispute.

2.8 Closing .

(a) Time and Place of Closing . The transactions provided for herein shall be consummated at a closing (the “ Closing ”) to be held at the offices of Mayer, Brown, Rowe & Maw LLP in New York, New York, commencing at 10:00 a.m. local time on the fifth Business Day following satisfaction of the conditions precedent set forth in Articles 6 and 7 , or at such other place and on such other date as may be mutually agreed upon by the parties. Subject to Article 8 , failure to consummate the transactions contemplated hereby on the date and time and place determined pursuant to this Section 2.8(a) will not result in the termination of this Agreement and will not relieve either any party of any obligation under this Agreement. In such situation, the Closing shall occur as soon as reasonably practicable, subject to Article 8 . The date on which the Closing actually occurs is referred to herein as the “ Closing Date .”

(b) Seller’s Closing Deliverables . At the Closing, Seller shall deliver or cause to be delivered to Purchaser, the following:

(i) a counterpart of each Bill of Sale, duly executed on behalf of Seller;

(ii) assignments, in forms of the applicable Intellectual Property Assignments, in respect of all Patents, Trademarks and Copyrights included in the Purchased Intellectual Property;

(iii) a counterpart signature page to a Noncompetition Agreement, substantially in the form of Exhibit E hereto (the “ Noncompetition Agreement ”), duly executed by each of Mohamad Motahari and each Member of Seller, other than 225 Telecom, Inc. and Odlan Holdings, LLC;

(iv) a counterpart of a Subscription and Shareholders Agreement substantially in the form attached as Exhibit F hereto (the “ Subscription Agreement ”), duly executed on behalf of Seller;

 

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(v) a certificate from the Secretary of State of the State of Louisiana, dated a recent date prior to Closing, certifying as to Seller’s good standing;

(vi) a certificate from the Secretary of Seller, certifying as to (i) the resolutions adopted or other written records of the actions taken by the managers and members of Seller approving the transactions contemplated by this Agreement and (ii) to the incumbency of each individual signing this Agreement or any of the other Transaction Documents on behalf of Seller;

(vii) evidence, in form reasonably satisfactory to Purchaser, that the Required Consent has been obtained;

(viii) a certificate dated the Closing Date, of an executive officer of Seller certifying as to the satisfaction of the conditions set forth in Sections 6.1 and 6.2 ;

(ix) a certificate, signed by an executive authorized officer of Seller, certifying as to Seller’s non-foreign status complying with the provisions of U.S. Treasury Regulations section 1.1445-2(b);

(x) any and all Cash included among the Purchased Assets;

(xi) duly executed payoff letters in respect of all funded Indebtedness of Seller from each applicable lender to Seller evidencing or specifying the amount necessary to effect the repayment in full of the Indebtedness owing to such lenders, in each case, in form and substance reasonably satisfactory to Purchaser (the “ Payoff Letters ”);

(xii) evidence reasonably satisfactory to Purchaser that Seller has satisfied all of the requirements set forth in the Payoff Letters necessary for the release of all Liens against the Purchased Assets in favor of the secured parties delivering such Payoff Letters;

(xiii) an opinion of Schwaminger & Associates, P.C., Seller’s FCC counsel, in form and substance reasonably satisfactory to Purchaser;

(xiv) a counterpart to a Termination Agreement, substantially in the form of Exhibit H hereto (the “ Sensus/AMDS Termination Agreement ”), duly executed on behalf of Seller;

(xv) evidence in a form reasonably satisfactory to Purchaser that the FCC Approvals have been obtained, that Seller’s Modification Application has been granted by the FCC, and that the FCC has approved Purchaser to manufacture and market the radio equipment that Seller is authorized to manufacture and market before Closing;

(xvi) a counterpart to the Metrocall Assignment and Assumption Agreement, duly executed on behalf of Seller;

(xvii) a counterpart to the STI Assignment and Assumption Agreement, duly executed on behalf of Seller; and

 

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(xviii) a counterpart of the Motahari Assignment Agreement, duly executed by Motahari.

(c) Purchaser’s Closing Deliverables . At the Closing, Purchaser shall deliver or cause to be delivered to Seller, the following:

(i) the Closing Cash Payment, in accordance with Section 2.4 ;

(ii) a duly executed share certificate evidencing the Consideration Shares;

(iii) a counterpart of each Bill of Sale, duly executed on behalf of Purchaser or Purchaser Parent, as applicable;

(iv) certificates from the Secretaries of each of Purchaser and Purchaser Parent, certifying as to (i) the resolutions adopted or other written records of the actions taken by the Boards of Directors of each of Purchaser and Purchaser Parent approving the transactions contemplated by this Agreement and (ii) the incumbency of each individual signing this Agreement or any of the other Transaction Documents on behalf of Purchaser or Purchaser Parent, as applicable;

(v) a certificate from the Secretary of State of the State of Delaware, dated a recent date prior to Closing, certifying as to Purchaser’s good standing;

(vi) a certificate of compliance from the Office of Registrar of Companies of Bermuda in respect of Purchaser Parent, dated a recent date prior to Closing;

(vii) a certificate, dated the Closing Date, of an executive officer of Purchaser, certifying as to the satisfaction of the conditions set forth in Sections 7.1 and 7.2 ;

(viii) a counterpart of the Subscription Agreement, duly executed by Purchaser Parent;

(ix) a counterpart of the Sensus/AMDS Termination Agreement, duly executed on behalf of Purchaser;

(x) a counterpart to the Metrocall Assignment and Assumption Agreement, duly executed on behalf of Purchaser;

(xi) a counterpart to the STI Assignment and Assumption Agreement, duly executed on behalf of Purchaser;

(xii) an opinion of Conyers Dill & Pearman, Purchaser Parent’s Bermuda counsel, in form and substance reasonably satisfactory to Seller; and

(xiii) a counterpart of the Motahari Assignment Agreement, duly executed by Purchaser.

 

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ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller hereby represents and warrants to Purchaser as follows:

3.1 Organization, Power and Authority; Capitalization .

(a) As of the date hereof and as of the Closing Date, Seller is duly organized, validly existing and in good standing under the laws of Louisiana. Seller has full limited liability company power, capacity and authority necessary under all applicable Laws to enter into and perform its obligations under this Agreement and the Transaction Documents to which it is a party, to consummate the transactions contemplated hereby and thereby and to own, operate or lease the properties that it purports to own, operate or lease and to carry on its business as it is now being conducted. Seller has no subsidiaries.

(b) Set forth on Schedule 3.1(b) hereto is a true and correct list of all holders of Seller’s issued and outstanding equity securities as of the date of this Agreement and a list of all holders of options, warrants, convertible securities and other rights to acquire equity securities of Seller, including, in each case, the number and type of security or right held by such holder. The terms of each class of Seller’s equity securities are as set forth in Seller’s Amended And Restated Operating Agreement, dated as of February 4, 2004, as amended by the First Amendment to Amended and Restated Operating Agreement, dated as of May 25, 2004, the Second Amendment to Amended and Restated Operating Agreement dated as of November 1, 2004, and the Third Amendment to Amended and Restated Operating Agreement dated as of July 12, 2005. Except as set forth on Schedule 3.1(b) , Seller does not presently intend to effect any change in Seller’s equity capitalization.

3.2 Due Authorization . The execution and delivery by Seller of this Agreement and the other Transaction Documents and the consummation by Seller of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of Seller and no other corporate proceeding is necessary for the execution and delivery of this Agreement or such other agreements by Seller, the performance by Seller of its obligations hereunder or thereunder and the consummation by Seller of the transactions contemplated hereby and thereby. This Agreement has been, and, when executed and delivered in accordance herewith, the other Transaction Documents to which Seller is a party shall have been, duly executed and delivered by Seller and constitute or shall constitute, as applicable, legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their terms.

3.3 No Violation; Consents and Notices .

(a) Except as disclosed on Schedule 3.3(a) , the execution, delivery and performance by Seller of this Agreement and the other Transaction Documents to which it is or will be a party do not and will not (i) violate in any material respect any Law or any decree or judgment of any court or other Governmental Authority applicable to Seller, the Business, any of the Purchased Assets, or the Assumed Liabilities; (ii) violate or conflict in any material respect with, result in a material breach of, constitute a material default (or an event which, with or

 

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without notice or lapse of time or both, would constitute a material default) under, permit cancellation of, or result in the creation of any Lien upon any of the Purchased Assets under, any Contract; or (iii) violate or conflict with any provision of the Certificate of Formation, operating agreement or other organizational documents of Seller.

(b) Except as disclosed on Schedule 3.3(b) , no consents or approvals of, or notices, filings or registrations by Seller to or with, any Governmental Authority or any other Person not a party to this Agreement are necessary in connection with the execution, delivery and performance of this Agreement or the other Transaction Documents, or in connection with the sale, transfer, conveyance, assignment or delivery of the Purchased Assets or Purchaser’s assumption of the Assumed Liabilities.

3.4 Ownership of Purchased Assets . Seller has sole good and indefeasible or marketable, as appropriate, title to, or a valid leasehold interest in, or valid license to use, all of the Purchased Assets, and the Purchased Assets are subject to no Liens except for Permitted Liens. Except as set forth on Schedule 3.4 , there are no leases, subleases, licenses, sublicenses, concession or other agreements granting to any third party or parties the right of use any Purchased Asset, or any portion thereof or interest therein. There are no outstanding options or rights of first refusal to purchase any Purchased Asset, or any portion thereof or interest therein.

3.5 Financial Statements; Distributions .

(a) Attached hereto as Exhibit I are the following financial statements (collectively the “ Financial Statements ”): (i) an audited balance sheet of Seller as of December 31, 2005, (ii) unaudited balance sheets of Seller as of December 31, 2004, (iii) unaudited statements of income, cash flow and members’ capital accounts of Seller for the twelve-month periods ended December 31, 2005 and 2004 and for the period from Seller’s inception to December 31, 2003 and (iv) an unaudited balance sheet (the “ Interim Balance Sheet ”) and statements of income and cash flow for Seller as of and for the three (3) months ended March 31, 2006 (collectively, with the Interim Balance Sheet, the “ Interim Financial Statements ”). Each of the Financial Statements fairly presents in all material respects the financial position and operating results and cash flows of Seller at and as of the respective dates thereof or for the periods ended on such dates, as applicable, subject, in the case of the Interim Financial Statements, to normal recurring year-end adjustments recorded in a manner consistent with prior periods. The Financial Statements (including the notes thereto) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, except that, with respect to the Interim Financial Statements: (i) notes have been omitted and (ii) certain of the long-term liabilities have been reclassified as short-term liabilities.

(b) Since December 31, 2004, Seller has not declared, set aside, paid or effected any Distributions.

3.6 Absence of Changes . Since December 31, 2005, no fact, event or circumstance has occurred or arisen which has had or is reasonably expected to have a Material Adverse Effect. Without limiting the foregoing, except as set forth on Schedule 3.6 or as expressly permitted by this Agreement, since such date:

 

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(a) Seller has not incurred any Liabilities of any nature, other than Accounts Payable incurred in the Ordinary Course of Business;

(b) Seller has not entered into any Contracts, other than purchase orders in respect of Accounts Receivable and Accounts Payable incurred in the Ordinary Course of Business;

(c) Seller has not modified the salary or other compensation (including benefits) of any of its employees, other than in the Ordinary Course of Business consistent with past practice;

(d) Seller has not sold, leased, transferred, licensed, assigned or otherwise disposed of any Purchased Asset, other than the sale of Inventory in the Ordinary Course of Business and Seller has not permitted, allowed or suffered any of the Purchased Assets to become subjected to any Lien, other than Permitted Liens;

(e) Seller has not written down or written up the value of any Inventory (including write-downs by reason of shrinkage or markdowns), determined as collectible any Accounts Receivable or any portion thereof which were previously considered uncollectible or written off as uncollectible any Accounts Receivable or any portion thereof, except in the Ordinary Course of Business and consistent with GAAP;

(f) Seller has not entered into any collective bargaining or labor agreement (oral and legally binding or written) or experienced any organized slowdown, work interruption, strike or work stoppage;

(g) Seller has not made any change in any of its methods of accounting or accounting principles, practices or policies, other than as a result of changes adopted in response to promulgations by national accounting bodies;

(h) No party (including Seller) has accelerated, terminated, modified, or canceled any Contract involving more than $25,000, individually or together with any related Contracts;

(i) Seller has not delayed or postponed the payment of any Accounts Payable or other Liabilities;

(j) Seller has not canceled, compromised, waived, or released any right or claim (or series of related rights or claims) either involving more than $25,000 or outside the Ordinary Course of Business;

(k) Seller has not suffered any casualty losses or damages in excess of $25,000 in the aggregate (whether or not insured against);

(l) Seller has not taken any action or omitted to take any action affecting the Business, other than in the Ordinary Course of Business; and

 

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(m) Seller has not agreed or committed to take any of the actions described in the foregoing clauses of this Section 3.6 not otherwise expressly permitted by this Agreement.

3.7 Absence of Undisclosed Liabilities . Seller has no Liabilities, contingent or otherwi