Exhibit
2.1
EXECUTION COPY
ASSET PURCHASE
AGREEMENT
by and among
FREQUENCY
ELECTRONICS, INC.,
FEI-ZYFER, INC.,
ODETICS, INC.
and
ZYFER, INC.
dated as of
May 9, 2003
TABLE
OF CONTENTS
i
ii
iii
Section 10.12
|
Election of Remedies
|
Section 10.13
|
Assignment
|
|
DISCLOSURE SCHEDULES
|
|
2.1
|
Sale and Transfer of
Assets
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2.2
|
Retained Assets
|
2.3
|
Assumed Liabilities
|
4.5
|
Consents and Approvals;
No Violations
|
4.6
|
Financial Statements;
SEC Filings
|
4.8
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No Undisclosed
Liabilities
|
4.10
|
Accounts Payable
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4.12
|
Absence of Certain
Changes
|
4.13
|
Availability of Assets
and Legality of Use
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4.14(b)
|
Leased Real Property
|
4.14(c)
|
Leased Personal
Property
|
4.15
|
Real Property
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4.17
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Material Contracts
|
4.18
|
Customers
|
4.19
|
Insurance
|
4.21
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Litigation
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4.23
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Employee Benefit Plans
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4.24
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Tax Matters
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4.25
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Intellectual Property
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4.26
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Inventory and Fixed
Assets
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4.28
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Personnel
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4.32
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Product Defects
|
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EXHIBITS
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|
Exhibit A
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Bill of Sale
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Exhibit B
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Escrow Agreement
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Exhibit C
|
Sub-Lease Agreement
|
Exhibit D
|
Transition Services
Agreement
|
Exhibit E
|
Assignment and
Assumption Agreement
|
|
|
|
iv
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT,
dated as of May 9, 2003, by and among FREQUENCY ELECTRONICS, INC., a Delaware
corporation (Frequency),
FEI-ZYFER, INC., a Delaware corporation (Purchaser),
ODETICS, INC., a Delaware corporation (Parent),
and ZYFER, INC., a Delaware corporation
(Seller). Certain capitalized terms used in this
Agreement have the meanings assigned to them in Article I.
WHEREAS,
Seller is engaged in the business of designing, developing, and manufacturing
time/frequency generation and synchronization products (the Business);
WHEREAS,
Parent is the direct owner of all of the outstanding capital stock of Seller;
WHEREAS,
Purchaser is a wholly-owned subsidiary of Frequency;
WHEREAS,
Seller wishes to sell, and Purchaser wishes to purchase, the Business and
Assets (as hereinafter defined), subject to the assumption by Purchaser of
certain liabilities of Seller comprising the Assumed Liabilities (as
hereinafter defined) on the terms and subject to the conditions set forth in
this Agreement;
NOW,
THEREFORE, in consideration of the foregoing and the mutual representations,
warranties, covenants and agreements set forth herein, intending to be legally
bound hereby, the parties hereto agree as follows:
Section 1.1 Definitions.
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context clearly requires otherwise:
Accounts Receivable
shall mean any and all trade accounts, notes and other receivables of Seller
and the Business and all claims relating thereto or arising therefrom other
than the Retained Assets.
Additional Payment Amount shall have the
meaning set forth in Section 2.8(a).
Affiliate
of a Person shall mean a Person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with the first mentioned Person.
Agreement
or this Agreement shall mean this Asset
Purchase Agreement, together with the Exhibits and Appendices hereto and the
Disclosure Schedules.
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Ancillary
Agreements shall mean the Bill of Sale, the Sub-Lease Agreement,
the Escrow Agreement, the Assignment and Assumption Agreement and the
Transition Services Agreement.
Applicable
Law shall mean any law, regulation, rule, order, judgment or decree
to which the Business, the Assets or Seller is subject.
Applicable
Rate means a rate per annum equal to the prime rate as set forth
in The
Wall Street Journal Money Rates column plus one percent (1%).
Assets
shall mean the assets of Seller set forth in Section 2.1.
Associate
shall have the meaning set forth in Rule 12b-2 promulgated under the
Exchange Act.
Assumed
Liabilities shall have the meaning set forth in Section 2.3.
Balance
Sheet shall mean the March 31, 2003 balance sheet of Seller
included in the Financial Statements.
Balance
Sheet Date shall mean March 31, 2003.
Business
Day shall mean a day other than Saturday, Sunday or any day on
which banks located in the States of California and New York are authorized or
obligated to close.
Closing
shall mean the closing referred to in Section 3.1.
Closing
Date shall mean the date on which the Closing occurs.
Closing Net Assets shall
have the meaning set forth in Section 2.7(a).
Closing Payment
shall have the meaning set forth in Section 2.6.
Code
shall mean the Internal Revenue Code of 1986, as amended.
Confidentiality
Agreement shall mean that certain letter agreement dated December
12, 2002 between Parent and Purchaser.
Confidentiality
Obligations shall mean any confidentiality obligations set forth
herein or in any other agreement to which each of the parties hereto are
parties or by which each are bound, including the Confidentiality Agreement.
Confidentiality
Regulations shall mean Treasury Regulation Section 1.6011-4(b)(3)
or any successor provision of the Treasury Regulations promulgated under
Section 6011 of the Code.
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Copyrights
shall mean, as they exist anywhere in the world, copyrights and mask works,
including all renewals and extensions thereof, copyright registrations and
applications for registration thereof, and non-registered copyrights.
Disclosure
Schedules shall mean the Disclosure Schedules of even date herewith
prepared and signed by Parent and Seller and delivered to Purchaser
simultaneously with the execution hereof or as approved thereafter in writing
by all of the parties hereto.
Earnout Products
shall have the meaning set forth in Section 2.8(a)(iii).
Earnout Year
shall have the meaning set forth in Section 2.8(a).
Encumbrances
shall mean any and all liens, charges, security interests, options, claims,
mortgages, pledges, proxies, voting trusts or agreements, obligations,
understandings or arrangements or other restrictions on title or transfer of
any nature whatsoever.
Environmental
Claim shall mean any claim, action, cause of action, investigation
or written notice by any Person alleging actual or potential liability for
investigatory, cleanup or governmental response costs, or natural resources or
property damages, or personal injuries, attorneys fees or penalties relating
to (i) the presence, or release into the environment, of any Materials of
Environmental Concern at any location owned or operated by Seller, now or in
the past, (ii) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law, or (iii) orders, judgements,
settlements, and liens related to any Environmental Law.
Environmental
Law shall mean each federal, state, local and foreign law and
regulation relating to pollution, protection or preservation of human health or
the environment including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata, and natural resources, and
including each law and regulation relating to emissions, discharges, releases
or threatened releases of Materials of Environmental Concern, or otherwise
relating to the manufacturing, processing, distribution, use, treatment,
generation, storage, containment (whether above ground or underground),
disposal, transport, handling of or
exposure to Materials of Environmental Concern, or the preservation of the
environment or mitigation of adverse effects thereon, including each law and
regulation with regard to record keeping, notification, disclosure and
reporting requirements respecting Materials of Environmental Concern.
ERISA
shall mean the Employee Retirement Income Security Act of 1974, as amended.
ERISA
Affiliate shall mean any trade or business, whether or not
incorporated, that together with Seller would be deemed a single employer
within the meaning of Section 4001(b) of ERISA.
Escrow
Agent shall mean HSBC Bank USA or the successor escrow agent
pursuant to the Escrow Agreement of even date herewith among HSBC Bank USA and
the parties to this Agreement.
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Exchange
Act shall mean the Securities Exchange Act of 1934, as amended.
Existing Technology
shall have the meaning set forth in Section 2.8(a) (iii).
Expenses
shall mean any and all reasonable expenses incurred in connection with
investigating, defending or asserting any claim, action, suit or proceeding
incident to any matter indemnified against hereunder (including court filing
fees, court costs, arbitration fees or costs, witness fees, and reasonable fees
and disbursements of legal counsel, investigators, expert witnesses,
accountants and other professionals).
Federal
Income Tax means any tax imposed under Subtitle A of the Code.
Final
Determination means (i) with respect of Federal Income Taxes,
a determination as defined in Section 1313(a) of the Code or execution
of an Internal Revenue Service Form 870-AD and (ii) with respect to Taxes
other than Federal Income Taxes, any final determination of liability in respect
of a Tax that, under applicable law, is not subject to further appeal, review
or modification through proceedings or otherwise (including the expiration of a
statute of limitations or a period for the filing of claims for refunds,
amended returns or appeals from adverse determinations).
Financial
Statements means the unaudited balance sheets of Seller at March
31, 2003, March 31, 2002 and March 31, 2001, and the unaudited related
statements of operations and cash flows for the periods then ended.
GAAP
shall mean United States generally accepted accounting principles.
Governmental
Entity shall mean a court, arbitral tribunal, administrative agency
or commission or other governmental or other regulatory authority or agency.
Holdback
Amount shall have the meaning set forth in Section 2.5(c).
Income
Tax means any income, franchise, gains or similar Tax imposed on or
measured by net income, profits, gains or similar items (including Federal
Income Tax) and any interest, additional amounts, additions to tax, penalties
or similar items with respect thereto.
Indemnified
Party shall have the meaning set forth in Section 10.4(a).
Indemnitor
shall have the meaning set forth in Section 9.4(a).
Intellectual
Property means all Copyrights, Internet Assets, Patents, Software,
Trade Secrets, Trademarks, Databases and IP Licenses.
IP
Licenses means all licenses, sublicenses, distributor agreements or
permissions, including without limitation, the right to receive royalties or
any other consideration relating to Copyrights, Internet Assets, Patents,
Software, Trade Secrets and Trademarks.
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Internet
Assets means, as they exist anywhere in the world, domain names,
Internet addresses and other computer identifiers, web sites, web pages and
similar rights and items.
Inventory
shall have the meaning set forth in Section 2.1(f).
Knowledge
of Seller concerning a particular subject, area or aspect of the
Business or affairs shall mean the actual knowledge of any of the senior
officers and directors of Seller or Parent.
Leased
Real Property shall mean the leasehold interests held by Seller
under the Real Property Leases.
Liabilities
shall mean the debts, liabilities, claims, security interests, Encumbrances
(other than Permitted Encumbrances), demands, expenses, commitments and
obligations (whether accrued or not, known or unknown, disclosed or
undisclosed, fixed or contingent, asserted or unasserted, liquidated or
unliquidated, arising prior to, at or after the Closing) of Seller.
Loss
Threshold shall have the meaning set forth in
Section 9.2(b)(i).
Losses
shall mean any and all losses, costs, claims, assessments, obligations,
liabilities, settlement payments, interest, other carrying costs, diminution in
value, awards, judgments, fines, penalties, damages, Expenses, deficiencies or
other charges which are actually incurred.
Material
Adverse Effect or Material Adverse
Change shall mean any change or changes, effect or effects, event
or events or circumstance or circumstances (any such item, an Effect) that individually or in the aggregate
are reasonably expected to be materially adverse to (i) the assets,
properties, business, results of operations, prospects or financial condition
(financial or otherwise) of Seller, taken as a whole, the Business or the
Assets or (ii) the ability of Parent or Seller to perform their
obligations under this Agreement.
Materials
of Environmental Concern shall mean all chemicals, pollutants,
contaminants, wastes and toxic or hazardous substances, materials and wastes,
including without limitation, petroleum and petroleum products, asbestos and
asbestos-containing materials, polychlorinated biphenyls, lead and lead-based
paints and materials, and radon.
Net
Assets shall mean the Assets minus the Assumed Liabilities set
forth on Schedule 2.3.
Notice of Disagreement
shall have the meaning set forth in Section 2.7(c).
Notice of Earnout
Dispute shall have the meaning set forth in Section 2.8(b).
Ordinary
Course of Business any action taken by a Person will be deemed to
have been taken in the Ordinary Course of Business only if that action: (a) is consistent in nature, scope and
magnitude with the past practices of such Person and is taken in the ordinary
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course of the normal, day-to-day operations of such Person; and (b) does not require authorization
by the board of directors or shareholders of such Person (or by any Person or
group of Persons exercising similar authority).
Parent Indemnified
Parties shall mean Parent, Seller and each of their respective
Representatives and Affiliates.
Patents
means, as they exist anywhere in the world, patents, patent renewals and
renewal rights, extension patents, patent applications and inventions, designs
and improvements described and claimed therein, patentable inventions and other
patent rights (including any divisions, continuations, continuations-in-part,
reissues, reexaminations, or interferences thereof, whether or not patents are
issued on any such applications and whether or not any such applications are
modified, withdrawn, or resubmitted).
Permits
shall mean permits, certificates, licenses, filings, approvals and other
authorizations of any Governmental Entity.
Permitted
Encumbrances shall mean (a) statutory liens, charges, assessments,
security interests, claims, obligations, understandings or arrangements for
current Taxes or other governmental charges not yet due and payable or the amount
or validity of which is being contested in good faith by appropriate
proceedings for which adequate reserves have been established in accordance
with GAAP, which reserves are reflected in the Financial Statements; (b)
mechanics, carriers, warehousemans, landlords, materialmans, workers,
repairers and similar statutory liens, charges, assessments, security
interests, options, claims, mortgages, pledges, obligations, understandings or
arrangements arising or incurred in the Ordinary Course of Business in amounts
that are not reasonably likely, individually or in the aggregate, to have
a Material Adverse Effect; (c) zoning,
entitlement, subdivision, building and other land use regulations imposed by
Governmental Entities having jurisdiction over such property that are not
violated by the current use and operation of such property; (d) pledges or
deposits in connection with, or to secure, workmens compensation, unemployment
insurance pension or other employee benefits; (e) restrictions on transfer arising out of or related to securities
Laws; (f) any Encumbrance renewing, extending or refunding any Encumbrance
permitted hereunder; and (g) the Seller Agreements.
Person
shall mean a natural person, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Entity or other entity or
organization.
Plan
shall mean each deferred compensation and each incentive compensation, stock
purchase, stock option and other equity compensation plan, program, agreement
or arrangement; each severance or termination pay, medical, surgical,
hospitalization, life insurance and other welfare plan, fund or program
(within the meaning of Section 3(1) of ERISA); each profit-sharing, stock
bonus or other pension plan, fund or program (within the meaning of
Section 3(2) of ERISA); each employment, termination or severance
agreement; and each other employee benefit plan, fund, program, agreement or
arrangement, in each case, that is sponsored, maintained or contributed to or
required to be contributed to by Seller or by any ERISA Affiliate,
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or to which Seller or an ERISA Affiliate is party, whether written or
oral, for the benefit of any director, employee or former employee of Seller.
Post-Closing
Statement of Net Assets shall have the meaning set forth in Section
2.7(a).
Post-Closing
Tax Period means any taxable period (or portion thereof) beginning
after the close of business on the Closing Date.
Pre-Closing Net
Assets shall have the meaning set forth in Section 2.6.
Pre-Closing Statement
of Net Assets shall have the meaning set forth in Section 2.6.
Pre-Closing
Tax Period means any taxable period (or portion thereof) ending on
or before the close of business on the Closing Date.
Product
Liability Claim shall mean any claim arising out of any injury to
individuals or property as a result of the ownership, possession or use of any
product manufactured, sold or delivered by Seller (or products containing
products manufactured by the Seller).
Purchase
Price shall have the meaning set forth in Section 2.5.
Purchaser
shall have the meaning set forth in the Recitals.
Purchaser
Indemnified Parties shall mean Purchaser and each of its
Representatives and Affiliates.
Real
Property Leases shall mean the real property leases for the real
property that Seller currently uses for the Business as described in Schedule
2.1(c).
Representative
shall mean any officer, director, employee, agent, advisor or consultant of a
Person.
Retained
Assets has the meaning set forth in Section 2.2.
Retained
Liabilities has the meaning set forth in Section 2.4.
Revenues
shall have the meaning set forth in Section 2.8(a)(iii).
Securities
Act shall mean the Securities Act of 1933, as amended.
SEC
shall mean the United States Securities and Exchange Commission.
Seller
shall have the meaning set forth in the Recitals.
Seller
Agreements shall have the meaning set forth in Section 2.3.
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Seller
Group means any combined, consolidated, affiliated or unitary
group, including within the meaning of Section 1504 of the Code or any
similar provision under the tax laws of any state or foreign jurisdiction, of
which the Seller is or has been a member.
Seller
Intellectual Property shall mean all Intellectual Property that is
currently used in the Business or that is necessary to conduct the Business as
presently conducted.
Seller
Indemnified Parties shall mean Seller and each of its respective
Representatives and Affiliates.
Seller
Trademarks and Logos has the meaning set forth in Section 6.5.
Software
means as they exist anywhere in the world, computer software programs,
including, without limitation, all source code as fully commented source code
as exists, object code, specifications, designs and documentation related
thereto, definitions of files, fields of files, variables, details, parameters,
installation and maintenance specifications, inputs and outputs (including
codes and acronyms), program descriptions, file descriptions, formats and
layouts, report descriptions and layouts, screen descriptions and layouts,
graphical and non-graphical user interfaces, input documents, data elements,
paper processing flowcharts, computer processing flowcharts, processing
narratives, editing rules, password development and protection rules,
telecommunications requirements, glossaries and manual procedures with respect
to the aforesaid computer programming.
Software shall include, without limitation, derivative works,
customizations, supplemental works, interim works, works in progress and all
other intellectual property rights, and portions thereof, with respect to the
Software, whether or not fixed in a tangible medium of expression, moral
rights, with respect to all computer platforms and configurations known or
unknown (e.g., PC, midrange, LAN, WAN, client server, mini,
mainframe), all APIs, DLLs and other programming by which the Software
integrates or communicates with other software and/or hardware/equipment,
together with all concomitant installation, technical, functional or user
documentation or specifications (the Documentation)
regardless of the media on which the Documentation is contained.
Stealthkey
Technology means(i) U.S. Registered Patent (File No. 09/510,540)
System and Method for Secure Cryptographic Communications; (ii) Pending U.S.
Patent Applications (File Nos. 09/574,345, 09/711,783, 09/790,021); (iii) all
foreign Patents addressing substantially the same technology covered by (i) or
(ii) above.
Subsidiary
shall mean, with respect to any Person, any corporation or other organization,
whether incorporated or unincorporated, of which (a) at least a majority
of the securities or other interests having by their terms ordinary voting
power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such Person or by any one or more
of its Subsidiaries, or by such Person and one or more of its Subsidiaries or
(b) such Person or any other Subsidiary of such Person is a general
partner (excluding any such partnership where such Person or any Subsidiary of
such party does not have a majority of the voting interest in such
partnership).
Survival
Period shall have the meaning set forth in Section 9.5(a).
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Tax
or Taxes shall mean all taxes, duties,
levies, penalties or other assessments imposed by any federal, state, local or
foreign governmental authority, including income, gross receipts, excise,
personal and real property (including leaseholds and interests in leaseholds), sales,
gain, use, license, custom duty, unemployment, capital stock, transfer,
franchise, payroll, withholding, social security, minimum estimated, profit,
gift, severance, value added, disability, premium, recapture, credit,
occupation, service, leasing, employment, stamp and other taxes, and shall
include interest, penalties or additions attributable thereto or attributable
to any failure to comply with any requirement regarding Tax Returns.
Tax
Benefit with respect to any event or adjustment for any Person
means the positive excess, if any, of the Tax liability of such Person without
regard to such event or adjustment over the Tax liability of such Person taking
into account such event or adjustment, with all other circumstances remaining
unchanged.
Taxing
Authority means any governmental or regulatory authority, body or
instrumentality exercising any authority to impose, regulate or administer the
imposition of Taxes.
Tax
Return shall mean any return (including estimated returns), report,
information return, statement, declaration or other document (including any
related or supporting information) filed or required to be filed with any
United States federal, state, local or foreign Governmental Entity in
connection with any determination, assessment or collection of any Tax or other
administration of any laws, regulations or administrative requirements
(collectively, returns) and any amended
returns.
Third
Party shall mean any Person other than Seller, Purchaser, or any of
their respective Affiliates.
Third
Party Claim shall have the meaning specified in
Section 9.4(b).
Title
IV Plan shall mean a Plan that is subject to Section 302 or
Title IV of ERISA or Section 412 of the Code.
TLP shall mean
Technology Lending Partners.
TLP Payment
shall have the meaning set forth in Section 3.3(c).
Trade
Secrets means, as they exist anywhere in the world, trade secrets,
know-how, inventions, processes, procedures, databases, confidential business
information, concepts, ideas, designs, research or development information,
techniques, technical information, specifications, operating and maintenance
manuals, engineering drawings, methods, technical data, discoveries,
modifications, extensions, improvements, and other proprietary information and
rights (whether or not patentable or subject to copyright, mask work, or trade
secret protection).
Trademarks
means, as they exist anywhere in the world, trademarks, service marks, trade
dress, trade names, brand names, designs, logos, or corporate names, whether
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registered or unregistered, and all registrations and applications for
registration thereof, and all goodwill related thereto.
Transactions
shall mean all the transactions provided for or contemplated by this Agreement
and/or the Ancillary Agreements.
Transfer
Tax or Transfer Taxes shall
mean any federal, state, county, local, foreign and other sales, use, transfer,
conveyance, documentary transfer, recording or other similar tax, fee or charge
imposed upon the sale, transfer or assignment of property or any interest
therein or the recording thereof, and any penalty, addition to tax or interest
with respect thereto.
WARN
Act shall mean the Worker Adjustment and Retraining Notification
Act.
Section 1.2 Interpretation.
(a) When a reference is made in this Agreement to a section
or article, such reference shall be to a section or article of this Agreement
unless otherwise clearly indicated to the contrary.
(b) Whenever
the words include, includes or including are used in this Agreement they
shall be deemed to be followed by the words without limitation.
(c) The
words hereof, herein and herewith and words of similar import shall,
unless otherwise stated, be construed to refer to this Agreement as a whole and
not to any particular provision of this Agreement, and article, section,
paragraph, exhibit and schedule references are to the articles, sections,
paragraphs, exhibits and schedules of this Agreement unless otherwise specified.
(d) The
meaning assigned to each term defined herein shall be equally applicable to
both the singular and the plural forms of such term, and words denoting any
gender shall include all genders. Where
a word or phrase is defined herein, each of its other grammatical forms shall
have a corresponding meaning.
(e) A
reference to any party to this Agreement or any other agreement or document
shall include such partys successors and permitted assigns, provided, however
in the event that either Purchaser or any of its Affiliates is deemed to be
Sellers successor, the references herein to Seller shall not include Purchaser
or its Affiliates.
(f) A
reference to any legislation or to any provision of any legislation shall
include any amendment to, and any modification or re-enactment thereof, any
legislative provision substituted therefor and all regulations and statutory
instruments issued thereunder or pursuant thereto.
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Section 2.1 Sale and Transfer of Assets. On the terms and subject to the conditions
set forth in this Agreement, at the Closing, Seller shall sell, convey, assign,
transfer and deliver to Purchaser and/or one or more of its Affiliates, and
Purchaser and/or one or more of its Affiliates, shall purchase, acquire and
accept from Seller, free and clear of any Encumbrances (other than Permitted
Encumbrances), all of Sellers right, title and interest in and to the assets,
properties, rights, claims, contracts and businesses of every kind, character
and description, whether tangible or intangible, whether real, personal or
mixed, whether accrued, contingent or otherwise, and wherever located, which
are used, held for use or necessary to conduct the Business as currently
conducted, other than the Retained Assets, including the following (but
excluding in each case any Retained Assets as defined below) (the Assets):
(a) all
Intellectual Property, except as provided in Section 6.8, which are used, held
for use or necessary to conduct the Business;
(b) except
as otherwise provided in this Agreement, all rights of Seller in and to all
supply agreements, license agreements, advisory agreements, promotional
agreements, independent contractor agreements, sales representative agreements,
manufacturing agreements, confidentiality agreements (under which Seller has
provided information to a Third Party) to the extent related to the Assets, all
purchase orders for the sale or purchase of goods and services, or both, all
agreements listed on Schedule 4.17(a) of the Disclosure Schedules and all other
contracts and other agreements of whatever nature to which Seller is a party,
in each case to the extent set forth in Schedule 2.1(b);
(c) except
as otherwise provided in this Agreement, all rights of Seller in and to the
Real Property Leases to the extent set forth in the Sub-Lease Agreement;
(d) all
books, files, data, customer and supplier lists, cost and pricing information,
business plans, quality control records and manuals, blueprints, research and
development files and all other records of Seller, which are used, held for use
or necessary to conduct the Business, as currently conducted by Seller, except
to the extent necessary to effect an orderly dissolution of Seller and other
than the minute books, stock record books, stock ledgers, Tax Returns, tax
books and records and similar financial and other records of Seller which
(i) relate to Income Taxes, gross receipts Taxes and any Taxes imposed in
lieu of such Taxes; and (ii) in the case of all other Tax Returns and tax books
and records that do not pertain primarily to the Business;
(e) all
personal computers, computer hardware, Software, data and other electronically
stored records and electronic messages of Seller, which are used in or
necessary to conduct the Business, as currently conducted by Seller;
(f) all
inventory, supplies, goods-in-transit, packaging materials and other
consumables of Seller (the Inventory),
including Inventory (i) in transit from suppliers of the Business or
(ii) held by suppliers of the Business;
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(g) all
transferable Permits of Seller related to the Business;
(h) all
Accounts Receivable;
(i) all
machinery, vehicles, tools, equipment, furnishings, fixtures, furniture and
spare parts owned or leased by Seller, on the Closing Date;
(j) all
advertising or promotional materials of Seller;
(k) all
manufacturers warranties to the extent related to the Assets and all claims
under such warranties;
(l) all
rights to the telephone numbers (and related directory listings) of Seller to
the extent assignable, Sellers Internet domain names, and internet sites used
by Seller;
(m) all
prepaid expenses and deposits of Seller;
(n) all
security deposits, earnest deposits and all other forms of security placed with
Seller for the performance of a contract or agreement which otherwise
constitute a portion of the Assets;
(o) except
for amounts collected and receipt of payments due under the Retained Assets,
all of Sellers rights in any security accounts, safe deposit boxes and vaults
and insurance policies, wherever maintained or held;
(p) the
goodwill in or arising from the Assets and the Business;
(q) all
other assets and properties used in or necessary in connection with the
Business as presently conducted by Seller; and
(r) Sellers
rights, privileges, claims, demands, causes of action, prepayments, deposits,
refunds, indemnification agreements with, and indemnification rights against,
Third Parties, warranty claims (to the extent transferable), offsets and other
claims of Seller in respect of the above-listed Assets.
Section 2.2 Retained Assets.
Notwithstanding Section 2.1, all of Sellers right, title and
interest in and to the following properties, assets and rights shall be
excluded from the Assets (collectively, the Retained
Assets):
(a) all
assets, properties, rights, claims and contracts listed in
Schedule 2.2(a);
(b) any
assets and associated claims, counterclaims, offsets, defenses or causes of
action relating to or arising out of
the Retained Liabilities;
(c) all
Tax refunds and recoveries and similar benefits of Seller, other than Tax
refunds and recoveries and similar benefits that relate to Taxes for which
Purchaser is liable pursuant to Section 7.2;
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(d) any
claims, counterclaims, offsets, defenses or causes of action arising prior to
the Closing Date, other than to the extent relating to, or arising from, the
Assets or Assumed Liabilities;
(e) all
right, title and interest in and to all properties, assets and rights of Seller
that are not being transferred pursuant to Section 2.1 (including the
Plans);
(f) all
right, title and interest in the Stealthkey Technology ); and
(g) any
Trademarks, Tradenames or Internet Assets, including the name Odetics or the
name of any business unit of Parent other than Sellers.
Section 2.3 Assumption of Liabilities.
(a) At
the Closing, Purchaser and/or one or more of its Affiliates or subsidiaries
shall assume, and shall be solely and exclusively liable only for (i) those
obligations of Seller under the contracts, agreements, leases, licenses,
permits, applications, unfilled sales and purchase orders, invoices, Inventory,
Permits and Assets and other commitments assigned or otherwise transferred to
Purchaser pursuant to Sections 2.1(b), (c), (f), (g), (i), (j) and (r)
(collectively, the Seller Agreements)
that arise, and relate to a period, on or after the Closing Date, including all
unperformed and unfulfilled obligations expressly identified in such Seller
Agreements incurred on or after the Closing Date in respect of services
rendered or goods sold to or by Seller on or after the Closing Date which are
required to be performed and fulfilled under the Seller Agreements; and (ii)
those liabilities set forth on Schedule 2.3 (collectively, the Assumed Liabilities). Assumed Liabilities shall not include any
Retained Liabilities.
(b) Nothing
contained in this Agreement shall require Purchaser or any of its Affiliates to
pay, perform or discharge any Assumed Liability so long as it shall in good
faith and by appropriate and legal means contest or cause to be contested the
amount or validity thereof and shall have indemnified and have held harmless
Seller and its Affiliates with respect thereto pursuant to the terms of this
Agreement.
(c) Nothing
contained in this Section 2.3 or in any instrument of assumption executed
by Purchaser at the Closing shall release or relieve Parent or Seller from
their representations, warranties, covenants and agreements contained in this
Agreement or any certificate, schedule, instrument, agreement or document
executed pursuant hereto or in connection herewith, including, the obligations
of Parent and Seller to indemnify Purchaser in accordance with the provisions
of Article X hereto.
(d) Notwithstanding
the foregoing, Purchaser and its Affiliates shall not, and nothing in this
Agreement shall require Purchaser and/or its Affiliates to, assume or be liable
or otherwise be responsible for any Liabilities of Seller with respect to any
Plan (including, but not limited to, any Title IV Plan), except as may be
required by law or pursuant to any Seller Agreement.
Section 2.4 Retained Liabilities. Notwithstanding anything in this Agreement to the contrary,
Purchaser shall not assume, and shall be deemed not to have assumed, any
Liabilities of Seller or the Business, except as specifically provided in
Section 2.3(a). All other
13
liabilities, known or
unknown, contingent or otherwise shall remain the obligations of Seller. Retained Liabilities shall include all
liabilities other than Assumed Liabilities, including but not limited to:
(a) any
and all liabilities incurred or assumed prior to the Closing Date relating to
current or former employees of Seller or any Plan, including any accrued
benefits of the current or former employees of Seller payable on or after the
Closing Date except in each case as specifically provided in Schedule 2.3(a);
(b) any
and all liabilities or potential liabilities in respect of pending or
threatened litigation brought or to be brought in respect of events,
circumstances or facts occurring prior to the Closing, including any indemnification
claims relating to this Agreement or the Transactions, including, without
limitation, the litigation identified on Schedule 4.21;
(c) Taxes
attributable to the Assets or the operations or the income of Seller or any
Seller Group for any Pre-Closing Tax Period; and
(d) Any
and all claims (including product liability claims), counterclaims, offsets,
defenses or causes of action relating to products manufactured by Seller on or
before the Closing Date and shipped to customers on or before the Closing Date.
As between Seller and Purchaser, it is understood that
Seller shall be solely and exclusively liable with respect to all Liabilities
of Seller and the Business, whether disclosed or undisclosed, whether known or
unknown, whether fixed or contingent, other than the Assumed Liabilities
(collectively, the Retained Liabilities).
(a) The
purchase price for the Assets (the Purchase Price)
shall be $2,300,000, payable at the Closing in the manner provided in Section
3.3(a).
(b) The
Purchase Price shall be subject to adjustment as provided in Sections 2.6,
2.7 and 2.8.
(c) Notwithstanding
the foregoing, at the Closing, Purchaser shall transfer $250,000 (the Holdback
Amount) of the Purchase Price to the Escrow Agent to be held
pursuant to the terms of the Escrow Agreement and this Section 2.5(c). The Holdback Amount shall be held by the
Escrow Agent for purposes of providing Purchaser security for Parent and
Sellers indemnification and other payment obligations under this Agreement,
including, without limitation, pursuant to Section 2.7(b). Promptly following the post-closing
reconciliation of the purchase price pursuant to Section 2.7, and without
limiting Purchasers right to offset against the Holdback Amount Sellers
payment obligations under Section 2.7, if any, the Holdback Amount shall be
reduced to $100,000 and the Escrow Agent shall immediately pay to Seller the
amount of the Holdback Amount that exceeds $100,000. On the date that is six (6) months following the Closing Date,
the Holdback Amount shall be reduced to $50,000 and the Escrow Agent shall
immediately pay to Seller the amount of the Holdback Amount that exceeds
$50,000. The Escrow Agent shall remit
the then remaining amount of the Holdback Amount to Seller on July 31, 2004.
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Section 2.6 Pre-Closing Adjustment to the Purchase Price. On or prior to the third (3rd)
Business Day prior to the Closing Date, Seller shall cause to be prepared and
delivered to Purchaser a written statement setting forth Sellers best good
faith determination of the Net Assets as of the Closing Date (the Pre-Closing
Statement of Net Assets), a copy of which is set forth on Schedule
2.6. The Pre-Closing Statement of Net Assets
shall be certified by Parent and Sellers chief financial officers. The amount of the Purchase Price to be paid
by Purchaser at the Closing shall be reduced by the amount, if any, by which
$2,200,000 exceeds the Net Assets as shown on the Pre-Closing Statement of Net
Assets (the Pre-Closing Net Assets). The amount of the Purchase Price
to be paid by the Purchaser at the Closing pursuant to this Section 2.6 shall
be referred to as the Closing Payment.
Section 2.7 Post-Closing Reconciliation of Purchase
Price.
(a) As
promptly as practicable, but in any event not later than forty-five (45) days
after the Closing Date, Seller shall prepare and deliver to Purchaser a written
statement (the Post-Closing Statement of Net Assets) which shall be
prepared by Ernst & Young, LLP, certified public accountants, who will
attest that the statement has been prepared in accordance with GAAP
consistently applied and in substantially the manner used to prepare the
Financial Statements. The amount
of the Net Assets as shown on the
Post-Closing Statement of Net Assets is hereinafter referred to as the (the Closing
Net Assets). All fees and expenses
of Ernst & Young LLP that are related to the preparation of the
Post-Closing Statement of Net Assets will be paid by the Seller.
(b) Provided
that (i) Purchaser does not provide a timely Notice of Disagreement in
accordance with Section 2.7(c) below, or (ii) Purchaser notifies Escrow Agent
in writing of Purchasers approval of the Post-Closing Statement of Assets, or
(iii) the Independent Accountant (as defined below) makes a determination in
accordance with Section 2.7(c), if the Closing Net Assets are less than
$2,200,000, within five (5) Business Days after the earlier of (i), (ii) or
(iii) above in this Section 2.7(b), the Seller and Purchaser will cause the
Escrow Agent to, pay to Purchaser from the Holdback Amount the amount equal to:
(i) the amount by which $2,200,000 exceeds the Closing Net Assets, minus the
amount by which the Closing Payment was reduced pursuant to Section 2.6;
provided, if such amount exceeds $150,000, Seller shall pay to Purchaser such
excess amount. The Seller may instruct
the Escrow Agent to pay such amount to Purchaser from the Holdback Amount then
remaining to the extent the Holdback Amount exceeds the amount to be paid. If the Closing Net Assets exceed the
Pre-Closing Net Assets, Purchaser shall, within five (5) Business Days after
delivery to Seller of the Post-Closing Statement of Net Assets, pay to Seller
the amount equal to: (i) the difference between the Closing Net Assets and the
Pre-Closing Net Assets, provided that such amount shall not exceed the amount,
if any, by which the Closing Payment was reduced pursuant to Section 2.6. Payments, if any, by Seller or Purchaser
pursuant to this Section 2.7(b) shall be made by wire transfer of
immediately available funds. The
parties shall treat any payment made pursuant to this Section 2.7(b) as an
adjustment to the Purchase Price for all purposes.
(c) Dispute
Resolution. If Purchaser in good
faith disagrees with the Post- Closing Statement of Net Assets, then Purchaser
shall notify Seller and the Escrow Agent in writing (the Notice of
Disagreement) of such disagreement within twenty (20) days after delivery
of the Post-Closing Statement of Net Assets to Purchaser. The Notice of Disagreement
15
shall set forth in
reasonable detail the basis for the disagreement. Thereafter, Purchaser and Seller, shall attempt in good faith to
resolve and finally determine the Post-Closing Statement of Net Assets. If Purchaser and Seller are unable to
resolve the disagreement within ten (10) days after giving the Notice of
Disagreement, then Purchaser and Seller shall select a mutually acceptable, nationally
recognized independent accounting firm (such accounting firm being hereinafter
referred to as the Independent Accountant)
to resolve the disputed items and make a determination with respect
thereto. Such determination will be
made, and written notice thereof given to Purchaser, Seller and the Escrow
Agent within thirty (30) days after such selection. The determination by the Independent Accountant shall be final,
binding and conclusive upon the Escrow Agent and the parties hereto, and shall
constitute the Post-Closing Statement of Net Assets for the purposes of this
Agreement. The scope of such firms
engagement (which shall not be an audit) shall be limited to the resolution of
the items contained in the Notice of Disagreement, and the recalculation, if
any, of the Post-Closing Statement of Net Assets in light of such resolution.
The fees, costs and expenses of the Independent Accountant, if any, selected in
accordance with this Section 2.7(c) will be shared equally by Purchaser on
the one hand, and by Seller on the other hand. Any portion of the purchase
price adjustment not in dispute shall be paid when due.
Section 2.8 Performance-Based Purchase Price
Adjustment. The Purchase Price set
forth in Section 2.5 shall be subject to adjustment after the Closing Date (if
the conditions set forth below are satisfied) as follows:
(a) As
additional consideration for the Assets, within 60 days after the end of the
twelve-month period starting May 1, 2003 and ending April 30, 2004 and the
twelve-month period starting May 1, 2004 and ending April 30, 2005 (each, an Earnout
Year), Purchaser shall be required to pay to Seller an additional cash
payment (each, an Additional Payment Amount ), as follows:
(i) If
during the first Earnout Year the Revenues (as defined below) generated from
sales or licenses of Earnout Products (as defined below) exceed
$6 million, Purchaser shall pay to Seller an additional cash payment equal
to 25% of the amount by which the Revenues for such Earnout Year exceed $6 million,
provided that the amount of the payment, if any, pursuant to this clause (i)
shall be capped at $1 million.
(ii) If
during the second Earnout Year the Revenues (as defined below) generated from
sales or licenses of Earnout Products exceed $8 million, Purchaser shall pay to
Seller an additional cash payment equal to 12.5% of the amount by which the
Revenues for such Earnout Year exceed $8 million, provided that the amount of
the payment, if any, pursuant to this clause (ii) shall be capped at $1
million.
(iii) Earnout Products shall mean: (a) Sellers
products existing as of the date of
this Agreement and direct derivatives thereof, (b) technology of Seller
existing as of the date of this Agreement and direct derivatives thereof (the Existing
Technology ) and (c) new products developed primarily from Existing
Technologies. Earnout Products shall specifically exclude: (i) products
primarily based on technologies assigned to or acquired by Purchaser or its
Affiliates after the Closing Date from third parties; and (ii) products based
primarily on technologies of Purchaser or its Affiliates existing as of the
16
date of this
Agreement. Revenues shall mean: gross revenues less: (i) actual returns to
Purchaser of Earnout Products during any Earnout Year and (ii) discounts on
Earnout Products. Purchaser shall use
its reasonable best efforts to ensure prompt revenue recognition of Earnout
Products.
(b) No
later than 60 days after the end of last day of each Earnout Year, Purchaser
shall prepare and deliver to Seller a written calculation of Revenues for such
Earnout Year, as determined in accordance with this Section 2.8. The calculation of Revenues for each such Earnout
Year shall be final and binding upon Seller, unless Seller within thirty (30)
days of receipt of the calculation notifies Purchaser in writing (the Notice
of Earnout Dispute ) that the calculation is in dispute. Any portion of the Additional Payment Amount
that is not disputed shall be paid to Seller within three (3) Business days
thereafter. In such case, the parties
shall discuss and try to resolve the dispute in good faith. In the event the parties are unable to
resolve the dispute within ten (10) days of receipt by Purchaser of the Notice
of Earnout Dispute, then either party may submit a statement setting forth the
issue of disagreement to a mutually acceptable nationally recognized
independent accounting firm for a binding and nonappealable determination to be
rendered within thirty (30) days after such submission. Such accounting firm shall have the right to
review, on a confidential basis, Purchasers records relating to the
calculation of Revenues for the relevant Earnout Year. Such accounting firms fees and expenses
shall be shared equally by Seller and Purchaser.
(c) Purchaser
shall, upon 48 hours advance notice, make its books and records relating to the
Additional Payment Amounts, available to Seller for inspection, during normal
business hours at Purchasers principal place of business, (i) for a period of
30 days following the end of each fiscal quarter of Purchaser and (ii) after
Purchasers delivery to Seller of its calculation of each Additional Payment
Amount, until resolution of any dispute over the Additional Payment Amount.
(d) Purchaser,
upon written notice to Seller, shall have the right to offset against any
amounts due to Seller in accordance with this Section 2.8 any amounts that
Parent or Seller are obligated to pay to Purchaser pursuant to Article X hereof.
Section 3.1 The Closing.
The consummation of the transactions contemplated by this Agreement
shall take place at the offices of Cadwalader, Wickersham & Taft LLP,
100 Maiden Lane, New York, New York 10038, at 10:00 a.m. EST, on May
9, 2003, unless another date or place is agreed in writing by each of the
parties hereto.
Section 3.2 Deliveries by Seller. At the Closing, Seller shall deliver or cause to be delivered to
Purchaser (unless previously delivered), the following:
(a) a
duly executed Bill of Sale in form and substance customary in similar
transactions;
17
(b) a
written consent from the landlord under the Sub-Lease in form satisfactory to
Purchaser;
(c) all
documents of title and instruments of conveyance reasonably necessary to
transfer record and/or beneficial ownership to Purchaser of all automobiles,
trucks, trailers (and any other property owned by Seller which require
execution, endorsement and/or delivery of a document in order to vest record or
beneficial ownership thereof in Purchaser) which constitute Assets pursuant to
this Agreement;
(d) Assignments
of the Patents, Trademarks and the other Intellectual Property rights in form
and substance reasonably acceptable to Purchaser and its counsel and such
confirmatory assignments as may be necessary to record in the United States
Patent and Trademark Office, the assignment to Purchaser of the United States
registered Trademarks and shall have executed such other confirmatory
assignments prepared by Purchaser which are in substance reasonably acceptable
to Seller and its counsel as Purchaser or its counsel deem to be reasonably
necessary or advisable to record in state trademark offices;
(e) executed
copies of the consents referred to in Section 4.5 that are identified by
Purchaser as necessary to the consummation of the Closing;
(f) a
duly executed counterpart of the Sub-Lease Agreement;
(g) a
duly executed counterpart of the Transition Services Agreement;
(h) a duly
executed counterpart of the Escrow Agreement;
(i) the
certificates referred to in Section 8.2(g);
(j) a
certification of non-foreign status for Seller in a form and manner which
complies with the requirements of Section 1445 of the Code and the regulations
promulgated thereunder; and
(k) all
other previously undelivered documents required to be delivered by Seller to
Purchaser at or prior to the Closing in connection with the Transactions.
Section 3.3 Deliveries by Purchaser. At the Closing, (a) Purchaser shall deliver
to Seller (unless previously delivered) the following:
(i) a
certified check (or, at Sellers option, wire transfer) payable to Seller in
the amount of the Purchase Price, less the Holdback Amount, less the TLP
Payment;
(ii) a
duly executed counterpart of the Sub-Lease Agreement;
(iii) a
duly executed counterpart of the Transition Services Agreement;
(iv) a
duly executed counterpart of the Escrow Agreement;
18
(v) such
other documents as are required to be delivered by Purchaser to Seller pursuant
to this Agreement.
(b) At
the Closing, Purchaser shall deliver to the Escrow Agent a certified check (or
wire transfer) in the amount of $250,000 representing the Holdback Amount.
(c) At
the Closing, Purchaser shall deliver to TLP a certified check (or wire
transfer) in the amount of $1,080,189 to release a lien against Sellers Assets
and certain of Sellers accounts receivable (TLP Payment).
Except as specifically
set forth in the Disclosure Schedules prepared and signed by Parent and Seller
and delivered to Purchaser simultaneously with the execution hereof, Parent and
Seller jointly and severally represent and warrant to Purchaser that all of the
statements contained in this Article IV are true and complete as of the
date of this Agreement. All
representations and warranties are made as of the Closing Date unless specifically
stated otherwise.
Section 4.1 Organization and Qualification of Parent. Parent (i) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, (ii) has full corporate power and authority to carry on the
Business as it is now being conducted and to own the properties and assets it
now owns, and (iii) is duly qualified or licensed to do business as a
foreign corporation in good standing in every jurisdiction in which such
qualification is required, except where the failure so to qualify would not
have a Material Adverse Effect. Parent
has heretofore made available to Purchaser complete and correct copies of the
certificate of incorporation and by-laws of Parent as presently in effect.
Section 4.2 Organization and Qualification of Seller. Seller (i) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, (ii) has full corporate power and authority to carry on the
Business as it is now being conducted and to own the properties and assets it
now owns, and (iii) is duly qualified or licensed to do business as a
foreign corporation in good standing in every jurisdiction in which such
qualification is required, except where the failure so to qualify would not
have a Material Adverse Effect. Seller
has heretofore made available to Purchaser complete and correct copies of the
certificate of incorporation and by-laws of Seller as presently in effect.
Section 4.3 Subsidiaries and Affiliates. Seller has no direct or indirect
Subsidiaries. Seller does not own any
outstanding capital stock of any company or division of Parent.
Section 4.4 Authorization; Validity of Agreement. Parent and Seller have full corporate power
and authority to execute and deliver this Agreement and the Ancillary Agreements
and to consummate the Transactions. The
execution, delivery and performance by Parent and Seller of this Agreement and
the Ancillary Agreements and the consummation by it
19
of the Transactions have
been duly authorized by the Parents and Sellers Boards of Directors, and no
other corporate action on the part of Parent or Seller is necessary to
authorize the execution and delivery by Parent and Seller of this Agreement,
the Ancillary Agreements or the consummation by it of the Transactions. This Agreement and the Ancillary Agreements
have been duly executed and delivered by Parent and Seller and, assuming due
and valid authorization, execution and delivery thereof by Purchaser, this
Agreement and the Ancillary Agreements are valid and binding obligations of
Parent and Seller enforceable against Parent and Seller in accordance with
their terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws of
general application affecting enforcement of creditors rights generally and
(ii) the availability of the remedy of specific performance or injunctive
or other forms of equitable relief may be subject to equitable defenses and
would be subject to the discretion of the court before which any proceeding
therefor may be brought.
Section 4.5 Consents and Approvals; No Violations. Except for the filings, permits,
authorizations, consents and approvals as may be required hereunder, and other
applicable requirements of, the Exchange Act and state securities or blue sky
laws, none of the execution, delivery or performance of this Agreement or the
Ancillary Agreements by Parent and Seller, the consummation by Parent and
Seller of any of the Transactions or compliance by Parent and Seller with any
of the provisions hereof will (i) conflict with or result in any breach of
any provision of the certificate of incorporation, the by-laws or similar
organizational documents of Parent and Seller, (ii) require any filing
with, or Permit, authorization, consent or approval of, any Governmental Entity
or other Person (including consents from parties to loans, contracts, leases
and other agreements to which any Parent and Seller is a party), (iii) require
any consent, approval or notice under, or result in a violation or breach of,
or constitute (with or without due notice or the passage of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any material
contract, agreement, arrangement or understanding to which Parent and Seller is
a party or by which any of the Assets are bound, or (iv) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Business, any of the Assets, Parent and Seller or any of their properties or
assets, except in the case of the foregoing clauses (ii), (iii) and (iv) as
would not have a Material Adverse Effect.
Section 4.6 Financial Statements; SEC Filings.
(a) Schedule 4.6
contains true and complete copies of the Financial Statements. The Financial Statements have been prepared
in accordance with GAAP applied on a consistent basis during the periods
involved (except as may be stated in the notes thereto). The Financial Statements fairly present the
consolidated financial position and the consolidated results of operations and
cash flows of Seller as of the times and for the periods referred to therein
(subject, in the case of any unaudited statements, to normally recurring
year-end audit adjustments which are not material either individually or in the
aggregate).
(b) Parent
has filed all required reports, schedules,
forms, statements and other documents (including exhibits and all other information
incorporated therein) with the SEC since January 1, 2001 (the Parent SEC Documents), except where the failure to file would not
have a Material Adverse Effect. As of
their respective dates, the Parent SEC Documents
20
complied
in all material respects with the requirements of the Securities Act of 1933,
as amended (the Securities Act), or the Exchange Act, as the case may be, and
the rules and regulations of the SEC promulgated thereunder applicable to such
Parent SEC Documents, and none of the Parent SEC Documents when filed contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
Section 4.7 Books and Records. The minute books and other corporate records of Seller are
complete and correct in all material respects.
The minute books of Seller contain accurate and complete records of all
meetings of, and corporate action taken by, the stockholders of Seller, the
Sellers Board of Directors and all committees of Sellers Board of Directors,
and no meeting of any of such stockholders, Sellers Board of Directors or such
committees has been held for which minutes have not been prepared and are not
contained in such minute books. True
and complete copies of all minute books of Seller have heretofore been made
available to Purchaser.
Section 4.8 No Undisclosed Liabilities. Except (a) as disclosed in the
Financial Statements or in the Pre-Closing Statement of Net Assets,
(b) for liabilities and obligations incurred in the Ordinary Course of
Business since the Balance Sheet Date or (c) as set forth in
Schedule 4.8, the Assumed Liabilities do not include any liability or
obligation that would be required to be disclosed in a consolidated balance
sheet of the Parent and Seller prepared in accordance with GAAP.
Section 4.9 Accounts Receivable. Seller is the sole and absolute owner of each accounts receivable
that comprise the accounts receivable line item (as reserved for doubtful
accounts) in Sellers Balance Sheet.
Each such accounts receivable is based on an actual sale and delivery of
goods and/or services rendered by Seller or Parent. Except as has been adequately reserved for under GAAP, each of
the accounts receivable represents obligations of Sellers customers and Seller
is not aware of any such accounts receivable being in dispute.
(a) Schedule 4.10(a) includes a list of
all accounts payable of the Business as of the day prior to this
Agreement. Such list includes the full
amount of payables due to suppliers of the Business and there are no such suppliers
which also supply other subsidiaries and Businesses of Parent.
(b) All suppliers of material goods and
services to the Business are continuing to supply such goods and services on
terms that Seller believes are commercially reasonable.
Section 4.11 Seller Indebtedness. Except as set forth on the Pre-Closing Statement of Net Assets or
included in the Retained Liabilities, Seller has no outstanding Indebtedness or
any amount of principal or unpaid interest outstanding under each instrument
evidencing Indebtedness of Seller.
Section 4.12 Absence of Certain Changes. Except for the transactions contemplated by
this Agreement, since the Balance Sheet Date, the Business has been conducted,
21
and the Assets utilized,
only in the Ordinary Course of Business.
Without limiting the generality of the foregoing, since the Balance
Sheet Date, Seller has not:
(a) incurred
any liability or obligation (absolute, accrued, contingent or otherwise) except
items incurred in the Ordinary Course of Business which do not exceed $25,000
(including obligations or liabilities arising from one transaction or a series
of similar transactions, and all periodic installments or payments under any
lease or other agreement providing for periodic installments or payments, as a
single obligation or liability), or increased, or experienced any change in any
assumptions underlying or methods of calculating, any bad debt, contingency or
other reserves;
(b) permitted
or allowed any of its Assets (real, personal or mixed, tangible or intangible)
to be encumbered or be subjected to any Encumbrance (other than Permitted
Encumbrances);
(c) sold,
transferred, or otherwise disposed of any material Assets (real, personal or
mixed, tangible or intangible), except in the Ordinary Course of Business;
(d) disposed
of or permitted to lapse any rights to the use of any material Intellectual
Property that is material to the Business, or disposed of or disclosed to any
Person other than representatives of Purchaser any trade secret, formula,
process, know-how or other material Intellectual Property not theretofore a
matter of public knowledge;
(e) granted
any general increase in the compensation of Sellers officers or employees
(including any such increase pursuant to any bonus, pension, profit sharing or
other plan or commitment) or any increase in the compensation payable or to
become payable to any officer or employee, except pursuant to written
agreements in existence on the date hereof;
(f) made
any single capital expenditure or commitment in excess of $25,000 for
additions to property, plant, equipment or intangible capital assets or made
aggregate capital expenditures and commitments in excess of $25,000 for
additions to property, plant, equipment or intangible capital assets;
(g) declared,
paid or set aside for payment any dividend or other distribution in respect of
its capital stock or redeemed, purchased or otherwise acquired, directly or
indirectly, any shares of capital stock or other securities of Seller;
(h) made
any change in any method of accounting or accounting practice; or
(i) agreed,
whether in writing or otherwise, to take any action described in this section.
Section 4.13 Availability of Assets and Legality of Use. Except for the Retained Assets, the Business
is conducted solely through the Seller, as set forth on Schedule 4.13, and
Parent. The Assets constitute all the
assets, properties and rights used or held for use in the Business and
necessary to operate the Business as currently conducted by Seller (including,
but not limited to, all books, records, computers and computer programs). The tangible personal property, including,
but not limited to, the personal property listed on Schedule 4.13,
included in
22
the Assets is in the
exclusive possession and control of Seller and located at the places specified
in Schedule 4.13. The tangible
personal property included in the Assets that is material to the Business
is in the aggregate, in good operating condition and repair (subject to
normal wear and tear).
Section 4.14 Title to Properties; Encumbrances.
(a) Personal
Property. Seller is the owner of
the Assets other than the Leased Real Property and leased personal property;
and has good and valid title (other than Permitted Encumbrances) to each of the
Assets other than the Leased Real Property and leased personal property. Schedule 4.14(a) sets forth the listing of
Sellers fixed assets as of March 31, 2003 which comprises the fixed assets
entry on the Pre-Closing Statement of Net Assets as well as a physical listing
of all purchased assets.
(b) Leased
Real Property.
Schedule 4.14(b) contains a list of all real property leased by
Seller and used in connection with the operation of the Business as presently
conducted. To the Knowledge of Seller,
each of such Real Property Leases is a valid and subsisting leasehold interest
of Seller free of subtenancies and Encumbrances (other than Permitted
Encumbrances) and is a binding obligation of Seller, enforceable against Seller
in accordance with its terms, and is in full force and effect. There are no defaults under the Real
Property Leases and no circumstances or events which, with notice or the
passage of time or both, would constitute defaults under such leases except, in
either of the foregoing instances, for defaults which would not have a Material
Adverse Effect. Seller has provided
Purchaser with complete and accurate copies of each such Real Property Lease.
(c) Leased
Personal Property. Schedule 4.14(c)
contains a list of all personal property leased by Seller and used in
connection with the operation of the Business as currently conducted and
included in the Assets. Each of such
leases relating to leased personal property (the Personal
Property Leases) is, to the Knowledge of Seller, a valid and
subsisting leasehold interest of Seller free of Encumbrances (other than
Permitted Encumbrances) and is a binding obligation of Seller, enforceable
against Seller in accordance with its terms, and is in full force and
effect. There are no defaults under the
Personal Property Leases and, to the Knowledge of Seller, no circumstances or
events exist which, with notice or the passage of time or both, would
constitute defaults under such leases except, in either instance, for defaults
which would have a Material Adverse Effect.
(d) Owned
Real Property. Seller owns no real
property.
Section 4.15 Real Property.
(a) Neither Parent nor Seller has granted to any Person
(other than pursuant to this Agreement) any right to occupy, possess, or
otherwise encumber or acquire any portion of the Leased Real Property. Neither Parent nor Sellers interests with
respect to the Real Property Leases have been assigned or pledged and such
interests are not subject to any Encumbrances (other than Permitted
Encumbrances).
(b) Neither
Parent nor Seller is a party to or obligated under any option, right of first
refusal or other contractual right to sell, dispose of or lease any of the
Leased Real
23
Property or other real
property or any portion thereof or interest therein to any Person other than
Purchaser.
(c) There
is no contract or agreement to which Parent or Seller is a party, other than
the Seller Agreements and the other Permitted Encumbrances, affecting any of
the Leased Real Property for which Purchaser will be responsible or liable
after Closing.
(d) Neither
Parent nor Seller has received any written notice of any pending, threatened or
contemplated condemnation proceeding affecting any of the Leased Real Property
or any part thereof or of any sale or other disposition of any of the Leased
Real Property or any part thereof in lieu of condemnation.
(e) Neither
Parent nor Seller has received any written notices from any Governmental Entity
requiring or advising as to the need for Seller to make any repair, alteration,
restoration or improvement in connection with the Leased Real Property that
would have a Material Adverse Effect.
(f) To
the Knowledge of Seller, the Real Property Leases are in full force and effect;
neither Parent nor Seller has received any written notice or, to the Knowledge
of Seller, oral notice, that any default or condition which with the passage of
time would constitute a default, exists under the Real Property Leases, except
such notices as to which the alleged defaults have been cured or otherwise
resolved or defaults that will not have a Material Adverse Effect.
(g) True,
correct and complete copies of the Real Property Leases, including any
non-disturbance agreements relating thereto, have been delivered to Purchaser
prior to the date hereof and such Real Property Leases have not been amended or
modified since that date (except as indicated on such delivered documents or as
set forth in the Sub-Lease).
(h) None
of the Leased Real Property has been pledged by Parent or Seller or is subject
to any Encumbrance other than a Permitted Encumbrance (other than pursuant to
this Agreement and Encumbrances in favor of Parent or Sellers lenders and those
which have been discharged at or prior to Closing).
(i) The
expiration date of each Real Property Lease is indicated on
Schedule 4.15(i). All security
deposits required under the Real Property Leases have been paid to and, to the
Knowledge of Seller, are being held by the applicable landlord under the Real
Property Leases.
(j) To
the Knowledge of Seller, the lessor under each Real Property Lease is not in
material default of its obligations under such Real Property Lease in a manner
that will have a Material Adverse Effect and neither Parent nor Seller has
received any notice from any such lessor of such lessors intention to exercise
any option thereunder, the exercise of which is reasonably likely to have a
Material Adverse Effect.
Section 4.16 Environmental Matters. (a) Parent and Seller and Sellers assets, Business,
and actions are in full compliance with all Environmental Laws. Such compliance includes, but is not limited
to, the possession by Parent and Seller of all Permits and other
24
governmental
authorizations required under all applicable Environmental Laws, and compliance
with the terms and conditions thereof.
Each Permit and other governmental authorization currently held by
Parent and Seller and required for the conduct of the Business as presently
conducted pursuant to the Environmental Laws is specifically identified in the
Disclosure Schedules.
(b) Neither
Parent nor Seller has received any communication (written or oral), whether
from a Governmental Entity, citizens group, employee or any other Person, that
alleges that Parent, Seller or Sellers Assets, Business, and actions are not
in full compliance with any Environmental Laws.
(c) There
is no Environmental Claim by any Person that is pending or threatened against
Parent or Seller, or to the Knowledge of Seller, related to Sellers Assets,
Business, and actions or against any Person whose liability for any
Environmental Claim Parent or Seller has retained or assumed either contractually
or by operation of law.
(d) There
are no past or present actions, activities, circumstances, conditions, events
or incidents, including, without limitation, the release, emission, discharge,
presence or disposal of any Materials of Environmental Concern, that could form
the basis of any Environmental Claim against Parent or Seller or against any
Person whose liability for any Environmental Claim Parent or Seller has
retained or assumed either contractually or by operation of law.
(e) Parent
and Seller have provided to Purchaser a copy of each assessment, report, datum,
result of investigations or audit, and other information that is in the
possession of or reasonably available to Parent or Seller related to the
environmental conditions or compliance with Environmental Laws at, of, or by
the Assets, the Assumed Liabilities, Sellers actions and Sellers Business.
(f) By
virtue of the Transactions, neither Purchaser nor Seller will become liable for
(i) the performance of any site assessment for Materials of Environmental
Concern, (ii) the removal or remediation of Materials of Environmental
Concern, (iii) the giving of notice to, or receiving the approval of, any
Governmental Entity with respect to Materials of Environmental Concern, (iv) the
recording or delivery to any other Person of any disclosure document or
statement pertaining to environmental matters, or (v) compliance with any state
property transfer law such as, for example, without limitation, the New Jersey
Industrial Site Recovery Act.
Section 4.17 Material Contracts. (a) Schedule 4.17(a) sets forth all of the
following types of contracts and other agreements below (whether written or
oral, express or implied) to which Seller is a party or by or to which Seller,
or its assets, properties or businesses, or the Assets is bound or subject, or
which relate to the Business (collectively, the Material
Contracts):
(i) contracts
and other agreements with any current or former officer, director, employee,
consultant, agent, other representative of Seller or with any Affiliate
25
or Associate of
Seller involving amounts in excess of $25,000 in any one case (or in the
aggregate);
(ii) contracts
and other agreements with any labor union or association representing any
employee;
(iii) contracts
and other agreements for the sale of any of Sellers assets or properties that
are material to the Business or for the grant to any Person of any preferential
rights to purchase any of such assets or properties;
(iv) joint
venture, partnership and alliance agreements;
(v) any
confidentiality or non-disclosure agreements with any Third Party;
(vi) any
original equipment manufacturer, distribution, re-seller, joint development or
software consultant agreements;
(vii) contracts
containing any so-called most favored nation provisions or any similar
provision requiring Seller to offer a Third Party terms or concessions at least
as favorable as offered to one or more other parties;
(viii) contracts
and other agreements not cancelable without penalty by Seller on sixty (60) or
fewer days notice calling for an aggregate purchase price or payments to or
from Seller in any one year of more than $25,000 in any one case (or in the
aggregate, in the case of any related series of contracts and other
agreements);
(ix) contracts
and other agreements with clients, customers or any other Person for the
sharing of fees or the rebating of charges or the purchase price or other
similar arrangements calling for an aggregate purchase price or payments to or
from Seller in any one year of more than $25,000 in any one case (or in the
aggregate, in the case of any related series of contracts and other
agreements);
(x) contracts
and other agreements with vendors, including purchase agreements for all
Inventory calling for an aggregate purchase price or payments from Seller in
any one year of more than $25,000 in any one case (or in the aggregate, in the
case of any related series of contracts and other agreements);
(xi) contracts
and other agreements containing covenants of Seller or any officer or employee
of Seller pertaining to the right to compete or not compete in any line of
business or similarly restricting its ability to conduct business with any
Person or in any geographical area or covenants of any other Person not to
compete with Seller in any line of business or restricting its ability to
conduct business or in any geographical area;
(xii) all
Real Property Leases and Personal Property Leases;
(xiii) contracts
and other agreements not cancelable without penalty by Seller on sixty (60) or
fewer days notice requiring the payment by or to Seller of a royalty,
26
override or
similar commission or fee of more than $25,000 per annum in any one case (or in
the aggregate, in the case of any related series of contracts and other
agreements);
(xiv) contracts
and other agreements not cancelable without penalty by Seller on sixty (60) or
fewer days notice relating to the sale or marketing of any products sold,
distributed or marketed by Seller or services to be performed by Seller and
involving an amount in excess of $25,000 in any one case (or in the aggregate,
in the case of any related series of contracts and other agreements);
(xv) contracts
and other agreements relating to the borrowing of money, creation of liens, or
the guarantee of the payment of liabilities or performance of obligations to
Seller by any other Person involving amounts in excess of $25,000 in any one case
(or in the aggregate, in the case of any related series of contracts and other
agreements);
(xvi) contracts
for the development of Software for use in the Business;
(xvii) contracts
with Development Personnel referred to in Section 4.25(e);
(xviii) contracts
that grant joint ownership rights to Seller and any other Third Party as to any
material Intellectual Property;
(xix) contracts
that grant any current or executory rights in any source code for Software to
any Person; and
(xx) any
other contract and other agreement made outside the Ordinary Course of Business
relating to Seller and involving an amount in excess of $25,000.
True and complete copies
of all of the written Material Contracts (and written summaries of all oral
Material Contracts) have been delivered to Purchaser.
(b) Except
as set forth in Schedule 4.17(b) and except as would not have a Material
Adverse Effect, each Material Contract is in full force and effect, has not
been modified or amended and constitutes the legal, valid and binding
obligation of Seller, as the case may be, in accordance with the terms of such
agreement. Except as would not have a
Material Adverse Effect, each Material Contract is a legal, valid and binding
obligation of the other party or parties to such Material Contract. In the past twelve months, neither Seller
nor any Subsidiary of Seller has given or received a notice of breach or
default under (whether written or, to the Knowledge of Seller, oral) or had any
dispute with respect to any Material Contract which is pending and would be
reasonably likely to result in a Material Adverse Effect. Each Material Contract is valid and
enforceable by Seller in accordance with its terms except as would not have a
Material Adverse Effect.
Section 4.18 Customers.
Schedule 4.18 sets forth a list for the twelve months ended March
31, 2003 of the top 15 revenue producing customers of the Business
(collectively, the Key Customers),
including the amount of revenue received from such Key Customers for the twelve
months ended March 31, 2003. Since
April 1, 2002, there has been no actual or, to the Knowledge of Seller,
threatened termination, cancellation or limitation of the business
27
relationship of Seller
with any one or more of the Key Customers.
To the Knowledge of Seller, there exists no present condition or state
of facts or circumstances involving any Key Customer and their relationships
with Seller which would have a Material Adverse Effect.
Section 4.19 Insurance.
Schedule 4.19 sets forth a true and complete list and description of all
insurance policies, other insurance arrangements and other contracts or
arrangements for the transfer or sharing of insurance risks by Seller or the
Business in force on the date hereof with respect to the Business. All such policies are in full force and
effect, all premiums due thereon have been paid by Parent or Seller, and Parent
and Seller are otherwise in compliance in all material respects with the terms
and provisions of such policies.
Furthermore, (a) neither Parent nor Seller has received any notice
of cancellation or non-renewal of any such policy or arrangement nor, to the
Knowledge of Seller, is the termination of any such policies or arrangements
threatened, (b) to the Knowledge of Seller, there is no claim pending
under any of such policies or arrangements as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or
arrangements, (c) neither Parent nor Seller has received any notice from
any of its insurance carriers that any insurance premiums will be increased in
the future or that any insurance coverage presently provided for will not be
available to Parent or Seller in the future on substantially the same terms as
now in effect and (d) none of such policies or arrangements provides for
any retrospective premium adjustment, experienced-based liability or loss
sharing arrangement affecting Parent or Seller. There is no claim pending or, to the Knowledge of Seller,
threatened, under any director and officer insurance policy of Parent or
Seller, nor has any claim been made under any such policy.
Section 4.20 Casualties.
Since the Balance Sheet Date, neither Parent nor Seller has been
affected in any way that would create a Material Adverse Effect as a result of
flood, fire, explosion or other casualty (whether or not material and whether
or not covered by insurance).
Section 4.21 Litigation.
There is no action, suit, inquiry, proceeding or investigation (Claim) by or before any court or governmental
or other regulatory or administrative agency or commission pending or, to the
Knowledge of Seller, threatened against or involving Seller or the Business or
Assets, or which questions or challenges the validity of this Agreement; and to
the Knowledge of Seller there is no valid basis for any such action, proceeding
or investigation. Seller is not subject
to any judgment, order or decree which may have a Material Adverse Effect on
its business practices or on its ability to acquire any property or conduct its
business in any area.
Section 4.22 Compliance with Laws; Permits and Licenses. (a) Except as would not have a
Material Adverse Effect, Parent and Seller are in compliance with all laws,
rules and regulations, ordinances, judgments, decrees, orders, writs and
injunctions of all United States federal, state, local and foreign governments
and agencies thereof that affect the business, properties or assets of the
Business as currently conducted by Seller or any of the Assets.
(b) Except
as would not have a Material Adverse Effect, Parent and Seller have obtained
all Permits necessary to conduct the Business as it is presently being
conducted in accordance with the ordinances, rules, requirements and
regulations of any Governmental Entity
28
having jurisdiction over
its properties or activities, and there has occurred no default under any such
Permit.
(c) Without
limiting the foregoing, (i) the operations of the Business do not violate
or fail to comply in any material respect with applicable health, fire, safety,
zoning or building codes, laws or ordinances, rules or regulations;
(ii) neither Parent nor Seller has received any notice not heretofore
complied with or in the process of being complied with, from any Governmental
Entity having jurisdiction over its properties or activities, or any insurance
or inspection body, that its operations or any of its properties, facilities,
equipment or business procedures or practices fail to comply in all material
respects with any Applicable Law, ordinance, regulation, building or zoning
law, or requirement of any public authority or body; and (iii) there are
no pending or, to the Knowledge of Seller, threatened actions or proceedings by
any Governmental Entity alleging violations in any material respect of such
codes, laws or ordinances.
Section 4.23 Employee Benefit Plans. (a) Schedule 4.23 contains a true and complete list of
all Plans. Neither Seller nor any ERISA
Affiliate has any commitment or formal plan, whether legally binding or not, to
create any additional employee benefit plan or to modify or change any existing
Plan that would affect any employee or former employee of Seller, except as may
be required under Applicable Law.
(b) Neither
Seller nor any ERISA Affiliate has ever sponsored or maintained or had any
direct or indirect liability with respect to any Plan subject to Title IV
or Section 302 of ERISA.
(c) No
Plan provides medical, surgical, hospitalization, death or similar benefits
(whether or not insured) for employees or former employees of Seller for
periods extending beyond their retirement or other termination of service,
other than (i) coverage mandated by Applicable Law, (ii) death
benefits under any pension plan, or (iii) benefits the full cost of
which is borne by the current or former employee (or his beneficiary).
(d) The
consummation of the Transactions will not, either alone or in combination with
another event, (i) entitle any current or former employee, director or
officer of Seller or any ERISA Affiliate to severance pay, unemployment
compensation or any other payment, except as expressly provided in this
Agreement, or (ii) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee, director or officer.
(a) All
income and other material Tax Returns required to be filed by Seller and each
Seller Group have been, and with respect to Tax Returns the due date for filing
of which is after the date of this Agreement and prior to the Closing Date,
will be, timely filed with the appropriate taxing authorities, and all such Tax
Returns are, or with respect to Tax Returns the due date for filing of which is
on or prior to the Closing Date, will be, correct and complete in all
material respects. All material Taxes,
whether or not shown on such Tax Returns, have been, or in the case of Taxes
due between the date hereof and the Closing Date, will be, timely paid.
29
(b) Each
deficiency resulting from any audit or examination relating to Taxes of Seller
and each Seller Group by any Taxing Authority has been timely paid; no issues
relating to Taxes were raised by the relevant Taxing Authority in a completed
audit or examination that can reasonably be expected to recur with respect to
the Assets in a later taxable period.
(c) No
claim has been made by any Taxing Authority in a jurisdiction where the Seller
or any Seller Group does not file Tax Returns that Seller or any Seller Group
is or may be subject to taxation in that jurisdiction.
(d) Neither
Seller nor any Seller Group is a party to or is bound by any Tax sharing
agreement, Tax indemnity obligation, or similar agreement, arrangement, or practice
with respect to Taxes (including any advance pricing agreement, closing
agreement, or other agreement relating to Taxes with any Taxing Authority).
(e) There
are no Encumbrances for Taxes upon any of the Assets, except for statutory
liens for Taxes not yet due and payable.
(f) None
of the Assets directly or indirectly secures any Indebtedness the interest on
which is tax exempt under Section 103(a) of the Code.
(g) None
of the Assets is tax-exempt use property within the meaning of
Section 168(h) of the Code.
Section 4.25 Intellectual Property. (a) Seller owns, or otherwise has the right pursuant
to a valid license, sublicense or other agreement to, the Seller Intellectual
Property that is material to the Business, free and clear of all Encumbrances
(other than Permitted Encumbrances), without payment accruing after the Closing
Date to any Third Party except as set forth in Section 4.25(a), and has the
necessary rights (subject to any such license terms, if applicable) to use such
material Seller Intellectual Property in the Business as presently
conducted. Upon transfer of the Seller
Intellectual Property to Purchaser at Closing, subject to Purchasers payments
of applicable license fees, as set forth in Schedule 4.25(a) and the obtaining
of the consents set forth in Section 4.17, Purchaser shall have the same rights
to Seller Intellectual Property as Seller had prior to the Closing.
(b) Schedule
4.25(b) sets forth all registrations, filings and applications filed by Parent
or Seller for any material Intellectual Property, or any predecessors in the
two year period prior to the date hereof, specifying as to each item, as
applicable: the nature of the item,
including the title; the owner of the item; the jurisdictions in which the item
is issued or registered or in which an application for issuance or registration
has been filed; and the issuance, registration, or application numbers and
dates. Except as noted in Schedule
4.25(b), all registrations with respect to the Seller Intellectual Property are
in full force and effect, and, to the Knowledge of Seller, all applications for
registrations with respect to the Intellectual Property are proceeding without
any opposition.
(c) Schedule
4.25(c) sets forth all IP Licenses that are material to the Business and
which currently are in effect under which Seller is a (i) licensee, or
(ii) licensor, distributor, or reseller.
Seller has substantially performed all obligations imposed on it
pursuant to the
30
IP Licenses. Seller has made all payments to date
required under all material IP Licenses, and is not, nor to the Knowledge of
Seller, is another party thereto, in material breach of or default thereunder,
nor to the Knowledge of Seller is there any event that with notice or lapse of
time or both would constitute a default thereunder. Except as set forth in Schedule 4.25(c), the Transactions
will not result in the termination of, or otherwise require the consent of any
party to, any material IP License.
(d) All
of Sellers rights in the Seller Intellectual Property material to the Business
and owned by Seller are valid and enforceable.
Seller has taken all commercially reasonable and desirable actions,
consistent with Sellers reasonable business judgment, to maintain and protect
each item of material Seller Intellectual Property owned or purported to be
owned by Seller. Seller has taken
reasonable precautions under the circumstances and where appropriate to protect
the secrecy and confidentiality of their material Trade Secrets and the
proprietary nature and value of the material Intellectual Property owned by
Seller. None of Sellers Trade Secrets
that are material to the Business and the value of which is contingent upon
maintenance of confidentiality thereof, have been disclosed to any employee,
representative or agent of Seller or any other Person not obligated to maintain
such material Trade Secret in confidence pursuant to a confidentiality
agreement or understanding entered into with Seller, except as required by the
applicable patent office pursuant to the filing of a patent application by
Seller.
(e) Each
present or past Employee, officer, consultant or any other Person
(collectively, the Development Personnel)
who developed any part of any Seller product or any material Intellectual
Property that is part of such product has executed a valid and enforceable
agreement with Seller that is substantially in the form of Sellers standard
employee agreement, a copy of which has been provided to Purchaser. None of the Development Personnel has made
any written claim of ownership (including, without limitation, copyrights or
patent rights) regarding the Seller Intellectual Property, nor to the Knowledge
of Seller does any such Development Personnel have colorable claim of right to
such, except as may be provided under Applicable Law.
(f) To
the Knowledge of Seller, no former employer of Seller has made a material
written Claim against such employee that such employee is utilizing or
infringing upon Intellectual Property of such former employer.
(g) Except
as set forth in Schedule 4.25(g), it is not necessary for Sellers
business to use any Intellectual Property owned by any present or past director
or officer of Seller.
(h) To
the Knowledge of Seller, none of the Intellectual Property, products or
services owned and used, developed, sold, licensed, imported or otherwise
exploited by Seller infringes upon or otherwise violates any Intellectual
Property rights of any Person in any material respect. To the Knowledge of Seller, no Person is
infringing upon or otherwise violating the Intellectual Property owned by
Seller in a manner that is likely to have a Material Adverse Effect.
31
(i) There
are no Claims pending with respect to which Seller has received formal written
notice, or, to the Knowledge of Seller, overtly threatened, opposing or
attempting to cancel any of Sellers rights in or to any Intellectual Property
owned by Seller.
(j) Seller
is not bound by any non-competition or similar agreement that would be binding
upon Purchaser after completion of the Transactions contemplated by this
Agreement.
(k) Seller
either owns or has a valid license to all material Software used in the
Business in constructing a product currently sold or licensed by Seller. No claims have been made with respect to the
Software or Documentation under any insurance coverage including, but not
limited to, errors and omissions insurance.
(l) Seller
either owns or has a valid license to all software of others that is material
to the Business (Third Party Software)
that is included in the Sellers Software products.
(m) No
copies of the source code for Software constituting a product of Seller has
been provided to any Third Party except in connection with a standard escrow
arrangement. Seller has not has
licensed a Third Party to use any material unregistered Trademark of Seller
except for rights to use the same granted to distributors, resellers, and sales
agents in connection with the sale of the Software.
(n) Seller
has provided to Purchaser a record or copy of the substance of all
material complaints from any customer regarding the performance of the Software
used in the Business or the Documentation which have been received from January
1, 2001 through Closing. Materiality,
for the purposes of this Section 4.25(n), shall mean that the particular
program complained of does not conform to the applicable warrantee(s) provided
by Seller.
(o) Other
than pursuant to this Agreement, Seller is not a party to any contract or
obligation whereby an absolute or contingent right to purchase, obtain or
acquire ownership of or exclusive rights to material Seller Intellectual
Property has been granted to any Person.
(p) Seller
is not nor, as a result of the execution, delivery or performance of this
Agreement or the consummation of the Transactions contemplated hereby, will be,
in violation of any material agreement relating to any Seller Intellectual Property, except with respect
to those agreements that cannot be transferred to Purchaser without the consent
of a Third Party.
Section 4.26 Inventory and Fixed Assets. Schedule 4.26 contains a true and correct
listing of Sellers inventory and fixed assets as of March 31, 2003 net of
reserves for obsolete or slow-moving fixed assets and inventory.
Section 4.27 Labor Matters.
(a) There is no labor strike, dispute, corporate campaign,
slowdown, stoppage or lockout actually pending, or, to the Knowledge of Seller,
threatened against or affecting Seller and during the past five years there has
not been any such action.
32
(b) Seller
is not a party to or bound by any collective bargaining or similar agreement
with any labor organization or work rules or practices agreed to with any labor
organization or employee association applicable to employees of Seller.
(c) To
the knowledge of Seller, no labor union has been certified by the National
Labor Relations Board as bargaining agent for any of the employees of Seller;
no written notice has been received from any labor union stating that it has
been designated as the bargaining agent for any of said employees; and no
petition has been filed by any labor union requesting an election to determine
whether or not it is the exclusive bargaining agent for any of said employees.
(d) To
the Knowledge of Seller, none of the employees of Seller is represented by any
labor organization and, to the Knowledge of Seller, there have been no union
organizing activities among the employees of Seller within the past five years,
nor does any question concerning representation exist concerning such
employees.
(e) Seller
has at all times been, in compliance, in all material respects, with all
Applicable Laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work and occupational safety and
health, and is not engaged in any unfair labor practices, as defined in the
National Labor Relations Act or other Applicable Laws.
(f) There
is no unfair labor practice charge or complaint against Seller pending or, to
the Knowledge of Seller, threatened before the National Labor Relations Board
or any similar state or foreign agency.
(g) Since
the enactment of the WARN Act, (i) neither Parent nor Seller has effectuated a plant closing (as defined in
the WARN Act) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of Parent or Seller,
(ii) there has not occurred a mass layoff (as defined in the WARN Act)
affecting any site of employment or facility of Parent or Seller,
(iii) Parent or Seller has not been affected by any transaction or engaged
in layoffs or employment terminations sufficient in number to trigger
application of any similar state, local or foreign Law or regulation and
(iv) none of Parent or Sellers employees has suffered an employment
loss (as defined in the WARN Act) during the six-month period prior to the
date hereof.
Section 4.28 Personnel.
Schedule 4.28 sets forth a true and complete list of (i) the names
and current salaries of all directors and elected and appointed officers of
Seller; and (ii) the wage rates for non-salaried and non-executive
salaried employees of each of Seller by classification. To the Knowledge of Seller, no officer, key
employee or group of employees has any plans to terminate employment with
Seller as a result of the Transactions or otherwise.
Section 4.29 Potential Conflict of Interest. No officer or director of Seller owns or
holds, directly or indirectly, any interest in (excepting holdings solely for
passive investment purposes of securities of publicly held and traded entities
constituting less than 5% of the equity of any such entity), or is an officer,
director, employee or consultant of any Person that is, a competitor, lessor,
lessee, customer or supplier of Seller or which conducts a business similar to
the Business as currently conducted by Seller.
No officer or director of Seller (a) owns or holds,
33
directly or indirectly,
in whole or in part, any Seller Intellectual Property, (b) has any claim,
charge, action or cause of action against Seller, except for claims for
reasonable unreimbursed travel or entertainment expenses, accrued vacation pay
or accrued benefits under any employee benefit plan existing on the date
hereof, (c) has made, on behalf of Seller, any payment or commitment to
pay any commission, fee or other amount to, or to purchase or obtain or
otherwise contract to purchase or obtain any goods or services from, any other
Person of which any officer or director of Seller (or, to the Knowledge of
Seller, a relative of any of the foregoing) is a partner or shareholder (except
holdings solely for passive investment purposes of securities of publicly held
and traded entities constituting less than 5% of the equity of any such entity)
or (d) owes any money to Seller or (e) has any material interest in
any property, real or personal, tangible or intangible, used in or pertaining
to the business of Seller.
Section 4.30 Propriety of Past Payments. (a) No unrecorded fund or asset of
Seller has been established for any purpose, (b) no accumulation or use of
corporate funds of Seller has been made without being properly accounted for in
the books and records of Seller or such Subsidiary, (c) no payment has
been made by or on behalf of Seller with the understanding that any part of
such payment is to be used for any purpose other than that described in the
documents supporting such payment and (d) none of Seller, any director,
officer, employee or agent of Seller or any other Person associated with or
acting for or on behalf of Seller has, directly or indirectly, made any illegal
contribution, gift, bribe, rebate, payoff, influence payment, kickback or other
payment to any Person, private or public, regardless of form, whether in money,
property or services, (i) to obtain favorable treatment for any of Seller,
any Affiliate of Seller in securing business, (ii) to pay for favorable
treatment for business secured for any of Seller, or any Affiliate of Seller,
(iii) to obtain special concessions, or for special concessions already
obtained, for or in respect of any of Seller, any Affiliate of Seller or
(iv) otherwise for the benefit of any of Seller or any Affiliate of Seller
in violation of any federal, state, local, municipal, foreign, international,
multinational or other administrative order, constitution, law, ordinance,
principle of common law, regulation, statute, or treaty (including existing
site plan approvals, zoning or subdivision regulations or urban redevelopment
plans relating to Leased Real Property).
Neither Seller nor any current director, officer, agent, employee or
other Person acting on behalf of Seller, has accepted or received any unlawful
contribution, payment, gift, kickback, expenditure or other item of value.
Section 4.31 Brokers or Finders. Seller shall be liable for any costs or expenses in connection
with any agent, broker, investment banker, financial advisor or other firm or
Person who is or will be entitled to any brokers or finders fee from Seller
or any other commission or similar fee from Seller in connection with any of
the Transactions.
(a) With
respect to Seller or the Business, there are no (i) products which have
been recalled, withdrawn or suspended (whether voluntarily or otherwise) since
January 1, 1998, and (ii) proceedings which have been brought or
which are pending against Seller or the Assets any time since January 1,
1998, (whether such proceedings have since been completed or remain pending)
seeking the recall, withdrawal, suspension or seizure of any of its products or
seeking to enjoin Seller or the Business from engaging in activities pertaining
to its products.
34
(b) To
Sellers Knowledge, the products currently manufactured by Seller are, and have
been, free from any product defect or risk to the safety of the users thereof
(a Product Defect) and conform at the time of sale with all relevant
descriptions, specifications and standards with which they purport to conform
at the time of sale.
(c) There
exists no set of facts relating to any Product Defects which could reasonably
be expected to cause Seller or the Business to recall, withdraw or suspend any
of its Products from the market or to cease further distribution or marketing
of its Products.
(d) To
Sellers Knowledge, Seller has properly reserved on the Financial Statements
for (i) liabilities and obligations relating to Product Defects, and
(ii) any warranty obligations of Seller for any Products sold or
distributed prior to the Closing Date.
Section 4.33 Government Licenses, Clearances and Security Regulations. Parent and Seller are in full compliance
with all applicable Government regulations and requirements with respect to (a)
the use, handling, storage, record keeping, and dissemination of all sensitive
or restricted documents and equipment, and (b) the associated requirements for
special physical facilities and personnel authorizations. Neither Parent nor Seller have received any
notices from any Governmental Entity advising of any deficiencies or any
notices requiring corrective actions, modifications or changes with respect to
compliance with any applicable Government regulations and requirements.
Each of Purchaser and
Frequency jointly and severally represent and warrant to Seller that:
Section 5.1 Organization.
Purchaser and Frequency are corporations duly organized, validly
existing and in good standing under the laws of the State of Delaware and have
all requisite corporate or other power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority, and
governmental approvals would not have, individually or in the aggregate, a
material adverse effect on Purchaser or Frequencys ability to consummate the
Transactions.
Section 5.2 Authorization; Validity of Agreement. Purchaser and Frequency have full corporate
power and authority to execute and deliver this Agreement and the Ancillary
Agreements and to consummate the Transactions.
The execution, delivery and performance by Purchaser and Frequency of
this Agreement and the Ancillary Agreements and the consummation of the
Transactions have been duly authorized by the Board of Directors of Purchaser,
and no other corporate action on the part of Purchaser or Frequency is
necessary to authorize the execution and delivery by Purchaser and Frequency of
this Agreement, the Ancillary Agreements or the consummation of the
Transactions. No vote of, or consent
by, the holders of any class or series of stock issued by Purchaser or
Frequency is necessary to authorize
35
the execution and
delivery by Purchaser and Frequency of this Agreement, the Ancillary Agreements
or the consummation by it of the Transactions.
This Agreement and the Ancillary Agreements have been duly executed and
delivered by Purchaser and Frequency, and, assuming due and valid
authorization, execution and delivery hereof by Seller, is a valid and binding
obligation of Purchaser and Frequency, enforceable against Purchaser and
Frequency in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other similar laws of general application affecting enforcement of creditors
rights generally and (ii) the availability of the remedy of specific
performance or injunctive or other forms of equitable relief may be subject to
equitable defenses and would be subject to the discretion of the court before
which any proceeding therefor may be brought.
Section 5.3 Consents and Approvals; No Violations. Except for the filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Exchange Act, and state securities or blue sky
laws, none of the execution, delivery or performance of this Agreement by
Purchaser and Frequency, the consummation by Purchaser and Frequency of the
Transactions or compliance by Purchaser and Frequency with any of the
provisions hereof will (i) conflict with or result in any breach of any
provision of the certificate of incorporation or by-laws of Purchaser and
Frequency, (ii) require any filing with, or permit, authorization, consent
or approval of, any Governmental Entity, (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Purchaser, Frequency or any of its
subsidiaries is a party or by which any of them or any of their respective
properties or assets may be bound, or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Purchaser or
Frequency, any of its subsidiaries or any of their properties or assets,
excluding from the foregoing clauses (ii), (iii) and (iv) such violations,
breaches or defaults which would not, individually or in the aggregate, have a
material adverse effect on Purchaser or Frequencys ability to consummate the
Transactions.
Section 5.4 Brokers or Finders. Neither Purchaser nor Frequency nor any of its subsidiaries or
its Affiliates has entered into any agreement or arrangement entitling any
agent, broker, investment banker, financial advisor or other firm or Person to
any brokers or finders fee or any other commission or similar fee in
connection with any of the Transactions, except TM Capital, whose fees and expenses will
be paid by Purchaser and Frequency in accordance with Purchaser and Frequencys
agreement with such firm.
Section 5.5 Availability of Funds. Purchaser and Frequency currently have access to sufficient
immediately available funds in cash or cash equivalents, and shall at the
Closing have sufficient immediately available funds, in cash, to pay all amounts
payable pursuant to this Agreement and to consummate the Transactions,
including, but not limited to, payment of the Purchase Price.
36
Section 6.1 Non-Compete.
Without the express prior written consent of Purchaser, neither Parent
nor Seller, nor any of Parents Subsidiaries, nor any of their respective
successors or assigns shall, at any time during the five-year period
immediately following the Closing Date, directly or indirectly, own, manage,
control or participate in the ownership, management or control of, or be
related or otherwise affiliated in any manner with, any business similar to the
Business;and provided, further, that the foregoing shall not
prohibit Parent or Seller or its Affiliates from, individually or collectively,
owning as a passive investment 5% or less of the equity of any publicly traded
entity. Neither Parent nor Seller, nor
any of Parents Subsidiaries, nor any of their respective successors or assigns
shall, and shall not permit their respective Affiliates to, for a period of
three (3) years after the Closing Date,
solicit to employ any person now employed by Seller. For purposes of this Agreement, successors and assigns shall
include the successors and assigns of Parent and Seller, whether by operation
of law or otherwise (including, without limitation, upon any sale of the assets
of Parent or Seller, or upon any merger, consolidation or reorganization of
Parent or Seller with or into any other Person).
Section 6.2 Confidentiality.
Notwithstanding anything to the contrary contained herein or in the
Confidentiality Agreement, the Confidentiality Obligations as they relate to
the transactions contemplated by this Agreement shall not apply to the
purported or claimed Federal income tax treatment of the transactions (the Tax Treatment) or to any fact that may be
relevant to understanding the purported or claimed Federal income tax treatment
of the transactions (the Tax Structure),
and each party hereto (and any employee, representative, or agent of any party
hereto) may disclose to any and all persons, without limitation of any kind,
the Tax Treatment and Tax Structure of the transactions contemplated by this
Agreement and any materials of any kind (including any tax opinions or other
tax analyses) that relate to the Tax Treatment or Tax Structure. In addition, each party hereto acknowledges
that it has no proprietary or exclusive rights to any tax matter or tax idea
related to the transactions contemplated by this Agreement. The preceding sentence is intended to ensure
that the transactions contemplated by this Agreement shall not be treated as
having been offered under conditions of confidentiality for purposes of the Confidentiality
Regulations and shall be construed in a manner consistent with such purpose.
Section 6.3 Subsequent Actions. If at any time after the Closing, Purchaser will consider or be
advised that any deeds, bills of sale, instruments of conveyance, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm ownership (of record or otherwise) in Purchaser, its right,
title or interest in, to or under any or all of the Assets or otherwise to
carryout this Agreement, Parent and Seller shall execute and deliver all deeds,
bills of sale, instruments of conveyance, powers of attorney, assignments and
assurances and take and do all such other actions and things as may be
reasonably requested by Purchaser, at Purchasers expense, in order to vest, perfect
or confirm any and all right, title and interest in, to and under such rights,
properties or assets in Purchaser or otherwise to carry out this Agreement.
37
(a) At
or after the Closing, Purchaser may, in its discretion, offer to employ any
hourly or salaried employees of Seller under such terms and conditions as
Purchaser may determine.
(b) Except
as set forth on Schedule 2.3, Seller shall retain, and Purchaser shall not
assume, any Plans (including, Title IV Plans) or any other arrangement or
agreements (including with respect to any retention or sale bonus arrangements
of Seller) relating to the employees of Seller. All Liabilities to, or relating to, the Plans (including, all
multiemployer Plans), and all Liabilities to, or relating to, any employee of
Seller, shall be Retained Liabilities, and Purchaser shall have no obligation
or liability with respect to such Plans, arrangements or agreements. Purchaser and Seller shall take all actions
necessary to cause the retention by Seller of all such Plans.
(c) Seller
shall comply with the requirements of the Worker Adjustment and Retraining
Notification Act of 1988 (WARN Act), if
applicable, or any state law applicable to or affecting any site of employment,
facility, operating unit, or employee of the Business.
Section 6.5 Use of Sellers Name and Logo. It is expressly agreed that Purchaser is
purchasing, acquiring or otherwise obtaining all right, title or interest in
and to any trade names, Trademarks, identifying logos or service marks related
thereto used in the Business (collectively, the Sellers
Trademarks and Logos).
Sellers Trademarks and Logos shall not include the trademarks and logos
used in any business unit of Parent other than Seller. Seller agrees that following the Closing
Date, Seller shall cease and desist, and cause all of its Affiliates or
licensees to cease and desist, from all further use of Sellers Trademarks and
Logos being transferred herein, and will adopt new trade names, Trademarks,
identifying logos and service marks related thereto which are not confusingly
similar to Sellers Trademarks and Logos being transferred herein. Promptly following the Closing, Seller shall
amend the charter documents of Seller to delete the name Zyfer.
Section 6.6 Further Assurances. Each party shall cooperate with the other parties, and execute
and deliver, or use its commercially reasonable efforts to cause to be executed
and delivered, all such other instruments, including instruments of conveyance,
assignment and transfer, and to make all filings with and to obtain all
consents, approvals or authorizations of any Governmental Entity or other
regulatory authority or any other Person under any Permit, agreement, indenture
or other instrument, and take all such other actions as such party may
reasonably be requested to take by another party hereto from time to time,
consistent with the terms of this Agreement, in order to effectuate the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
Section 6.7 Record
Retention. Each party agrees that
for a period of not less than seven years following the Closing Date, it shall
not destroy or otherwise dispose of any of the books and records relating to
the Assets or the Assumed Liabilities in its possession with respect to periods
prior to the Closing. Each party shall
have the right to destroy all or part of such books and records after the seventh
anniversary of the Closing Date or, at an earlier time by giving each other
party hereto thirty days prior written notice of such intended disposition and
by offering to deliver to the other party, at the other partys expense,
custody of such books and records as such first party may intend to destroy.
38
Section 6.8 Technology
License. Effective as of the Closing
Date, the Seller hereby grants to Purchaser a perpetual, non-exclusive,
royalty-free license to use Sellers and Parents Stealthkey Technology for
applications that are not competitive to Parent or any of its Subsidiaries,
successors or assigns.
Section 6.9 Parent Guarantee. Frequency hereby guarantees all of the payment obligations of
Purchaser under Section 2.8 and Article IX of this Agreement.
Section 7.1 Transfer Taxes.
All Transfer Taxes attributable to the transfer of the Assets and any
Transfer Taxes required to effect any recording or filing with respect thereto
shall be borne by Seller. The Transfer
Taxes shall be calculated assuming that no exemption from Transfer Taxes is
available. Seller and Purchaser shall
cooperate to timely prepare and file any Tax Return or other filings relating
to such Transfer Taxes, including any claim for exemption or exclusion from the
application or imposition of any Transfer Taxes, and Seller shall timely file
any such Tax Return and timely pay any associated Transfer Taxes unless
Purchaser is required to file such Tax Return by applicable law. Promptly following the filing of any Tax
Return with respect to Transfer Taxes, Seller shall promptly furnish a copy of
such return or other filing and a copy of receipt showing payment of any such
Transfer Tax. With respect to any such
returns or filings required to be filed by Purchaser, Seller shall pay to
Purchaser, not later than five (5) Business Days before the due date for
payment of such Transfer Taxes, an amount equal to the Transfer Taxes shown on
such return or other filing, and Purchaser shall, following the filing thereof,
furnish to Seller a copy of such return or other filing and a copy of a receipt
showing payment of any such Transfer Tax.
Section 7.2 Liability for Taxes and Related Matters.
(a) Seller
shall prepare, or cause to be prepared, all Tax Returns relating to the Assets
for periods ending on or prior to the Closing Date. Seller shall be liable for and shall indemnify Purchaser, its
Affiliates and each of their respective officers, directors, employees,
stockholders, agents, and representatives against all liability for any Taxes
related to the Assets, Seller or any Seller Group attributable to periods
ending on or prior to the Closing Date.
(b) Purchaser
shall prepare and file, or shall cause to be filed all Tax Returns relating to
the Assets, including, without limitation, all real property Taxes, personal
property Taxes or similar ad valorem obligations levied with
respect to the Assets, for any taxable period that begins before the Closing
Date and ends after the Closing Date (each such taxable period, a Straddle Period, and such Taxes, Straddle Period Taxes), whether imposed or
assessed before or after the Closing Date, other than Straddle Period Tax
Returns that Seller is required to file by applicable law. Seller shall be liable for and shall
indemnify Purchaser, its Affiliates and each of their respective officers,
directors, employees, stockholders, agents, and representatives against all
liability for (i) in the case of any Straddle Period Taxes other than
Straddle Period Taxes based upon income or receipts, the amount of such
Straddle Period Tax for the entire Tax period multiplied by a fraction the
numerator of which is the number of days in the Tax period
39
ending on the Closing
Date and the denominator of which is the number of days in the entire Tax
period, and (ii) in the case of any Straddle Period Taxes based upon or
related to income or receipts, the amount that would be payable if the relevant
Tax period ended as of the close of business on the Closing Date. Any credits relating to a Straddle Period
shall be taken into account as though the relevant Straddle Period ended on the
Closing Date. All determinations
necessary to give effect to the foregoing allocations shall be made in a manner
that does not accelerate deductions or defer income. With respect to any such Straddle Period returns or filings, the
non-filing party shall pay to the filing party, not later than five Business Days
before the due date for payment of such Straddle Period Taxes, an amount equal
to the portion of such Straddle Period Taxes for which the non-filing party is
liable under this Section 7.2, and the filing party shall, promptly
following the filing thereof, furnish to the non-filing party a copy of such
return or other filing and a copy of a receipt showing payment of any such
Straddle Period Tax.
Section 7.3 Cooperation.
Purchaser and Seller agree to furnish or cause their Affiliates to
furnish to each other upon request, as promptly as practicable, such
information and assistance relating to the Assets (including access to books
and records) as is reasonably necessary for the filing of all Tax Returns and
other Tax filings, the making of any elections related to Taxes, the
preparation for any audit by any Taxing Authority, and the prosecution or
defense of any claim, suit or proceeding relating to any Tax Return. Purchaser and Seller shall cooperate, or
cause their Affiliates to cooperate, with each other in the conduct of any
audit or other proceeding related to Taxes and each shall execute and deliver
such other documents as are necessary to carry out the intent of this
Section 7.3. Purchaser and Seller
shall provide, or cause their Affiliates to provide, timely notice to each
other in writing of any pending or threatened Tax audits, assessments or
litigation with respect to the Assets for any taxable period for which the
other party may have liability under this Agreement. Purchaser and Seller shall furnish, or cause their respective
Affiliates to furnish, to each other copies of all correspondence received from
any Taxing Authority in connection with any Tax Audit or information request
with respect to any taxable period for which the other party or its Affiliates
may have liability under this Agreement.
Section 7.4 Allocation of Purchase Price.
(a) The
parties agree that the Purchase Price and the Assumed Liabilities (plus other
relevant items) will be allocated to the Assets in a manner consistent with
Section 1060 of the Code and the regulations promulgated thereunder. Purchaser will complete a draft schedule
(the Allocation Schedule) allocating
the Purchase Price and Assumed Liabilities to the Assets and provide a copy to
Seller at least 60 days prior to the due date for filing any form with respect
to the Allocation Schedule.
(b) Seller
shall notify Purchaser within ten days after the receipt thereof if it
considers the amount allocated to any assets to be inconsistent with
Section 1060 of the Code and the regulations promulgated thereunder. Seller and Purchaser shall attempt to
resolve any disagreement in good faith.
If Seller and Purchaser fail to reach agreement as to an alternative
allocation in the ten days following such notice, the dispute with respect to
the Allocation Schedule shall be presented on the next Business Day to a
nationally recognized independent accounting firm mutually chosen by Purchaser
and Seller, and if Purchaser and Seller cannot
40
agree, mutually chosen by
their respective independent accounting firms, for a decision that shall be
rendered within five days thereafter.
The independent accounting firms review shall be limited to whether a
disputed item has been prepared in accordance with Section 1060 of the
Code and the regulations promulgated thereunder, and shall be final and binding
on all parties. The fees, costs and
expenses incurred in connection therewith shall be shared in equal amounts by
Seller and Purchaser; provided, however, Seller shall bear the
full amount of fees, costs and expenses if there are no material changes to the
Allocation Schedule.
(c) Purchaser
and Seller shall file, and cause their respective Affiliates to file, all Tax
Returns and statements, forms and schedules in connection therewith in a manner
consistent with the Allocation Schedule and shall take no position inconsistent
therewith, unless, and then only to the extent, required to do so by a Final
Determination. Purchaser and Seller
shall exchange completed and executed copies of Internal Revenue Service
Form 8594, any required schedules thereto, and any similar state, local
and foreign forms, not later than 30 days prior to the filing date.
Section 7.5 Employees.
Purchaser, Seller and their respective Affiliates shall cooperate with
each other to the extent necessary (including making any required elections) to
permit Purchaser to treat wages paid to all employees of Seller prior to the
Closing who become employees of Purchaser or its Affiliates subsequent to the Closing
as having been paid by the Purchaser as successor employer solely for the
purposes of Section 3121(a)(1) of the Code and any related employment or
withholding tax provisions of any relevant Tax law.
Section 8.1 Conditions to Each Partys Obligation to Effect the
Closing. The respective obligation
of each party to effect the Closing shall be subject to the satisfaction at or
prior to the Closing Date of the following condition:
(a) Statutes;
Court Orders. No statute, rule or
regulation shall have been enacted or promulgated by any Governmental Entity
which prohibits the consummation of the Closing; and there shall be no order or
injunction of a court of competent jurisdiction in effect precluding
consummation of the Closing.
Section 8.2 Conditions to Obligations of Purchaser to Effect the
Closing. The obligations of
Purchaser to consummate the Closing shall be subject to the satisfaction or
waiver on or prior to the Closing Date of each of the following conditions:
(a) Government
Action. There shall not be
threatened or pending any suit, action or proceeding by any Governmental
Entity:
(i) seeking
to prohibit or impose any material limitations on Purchasers ownership or
operation of all or a material portion of the Assets, or to compel Purchaser to
dispose of or hold separate any material portion of the Assets;
41
(ii) seeking
to restrain or prohibit the consummation of the Closing or the performance of
any of the other Transactions;
(iii) seeking
to impose material limitations on the ability of Purchaser, or rendering
Purchaser unable, to accept for payment or pay for or purchase any material
Asset or otherwise to consummate the Closing;
(iv) seeking
to impose material limitations on the ability of Purchaser effectively to
exercise full rights of ownership of the Assets;
(v) which
otherwise is reasonably likely to have a Material Adverse Effect; or
(vi) there
shall be any statute, rule, regulation, judgment, order or injunction enacted,
entered, enforced, promulgated or deemed applicable to the Transactions, or any
other action shall be taken by any Governmental Entity, that is reasonably
likely to result, directly or indirectly, in any of the consequences referred
to in clauses (i) through (v) above.
(b) Consents
Obtained. All consents of any
Person necessary to the consummation of the Closing and the other Transactions,
including those identified on Schedule 4.17, shall have been obtained in the
form satisfactory to Purchaser.
(c) Permits
Obtained. All Permits necessary for
the operation of the Business either have been transferred to Purchaser or have
been obtained by Purchaser.
(d) Representations
and Warranties. All of the
representations and warranties of Seller set forth in this Agreement that are
qualified as to materiality shall be true and complete and any such
representations and warranties that are not so qualified shall be true and
complete in all material respects, in each case as of the date of this Agreement
and as of the Closing Date, other than representations and warranties that
speak as of a specific date or time (which need only be so true and correct as
of such date or time).
(e) Performance
of Covenants. Neither Parent nor
Seller have failed to perform in any material respect any obligation or to
comply in any material respect with any agreement or covenant of Seller to be
performed or complied with by it under this Agreement on or prior to the
Closing Date.
(f) Tax
Certifications. Purchaser shall
have received a certification of non-foreign status from Seller and any
Subsidiary of Seller that is selling Assets pursuant to this Agreement in the
form and manner which complies with the requirements of Section 1445 of
the Code and the regulations promulgated thereunder.
(g) Certificates. Purchaser shall have received from Parent
and Seller a certificate, dated the Closing Date, duly executed by the Chief
Executive Officer or the Chief Financial Officer of Seller, reasonably
satisfactory in form to Purchaser, to the effect of paragraphs (d), and (e).
42
(h) Material
Documents. Purchaser will have
(i) received copies of all relevant material documents regarding the
rights and obligations of Seller in connection with the Assets; and
(ii) received certification from Seller that there are no relevant
material documents other than those given to Purchaser and that Seller is in
compliance with all terms and provisions of the relevant documents.
(i) Release
of Security Interests. All security
interests in the Assets (other than Permitted Encumbrances) shall have been
released, and Purchaser shall have received copies of UCC-3 financing
statements or such other documentary evidence satisfactory to Purchaser that
such security interests have been released.
(j) Closing
Deliveries. Seller shall have made
all closing deliveries to Purchaser as set forth in Section 3.2.
(k) Employment
Contract. Purchaser shall have
entered into an employment contract with Hugo Fruehauf on terms and in a form
reasonably satisfactory to Purchaser.
The foregoing conditions
are for the sole benefit of Purchaser and may be waived by Purchaser, in whole
or in part, at any time and from time to time in its sole discretion.
Section 8.3 Conditions to Obligations of Seller to Effect the
Closing. The obligations of Seller
to consummate the Closing shall be subject to the satisfaction or waiver on or
prior to the Closing Date of each of the following conditions:
(a) Representations
and Warranties. All of the
representations and warranties Purchaser and Frequency set forth in this
Agreement that are qualified as to materiality shall be true and complete and
any such representations and warranties that are not so qualified shall be true
and complete in all material respects, in each case as of the date of this
Agreement and as of the Closing Date, other than representations and warranties
that speak as of a specific date or time (which need only be so true and
correct as of such date or time).
(b) Purchasers
Performance of Covenants. Purchaser
shall not have failed to perform in any material respect any material
obligation or to comply in any material respect with any agreement or covenant
to be performed or complied with by it under this Agreement.
(c) Certificate
of Purchasers Officers. Seller
shall have received from Purchaser a certificate, dated the Closing Date, duly
executed by Purchaser, satisfactory in form to Seller, to the effect of
paragraphs (a) and (b) above.
(d) Closing
Deliveries. Purchaser shall have
made all closing deliveries to Seller as set forth in Section 3.3.
(e) Government
Action. There shall not be
threatened or pending any suit, action or proceeding by any Governmental
Entity:
(i) seeking
to impose material limitations on the ability of Seller, or rendering Seller
unable, to sell any material Asset or otherwise to consummate the Closing;
43
(ii) seeking
to restrain or prohibit the consummation of the Closing or the performance of
any of the other Transactions;
(iii) which
otherwise is reasonably likely to have a Material Adverse Effect; or
(iv) there
shall be any statute, rule, regulation, judgment, order or injunction enacted,
entered, enforced, promulgated or deemed applicable to the Transactions, or any
other action shall be taken by any Governmental Entity, that is reasonably
likely to result, directly or indirectly, in any of the consequences referred
to in clauses (i) through (iii) above.
The foregoing conditions are for the sole benefit of
Seller and may be waived by Seller, in whole or in part, at any time and from
time to time in its sole discretion.
Section 9.1 Survival of Certain Representations and Warranties. The representations and warranties set forth
in Article IV and Article V shall generally survive the Closing and
continue in full force and effect until July 31, 2004. Notwithstanding the foregoing, the representations
and warranties of the parties contained in Sections 4.4 (Authorization;
Validity of Agreement), 4.13 (Availability of Assets and Legality of Use)
(except for the last sentence thereof), 4.14(a) (Title to Property;
Encumbrances), 4.16 (Environmental Matters) and 4.24 (Tax Matters) shall survive
the Closing and continue in full force and effect for a period beginning on the
Closing Date and ending thirty (30) days following the expiration of the
applicable statute of limitations, and they shall thereafter be of no further
force or effect. All covenants and
agreements of the parties contained in this Agreement shall survive the
Closing, unless otherwise indicated herein.
Section 9.2 Indemnification by Parent and Seller.
(a) Subject
to the other terms and conditions of this Agreement (including, without
limitation, Section 9.2(b)), Parent and Seller shall jointly and severally
indemnify, defend and hold the Purchaser Indemnified Parties harmless from and
against any and all Losses directly or indirectly based upon, arising out of,
resulting from or relating to:
(i) any
breach of any representation or warranty of Parent or Seller contained in this
Agreement or the Ancillary Agreements;
(ii) any
breach of any agreement, covenant or obligation of Parent or Seller set forth
in this Agreement or the Ancillary Agreements;
(iii) the
Retained Liabilities; and
(iv) claims
under bulk transfer laws.
44
(b) Notwithstanding
anything contained in this Agreement to the contrary, Parent and Sellers
obligation to indemnify, defend and hold the Purchaser Indemnified Parties
harmless shall be limited as follows:
(i) No
amounts of indemnity shall be payable pursuant to this Section 9.2(a)(i) (other
than amounts payable as a result of a breach of the representations and
warranties contained in Section 4.16 (Environmental Matters),
Section 4.24 (Tax Matters), and any amount Seller is liable for pursuant
to Sections 7.1 and 7.2), except in the event of fraud, unless
and until the aggregate of all Losses suffered by Purchaser Indemnified Parties
shall exceed $50,000 in the aggregate (the Loss Threshold), and then
from the first dollar to the full extent of such Losses.
(ii) In
no event shall the aggregate amount of indemnity required to be paid by Seller
or Parent to all Purchaser Indemnified Parties pursuant to
Section 9.2(a)(i) (other than amounts payable as a result of a breach of
the representations and warranties contained in Section 4.16
(Environmental Matters), Section 4.24 (Tax Matters), and any amount Seller
is liable for pursuant to Sections 7.1 and 7.2) exceed the aggregate of all
payments made by Purchaser to Seller pursuant to Sections 2.5, 2.6, 2.7 and 2.8
of this Agreement, except in the event of fraud;
(iii) No
claim may be asserted nor may any action be commenced against Parent or Seller
pursuant to Section 9.2(a) unless written notice of such claim or action
is received by Purchaser or Parent describing in detail the facts and
circumstances with respect to the subject matter of such claim or action on or
prior to the date on which the representation or warranty on which such claim
or action is based ceases to survive as set forth in Section 9.1,
irrespective of whether the subject matter of such claim or action shall have
occurred before or after such date;
(iv) For
purposes of computing the aggregate amount of claims against Seller, the amount
of each claim by a Purchaser Indemnified Party shall be deemed to be an amount
equal to, and any payments by Seller pursuant to Section 9.2(a) shall be
limited to, the amount of Losses that remain after (A) deducting therefrom
(1) any insurance proceeds and any indemnity, contributions or other
similar payment payable by any Third Party with respect thereto, and
(2) any Tax benefit realized by a Purchaser Indemnified Party or any
Affiliate thereof with respect to the Losses or items giving rise to such claim
for indemnification, and (B) adding thereto any Tax cost realized by a
Purchaser Indemnified Party or any Affiliate thereof with respect to any payments
to be made pursuant to Section 9.2(a) (as determined after the application
of Section 9.2(b)(ii)(A)(1)). For
purposes of this Section 9.2(b)(ii), Tax benefits shall mean the present
value (determined using the applicable long-term federal rate as defined in
Section 1274(d) of the Code, or any successor provision) of any past,
present or future deduction, expense, loss, increase in asset basis, credit or
refund realized by a Purchaser Indemnified Party or any Affiliate thereof, and
Tax cost shall mean the present value (determined using the applicable
long-term federal rate as defined in Section 1274(d) of the Code, or any
successor provision) of any present or future income, gain, loss of deduction,
or decrease in asset basis realized by a Purchaser Indemnified Party, or any
Affiliate thereof. The amount of the
Tax benefits and Tax costs shall be determined by
45
assuming
(1) the Purchaser Indemnified Party or any Affiliate thereof, as the case
may be, is, and will continue to be, in the maximum United States federal
income tax bracket, after any deduction reportable with respect to a payment
hereunder, and (2) the effective state and local Income Tax rate, or, as
the case may be, corporation tax rate of the Purchaser Indemnified Party or any
Affiliate thereof, as the case may be, is, and will continue to be, its
effective rate for the most recent prior taxable year for which such
information is available;
(v) For
the purposes of the satisfaction of the limitations set forth in
Section 9.2, the representations, warranties, covenants and agreements of
Parent and Seller in this Agreement and in the Ancillary Agreements shall be
read without giving effect to qualifications for materiality or Material Adverse
Effect.
Section 9.3 Indemnification by Purchaser and Frequency.
(a) Subject
to the other terms and conditions of this Agreement (including, without
limitation, Section 9.3(b)), Purchaser and Frequency shall jointly and
severally indemnify, defend and hold the Seller Indemnified Parties harmless
from and against any and all Losses directly or indirectly based upon, arising
out of, resulting from or relating to:
(i) any
breach of any representation or warranty of Purchaser or Frequency contained in
this Agreement;
(ii) any
breach of any agreement, covenant or obligation of Purchaser or Frequency set
forth in this Agreement;
(iii) the
Assumed Liabilities; and
(iv) the
operation of the Business and the Assets on and after the Closing Date (other
than with respect to the Retained Liabilities).
(b) Notwithstanding
anything contained in Section 9.3(a) to the contrary, Purchasers and
Frequencys obligation to indemnify, defend and hold the Seller Indemnified
Parties harmless shall be limited as follows:
(i) No
claim may be asserted nor may any action be commenced against Purchaser
pursuant to Section 9.3(a) unless written notice of such claim or action
is received by Purchaser describing in detail the facts and circumstances with
respect to the subject matter of such claim or action on or prior to the date
on which the representation or warranty on which such claim or action is based
ceases to survive as set forth in Section 9.1, irrespective of whether the
subject matter of such claim or action shall have occurred before or after such
date;
(ii) For
purposes of computing the aggregate amount of claims against Purchaser the
amount of each claim by a Seller Indemnified Party shall be deemed to be an
amount equal to, and any payments by Purchaser pursuant to Section 9.3(a)
shall be limited to, the amount of Losses that remain after (A) deducting
therefrom, (1) any insurance proceeds and any indemnity, contributions or
other similar payment payable by
46
any Third Party
with respect thereto, and (2) any Tax benefit realized by a Seller
Indemnified Party or any Affiliate therefor with respect to the Losses or items
giving rise to such claim for indemnification, and (B) adding thereto any
Tax cost realized by a Seller Indemnified Party or any Affiliate thereof with
respect to any payments to be made pursuant
to Section 9.3(a) (as determined after the application of Section 9.3(b)(ii)(A)(1)). For purposes of this
Section 9.3(b)(ii), Tax benefits shall mean the present value
(determined using the applicable long-term federal rate as defined in
Section 1274(d) of the Code, or any successor provision) of any present or
future deduction, expense, loss, increase in asset basis, credit or refund
realized by a Seller Indemnified Party or any Affiliate thereof, and Tax cost
shall mean the present value (determined using the applicable long-term federal
rate as defined in Section 1274(d) of the Code, or any successor
provision) of any past, present or future income, gain, loss of deduction, or
decrease in asset basis realized by a Seller Indemnified Party, or any
Affiliate thereof. The amount of the
Tax benefits and Tax costs shall be determined by assuming (1) the Seller
Indemnified Party or any Affiliate thereof, as the case may be, is, and will
continue to be, in the maximum United States federal income tax bracket after
any deduction reportable with respect to a payment hereunder, and (2) the
effective state and local Income Tax rate, or, as the case may be, corporation
tax rate of the Seller Indemnified Party or any Affiliate thereof, as the case
may be, is, and will continue to be, its effective rate for the most recent
prior taxable year for which such information is available;
(iii) No
amount of indemnity shall be payable pursuant to Section 9.3(a) with
respect to any Loss resulting from a misrepresentation, breach of warranty or
breach of covenant or agreement that is (A) disclosed in a written notice,
setting forth in reasonable detail the specific facts and circumstances
pertaining thereto, delivered by Purchaser to Seller after the date of this
Agreement and at or prior to the Closing, or (B) otherwise actually known
by Seller prior to the Closing, if Seller nevertheless elects to close
(regardless of whether Seller waives such breach in writing or otherwise), or
(C) reflected in the post-closing reconciliation of the purchase price pursuant
to Section 2.7 hereof.
Section 9.4 Indemnification Procedures.
(a) Any
Seller Indemnified Party or Purchaser Indemnified Party (each, an Indemnified
Party) seeking indemnification hereunder shall give to the party obligated
to provide indemnification hereunder (the Indemnitor) written notice
of any claim or matter which gives rise to a claim for indemnification
hereunder, promptly upon becoming aware of a fact, condition or event for which
indemnification is provided under this Article X, but in any event within
thirty (30) days after such Person has actual knowledge of the facts
constituting the basis for indemnification; provided, however,
that the failure of an Indemnified Party to give such notice shall not relieve
any Indemnitor of its obligations under this Agreement, except to the extent
that such failure materially prejudices the rights of any such Indemnitor.
(b) The Indemnitor shall have the right to control and
direct, through counsel of its own choosing, the defense or settlement of any
claim, action, suit or proceeding brought by a Person who is not a party or an
Affiliate of a party to this Agreement (a Third
Party Claim). The
Indemnified Party may participate in such defense, but in such case the
expenses of the
47
Indemnified Party shall
be paid by the Indemnified Party; provided, however, that the Indemnified Party
shall have the right to employ, at Indemnitors expense, one counsel of its
choice to represent the Indemnified Party, if the Indemnified Party is advised
by counsel reasonably satisfactory to the Indemnitor that there exists any
actual or potential conflict of interest between the Indemnitor and the
Indemnified Party. The Indemnified
Party shall provide the Indemnitor with access to its records and personnel
relating to any Third Party Claim during normal business hours and shall
otherwise cooperate fully with the Indemnitor in the defense or settlement
thereof, and the Indemnitor shall reimburse the Indemnified Party for all its
reasonable out-of-pocket expenses in connection therewith. If the Indemnitor elects to direct the
defense of a Third Party Claim, then the Indemnified Party shall not pay,
permit to be paid, or settle any part of any claim or demand arising from such
asserted liability, unless the Indemnitor consents in writing to such payment
or unless the Indemnitor, subject to the last sentence of this
Section 9.4(b), withdraws from the defense of such asserted liability, or
unless a final judgment from which no appeal may be taken by or on behalf of
the Indemnitor is entered against the Indemnified Party for such liability. The Indemnitor will not settle any claim
without the consent of the Indemnified Party (such consent not to be
unreasonably withheld) if such settlement would involve the imposition of
equitable remedies or impose material obligations on the Indemnified Party
other than financial obligations for which the Indemnified Party will be
indemnified hereunder. If the
Indemnitor shall fail to defend, or if, after commencing or undertaking any
such defense, fails to prosecute or withdraws from the defense of a Third Party
Claim, then the Indemnified Party shall have the right to undertake the defense
or settlement thereof, at the Indemnitors expense. If the Indemnified Party assumes the defense of any such claim or
proceeding pursuant to this Section 9.4(b) and proposes to settle such
claim or proceeding prior to a final judgment thereon or to forego appeal with
respect thereto, then the Indemnified Party shall give the Indemnitor prompt
written notice thereof, and the Indemnitor shall have the right to participate
in the settlement or assume or reassume the defense of such claim or
proceeding.
(c) Any damages for which a Purchaser Indemnified Party shall
be entitled to indemnification pursuant to Section 9.2 will be immediately
payable by the reduction of the Holdback Amount by an amount equal to the
amount of such damages.
(d) Subject to the provisions of Section 2.5(c) with
respect to the size and release of the Holdback Amount, a Purchaser Indemnified
Party may institute claims against the Holdback Amount and may recover the
Holdback Amount to the extent of such claims, in accordance with the terms of
this Agreement, without first making any other claims (other than a claim for
indemnification made under this Article IX) directly against the Parent or
Seller, without rescinding or attempting to rescind any transaction consummated
by this Agreement and without first exhausting any other remedies that may be
available to it with respect to the subject matter of any claim, and such
Purchaser Indemnified Party will proceed directly in accordance with the
provisions of this Agreement.
(a) Notwithstanding
anything to the contrary in this Agreement, the period of time that a provision
survives the Closing and remains in full force and effect pursuant to Section 9.1
(the Survival Period) shall
automatically be extended to include any time period
48
necessary to resolve a
specific claim for indemnification which was made before expiration of the
Survival Period but not resolved prior to its expiration; provided, however,
that any such extension shall apply only as to claims asserted and not so
resolved within the original Survival Period.
(b) In
any case where an Indemnified Party recovers from a Third Party any amount in
respect of a matter with respect to which an Indemnitor has indemnified it
pursuant to this Agreement, such Indemnified Party shall promptly pay over to
the Indemnitor the amount so recovered (after deducting therefrom the full
amount of the expenses incurred by it in procuring such recovery), but not in
excess of the sum of (i) any amount previously so paid by the Indemnitor
to or on behalf of the Indemnified Party in respect of such matter, and
(ii) any amount expended by the Indemnitor in pursuing or defending any
claim arising out of such matter.
(c) The
remedies provided for in this Agreement shall be the parties sole and exclusive
remedy with respect to the subject matter of this Agreement, other than with
respect to remedies for fraud or intentional breach.
Section 9.6 Dispute Resolution. Any claim or controversy
among the parties hereto arising out this Article IX will be settled in
the following manner: (a) senior
executives representing each of the parties will meet to discuss and attempt to
resolve the controversy or claim; and (b) if the executives are unable to
resolve the controversy or claim within ten (10) days after either party gives
written notice to the other of the controversy, then Seller and Purchaser will
mutually select an independent arbitrator (which may be a nationally recognized
accounting firm or other individual or entity reasonably qualified to act as an
independent arbitrator) to resolve the controversy or claim and make a
determination with respect thereto. Such
determination will be made, and written notice thereof given to Purchaser and
Seller within thirty (30) days after such selection. The determination by the independent arbitrator shall be final,
binding and conclusive upon the parties.
The scope of independent arbitrators review will be limited to the
resolution of the specific controversy or claim presented. The fees, costs and
expenses of the independent arbitrator will be borne equally by the parties.
Section 10.1 Fees and Expenses.
All costs and expenses incurred in connection with this Agreement and
the consummation of the Transactions shall be paid by the party incurring such
expenses, except as specifically provided to the contrary in this Agreement.
Section 10.2 Amendment and Modification. This Agreement may be amended, modified and
supplemented in any and all respects, but only by a written instrument signed
by all of the parties hereto expressly stating that such instrument is intended
to amend, modify or supplement this Agreement.
Section 10.3 Publicity.
Until the Closing, or the date the Transactions are terminated or
abandoned pursuant to Article IX, neither Seller, Purchaser nor any of
their
49
respective Affiliates
shall issue or cause the publication of any press release or other public
announcement with respect to this Agreement or the other Transactions without
prior consultation with the other party, except as may be required by law or by
any listing agreement with a national securities exchange or trading market.
Section 10.4 Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed given when mailed, delivered personally, telecopied (which is
confirmed) or sent by an overnight courier service, such as Federal Express, to
the parties at the following addresses (or at such other address for a party as
shall be specified by such party by like notice):
if to
Frequency, to:
Frequency Electronics,
Inc.
55 Charles Lindberg Blvd.
Mitchel Field, NY 11553
Attention: Len Martire
Telephone: (516) 794-4500 ext. 4006
Telecopy: (516) 794-4340
with a copy to:
Cadwalader, Wickersham
& Taft LLP
100 Maiden Lane
New York, NY 10038
Attention: Dennis J. Block, Esq.
Telephone: (212) 504-5555
Telecopy: (212) 504-6666
if to
Purchaser, to:
FEI-Zyfer, Inc.
55 Charles Lindberg Blvd.
Mitchel Field, NY 11553
Attention: Len Martire
Telephone: (516) 794-4500 ext. 4006
Telecopy: (516) 794-4340
with a copy to:
Cadwalader, Wickersham
& Taft LLP
100 Maiden Lane
New York, NY 10038
Attention: Dennis J. Block, Esq.
Telephone: (212) 504-5555
Telecopy: (212) 504-6666
50
if to
Parent, to:
Odetics, Inc.
1515 South Manchester Avenue
Anaheim, California 92802
Attention: Gregory A. Miner
Telephone: (714) 774-5000
Telecopy: (714) 780-7857
with a copy to:
Dorsey & Whitney LLP
38 Technology Drive
Irvine, CA 92618
Attention: Ellen S. Bancroft, Esq.
Telephone: (714) 424-5555
Telecopy: (714) 424-5554
if to
Seller, to:
Zyfer, Inc.
1515 South Manchester Avenue
Anaheim, California 92802
Attention: Gregory A. Miner
Telephone: (714) 780-7802
Telecopy: (714) 780-7857
with a copy to:
Dorsey & Whitney LLP
38 Technology Drive
Irvine, CA 92618
Attention: Ellen S. Bancroft, Esq.
Telephone: (714) 424-5555
Telecopy: (714) 424-5554
Section 10.5 Counterparts.
This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
two or more counterparts have been signed by each of the parties and delivered
to the other parties. Copies of
executed counterparts transmitted by telecopy or other electronic transmission
service shall be considered original executed counterparts, provided receipt of
such counterparts is confirmed.
Section 10.6 Entire Agreement; No Third Party Beneficiaries. This Agreement (a) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and thereof and (b) are not intended to confer any rights or remedies upon
any Person other than the parties hereto and thereto.
51
Section 10.7 Severability.
Any term or provision of this Agreement that is held by a court of
competent jurisdiction or other authority to be invalid, void or unenforceable
in any situation in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other situation or in
any other jurisdiction. If the final
judgment of a court of competent jurisdiction or other authority declares that
any term or provision hereof is invalid, void or unenforceable, the parties
agree that the court making such determination shall have the power to reduce
the scope, duration, area or applicability of the term or provision, to delete
specific words or phrases, or to replace any invalid, void or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision.
Section 10.8 Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without giving effect to the principles of
conflicts of law thereof.
Section 10.9 Enforcement.
The parties agree that irreparable damage would occur in the event that
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement.
Section 10.10 Time of Essence.
Each of the parties hereto hereby agrees that, with regard to all dates
and time periods set forth or referred to in this Agreement, time is of the
essence.
Section 10.11 Extension; Waiver.
At any time prior to the Closing Date, the parties may (a) extend
the time for the performance of any of the obligations or other acts of the
other parties, (b) waive any inaccuracies in the representations and
warranties of the other parties contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) waive compliance by the other
parties with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a party to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of those
rights.
Section 10.12 Election of Remedies. Neither the exercise of nor the failure to exercise a right of
set-off or to give notice of a claim under this Agreement will constitute an
election of remedies or limit any of the Purchaser Indemnified Parties in any
manner in the enforcement of any other remedies that may be available to any of
them, whether at law or in equity.
Section 10.13 Assignment.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties,
except that Purchaser may assign, in its sole discretion, any or all of its
rights and interests hereunder to any direct or indirect wholly owned
Subsidiary of Purchaser. Subject to the
preceding sentence, this
52
Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
53
IN WITNESS WHEREOF,
Purchaser and Seller have executed this Agreement or caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first written above.
|
FREQUENCY ELECTRONICS, INC.
|
|
|
|
|
|
By:
|
/S/ MARTIN B. BLOCH
|
|
|
Name: Martin B. Bloch
|
|
|
Title: President
|
|
|
|
|
|
|
|
FEI-ZYFER, INC.
|
|
|
|
|
|
By:
|
/S/ ALAN MILLER
|
|
|
Name: Alan
Miller
|
|
|
Title: Secretary and Treasurer
|
|
|
|
|
|
|
|
ODETICS, INC.
|
|
|
|
|
|
By
|
/S/ GREGORY A. MINER
|
|
|
Name:
Gregory A. Miner
|
|
|
Title: Chief Executive Officer
|
|
|
|
|
|
|
|
ZYFER, INC.
|
|
|
|
|
|
By
|
/S/ HUGO FRUEHAUF
|
|
|
Name: Hugo Fruehauf
|
|
|
Title: Chief Executive Officer
|
54
INDEX
OF DEFINED TERMS
A
|
|
|
|
Accounts
Receivable
|
1
|
Additional
Payment Amount
|
1, 16
|
Affiliate
|
1
|
Agreement
|
1
|
Allocation
Schedule
|
40
|
Ancillary
Agreements
|
2
|
Applicable
Law
|
2
|
Applicable
Rate
|
2
|
Assets
|
2, 11
|
Associate
|
2
|
Assumed
Liabilities
|
2, 13
|
|
|
B
|
|
|
|
Balance
Sheet
|
2
|
Balance
Sheet Date
|
2
|
Business
|
1
|
Business
Day
|
2
|
|
|
C
|
|
|
|
Claim
|
28
|
Closing
|
2
|
Closing
Date
|
2
|
Closing
Net Assets
|
2, 15
|
Closing
Payment
|
2, 15
|
Code
|
2
|
Confidentiality
Agreement
|
2
|
Confidentiality
Obligations
|
2
|
Confidentiality
Regulations
|
2
|
Copyrights
|
3
|
|
|
D
|
|
|
|
Development
Personnel
|
31
|
Disclosure
Schedules
|
3
|
Documentation
|
8
|
|
|
E
|
|
|
|
Earnout
Products
|
3, 16
|
Earnout
Year
|
3, 16
|
Effect
|
5
|
Encumbrances
|
3
|
Environmental
Claim
|
3
|
Environmental
Law
|
3
|
ERISA
|
3
|
ERISA
Affiliate
|
3
|
Escrow
Agent
|
3
|
Exchange
Act
|
4
|
Existing
Technology
|
4, 16
|
Expenses
|
4
|
|
|
F
|
|
|
|
Federal
Income Tax
|
4
|
Final
Determination
|
4
|
Financial
Statements
|
4
|
Frequency
|
1
|
|
|
G
|
|
|
|
GAAP
|
4
|
Governmental
Entity
|
4
|
|
|
H
|
|
|
|
Holdback
Amount
|
4, 14
|
|
|
I
|
|
|
|
Income
Tax
|
4
|
Indemnified
Party
|
4, 47
|
Indemnitor
|
4, 47
|
Independent
Accountant
|
16
|
Intellectual
Property
|
4
|
Internet
Assets
|
5
|
Inventory
|
5, 11
|
IP
Licenses
|
4
|
|
|
K
|
|
|
|
Key
Customers
|
27
|
Knowledge
of Seller
|
5
|
|
|
L
|
|
|
|
Leased
Real Property
|
5
|
Liabilities
|
5
|
Loss
Threshold
|
5, 45
|
Losses
|
5
|
|
|
M
|
|
|
|
Material
Adverse Change
|
5
|
Material
Adverse Effect
|
5
|
Material
Contracts
|
25
|
Materials
of Environmental Concern
|
5
|
|
|
N
|
|
|
|
Net
Assets
|
5
|
Notice
of Disagreement
|
5, 15
|
Notice
of Earnout Dispute
|
5, 17
|
|
|
O
|
|
|
|
Ordinary
Course of Business
|
5
|
|
|
P
|
|
|
|
Parent
|
1
|
Parent
Indemnified Parties
|
6
|
Parent SEC Documents
|
20
|
1
Patents
|
6
|
Permits
|
6
|
Permitted
Encumbrances
|
6
|
Person
|
6
|
Personal
Property Leases
|
23
|
Plan
|
6
|
Post-Closing
Statement of Net Assets
|
7, 15
|
Post-Closing
Tax Period
|
7
|
Pre-Closing
Net Assets
|
15
|
Pre-Closing
Statement of Net Assets
|
7, 15
|
Pre-Closing
Tax Period
|
7
|
Product
Defect
|
35
|
Product
Liability Claim
|
7
|
Purchase
Price
|
7, 14
|
Purchaser
|
1, 7
|
Purchaser
Indemnified Parties
|
7
|
|
|
R
|
|
|
|
Real
Property Leases
|
7
|
Representative
|
7
|
Retained
Assets
|
7, 12
|
Retained
Liabilities
|
7, 14
|
returns
|
9
|
Revenues
|
7, 17
|
|
|
S
|
|
|
|
SEC
|
7
|
Securities
Act
|
7, 21
|
Seller
|
1, 7
|
Seller
Agreements
|
7, 13
|
Seller
Group
|
8
|
Seller
Indemnified Parties
|
8
|
Seller
Intellectual Property
|
8
|
Seller
Trademarks and Logos
|
8
|
Sellers
Trademarks and Logos
|
38
|
Software
|
8
|
Stealthkey
Technology
|
8, 13
|
Straddle
Period
|
39
|
Straddle
Period Taxes
|
39
|
Subsidiary
|
8
|
Survival
Period
|
8, 48
|
|
|
T
|
|
|
|
Tax
|
9
|
Tax
Benefit
|
9
|
Tax
Return
|
9
|
Tax
Structure
|
37
|
Tax
Treatment
|
37
|
Taxes
|
9
|
Taxing
Authority
|
9
|
Third
Party
|
9
|
Third
Party Claim
|
9, 47
|
Third
Party Software
|
32
|
this
Agreement
|
1
|
Title
IV Plan
|
9
|
TLP
|
9, 19
|
TLP
Payment
|
9, 19
|
Trade
Secrets
|
9
|
Trademarks
|
9
|
Transactions
|
10
|
Transfer
Tax
|
10
|
Transfer
Taxes
|
10
|
|
|
W
|
|
|
|
WARN
Act
|
10, 38
|
2