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
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1 Definitions..................................................
Section 1.2 Interpretation...............................................
ARTICLE II
PURCHASE AND SALE OF ASSETS
Section 2.1 Sale and Transfer of Assets..................................
Section 2.2 Retained Assets..............................................
Section 2.3 Assumption of Liabilities....................................
Section 2.4 Retained Liabilities.........................................
Section 2.5 The Purchase Price...........................................
Section 2.6 Pre-Closing Adjustment to the Purchase Price. ...............
Section 2.7 Post-Closing Reconciliation of Purchase Price................
Section 2.8 Performance-Based Purchase Price Adjustment..................
ARTICLE III
THE CLOSING
Section 3.1 The Closing..................................................
Section 3.2 Deliveries by Seller.........................................
Section 3.3 Deliveries by Purchaser......................................
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF parent and SELLER
Section 4.1 Organization and Qualification of Parent.....................
Section 4.2 Organization and Qualification of Seller.....................
Section 4.3 Subsidiaries and Affiliates..................................
Section 4.4 Authorization; Validity of Agreement.........................
Section 4.5 Consents and Approvals; No Violations........................
Section 4.6 Financial Statements; SEC Filings............................
Section 4.7 Books and Records............................................
Section 4.8 No Undisclosed Liabilities...................................
Section 4.9 Accounts Receivable..........................................
Section 4.10 Accounts Payable.............................................
Section 4.11 Seller Indebtedness..........................................
Section 4.12 Absence of Certain Changes...................................
Section 4.13 Availability of Assets and Legality of Use...................
Section 4.14 Title to Properties; Encumbrances............................
Section 4.15 Real Property................................................
Section 4.16 Environmental Matters........................................
Section 4.17 Material Contracts...........................................
Section 4.18 Customers....................................................
Section 4.19 Insurance....................................................
Section 4.20 Casualties...................................................
Section 4.21 Litigation...................................................
Section 4.22 Compliance with Laws; Permits and Licenses...................
Section 4.23 Employee Benefit Plans.......................................
Section 4.24 Tax Matters..................................................
Section 4.25 Intellectual Property........................................
Section 4.26 Inventory and Fixed Assets...................................
Section 4.27 Labor Matters................................................
Section 4.28 Personnel....................................................
Section 4.29 Potential Conflict of Interest...............................
Section 4.30 Propriety of Past Payments...................................
Section 4.31 Brokers or Finders...........................................
Section 4.32 Product Defects..............................................
Section 4.33 Government Licenses, Clearances and Security Regulations.....
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 5.1 Organization.................................................
Section 5.2 Authorization; Validity of Agreement.........................
Section 5.3 Consents and Approvals; No Violations........................
Section 5.4 Brokers or Finders...........................................
Section 5.5 Availability of Funds........................................
ARTICLE VI
COVENANTS
Section 6.1 Non-Compete..................................................
Section 6.2 Subsequent Actions...........................................
Section 6.3 Employee Matters.............................................
Section 6.4 Use of Seller's Name and Logo................................
Section 6.5 Further Assurances...........................................
Section 6.6 Record Retention.............................................
Section 6.7 Technology License...........................................
Section 6.8 Parent Guarantee.............................................
ARTICLE VII
Tax matters
Section 7.1 Transfer Taxes...............................................
Section 7.2 Liability for Taxes and Related Matters......................
Section 7.3 Cooperation..................................................
Section 7.4 Allocation of Purchase Price.................................
Section 7.5 Employees....................................................
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to Effect the
Closing.....................................................
Section 8.2 Conditions to Obligations of Purchaser to Effect the
Closing.....................................................
Section 8.3 Conditions to Obligations of Seller to Effect the Closing....
ARTICLE IX
INDEMNIFICATION
Section 9.1 Survival of Certain Representations and Warranties...........
Section 9.2 Indemnification by Parent and Seller.........................
Section 9.3 Indemnification by Purchaser.................................
Section 9.4 Indemnification Procedures...................................
Section 9.5 Limitations..................................................
ARTICLE X
MISCELLANEOUS
Section 10.1 Fees and Expenses............................................
Section 10.2 Amendment and Modification...................................
Section 10.3 Publicity....................................................
Section 10.4 Notices......................................................
Section 10.5 Counterparts.................................................
Section 10.6 Dispute Resolution...........................................
Section 10.7 Entire Agreement; No Third Party Beneficiaries...............
Section 10.8 Severability.................................................
Section 10.9 Governing Law................................................
Section 10.10 Enforcement..................................................
Section 10.11 Time of Essence..............................................
Section 10.12 Extension; Waiver............................................
Section 10.13 Election of Remedies.........................................
Section 10.14 Assignment...................................................
DISCLOSURE SCHEDULES
2.1 Sale and Transfer of Assets
2.2 Retained Assets
2.3 Assumed Liabilities
4.5 Consents and Approvals; No Violations
4.6 Financial Statements; SEC Filings
4.8 No Undisclosed Liabilities
4.10 Accounts Payable
4.12 Absence of Certain Changes
4.13 Availability of Assets and Legality of Use
4.14(b) Leased Real Property
4.14(c) Leased Personal Property
4.15 Real Property
4.17 Material Contracts
4.18 Customers
4.19 Insurance
4.21 Litigation
4.23 Employee Benefit Plans
4.24 Tax Matters
4.25 Intellectual Property
4.26 Inventory and Fixed Assets
4.28 Personnel
4.32 Product Defects
EXHIBITS
Exhibit A Xxxx of Sale
Exhibit B Escrow Agreement
Exhibit C Sub-Lease Agreement
Exhibit D Transition Services Agreement
Exhibit E Assignment and Assumption Agreement
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:
ARTICLE I
DEFINITIONS AND INTERPRETATION
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.
"Ancillary Agreements" shall mean the Xxxx 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.
"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, attorney's 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.
"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.
"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 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) mechanic's, carrier's, warehouseman's, landlord's, materialman's, worker's,
repairer's 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,
workmen's 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, 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.
"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).
"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 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 party's successors and permitted
assigns, provided, however in the event that either Purchaser or any of its
Affiliates is deemed to be Seller's 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.
ARTICLE II
PURCHASE AND SALE OF ASSETS
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 Seller's 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;
(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 manufacturer's 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, Seller's Internet domain names,
and internet sites used by Seller;
(m) all prepaid expenses and deposits of Seller;
(n) all security deposits, xxxxxxx 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 Seller's 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) Seller's 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
Seller's 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;
(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 Seller's.
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 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").
Section 2.5 The Purchase Price.
(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 Seller's 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 Purchaser's
right to offset against the Holdback Amount Seller's 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.
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 Seller's 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 Seller's 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 Purchaser's 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 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 firm's
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) Seller's 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 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, Purchaser's records relating to
the calculation of Revenues for the relevant Earnout Year. Such accounting
firm's 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 Purchaser's principal place of
business, (i) for a period of 30 days following the end of each fiscal quarter
of Purchaser and (ii) after Purchaser's 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.
ARTICLE III
THE CLOSING
Section 3.1 The Closing. The consummation of the transactions
contemplated by this Agreement shall take place at the offices of Cadwalader,
Xxxxxxxxxx & Xxxx LLP, 000 Xxxxxx Xxxx, Xxx Xxxx, Xxx Xxxx 00000, 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 Xxxx of Sale in form and substance customary in
similar transactions;
(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 Seller's 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;
(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
Seller's Assets and certain of Seller's accounts receivable ("TLP Payment").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER
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 of the Transactions have been
duly authorized by the Parent's and Seller's 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 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 Seller's Board of
Directors and all committees of Seller's Board of Directors, and no meeting of
any of such stockholders, Seller's 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 Seller's 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
Seller's customers and Seller is not aware of any such accounts receivable being
in dispute.
Section 4.10 Accounts Payable.
(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, 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 Seller's
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 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 Seller's
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 Seller's
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 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
Seller's 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 lessor's
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 Seller's 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
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 Seller's 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
Seller's 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, Seller's actions and
Seller's 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 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 Seller's
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, 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
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 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.
Section 4.24 Tax Matters.
(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.
(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 Purchaser's
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 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 Seller's 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
Seller's 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 Seller's 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 Seller's 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
Seller's 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.
(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 Seller's 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 Seller's 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 Seller's 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.
(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 Seller's 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, 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
broker's or finder's fee from Seller or any other commission or similar fee from
Seller in connection with any of the Transactions.
Section 4.32 Product Defects.
(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.
(b) To Seller's 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 Seller's 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.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
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 Frequency's 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 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 Frequency's 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 broker's or finder's 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 Frequency's 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.
ARTICLE VI
COVENANTS
Section 6.1 Non-Compete. Without the express prior written consent
of Purchaser, neither Parent nor Seller, nor any of Parent's 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 Parent's 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 Purchaser's 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.
Section 6.4 Employee Matters.
(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 Seller's 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 "Seller's
Trademarks and Logos"). Seller's 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 Seller's 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 Seller's 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
party's expense, custody of such books and records as such first party may
intend to destroy.
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 Seller's and Parent's 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.
ARTICLE VII
TAX MATTERS
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 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 agree, mutually chosen by their respective
independent accounting firms, for a decision that shall be rendered within five
days thereafter. The independent accounting firm's 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.
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's 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
Purchaser's 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;
(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).
(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 Xxxx Xxxxxxxx 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) Purchaser's 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 Purchaser's 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;
(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.
ARTICLE IX
INDEMNIFICATION
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.
(b) Notwithstanding anything contained in this Agreement to the
contrary, Parent and Seller's 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 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, Purchaser's and Frequency's 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 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
Indemnified Party shall be paid by the Indemnified Party; provided, however,
that the Indemnified Party shall have the right to employ, at Indemnitor's
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 Indemnitor's
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.
Section 9.5 Limitations.
(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 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 arbitrator's 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.
ARTICLE X
MISCELLANEOUS
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 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.
00 Xxxxxxx Xxxxxxxx Xxxx.
Xxxxxxx Xxxxx, XX 00000
Attention: Xxx Xxxxxxx
Telephone: (516) 794-4500 ext. 4006
Telecopy: (000) 000-0000
with a copy to:
Cadwalader, Xxxxxxxxxx & Xxxx LLP
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Block, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
if to Purchaser, to:
FEI-Zyfer, Inc.
00 Xxxxxxx Xxxxxxxx Xxxx.
Xxxxxxx Xxxxx, XX 00000
Attention: Xxx Xxxxxxx
Telephone: (516) 794-4500 ext. 4006
Telecopy: (000) 000-0000
with a copy to:
Cadwalader, Xxxxxxxxxx & Xxxx LLP
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Block, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
if to Parent, to:
Odetics, Inc.
0000 Xxxxx Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxxx LLP
00 Xxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
if to Seller, to:
Zyfer, Inc.
0000 Xxxxx Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx & Whitney LLP
00 Xxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
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.
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 Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
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/ Xxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxx X. Xxxxx
Title: President
FEI-ZYFER, INC.
By: /s/ Xxxx Xxxxxx
------------------------------------
Name: Xxxx Xxxxxx
Title: Secretary and Treasurer
ODETICS, INC.
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Chief Executive Officer
ZYFER, INC.
By: /s/ Xxxx Xxxxxxxx
------------------------------------
Name: Xxxx Xxxxxxxx
Title: Chief Executive Officer
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
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
Seller's 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
