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EXHIBIT 10.26
THE LIMITED PARTNER INTERESTS EVIDENCED BY THIS AGREEMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES LAWS OF ANY
STATE OR FOREIGN JURISDICTION AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT
COMPLIANCE WITH APPLICABLE FEDERAL, STATE OR FOREIGN SECURITIES LAWS. IN
ADDITION, TRANSFER OR OTHER DISPOSITION OF THE INTERESTS IS RESTRICTED AS
PROVIDED IN THIS AGREEMENT.
AUDIOLOGIC HEARING SYSTEMS, L.P.
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
dated as of
September 30, 1996
among
AUDIOLOGIC HEARING SYSTEMS, INC.
GN DANAVOX AS
AUDIOLOGIC, INC.
RESOUND CORPORATION
and
CERTAIN MANAGERS OF
THE PARTNERSHIP
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TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS
SECTION 1.01. Definitions ..................................................... 1
ARTICLE 2 THE PARTNERSHIP
SECTION 2.01. Formation ....................................................... 10
SECTION 2.02. Name 10
SECTION 2.03. Purpose ......................................................... 11
SECTION 2.04. Limitations on Business ......................................... 11
SECTION 2.05. Danavox Exclusivity ............................................. 11
SECTION 2.06. Principal Place of Business ..................................... 11
SECTION 2.07. Term 12
SECTION 2.08. Filings; Agent for Service of Process ........................... 12
SECTION 2.09. Independent Activities; Transactions with Affiliates ............ 13
SECTION 2.10. Fiscal Year ..................................................... 13
ARTICLE 3 CAPITAL ACCOUNTS AND CONTRIBUTIONS
SECTION 3.01. Capital Accounts ................................................ 14
SECTION 3.02. AL1 Asset Contribution .......................................... 14
SECTION 3.03. Danavox Contribution ............................................ 15
SECTION 3.04. ReSound Contribution ............................................ 16
SECTION 3.05. General Partner Contribution .................................... 16
SECTION 3.06. Additional Contributions ........................................ 16
SECTION 3.07. General Partner ................................................. 16
SECTION 3.08. Limited Partners ................................................ 17
SECTION 3.09. Representations of AL1 .......................................... 18
SECTION 3.10. Representations of Danavox and ReSound .......................... 18
ARTICLE 4 ALLOCATIONS
SECTION 4.01. Net Profits ..................................................... 18
SECTION 4.02. Net Losses ...................................................... 19
SECTION 4.03. Special Allocations ............................................. 20
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SECTION 4.04. Tax Allocations ................................................. 20
SECTION 4.05. Revaluation of Partnership Assets ............................... 20
ARTICLE 5 DISTRIBUTIONS
SECTION 5.01. Distributions ................................................... 21
SECTION 5.02. Amounts Withheld ................................................ 21
SECTION 5.03. Restricted Distributions ........................................ 22
ARTICLE 6 MANAGEMENT'S PUTS AND CALLS
SECTION 6.01. Vesting ......................................................... 22
SECTION 6.02. Repurchase Obligations upon Termination of Employment ........... 22
SECTION 6.03. Put Options ..................................................... 23
SECTION 6.04. Reallocation of Manager Interests ............................... 23
ARTICLE 7 MANAGEMENT
SECTION 7.01. Authority of the General Partner ................................ 24
SECTION 7.02. Right to Rely on General Partner ................................ 26
SECTION 7.03. Restrictions on Authority of General Partner .................... 26
SECTION 7.04. Duties and Obligations of General Partner ....................... 29
SECTION 7.05. Indemnification of General Partner .............................. 29
SECTION 7.06. Compensation, Reimbursement and Loans ........................... 30
SECTION 7.07. Operating Restrictions .......................................... 30
SECTION 7.08. Rights or Powers ................................................ 31
SECTION 7.09. Voting Rights ................................................... 31
ARTICLE 8 BOOKS AND RECORDS
SECTION 8.01. Books and Records ............................................... 31
SECTION 8.02. Periodic Reports; Financial Statements .......................... 31
SECTION 8.03. Tax Information ................................................. 32
SECTION 8.04. Consent to Capital Account Statements ........................... 32
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ARTICLE 9 CERTAIN COVENANTS
SECTION 9.01. Confidentiality ................................................. 33
SECTION 9.02. Press Announcements ............................................. 34
SECTION 9.03. No Solicitation of Employees .................................... 34
ARTICLE 10 AMENDMENTS; MEETINGS
SECTION 10.01. Amendments ..................................................... 34
SECTION 10.02. Meetings of the Partners ....................................... 35
ARTICLE 11 TRANSFERS OF INTERESTS, ETC
SECTION 11.01. Restriction of Transfers of Interests .......................... 36
SECTION 11.02. Permitted Transfers of Interests ............................... 36
SECTION 11.03. Conditions to Permitted Transfers .............................. 37
SECTION 11.04. Prohibited Transfers ........................................... 38
SECTION 11.05. Rights of Unadmitted Assignees ................................. 39
SECTION 11.06. Admission of Transferees as Partners ........................... 39
SECTION 11.07. Distributions and Applications in Respect to
Transferred Interests....................................... 40
ARTICLE 12 GENERAL PARTNER
SECTION 12.01. Additional General Partners .................................... 40
SECTION 12.02. Covenant Not to Withdraw, Transfer, or Dissolve ................ 40
SECTION 12.03. Permitted Transfer ............................................. 41
SECTION 12.04. Prohibited Transfer ............................................ 42
ARTICLE 13 DISSOLUTION AND WINDING UP
SECTION 13.01. Liquidating Events ............................................. 42
SECTION 13.02. Winding up ..................................................... 44
SECTION 13.03. Obligation to Restore Deficit Capital Accounts; Compliance
With Timing Requirements of Regulations ................... 45
SECTION 13.04. Allocations During Period of Liquidation ....................... 45
SECTION 13.05. Character of Liquidating Distributions ......................... 45
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SECTION 13.06. Indemnification of the Liquidator .............................. 45
ARTICLE 14 POWER OF ATTORNEY
SECTION 14.01. General Partner as Attorney-in-fact ............................ 46
SECTION 14.02. Special Power .................................................. 46
ARTICLE 15 DEFAULT
SECTION 15.01. Default ........................................................ 47
ARTICLE 16 GENERAL INDEMNIFICATIONS
SECTION 16.01. Survival of Representations, Warranties and Covenants .......... 48
SECTION 16.02. Obligation of the Partners ..................................... 48
SECTION 16.03. Obligations of the Partnership to Indemnify .................... 48
SECTION 16.04. Notice of Opportunity to Defend ................................ 48
ARTICLE 17 MISCELLANEOUS
SECTION 17.01. Notices ........................................................ 49
SECTION 17.02. Binding Effect ................................................. 50
SECTION 17.03. Construction ................................................... 50
SECTION 17.04. Arbitration .................................................... 50
SECTION 17.05. Assignability .................................................. 51
SECTION 17.06. Headings ....................................................... 51
SECTION 17.07. Severability; Integration ...................................... 51
SECTION 17.08. Further Action ................................................. 52
SECTION 17.09. Variation of Pronouns .......................................... 52
SECTION 17.10. Governing Law .................................................. 52
SECTION 17.11. Waiver of Action for Partition; No Xxxx for
Partnership Accounting..................................... 52
SECTION 17.12. Counterpart Execution .......................................... 52
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SECTION 17.13. Sole and Absolute Discretion ................................... 52
SECTION 17.14. Limitation on Limited Partner Obligations ...................... 52
SECTION 17.15. Expenses ....................................................... 52
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SCHEDULES
SCHEDULE 1.01(a)(v) ............................................................ 55
SCHEDULE 1.01(a)(xxviii) ....................................................... 57
SCHEDULE 3.09 .................................................................. 59
SCHEDULE 3.10 .................................................................. 61
EXHIBITS
EXHIBIT A Balance Sheet of AudioLogic, Inc. dated as of
September 30, 1986
EXHIBIT B Budget of AudioLogic Hearing Systems, L.P.
EXHIBIT C Excluded Assets and Excluded Liabilities
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AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
AudioLogic Hearing Systems, L.P.
This AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP is entered
into and shall be effective as of the 30th day of September, 1996 (the
"EFFECTIVE DATE"), by and among AudioLogic Hearing Systems, Inc. ("AL2"), as the
General Partner, ReSound Corporation ("ReSound"), AudioLogic, Inc. ("AL1") and
GN Danavox AS ("DANAVOX") and the Managers as the Limited Partners pursuant to
the provisions of the Act, on the following terms and conditions:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. (a) Capitalized words and phrases used in
this Agreement (and the schedules hereto) have the following meanings:
(i) "ACT" means the Delaware Revised Uniform Limited
Partnership Act, as set forth in Del. Code Xxx. Tit. 6, Sections
17-101 to 17-1109, as amended from tIme to time (or any corresponding
provisions of succeeding law).
(ii) "AFFILIATE" means, with respect to any Person, (i) any
Person directly or indirectly controlling, controlled by or under
common control with such Person, (ii) any Person owning or controlling
10% or more of the outstanding voting interests of such Person, (iii)
any officer, director or general partner of such Person, or (iv) any
Person who is an executive officer, director, general partner, trustee,
or holder of 10% or more of the voting interests of any Person
described in clauses (i) through (iii) of this sentence.
(iii) "AGREEMENT" or "PARTNERSHIP AGREEMENT" means this
Amended and Restated Agreement of Limited Partnership, as amended
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from time to time. Words such as "herein," "hereinafter," "hereof,"
"hereto" and "hereunder," refer to this Agreement as a whole, unless
the context otherwise requires.
(iv) "AL1 INITIAL CONTRIBUTIONS" means the contributions made
by AL1 pursuant to Section 3.02.
(v) "ANCILLARY AGREEMENTS" means the documents listed on
Schedule 1.1(a)(v).
(vi) "BALANCE SHEET" means the balance sheet of AL1 dated as
of September 30, 1996 (the "BALANCE SHEET DATE") attached hereto as
Exhibit A.
(vii) "BASE DSP TECHNOLOGY" has the meaning ascribed thereto
in the Development Contract.
(viii) "BUSINESS" means the business of developing,
manufacturing and marketing Base DSP Technology and Full DSP
Technology, but excluding technology relating solely to surgically
implanted hearing aid devices.
(ix) "BUSINESS DAY" means a day of the year on which banks are
not required or authorized to close in New York City.
(x) "CAPITAL ACCOUNT" means, with respect to each Partner, the
Capital Account maintained for such Person in accordance with the
following provisions:
(A) To each Person's Capital Account there shall be
credited such Person's Capital Contributions, such Person's
share of Net Profit allocated pursuant to Section 4.01 hereof
and any items of Partnership income or gain which are
specially allocated pursuant to Section 4.03 hereof, and the
amount of any Partnership liabilities assumed by such Person
or which are secured by any Property distributed to such
Person.
(B) To each Person's Capital Account there shall be
debited the amount of cash and the Gross Asset Value of any
Property distributed to such Person pursuant to any provision
of this Agreement, such Person's share of Net Loss allocated
pursuant to Section 4.02 hereof and any items of Partnership
deduction or loss which are specifically allocated pursuant to
Section 4.03 hereof, and the amount of the liabilities of such
Person assumed by the Partnership or which are secured by any
property contributed by such Person to the Partnership
pursuant to Section 3.03 hereof.
(C) In the event all or a portion of an interest in
the Partnership is transferred in accordance with the terms of
this Agreement, the transferee shall succeed to the Capital
Account of the transferor to the extent it relates to the
transferred interest.
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(D) In determining the amount of any liability for
purposes of Sections 1.01(a)(x)(A) and 1.01(a)(x)(B) hereof,
there shall be taken into account Code Section 752(c) and any
other applicable provisions of the Code and Regulations.
(E) Credits and debits to each Person's Capital
Account shall be allocated among the various sub-accounts
created with respect to such Capital Account in accordance
with the provisions of Articles 3, 4 and 5.
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Regulations
Section 1.704-1(b), and shall be interpreted and applied in a manner consistent
with such Regulation.
(xi) "CAPITAL CONTRIBUTION" means, with respect to each
Partner, the capital contribution made by, or on behalf of, such
Partner pursuant to Article 3 hereof.
(xii) "CAUSE" means:
(A) the willful failure by the Manager to perform
substantially the Manager's duties as an employee of AL1
performing services for the Partnership (other than due to
physical or mental illness);
(B) the Manager's engaging in misconduct that is
materially injurious to the Partnership or any Affiliate of
the Partnership;
(C) the material breach by the Manager of any written
covenant or agreement not to compete with the Partnership or
any Affiliate of the Partnership;
(D) the breach by the Manager of his or her duty of
loyalty to AL1 and any contractual obligations to perform
services for the Partnership which shall include, without
limitation (1) the disclosure by the member of any
confidential information pertaining to the Partnership or any
Affiliate of the Partnership, other than (x) in the ordinary
course of the performance of his or her duties on behalf of
the Partnership or (y) pursuant to a judicial or
administrative subpoena from a court or governmental authority
with jurisdiction over the matter in question, (2) the harmful
interference by the Manager in the business or operations of
the Partnership or of an Affiliate of the Partnership, (3) any
attempt by the Manager to induce any employee of AL1
performing services for the Partnership or any Affiliate of
the Partnership to be employed or
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perform services elsewhere, other than actions taken by the
Manager that are intended to benefit the Partnership and do
not benefit the Manager financially other than as an employee
of or holder of a Percentage Interest in the Partnership, or
(4) any attempt by the Manager to solicit the trade of any
customer or supplier, or prospective customer or supplier, of
the Partnership on behalf of any Person other than the
Partnership or an Affiliate of the Partnership, other than
actions taken by the Manager that are intended to benefit the
Partnership and do not benefit the Manager financially other
than as an employee of AL1 performing services for, or holder
of a Percentage Interest in, the Partnership, provided,
however, that this provision shall only apply to any product
or service which is in competition with a product or service
of the Partnership or any Affiliate of the Partnership.
(xiii) "CODE" means the Internal Revenue Code of 1986, as
amended and as in effect from time to time.
(xiv) "DEVELOPMENT CONTRACT" means the agreement listed under
(1) on Schedule 1.01(a)(v).
(xv) "DEPRECIATION" means, for each fiscal year or other
period, an amount equal to the depreciation, amortization, or other
cost recovery deduction allowable for federal income tax purposes with
respect to an asset for such year or other period, except that if the
Gross Asset Value of an asset differs from its adjusted basis for
federal income tax purposes at the beginning of such year or other
period, Depreciation shall be an amount which bears the same ratio to
such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such
year or other period bears to such beginning adjusted tax basis;
provided, however, that if the federal income tax depreciation,
amortization, or other cost recovery deduction for such year is zero,
Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the General
Partner.
(xvi) "FULL DSP TECHNOLOGY" has the meaning ascribed thereto
in the Development Contract.
(xvii) "GENERAL PARTNER" means any Person who (A) is referred
to as such in the first paragraph of this Agreement or has become a
General Partner pursuant to the terms of this Agreement, and (B) has
not ceased to be a General Partner pursuant to the terms of this
Agreement.
(xviii) "GROSS ASSET VALUE" means, with respect to any asset,
the asset's adjusted basis for federal income tax purposes, except (A)
the initial Gross Asset Value of any asset contributed by a Partner to
the Partnership shall be the gross fair market value of such asset, as
specified in this
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Agreement or determined by the General Partner, and (B) the Gross Asset
Value of the Partnership's assets shall be adjusted in accordance with
the provisions of Section 4.05 hereof and to reflect adjustments to the
adjusted tax basis of the Partnership's assets pursuant to Section 732,
734 or 743 of the Code, but only to the extent that such adjustments
are taken into account in determining Capital Accounts pursuant to
Regulations Section 1.704-1(b)(2)(iv)(m). If the Gross Asset Value of
an Asset has been determined or adjusted pursuant to clause (A) or (B)
hereof, such Gross Asset Value shall thereafter be adjusted by the
Depreciation taken into account with respect to such asset for purposes
of determining Net Profit and Net Loss.
(xix) "INITIAL PERCENTAGE INTEREST" shall mean, with respect
to each Partner, the percentage set forth below:
[*]
(xx) "INTELLECTUAL PROPERTY RIGHT" means any trademark,
service xxxx, trade name, invention, patent, trade secret, know-how,
copyright, (including any registration or applications for registration
of any of the foregoing) or any other similar type of proprietary
intellectual property right, in each case which is owned or licensed by
AL1 or any Affiliate of AL1 and used or held for use in the Business.
(xxi) "INTEREST" means the entire ownership interest of a
Partner in the Partnership at any time, including the rights of such
Partner to capital,
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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Net Profit, Net Loss, distributions and other benefits to which such
Partner may become entitled hereunder, and the obligations of such
Partner to comply with the terms and provisions of this Agreement.
(xxii) "LIEN" means, with respect to any property or asset,
any mortgage, lien, pledge, charge, security interest, encumbrance or
other adverse claim of any kind in respect of such property or asset.
For the purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any property or asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional
sale agreement, capital lease or other title retention agreement
relating to such property or asset.
(xxiii) "LIMITED PARTNERS" means any Person who (A) is
referred to as such in the first paragraph of this Agreement or (B) who
has become a Limited Partner pursuant to the terms of this Agreement.
"LIMITED PARTNERS" means all such Persons.
(xxiv) "MANAGER" means Xxxx Xxxxxxxx, Xxxxx Xxxxxxx, Xxxx
Xxxxxxxxx, Xxx Xxxxxxx, Xxxxx Xxxxxxx, Xxxxx Xxxxx, Xxxx Xxxxxx, Xxxxx
Xxxxx, Xxxxx Xxxxxxx, Xxxxxxxxx Xxxxxxx, Xxxxxxxxxxx Xxxxxxxxxx and
such other managers of the Partnership who are designated as such by
AL1.
(xxv) "MATERIAL ADVERSE CHANGE" means a material adverse
change in the business, assets, condition (financial or otherwise),
results of operations or prospects of the Business taken as a whole.
(xxvi) "MATERIAL ADVERSE EFFECT" means a material adverse
effect on the business, assets, condition (financial or otherwise),
results of operations or prospects of the Business taken as a whole.
(xxvii) "NET PROFIT" and "NET LOSS" means, for each fiscal
year or other period, an amount equal to the Partnership's taxable
income or loss for such year or period, determined in accordance with
Code Section 703(a) (for this purpose, all items of income, gain, loss,
or deduction required to be stated separately pursuant to Code Section
703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(A) Any income of the Partnership that is exempt from
federal income tax and not otherwise taken into account in
computing Net Profit or Net Loss pursuant to this Section
1.01(a)(xxvii) shall be added to such taxable income or loss;
(B) Any expenditures of the Partnership described in
Code Section 705(a)(2)(B) or treated as Code Section
705(a)(2)(B) expenditures pursuant to Regulations Section
1.704-1(b)(2)(iv)(i) shall be subtracted from such taxable
income or loss;
(C) In the event the Gross Asset Value of any
Partnership
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asset is adjusted pursuant to Section 1.01(a)(xviii) hereof,
the amount of such adjustment shall be taken into account as
gain or loss from the disposition of such asset for purposes
of computing Net Profit or Net Loss;
(D) Gain or loss resulting from any disposition of
Property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to
the Gross Asset Value of the property disposed of,
notwithstanding that the adjusted tax basis of such property
differs from its Gross Asset Value;
(E) In lieu of the depreciation, amortization, and
other cost recovery deductions taken into account in computing
such taxable income or loss, there shall be taken into account
Depreciation for such fiscal year or other period, computed in
accordance with Section 1.01(a)(xv) hereof; and
(F) Notwithstanding any other provision of this
Section 1.01(a)(xxvii), any items which are specially
allocated pursuant to Section 4.03 hereof shall not be taken
into account in computing Net Profit or Net Loss.
(xxviii) "NONRECOURSE LIABILITY" has the meaning set forth in
Section 1.704-2(b)(3) of the Regulations.
(xxix) "PARTNERS" means the General Partner and all Limited
Partners, where no distinction is required by the context in which the
term is used herein. "PARTNER" means any one of the Partners. All
references in this Agreement to a majority in interest or a specified
percentage of the Partners shall mean Partners whose Initial Capital
Contributions pursuant to Article 3 hereof, together with any other of
their Capital Contributions, constitute more than 50% or such specified
percentage, respectively, of the aggregate Initial Capital
Contributions of all Partners pursuant to Article 3 hereof and any
other Capital Contributions of all Partners.
(xxx) "PARTNERSHIP" means the partnership continued pursuant
to this Agreement and the partnership continuing the business of this
Partnership in the event of dissolution as herein provided.
(xxxi) "PERCENTAGE INTEREST" shall mean, with respect to each
Partner, a percentage initially equal to such Partner's Initial
Percentage Interest and thereafter the Percentage Interest as
determined by Schedule 1.01(a)(xxviii).
(xxxii) "PERMITTED LIEN" means all Liens (A) disclosed on the
Balance Sheet, (B) for taxes not yet due or being contested in good
faith (and for which adequate accruals or reserves have been
established on the
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Balance Sheet), or (C) which do not materially detract from the value
of any of the Contributed Assets as now used or materially interfere
with any present use of any of the Contributed Assets.
(xxxiii) "PERSON" means any individual, partnership,
corporation, trust, or other entity.
(xxxiv) "PROPERTY" means all real and personal property
acquired by the Partnership, and shall include both tangible and
intangible property.
(xxxv) "REGULATIONS" means the Income Tax Regulations
promulgated under the Code, as amended from time to time.
(xxxvi) "SUBSIDIARY" means, with respect to any Person, any
corporation or other entity of which a majority of the capital stock,
securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by such
Person.
(xxxvii) "TRANSFERS" means, as a noun, any voluntary or
involuntary transfer, sale, pledge, hypothecation, or other disposition
and, as a verb, voluntarily or involuntarily to transfer, sell, pledge,
hypothecate or otherwise dispose of.
(xxxviii) "WHOLLY OWNED AFFILIATE" of any Person shall mean an
Affiliate of such Person 100% of the voting stock or beneficial
ownership of which is owned by such Person, directly, or indirectly
through one or more Wholly Owned Affiliates, or by any Person who,
directly or indirectly, owns 100% of the voting stock or beneficial
ownership of such Person, and an Affiliate of such Person who, directly
or indirectly, owns 100% of the voting stock or beneficial ownership of
such Person, provided that, directors' qualifying shares shall not be
taken into account in determining whether any Person is a Wholly Owned
Affiliate of any other Person.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
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AL1 Preamble
AL1 Intellectual Property Rights Schedule 3.09
AL2 Preamble
Asserted Liability 16.04
Assumed Liabilities 3.02
AudioLogic Designees 7.03
Balance Sheet Date 1.01
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Term Section
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Budget 2.03
Certificate 2.08
Chipsets 2.04
Claims Notice 16.04
Common Sub-Account 3.01
Contributed Assets 3.02
Danavox Preamble
Danavox Designees 3.06
Dispute Resolutions Committee 7.03
Effective Date Preamble
Excluded Assets 3.02
Excluded Liabilities 3.02
Financial Statements Schedule 3.09
ICC 17.04
Indemnifying Party 16.04
Indemnitee 16.04
Independent Accountants 8.04
Information 9.01
Intellectual Property Rights Schedule 3.09
Interest Offer 11.02
Liquidating Events 13.01
Liquidator 13.02
Losses 16.02
Offer 11.02
Offer Notice 11.02
Offer Price 11.02
Other Consent Schedule 3.09
Permitted Transfers 11.02
Preferred Percentage Interest 4.01
Preferred Sub-Account 3.01
Profits Sub-Account 3.01
Put Option 6.03
Regulatory Allocations 4.03
Required Consent Schedule 3.09
ReSound Preamble
ReSound Designees 3.06
Section II.G.3. Payments 6.02
Selling Party 11.02
Technologies Schedule 3.09
Third Party Action 16.04
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ARTICLE 2
THE PARTNERSHIP
SECTION 2.1. Formation. The Partnership was formed on September 27,
1996. The Partners hereby agree to continue the Partnership as a limited
partnership pursuant to the provisions of the Act and upon the terms and
conditions set forth in this Agreement.
SECTION 2.2. Name. The name of the Partnership shall continue to be
AudioLogic Hearing Systems, L.P. and all business of the Partnership shall be
conducted in such name. The General Partner may change the name of the
Partnership upon ten days notice to the Limited Partners. Except as otherwise
provided in this Agreement, the Partnership shall hold all of its property in
the name of the Partnership and not in the name of any Partner.
SECTION 2.3. Purpose. The Partnership was formed to facilitate the
development, manufacture and marketing of Base DSP Technology and Full DSP
Technology (but not technology relating solely to surgically implanted hearing
aid devices), and to engage in any and all activities directly related thereto.
All of the activities of the Partnership shall be in conformity with a four-year
budget (the "BUDGET") attached as Exhibit B hereto or such other budget as may
be adopted by the Partnership in accordance with Section 7.03(b). On or before
September 30, 1997, the Partners shall negotiate in good faith to extend the
Budget for continued development of Full DSP Technology after June 30, 1998.
Danavox and ReSound shall also negotiate in good faith if either party wants to
continue to develop with the other Partners Base DSP Technology or Full DSP
Technology after June 30, 2000, through the Partnership or otherwise. The
Partners have made contributions to and entered into certain contractual
arrangements with the Partnership and each other with the intent of
accomplishing the above-mentioned objectives.
SECTION 2.4. Limitations on Business. The Partnership may manufacture
and subcontract the production of chipsets ("CHIPSETS") using Full DSP
Technology. The Partnership shall sell Chipsets only to Danavox and ReSound,
except that the Partnership shall be obligated to sell Chipsets to third parties
as directed by the General Partner. Danavox and ReSound each agree not to resell
Chipsets purchased from the Partnership to primary hearing aid manufacturers,
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except if such manufacturers (i) are purchasing such Chipsets for sale through
their retail organizations in products that identify that AudioLogic Hearing
Systems technology is used in the product and (ii) do not derive more than 25%
of their total revenue from sales through their retail organizations.
Each Partner agrees (and agrees to require all purchasers of Chipsets
to agree) that all references to Base DSP Technology and Full DSP Technology
developed by the Partnership shall use the AudioLogic Hearing Systems name.
SECTION 2.5. Danavox Exclusivity. If Danavox and ReSound are unable to
agree to continue the joint development of Full DSP Technology after June 30,
1998, Danavox shall have the exclusive right to continue to develop DSP
Integrated Circuit chipsets and DSP based hearing aid circuits with AL1. If
Danavox and AL1 are to work exclusively together, the Partnership shall work
with ReSound's engineers for up to one year to effect an appropriate transfer of
technology know-how and expertise to ReSound. ReSound shall reimburse the
Partnership for the services involved in such transfer at a rate equal to 1.5
times the actual salaries of AL1 employees allocable to such services plus all
applicable travel expenses of such employees.
SECTION 2.6. Principal Place of Business. The principal place of
business of the Partnership shall continue to be 0000 Xxxxxxx Xxxx, Xxxxxxx,
Xxxxxxxx 00000. The General Partner may change the principal place of business
of the Partnership to any other place upon ten days notice to the Limited
Partners. The registered office of the Partnership in the State of Delaware is
located at The Corporation Trust Company, Corporation Trust Center, 0000 Xxxxxx
Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx Xxxxxx, Xxxxxxxx 00000.
SECTION 2.7. Term. The term of the Partnership shall commence on the
date the Partnership was formed, as set forth in Section 2.01 hereof, and shall
continue until the winding up and liquidation of the Partnership and its
business is completed following a Liquidating Event, as provided in Section
13.01 hereof.
SECTION 2.8. Filings; Agent for Service of Process.
(a) A Certificate of Limited Partnership (the "CERTIFICATE") has been
filed in the office of the Secretary of State of the State of Delaware in
accordance with the provisions of the Act. The General Partner shall take any
and all other actions reasonably necessary to perfect and maintain the status of
the Partnership as a limited partnership under the laws of Delaware. The General
Partner shall cause amendments to the Certificate to be filed whenever required
by the Act. Such amendments may be executed by the General Partner.
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(b) The General Partner shall execute and cause to be filed an
original or amended Certificate and shall take any and all other actions as may
be reasonably necessary to perfect and maintain the status of the Partnership as
a limited partnership or similar type of entity under the laws of any other
state or jurisdictions in which the Partnership engages in business.
(c) The registered agent for service of process on the Partnership in
the State of Delaware shall be The Corporation Trust Company, Corporation Trust
Center, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx Xxxxxx, Xxxxxxxx 00000 or any
successor as appointed by the General Partner in accordance with the Act.
(d) Upon the dissolution of the Partnership, the General Partner (or,
in the event the General Partner does not wind up the Partnership's affairs, any
Person elected pursuant to Section 13.02 hereof) shall promptly execute and
cause to be filed certificates of cancellation in accordance with the Act and
the laws of any other states or jurisdictions in which the Partnership has filed
Certificates.
SECTION 2.9. Independent Activities; Transactions with Affiliates.
(a) The Partners recognize and acknowledge that certain of the Limited
Partners and certain Affiliates of the Limited Partners are currently and shall
continue to be separately engaged in the hearing aid business, and that such
business may be competitive with the Partnership's business. Except as expressly
provided herein or in the Development Contract, each Limited Partner and each of
their Affiliates may, notwithstanding this Agreement, engage in whatever
activities they choose, whether the same are competitive with the Partnership or
otherwise, without having or incurring any obligation to offer any interest in
such activities to the Partnership or any Partner and, except as expressly
provided for, neither this Agreement nor any activity undertaken pursuant hereto
shall prevent any Partner or its Affiliates from engaging in such activities, or
require any Partner or its Affiliates to permit the Partnership or any other
Partner or its Affiliates to participate in any such activities, and each
Partner hereby waives, relinquishes, and renounces any such right or claim of
participation.
(b) Without limiting the generality of the forgoing, with respect to
the development of DSP hearing aid fitting systems, scientific research programs
(including algorithm development), clinical field testing and collateral
marketing arrangements, Danavox and ReSound may conduct such activities
independently or, if both Danavox and ReSound agree, jointly through the
Development Contract with the Partnership. Any developments resulting from the
independent activities of Danavox or ReSound need not be shared with any other
Partner or the Partnership. If any product is sold to address a hearing loss
need as well as other needs unrelated to hearing loss, none of the Partnership,
Danavox or ReSound shall have any obligation to license the related technology
to the Partnership or AL1.
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(c) To the extent permitted by applicable law and except as otherwise
provided in this Agreement or the Development Contract, the General Partner,
when acting on behalf of the Partnership, is hereby authorized to purchase
property from, sell property to, or otherwise deal with the General Partner,
acting on its own behalf, any Affiliate of the General Partner, any Limited
Partner, or any Affiliate of a Limited Partner, provided that any such purchase,
sale or other transaction shall be made on terms and conditions which are no
less favorable to the Partnership than if the sale, purchase or other
transaction had been made with an independent third party.
SECTION 2.10. Fiscal Year. The fiscal year of the Partnership for
financial statement and Federal income tax purposes shall end on December 31st.
ARTICLE 3
CAPITAL ACCOUNTS AND CONTRIBUTIONS
SECTION 3.1. Capital Accounts. The Capital Account established for the
General Partner, AL1, Danavox and ReSound will consist of one or more of the
following sub-accounts: a Common Sub-Account (the "COMMON SUB-ACCOUNT"), a
Preferred Sub-Account (the "PREFERRED SUB-ACCOUNT") and a Profits Sub-Account
(the "PROFITS SUB-ACCOUNT"). A Profits Sub-Account shall also be established for
each Manager.
SECTION 3.2. AL1 Asset Contribution. (a) AL1 agrees to contribute,
convey, transfer, assign and deliver, or cause to be contributed, conveyed,
transferred, assigned and delivered, to the Partnership on the Effective Date,
free and clear of all Liens, other than Permitted Liens, all of AL1's right,
title and interest in, to and under the assets, properties and business, of
every kind and description, wherever located, real, personal or mixed, tangible
or intangible, owned, held or used in the conduct of its business as the same
shall exist on the Effective Date, including without limitation all assets shown
on the Balance Sheet (the "CONTRIBUTED ASSETS").
(b) The Partnership and each of the Partners expressly understands and
agrees that the following assets and properties of AL1 (the "EXCLUDED ASSETS")
shall be excluded from the Contributed Assets:
(i) all of AL1's cash and cash equivalents on hand and in
banks except for xxxxx cash; and
(ii) all other assets indicated on Exhibit C.
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(c) Upon the terms and subject to the conditions of this Agreement, the
Partnership agrees, on the Effective Date, to assume (the "ASSUMED LIABILITIES")
all liabilities set forth on the Balance Sheet other than Excluded Liabilities.
(d) Notwithstanding any provision in this Agreement or any other
writing to the contrary, the Partnership is assuming only the Assumed
Liabilities and is not assuming any other liability or obligation of AL1 (or any
predecessor owner of all or part of its businesses and assets) of whatever
nature, whether presently in existence or arising hereafter. All such other
liabilities and obligations shall be retained by and remain obligations and
liabilities of AL1 (all such liabilities and obligations not being assumed being
herein referred to as the "EXCLUDED LIABILITIES"), and, notwithstanding anything
to the contrary in this Section 3.02, none of the following shall be Assumed
Liabilities for the purposes of this Agreement:
(i) any obligation or liability of ALI for any taxes, duties
or similar charges or related penalties or interest arising from or
with respect to the Contributed Assets or the operations of the
Business which is incurred in or attributable to any tax period or
portion thereof prior to and through the Effective Date, including,
without limitation, any sales, use, transfer or other similar taxes,
duties, similar charges or related penalties or interest attributable
to the Transfer of the Contributed Assets to the Partnership;
(ii) any liabilities or obligations relating to employee
benefits or compensation arrangements existing on or prior to the
Effective Date; and
(iii) all liabilities set forth on Exhibit C.
(e) Anything in this Agreement to the contrary notwithstanding, this
Agreement shall not constitute an agreement to assign any Contributed Asset or
any claim or right or any benefit arising thereunder or resulting therefrom if
an attempted assignment thereof, without the consent of a third party thereto,
would constitute a breach or other contravention thereof or in any way adversely
affect the rights of the Partnership or AL1 thereunder. AL1 and the Partnership
will use their best efforts (but without any payment of money by AL1 or the
Partnership) to obtain the consent of the other parties to the assignment to the
Partnership of any such Contributed Asset or any claim or right or any benefit
arising thereunder for the assignment thereof to the Partnership as the
Partnership may request. If such consent is not obtained, or if an attempted
assignment thereof would be ineffective or would adversely affect the rights of
AL1 thereunder so that the Partnership would not in fact receive all such
rights, AL1 and the Partnership will cooperate in a mutually agreeable
arrangement under which the Partnership would obtain the benefits and assume the
obligations thereunder in accordance with this Agreement,
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including sub-contracting, sub-licensing, or sub-leasing to the Partnership, or
under which AL1 would enforce for the benefit of the Partnership, with the
Partnership assuming AL1's obligations, any and all rights of AL1 against a
third party thereto. AL1 will promptly pay to the Partnership when received all
monies received by AL1 from any Contributed Asset or any claim or right or any
benefit arising thereunder, except to the extent the same represents an Excluded
Asset.
(f) All contributions by AL1 pursuant to this Section 3.02 shall result
in a credit to AL1's Common Sub-Account of $219,166.28.
SECTION 3.3. Danavox Contribution. On or immediately after the
Effective Date, Danavox shall contribute $219,166.28 in cash to the Partnership.
Such contribution shall result in a credit to Danavox's Common Sub-Account of
$219,166.28.
SECTION 3.4. ReSound Contribution. On or immediately after October 1,
1996, ReSound shall contribute $219,166.28 in cash to the Partnership. Such
contribution shall result in a credit to ReSound's Common Sub-Account of
$219,166.28.
SECTION 3.5. General Partner Contribution. On or immediately after the
Effective Date, the General Partner shall contribute $6,641.40 in cash to the
Partnership. Such contribution shall result in a credit to the General Partner's
Common Sub-Account of $6,641.40.
SECTION 3.6. Additional Contributions. If the General Partner at the
sole direction of those members of the Board of Directors of the General Partner
designated by Danavox (the "DANAVOX DESIGNEES") and ReSound (the "RESOUND
DESIGNEES") decides that the Partnership should continue to develop Full DSP
Technology after June 30, 1998 or to develop Base DSP Technology after June 30,
2000, the term of the Partnership shall be extended to accomplish such
development and a new budget shall be adopted by the Partnership as agreed by
Danavox and ReSound. In connection with the adoption of such new budget, the
General Partner at the sole direction of the Danavox Designees and the ReSound
Designees shall establish the amounts of necessary funding and whether such
amounts shall be funded through capital contributions to the Partnership or
development contracts. In the case of any capital contributions to the
Partnership as a result of such determination, each Partner shall have the right
to make capital contributions so as to retain its Percentage Interest in the
Partnership, and Danavox and ReSound shall share equally in making any capital
contributions to the Partnership not made by any other Partner pursuant to this
right. Any such capital contributions shall be in cash and a credit equal to the
cash contributed by any Partner shall be made to such Partner's Common Capital
Sub-Account.
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SECTION 3.7. General Partner. The name, address, value of the initial
Capital Contribution and Initial Percentage Interest of the General Partner are
as follows:
Name and Address Initial Percentage
Capital Interest
Contribution --------
------------
AudioLogic Hearing Systems, Inc. $6,641.40 [*]
0000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxxxxx 00000
SECTION 3.8. Limited Partners. The names, addresses, value of the
initial Capital Contributions and Initial Percentage Interests of, or made on
behalf of, the Limited Partners are as follows:
Name and Address Initial Percentage
Capital Interest
Contribution --------
------------
ReSound Corporation $219,166.28 [*]
000 Xxxxxxx Xxxxx
Xxxxxxx Xxxxxx
Xxxxxxx Xxxx, XX 00000
GN Danavox AS $219,166.28 [*]
Xxxxxxxxxxx 0X
0000 Xxxxxxxx
Xxxxxxx
AudioLogic, Inc. $219,166.28 [*]
0000 Xxxxxxx Xxxx
Xxxxxxx, XX 00000
[*] [*] [*]
* CERTAIN CONFIDENTIAL INFORMATION ON THIS
PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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Name and Address Initial Percentage
Capital Interest
Contribution --------
------------
AudioLogic, Inc. [*] [*]
0000 Xxxxxxx Xxxx
Xxxxxxx, XX 00000
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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SECTION 3.9. Representations of AL1. AL1 hereby represents and warrants
to the Partnership as to matters set forth on Schedule 3.09, which shall form
part of this Agreement.
SECTION 3.10. Representations of Danavox and ReSound. Each of Danavox
and ReSound hereby represent and warrant to the Partnership with respect to
itself as to matters set forth on Schedule 3.10, which shall form part of this
Agreement.
ARTICLE 4
ALLOCATIONS
SECTION 4.1. Net Profits. After giving effect to the special
allocations set forth in Section 4.03 hereof, Net Profit for any fiscal year, or
other period, shall be allocated in the following order and priority:
(i) first, to the General Partner in an amount equal to the
negative balance, if any, in the General Partner's Capital Account;
(ii) second, to the Common Sub-Account of the General Partner,
Danavox and ReSound in proportion to and to the extent of the excess,
if any, of (x) the aggregate amount of Net Losses allocated to such
Common Sub-Accounts under clause (iii) of Section 4.02 with respect to
all prior fiscal years or other periods over (y) the aggregate amount
of Net Profits allocated to such Common Sub-Accounts under this clause
with respect to all prior fiscal years or other periods;
(iii) third, to the Preferred Sub-Account of the General
Partner, Danavox and ReSound in accordance with the following
percentages: General Partner 1%, Danavox 49.5%, ReSound 49.5% (such
percentage for each Partner is hereafter referred to as such Partner's
"PREFERRED PERCENTAGE INTEREST") until the aggregate amount of Net
Profits allocated pursuant to this clause with respect to the current
and all prior fiscal years or other periods (less the aggregate amount
of Net Losses allocated to such Preferred Sub-Accounts under clause
(ii) of Section 4.02 with respect to all prior fiscal years or other
periods) equals $13.4 million; and
(iv) fourth, to the Profits Sub-Account of each Partner in
accordance with their respective Percentage Interests.
SECTION 4.2. Net Losses. After giving effect to the special allocations
set forth in Section 4.03 hereof, Net Loss for any fiscal year, or other period,
shall be
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allocated in the following order and priority:
(i) first, to the Partners in accordance with their Percentage
Interests to the extent of the positive balances, if any, in their
Profits Sub-Accounts;
(ii) second, to the General Partner, Danavox and ReSound in
accordance with their Preferred Percentage Interests to the extent of
the positive balances, if any, in their Preferred Sub-Accounts;
(iii) third, to the General Partner, Danavox, ReSound, and AL1
in accordance with and to the extent of the positive balances, if any,
in their Common Sub-Accounts; and
(iv) fourth, to the General Partner.
SECTION 4.3. Special Allocations.
(a) Minimum Gain Chargeback. Items of the Partnership's income and gain
shall be specially allocated among the Partners at such times and in such
amounts as necessary to satisfy the minimum gain chargeback requirements of
Regulations Sections 1.704-2(f) and (i).
(b) Qualified Income Offset. Items of the Partnership's income and gain
shall be specially allocated among the Partners at such times and in such
amounts required to satisfy the qualified income offset requirement of
Regulations Section 1.704-1(b)(2)(ii)(d).
(c) Curative Allocations. The allocations set forth in Sections 4.03(a)
and 4.03(b) (the "REGULATORY ALLOCATIONS") shall be taken into account in
allocating items of income, gain, loss and deduction among the Partners so that,
to the extent possible, the net amount of such allocations of other items and
the Regulatory Allocations shall be equal to the net amount that would have been
allocated to each such Partner if the Regulatory Allocations had not occurred.
SECTION 4.4. Tax Allocations. Except as otherwise provided in this
Section 4.04, for United States federal, state and local income tax purposes,
each item of income, gain, loss, deduction and credit of the Partnership shall
be allocated among the Partners as nearly as possible in the same manner as the
corresponding item of income, gain, loss or expense is allocated pursuant to the
other provisions of this Article 4. All items of income, gain, loss and
deduction with respect to any Partnership asset having a Gross Asset Value that
differs from the adjusted basis of such asset for United States federal income
tax purposes shall be allocated so as to take into account the difference
between the Gross Asset Value and the adjusted tax basis of such asset in
accordance with the principles of Code Section 704(c) and the Regulations
thereunder.
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SECTION 4.5. Revaluation of Partnership Assets. Upon the occurrence of
any event specified in Regulations Section 1.704-2(b)(2)(iv)(f), the General
Partner may cause the Capital Accounts of the Partners to be adjusted to reflect
the Gross Asset Value of the Partnership's assets at such time, as determined by
the General Partner, in accordance with such Regulation.
ARTICLE 5
DISTRIBUTIONS
SECTION 5.1. Distributions.
(a) General. Except as otherwise provided in Sections 5.01(b) and 13.02
hereof, distributions of Partnership cash or other property shall be made to the
Partners at such times as the General Partner may determine. Any distributions
so made by the Partnership shall be made in the following order and priority:
(i) first, to the Partners in proportion to and to the extent
of the positive balances, if any, in their Profits Sub-Accounts;
(ii) second, to Danavox, ReSound and the General Partner in
proportion to and to the extent of the positive balances, if any, in
their Preferred Sub-Accounts; and
(iii) third, to the General Partner, Danavox, ReSound and AL1
in proportion to and to the extent of the positive balances, if any, in
their Common Sub-Accounts.
(b) Tax Distributions. In the event that the Partnership has taxable
income for any fiscal year, the Partnership shall endeavor to make, consistent
with business needs, distributions of available cash to the Partners, in the
same order and priority as set forth in Section 5.01(a), in amounts sufficient
to provide each of them with cash equal to the amount obtained by multiplying
(i) such Partner's distributive share of taxable income of the Partnership for
such fiscal year by (ii) the highest effective marginal combined federal, state
and local income tax rate (giving effect to the deduction of state and local
income taxes, as applicable for federal and state income tax purposes) that
would be applicable to the Partnership if it were a corporation.
SECTION 5.2. Amounts Withheld. All amounts withheld pursuant to the
Code or any provision of any state or local tax law with respect to any payment,
distribution or allocation to the Partnership, the General Partner or the
Limited Partners shall be treated as amounts distributed to the General Partner
and the Limited Partners pursuant to this Article 5 for all purposes under this
Agreement. The General Partner is authorized to withhold from distributions, or
with respect to allocations, to the General Partner or Limited Partners and to
pay over to any
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federal, state or local government any amounts required pursuant to the Code or
any provisions of any other federal, state or local law, and may allocate any
such amounts among the General Partner and Limited Partners in any manner that
is in accordance with applicable law.
SECTION 5.3. Restricted Distributions. Notwithstanding any provision in
this Agreement to the contrary, the Partnership shall not make a distribution to
any Partner if such distribution would violate applicable law, including,
without limitation, the Act.
ARTICLE 6
MANAGEMENT'S PUTS AND CALLS
SECTION 6.1. Vesting. Solely for purposes of this Article 6, the
Interest of each Manager shall vest over the four-year period commencing on the
Effective Date based upon continued employment of such Manager with AL1 and
performing services exclusively for the Partnership, with 25% vesting at the end
of each year, except that in the case of Xx. Xxxxxxxx whose Interest shall vest
at the rate of 10% at the end of each of the first three years after the
Effective Date and 70% at the end of the fourth year after the Effective Date
and AL1's 2% Interest which 2% Interest shall vest 100% at the end of the fourth
year, unless otherwise allocated to other Managers pursuant to Section 6.04
hereof.
SECTION 6.2. Repurchase Obligations upon Termination of Employment . In
the case of termination of employment with AL1 for any reason (other than Cause)
of any Manager, (a) 50% of the vested portion of the Interest of such Manager
must be repurchased by the Partnership for an amount in cash equal to such
vested portion of the Percentage Interest of such Manager, determined as if such
Interest were being repurchased as of the Effective Date (as reallocated from
time to time pursuant to Section 6.04 hereof), times $10,000,000 on the date
which is the latest of (i) the date of termination of employment of such
Manager, (ii) the date on which the first and second product Chipsets have been
released by the Partnership and approved by each of Danavox and ReSound, or
(iii) the receipt by the Partnership of royalties and any amounts paid by
Danavox and ReSound to the Partnership (the "SECTION II.G.3. PAYMENTS") pursuant
to Section II.G.3. of the Development Contract sufficient to make such payment,
it being understood that if royalties and Section II.G.3. Payments have been
received by the Partnership but such royalties and Section II.G.3. Payments are
insufficient to
00
00
xxxxxxxxxx all Interests subject to repurchase at such time, the Partnership
shall make any required partial payments to each Manager in proportion to the
percentage that the Percentage Interest of such Manager subject to repurchase at
such time is of the total Percentage Interests subject to a repurchase
obligation by the Partnership at such time; (b) 25% of the vested portion of the
Interest of such Manager shall be purchased equally by each of ReSound and
Danavox in cash for an amount equal to such vested portion of the Percentage
Interest of such Manager, determined as if such Interest were being repurchased
as of the Effective Date, times $5,000,000, 12.5% after the first product
Chipset is released by the Partnership and approved by Danavox and ReSound and
12.5% after the second product Chipset is released and approved by Danavox and
ReSound; and (c) the unvested portion of the Interest of such Manager shall be
purchased by the Partnership for $1.00. Upon termination of employment for Cause
of any Manager, the Partnership shall have the right to purchase the vested and
unvested portion of such Manager's Interest for $1.00.
SECTION 6.3. Put Options. A Manager shall have the put option (the "PUT
OPTION") described in this Section 6.03 so long as he or she is employed by AL1
and performs services exclusively for the Partnership. A Manager shall have a
Put Option (i) first, to require Danavox and ReSound to purchase 25% of his or
her vested portion of his or her Interest after the first product Chipset is
released by the Partnership and approved by both Danavox and ReSound, (ii)
second, to require the Partnership to purchase 25% of his or her vested portion
of his or her Interest if, but only to the extent that, royalties and Section
II.G.3. Payments have been received by the Partnership from the sale of the
first product Chipset in excess of royalties and Section II.G.3. Payments needed
to fulfill the Partnership's repurchase obligations under Section 6.02 at such
time, (iii) third, to require Danavox and ReSound to purchase 25% of his or her
vested portion of his or her Interest after the second product Chipset is
released by the Partnership and approved by both Danavox and ReSound and (iv)
fourth, to require the Partnership to purchase 25% of his or her vested portion
of his or her Interest if, but only to the extent that, royalties and Section
II.G.3. Payments have been received by the Partnership from the sale of the
second product Chipset in excess of royalties and Section II.G.3. Payments
needed to fulfill the Partnership's repurchase obligations under Section 6.02 at
such time. In each such case where a Manager exercises a Put Option pursuant to
this Section 6.03, Danavox and ReSound or the Partnership, as the case may be,
shall be required to pay to such Manager in return for the portion of the
Interest being sold an amount in each case equal to the Percentage Interest
being sold, determined as if such Interest were being sold as of the Effective
Date (as reallocated from time to time pursuant to Section 6.04 hereof), times
$20,000,000.
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SECTION 6.4. Reallocation of Manager Interests. After the Effective
Date, the AudioLogic Designees shall have the right to reallocate the Percentage
Interests of the Managers, including any Percentage Interests forfeited in
accordance with the provisions of this Article 6, among the present and any
future Managers admitted as Limited Partners pursuant to the terms of this
Agreement in such designees' sole discretion; provided that, after such
reallocation, the sum of the Managers' Percentage Interests at that time and any
Percentage Interest repurchased or sold pursuant to Sections 6.02 and 6.03
hereof shall not be greater than 10%, determined as if such calculation occurred
on and as of the Effective Date.
ARTICLE 7
MANAGEMENT
SECTION 7.1. Authority of the General Partner. Except to the extent
otherwise provided herein, the General Partner shall have the sole and exclusive
right to manage the business of the Partnership and shall have all of the rights
and powers which may be possessed by general partners under the Act including,
without limitation, the right and power to:
(a) acquire by purchase, lease, or otherwise any real or personal
property which may be necessary, convenient, or incidental to the accomplishment
of the purposes of the Partnership;
(b) operate, maintain, finance, improve, construct, own, grant options
with respect to, sell, convey, assign, mortgage, and lease any real estate and
any personal property necessary, convenient, or incidental to the accomplishment
of the purposes of the Partnership;
(c) execute any and all agreements, contracts, documents,
certifications, and instruments necessary or convenient in connection with the
management, maintenance, and operation of property of the Partnership, or in
connection with managing the affairs of the Partnership, including amendments to
this Agreement and the Certificate in accordance with the terms of this
Agreement, pursuant to any power of attorney granted by the Limited Partners to
the General Partner;
(d) borrow money and issue evidences of indebtedness necessary,
convenient, or incidental to the accomplishment of the purposes of the
Partnership, and secure the same by mortgage, pledge, or other lien on any
property of the Partnership;
(e) execute, in furtherance of any or all of the purposes of the
Partnership, any deed, lease, mortgage, deed of trust, mortgage note, promissory
note, xxxx of sale, contract, or other instrument purporting to convey or
encumber
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any or all of the property of the Partnership;
(f) prepay in whole or in part, refinance, recast, increase, modify, or
extend any liabilities affecting the property of the Partnership and in
connection therewith execute any extensions or renewals of encumbrances on any
or all of the property of the Partnership;
(g) care for and distribute funds to the Partners by way of cash,
income, return of capital, or otherwise, all in accordance with the provisions
of this Agreement, and perform all matters in furtherance of the objectives of
the Partnership or this Agreement;
(h) contract on behalf of the Partnership for the employment and
services of employees and/or independent contractors, such as lawyers and
accountants, and delegate to such Persons the duty to manage or supervise any of
the assets or operations of the Partnership;
(i) engage in any kind of activity and perform and carry out contracts
of any kind (including contracts of insurance covering risks to property of the
Partnership and General Partner liability) necessary or incidental to, or in
connection with, the accomplishment of the purposes of the Partnership, as may
be lawfully carried on or performed by a partnership under the laws of each
state in which the Partnership is then formed or qualified;
(j) make any and all elections for federal, state, and local tax
purposes including, without limitation, any election, if permitted by applicable
law: (i) to adjust the basis of property of the Partnership pursuant to Code
Sections 754, 734(b) and 743(b), or comparable provisions of state or local law,
in connection with transfers of Partnership interests and Partnership
distributions; (ii) with the consent of a majority of the Limited Partners, to
extend the statute of limitations for assessment of tax deficiencies against the
Partners with respect to adjustments to the Partnership's federal, state, or
local tax returns; and (iii) to represent the Partnership and the Partners
before taxing authorities or courts of competent jurisdiction in tax matters
affecting the Partnership, and the Partners in their capacities as Partners, and
to file any tax returns and to execute any agreement or other document relating
to or affecting such tax matters, including, to the extent provided in Sections
6221 through 6231 of the Code, agreements or other documents that bind the
Partners with respect to such tax matters or otherwise affect the rights of the
Partnership, the General Partner, and the Limited Partners. The General Partner
is specifically authorized to act as the "Tax Matters Partner" under the Code
and in any similar capacity under state or local law;
(k) take, or refrain from taking, all actions, not expressly proscribed
or limited by this Agreement, as may be necessary or appropriate to accomplish
the purposes of the Partnership; and
(l) institute, prosecute, defend, settle, compromise, and dismiss
lawsuits
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or other judicial or administrative proceedings brought on or in behalf of, or
against, the Partnership or the Partners in connection with activities arising
out of, connected with, or incidental to this Agreement, and to engage counsel
or others in connection therewith.
SECTION 7.2. Right to Rely on General Partner. Any Person dealing with
the Partnership may rely (without duty of further inquiry) upon a certificate
signed by any General Partner as to:
(a) the identity of any General Partner or Limited Partner;
(b) the existence or nonexistence of any fact or facts which constitute
a condition precedent to act by a General Partner or which are in any other
manner germane to the affairs of the Partnership;
(c) the Persons who are authorized to execute and deliver any
instrument or document of the Partnership; or
(d) any act or failure to act by the Partnership or any other matter
whatsoever involving the Partnership or any Partner.
SECTION 7.3. Restrictions on Authority of General Partner.
(a) Without the prior approval of each of the Danavox Designees, the
ReSound Designees and those members of the Board of Directors of the General
Partner designated by AL1 (the "AUDIOLOGIC DESIGNEES"), the General Partner
shall not have the authority to, and the General Partner covenants and agrees
that it shall not cause the Partnership to, take any of the following actions:
(i) any acquisition or sale of assets (not in the ordinary
course) or other entities, mergers, consolidations, or other business
combinations of the Partnership or any of its subsidiaries;
(ii) liquidation or dissolution of the Partnership or the
filing of a voluntary bankruptcy petition or similar event;
(iii) changes of scope in the business of the partnership
(including geographic scope, lines of business or channels of trade);
(iv) establishment and capitalization of material
subsidiaries, partnerships or other entities;
(v) acceptance or rejection of a business opportunity not in
the ordinary course of business;
(vi) all material research and development decisions including
technical specifications and milestones;
(vii) except as otherwise provided in Article 3 hereof, any
capital calls; provided that all Partners shall negotiate in good faith
if such capital calls are required to purchase the rights to any
technologies that may be
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beneficial to the Partnership in achieving its goals in the Budget;
(viii) Partnership distributions (other than distributions to
the extent required under Section 5.01(b));
(ix) any incurrence of debt in excess of any approved budget
or business plan;
(x) guarantees, pledges or mortgages of assets;
(xi) entering into or modifying material agreements not within
approved budgets or business plans (including purchase/sale contracts,
capital/operating leases or any contract which cannot be terminated on
less than 90 days' notice);
(xii) any decisions by the Partnership relating to the
Employment Services Agreement by and among AL1 and the Partnership as
of the Effective Date;
(xiii) changes of independent accountants and counsel; and
(xiv) changes in accounting and tax policies.
(b) Without the prior consent of the Danavox Designees and the ReSound
Designees, the General Partner shall not have the authority to, and the General
Partner covenants and agrees that it shall not cause the Partnership to, take
any of the following actions:
(i) admission of partners to the partnership;
(ii) all marketing activities, branding of the Partnership
technology, materials/positioning to be used by the Partnership and to
be used by Danavox and ReSound when they use Partnership technology;
(iii) the approval of business plans or budgets;
(iv) except as expressly permitted by the Ancillary
Agreements, all transactions between the Partnership and any Partners
or their Affiliates; and
(v) initiation or settlement of litigation or imposition of
injunctive or other equitable relief on the Partnership.
(c) Day-to-day management of the Partnership will be carried out by
such officers of the Partnership as the General Partner shall determine. Such
officers will have the powers that are usually exercised by comparably
designated officers of a Delaware corporation, and their responsibilities will
include, but will not be limited to, development (but not approval) of business
plans, development of annual budgets, hiring and other employee decisions,
establishment and
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execution of research, marketing, sales, customer contracts,
customer service and pricing (other than to the extent such decisions relate to
actions listed in Sections 7.03(a) or 7.03(b) or are inconsistent with this
Agreement or the Budget).
(d) If the Board of Directors of the General Partner is not able to
reach a decision on a matter described in Section 7.03(a) or the Danavox
Designees and the ReSound Designees are not able to reach a decision on a matter
described in Section 7.03(b), the dispute will be referred to a subcommittee of
the Board of Directors of the General Partner established specifically for the
purpose of resolving the dispute ("DISPUTE RESOLUTIONS COMMITTEE") which Dispute
Resolutions Committee will consist of an equal number of the AudioLogic
Designees, the Danavox Designees and the ReSound Designees. In the event the
Dispute Resolution Committee is unable to resolve the dispute within 30 days,
the Dispute Resolution Committee shall refer the dispute to the chief executive
officers of AL1, Danavox and ReSound.
(e) In the event and during such period that any dispute has been
referred to a Dispute Resolutions Committee in accordance with subsection (d) of
this Section 7.03, the Partnership will continue to run and operate in
accordance with the budget of the Partnership which had been most recently
approved by the General Partner in accordance with the terms of this Agreement.
SECTION 7.4. Duties and Obligations of General Partner.
(a) The General Partner shall cause to be provided, or cause the
Partnership to carry, such insurance as is customary in the businesses in which
the Partnership is engaged and in the place in which it is so engaged.
(b) The General Partner shall take all actions which may be necessary
or appropriate (i) for the continuation of the Partnership's valid existence as
a limited partnership under the laws of the State of Delaware (and of each other
jurisdiction in which such existence is necessary to protect the limited
liability of the Limited Partners or to enable the Partnership to conduct the
business in which it is engaged) and (ii) for the accomplishment of the
Partnership's purposes, including the acquisition and preservation of the
Partnership's property in accordance with the provisions of this Agreement and
applicable laws and regulations.
(c) Except as otherwise provided in the Act, the General Partner shall
have the liabilities of a partner in a partnership without limited partners to
persons other than the Partnership and the Limited Partners. Except as otherwise
provided in this Agreement or the Act, the General Partner shall have the
liabilities of a partner in a partnership without limited partners to the
Partnership and the Limited Partners.
SECTION 7.5. Indemnification of General Partner.
(a) The Partnership, its receiver, or its trustee shall indemnify, save
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harmless, and pay all judgments and claims against any General Partner relating
to any liability or damage incurred by reason of any act performed or omitted to
be performed by such General Partner in connection with the business of the
Partnership, including attorneys' fees incurred by such General Partner in
connection with the defense of any action based on any such act or omission,
which attorneys' fees may be paid as incurred, including all such liabilities
under federal and state securities laws (including the Securities Act of 1933,
as amended) as permitted by law.
(b) In the event of any action by any Limited Partner against any
General Partner, including a Partnership derivative suit, the Partnership shall
indemnify, save harmless, and pay all expenses of such General Partner,
including attorneys' fees, incurred in the defense of such action.
(c) The Partnership shall indemnify, save harmless, and pay all
expenses, costs, or liabilities of any General Partner who for the benefit of
the Partnership makes any deposit, acquires any option, or makes any other
similar payment or assumes any obligation in connection with any property
proposed to be acquired by the Partnership and who suffers any financial loss as
the result of such action.
(d) Notwithstanding the provisions of Sections 7.05(a), 7.05(b) and
7.05(c) above, such Sections shall be enforced to the maximum extent permitted
by law and no General Partner shall be indemnified from any liability for fraud,
bad faith, or willful misconduct.
SECTION 7.6. Compensation, Reimbursement and Loans.
(a) Compensation and Reimbursement. Except as otherwise provided in
this Section 7.06 or in the Service Agreements substantially in the form of
Exhibits 7.06(a) and 7.06(b), no Partner shall receive any salary, fee, or draw
for services rendered to or on behalf of the Partnership, nor shall any Partner
be reimbursed for any expenses incurred by such Partner on behalf of the
Partnership, provided that the Managers may receive salaries and expense
reimbursements in connection with their employment by AL1 pursuant to which they
will provide services to the Partnership.
(b) Expenses. The General Partner may charge the Partnership for any
direct expenses reasonably incurred in connection with the Partnership's
business.
SECTION 7.7. Operating Restrictions.
(a) All property of the Partnership in the form of cash not otherwise
invested shall be deposited for the benefit of the Partnership in one or more
accounts of the Partnership or any of its Affiliates, maintained in such
financial institutions as the General Partner shall determine or shall be
invested in short-term liquid securities or other cash equivalent assets or
shall be left in escrow, and withdrawals shall be made only in the regular
course of Partnership business and
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on such signature or signatures as the General Partner may determine from time
to time.
(b) The signature of the General Partner shall be necessary and,
subject to Section 7.03, sufficient to convey title to any property owned by the
Partnership or to execute any promissory notes, trust deeds, mortgages, or other
instrument of hypothecation, and all of the Partners agree that a copy of this
Agreement may be shown to the appropriate parties in order to confirm the same,
and all of the Partners further agree that the signature of the General Partner
shall be sufficient to execute any "statement of partnership" or other documents
necessary to effectuate this or any other provision of this Agreement. All of
the Partners do hereby appoint the General Partner as their attorney-in-fact for
the execution of any or all of the documents described herein.
SECTION 7.8. Rights or Powers. No Limited Partner shall have any right
or power to take part in the management or control of the Partnership or its
business and affairs or to act for or bind the Partnership in any way.
SECTION 7.9. Voting Rights. Except as expressly provided herein or
required by law, the Limited Partners shall have no right to vote on any
matters.
ARTICLE 8
BOOKS AND RECORDS
SECTION 8.1. Books and Records. The Partnership shall keep adequate
books and records at its principal place of business, setting forth a true and
accurate account of all business transactions arising out of and in connection
with the conduct of the Partnership. Any Partner or its designated
representative shall have the right, at any reasonable time, to have access to
and inspect and copy the contents of such books or records, provided that any
such inspection shall be conducted in such manner as not to interfere
unreasonably with the conduct of the business of the Partnership. Any Limited
Partner, or its designee, shall also have access to such additional financial
information, documents, books and records, as are reasonably necessary to allow
such Limited Partner or its designee to comply with reporting requirements
pursuant to applicable law or regulations or the requirements of any applicable
stock exchange.
SECTION 8.2. Periodic Reports; Financial Statements.
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(a) Within 30 days after the end of each Partnership fiscal year, the
General Partner shall cause to be prepared, and each Partner shall be furnished
with, the following audited financial statements, accompanied by the report
thereon of Xxxxxx Xxxxxxxx LLP, or another nationally recognized accounting firm
selected by the General Partner:
(i) a balance sheet of the Partnership as of the end of such
fiscal year; (ii) a statement of profit and loss for the Partnership
for such fiscal year;
(iii) a statement of each Partner's Capital Account (including
the sub-accounts thereof) and changes therein for such fiscal year; and
(iv) a statement of Partnership cash flow for such fiscal
year.
(b) Within 30 days after the close of each fiscal quarter, the General
Partner shall cause to be prepared, and each Partner shall be furnished with:
(i) a balance sheet of the Partnership as of the end of such
fiscal quarter;
(ii) a statement of profit and loss for the Partnership for
such fiscal quarter;
(iii) a statement of each Partner's Capital Account (including
the sub-accounts thereof) and change therein for such fiscal quarter;
(iv) a statement of Partnership cash flow for such fiscal
quarter; and
(v) a certification by an officer of the General Partner that
the statements listed in (i) through (iv) have been prepared in
accordance with this Agreement, and that such statements have been
prepared in accordance with generally accepted accounting principles.
(c) The Partnership shall furnish to each Partner at such Partner's
cost, such other information regarding its finances at such times and prepared
in such form as shall reasonably be requested by such Partner, provided that,
the Partnership shall not furnish information which the General Partner or any
of its Affiliates considers proprietary or the disclosure of which might subject
such Persons to competitive disadvantage.
SECTION 8.3. Tax Information. Necessary tax information shall be
delivered to each Partner after the end of each fiscal year of the Partnership.
Such information shall be furnished within two months after the end of each
fiscal year. Notwithstanding anything in this Agreement to the contrary, the
General Partner shall file tax returns prepared in accordance with the Code and
the regulations promulgated thereunder as in effect at the time of such filing.
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SECTION 8.4. Consent to Capital Account Statements. The statements of
the Partners' Capital Accounts described in Sections 8.02(a) and (b) hereof and
the calculations and determinations underlying them, will not be final without
the consent of each of the Danavox Designees and the ReSound Designees. Consent
to such statements shall be presumed from the absence of the receipt of any
written statement to the contrary from such designees within a period of 60 days
after delivery of the statements of the Partners' Capital Accounts. In the event
that any such designee objects to or otherwise indicates that it does not
consent to the statements of the Partners' Capital Accounts or the underlying
calculations and determinations and indicates that its determination of Capital
Accounts results in a discrepancy of more than $50,000 from the determination of
Capital Accounts made by the General Partner, the Partners' Capital Accounts
shall be determined by a nationally recognized accounting firm mutually
acceptable to all of the Partners, which accounting firm (the "INDEPENDENT
ACCOUNTANTS") shall make its determination on the basis of this Agreement and
the economic relationship among the Partners created hereby, and without giving
special weight to any determinations underlying the calculations of the
Partners' Capital Accounts previously made by the General Partner. If any such
objecting designee is successful in its challenge to the Partners' Capital
Accounts, the General Partner shall pay the cost of the Independent Accountants.
If any objecting designee is unsuccessful in its challenge to the Partner's
Capital Accounts, the entity that designated such designee shall pay the costs
of the Independent Accountants, and if more than one designee objected, the
costs shall be shared equally among the entities which nominated such designees.
ARTICLE 9
CERTAIN COVENANTS
SECTION 9.1. Confidentiality. Each Partner and each of its Affiliates
shall keep confidential and not reveal, and shall cause its Subsidiaries and the
officers, directors, employees, agents and representatives of it and its
Subsidiaries, to keep confidential and not to reveal, to any other Person (other
than to another Partner or its officers and employees, to any Affiliate or any
officer, director, employee, agent or representative of such Partner or its
Affiliates (each of whom shall be subject to the confidentiality obligations set
forth herein)), from the date hereof through the third anniversary of the first
date on which such Partner is no longer a Partner of the Partnership, any
confidential documents, trade secrets, secret processes or methods and other
confidential information concerning, relating to or
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in connection with the Partnership, the business of the Partnership, the
manufacture or sale of products by the Partnership, or the processes and designs
owned by the Partnership, that come to the knowledge of such Partner or its
Affiliates or their respective representatives or agents by reason of the
relationship of such Partner or Affiliate with the Partnership ("INFORMATION"),
except for such Information that (a) is generally available to the public (other
than as a result of a disclosure by such Partner or its Affiliates), (b) is
available to such Person on a non-confidential basis from a source that is not
prohibited from disclosing such Information to such Person or (c) after notice
and an opportunity to contest, such Person is required to disclose under any
applicable law or under subpoena or other legal process; provided that nothing
in this Section 9.01 shall preclude any Partner or its Affiliates from using any
Information in any manner reasonably connected to its investment in the
Partnership or as contemplated by this Agreement, the Development Contract or
any other agreements entered into in connection therewith.
SECTION 9.2. Press Announcements. Except as required by law or if
consented to by each of the General Partner, ReSound and Danavox, no Partner
will make any public announcement regarding the Partnership. The Partners shall
generally coordinate with each other in any public distribution of information
regarding the Partnership.
SECTION 9.3. No Solicitation of Employees. During the existence of the
Partnership and for the two-year period thereafter, no Partner or Affiliate of
any Partner shall (i) hire any employee of AL1 performing services for the
Partnership, (ii) offer employment to any employee of AL1 performing services
for the Partnership or (iii) induce any employee of AL1 performing services for
the Partnership to terminate his or her employment with AL1 or to stop
performing services for the Partnership; provided that Danavox may hire
employees of AL1 if it purchases ReSound's interest in the Partnership.
ARTICLE 10
AMENDMENTS; MEETINGS
SECTION 10.1. Amendments. (a) Amendments to this Agreement, the limited
partnership certificate and the Ancillary Agreements may be proposed by any
General Partner or by any Limited Partner. Following such proposal, the General
Partner shall submit to the Limited Partners a verbatim statement of any
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proposed amendment, providing that counsel for the Partnership shall have
approved of the same in writing as to form, and the General Partner shall
include in any such submission a recommendation as to the proposed amendment.
The General Partner shall seek the written vote of the Partners on the proposed
amendment or shall call a meeting to vote thereon and to transact any other
business that it may deem appropriate. For purposes of obtaining a written vote,
the General Partner may require response within a reasonable specified time, but
not less than 15 days, and failure to respond in such time period shall
constitute a vote against the General Partner's recommendation with respect to
the proposal. A proposed amendment shall be adopted and be effective as an
amendment hereto if it receives the affirmative vote of the General Partner and
the Limited Partners holding at least -3/4 of the Percentage Interests of all of
the Partners.
(b) Notwithstanding Section 10.01(a) hereof, this Agreement shall not
be amended without the consent of each Person adversely affected if such
amendment would (i) convert a Limited Partner's interest in the Partnership into
a General Partner's interest, (ii) modify the limited liability of a Limited
Partner, (iii) alter the interest of a Partner in Net Profits, Net Losses, other
items, or any Partnership distributions or (iv) alter the rights under Article
6.
SECTION 10.2. Meetings of the Partners. (a) Meetings of the Partners
may be called by the General Partner and shall be called upon the written
request of any Limited Partner. The notice of any such meeting shall state the
nature of the business to be transacted and shall be given to all Partners not
less than fifteen (15) days nor more than thirty (30) days prior to the date of
such meeting. Partners may vote in person or by proxy at such meeting. Whenever
the vote or consent of Partners is permitted or required under this Agreement,
such vote or consent may be given at a meeting of Partners or may be given in
accordance with the procedure prescribed in Section 10.02(c) hereof. Except as
otherwise expressly provided in this Agreement, the vote of the General Partner
and the Limited Partners shall control.
(b) For the purpose of determining the Partners entitled to vote on, or
to vote at, any meeting of the Partners or any adjournment thereof, the General
Partner or the Limited Partners requesting such meeting may fix, in advance, a
date as the record date for any such determination. Such date shall not be more
than 30 days nor less than 10 days before any such meeting.
(c) Each Limited Partner may authorize any Person or Persons to act for
him by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting, or voting or participating
at a meeting. Every proxy must be signed by the Limited Partner or his
attorney-in-fact. No proxy shall be valid after the expiration of 12 months from
the date thereof unless
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otherwise provided in the proxy. Every proxy shall be revocable at the pleasure
of the Limited Partner or his attorney-in-fact executing it.
(d) Each meeting of Partners shall be conducted by the General Partner
or such other Person as the General Partner may appoint pursuant to such rules
for the conduct of the meeting as the General Partner or such other Person deems
appropriate.
ARTICLE 11
TRANSFERS OF INTERESTS, ETC
SECTION 11.1. Restriction of Transfers of Interests. Except as
otherwise permitted by this Agreement, no Partner shall transfer all or any
portion of his or her Interest.
SECTION 11.2. Permitted Transfers of Interests. (a) During the first
four years after the Effective Date, a Limited Partner may not Transfer any
Interest to a third party, except for Transfers ("PERMITTED TRANSFERS") (i) to a
directly or indirectly wholly-owned subsidiary of such Partner, (ii) to a
directly or indirectly wholly-owned subsidiary of an entity which directly or
indirectly holds all of the Interests of such Partner, or (iii) in compliance
with Article 15. No shareholder in the General Partner may Transfer its equity
interest in the General Partner to any Person except in connection with a
Transfer of such shareholder's Interest in the Partnership to such Person.
(b)(i) After the fourth anniversary of the Effective Date, if any of
the Partners receives from or otherwise negotiates with a third party in a
private transaction an offer to purchase for cash any or all of the Interests
owned or held by such Partner (an "OFFER") and such Partner (a "SELLING PARTY")
intends to pursue such sale of such Interests to such third party, such Selling
Party shall provide the Partnership and each other Partner written notice of
such Offer (the "OFFER NOTICE"). The Offer Notice shall identify the percentage
amount of Interests subject to the Offer, the cash price for such Interests at
which a sale is proposed to be made (the "OFFER PRICE") and all other material
terms and conditions of the Offer.
(ii) The receipt of an Offer Notice by the Partnership and
each Partner from any Selling Party shall constitute an offer (the
"INTEREST OFFER") by such Selling Party to sell, to the Partnership and
the Partners, for cash in whole and not in part, with the Partnership
having priority with respect to the acceptance of the Interest Offer.
If the Partnership does not
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accept the Interest Offer, in whole and not in part, in accordance
herewith, then such Interest Offer may be accepted at the Offer Price
by the Partners on a pro rata basis based on each Partner's Percentage
Interest unless the Partners shall agree to another allocation
resulting in acceptance of the Interest Offer with respect to all
Interests subject thereto. Such Interest Offer shall be irrevocable for
30 days after receipt of such Offer Notice by the Partnership and each
Partner. Subject to the Partnership's priority right of exercise as set
forth above, each Partner shall have the right to accept such Interest
Offer (as provided above) within such 30-day period. The Interest Offer
may be accepted by giving a written irrevocable notice of acceptance to
such Selling Party prior to the expiration of such 30-day period.
(iii) The Partnership or the Partners, as the case may be,
shall purchase for cash at the Offer Price and pay for all Interests
set forth in the Offer Notice within a 20-day period following
acceptance of the Interest Offer; provided that if the purchase and
sale of such Interest is subject to any regulatory approval, the time
period during which such purchase and sale may be consummated shall be
extended until the expiration of five Business Days after all such
regulatory approvals shall have been obtained; provided further that
such time period shall not exceed 60 days without the written consent
of the Selling Party.
(iv) Upon the rejection or deemed rejection of the Interest
Offer by the Partnership and the Partners or the failure to obtain any
required consent for the purchase of the Interests subject thereto
within 60 days, there shall commence a 90-day period during which the
Selling Party shall have the right to consummate the sale to the third
party making the Offer of any or all of the Interests subject to the
Offer at a price not less than the Offer Price; provided that (i) such
third party shall have agreed in writing to be bound by the terms of
this Agreement and (ii) the Transfer to such third party is not in
violation of applicable federal or state or foreign securities laws.
Notwithstanding the foregoing, if the purchase and sale of such
Interests is subject to any prior regulatory approval, the time period
during which such purchase and sale may be consummated shall be
extended until the expiration of five Business Days after all such
approvals shall have been received but in no event shall such time
period exceed 120 days without the consent of the Partnership. If such
Selling Party does not consummate the sale of any Interests subject to
the Offer in accordance with the foregoing time limitations, such
Selling Party may not sell any Interests without repeating the
foregoing procedures.
(v) For purposes of this Section 11.02, any sale of an
Interest pursuant to an Interest Offer or an Offer shall also be deemed
a sale of
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a proportionate number of shares of the General Partner held by the
Selling Party.
SECTION 11.3. Conditions to Permitted Transfers. A Transfer of
Interests shall not be treated as a Permitted Transfer under Section 11.02
hereof unless and until the following conditions are satisfied:
(a) Except in the case of a Transfer of Interests involuntarily by
operation of law, the transferor and transferee shall execute and deliver to the
Partnership such documents and instruments of conveyance as may be necessary or
appropriate in the opinion of counsel to the Partnership to effect such Transfer
and to confirm the agreement of the transferee to be bound by the provisions of
this Section 11.03. In the case of a Transfer of Interests involuntarily by
operation of law, the Transfer shall be confirmed by presentation to the
Partnership of legal evidence of such Transfer, in form and substance
satisfactory to counsel to the Partnership. In all cases, the Partnership shall
be reimbursed by the transferor and/or transferee for all costs and expenses
that it reasonably incurs in connection with such Transfer.
(b) Unless the General Partner has waived the requirements of this
Section 11.03(b) with respect to a Transfer by a Limited Partner, except in the
case of a Transfer involuntarily by operation of law, the transferor shall
furnish to the Partnership an opinion of counsel, which counsel and opinion
shall be satisfactory to the General Partner that the Transfer will not cause
the Partnership to terminate for federal income tax purposes.
(c) The transferor and transferee shall furnish the Partnership with
the transferee's taxpayer identification number, sufficient information to
determine the transferee's initial tax basis in the Interests transferred, and
any other information reasonably necessary to permit the Partnership to file all
required federal and state tax returns and other legally required information
statements or returns. Without limiting the generality of the foregoing, the
Partnership shall not be required to make any distribution otherwise provided
for in this Agreement with respect to any transferred Interest until it has
received such information.
(d) Except in the case of a Transfer of Interests involuntarily by
operation of law, or in the case of a Transfer of Interests to a Wholly Owned
Affiliate of the transferor or of any other Partner, the transferor shall
provide an opinion of counsel, which opinion and counsel shall be satisfactory
to the Partnership, to the effect that such Transfer is exempt from all
applicable registration requirements and that such Transfer will not violate any
applicable laws regulating the Transfer of securities.
SECTION 11.4. Prohibited Transfers. Any purported Transfer of Interests
that is not a Permitted Transfer shall be null and void and of no effect
whatever;
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provided that, if the Partnership is required to recognize a Transfer that is
not a Permitted Transfer (or if the Partnership, in its sole discretion, elects
to recognize a Transfer that is not a Permitted Transfer), the Interest
Transferred shall be strictly limited to the transferor's rights to allocations
and distributions as provided by this Agreement with respect to the Transferred
Interests, which allocations and distributions may be applied (without limiting
any other legal or equitable rights of the Partnership) to satisfy any debts,
obligations, liabilities or damages that the transferor or transferee of such
Interests may have to the Partnership.
In the case of a Transfer or attempted Transfer of Interests that is
not a Permitted Transfer, the parties engaging or attempting to engage in such
Transfer shall be liable to indemnify and hold harmless the Partnership and the
other Partners from all cost, liability, and damage that any of such indemnified
Persons may incur (including, without limitation, incremental tax liability and
lawyers fees and expenses) as a result of such Transfer or attempted Transfer
and efforts to enforce the indemnity granted hereby.
SECTION 11.5. Rights of Unadmitted Assignees. A transferee of one or
more Interests who is not admitted as a substituted Limited Partner pursuant to
Section 11.06 hereof shall be entitled only to allocations and distributions
with respect to such Interests in accordance with this Agreement, but, except as
otherwise consented to by the transferor and the General Partner in the case of
a pledge or grant of a security interest in an Interest, shall have no right to
any information or accounting of the affairs of the Partnership, shall not be
entitled to inspect the books or records of the Partnership, and shall not have
any of the rights of a General Partner or a Limited Partner under the Act or
this Agreement.
SECTION 11.6. Admission of Transferees as Partners. Subject to the
other provisions of this Article 11, a transferee of Interests may be admitted
to the Partnership as a substituted Limited Partner only upon satisfaction of
the conditions set forth below in this Section 11.06:
(a) The General Partner consents to such admission, which consent may
be withheld in its sole discretion;
(b) The Interests with respect to which the transferee is being
admitted were acquired by means of a Permitted Transfer;
(c) The transferee becomes a party to this Agreement as a Limited
Partner and executes such documents and instruments as the General Partner may
reasonably request (including, without limitation, counterparts or amendments to
this Agreement and amendments to the Certificate) and as may be necessary or
appropriate to confirm such transferee as a Limited Partner in the Partnership
and
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such transferee's agreement to be bound by the terms and conditions hereof;
(d) If the transferee is a corporation, the transferee provides the
Partnership with evidence satisfactory to counsel for the Partnership that such
transferee has the power and authority to execute and deliver this Agreement and
to perform its obligations hereunder and the execution, delivery and performance
of this Agreement have been duly authorized by all necessary action; and
(e) The transferee executes and consents to any and all assignments or
Transfers previously executed by the transferor.
SECTION 11.7. Distributions and Applications in Respect to Transferred
Interests. If any Interests are Transferred during any accounting period in
compliance with the provisions of this Article 11, Net Profit, Net Loss, each
item thereof, and all other items attributable to the Transferred Interest for
such period shall be divided and allocated between the transferor and the
transferee by taking into account their varying interests during the period in
accordance with Code Section 706(d), using any conventions permitted by law and
elected by the General Partner and agreed to by the transferor and transferee.
All distributions on or before the date of such Transfer shall be made to the
transferor, and all distributions thereafter shall be made to the transferee.
Solely for purposes of making such allocations and distributions, the
Partnership shall recognize such Transfer not later than the end of the calendar
month during which it is given notice of such Transfer, provided that if the
Partnership does not receive a notice stating the date such Interest was
Transferred and such other information as the General Partner may reasonably
require within 30 days after the end of the accounting period during which the
Transfer occurs, then all of such items shall be allocated, and all
distributions shall be made, to the Person who, according to the books and
records of the Partnership, on the last day of the accounting period during
which the Transfer occurs, was the owner of the interest. Neither the
Partnership nor any General Partner shall incur any liability for making
allocations and distributions in accordance with the provisions of this Section
11.07, whether or not any General Partner or the Partnership has knowledge of
any Transfer of ownership of any interest.
ARTICLE 12
GENERAL PARTNER
SECTION 12.1. Additional General Partners. Except as provided in this
Section 12.01 and Section 12.02, no Person shall be admitted to the Partnership
as a General Partner without the unanimous consent of the Partners.
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SECTION 12.2. Covenant Not to Withdraw, Transfer, or Dissolve . Except
as otherwise permitted by this Agreement, the General Partner hereby covenants
and agrees not to (a) take any action to file a certificate of dissolution or
its equivalent with respect to itself, (b) take any action that would cause a
voluntary bankruptcy of the General Partner, (c) withdraw or attempt to withdraw
from the Partnership, (d) petition for judicial dissolution of the Partnership
under 17-802 of the Act, (e) Transfer all or any portion of its Interest in the
Partnership as a General Partner, except in accordance with the terms of Section
12.03 hereof, or (f) exercise any power under the Act to dissolve the
Partnership. Further, the General Partner hereby covenants and agrees to
continue to carry out the duties of a General Partner hereunder until the
Partnership is dissolved and liquidated pursuant to Article 13 hereof.
SECTION 12.3. Permitted Transfer.
(a) A General Partner may Transfer all, but not less than all, of its
interest in the Partnership as a General Partner (i) at any time to any Person
who is such General Partner's Wholly Owned Affiliate, or (ii) at any time
involuntarily by operation of law; provided that no such Transfer shall be
permitted unless and until (A) all of the conditions set forth in Section 11.03
hereof are satisfied as if the Partnership interest being Transferred was an
Interest, and (B) the transferor and transferee provide the Partnership with an
opinion of counsel, to the effect that such Transfer will not cause the
Partnership to become taxable as a corporation for federal income tax purposes,
or to fail to meet any condition precedent then in effect pursuant to an
official pronouncement of the Internal Revenue Service to the issuance of a
private letter ruling by the Internal Revenue Service confirming that the
Partnership will be treated as a Partnership for federal tax purposes, whether
or not such a ruling is being or has been requested.
(b) A transferee of a Partnership interest from a General Partner
hereunder shall be admitted as a General Partner with respect to such interest
if, but only if, (i) at the time of such Transfer, such transferee is otherwise
a General Partner, or the transferee is a Wholly Owned Affiliate of the
transferring General Partner and all of the other Partners consent to such
admission and (ii) such transferee executes and consents to any and all
assignments or consents to Transfer previously executed by the transferor. In
the event that the transferee of a Partnership interest from a General Partner
is admitted hereunder, such transferee shall be deemed admitted to the
Partnership as a General Partner immediately prior to the Transfer, and such
transferee shall continue the business of the Partnership without dissolution.
(c) A transferee who acquires an Interest from a General Partner
hereunder by means of a Transfer that is permitted under this Section 12.03, but
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who is not admitted as a General Partner, shall have no authority to act for or
bind the Partnership, to inspect the Partnership's books, or otherwise to be
treated as a General Partner, but such transferee shall be treated as a Limited
Partner who acquired an interest in the Partnership in a Permitted Transfer
under Article 11 hereof. Following such a Transfer, the transferor shall not
cease to be a general partner of the Partnership and shall continue to be a
General Partner.
SECTION 12.4. Prohibited Transfer. Any purported Transfer of any
Interest held by a General Partner that is not permitted by Section 12.03 above
shall be null and void and of no effect whatever; provided that, if the
Partnership is required to recognize a Transfer that is not so permitted (or if
the Partnership elects to recognize a Transfer that is not so permitted), the
interest Transferred shall be strictly limited to the transferor's rights to
allocations and distributions as provided by this Agreement with respect to the
Transferred interest, which allocations and distributions may be applied
(without limiting any other legal or equitable rights of the Partnership) to
satisfy any debts, obligations, liabilities or damages that the transferor or
transferee of such interest may have to the Partnership.
In the case of a Transfer or attempted Transfer of a Partnership
interest that is not permitted by Section 12.03 above, the parties engaging or
attempting to engage in such Transfer shall be liable to indemnify and hold
harmless the Partnership and the other Partners from all cost, liability and
damage that any of such indemnified Persons may incur (including, without
limitation, incremental tax liability and lawyers fees and expenses) as a result
of such Transfer or attempted Transfer and efforts to enforce the indemnity
granted hereby.
ARTICLE 13
DISSOLUTION AND WINDING UP
SECTION 13.1. Liquidating Events. The Partnership shall dissolve and
commence winding up and liquidating upon the first to occur of any of the
following ("LIQUIDATING Events"):
(a) At any time after June 30, 2000, if the Partnership has not
generated any operating income for the six-month period preceding such date and
the Development Contract has been terminated;
(b) The voluntary or involuntary bankruptcy of the General Partner;
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(c) The happening of any other event that makes it unlawful or
impossible to carry on the business of the Partnership; or
(d) The withdrawal or removal of the General Partner, the assignment by
the General Partner of its entire Interest in the Partnership or any other event
that causes the General Partner to cease to be a general partner under the Act,
provided that any such event shall not constitute a Liquidating Event if the
Partnership is continued pursuant to this Section 13.01. The Partners hereby
agree that, notwithstanding any provision of the Act or the Delaware Uniform
Partnership Act, the Partnership shall not dissolve prior to the occurrence of a
Liquidating Event. Upon the occurrence of any event set forth in Section
13.01(d), the Partnership shall not be dissolved or required to be wound up if
within 90 days after such event all remaining Partners agree in writing to
continue the business of the Partnership and to the appointment, effective as of
the date of such event, of a new General Partner. If it is determined by a court
of competent jurisdiction that the Partnership has dissolved prior to the
occurrence of a Liquidating Event, or if upon the occurrence of an event
specified in Section 13.01(d) hereof, the Partners fail to agree to continue the
business of the Partnership as provided in this Section 13.01, then within an
additional 90 days, the holders of at least 3/4 of the Percentage Interests of
all the Partners may elect to reconstitute the Partnership and continue its
business on the same terms and conditions set forth in this Agreement by forming
a new limited partnership on terms identical to those set forth in this
Agreement and having as a general partner a Person elected by the Limited
Partners holding at least 3/4 of the Percentage Interests of all the Limited
Partners. Upon any such election by such holders, all Partners shall be bound
thereby and shall be deemed to have consented thereto. Unless such an election
is made within 180 days after the event causing dissolution, the Partnership
shall wind up its affairs in accordance with Section 13.02 hereof. If such an
election is made within 180 days after the event causing dissolution, then:
(i) the reconstituted limited partnership shall continue until
the occurrence of a Liquidating Event as provided in this Section
13.01;
(ii) if the successor general partner is not the former
General Partner, then the interest of the former General Partner shall
be treated thenceforth as the interest of a Limited Partner; and
(iii) all necessary steps shall be taken to cancel this
Agreement and the Certificate and to enter into a new partnership
agreement and certificate of limited partnership, and the successor
general partner may for this purpose exercise the powers of attorney
granted the General Partner pursuant to Article 14;
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provided that the right of the Limited Partners holding at least -3/4 of the
Percentage Interests of all the Limited Partners to select a successor general
partner and to reconstitute and continue the business of the Partnership shall
not exist and may not be exercised unless the Partnership has received an
opinion of counsel that the exercise of the right would not result in the loss
of limited liability of any Limited Partner and neither the Partnership nor the
reconstituted partnership would cease to be treated as a partnership for federal
income tax purposes upon the exercise of such right to continue.
SECTION 13.2. Winding up. Upon the occurrence of a Liquidating Event,
the Partnership shall continue solely for the purposes of winding up its affairs
in an orderly manner, liquidating its assets, and satisfying the claims of its
creditors and Partners and no Partner shall take any action that is inconsistent
with, or not necessary to or appropriate for, the winding up of the
Partnership's business and affairs, provided that, all covenants contained in
this Agreement and all obligations provided for in this Agreement shall continue
to be fully binding upon the Partners until such time as the property of the
Partnership has been distributed pursuant to this Section 13.02 and the
Partnership has been terminated. The General Partner, or, upon the occurrence of
a Liquidating Event specified in Section 13.01(b) or 13.01(d), a Person elected
by the Limited Partners holding at least -3/4 of the Percentage Interests of all
Limited Partners, or, upon the occurrence of a Liquidating Event specified in
Section 13.01(d) after or as a result of which Liquidating Event there is no
remaining General Partner, a Person elected by all of the Partners, shall be
responsible for overseeing the winding up and dissolution of the Partnership
(the General Partner or any other Person elected pursuant to this Section 13.02
to wind up the affairs of the Partnership being referred to as the
"LIQUIDATOR"). Not later than 90 days after the date on which the Liquidating
Event occurred, (i) the Liquidator shall cause the Partnership to assign all of
its right, title and interest, free and clear of any Liens, to all of the
technologies owned by the Partnership to an entity which shall be jointly owned
by Danavox and ReSound, which entity shall be obligated to grant to each of
Danavox and ReSound royalty-free, perpetual, non-exclusive, worldwide licenses
to all such technology and (ii) the Liquidator shall take full account of the
Partnership's liabilities and assets (other than the assets referred to in (i)
immediately above) and shall cause such assets to be sold to AL1 (at a price
that shall not be less than the fair market value that could be obtained by
selling such assets to a third party) and the General Partner shall cause the
proceeds therefrom, to the extent sufficient therefor, to be applied and
distributed, to the maximum extent permitted by law, in the following order:
(a) first, to the payment and discharge of all of the Partnership's
debts
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and liabilities to creditors other than General Partners which are known or
ascertainable within 90 days after the occurrence of a Liquidating Event, other
than liabilities for distributions to Partners;
(b) second, to the payment and discharge of all of the Partnership's
debts and liabilities to General Partners which are known or ascertainable
within 90 days after the occurrence of a Liquidating Event, other than
liabilities for distributions to Partners; and
(c) the balance, if any, to the Partners in accordance with their
Capital Accounts, after giving effect to all contributions, distributions, and
allocations for all periods.
SECTION 13.3. Obligation to Restore Deficit. Capital Accounts;
Compliance With Timing Requirements of Regulations. In the event the Partnership
is "liquidated" within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g),
(a) distributions shall be made pursuant to this Section 13.03 to the Partners
who have positive Capital Accounts in compliance with Regulations Section
1.704-1(b)(2)(ii)(b)(2), and (b) notwithstanding anything to the contrary in
this Agreement, if the General Partner's Capital Account has a deficit balance
(after giving effect to all contributions, distributions, and allocations for
all taxable years, including the year during which such liquidation occurs), the
General Partner shall contribute to the capital of the Partnership cash in the
amount necessary to restore such deficit balance to zero within 90 days after
the date on which the Liquidating Event occurred.
SECTION 13.4. Allocations During Period of Liquidation. During the
period commencing on the date on which a Liquidating Event occurs and ending on
the date on which the assets of the Partnership are distributed to the Partners
pursuant to Section 13.02 hereof, the Partners shall continue to share Net
Profit, Net Loss and other items of Partnership income, gain, loss or deduction
in the manner provided in Article 4 hereof.
SECTION 13.5. Character of Liquidating Distributions. All payments made
in liquidation of the Interest of a retiring Partner shall be made in exchange
for the interest of such Partner in Partnership property pursuant to Section
736(b)(1) of the Code, including the interest of such Partner in Partnership
goodwill.
SECTION 13.6. Indemnification of the Liquidator. In the event that the
Liquidator is a Person other than the General Partner, the General Partner shall
indemnify, save harmless, and pay all judgments and claims against such
Liquidator relating to any liability or damage incurred by reason of its making
distributions to the Partners and in accordance with Section 13.02 hereof,
except to the extent
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such liability or damage is caused by the gross negligence, fraud, or willful
misconduct of the Liquidator.
ARTICLE 14
POWER OF ATTORNEY
SECTION 14.1. General Partner as Attorney-in-fact. Each Limited Partner
hereby makes, constitutes, and appoints the General Partner and each successor
General Partner, with full power of substitution and resubstitution, its true
and lawful attorney-in-fact for it and in its name, place, and stead and for its
use and benefit, to sign, execute, certify, acknowledge, swear to, file, and
record (a) all certificates of limited partnership, assumed name or similar
certificates, and other certificates and instruments (including counterparts of
this Agreement) which the General Partner deems necessary or appropriate to be
filed by the Partnership under the laws of the State of Delaware or any other
state or jurisdiction in which the Partnership is doing or intends to do
business; (b) any and all amendments or changes to this Agreement and the
instruments described in (a), as now or hereafter amended, which the General
Partner may deem necessary, desirable, or appropriate to effect a change or
modification of the Partnership in accordance with Section 10.01 of this
Agreement, including, without limitation, amendments or changes to reflect (i)
the exercise by the General Partner of any power granted to it under this
Agreement; (ii) any amendments adopted by the Partners in accordance with the
terms of this Agreement; (iii) the admission of any substituted Partner; and
(iv) the disposition by any Partner of its Interest in the Partnership; (c) all
certificates of cancellation and other instruments which the General Partner
deems necessary or appropriate to effect the dissolution and termination of the
Partnership pursuant to the terms of this Agreement; and (d) any other
instrument which is now or may hereafter be required by law to be filed on
behalf of the Partnership or is deemed necessary or desirable by the General
Partner to carry out fully the provisions of this Agreement in accordance with
its terms. Each Limited Partner authorizes each such attorney-in-fact to take
any further action which such attorney-in-fact shall consider necessary or
advisable in connection with any of the foregoing, hereby giving each such
attorney-in-fact full power and authority to do and perform each and every act
or thing whatsoever requisite or advisable to be done in connection with the
foregoing as fully as such Limited Partner might or could do personally, and
hereby ratifying and confirming all that any such attorney-in-fact shall
lawfully do or cause to be done by virtue thereof or hereof.
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SECTION 14.2. Special Power. The power of attorney granted pursuant to
this Article 14:
(a) is a special power of attorney coupled with an Interest and is
irrevocable;
(b) may be exercised by any such attorney-in-fact by listing the
Limited Partners executing any agreement, certificate, instrument, or other
document with the single signature of any such attorney-in-fact acting as
attorney-in-fact for such Limited Partners; and
(c) shall survive the bankruptcy, insolvency, dissolution, or cessation
of existence of a Limited Partner and shall survive the delivery of an
assignment by a Limited Partner of the whole or a portion of its interest in the
Partnership, except that where the assignment is of such Limited Partner's
entire interest in the Partnership and the assignee, with the consent of the
General Partner, is admitted as a substituted Limited Partner, the power of
attorney shall survive the delivery of such assignment for the sole purpose of
enabling any such attorney-in-fact to effect such substitution.
ARTICLE 15
DEFAULT
SECTION 15.1. Default. If (i) any Partner fails to make its Capital
Contribution or any required payments under the Development Contract within
fifteen Business Days after such contributions or payments are required to be
made, (ii) ReSound fails to exercise its option in full to purchase 220,264
shares of Series C Preferred Stock of AL1 on or promptly after January 1, 1997,
(iii) any Partner breaches Section 9.03 hereof or (iv) the Development Contract
has been terminated as to any Partner pursuant to the terms of Section VIII.A.
thereof, the Partnership shall have the right to purchase all of such Partner's
Interest at an amount equal to the lower of the Capital Contributions made by
such Partner during the time it was a Partner and the fair market value of such
Interest as determined by the General Partner. Such right to purchase shall be
assignable by the Partnership to any other Partner, or if no Partner is
interested, to any third-party. Any such failure under (i) or (ii) above, any
such breach of Section 9.03 hereof or any occurrence of the contingency under
(iv) above will also result in the loss of all rights under this Agreement and
any other agreements with the Partnership. Notwithstanding any such failure,
breach or occurrence and the consequences of this Section 15.01, such Partner
will continue to be required to license any newly developed or acquired
technologies relating to, and any
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enhancements in, Base DSP Technology (during the initial four years of the Term)
and Full DSP Technology (during the initial two years of the Term) to the
Partnership as required under the Development Contract.
ARTICLE 16
GENERAL INDEMNIFICATIONS
SECTION 16.1. Survival of Representations, Warranties and Covenants .
All representations, warranties, covenants and agreements of any Partner
contained in this Agreement or any Schedule hereto shall survive the execution
and delivery of this Agreement; provided that all such representations and
warranties shall thereafter terminate and expire on the third anniversary of the
Effective Date. All covenants and agreements of any party to this Agreement
shall survive the execution and delivery of this Agreement.
SECTION 16.2. Obligation of the Partners. Each Partner agrees to
indemnify, defend and hold harmless the Partnership, any Affiliate of the
Partnership, and each other Partner and their Affiliates, and their successors
in interest and permitted transferees and assigns against all losses (including,
without limitation, any decrease in the value of an Interest), liabilities,
damages, deficiencies, demands, claims, actions, judgments, assessments, costs
or expenses (including, without limitation, interest, penalties and reasonable
attorneys' fees and disbursements) ("LOSSES") based upon, arising out of or
otherwise in respect of any inaccuracy in or any breach of any representation or
warranty or any covenant or agreement of such Partner or its Affiliates
contained in this Agreement.
SECTION 16.3. Obligations of the Partnership to Indemnify. The
Partnership agrees to indemnify, defend and hold harmless each Limited Partner,
each Affiliate thereof and their successors and permitted transferees and
assigns from and against all Losses based upon, arising out of or otherwise in
respect of any claims, actions, demands or investigations brought or threatened
to be brought by or against the Partnership; provided that no indemnity shall be
provided to any Limited Partner who has acted with intentional misconduct or
gross negligence.
SECTION 16.4. Notice of Opportunity to Defend. (a) If any party to this
Agreement (or a successor or permitted transferee or assign) becomes aware of or
otherwise receives notice of any demand or claim or commencement of any action,
proceeding or investigation (an "ASSERTED LIABILITY") that may result in an
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indemnifiable Loss to such party, such party (the "INDEMNITEE") shall give
notice thereof (the "CLAIMS NOTICE") to any party (or parties) obligated to
provide indemnification in respect of such Asserted Liability pursuant to
Article 15 (the "INDEMNIFYING PARTY"). Notwithstanding the foregoing, the
failure so to give prompt notice to the Indemnifying Party will not relieve the
Indemnifying Party from Liability under this Article 16, except to the extent
such failure or delay results in the forfeiture by the Indemnifying Party of
substantial rights and defenses. The Claims Notice shall describe the Asserted
Liability in reasonable detail, and shall indicate the amount (estimated, if
necessary and to the extent feasible) of the Loss that has been or may be
suffered by the Indemnitee.
(b) With respect to any Asserted Liability that arises out of any
action or proceeding brought by a third party (a "THIRD PARTY ACTION"), the
Indemnifying Party may elect to compromise or defend (subject to paragraph (c)
below), at its own expense and by counsel reasonably satisfactory to the
Indemnitee, such Third Party Action, provided that the Indemnifying Party has
agreed in writing to indemnify the Indemnitee for the full amount of such
liability. If the Indemnifying Party elects to settle, compromise or defend such
Third Party Action, it shall within 30 days (or sooner, if the nature of the
Third Party Action so requires) notify the Indemnitee of its intent to do so,
and the Indemnitee shall cooperate, at the expense of the Indemnifying Party, in
the settlement or compromise of, or defense against, such Third Party Action.
(c) An Indemnifying Party shall not, without the prior written consent
of the Indemnitee, settle or compromise or consent to the entry of any judgment
with respect to any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not the
Indemnitee is an actual or potential party to such claim or action) unless such
settlement, compromise or consent includes an unconditional release of the
Indemnitee from all liability arising out of such claim, action, suit or
proceeding. If the Indemnifying Party chooses to defend any claims, the
Indemnitee shall make available to the Indemnifying Party any books, records or
other documents within its control that are reasonably necessary or appropriate
for such defense.
ARTICLE 17
MISCELLANEOUS
SECTION 17.1. Notices. Any notice, payment, demand, or communication
required or permitted to be given by any provision of this Agreement shall be in
writing and shall be delivered personally or by hand to the Person or to an
officer
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of the Person to whom the same is directed, or sent by facsimile or other
similar and immediate method of delivery, addressed as follows, or to such other
address as such Person may from time to time specify by notice to the Partners:
(a) If to the Partnership, to the address for its principal place of
business set forth in Section 2.06 hereof;
(b) If to a General Partner, to the address set forth in Section 3.07
hereof; and
(c) If to a Limited Partner, to the address set forth in Section 3.08
hereof. Any such notice shall be delivered by hand, facsimile or other similar
and immediate method of delivery and shall be deemed to be delivered, given, and
received for all purposes as of the date so delivered. Any Person may from time
to time specify a different address by notice to the Partnership and the
Partners.
SECTION 17.2. Binding Effect. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Partners and their respective
successors and permitted transferees and assigns.
SECTION 17.3. Construction. Every covenant, term, and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Partner. The terms of this Agreement are intended to
embody the economic relationship among the Partners and shall not be subject to
modification by or conform with any actions by the Internal Revenue Service
except as this Agreement shall be explicitly so amended. The previous sentence
shall not apply to the filing of tax returns.
SECTION 17.4. Arbitration. All disputes arising out of this Agreement
shall be settled as far as possible by negotiations between the Partners. If the
Partners cannot agree on an amicable settlement within thirty days from written
submission of the matter by one or more of the Partners to the other Partner or
Partners, the matter shall be submitted for decision and final resolution to
arbitration to the exclusion of any courts of law, under the rules of
Conciliation and Arbitration of the International Chamber of Commerce of Paris,
France (the "ICC").
The arbitration tribunal shall be composed of one disinterested
arbitrator, appointed pursuant to the following procedure: the Partner or
Partners invoking arbitration shall notify the other Partner or Partners by
registered air mail stating the substance of its or their claim. The Partners
shall agree on the arbitrator, who
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may be a citizen of any country. Within thirty days of receipt of such
notification, the other Partner or Partners shall notify the initiating Partner
or Partners in the manner provided in Section 17.01 hereof its or their answer
to the claim made, and any counterclaim which it wishes or they wish to assert
in the arbitration. If the Partners are unable to agree to an arbitrator within
thirty days, appointment of the arbitrator shall be made by the Court of
Arbitration of the ICC upon request by any Partner.
The arbitrator will decide the dispute in accordance with the internal
laws of the State of Delaware. The decision shall be rendered in writing, shall
state the reasons on which it is based, and shall bear the signature of the
arbitrator. It also shall identify the time and place of the award granted.
Finally, it shall determine the expenses of the arbitration and the Partner or
Partners who shall be charged therewith or the allocation of the expenses
between the Partners in the discretion of the tribunal.
The arbitration decision shall be rendered as soon as possible, not
later, however, than six months after the constitution of the arbitration
tribunal. The arbitration decision shall be final and binding upon all of the
Partners and the Partners agree that any award granted pursuant to such decision
may be entered forthwith in any court of competent jurisdiction. This
arbitration clause and any award rendered pursuant to it shall be governed by
the United Nations Convention on the Recognition and Enforcement of Foreign
Arbitration Awards signed in New York on June 10, 1958.
The seat of arbitration will be New York City, unless the Partners
otherwise agree in writing. The official arbitration language shall be English.
SECTION 17.5. Assignability. No Partner may assign its rights or
obligations under this Agreement to a third party except in connection with a
Permitted Transfer as described above.
SECTION 17.6. Headings. Article and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
SECTION 17.7. Severability; Integration. Every provision of this
Agreement is intended to be severable. If any term or provision hereof is
illegal or invalid for any reason whatsoever, such illegality or invalidity
shall not affect the validity or legality of the remainder of this Agreement.
This Agreement, the Development Agreement, the Employment Services Agreement and
the
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Shareholders Agreement and certain employment agreements by and among AL1 and
its employees, each dated as of the Effective Date, constitute the entire
agreement among the parties with regard to this subject matter, and no other
agreement, statement, promise, or practice among the parties relating to this
subject matter shall be binding on the parties.
SECTION 17.8. Further Action. Each Partner, upon the request of any
General Partner, agrees to perform all further acts and execute, acknowledge,
and deliver any documents which may be reasonably necessary, appropriate, or
desirable to carry out the provisions of this Agreement.
SECTION 17.9. Variation of Pronouns. All pronouns and any variation
thereof shall be deemed to refer to masculine, feminine, or neuter, singular or
plural, as the identity of the Person or Persons may require.
SECTION 17.10. Governing Law. The law of the State of Delaware shall
govern the validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the Partners.
SECTION 17.11. Waiver of Action for Partition; No Xxxx for Partnership
Accounting. Each of the Partners irrevocably waives any right that such Partner
may have to maintain any action for partition with respect to any of the
property of the Partnership. To the fullest extent permitted by applicable law,
each of the Partners covenants that it will not (except with the consent of the
General Partner) file a xxxx for Partnership accounting.
SECTION 17.12. Counterpart Execution. This Agreement may be executed in
any number of counterparts with the same effect as if all of the Partners had
signed the same document. All counterparts shall be construed together and shall
constitute one agreement.
SECTION 17.13. Sole and Absolute Discretion. Except as otherwise
provided in this Agreement, all actions which the General Partner may take and
all determinations which the General Partner may make pursuant to this Agreement
may be taken and made at the sole and absolute discretion of the General
Partner.
SECTION 17.14. Limitation on Limited Partner Obligations. Except as
otherwise required by law, no Limited Partner shall (i) have any liability for
the obligations or liabilities of the Partnership or (ii) owe any duty
(including, without limitation, fiduciary duties) to the Partnership or any
other Partner.
SECTION 17.15. Expenses. The expenses incurred by the outside advisors
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of the Partners and the Partnership in connection with (i) the negotiation of
this Agreement and the Ancillary Agreements and (ii) the formation of the
Partnership shall be borne by and allocated among the Partners and the
Partnership as agreed by the AudioLogic Designees, the Danavox Designees and the
ReSound Designees after the Effective Date.
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IN WITNESS WHEREOF, the parties have entered into this Agreement of
Limited Partnership as of the day first above set forth.
AUDIOLOGIC, INC.
By:__________________________________
GN DANAVOX, AS
By:__________________________________
By:__________________________________
RESOUND CORPORATION
By:__________________________________
XXXX XXXXXXXX
_____________________________________
XXXXX XXXXXXX
_____________________________________
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XXXX XXXXXXXXX
_____________________________________
XXX XXXXXXX
_____________________________________
XXXXX XXXXXXX
_____________________________________
XXXXX XXXXX
_____________________________________
XXXX XXXXXX
_____________________________________
XXXXX XXXXX
_____________________________________
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XXXXX XXXXXXX
_____________________________________
XXXXXXXXX XXXXXXX
_____________________________________
XXXXXXXXXXX XXXXXXXXXX
_____________________________________
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SCHEDULE 1.01(a)(v)
ANCILLARY AGREEMENTS
(1) Development, Licensing and Distribution Agreement by and among Danavox,
ReSound and AL1 dated September 30, 1996.
(2) Shareholders Agreement by and among Danavox, ReSound and AL1 dated
September 30, 1996.
(3) Employment Services Agreement by and among AL1 and the Partnership
dated September 30, 1996.
(4) Cross License Agreement by and among Danavox and ReSound dated
September 30, 1996.
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SCHEDULE 1.01(a)(xxviii)
PERCENTAGE INTERESTS
After the Effective Date, the Percentage Interest of any Partner shall
be adjusted as follows:
(A) following the repurchase by the Partnership of all or a portion of
a Manager's Interest, the Percentage Interest of each remaining Partner shall be
equal to a fraction of which:
(i) the numerator is such Partner's Percentage Interest
immediately prior to the redemption, other than the redeeming partner
whose Percentage Interest is the Percentage Interest before the
redemption less the percentage redeemed, and
(ii) the denominator is the sum of the remaining Partner
Percentage Interests immediately prior to the redemption, other than
the redeeming partner whose Percentage Interest is the Percentage
Interest before the redemption less the percentage redeemed.
(B) at the time of any Capital Contribution pursuant to Section 3.06,
the Percentage Interest of each Limited Partner shall be adjusted to be equal to
the fraction of which:
(i) the numerator is the sum of (a) the Percentage Interest of
such Limited Partner prior to such Capital Contribution multiplied by
the sum of all Initial Capital Contributions and the sum of all prior
Capital Contributions made pursuant to Section 3.06, plus, (b) the
Capital Contribution being made by such Limited Partner at such time,
and
(ii) the denominator is the sum of (a) all Initial Capital
Contributions, (b) the sum of all prior Capital Contributions made
pursuant to Section 3.06, (c) and the sum of all Capital Contributions
being made at such time.
(C) If a Limited Partner purchases an Interest from any other Limited
Partner, the purchasing Limited Partner's Percentage Interest shall be increased
by the amount of the Percentage Interest purchased. If there is a simultaneous
purchase by a Limited Partner of another Limited Partner's Interest and a
64
redemption by the Partnership, the purchase by the Limited Partner will be
deemed to occur first.
(D) After the Effective Date, the General Partner will contribute at
the time of any Capital Contribution an amount sufficient to maintain a 1%
Percentage Interest and a capital account equal to 1% of the total positive
capital account balance of the Partnership.
65
SCHEDULE 3.09
REPRESENTATIONS AND WARRANTIES OF AL1
AL1 represents and warrants to the Partnership and each other Partner
as of the Effective Date that:
1. Corporate Existence and Power. AL1 is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all material
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted. AL1 has heretofore delivered to the
Partnership and each of the Partners true and complete copies of its certificate
of incorporation and bylaws as currently in effect.
2. Corporate Authorization. The execution, delivery and performance by
AL1 of this Agreement and each Ancillary Agreement to which it is a party are
within AL1's corporate powers and have been duly authorized by all necessary
corporate action on the part of AL1. This Agreement and each Ancillary Agreement
to which it is a party constitutes a valid and binding agreement of AL1
enforceable in accordance with its terms.
3. Governmental Authorization. The execution, delivery and performance
by AL1 of this Agreement and each Ancillary Agreement to which it is a party
require no action by or in respect of, or filing with, any governmental body,
agency or official.
4. Non-Contravention. The execution, delivery and performance by AL1 of
this Agreement and each Ancillary Agreement to which it is a party do not and
will not (a) violate the certificate of incorporation or bylaws of AL1, (b)
violate any applicable law, rule, regulation, judgment, injunction, order or
decree; (c) constitute a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of AL1 or to a loss of
any benefit relating to the Business to which AL1 is entitled under any
provision of any agreement, contract or other instrument binding upon AL1 or by
which any of the Contributed Assets is or may be bound or any Permit or (d)
result in the creation or imposition of any Lien on any Contributed Asset, other
than Permitted Liens.
5. Required and Other Consents. (a) There is no agreement, contract,
Permit or other instrument binding upon AL1 which requires a consent as a result
of the execution, delivery and performance of this Agreement, except such
consents as would not, individually or in the aggregate, have a Material Adverse
Effect if not received by the Closing Date (each such consent, a "REQUIRED
66
CONSENT" and together the "REQUIRED CONSENTS").
6. Financial Statements. The Balance Sheet attached hereto as Exhibit A
and the related income statement dated as of September 30, 1996 taken as a whole
(collectively, the "FINANCIAL STATEMENTS") fairly present, in conformity with
generally accepted accounting principles applied on a consistent basis (except
as may be indicated in the notes thereto), the financial position of the
Business taken as a whole as of the dates thereof and its results of operations
and cash flows for the periods then ended (subject to normal year-end
adjustments in the case of any unaudited interim financial statements).
7. Absence of Certain Changes. Since the Balance Sheet Date, the
Business has been conducted in the ordinary course consistent with past
practices, and there has not been:
(a) any event, occurrence, development or state of
circumstances or facts which has had or could reasonably be expected to
have a Material Adverse Change;
(b) any incurrence, assumption or guarantee by AL1 of any
indebtedness for borrowed money with respect to the Business other than
in the ordinary course of business and in amounts and on terms
consistent with past practices, but in any event not exceeding $50,000;
(c) any creation or other incurrence of any Lien on any
material Contributed Asset other than in the ordinary course of
business consistent with past practices;
(d) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the Business or any Contributed
Asset which, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect;
(e) any transaction or commitment made, or any contract or
agreement entered into, by AL1 relating to the Business or any
Contributed Asset (including the acquisition or disposition of any
assets) or any relinquishment by AL1 of any contract or other right, in
either case, material to the Business taken as a whole, other than
transactions and commitments in the ordinary course of business
consistent with past practices and those contemplated by this
Agreement;
(f) any (i) employment, deferred compensation, severance,
retirement or other similar agreement entered into with any employee of
the Business (or any amendment to any such existing agreement), (ii)
grant
67
of any severance or termination pay to any such employee or (iii)
change in compensation or other benefits payable to any such employee
pursuant to any severance or retirement plans or policies.
8. Technologies. Annex 8(a) hereto correctly describes technologies
used in the Business included in the Contributed Assets (the "TECHNOLOGIES"),
which AL1 owns or has licenses to.
9. Sufficiency of and Title to the Contributed Assets. (a) Except for
the Excluded Assets, the Contributed Assets constitute all of the assets or
property used or held for use in the Business.
(b) Upon consummation of the transactions contemplated hereby, the
Partnership will have acquired good and marketable title in and to, or a valid
leasehold interest in, each of the Contributed Assets, free and clear of all
Liens, except for Permitted Liens.
10. No Undisclosed Material Liabilities. There are no liabilities of
the Business of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing condition,
situation or set of circumstances which could reasonably be expected to result
in such a liability, other than:
(a) liabilities provided for in the Balance Sheet or disclosed
in the notes thereto; and
(b) other undisclosed liabilities which, individually or in
the aggregate are not material to the Business, taken as a whole.
11. Litigation. There is no action, suit, investigation or proceeding
pending against, or to the knowledge of AL1, threatened against or affecting,
the Business or any Contributed Asset before any court or arbitrator or any
governmental body, agency or official which, if determined or resolved adversely
in accordance with the plaintiff's demands, would reasonably be expected to have
a Material Adverse Effect or which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay the transactions contemplated hereby.
12. Compliance with Laws and Court Orders. AL1 is not in violation of
and to AL1's knowledge is not under investigation with respect to or has not
been threatened to be charged with or given notice of any violation of, any law,
rule, regulation, judgment, injunction, order or decree applicable to the
Contributed Assets or the conduct of the Business, except for violations that
have not had and could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect.
56
68
13. Intellectual Property. (a) Annex 13 hereto contains a list of all
trademarks, service marks, trade names, inventions, patents, trade secrets,
copyrights, software rights, know-how (including, without limitation, any
registrations or applications for registration of any of the foregoing) or any
other similar type of proprietary intellectual property right (the "INTELLECTUAL
PROPERTY RIGHTS") owned or licensed and used or held for use by AL1 (the "AL1
INTELLECTUAL PROPERTY RIGHTS"), specifying as to each, as applicable: (i) the
nature of such Intellectual Property Right; (ii) the owner of such Intellectual
Property Right; (iii) the jurisdictions by or in which such Intellectual
Property Right is recognized without regard to registration or has been issued
or registered or in which an application for such issuance or registration has
been filed, including the respective registration or application numbers; and
(iv) licenses, sublicenses and other agreements as to which AL1 is a party and
pursuant to which any Person is authorized to use such Intellectual Property
Right, including the identity of all parties thereto, a description of the
nature and subject matter thereof, the applicable royalty and the term thereof.
(b) (i) AL1 has not been a defendant in any action, suit, investigation
or proceeding relating to, or otherwise been notified of, any claim of alleged
infringement of any Intellectual Property Rights, and, to the knowledge of AL1,
there is no other such infringement by AL1 and (ii) to the knowledge of AL1,
there is no continuing infringement by any other Person of any AL1 Intellectual
Property Rights. No AL1 Intellectual Property Right is subject to any
outstanding judgment, injunction, order, decree or agreement restricting the use
thereof by AL1 or restricting the licensing thereof by AL1 to any Person. AL1
has not entered into any agreement to indemnify any other Person against any
charge of infringement of any Intellectual Property Right.
(c) None of the processes and formulae, research and development
results and other know-how of AL1 (including, without limitation, AL1
Intellectual Property Rights), the value of which to AL1 is contingent upon
maintenance of the confidentiality thereof, has been disclosed by AL1 to any
Person other than employees, representatives and agents of, or potential
investors in, AL1, all of whom are bound by written confidentiality agreements
substantially in the form previously disclosed to ReSound and Danavox.
(d) AL1 has taken reasonable steps to establish and preserve its
ownership of all of the AL1 Intellectual Property Rights.
(e) All of the officers, directors, employees, agents and consultants
of AL1 have executed assignment of invention/confidentiality agreements and none
of such
69
Persons is in violation thereof.
70
ANNEX 8(A)
AUDIOLOGIC, INC.
TECHNOLOGY DESCRIPTION
AUDIOLOGIC TECHNOLOGY:
[*]
1.[*]
[*]
2.[*]
[*]
[*]
3.[*]
[*]
[*]
4.[*]
[*]
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
71
[*]
5.[*]
[*]
[*]
6.[*]
[*]
[*]
7.[*]
8.[*]
[*]
1.[*]
2.[*]
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
72
[*]
[*]
1.[*]
2.[*]
3.[*]
4.[*]
5.[*]
6.[*]
7.[*]
8.[*]
9.[*]
10.[*]
11.[*]
12.[*]
13.[*]
14.[*]
15.[*]
16.[*]
17.[*]
18.[*]
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
73
19.[*]
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
74
ANNEX 13
All of the Intellectual Property listed on Annex 8(a) to Schedule 3.09, in
addition to the following trademarks:
Federally Registered Marks
AUDALLION Registration Number 1,964,581
Applications for Federal Registration Based on Intent-to-Use
AL AUDIOLOGIC (stylized letters) Serial Number 74/361089
SOUNDBEAM Serial Number 74/433222
PSP PERSONALIZED SPEECH PROCESSOR Serial Number 74/427173
75
SCHEDULE 3.10
REPRESENTATIONS AND WARRANTIES OF DANAVOX AND RESOUND
Danavox and ReSound each severally represent and warrant to each of the
other Partners and to each other as of the Effective Date that:
1. Organization and Existence. It is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all corporate powers and all material governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted.
2. Corporate Authorization. The execution, delivery and performance by
it of this Agreement are within its corporate powers and have been duly
authorized by all necessary corporate action on its part. This Agreement
constitutes a valid and binding agreement of such entity.
3. Governmental Authorization. The execution, delivery and performance
by it of this Agreement require no action by or in respect of, or filing with,
any governmental body, agency or official.
4. Non-Contravention. The execution, delivery and performance by it of
this Agreement do not and will not (a) violate its certificate of incorporation
or bylaws or (b) assuming compliance with the matters referred to in Section 3
above, violate any applicable law, rule, regulation, judgment, injunction, order
or decree.
5. Litigation. There is no action, suit, investigation or proceeding
pending against it, or to its knowledge threatened against or affecting it
before any court or arbitrator or any governmental body, agency or official
which in any manner challenges or seeks to prevent, enjoin, alter or materially
delay the transactions contemplated hereby.
76
EXHIBIT A
AL1 ASSET TRANSFER TO AL2
ADJUSTED
9/30/96 AL1 9/30/96 AL1 ALLOCATIONS
BALANCE SHEET ADJUSTMENTS BALANCE SHEET AL1* AL2**
ASSETS
CASH [*] [*] [*] [*]
OTHER CURRENT ASSETS [*] [*] [*] [*]
FIXED ASSETS [*] [*] [*] [*]
OTHER ASSETS [*] [*] [*] [*]
INVESTMENT IN AL2 [*] [*] [*]
AL2 RECEIVABLE
TOTAL ASSETS [*] [*] [*] [*] [*]
LIABILITIES [*] [*] [*] [*] [*]
TOTAL LIABILITIES [*] [*] [*] [*] [*]
CAPITAL [*]
RESULTS OF OPERATIONS
NET WORTH [*] [*] [*] [*]
TOTAL LIABILITIES AND [*] [*] [*] [*] [*]
CAPITAL
* - Excluded Assets and Excluded Liabilities per Section 3.02
** - Contributed Assets and Assumed Liabilities per section 3.02
*** - Estimate - Subject to revision including any revisions per Section 17.15
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
77
EXHIBIT B
Budget
[*] Budget AUDIOLOGIC/DANAVOX/RESOUND
(US$1000, except Units)
1998 1998
WORK PACKAGE RESP TOTAL 1996 1997 (Q1 & Q2) (Q3 & Q4) 1999 2000
[*]
Dx Payments 6,700 (of which $219,000 is a capital contribution under the
Partnership Agreement)
RS Payments 6,700 (of which $219,000 is a capital contribution under the
Partnership Agreement)
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
78
EXHIBIT C
AL1
EXCLUDED ASSETS AT 9/30/96
AL1 RAW MATERIALS AT 9/30/96 - [*] [*]
TRADE RECEIVABLES AT 9/30/96 - [*] [*]
[*] COMPUTER [*]
OSCILLOSCOPE - 1/26/95 LAB EQUIP [*]
NET ORGANIZATIONAL COSTS [*]
TOTAL EXCLUDED ASSETS [*]
AL1
EXCLUDED LIABILITIES AT 9/30/96
PAYROLL TAX LIABILITY [*]
ACCRUED VACATION [*]
SALES TAX PAYABLE [*]
TOTAL EXCLUDED LIABILITIES [*]
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
