1
PURCHASE AND LOAN AGREEMENT
by and between
FRANKLIN ELECTRONIC PUBLISHERS, INC.
and
VOICE POWERED TECHNOLOGY INTERNATIONAL, INC.
Dated May 21, 1997
2
TABLE OF CONTENTS
Page
ARTICLE I
PURCHASE AND SALE OF ASSETS AND COMMON STOCK; LOAN TO SELLER 1
Section 1.01 Sale of Assets 1
Section 1.02 Issue and Sale of Common Stock 2
Section 1.03 Loan to Seller 3
ARTICLE II
THE CLOSING; PURCHASE PRICE 4
Section 2.01 Closing 4
Section 2.02 Purchase Price; Allocation; Payment of
the Purchase Price and the Loan 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER 5
Section 3.01 Organization and Good Standing 5
Section 3.02 Authority of the Seller 5
Section 3.03 No Default; Non-Contravention 5
Section 3.04 Consents and Approvals 6
Section 3.05 Liens 6
Section 3.06 Inventory 6
Section 3.07 Equipment 6
Section 3.08 Sufficiency of the Assets 7
Section 3.09 Litigation 7
Section 3.10 SEC Reports 7
Section 3.11 KBK Line of Credit 8
Section 3.12 Ordinary Course; No Material Adverse Change 8
Section 3.13 Purchaser Shares 8
Section 3.14 Disclosure 8
Section 3.15 Finder's Fees 8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 9
Section 4.01 Organization and Good Standing 9
Section 4.02 Authority Relative to Agreement 9
Section 4.03 No Default; Non-Contravention 9
Section 4.04 Consents and Approvals 10
Section 4.05 Purchaser Qualification; Investment, Intent 10
Section 4.06 Finder's Fees 10
ARTICLE V
POST-CLOSING COVENANTS 11
Section 5.01 Borrowings of the Seller 11
Section 5.02 Customer Notification 11
Section 5.03 Transfer Taxes 11
Section 5.04 Post-Closing Cooperation 11
i
3
TABLE OF CONTENTS - (CONTINUED)
Section 5.05 Software Testing 12
Section 5.06 Sale and Purchase of Model 5150 Returns 12
Section 5.07 Subordination of Security Interest 12
ARTICLE VI
INDEMNIFICATION 12
Section 6.01 Indemnification by the Seller 12
Section 6.02 Indemnification by the Purchaser 13
Section 6.03 Termination of Indemnification 13
Section 6.04 Procedures 13
Section 6.05 Survival of Representations 15
ARTICLE VII
MISCELLANEOUS 15
Section 7.01 Entire Agreement 15
Section 7.02 Notices 15
Section 7.03 Successors and Assigns 16
Section 7.04 Governing Law 16
Section 7.05 Gender and Person 16
Section 7.06 Interpretation 16
Section 7.07 Confidentiality of Disclosures 18
Section 7.08 Publicity 18
Section 7.09 Consent to Jurisdiction 19
Section 7.10 Specific Performance 19
Section 7.11 Fees and Expenses 19
Section 7.12 Amendment 19
Section 7.13 Extension; Waiver 20
Section 7.14 Costs of Enforcement 20
Section 7.15 Third Parties 20
Section 7.16 Counterparts 20
ii
3
EXHIBITS
Exhibit A Form of New Promissory Note
Exhibit B Form of New Security Agreement
SCHEDULES
Schedule 1.01(a)(i) Inventory
Schedule 1.01(a)(iii) Equipment
Schedule 1.01(a)(iv) Assigned Contracts
Schedule 3.06 Inventory
Schedule 3.07 Equipment
Schedule 3.10 SEC Reports
Schedule 3.12 Ordinary Course; No Material
Adverse Change
Schedule 3.15 Finder's Fees
Schedule 5.06 Sale and Purchase of
Model 5150 Returns
Schedule 7.08 Publicity
iii
4
PURCHASE AND LOAN AGREEMENT
PURCHASE AND LOAN AGREEMENT, dated May 21, 1997, by and
between Franklin Electronic Publishers, Inc., a Pennsylvania corporation (the
"Purchaser"), and Voice Powered Technology International, Inc., a California
corporation (the "Seller").
W I T N E S E T H :
WHEREAS, the Seller is willing to sell, and the Purchaser is
willing to purchase, on the terms and subject to the conditions hereinafter set
forth, (i) all of the inventory of the Seller's IQ Voice Model 5150 Voice Pocket
Organizer (the "Model 5150") and the Seller's IQ Voice Model 5160 Voice Pocket
Organizer (the "Model 5160"), and all of the Seller's assets used in the
manufacture and sale thereof, and (ii) 2,000,000 shares of the Seller's common
stock, par value $.001 per share (the "Common Stock");
WHEREAS, the Purchaser is willing to loan to the Seller, and
the Seller is willing to repay to the Purchaser, on the terms and subject to the
conditions hereinafter set forth, an amount in cash equal to $1,200,000;
WHEREAS, simultaneous with the execution of this Agreement,
the Purchaser and the Seller are entering into a Technology Transfer Agreement
pursuant to which the Purchaser will acquire certain rights to the Seller's low
power voice recognition technology known as Voice Logic(TM) technology.
NOW, THEREFORE, the parties agree as follows:
Article 1.
PURCHASE AND SALE OF ASSETS AND COMMON STOCK; LOAN TO SELLER
Section 1.01 Sale of Assets. (a) The Seller agrees that at the Closing Time
it will sell, transfer, convey, assign and deliver to the Purchaser, free and
clear of all mortgages, charges, pledges, liens, security interests, claims,
encumbrances and restrictions, of any kind or nature ("Liens"), all the Seller's
right, title and interest in and to all of the Seller's:
(i) (A) supplies, parts (including micro-controllers), spare
parts and operating supplies needed to complete the manufacture of the
outstanding purchase orders issued by the Seller as of the Closing
Date for the Model 5150 and the Model 5160, and (B) raw materials,
work-in-process, and packaging materials used in connection with the
manufacture of the Model 5150 and the Model 5160, and all finished
goods and other inventory of the Model 5150 and the
5
Model 5160 set forth in Schedule 1.01(a)(i)
(collectively, the "Inventory");
(ii) customer telephone numbers, customer lists, supplier lists,
referral lists, purchase or customer orders, and advertising materials
and data, used in the sale of the Model 5150 and the Model 5160
(collectively, the "Selling Materials"); provided, however, that if
the Seller uses any of the Selling Materials for additional business
purposes other than in connection with the Model 5150 or the Model
5160, the Seller shall be permitted to retain and use a copy of such
Selling Materials;
(iii)tangible personal property and interests therein, including
all machinery, equipment, computer hardware and software and all other
tangible assets and properties of the Seller, used in the manufacture
and tooling of the Model 5150 and the Model 5160, and all
hardware-related deliverables, software-related deliverables and
marketing deliverables set forth in Schedule 1.01(a)(iii)
(collectively, the "Equipment");
(iv) all outstanding contracts, licenses, permits, leases and
commitments (including purchase orders and sales orders) to which the
Seller is a party or by which the Seller is bound that are listed in
Schedule 1.01(a)(iv) that arise primarily out of the manufacture or
sale of the Model 5150 and the Model 5160, together with all
prepayments received by the Seller therefrom (collectively, the
"Assigned Contracts"); and
(v) all rights, claims and credits to the extent relating to any
Assumed Liabilities (as defined in Section 1.01(b)), the Inventory,
the Selling Material, the Equipment and the Assigned Contracts
(collectively, the "Rights and Claims"). The Rights and Claims,
Inventory, Selling Material, Equipment and Assigned Contracts shall
collectively be referred to herein as the "Assets."
(b) Assumed Liabilities. The Purchaser shall assume, effective as of
the Closing Date, and from and after the Closing Date, the Purchaser shall
pay, perform and discharge when due, all of the Seller's liabilities,
obligations and commitments under the Assigned Contracts (the "Assumed
Liabilities"). Other than the Assumed Liabilities, the Purchaser shall not
assume any liabilities or obligations of the Seller of any kind, character
or description, whether known or unknown, direct or indirect, absolute or
contingent, in connection with the Purchaser's purchase of the Assets or
otherwise (the "Excluded Liabilities").
(c) Consents of Third Parties. Notwithstanding anything in this
Agreement to the contrary, this Agreement shall not constitute an agreement
to assign any Asset if an attempted
2
6
assignment thereof, without the consent of a third party, would constitute
a breach or other contravention thereof, would be ineffective with respect
to any party thereto or would in any way adversely affect the rights of the
Seller or, upon transfer, the Purchaser thereunder; and any transfer or
assignment by the Seller to, or any assumption by, the Purchaser of any
interest in, or liability, obligation or commitment under, any such Asset
that requires the consent of a third party shall be made subject to such
consent being obtained. To the extent any Assigned Contract may not be
assigned to the Purchaser by reason of the absence of any such consent, the
Purchaser shall not be required to assume any Assumed Liabilities arising
under such Assigned Contract. If any such consent is not obtained prior to
the Closing, the Seller and the Purchaser shall cooperate (at the Seller's
own expense) in any lawful and reasonable arrangement reasonably proposed
by the Purchaser under which the Purchaser shall obtain the economic
claims, rights and benefits under the asset, claim or right with respect to
which the consent has not been obtained in accordance with this Agreement,
including subcontracting, sublicensing or subleasing to the Purchaser and
enforcement of any and all rights of the Seller against the other party
thereto arising out of a breach or cancellation thereof by the other party.
(d) Transfer Documents. The sale, transfer, conveyance, assignment and
delivery by the Seller to the Purchaser of the Assets shall be effected on
the Closing Date by deliveries by the Seller to the Purchaser of (i) all
assignments, bills of sale and other instruments of conveyance as the
Purchaser may reasonably request, in form and substance reasonably
satisfactory to the Purchaser and its counsel, and (ii) all other documents
and instruments required to be delivered by the Seller under the terms of
this Agreement.
(e) Bulk Transfer Laws. The Purchaser hereby waives compliance by the
Seller with the provisions of any so-called "bulk transfer law" of any
jurisdiction in connection with the sale of the Assets to the Purchaser.
Section 1.02 Issue and Sale of Common Stock. At the Closing Time, the
Seller shall issue and sell to the Purchaser 2,000,000 shares of Common Stock
(the "Purchaser Shares"), free and clear of all Liens, by delivering to the
Purchaser a stock certificate representing the Purchaser Shares.
Section 1.03 Loan to the Seller. At the Closing Time, (i) the Purchaser
shall make a cash loan to the Seller in an amount equal to $1,200,000 (the
"Loan") and shall cancel the $500,000 Promissory Note, dated March 10, 1997,
executed by the Seller in favor of the Purchaser (the "Old Promissory Note"),
(ii) the Seller shall execute a new Promissory Note in favor of the Purchaser in
the form attached hereto as Exhibit A (the "New Promissory Note") in an amount
equal to $1,708,750, which amount
3
7
represents the Loan plus the $500,000 loan
made by the Purchaser to the Seller on March 10, 1997, plus $8,750 of accrued
and unpaid interest on the Old Promissory Note through the Closing Date, and
(iii) the Security Agreement, dated March 10, 1997, entered into by the
Purchaser and the Seller, shall be terminated, and the Purchaser and the Seller
shall each execute a new Security Agreement in the form attached hereto as
Exhibit B (the "New Security Agreement").
Article 2.
THE CLOSING; PURCHASE PRICE
Section 2.01 Closing. The closing (the "Closing") of the transactions
contemplated by Article I shall take place at 1:00 p.m., local time, on the date
of this Agreement, via facsimile and wire transfer. Hereinafter, the date on
which the Closing shall take place is referred to as the "Closing Date" and the
time on the Closing Date when the Closing shall take place is referred to as the
"Closing Time."
Section 2.02 Purchase Price; Allocation; Payment of the Purchase Price and
the Loan.
(a) The aggregate purchase price (the "Purchase Price") for the Assets
and the Purchaser Shares shall be $585,000.
(b) The Purchase Price shall be allocated as follows: (i) $156,366.94
for the Inventory, (ii) $278,633.06 for the Selling Materials and the
Equipment, and (iii) $150,000 for the Purchaser Shares.
(c) At the Closing Time, the Purchaser shall deliver to the Seller
payment, by wire transfer to a bank account designated in writing by the
Seller at least two business days prior to the Closing Date, in immediately
available funds in an amount equal to $1,635,000, which amount represents
(i) the Loan and (ii) payment of $435,000 on account of the Purchase Price.
(d) The Purchaser shall pay to the Seller (i) $100,000 on account of
the Purchase Price within three days after the date on which the Purchaser
shall be reasonably satisfied that the Read-Only-Memory ("ROM") images (the
"Images") generated by the Purchaser using the software source codes for
the Model 5150 and the Model 5160 match the Seller's latest production of
ROM images for the Model 5150 and the Model 5160, respectively, as
transmitted directly from Panasonic to the Purchaser, which procedure is
commonly known in the industry as performing a "diff," and (ii) $50,000 on
account of the Purchase Price within three days after the date on which the
Purchaser shall be satisfied that the Images, when executed in the hardware
platforms of the Purchaser that correspond to the hardware platforms for
the Model 5150 and
4
8
the Model 5160, function identically to the Seller's latest versions of the
Model 5150 and the Model 5160. Payments under this clause (d) shall be made
to the Seller by wire transfer to a bank account designated in writing by
the Seller.
Article 3.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Purchaser that:
Section 3.01 Organization and Good Standing. The Seller is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and it has the corporate power and authority to
own or lease all of the properties and assets owned or leased by it and to carry
on its business as it is now being conducted. The Seller has heretofore
delivered to the Purchaser true and complete copies of its Certificate of
Incorporation and By-laws, each as currently in effect.
Section 3.02 Authority of the Seller. The Seller has the corporate power to
execute and deliver this Agreement and all other documents hereby contemplated,
to consummate the transactions hereby contemplated and to take all other actions
required to be taken by it pursuant to the provisions hereof. The execution,
delivery and performance of, and consummation of the transactions contemplated
by this Agreement and all other documents hereby contemplated have been duly
authorized by the Seller's Board of Directors, and no other corporate
proceedings on the part of the Seller are necessary to authorize this Agreement
and the transactions contemplated hereby. This Agreement and all other documents
hereby contemplated to be executed by the Seller constitute legal, valid and
binding obligations of the Seller, enforceable against it in accordance with
their respective terms, except as they may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws of general application relating to or
affecting the enforcement of creditors' rights and by the application of
equitable principles whether in a suit at law or in equity.
Section 3.03 No Default; Non-Contravention. The Seller is not in violation
of any term of its Certificate of Incorporation or its By-laws. Neither the
execution and delivery of this Agreement and all other documents hereby
contemplated nor the consummation of the transactions hereby contemplated shall
(i) constitute any violation or breach of the Certificate of Incorporation or
the By-laws of the Seller; (ii) constitute a default under or a breach of, or
result in acceleration of any obligation under, any provision of any contract,
lease, mortgage or other instrument to which the Seller or any of its
subsidiaries is a party or by which any of their assets may be affected or
secured, which default, breach or acceleration has
5
9
not been waived; (iii)
violate any judgment, order, writ, injunction, decree, statute, rule or
regulation affecting the Seller or any of its assets; (iv) result in the
creation of any Lien on any of the assets or properties of the Seller; or (v)
result in the termination of any license, franchise, lease or permit to which
the Seller is a party or by which it is bound, except in the case of those items
specified in clause (ii), (iii), (iv) or (v) above which would not, individually
or in the aggregate, limit the Seller's ability to consummate the transactions
hereby contemplated or have a material adverse effect on the business,
properties, assets, liabilities, results of operations or financial condition of
the Seller and its subsidiaries, taken as a whole (a "Seller Material Adverse
Effect").
Section 3.04 Consents and Approvals. No authorization, approval, order,
license, permit, franchise or consent, and no registration, declaration, notice
or filing by or with any federal, state, local or foreign governmental authority
or regulatory body, any subdivision, agency, commission or authority thereof
(including, without limitation, environmental protection, planning and zoning),
or any quasi-governmental or private body exercising any regulatory authority
thereunder and any person directly or indirectly owned by and subject to the
control of any of the foregoing, or any court, arbitrator or other judicial or
quasi-judicial tribunal (each of the foregoing is referred to herein as a
"Governmental Body") or the Seller is required in connection with the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby.
Section 3.05 Liens. The Seller has good and marketable title, free and
clear of all Liens, to all of the Assets, and the delivery to the Purchaser of
the instruments of transfer of ownership contemplated by this Agreement will
vest good and marketable title to the Assets in the Purchaser, free and clear of
all Liens.
Section 3.06 Inventory. Except as specifically set forth in Schedule
1.01(a)(i) hereto, the Inventory is generally of a quality and quantity usable
and salable at customary gross margins consistent in all material respects with
past practice in the ordinary course of the Seller's business, and is
merchantable and fit for the purpose for which it was intended. The Inventory is
located at the location(s) set forth in Schedule 3.06.
Section 3.07 Equipment. To the Seller's knowledge, each item of Equipment
is in good working order (ordinary wear and tear excepted), is free from any
material defect and has been maintained in all material respects in accordance
with the past practice of the business of the Seller and generally accepted
industry practice, and no repairs, replacements or regularly scheduled
maintenance relating to any such item has been
6
10
deferred. The Equipment is located at the location(s) set forth in Schedule
3.07.
Section 3.08 Sufficiency of the Assets. The Assets to be sold, transferred,
conveyed and assigned to the Purchaser pursuant to this Agreement are sufficient
for the manufacture and sale of the Model 5150 and the Model 5160 immediately
following the Closing in substantially the same manner in which they are
currently being manufactured and sold.
Section 3.09 Litigation.
(a) There is no claim, suit, action, proceeding, audit or
investigation pending or threatened, involving or affecting the Assets, nor
is there any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or arbitrator
outstanding involving or affecting the Assets, or which seeks to or may
materially adversely affect the ability of the Seller or the Purchaser to
consummate any of the transactions contemplated hereby.
(b) Neither the Seller nor any of its subsidiaries is in default under
or with respect to any judgment, writ, injunction, order or decree of any
court, any arbitrator or arbitration tribunal or any governmental
authority, agency or other instrumentality, domestic or foreign, involving
or affecting the Assets.
Section 3.10 SEC Reports. Except as set forth in Schedule 3.10 hereto, the
Seller has filed with the Securities and Exchange Commission (the "Commission")
all reports, registration statements, definitive proxy statements and other
documents, including any amendments thereto and supplements thereof, required to
be filed by it with the Commission (the "SEC Reports") since the effectiveness
of the registration statement relating to its initial public offering in October
1992, all of which have complied in all material respects with all applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
rules and regulations promulgated thereunder. Except as disclosed in Schedule
3.10 hereto, as of their respective dates of filing in final or definitive form
(or, if amended or superseded by a subsequent filing, then on the date of such
subsequent filing), none of the SEC Reports of the Seller, including, without
limitation, any financial statements or schedules included therein, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not misleading.
Each of the balance sheets (including the related notes) included in the SEC
Reports of the Seller fairly presents the consolidated financial position of the
7
11
Seller as of the respective dates thereof, and the
other related financial statements (including the related notes) included
therein fairly presented the consolidated results of operations and changes in
financial position of the Seller for the respective periods indicated, except,
in the case of interim financial statements, for year-end audit adjustments,
consisting only of normal recurring accruals. Each of the financial statements
(including the related notes) included in the SEC Reports of the Seller has been
prepared in accordance with United States generally accepted accounting
principles, except as otherwise noted therein or, in the case of the unaudited
financial statements, as permitted by the applicable rules and regulations of
the Commission.
Section 3.11 KBK Line of Credit. As of the date hereof, the Seller's
borrowings under the Seller's line of credit with KBK Financial Inc. ("KBK") are
not in excess of $3,000,000.
Section 3.12 Ordinary Course; No Material Adverse Change. Except as set
forth in Schedule 3.12 hereto and other than as permitted by this Agreement,
since December 31, 1996, the Seller has conducted its business in the ordinary
and regular course thereof and there has not been (i) any material adverse
change in the business, assets, prospects, financial condition or results of
operations of the Seller, (ii) any damage, destruction or loss, whether or not
covered by insurance, which has had a Seller Material Adverse Effect or (iii)
any event or condition of any character whatsoever the occurrence of which
affects or threatens to affect, the business, assets, prospects, financial
condition or results of operations of the Seller.
Section 3.13 Purchaser Shares. The Purchaser Shares have been duly
authorized and, when issued, will be validly issued, fully paid and
nonassessable and will, as delivered, be owned of record and beneficially by the
Purchaser, free and clear of any and all Liens.
Section 3.14 Disclosure. No representation or warranty of the Seller
contained in this Agreement, and no statement contained in any document,
certificate or Schedule furnished or to be furnished by or on behalf of the
Seller to the Purchaser or any of its representatives pursuant to this
Agreement, contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading or necessary in order to fully and
fairly provide the information required to be provided in any such document,
certificate or Schedule.
Section 3.15 Finder's Fees. Except as set forth in Schedule 3.15 hereto,
the Seller has not incurred any liability for finder's or brokerage fees or
agent's commissions in
8
12
connection with this Agreement or the transactions
hereby contemplated.
Article 4.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller that:
Section 4.01 Organization and Good Standing. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and it has the corporate power and authority to
own or lease all of the properties and assets owned or leased by it and to carry
on its business as it is now being conducted.
Section 4.02 Authority Relative to Agreement. The Purchaser has the
corporate power to execute and deliver this Agreement and all other documents
hereby contemplated, and to consummate the transactions hereby contemplated and
to take all other actions required to be taken by it pursuant to the provisions
hereof. The execution, delivery and performance of, and consummation of the
transactions contemplated by, this Agreement and all other documents hereby
contemplated to be executed by the Purchaser has been duly authorized by the
Board of Directors of the Purchaser. This Agreement and all other documents
hereby contemplated to be executed by the Purchaser constitute, legal, valid and
binding obligations of the Purchaser enforceable against it in accordance with
their respective terms, except as they may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws of general application relating to or
affecting the enforcement of creditors' rights and by the application of
equitable principles whether in a suit at law or in equity.
Section 4.03 No Default; Non-Contravention. The Purchaser is not in
violation of any term of its Certificate of Incorporation or its By-laws.
Neither the execution and delivery of this Agreement and all other documents
hereby contemplated nor the consummation of the transactions hereby contemplated
shall (i) constitute any violation or breach of the Certificate of Incorporation
or By-laws of the Purchaser; (ii) constitute a default under or a breach of, or
result in acceleration of any obligation under, any provision of any contract,
lease, mortgage or other instrument to which it is a party or by which any of
its assets may be affected or secured, which default, breach or acceleration has
not been waived; (iii) violate any judgment, order, writ, injunction, decree,
statute, rule or regulation affecting the Purchaser or any of its respective
assets; (iv) result in the creation of any Lien on any of the assets or
properties of the Purchaser; or (v) result in the termination of any license,
franchise, lease or permit to which the Purchaser is
9
13
a party or by which it is
bound, except in the case of those items specified in clause (ii), (iii), (iv)
or (v) above which would not, individually or in the aggregate, limit the
Purchaser's ability to consummate the transactions hereby contemplated or have a
material adverse effect on the business, properties, assets, liabilities,
results of operations or financial condition of the Purchaser and its
subsidiaries, taken as a whole (a "Purchaser Material Adverse Effect").
Section 4.04 Consents and Approvals. No authorization, approval, order,
license, permit, franchise or consent, and no registration, declaration, notice
or filing by or with any domestic or foreign Governmental Body or the Purchaser
is required in connection with the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby. Section 4.05 Purchaser
Qualification; Investment Intent.
(a) The Purchaser is an "accredited investor" (as that term is defined
in Rule 501 of Regulation D under the Securities Act).
(b) The Purchaser has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of
the acquisition of the Purchaser Shares.
(c) The Purchaser is able to bear the economic risks of the investment
in the Purchaser Shares contemplated hereby and consequently, without
limiting the generality of the foregoing, the Purchaser is able to hold
such Purchaser Shares for an indefinite period of time.
(d) The Purchaser is acquiring the Purchaser Shares for its own
account for investment and not with a view to the distribution or resale
thereof and the Purchaser has no present intention of selling such
Purchaser Shares.
(e) The Purchaser is aware that the Purchaser Shares to be received by
the Purchaser have not been registered under the Securities Act, or under
the securities laws of any state, and, therefore, cannot be sold unless
subsequently registered under the Securities Act and any applicable state
securities laws or unless an exemption from registration is available, and
that the stock certificate to be issued to the Purchaser representing the
Purchaser Shares will bear a legend to that effect, and further that only
the Seller can take action to so register the Purchaser Shares.
Section 4.06 Finder's Fees. The Purchaser has not incurred any liability
for finder's or brokerage fees or agent's
10
14
commissions in connection
with this Agreement or the transactions hereby contemplated.
Article 5.
POST-CLOSING COVENANTS
Section 5.01 Borrowings of the Seller. After the Closing Time and
continuing through the date on which the principal amount of the New Promissory
Note and the interest accrued thereon is paid in full, the Seller shall not,
without the prior written consent of the Purchaser, which consent shall not be
unreasonably withheld, incur or assume any indebtedness whatsoever for borrowed
money in excess of $3,000,000 (including existing borrowings).
Section 5.02 Customer Notification. Within three days after the Closing
Date, the Seller and the Purchaser shall send to all current customers of the
Seller a letter of notification mutually acceptable to the Seller and the
Purchaser regarding the sale of the Assets.
Section 5.03 Transfer Taxes. All liabilities, obligations and commitments
for transfer, documentary, sales, use, registration, value-added and other
similar taxes and related amounts (including any penalties, interest and
additions to such taxes) incurred in California in connection with this
Agreement and the other transactions contemplated hereby ("Transfer Taxes") and
any filing or recording fees applicable to the conveyance and transfer of the
Assets and the Purchaser Shares shall be paid by the Seller. Each party shall
use reasonable efforts to avail itself of any available exemptions from any such
taxes or fees, and to cooperate with the other party in providing any
information and documentation that may be necessary to obtain such exemptions.
Section 5.04 Post-Closing Cooperation. The Seller shall as promptly as
practicable after the Closing Date, furnish or cause to be furnished to the
Purchaser or its employees or agents, (i) the software source codes for the
Model 5150 and the Model 5160 and (ii) such information, assistance, and
additional deliverables as may be reasonably requested by the Purchaser to
assist the Purchaser in building and testing the Images. For a period of one
year from and after the Closing Date, the Seller shall, as promptly as
practicable, furnish or cause to be furnished to the Purchaser, all information
and records relating to the Assets (including updated telephone numbers,
customer lists, supplier lists, referral lists, and purchase or customer orders)
received by or furnished to the Seller after the Closing.
11
15
Section 5.05 Software Testing. As promptly as shall be practicable after
the Closing, the Purchaser shall generate and test the Images.
Section 5.06 Sale and Purchase of Model 5150 Returns.
(a) On or prior to September 30, 1997, the Seller shall sell,
transfer, convey, assign and deliver to the Purchaser, free and clear of
all Liens, up to the maximum amount of Model 5150 units from each retail
customer specified in Schedule 5.06 hereto, which Model 5150 units were
sold by the Seller prior to the Closing Date and returned to the Seller by
such customers after the Closing Date and before September 30, 1997 (the
"Returned Model 5150's").
(b) The Returned Model 5150's shall be generally of a quality and
quantity usable and salable as new product, and shall be merchantable and
fit for the purpose for which they were intended.
(c) The Seller shall sell the first 1,200 Returned Model 5150's to the
Purchaser for no consideration. Thereafter, the purchase price for each
Returned Model 5150 shall be $22.43. If the aggregate number of Returned
Model 5150's is greater than 1,200, the Purchaser shall pay to the Seller
an amount equal to the product of (i) the aggregate number of Returned
Model 5150's, less 1,200, and (ii) $22.43. Such payment shall be made
within two business days following the Purchaser's receipt of the Returned
Model 5150's, and shall be made by wire transfer to a bank account
designated in writing by the Seller.
Section 5.07 Subordination of Security Interest. If the Seller terminates
its Account Transfer Agreement with KBK after the Closing Date and thereafter
enters into a substantially similar agreement with a third party, the Purchaser
shall agree to subordinate its security interest in the Seller's accounts
receivable and inventory in substantially the same manner that the Purchaser has
subordinated its security interest in such accounts receivable and inventory to
KBK under the Release of Security Interest and Subordination Agreement, dated as
of the date hereof, entered into between the Purchaser and KBK.
Article 6.
INDEMNIFICATION
Section 6.01 Indemnification by the Seller. The Seller shall indemnify the
Purchaser and its affiliates and each of their respective officers, directors,
employees, agents and representatives against, and hold them harmless from, any
loss, liability, claim, damage or expense (including reasonable legal fees and
expenses) ("Losses"), arising from, relating to
12
16
or otherwise in respect
of (i) any breach of any representation, warranty, covenant or agreement of the
Seller contained in this Agreement or any document delivered pursuant hereto,
(ii) the failure to comply with statutory provisions relating to bulk sales and
transfers, if applicable, (iii) any Excluded Liability, and (iv) any claim made
by Everen Securities, Inc. against the Purchaser arising out of or related to
the letter agreement, dated May 2, 1996, between the Seller and Everen
Securities, Inc.
Section 6.02 Indemnification by the Purchaser. The Purchaser shall
indemnify the Seller, its affiliates and their respective officers, directors,
employees, agents and representatives against, and agrees to hold them harmless
from, any Loss, for or on account of or arising from, relating to or otherwise
in respect of any (i) breach of any representation, warranty, covenant or
agreement of the Purchaser contained in this Agreement or any document delivered
pursuant hereto, and (ii) any failure of the Purchaser to pay, perform or
discharge any Assumed Liability in accordance with the terms thereof.
Section 6.03 Termination of Indemnification. The obligations to indemnify
and hold harmless any party, pursuant to Section 6.01 or 6.02, shall terminate
when the applicable representation or warranty terminates pursuant to Section
6.05; provided, however, that such obligations to indemnify and hold harmless
shall not terminate with respect to any item as to which the person to be
indemnified shall have, before the expiration of the applicable period,
previously made a claim by delivering a notice of such claim pursuant to Section
6.04 to the party to be providing the indemnification.
Section 6.04 Procedures. (a) If either party hereto believes that such
party has suffered or incurred any Losses pursuant to Section 6.01 or Section
6.02 (hereinafter the "Indemnified Person" and the persons providing
indemnification shall be the "Indemnifying Person"), such Indemnified Person
shall so notify the Indemnifying Person promptly in writing (i) describing such
Losses, (ii) the amount thereof, if known, (iii) any complaints, subpoena or
other documents served against the Indemnified Person in connection with such
Losses, (iv) in reasonable specificity, whether in the judgment of the
Indemnified Person the claim is only for money Losses and does not have a
continuing effect on the business of the Indemnified Person, and (v) the method
of computation of such Losses. Promptly after receipt by an Indemnified Person
of notice of the commencement of any action by any third party, such Indemnified
Person shall, if a claim in respect thereof is to be made against the
Indemnifying Person, notify the Indemnifying Person in writing of the
commencement thereof (but the failure so to notify an Indemnifying Person shall
not relieve such Indemnifying Person from any liability which it may have under
this Article VII except to the extent that such Indemnifying Person has been
13
17
prejudiced in any material respect by such failure or from any liability which
it might otherwise have).
(b) Subject to paragraph (c) below, in the case of any third party
claim, action or suit as to which indemnification is sought by an
Indemnified Person, the Indemnifying Person shall have 15 business days
after receipt of the notice referred to in paragraph (a) above to notify
the Indemnified Person that it elects to conduct and control such action or
suit. If the Indemnifying Person does not give the foregoing notice, the
Indemnified Person shall have the right to defend, contest, settle or
compromise such action or suit in the exercise of its exclusive discretion,
and the Indemnifying Person shall, upon request from any Indemnified
Person, promptly pay to such Indemnified Person in accordance with the
other terms of this Article VII the amount of any Losses. If the
Indemnifying Person gives the foregoing notice, the Indemnifying Person
shall have the right to undertake, conduct and control, through counsel of
its own choosing and at the sole expense of the Indemnifying Person, the
conduct and settlement of such action or suit, and the Indemnified Person
shall cooperate with the Indemnifying Person in connection therewith;
provided, that (i) the Indemnifying Person shall permit the Indemnified
Person to participate in such conduct or settlement through counsel chosen
by the Indemnified Person, but the fees and expenses of such counsel shall
be borne by the Indemnified Person and (ii) the Indemnifying Person shall
agree promptly to reimburse the Indemnified Person for the full amount of
any Losses resulting from such action or suit, except fees and expenses of
counsel for the Indemnified Person incurred after the assumption of the
conduct and control of such action or suit by the Indemnifying Person. So
long as the Indemnifying Person is contesting any such action or suit in
good faith, the Indemnified Person shall not pay or settle any such action
or suit.
(c) In the case of any third party claim, action or suit as to which
indemnification is sought by an Indemnified Person which involves a claim
for Losses other than money Losses together with money Losses or involves a
claim solely for such other Losses and, in either case, could have a
continuing effect on the business of the Indemnified Person, the
Indemnified Person shall have the right to conduct and control, through
counsel of its choosing, such claim, action or suit. The Indemnified Person
shall permit the Indemnifying Person to participate in the defense of any
such action or suit through counsel chosen by it, provided that the fees
and expenses of such counsel shall be borne by the Indemnifying Person. The
Indemnified Person may compromise or settle any such claim, action or suit;
provided, that, any compromise or settlement with respect to a claim for
money Losses effected after the Indemnifying Person, by notice to the
Indemnified Person, shall have reasonably disapproved in its reasonable
judgment such compromise or settlement shall discharge the Indemnifying
Person from liability with respect to the
14
18
subject matter thereof, and no amount in respect thereof shall be claimed
as Losses.
Section 6.05 Survival of Representations. All representations and
warranties in Article III and Article IV shall survive the Closing for a period
of three years following the Closing Date. This Section 6.05 shall not limit the
covenants of the parties contained in Article V and Article VI which by their
terms contemplate performance after the Closing Date.
Article 7.
MISCELLANEOUS
Section 7.01 Entire Agreement. All prior or contemporaneous agreements,
contracts, promises, representations and statements, if any, among the parties
hereto as to the subject matter hereof, are merged into this Agreement. This
Agreement, together with all agreements, Schedules, Exhibits, documents and
other instruments to be attached hereto or delivered hereunder sets forth the
entire understanding between the parties, and there are no terms, conditions,
representations, warranties or covenants other than those contained herein and
in such agreements, Schedules, Exhibits, documents and other instruments to be
attached hereto or delivered hereunder.
Section 7.02 Notices. (a) All notices, consents, demands or other
communications required or permitted to be given pursuant to the Agreement shall
be in writing and shall be deemed sufficiently given on (i) the day on which
delivered personally or by telecopy (with prompt confirmation by mail) during a
business day to the appropriate location listed as the address below, (ii) three
business days after the posting thereof by United States registered or certified
first class mail, return receipt requested with postage and fees prepaid, or
(iii) one business day after deposit thereof for overnight delivery. Such
notices, consents, demands or other communications shall be addressed
respectively:
As to the Seller: Voice Powered Technology
International, Inc.
00000 Xxxxxxx Xxxx.
Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxxx Xxxxx,
Chief Financial Officer
Telecopy No.: (000) 000-0000
with a copy to: Xxx, Castle & Xxxxxxxxx LLP
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxxx, Esq.
15
19
Telecopy No.: (000) 000-0000
As to the Purchaser: Franklin Electronic
Publishers, Inc.
Xxx Xxxxxxxx Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxx,
Senior Vice President
Telecopy No.: (000) 000-0000
with a copy to: Rosenman & Colin LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxx, Esq.
Telecopy No.: (000) 000-0000
or to any other address or telecopy number which such party may have
subsequently communicated to the other parties in writing.
(b) Except as otherwise provided in this Agreement, any notice,
consent, demand or other communication given hereunder may be signed on
behalf of a party by any duly authorized representative of that party.
Section 7.03 Successors and Assigns. Each and every representation,
warranty, covenant, agreement, indemnification, and provision of the Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto. This Agreement may not
be assigned by any party hereto without the prior written consent of the other
party hereto. Any purported assignment in violation of this Agreement shall be
void.
Section 7.04 Governing Law. This Agreement and any other agreement entered
into in connection herewith shall be governed by, and construed under and in
accordance with, the laws of the State of New Jersey without giving effect to
the conflict of laws principles thereof.
Section 7.05 Gender and Person. Wherever the context so requires, the
masculine pronoun shall include the feminine and the neuter, and the singular
shall include the plural.
Section 7.06 Interpretation. (a) The headings contained in this Agreement,
in any Exhibit or Schedule hereto and in the table of contents to this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All Exhibits and Schedules annexed hereto or
referred to herein are hereby incorporated in and made a part of this Agreement
as if set forth in full herein. Any capitalized terms used in any Schedule or
Exhibit but not otherwise defined therein, shall have
16
20
the meaning assigned to such term in this Agreement. When a reference is made in
this Agreement to an Article or a Section, Exhibit or Schedule, such reference
shall be to an Article or Section of, or an Exhibit or Schedule to, this
Agreement unless otherwise indicated.
(b) For all purposes hereof:
"affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person.
"consent" means, with respect to any party, the consent, approval,
license, permit, order or authorization of such party.
"including" means including, without limitation.
"person" means any individual, firm, corporation, partnership, limited
liability company, trust, joint venture, Governmental Entity or other
entity.
"subsidiary" when used with respect to any party means any
corporation, partnership or other organization, whether incorporated or
unincorporated, which is consolidated with such party for financial
reporting purposes.
(c) The following terms are defined in this Agreement in the Sections
set forth below:
Term Section
Accredited Investor 4.05
Assets 1.01
Assigned Contracts 1.01
Assumed Liabilities 1.01
Bulk Transfer Law 6.02
Closing 2.01
Closing Date 2.01
Closing Time 2.01
Commission 3.10
Common Stock Recitals
Equipment 1.01
Exchange Act 3.10
Excluded Liabilities 1.01
Governmental Body 3.04
Images 2.02
Indemnified Person 6.04
Indemnifying Person 6.04
Inventory 1.01
KBK 3.10
Liens 1.01
17
21
Loan 1.03
Losses 6.01
Model 5150 Recitals
Model 5160 Recitals
New Promissory Note 1.03
New Security Agreement 1.03
Old Promissory Note 1.03
Purchase Price 2.02
Purchaser Introductory Paragraph
Purchaser Material Adverse Effect 4.03
Purchaser Shares 1.02
Representatives 6.07
Returned Model 5150's 5.06
Rights and Claims 1.01
ROM 2.02
Securities Act 3.10
SEC Reports 3.10
Seller Introductory Paragraph
Seller Material Adverse Effect 3.03
Selling Materials 1.01
Transfer Taxes 5.03
Section 7.07 Confidentiality of Disclosures. Any corporate information,
records, documents, descriptions or other disclosures of whatsoever nature or
kind, including all information relating to the Assets, made or disclosed by any
of the parties to any of the other parties, or to any of their officers,
directors, employees or legal or financial advisors ("Representatives"), or
learned or discovered by such other party or by any Representative thereof in
the course of the investigations pursuant to the consummation of the
transactions contemplated by this Agreement (whether prior to or after the date
of the execution of this Agreement) and not known by or available to the public
at large, shall be received in confidence and none of the parties nor any such
Representative shall disclose or make use of such information or authorize
anyone else to disclose or make use thereof without the written consent of the
other relevant parties hereto, except (a) as necessary to consummate the
transactions contemplated hereby, (b) as necessary in consultation with lawyers,
accountants and advisors, or (c) as compelled by judicial or administrative
process or by other requirements of applicable law including any disclosure
under federal securities laws; provided, however, that in the case of any
disclosure contemplated pursuant to this clause (c), the party seeking to
disclose such information shall give the other party or parties reasonable prior
written notice thereof in order to afford such other party or parties reasonable
opportunity to seek a protective order or other limitation under such
disclosure.
Section 7.08 Publicity. Any communications and notices to third parties and
all other publicity concerning the transactions
18
22
contemplated by this Agreement (other than governmental or regulatory filings)
shall be planned and coordinated by and among each of the parties. Unless
required by applicable law, none of the parties shall disseminate or make public
or cause to be disseminated or made public any information regarding the
transactions contemplated hereunder without the prior written approval of the
other parties, which approval shall not be unreasonably withheld.
Notwithstanding the foregoing, the Purchaser hereby acknowledges that the Seller
has communicated the terms of the transactions contemplated hereby to the
parties listed on Schedule 7.08 hereto and consents to the Seller's publication
of the proposed press release included in Schedule 7.08 hereto.
Section 7.09 Consent to Jurisdiction. With respect to any claim arising out
of this Agreement, the Purchaser and the Seller irrevocably submit to the
jurisdiction of the courts of the State of New Jersey and the United States
District Court in the District of New Jersey (and of the appropriate appellate
courts thereof). In addition, both parties irrevocably waive any objection which
they may now or hereafter have to the laying of venue of any action, suit or
proceeding arising out of or relating to this Agreement brought in such courts,
irrevocably waive any claim that any such action, suit or proceeding brought in
any such court has been brought in an inconvenient forum and further irrevocably
waive the right to object with respect to such claim, action, suit or proceeding
brought in any such court, that such court does not have jurisdiction over him
or it, as the case may be, or any other party hereto. The Purchaser and the
Seller hereby agree that process in any such action or proceeding may be served
on any party anywhere in the world, whether within or without the State of New
Jersey, provided that notice thereof is provided pursuant to the provisions of
Section 7.02 hereof.
Section 7.10 Specific Performance. The parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
Section 7.11 Fees and Expenses. Except as otherwise set forth herein, all
costs and expenses incurred in connection with the negotiation and execution of
this Agreement and the consummation of the transactions contemplated hereby
shall be paid by the party incurring such expenses.
Section 7.12 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
19
23
Section 7.13 Extension; Waiver. At any time prior to the Closing Date, the
parties hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
Section 7.14 Costs of Enforcement. Except as otherwise set forth herein,
the prevailing party in any proceeding brought to enforce any provision of the
Agreement shall be entitled to recover the reasonable fees and costs of its
counsel, plus all other costs of such proceeding.
Section 7.15 Third Parties. Other than the parties hereto, no person shall
have any rights under or to enforce any provision of this Agreement.
Section 7.16 Counterparts. The Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute a single agreement.
20
24
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
FRANKLIN ELECTRONIC
PUBLISHERS, INC.
By /s/ Xxxxxxx Xxxxxx
Name: Xxxxxxx Xxxxxx
Title: Vice President
VOICE POWERED TECHNOLOGY
INTERNATIONAL, INC.
By /s/ Xxxxxxxx Xxxxx
Name: Xxxxxxxx Xxxxx
Title: President
21
25
EXHIBIT A
Form of New Promissory Note
26
Exhibit A
PROMISSORY NOTE
$1,708,750.00 Burlington, New Jersey May 21, 1997
FOR VALUE RECEIVED, VOICE POWERED TECHNOLOGY INTERNATIONAL
INC., a California corporation (such corporation and any successor entity by
merger, consolidation, sale or exchange of all or substantially all of its
assets, or otherwise is hereinafter referred to as the "Company"), hereby
promises to pay to FRANKLIN ELECTRONIC PUBLISHERS, INC., a Pennsylvania
corporation (together with any successor or assignees, the "Holder"), the
principal amount of ONE MILLION SEVEN HUNDRED EIGHT THOUSAND SEVEN HUNDRED FIFTY
DOLLARS ($1,708,750.00) in lawful money of the United States of America, payable
in four annual installments on April 30 of each year, commencing April 30, 1998
and ending on April 30, 2001. The first three installments shall each be in the
amount of $400,000. The last installment shall be in the amount of $508,750,
provided, however, that the last such installment shall be in the amount
necessary to repay in full the outstanding principal and interest accrued
hereunder.
The following additional terms shall apply to this Note:
1. Interest. Interest shall accrue on the outstanding
principal balance of this Note at a rate of 10% per annum from the date hereof
to (and including) the date on which the principal balance hereof is paid in
full, and shall be payable monthly on the 30th day of each month, commencing May
30, 1997 and continuing through and including April 30, 2001. Interest under
this Note shall be calculated on the basis of a 360-day year for the actual
number of days elapsed.
2. Payment not on a Business Day. If any payment on this Note
shall become due on a Saturday, Sunday or a public holiday under the laws of the
United States of America, such payment shall be made on the next succeeding
business day and such extension of time shall in such case be included in
computing interest in connection with such payment.
3. Prepayment. This Note may be prepaid, in whole or in part,
at any time or from time to time, without premium or penalty, but with accrued
but unpaid interest through the date of prepayment. All amounts paid hereunder
shall be applied first to accrued interest on the principal balance of this
Note, and then to the principal balance of this Note.
27
4. Surrender of Note; Notation Thereon. Upon any prepayment of
a portion of the principal amount of this Note pursuant to Section 3, the Holder
at its option may require the Company to make and deliver, at the expense of the
Company (other than for transfer taxes, if any), upon surrender of this Note, a
new Note payable to such holder for the principal amount then remaining unpaid,
dated as of the date of this Note, or may present this Note to the Company for
notation hereon of the payment of the portion of the principal amount of this
Note so prepaid. The Company may, as a condition of payment of all or any of the
principal or interest on this Note, require the holder to present this Note for
notation of such payment and, if this Note is to be paid in full, require the
surrender hereof.
5. Events of Default. For purposes hereof, the occurrence of
any of following events shall constitute an "Event of Default":
Failure to make any payment of principal under this Note when such payment
becomes due and payable and such failure shall continue for a period of one
business day after written notice thereof by the Holder to the Company, or the
failure to make any payment of interest under this Note within ten days of the
date when such payment becomes due and payable;
With respect to the Purchase and Loan Agreement (the "Purchase and Loan
Agreement") entered into between the Company and the Holder on the date hereof,
(i) upon the breach or nonperformance of any of the Company's obligations or
covenants contained in Sections 1.01, 5.01, 5.04 or 6.01 thereof, (ii) upon a
material breach or the material nonperformance of any of the Company's
obligations or covenants contained in Sections 5.02 or 5.03 thereof, (iii) upon
a breach of the representations and warranties contained in Sections 3.05 or
3.13 thereof, or (iv) upon a material breach of any of the other representations
and warranties contained in Article III thereof; which breach or nonperformance,
with respect to the preceding clauses (i), (ii), (iii) and (iv), is not curable
or, if curable, is not cured (A) with respect to Sections 1.01, 3.06, 3.07,
3.08, 5.02, 5.04 and 6.01, within ten days after written notice of such breach
or nonperformance is given by the Holder to the Company and (B) with respect to
Sections 5.01, 5.03, 5.06 and the Sections of Article III not listed in the
preceding subclause (A), within the earlier of (x) ten days after written notice
of such breach or nonperformance is given by the Holder to the Company and (y)
20 days after such breach or nonperformance regardless of notice.
With respect to the Technology Transfer Agreement (the "Technology Transfer
Agreement") entered into between the Company and the Holder on the date hereof,
(i) upon the breach or nonperformance of any of the Company's obligations or
covenants under Sections 1, 2, 4.3, 6, 7, 8 and 10 thereof,
2
28
(ii) upon a material breach of any of the Company's representations and
warranties contained in Section 5 thereof, or (iii) upon a material breach or
the material nonperformance of any of the Company's obligations or covenants
under Sections 9 and 11 thereof; which breach or nonperformance, with respect to
the preceding clauses (i), (ii) and (iii), is not curable or, if curable, is not
cured (A) with respect to Section 4.3, within one business day after written
notice of such breach or nonperformance is given by the Holder to the Company,
(B) with respect to Sections 5.4, 8 and 10, within ten days after written notice
of such breach or nonperformance is given by the Holder to the Company, and (C)
with respect to Sections 1, 2, 5.1 through 5.3 and 5.5 through 5.9, 6, 7, and 9,
within the earlier of (x) ten days after written notice of such breach or
nonperformance is given by the Holder to the Company and (y) 20 days after such
breach or nonperformance regardless of notice.
Upon (i) the Company's failure to pay any material indebtedness for
borrowed money or the Company's material default under any other obligation
(monetary or otherwise) owing by it to any third party, when due, which
non-payment or default is not cured within any applicable grace period or
waived, or (ii) the occurrence of any "Event of Default" (as defined in any
promissory note or other instrument of indebtedness to which the Company is a
party or by which the Company is bound) by or with respect to the Company, which
default is not cured within any applicable grace period or waived;
Any material asset of the Company shall be attached, seized, levied upon or
subjected to a writ or distress warrant, or come within the possession of any
receiver, trustee, custodian or assignee for the benefit of creditors of the
Company, or any person other than the Company shall apply for the appointment of
a receiver, trustee or custodian for any material asset of the Company, and such
application or proceeding shall remain unstayed or undismissed for 50 days;
A case or proceeding shall have been commenced against the Company in a
court having competent jurisdiction seeking a decree or order in respect of the
Company (i) under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other applicable federal, state or foreign bankruptcy
or other similar law, (ii) appointing a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) of the Company or of any
of its properties, or (iii) ordering the winding-up or liquidation of the
affairs of the Company, and such case or proceeding shall remain undismissed or
unstayed for 45 days or such court shall enter a decree or order granting the
relief sought in such case or proceeding; or
3
29
The Company shall (i) file a petition seeking relief under Title 11 of the
United States Code, as now constituted or hereafter amended, or any other
applicable federal, state or foreign bankruptcy or other similar law, (ii)
consent to the institution of proceedings thereunder or to the filing of any
such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official) of
the Company or of any of its properties, (iii) fail generally to pay its debts
as such debts become due, or (iv) take any corporate or other action in
furtherance of any such action;
then, and in any such event, it is agreed that the entire unpaid principal
balance of this Note shall, at the Holder's option, become immediately due and
payable, together with interest accrued plus all costs and expenses of the
collection and enforcement of this Note, including reasonable attorneys' fees,
all of which shall be added to the amount due under this Note; provided,
however, that upon the occurrence of any event referred to in clauses (d), (e),
(f) or (g) above, all of such amounts shall automatically become and be due and
payable, without any election by the Holder and without notice or demand of any
kind.
If this Note is not paid in full upon the acceleration of the payment of
the principal and interest hereunder, interest shall accrue on the outstanding
principal of and interest on this Note from the date the Holder elects to
accelerate such payments, or from the date such amounts automatically become due
and payable, as the case may be, to and including the date of payment, at a rate
equal to the lesser of 18% per annum or the maximum interest rate permitted by
applicable law. Further, the Holder may proceed to enforce payment of all
obligations of the Company and exercise any or all of the rights and remedies
afforded to the Holder by applicable law, or otherwise. All rights and remedies
afforded to the Holder pursuant to the terms hereof or by law shall be
cumulative and may be exercised in any manner the Holder may determine, without
limiting or restricting the Holder's rights to subsequently exercise any of its
other rights and remedies.
6. Notices. All notices or other communications to be given
pursuant to the terms hereof shall be in writing and shall be deemed
sufficiently given on (i) the day on which delivered personally or by telecopy
(with prompt confirmation by mail) during a business day to the appropriate
location listed as the address below, (ii) three business days after the posting
thereof by United States registered or certified first class mail, return
receipt requested with postage and fees prepaid, or (iii) one
4
30
business day after deposit thereof for overnight delivery. Such notices or other
communications shall be addressed respectively:
To the Holder: Franklin Electronic Publishers, Inc.
Xxx Xxxxxxxx Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxx
Fax: (000) 000-0000
To the Company: Voice Powered Technology
International, Inc.
00000 Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxxx Xxxxx
Fax: (000) 000-0000
or to such other address as either of them, by notice to the other may designate
from time to time. The transmission confirmation-receipt from the sender's
facsimile machine shall be conclusive evidence of successful facsimile delivery.
Time shall be counted to, or from, as the case may be, the delivery in person,
by Federal Express or similar receipted delivery, by facsimile or by mailing.
7. Payments. Payments of principal and interest hereunder shall be made by
check mailed to the Holder hereof at the address set forth in Section 8 hereof
or at such other place as the Holder shall have notified the Company in writing
at least five days before such payment is due.
8. Non-Waiver and Other Remedies. No course of dealing or delay on the part
of the Holder in exercising any right, remedy or option hereunder or otherwise
shall operate as a waiver of such right, remedy or option, nor shall any single
or partial exercise of any such right, remedy or option preclude any further
exercise thereof.
9. Assignment. This Note shall inure to the benefit of and be enforceable
by the Holder and its successors and assigns, and shall not be assignable by the
Company without the prior written consent of the Holder.
10. Amendment. No modification, alteration or change of any of the
provisions hereof shall be effective unless in writing and signed by the Company
and the Holder and only to the extent set forth therein.
11. Severability. If any term or provision of this Note shall be held
invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby.
5
30
12. Headings. The paragraph headings herein are for convenience only and
shall not affect the construction hereof.
13. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New Jersey, without giving effect to
principles of conflicts of law. Any action or proceedings to enforce or arising
out of this Note may be commenced in any court of the State of New Jersey or in
the United States District Court for the District of New Jersey.
14. Waiver of Presentment. The Company and all endorsers hereof hereby
waive presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Note, except as specifically otherwise provided herein, and assent to extensions
of the time of payment or forbearance or other indulgence without notice.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
and delivered by its proper and duly authorized officer as of the date first
above written.
VOICE POWERED TECHNOLOGY
INTERNATIONAL, INC.
By:________________________
Name:
Title:
6
31
EXHIBIT B
Form of New Security Agreement
32
Exhibit B
SECURITY AGREEMENT
SECURITY AGREEMENT (this "Agreement"), dated as of May __,
1997, between VOICE POWERED TECHNOLOGY INTERNATIONAL, INC., a California
corporation (the "Debtor"), and FRANKLIN ELECTRONIC PUBLISHERS, INC., a
Pennsylvania corporation (the "Secured Party").
WITNESSETH:
WHEREAS, the Secured Party and the Debtor are entering into a
Purchase and Loan Agreement simultaneous with the execution of this Agreement
(the "Purchase and Loan Agreement");
WHEREAS, pursuant to the Purchase and Loan Agreement, the
Secured Party will, among other things, make a $1,200,000 loan to the Debtor and
the Debtor will issue a Promissory Note (the "Note") of even date herewith to
the Secured Party; and
WHEREAS, in order to induce the Secured Party to make the loan
described in the Note and to secure the Debtor's performance and payment under
the Note, the Debtor has agreed to execute this Agreement.
NOW THEREFORE, the parties hereto agree as follows:
15. Security Interest. As collateral security for the prompt
and complete payment and performance when due of its obligations under the Note
and the prompt performance and observance of all the covenants contained therein
and in this Agreement, the Debtor hereby grants to the Secured Party a
continuing security interest in and lien on all of the Debtor's right, title and
interest in, to and under all of the Debtor's assets (collectively, the
"Collateral"), including all accessions to the Collateral, substitutions and
replacements thereof, now owned or existing and hereafter acquired, created or
arising, and all products and proceeds thereof (including, without limitation,
claims of the Debtor against third parties for loss or damage to or destruction
of any Collateral), including, without limitation, all of the Debtor's right,
title and interest in, to and under, the following:
(a) all equipment in all of its forms, wherever located, now or
hereafter existing, including, but not limited to, all fixtures and all
parts thereof and all accessions thereto;
33
(b) all inventory in all of its forms, wherever located, now or
hereafter existing, including, but not limited to, (i) all raw materials,
work in process and finished products, intended for sale or lease or to be
furnished under contracts of service in the ordinary course of business, of
every kind and description; (ii) goods in which the Debtor has an interest
in mass or a joint or other interest or right of any kind (including,
without limitation, goods in which the Debtor has an interest or right as
consignee); and (iii) goods which are returned to or repossessed by the
Debtor, and all accessions thereto and products thereof and documents
(including, without limitation, all warehouse receipts, negotiable
documents, bills of lading and other title documents) therefor;
(c) all accounts, contract rights, chattel paper, instruments, letters
of credit, deposit accounts, insurance policies, general intangibles
(including, without limitation, all pension reversions, tax refunds, and
intellectual property) and other obligations of any kind, now or hereafter
existing, whether or not arising out of or in connection with the sale or
lease of goods or the rendering of services, and all rights now or
hereafter existing in and to all security agreements, leases, and other
contracts securing or otherwise relating to any such accounts, contract
rights, chattel paper, instruments, letters of credit, deposit accounts,
insurance policies, general intangibles or other obligations;
(d) all original works of authorship fixed in any tangible medium of
expression, all mask works fixed in a chip product, all right, title and
interest therein and thereto, and all registrations and recordings thereof,
including, without limitation, applications, registrations and recordings
in the United States Copyright Office or any other country or any political
subdivision thereof, all whether now or hereafter owned or licensable by
the Debtor, and all extensions or renewals thereof;
(e) all letters patent, design and plant patents, utility models,
industrial designs, interior certificates and statutory invention
registrations of the United States or any other country, and all
registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office or any other country or any political subdivision thereof,
all whether now or hereafter owned or licensable by the Debtor, and all
reissues, continuations, continuations-in-part, term restorations or
extensions thereof;
(f) all trademarks, trade names, trade styles, service marks, prints
and labels on which said trademarks, trade names, trade styles and service
marks have appeared or
2
34
appear, designs and general intangibles of like nature, now existing or
hereafter adopted or acquired, all right, title and interest therein and
thereto, and all registrations and recordings thereof, including, without
limitation, applications, registrations and recordings in the United States
Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof, or any other country or any political
subdivision thereof, all whether now or hereafter owned or licensable by
the Debtor, and all reissues, extensions or renewals thereof;
(g) all other goods and personal property, whether tangible or
intangible, or whether now owned or hereafter acquired and wherever
located; and
(h) all proceeds of every kind and nature, including proceeds of
proceeds, of any and all of the foregoing Collateral (including, without
limitation, proceeds which constitute property of the types described in
clauses (a) through (g) of this paragraph 1) and, to the extent not
otherwise included, all (i) payments under insurance or any indemnity,
warranty or guaranty, payable by reason of loss or damage to or otherwise
with respect to any of the foregoing Collateral and (ii) money and cash.
16. Representations and Warranties. The Debtor hereby represents and
warrants that:
(a) Except for the security interest granted pursuant to this
Agreement and as set forth on Schedule A hereto, the Debtor is the sole
owner of the Collateral, having good and valid title thereto, free and
clear of any and all liens and encumbrances.
(b) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby to be performed by the Debtor have
been duly and validly authorized by the Board of Directors of the Debtor
and no other corporate proceedings on the part of the Debtor are necessary
to authorize this Agreement or to consummate the transactions so
contemplated. The Debtor has all corporate power and authority to execute
and deliver this Agreement, to consummate the transactions hereby
contemplated and to take all other actions required to be taken by it
pursuant to the provisions hereof; and, this Agreement is the legal, valid
and binding obligation of the Debtor, enforceable against the Debtor in
accordance with its terms.
(c) Except for filings with governmental entities needed to perfect
the security interest granted to the Secured Party hereunder, no consent,
approval, authorization or notification of, or declaration, filing or
registration with, any governmental entity is required on behalf of or on
the part of the Debtor in connection with the execution, delivery, or
performance of this Agreement and the consummation of
3
35
the transactions contemplated hereby by the Debtor. Neither the execution
and delivery of this Agreement by the Debtor nor the consummation of the
transactions hereby contemplated to be performed by the Debtor will (i)
constitute any violation or breach of the Certificate of Incorporation or
By-Laws of the Debtor, (ii) violate, or constitute a default under, or
permit the termination or acceleration of the maturity of, any indebtedness
for borrowed money of the Debtor, (iii) violate, or constitute a default
under, or permit the termination of, any license, contract, lease or other
instrument to which the Debtor is a party or by which the Debtor or any of
its properties is subject or by which any of them is bound, or (iv) violate
any order, writ, injunction, decree, statute, rule or regulation,
governmental license or permit, to which the Debtor or any of its
properties is subject or by which any of them is bound.
(d) Schedule B hereto sets forth the location(s) where the books and
accounts of the Debtor are maintained and where the Collateral is used,
stored or located.
17. Covenants. The Debtor hereby covenants as follows:
(a) The Debtor shall pay all expenses and reimburse the Secured Party
for any reasonable expenditure, including reasonable attorneys' fees,
including attorneys' fees incurred in any appellate or insolvency
proceedings, in connection with the Secured Party's exercise of its rights
and remedies herein or contained in the Note.
(b) The Debtor shall execute and deliver, or cause to be executed and
delivered, to the Secured Party those documents and agreements, including
without limitation, Uniform Commercial Code financing statements, and shall
take or cause to be taken those actions that the Secured Party may, from
time to time, reasonably request to carry out the terms and conditions of
this Agreement and the Note.
(c) Except as set forth on Schedule A hereto, the Debtor shall not
assign, convey, sell, mortgage, pledge, hypothecate, transfer, encumber or
otherwise dispose of, or grant a security interest in, the Collateral or
any interest therein, or enter into an agreement to do so, without the
prior written consent of the Secured Party, which consent, after taking
into account, among other things, the nature and adequacy of the
consideration to be received in exchange for such Collateral, shall not be
unreasonably withheld.
(d) The Debtor will not change its name, identity or organizational
structure in any manner which might make any financing or continuation
statement filed in connection herewith seriously misleading within the
meaning of Section 9-402(7) of the UCC (as hereinafter defined), or any
other then applicable provision of the UCC unless the Debtor shall have
given the Secured Party at least 30 days' prior written notice thereof and
4
36
shall have taken all action necessary or reasonably requested by the
Secured Party to amend such financing statement or continuation statement
so that it is not seriously misleading. Except as set forth on Schedule B
hereto, the Debtor will not change its principal place of business or
remove its records from such place unless the Debtor shall have given the
Secured Party at least 30 days' prior written notice thereof and shall have
taken such action as is necessary to cause the security interest of the
Secured Party in the Collateral to continue to be perfected. The Collateral
shall not be used, stored or located at any location except such locations
as are specified in Schedule B hereto without the prior written consent of
the Secured Party.
18. Continuing Security Interest. This Agreement shall create
a continuing security interest in the Collateral securing the Debtor's
obligations under the Note and shall (a) remain in full force and effect until
the payment in full of the Debtor's obligations under and pursuant to the terms
of the Note, (b) be binding upon the Debtor and its successors and assigns and
(c) inure to the benefit of the Secured Party and its successors, transferees
and assigns. Upon the termination of the security interest created hereby
pursuant to clause (a) above, the Secured Party shall, at the Debtor's request
and expense, deliver to the Debtor a release of all security interests granted
by the Debtor to the Secured Party pursuant to this Agreement.
19. Realization upon Collateral. If the Debtor shall fail to
perform any of its obligations under the Note when due (an "Event of Default"),
the Secured Party shall have all of the rights of a secured party under the
Uniform Commercial Code as in effect in the State of New Jersey (the "UCC"),
including, without limitation, the right to sell the Collateral at public or
private sale for cash or credit and on such terms as the Secured Party deems
reasonable. The Secured Party shall apply the proceeds of any realization on the
whole or any part of the Collateral after deducting all of its reasonable
expenses and costs incurred in collection and realization (including, without
limitation, reasonable counsel's fees and expenses) to the payment of the
Debtor's obligations under the Note; the balance, if any, of such proceeds shall
be paid to Debtor.
5
37
20. The Secured Party's Appointment as Attorney-in-Fact.
(a) The Debtor hereby irrevocably constitutes and appoints the Secured
Party and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full irrevocable power and
authority in the place and stead of the Debtor and in the name of the
Debtor or in its own name, from time to time in the Secured Party's
discretion, for the purpose of carrying out the terms of this Agreement, to
take any and all appropriate action and to execute and deliver any and all
documents and instruments which may be reasonably necessary or desirable to
accomplish the purposes of this Agreement.
(b) The Secured Party agrees that, except upon the occurrence and
during the continuation of an Event of Default and until any necessary
consents have been obtained, it will forbear from exercising the power of
attorney or any rights granted to the Secured Party pursuant to this
Section 6. The Debtor hereby ratifies, to the extent permitted by law, all
that said attorney shall lawfully do or cause to be done by virtue hereof.
The power of attorney granted pursuant to this Section 6 is a power coupled
with an interest and shall be irrevocable until the Note is paid in full.
(c) The powers conferred on the Secured Party hereunder are solely to
protect the Secured Party's interests in the Collateral and shall not
impose any duty upon it to exercise any such powers. The Secured Party
shall be accountable only for amounts that it actually receives as a result
of the exercise of such powers and neither it nor any of its officers,
directors, employees or agents shall be responsible to the Debtor for any
act or failure to act, except for its own gross negligence or willful
misconduct.
21. Severability and Enforceability. If any of the provisions
of this Agreement, or the application thereof to any person or circumstance
shall, to any extent, be invalid or unenforceable, the remainder of this
Agreement, or the application of such provision or provisions to persons or
circumstances other than those to whom or which it is held invalid or
unenforceable, shall not be affected thereby and every provision of this
Agreement shall be valid and enforceable to the fullest extent permitted by law.
22. Governing Law; Severability. This Agreement shall be
governed by and construed in accordance with the laws of the State of New
Jersey, without giving effect to principles of conflicts of law. Any action or
proceedings to enforce or arising out of this Agreement may be commenced in any
court of the State of New Jersey or in the United States District Court for the
District of New Jersey. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
6
38
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
23. Notices. All notices or other communications to be given
pursuant to this Agreement shall be in writing and shall be deemed sufficiently
given on (i) the day on which delivered personally or by telecopy (with prompt
confirmation by mail) during a business day to the appropriate location listed
as the address below, (ii) three business days after the posting thereof by
United States registered or certified first class mail, return receipt requested
with postage and fees prepaid, or (iii) one business day after deposit thereof
for overnight delivery. Such notices or other communications shall be addressed
respectively:
As to the Debtor: Voice Powered Technology,
International, Inc.
00000 Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxxxxxx Xxxxx -
Vice President
Telecopy No.: (000) 000-0000
with a copy to: Xxx, Castle & Xxxxxxxxx LLP
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
As to the Secured Party: Franklin Electronic
Publishers, Inc.
Xxx Xxxxxxxx Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
Attention: Xx. Xxxxxxx X. Xxxxxx -
Senior Vice President
Telecopy No.: (000) 000-0000
with a copy to: Rosenman & Colin LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxx, Esq.
Telecopy No.: (000) 000-0000
or to any other address or telecopy number which such party may have
subsequently communicated to the other parties in writing.
24. Counterparts. This Agreement may be executed in any number
of counterparts, each of which when executed and delivered shall be deemed to be
an original and all of which when taken together shall constitute one and the
same instrument.
7
39
25. Captions. The captions in this Agreement are for
convenience only, and in no way limit or amplify the provisions hereof.
IN WITNESS WHEREOF, the undersigned have executed this document
as of the date first above written.
FRANKLIN ELECTRONIC
PUBLISHERS, INC.
By:_______________________
Name:
Title:
VOICE POWERED TECHNOLOGY
INTERNATIONAL, INC.
By:_______________________
Name:
Title:
8
40
Schedule A
Permitted Liens
UCC-1 Financing Statement filed on August 20, 1996 with the Office of the
Secretary of State of the State of California by VPT/KBK Acceptance Corporation.
41
Schedule B
Location of Books and Records and Collateral
I. Location of Books and Records
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000-000
Xxxxxxx, Xxxxxxxxxx 00000
II. Location of Inventory and other Collateral
(a) Service Center
00000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
(b) Warehouse - U.S.
Xxxxxxx Data
00000 Xxxxxxx Xxxx
Xxxxx Xxxxxxxxx, Xxxxxxxxxx 00000
(c) Warehouse - Europe
Precision Fulfillment Services
Xxxxxxxxxxxxxx 00, 0000 Xx Xxxx (I)
Xxxxxxx 0000, 0000
XX Xxxxxxxxxx, Xxxxxxx
