EXHIBIT 2.5
AMENDMENT NO. 1
TO
PURCHASE AGREEMENT
BETWEEN
KONINKLIJKE PHILIPS ELECTRONICS N.V.
AND
SCANSOFT, INC.
DATED AS OF DECEMBER 20, 2002
AMENDMENT NO. 1 TO PURCHASE AGREEMENT (this "Amendment"), dated as of
December 20, 2002, between KONINKLIJKE PHILIPS ELECTRONICS N.V., a limited
liability company organized under the laws of The Netherlands ("Seller") and
ScanSoft, Inc., a Delaware corporation ("Purchaser") (each a "Party", and
collectively, "Parties").
W I T N E S S E T H:
WHEREAS, the Parties have entered into the Purchase Agreement,
dated as of October 7, 2002 (the "Original Purchase Agreement"); and
WHEREAS, the Parties desire to amend the Original Purchase
Agreement as provided below.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and subject to and on the terms and conditions
herein set forth, the Parties agree as follows:
ARTICLE I
AMENDMENTS
Section 1.1 Effective Date of Purchase. The Original Purchase
Agreement is amended as follows:
(a) Section 1.1 is amended by adding the following defined
term: "`Effective Date' shall mean 12:01 a.m., New York City time, January 1,
2003."
(b) The definition of "Excluded Liabilities" are amended to
replace the term "Closing Date" used in that definition with the term "Effective
Date".
(c) The following paragraph (d) is inserted immediately after
paragraph (c) of Section 2.1:
"(d) As of and at the Effective Date (subject to the Closing
having occurred), risk of loss as to the Assets shall pass from Seller and each
Local Seller to Purchaser and the Local Purchasers except as may otherwise be
provided herein and the Business shall be operated for the risk and account of
Purchaser as of the Effective Date."
(d) The following paragraph is inserted in the end of Section
2.2:
"Notwithstanding the above, the Business transferred at
Closing shall be deemed to have been operated by Seller with
the profits, losses, and
liabilities of the Business for the account of Purchaser from
and after the Effective Date."
(e) Paragraph (b) of Section 2.3 is amended to replace the
term "Closing" in that paragraph (b) with the term "Effective Date".
(f) Paragraph (e) of Section 5.9 is amended to replace the
term "Closing" used in that paragraph (e) with the term "Effective Date".
(g) Section 7.6 is amended to replace the term "Closing" used
in that Section 7.6 with the term "Effective Date".
Section 1.2 Operation of the Business between Effective Date
and Closing. To implement the agreement of the Parties that Seller will operate
the Business between the Effective Date and the Closing for the risk and account
of Purchaser, the Original Purchase Agreement is amended as follows:
(a) Section 1.1 is amended by adding the following defined
term:
"`Interim Cash Allowance Amount' shall have the meaning set
forth in Section 2.4(g)."
(b) The following Section 2.3(i) is added immediately after
Section 2.3(h):
"(i) Payment of Cash Deficit Contribution. Promptly after the
Closing, Seller shall deliver to Purchaser a statement (the
"Cash Deficit Contribution Statement") setting forth the
amount of cash contributed to the Business by Seller between
the Effective Date and the Closing in order to keep the
Business operating in the ordinary course or as requested by
Purchaser (the "Cash Deficit Contribution Amount"), which
statement shall bind the Parties in absence of error. Promptly
after Purchaser's receipt from Seller of the Cash Deficit
Contribution Statement, (i) to the extent the Cash Deficit
Contribution Amount exceeds the Interim Cash Allowance Amount,
Purchaser shall promptly pay Seller an amount equal to such
excess, payable in immediately available funds, or (ii) to the
extent the Cash Deficit Contribution Amount is less than the
Interim Cash Allowance Amount, Seller shall promptly pay
Purchaser an amount equal to such difference, payable in
immediately available funds."
(c) The following Section 2.4(g) is added immediately after
Section 2.4(f):
"(g) Euro 800,000 in cash by wire transfer in immediately
available funds to an account designated by Seller in writing
at least 3 Business Days prior to the Closing Date
representing the estimated net cash flow
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and cash generation of the Business between the Effective Date
and the Closing (the "Interim Cash Allowance Amount")."
(d) The following text is added immediately after the last
word of paragraph (c) of Section 5.1:
",and (iii) between the Effective Date and the Closing,
provide the services to the Business necessary to operate the
Business in substantially the same manner as it is operated
prior to the Effective Date, which services shall be subject
to substantially the same terms, conditions and charges as
those applicable to such services during 2002."
Section 1.3 Reference Balance Sheet. To implement the
agreement of the Parties with respect to the Reference Balance Sheet and
Reference NAV, the Original Purchase Agreement is amended as follows:
(a) Section 2.3(a) is replaced in its entirety with the
following:
"(a) Reference Balance Sheet. The `Reference Balance Sheet'
shall mean the balance sheet of the Business as of September
29, 2002 adjusted as set forth in Annex 1 to the Amendment No.
1 to the Purchase Agreement."
(b) Section 2.3(f) is replaced in its entirety with the
following:
"(f) Calculation and Payment of Adjustment Payments. Promptly
after the determination of the Final Statement of Net Assets
pursuant to Section 2.3(e), (i) to the extent the net asset
value of the Business set forth in the Final Statement of Net
Assets (the "Final Net Asset Value") exceeds euro 1,754,000
(the "Reference NAV") Purchaser shall promptly pay Seller an
amount equal to such excess (a "Purchaser Adjustment
Payment"), payable in immediately available funds, or (ii) to
the extent the Final Net Asset Value is less than the
Reference NAV, Seller shall promptly pay Purchaser an amount
equal to such difference (a "Seller Adjustment Payment"),
payable in immediately available funds. For clarity, it is
agreed and understood that references to net asset value and
the term "NOC" used in the Reference Balance Sheet are used
interchangeably."
Section 1.4 Representations and Warranties; Conditions to the
Obligations of Purchaser to Close. Original Purchase Agreement is amended as
follows:
(a) The introductory paragraph to Article III is replaced in
its entirety with the following:
"As of the date hereof and as of the Effective Date, Seller,
for itself and, where appropriate, on behalf of the
Transferred Subsidiary and the Local
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Sellers, jointly and severally, represent and warrant to
Purchaser (except (x) representations and warranties contained
in Sections 3.1, 3.2, 3.3, 3.4, 3.5 (clause (i) only), 3.16,
3.21, and 3.24, which Seller represents and warrants only as
of the date hereof and as of the Closing Date, (y)
representations and warranties made with respect to the
Transferred Subsidiary, which Seller represents and warrants
only as of the Closing Date, and (z) any representations and
warranties that are expressly made as of a specific date,
which Seller represents and warrants only as of such date), as
follows:"
(b) Section 6.2(a) is replaced in its entirety with the
following:
"(a) Representations and Warranties. The representations and
warranties of Seller contained in Sections 3.1, 3.2, 3.3, 3.4,
3.5 (clause (i) only), 3.16, 3.21, and 3.24 shall be true and
correct in all material respects (other than those
representations and warranties that are qualified by "Material
Adverse Effect" or similar materiality qualifier, which
representations and warranties shall be true and correct in
all respects) both as of the date of this Agreement and as of
the Closing, as if made as of the Closing (except that
representations and warranties that are made as of a specific
date need be true and correct only as of such date), and
Purchaser shall have received certificates to such effect
dated the Closing Date and executed by a duly authorized
officer of Seller; provided, however, that notwithstanding
anything herein to the contrary, this Section 6.2(a) shall be
deemed to have been satisfied even if such representations or
warranties are not so true and correct (i) if the failure of
such representations and warranties to be so true and correct
can be attributed to Seller's efforts to comply with
Purchaser's requests or to Purchaser's actions with respect to
the Business, or (ii) unless the failure of such
representations or warranties to be so true and correct,
individually or in the aggregate, has had, or is reasonably
likely to have, a Material Adverse Effect or is reasonably
likely to prevent or to materially burden or materially impair
the ability of Seller to consummate the transactions
contemplated by this Agreement."
(c) Section 6.2(b) is replaced in its entirety with the
following:
"(b) Covenants. The material covenants and agreements of
Seller and its Affiliates contained in Sections 5.1 and 5.3
shall have been duly performed by the Closing in all material
respects, and Purchaser shall have received certificates to
such effect dated the Closing Date and executed by a duly
authorized officer of Seller; provided, however, that
notwithstanding anything herein to the contrary, this Section
6.2(b) shall be deemed to have been satisfied even if such
covenants and agreements shall not have been so performed if
the failure of such covenants and
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agreements to be so performed can be attributed to Seller's
efforts to comply with Purchaser's requests or to Purchaser's
actions with respect to the Business."
(d) Section 6.2(g) is deleted in its entirety.
Section 1.5 Certain Additional Severance Arrangements.
Original Purchase Agreement is amended as follows:
(a) The following text is added immediately after the last
sentence of paragraph (d) of Section 5.9:
"Notwithstanding anything herein to the contrary, Purchaser
shall provide severance to U.S. Employees who do not transfer
to Purchaser in accordance with Seller's severance policy
applicable to such employees, and Seller shall reimburse
Purchaser in a mutually agreeable manner for the amount by
which any such severance payment provided in accordance with
Seller's severance policy exceeds the severance payment that
would have been provided in accordance with Purchaser's
severance policy; provided, however, that such Seller's
reimbursement obligations shall not exceed US$400,000 in the
aggregate."
(b) The following Section 5.9(n) is added immediately after
Section 5.9(m):
"(n) Without limiting Purchaser's obligations and liabilities
for severance and other costs and expenses in countries other
than Australia, Taiwan and Japan, Purchaser shall be
responsible for all liabilities and obligations to provide
severance to Transferred Employees employed in Australia,
Taiwan and Japan and for all costs and expenses related to,
arising out of, or incurred in connection with, providing such
employees with notice of termination of employment, regardless
of when such costs and expenses are incurred; provided,
however, that the amount of such liabilities, obligations,
costs and expenses shall not exceed euro 25,000 in Australia
and euro 250,000 in Taiwan."
Section 1.6 Sales to Seller and Affiliates. The first sentence
of Section 5.14 is replaced in its entirety with the following:
"Seller shall, or shall cause its Affiliates to, purchase or
license speech, language and other products and services on an
arm's length basis from Purchaser for a period beginning on
January 1, 2003 and ending on December 31, 2003 for the total
aggregate amount of euro 2 million; provided, however, that
only 50% of the amounts paid to purchase or license products
and services other than speech and language products shall be
credited against the euro 2 million commitment."
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ARTICLE II
MISCELLANEOUS
Section 2.1 Definitions; Interpretations. All capitalized
terms used but not defined in this Amendment have the meaning ascribed to them
in the Original Purchase Agreement, and such terms are incorporated in this
Amendment by reference. All other definitional provisions and rules of
interpretation set forth in Article I of the Original Purchase Agreement shall
apply to this Amendment.
Section 2.2 Incorporation of Terms. The provisions of the
Original Purchase Agreement set forth in Sections 9.1 (Notices), 9.3
(Assignment), 9.6 (Fulfillment of Obligations), 9.7 (Parties in Interest; No
Third Party Beneficiaries), 9.8 (Public Disclosure), 9.10 (Expenses), 9.11
(Amounts Paid and Calculated in Euro; Receivables and Payable Currency), 9.13
(Governing Law and Venue; Waiver of Jury Trial), 9.14 (No Right to Dissolution
Under Law; Textual Interpretation of this Agreement to Control), 9.15
(Counterparts), 9.16 (Headings), and 9.17 (Severability), thereof, are
incorporated by reference herein as if fully set forth, except that references
to "this Agreement" therein shall be deemed to refer to this Amendment.
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IN WITNESS WHEREOF, the Parties have executed or caused this Amendment
to be executed as of the date first written above.
KONINKLIJKE PHILIPS ELECTRONICS N.V.
By: /s/ X. Xxxxxxxx
------------------------------------
Name: X. Xxxxxxxx
Title: Authorized Signatory
SCANSOFT, INC.
By:
------------------------------------
Name:
Title:
IN WITNESS WHEREOF, the Parties have executed or caused this Amendment
to be executed as of the date first written above.
KONINKLIJKE PHILIPS ELECTRONICS N.V.
By:
------------------------------------
Name:
Title:
SCANSOFT, INC.
By: /s/ Xxxxxxx X Xxxxxx
------------------------------------
Name: Xxxxxxx X Xxxxxx
Title: President & COO
Annex 1
PHILIPS SPEECH PROCESSING TELEPHONY AND VOICE CONTROL (A division
of Royal Philips Electronics N.V.)
COMBINED BALANCE SHEETS
DECEMBER 31, SEPTEMBER 29,
In Thousands of EURO's 2001 2002
ASSETS
CURRENTS ASSETS:
Cash 23 12
Accounts receivable, net (Notes 3 and 16) 3,036 4,580
Receivables from related parties (Note 13) 512 457
Inventory, net (Note 4 ) 662 773
Deferred income taxes (Notes 8 and 13) 25 0
Other current assets (Note 5) 240 618
TOTAL CURRENT ASSETS 4,498 6,440
----- -----
Property, plant and equipment, net (Notes 6 and 15) 521 388
Intangible assets, net (Note 7) 184 135
TOTAL ASSETS
5,203 6,963
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LIABILITIES AND NET INVESTMENT OF THE
PHILIPS GROUP
CURRENT LIABILITIES:
Accounts payable 850 672
Deferred income 1,481 1,141
Payables to related parties (Note 13) 1,541 692
Deferred income tax liability (Notes 9 and 13) 17 17
Other accrued liabilities (Note 8) 2,153 2,349
TOTAL CURRENT LIABILITIES 6,042 4,871
----- -----
Long-term provisions (Note 10) 269 338
TOTAL LIABILITIES 6,311 5,209
----- -----
Commitments and contingencies (Note 14)
NET INVESTMENT PHILIPS GROUP/NOC (1,108) 1,754
TOTAL LIABILITIES AND NET INVESTMENT OF THE PHILIPS GROUP 5,203 6,963
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