COMPUTER TELEPHONY
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
EXECUTONE INFORMATION SYSTEMS, INC.,
INTER-TEL, INCORPORATED
AND
EXECUTONE INTER-TEL BUSINESS INFORMATION SYSTEMS, INC.
TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS..........................................................1
1.01 Accounts........................................................1
1.02 Acquisition.....................................................2
1.03 Adjustment......................................................2
1.04 Affiliate.......................................................2
1.05 Agreement.......................................................2
1.06 Arbitration Fees................................................2
1.07 Assignment and Assumption Agreement.............................2
1.08 Assumed Leases..................................................2
1.09 Assumed Liabilities.............................................3
1.10 Basket..........................................................3
1.11 ▇▇▇▇ of Sale....................................................4
1.12 Books and Records...............................................4
1.13 Buyer...........................................................4
1.14 Buyer's Closing Certificate.....................................4
1.15 Buyer Review Period.............................................4
1.16 Closing.........................................................4
1.17 Closing Balance Sheet...........................................5
1.18 Closing Date....................................................5
1.19 Code............................................................5
1.20 Commission......................................................5
1.21 Competing Transaction...........................................5
1.22 Computer Assets.................................................5
1.23 Computer Assets License Agreement...............................5
1.24 Computer Telephony Business.....................................5
1.25 Computer Telephony Products.....................................6
1.26 Confidentiality Agreement.......................................6
1.27 Contracts.......................................................6
1.28 Customer List...................................................6
1.29 DCC.............................................................7
1.30 ECS Shares......................................................7
1.31 Effective Time..................................................7
1.32 eLottery........................................................7
1.33 eLottery Business...............................................7
1.34 Employee Benefit Plan...........................................7
1.35 Employees.......................................................8
1.36 End Date........................................................8
1.37 Environmental Laws..............................................8
1.38 Environmental Permits...........................................8
1.39 ERISA...........................................................8
1.40 ERISA Affiliate.................................................8
1.41 Escrow Agent....................................................8
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1.42 Escrow Amount...................................................8
1.43 Escrow Fund.....................................................8
1.44 Escrow Period...................................................9
1.45 Exchange Act....................................................9
1.46 Excluded Assets.................................................9
1.47 Excluded Prepaid Assets.........................................9
1.48 Fixtures and Equipment..........................................9
1.49 GAAP............................................................9
1.50 Governmental Entity............................................10
1.51 Hazardous Material.............................................10
1.52 Hazardous Material Activities..................................10
1.53 Headquarters Facility..........................................10
1.54 Headquarters Sublease Agreement................................10
1.55 Healthcare Communications Business.............................10
1.56 Healthcare Services Assets.....................................11
1.57 HSR Act........................................................11
1.58 Indemnifiable Loss.............................................11
1.59 Indemnified Litigation.........................................11
1.60 Intellectual Property Rights...................................11
1.61 Interim Financial Statements...................................12
1.62 Inventory......................................................12
1.63 Knowledge......................................................12
1.64 Law............................................................13
1.65 Licensed Trademarks............................................13
1.66 Liens..........................................................13
1.67 Manufacturing Agreement........................................13
1.68 Material Adverse Change........................................13
1.69 Net Assets.....................................................15
1.70 Officer's Certificate..........................................15
1.71 Parent.........................................................15
1.72 Permits........................................................15
1.73 Permitted Liens................................................15
1.74 Person.........................................................16
1.75 Poway Facility.................................................16
1.76 Premises.......................................................16
1.77 Prepaid Assets.................................................16
1.78 Purchase Price.................................................16
1.79 Purchased Assets...............................................16
1.80 Required Consents..............................................17
1.81 Retained Debt..................................................17
1.82 Retained Liabilities...........................................17
1.83 Seller.........................................................19
1.84 Seller Acquisition.............................................19
1.85 Seller Triggering Event........................................19
1.86 Seller's Closing Certificate...................................20
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1.87 Services Agreement.............................................20
1.88 Severed Employees..............................................20
1.89 Superior Proposal..............................................20
1.90 Tax or Taxes...................................................20
1.91 Tax Return.....................................................20
1.92 Technology.....................................................21
1.93 Trademark License Agreement....................................21
1.94 Transferred Employees..........................................21
1.95 Transferred Intellectual Property Rights.......................21
1.96 Transferred Technology.........................................21
1.97 TRP Liabilities................................................22
1.98 Year-End Financial Statements..................................22
1.99 Year 2000 Compliant............................................22
ARTICLE II PURCHASE AND SALE; ASSIGNMENT AND ASSUMPTION.......................22
2.01 Sale of Purchased Assets.......................................22
2.02 Transfer or Sales Taxes; Property Taxes........................23
2.03 Allocation of Purchase Price...................................23
2.04 Adjustments....................................................24
2.05 Escrow.........................................................27
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER..........................27
3.01 Organization and Good Standing.................................27
3.02 Foreign Qualification..........................................27
3.03 Authorization; Enforceability..................................28
3.04 Conflicts or Violations; Required Consents.....................28
3.05 Litigation.....................................................29
3.06 Compliance with Law............................................29
3.07 Environmental Matters..........................................29
3.08 Permits........................................................31
3.09 Taxes..........................................................31
3.10 Title to Purchased Assets......................................32
3.11 Condition and Sufficiency of Assets............................32
3.12 Accounts Receivable............................................32
3.13 No Undisclosed Liabilities.....................................33
3.14 Contracts and Assumed Leases...................................33
3.15 Books and Records..............................................35
3.16 Employee Benefit Plans.........................................36
3.17 Employee Matters...............................................37
3.18 Fees and Expenses of Brokers and Others........................39
3.19 Insurance......................................................39
3.20 Intellectual Property Rights and Technology....................39
3.21 Inventory......................................................42
3.22 Financial Statements...........................................42
3.23 No Material Adverse Change.....................................43
3.24 Disclaimers of Seller..........................................43
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3.25 Disclosure.....................................................43
3.26 Year 2000......................................................44
3.27 Authenticity and Entirety of Documents.........................45
3.28 Premises.......................................................45
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER............................46
4.01 Organization...................................................46
4.02 Authorization; Enforceability..................................46
4.03 No Conflict or Violation; Required Consents....................46
4.04 No Litigation..................................................47
4.05 Fees and Expenses of Brokers and Others........................47
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT............................47
5.01 Organization...................................................47
5.02 Authorization; Enforceability..................................47
5.03 No Conflict or Violation; Required Consents....................48
5.04 No Litigation..................................................48
5.05 Fees and Expenses of Brokers and Others........................48
5.06 Sufficient Funds...............................................49
ARTICLE VI CERTAIN UNDERSTANDINGS AND AGREEMENTS..............................49
6.01 Conduct of Seller Prior to Closing.............................49
6.02 Negative Covenants.............................................50
6.03 Access.........................................................51
6.04 No Solicitation................................................51
6.05 Further Assurances.............................................53
6.06 Publicity......................................................54
6.07 Employees......................................................54
6.08 WARN Act.......................................................56
6.09 Benefit Obligations............................................56
6.10 Services Agreement.............................................59
6.11 Headquarters Facility Sublease Agreement.......................59
6.12 Manufacturing Agreement........................................59
6.13 Non Compete....................................................60
6.14 Trademark License Agreement....................................60
6.15 Computer Assets License Agreement..............................61
6.16 Bulk Transfers Laws............................................61
6.17 Notice of Developments.........................................61
6.18 Third Party Consents...........................................62
6.19 Risk of Loss...................................................63
6.20 Meeting of Seller's Shareholders...............................63
6.21 Customer List..................................................64
6.22 Year 2000 Claims...............................................64
6.23 Executone Name.................................................65
6.24 Poway Facility Permits.........................................65
6.25 Schedules......................................................65
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ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER..................66
7.01 Accuracy of Representations and Warranties.....................66
7.02 HSR Act Waiting Period.........................................66
7.03 No Litigation..................................................66
7.04 Seller's Performance...........................................66
7.05 Deliveries at Closing..........................................67
7.06 No Material Adverse Change.....................................67
ARTICLE VIII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER................67
8.01 Accuracy of Representations and Warranties.....................68
8.02 Shareholder Approval...........................................68
8.03 No Litigation..................................................68
8.04 HSR Act Waiting Period.........................................68
8.05 Buyer's Performance............................................68
8.06 Deliveries at Closing..........................................68
ARTICLE IX ACTIONS BY SELLER AND BUYER AFTER THE CLOSING......................69
9.01 Seller's Indemnity.............................................69
9.02 Buyer's Indemnity..............................................70
9.03 Limitations on Indemnification.................................71
9.04 Procedure for Indemnification - Third Party Claims.............71
9.05 Procedure for Indemnification - Third Party Claims.............73
9.06 Computation of Indemnity Amounts...............................73
9.07 Litigation Support.............................................74
9.08 Post-Closing Cooperation.......................................74
9.09 Escrow Arrangements............................................74
9.10 Taxes..........................................................82
9.11 Books and Records; Personnel...................................83
ARTICLE X TERMINATION.........................................................84
10.01 Termination....................................................84
10.02 Termination by Buyer...........................................85
10.03 Termination by Seller..........................................86
10.04 Procedure for Termination......................................87
10.05 Effect of Termination..........................................87
ARTICLE XI MISCELLANEOUS......................................................88
11.01 Entire Agreement; Amendment....................................88
11.02 Expenses.......................................................89
11.03 Governing Law; Consent to Jurisdiction.........................89
11.04 Assignment.....................................................90
11.05 Agreement Not to Compete.......................................90
11.06 Notices........................................................91
11.07 Counterparts; Headings.........................................92
11.08 Severability...................................................93
11.09 No Reliance....................................................93
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11.10 Interpretation.................................................93
11.11 Specific Performance...........................................93
11.12 Employee Tax Reporting.........................................94
11.13 Further Assurances.............................................94
11.14 Disclosure Schedule............................................94
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SCHEDULES AND EXHIBITS
SCHEDULE DESCRIPTION
-------- -----------
1.01 Accounts
1.08(a) Assumed Leases for Office Space
1.08(b) Assumed Leases for Equipment
1.22 Computer Assets
1.24(a) eLottery Business
1.24(b) Healthcare Communications Business
1.25 Computer Telephony Products
1.27 Contracts
1.35 Employees
1.47 Excluded Prepaid Assets
1.48 Fixtures and Equipment
1.55 Healthcare Communications Business
1.56 Healthcare Services Assets Excluded From Computer Telephony Business
1.59 Indemnified Litigation
1.61 Interim Financial Statements
1.65 Licensed Trademarks
1.68 Material Adverse Change -- Managerial and Engineering Employees
1.73 Permitted Liens
1.76 Premises
1.82 Retained Liabilities
1.95 Transferred Intellectual Property Rights and Transferred Technology
1.98 Year-End Financial Statements
3.02 Foreign Qualifications
3.04(a) Conflicts or Violations
3.04(b) Required Consents
3.05 Litigation
3.06 Compliance with Law
3.09 Taxes
3.10 Title to Purchased Assets
3.11 Condition and Sufficiency of Assets
3.13 No Undisclosed Liabilities
3.16 Employee Benefit Plans
3.17(a) Employee Debts
3.17(b) Independent Contractors
3.17(c) Employment Matters (Threatened and Filed Employment and Labor
Complaints)
3.17(d) Labor Disturbances
3.17(e) Employees
3.20 Intellectual Property Rights and Technology -- Infringement Claims
3.23 Material Adverse Change
3.26 Year 2000
4.03 Buyer Required Consents
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5.03 Parent Required Consents
6.05 Preclosing Actions With Respect to Customers and Distributors
6.12 Terms of Manufacturing Agreement
6.24 Poway Facility Permits
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EXHIBIT DESCRIPTION
------- -----------
A Assignment and Assumption Agreement
B ▇▇▇▇ of Sale
C Computer Asset License Agreement
D Headquarters Sublease Agreement
E Trademark License Agreement
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, made as of October 17, 1999, by and between
EXECUTONE Information Systems, Inc., a Virginia corporation ("Seller"),
Inter-Tel, Incorporated, an Arizona corporation ("Parent"), and Executone
Inter-Tel Business Information Systems, Inc. an Arizona corporation and a
wholly-owned subsidiary of Parent ("Buyer"), provides as follows:
RECITALS
WHEREAS, one of the businesses engaged in by Seller is the Computer
Telephony Business as defined herein.
WHEREAS, Seller desires to sell certain of its assets and be relieved of
certain of its liabilities that are employed by Seller in operating the Computer
Telephony Business, and Buyer desires to purchase those assets and assume those
liabilities.
NOW, THEREFORE, in consideration of the Recitals and of the mutual
covenants, conditions and agreements set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree that:
ARTICLE I
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
specified:
1.01 ACCOUNTS.
"Accounts" shall mean all accounts receivable, notes receivable and
associated rights (including, without limitation, amounts due from vendors, all
security deposits, letters of credit and security interests in collateral) and
all related reserves arising from the sale of goods and services of the Computer
Telephony Business and outstanding as of the Effective Time, including the
Accounts to be listed on SCHEDULE 1.01 hereto, as well as all other Accounts not
listed on SCHEDULE 1.01 which are Accounts of the Computer Telephony Business,
but specifically excluding the Excluded Prepaid Assets.
1.02 ACQUISITION.
"Acquisition" shall mean the purchase and sale of the Computer
Telephony Business pursuant to this Agreement.
1.03 ADJUSTMENT.
"Adjustment" shall have the meaning assigned to it in SECTION 2.04.
1.04 AFFILIATE.
"Affiliate" shall mean, with respect to any Person, any Person or
entity, that directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such Person.
1.05 AGREEMENT.
"Agreement" shall mean this Asset Purchase Agreement, together with
the Exhibits and Schedules attached hereto, as the same may be amended from time
to time in accordance with the terms hereof.
1.06 ARBITRATION FEES.
"Arbitration Fees" shall have the meaning assigned to it in SECTION
9.09(f)(III).
1.07 ASSIGNMENT AND ASSUMPTION AGREEMENT.
"Assignment and Assumption Agreement" shall mean the Assignment and
Assumption Agreement between Seller and Buyer substantially in the form of
EXHIBIT A hereto.
1.08 ASSUMED LEASES.
"Assumed Leases" shall mean those leases for all facilities used by
the Computer Telephony Business and listed on SCHEDULE 1.08(a) hereto and those
equipment leases listed on SCHEDULE 1.08(b) hereto.
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1.09 ASSUMED LIABILITIES.
"Assumed Liabilities" shall mean the following liabilities (other than
Retained Liabilities): (i) all obligations and liabilities with respect to
circumstances and events occurring on or after the Closing Date with respect to
the Assumed Leases listed on SCHEDULE 1.08(a) and SCHEDULE 1.08(b), (ii) all
trade account payables and accrued liabilities (excluding Taxes, except those
Taxes specifically excluded from the definition of Retained Liabilities) related
to the Computer Telephony Business, (iii) all obligations and liabilities with
respect to all Contracts listed on SCHEDULE 1.27, (iv) all warranty obligations
and liabilities relating to the Computer Telephony Business, excluding (other
than as set forth in clause (v) below) all claims, lawsuits or actions of
current or former customers of the Computer Telephony Business related to the
Year 2000 readiness of the Computer Telephony Products initiated or, to the
Knowledge of Seller, threatened prior to the Closing, (v) all obligations of
Seller for judgments, amounts paid in settlement, and attorneys' fees and costs,
and other expenses and costs, arising out of the Indemnified Litigation, (vi)
all liabilities and obligations arising from circumstances or events occurring
prior to the Effective Time in the ordinary course of the Computer Telephony
Business consistent with past practice, other than Retained Liabilities, (vii)
all other liabilities and obligations of the Computer Telephony Business that
arise from circumstances or events occurring after the Closing, and (viii) up to
fifty percent (50%) of any liabilities relating to indebtedness to any
participants under Seller's Transition and Retention Plan and up to fifty
percent (50%) of any liabilities relating to any severance, separation or other
payment obligations to any Transition and Retention Plan participants (other
than such liabilities in respect of ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇, which shall be
Retained Liabilities hereunder).
1.10 BASKET.
"Basket" shall have the meaning assigned to it in SECTION 9.03(a).
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1.11 ▇▇▇▇ OF SALE.
"▇▇▇▇ of Sale" shall mean the ▇▇▇▇ of sale substantially in the form
of EXHIBIT B hereto.
1.12 BOOKS AND RECORDS.
"Books and Records" shall mean original or true and complete copies of
the Customer List and all the books, records, files, data and information of
Seller relating to the Computer Telephony Business, including, without
limitation, all customer lists, financial and accounting records (including all
Tax Returns other than income tax returns), purchase orders and invoices, sales
orders and sales order log books, credit and collection records, correspondence
and miscellaneous records with respect to customers and supply sources and all
other general correspondence, records, books and files relating to the Computer
Telephony Business.
1.13 BUYER.
"Buyer" shall mean Executone Inter-Tel Business Information Systems,
Inc., an Arizona corporation and a wholly-owned subsidiary of Parent.
1.14 BUYER'S CLOSING CERTIFICATE.
"Buyer's Closing Certificate" shall mean the certificate of Buyer in a
form to be reasonably agreed upon between Buyer and Seller.
1.15 BUYER REVIEW PERIOD.
"Buyer Review Period" shall have the meaning assigned to it in SECTION
2.04(b).
1.16 CLOSING.
"Closing" shall mean the meeting of the parties held at 10:00 A.M.,
local time, on the Closing Date, at the offices of Hunton & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other time and place as the
parties may mutually agree in writing.
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1.17 CLOSING BALANCE SHEET.
"Closing Balance Sheet" shall have the meaning assigned to it in
SECTION 2.04(a).
1.18 CLOSING DATE.
"Closing Date" shall mean the business day following approval of this
Agreement and the transaction contemplated thereby by Seller's shareholders and
satisfaction of the conditions set forth in Articles VIII and IX, or such other
date as the parties may mutually agree in writing.
1.19 CODE.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
any predecessor thereto to the extent applicable to prior periods.
1.20 COMMISSION.
"Commission" shall mean the Securities and Exchange Commission.
1.21 COMPETING TRANSACTION.
"Competing Transaction" shall have the meaning assigned to it in
SECTION 6.04.
1.22 COMPUTER ASSETS.
"Computer Assets" shall mean the computer hardware and software listed
on SCHEDULE 1.22 hereto.
1.23 COMPUTER ASSETS LICENSE AGREEMENT.
"Computer Assets License Agreement" shall mean the computer assets
license agreement substantially in the form of EXHIBIT C hereto.
1.24 COMPUTER TELEPHONY BUSINESS.
"Computer Telephony Business" shall mean the development, manufacture,
marketing, selling and servicing of telephone key and PBX, voice mail, automatic
call distribution and other business telephone products, software and system
applications for and to
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end-user customers and independent distributors, as well as the manufacturing,
logistics, repair, warehousing, billing and related services provided to the
Healthcare Communications Business, subject to the terms of the Manufacturing
Agreement, as conducted by Seller as of the date of the Agreement, and as it
historically has been conducted, including all research and development relating
to the Computer Telephony Business, and excluding assets related to the eLottery
Business to be expressly listed on SCHEDULE 1.24(a) and assets related to the
Healthcare Communications Business to be expressly listed on SCHEDULE 1.24(B).
1.25 COMPUTER TELEPHONY PRODUCTS.
"Computer Telephony Products" shall mean all products, including
software, of the Computer Telephony Business listed on SCHEDULE 1.25, including
installation, programming, customer training, service and maintenance thereof,
and predecessor and updated versions thereof and extensions, modifications and
developments thereof.
1.26 CONFIDENTIALITY AGREEMENT.
"Confidentiality Agreement" shall have the meaning assigned to it in
SECTION 1.27.
1.27 CONTRACTS.
"Contracts" shall mean those contracts, agreements, blanket and other
purchase orders, options, leases of personal or moveable property (such as
computers, copiers and vehicles), sales orders, license agreements,
relationships and commitments and invoices related thereto specifically listed
on SCHEDULE 1.27 hereto.
1.28 CUSTOMER LIST.
"Customer List" shall mean the customer list of the Computer Telephony
Business.
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1.29 DCC.
"DCC" shall mean Dialogic Communications Corporation, a Tennessee
corporation.
1.30 ECS SHARES.
"ECS Shares" shall mean Seller's equity interest in ECS Communications
Group, Inc.
1.31 EFFECTIVE TIME.
"Effective Time" shall mean 5:00 P.M. Eastern Time, on the Closing
Date.
1.32 ELOTTERY.
"eLottery" shall mean eLottery, Inc., a wholly-owned subsidiary of
Seller, and its predecessor entity, Unistar Gaming Corp., and its wholly-owned
subsidiary, UniStar Entertainment, Inc.
1.33 ELOTTERY BUSINESS.
"eLottery Business" shall mean the business as conducted by eLottery
as of the date of the Agreement, and as it historically has been conducted
through the Closing Date, including all developments and extensions thereof.
1.34 EMPLOYEE BENEFIT PLAN.
"Employee Benefit Plan" shall mean any plan, program, policy,
practice, contract, agreement or other arrangement providing for compensation,
severance, termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written or unwritten or otherwise, funded or unfunded,
including without limitation, each "employee benefit plan," within the meaning
of Section 3(3) of ERISA which is or has been maintained, contributed to, or
required
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to be contributed to, by Seller or any ERISA Affiliate for the benefit of any
Employee, or with respect to which Seller has or may have any liability or
obligation for any Employee.
1.35 EMPLOYEES.
"Employees" shall mean the employees of Seller necessary for the
operation of the Computer Telephony Business as listed on SCHEDULE 1.35 hereto.
1.36 END DATE.
"End Date" shall have the meaning assigned to it in Section 10.01(b).
1.37 ENVIRONMENTAL LAWS.
"Environmental Laws" shall have the meaning assigned to it in SECTION
3.07(a)(i).
1.38 ENVIRONMENTAL PERMITS.
"Environmental Permits" shall have the meaning assigned to in SECTION
3.07(c).
1.39 ERISA.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.40 ERISA AFFILIATE.
"ERISA Affiliate" shall mean each entity that is a member of a
controlled group or affiliated service group of which Seller is a member or that
is under common control with Seller (within the meaning of Section 414(b),
414(c) or 414(m) of the Code).
1.41 ESCROW AGENT.
"Escrow Agent" shall have the meaning assigned to it in SECTION
9.09(a).
1.42 ESCROW AMOUNT.
"Escrow Amount" shall have the meaning assigned to it in SECTION 2.05.
1.43 ESCROW FUND.
"Escrow Fund" shall have the meaning assigned to it in SECTION
9.09(a).
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1.44 ESCROW PERIOD.
"Escrow Period" shall have the meaning assigned to it in SECTION
9.09(b).
1.45 EXCHANGE ACT.
"Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended.
1.46 EXCLUDED ASSETS.
"Excluded Assets" shall mean (i) all cash and cash equivalents (other
than any deposits reflected on the Closing Balance Sheet), (ii) the shares and
options to purchase shares of DCC owned by Seller, (iii) Excluded Prepaid Assets
and (iv) all other assets of Seller not used in connection with the Computer
Telephony Business and to be listed on SCHEDULES 1.24(a) and 1.24(b).
1.47 EXCLUDED PREPAID ASSETS.
"Excluded Prepaid Assets" shall mean those assets listed on SCHEDULE
1.47 hereto.
1.48 FIXTURES AND EQUIPMENT.
"Fixtures and Equipment" shall mean all tangible assets (other than
Inventory) associated with or used in the ordinary course of the Computer
Telephony Business, including, but not limited to, all furniture, fixtures,
leasehold improvements, vehicles and equipment located on or off of the
Premises, including, without limitation, those items to be listed by location on
SCHEDULE 1.48 hereto.
1.49 GAAP.
"GAAP" shall mean generally accepted accounting principles as of the
date of this Agreement and as applied by Seller in a manner consistent with
prior periods.
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1.50 GOVERNMENTAL ENTITY.
"Governmental Entity" shall mean any court, administrative agency or
commission, or other governmental authority or instrumentality, domestic or
foreign.
1.51 HAZARDOUS MATERIAL.
"Hazardous Material" shall have the meaning assigned to it in SECTION
3.07(a).
1.52 HAZARDOUS MATERIAL ACTIVITIES.
"Hazardous Material Activities" shall have the meaning assigned to it
in SECTION 3.07(b).
1.53 HEADQUARTERS FACILITY.
"Headquarters Facility" shall mean the headquarters for the Computer
Telephony Business, the Healthcare Communications Business and the eLottery
Business located at 472 and ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
1.54 HEADQUARTERS SUBLEASE AGREEMENT.
"Headquarters Sublease Agreement" shall mean the sublease or license
agreement substantially in the form of EXHIBIT D hereto granted by Buyer to
Seller to use certain space located at the Headquarters Facility for use in
connection with the Healthcare Communications Business.
1.55 HEALTHCARE COMMUNICATIONS BUSINESS.
"Healthcare Communications Business" shall mean the development,
manufacture, selling and servicing of nurse and patient communication systems,
infrared locator systems and the other products listed on SCHEDULE 1.55, as
conducted by Seller as of the date of the Agreement and as it historically has
been conducted through the Closing Date, including all developments and
extensions thereof, and shall exclude the eLottery Business and the Computer
Telephony Business.
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1.56 HEALTHCARE SERVICES ASSETS.
"Healthcare Services Assets" shall mean the assets contained in the
Poway Facility, including those assets relating to the manufacturing, logistics,
repair, warehousing, billing and related services provided to the Healthcare
Communications Business, pursuant to the terms of the Manufacturing Agreement,
except those assets listed on SCHEDULE 1.56.
1.57 HSR ACT.
"HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended, or any successor law, and regulations and rules issued
pursuant to that Act or any successor law.
1.58 INDEMNIFIABLE LOSS.
"Indemnifiable Loss" shall have the meaning assigned to it in SECTION
9.09(d).
1.59 INDEMNIFIED LITIGATION.
"Indemnified Litigation" means the litigation listed on SCHEDULE 1.59
hereto.
1.60 INTELLECTUAL PROPERTY RIGHTS.
"Intellectual Property Rights" shall mean any or all of the following
and all rights therein: (i) all United States and foreign patents and utility
models and applications therefor and all reissues, divisions, re-examinations,
renewals, extensions, provisionals, continuations and continuations-in-part
thereof, and equivalent or similar rights anywhere in the world in inventions
and discoveries including without limitation invention disclosures; (ii) all
trade secrets and other rights in know-how and confidential or proprietary
information; (iii) all copyrights, copyrights registrations and applications
therefor and all other rights corresponding thereto throughout the world; (iv)
all mask works, mask work registrations and applications therefor, and any
equivalent or similar rights in semiconductor masks, layouts, architectures or
topology; (v) all industrial designs and any registrations and applications
therefor throughout the
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world; (vi) all rights in World Wide Web addresses and domain names and
applications and registrations therefor; (vii) all trade names, logos, common
law trademarks and service marks, trademark and service ▇▇▇▇ registrations and
applications therefor and all goodwill associated therewith throughout the
world; (viii) all guarantees, warranties, bonds, easements, licenses, permits
and approvals; and (ix) any similar, corresponding or equivalent rights to any
of the foregoing anywhere in the world.
1.61 INTERIM FINANCIAL STATEMENTS.
"Interim Financial Statements" shall mean the (i) balance sheet of the
Computer Telephony Business as of June 30, 1999, (ii) statement of cash flows of
the Computer Telephony Business for the six-month period ended June 30, 1999 and
(iii) income statement of the Computer Telephony Business for the six-month
period ended June 30, 1999, attached hereto as SCHEDULE 1.61.
1.62 INVENTORY.
"Inventory" shall mean all of Seller's inventories of raw materials,
work in process and finished goods and all related reserves related to the
Computer Telephony Business and the raw materials and work in process used in
the Healthcare Communications Business and all related reserves.
1.63 KNOWLEDGE.
A Person will be deemed to have "Knowledge" of a particular fact if
such Person is actually aware after reasonable inquiry of such fact. With
respect to a Person other than an individual, such Person will be deemed to have
"Knowledge" of a particular fact if any individual who is presently serving as
an officer, partner, executor or trustee of such Person has Knowledge of such
fact.
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1.64 LAW.
"Law" shall mean any federal, state, local, international or other law
or governmental requirement of any kind, and the rules, regulations and orders
promulgated thereunder.
1.65 LICENSED TRADEMARKS.
"Licensed Trademarks" shall mean the trademarks to be licensed to the
Healthcare Communications Business listed on SCHEDULE 1.65 hereto.
1.66 LIENS.
"Liens" shall mean all liens, pledges, claims, security interests,
mortgages, deeds of trust, encumbrances, assessments, easements, rights of way,
covenants, restrictions, rights of first refusal, defects in title,
encroachments and other burdens.
1.67 MANUFACTURING AGREEMENT.
"Manufacturing Agreement" shall mean the manufacturing agreement to be
entered into between Buyer and Seller containing the terms on which Buyer or its
permitted assignee will provide manufacturing and other services to Seller,
utilizing the Poway Facility, as described in SECTION 6.12.
1.68 MATERIAL ADVERSE CHANGE.
"Material Adverse Change" shall mean any change, violation,
inaccuracy, circumstance or effect that is materially adverse to the business,
properties, assets (including intangible assets), liabilities or financial
condition of the Computer Telephony Business; PROVIDED, HOWEVER, that the
following shall not be taken into account in determining whether there has been
or could or would be a "Material Adverse Change" on or with respect to the
Computer Telephony Business: (i) the delay or cancellation of orders for the
Computer Telephony Business' products from customers or distributors (or other
resellers) directly
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attributable to the announcement of this Agreement or the pendency of the
Acquisition, (ii) the lack of or delay in availability of components or raw
materials from the Computer Telephony Business' suppliers directly attributable
to the announcement of this Agreement or the pendency of the Acquisition, (iii)
any litigation brought or threatened against Seller or any officer or member of
the Board of Directors of Seller in respect of this Agreement or the Acquisition
(including any shareholder class action litigation arising from allegations or a
breach of fiduciary duty relating to the Agreement), (iv) the loss of employees
of the Business as a result of reductions in force that are mutually agreed upon
by Seller and Buyer; (v) the loss prior to Closing of not more than twenty-five
percent (25%) of the Managerial Employees of the Computer Telephony Business
identified on SCHEDULE 1.68 hereto ("Managerial Employees"), excluding
Managerial Employees lost pursuant to reductions in force described in clause
(iv) prior to the Closing and Managerial Employees who are not offered
employment packages by Buyer pursuant to SECTION 6.07 that are substantially
comparable to those such Managerial Employees have in place as of September 26,
1999; (vi) the loss prior to Closing of not more than twenty-five percent (25%)
of the Computer Telephony Business' Engineering Employees identified on SCHEDULE
1.68 hereto ("Engineering Employees"), excluding Engineering Employees lost
pursuant to mutually agreed upon reductions in force described in clause (iv)
prior to Closing and Engineering Employees who are not offered employment
packages by Buyer pursuant to SECTION 6.07 that are substantially comparable to
those such Engineering Employees have in place as of the date of this Agreement,
and (vii) changes in trading prices for Seller's securities. Notwithstanding the
foregoing, the loss of two or more of the Computer Telephony Business' top five
government or national accounts, or three or more of the Computer Telephony
Business' top ten dealers, in each case between the date of the Interim
Financial
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Statements and the Closing, shall constitute a Material Adverse Change. For the
purposes of this definition, the "loss" of a top ten Computer Telephony Business
dealer shall mean (i) the termination by Seller of the exclusivity of a dealer
that was an exclusive dealer as of the date of the Interim Financial Statements,
(ii) such dealer has made no purchases of Computer Telephony Products in the
prior 90 days or (iii) Seller has received notice from such dealer that it is
terminating its distributor agreement with Seller.
1.69 NET ASSETS.
"Net Assets" shall mean an amount equal to the amount of the Purchased
Assets that are reflected on the Closing Balance Sheet less the amount of the
Assumed Liabilities that are reflected on the Closing Balance Sheet, all as
derived from the Closing Balance Sheet prepared in accordance with SECTION 2.04
1.70 OFFICER'S CERTIFICATE.
"Officer's Certificate" shall have the meaning assigned to it in
SECTION 9.09(d).
1.71 PARENT.
"Parent" shall mean Inter-Tel, Incorporated, an Arizona corporation.
1.72 PERMITS.
"Permits" shall mean all governmental approvals, authorizations,
registrations, permits and licenses owned by Seller, other than qualifications
to do business as a foreign corporation, that are used in or required in
connection with the operation of the Computer Telephony Business.
1.73 PERMITTED LIENS.
"Permitted Liens" shall mean the Liens listed on SCHEDULE 1.73 hereto,
together with liens for taxes not yet due and payable and Liens that,
individually or in the aggregate, could not reasonably be expected to cause a
Material Adverse Change.
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1.74 PERSON.
"Person" shall mean any individual, corporation, proprietorship,
partnership, limited liability company, trust or other legal entity.
1.75 POWAY FACILITY.
"Poway Facility" shall mean the Seller's manufacturing plant located
in Poway, California.
1.76 PREMISES.
"Premises" shall mean the real property and improvements owned or
leased by Seller and used in the operation of the Computer Telephony Business,
as described on SCHEDULE 1.76 hereto.
1.77 PREPAID ASSETS.
"Prepaid Assets" shall mean all prepaid expenses and deposits of
Seller used in the operation of the Computer Telephony Business, excluding the
Excluded Prepaid Assets.
1.78 PURCHASE PRICE.
"Purchase Price" shall mean $44,300,000, subject to Adjustment as set
forth in SECTION 2.04.
1.79 PURCHASED ASSETS.
"Purchased Assets" shall mean all of the assets used in or necessary
to the operation of the Computer Telephony Business, including but not limited
to:
(a) the Accounts;
(b) the Assumed Leases;
(c) the Books and Records;
(d) the Computer Assets;
(e) the Contracts;
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(f) the Customer List;
(g) the Fixtures and Equipment;
(h) the Healthcare Services Assets;
(i) the Inventory;
(j) the Permits;
(k) the Prepaid Assets;
(l) the Transferred Intellectual Property Rights;
(m) the Transferred Technology; and
(n) ECS Shares,
but shall specifically exclude the Excluded Assets.
1.80 REQUIRED CONSENTS.
"Required Consents" shall mean the consents required to be obtained to
permit the transfer of the Purchased Assets and the assignment of the Assumed
Liabilities pursuant to this Agreement, as set forth on SCHEDULES 3.04(b) and
4.03 hereto.
1.81 RETAINED DEBT.
"Retained Debt" shall mean long-term debt, other long-term liabilities
and current portion of long-term debt, as each is reflected in the Interim
Financial Statements.
1.82 RETAINED LIABILITIES.
"Retained Liabilities" shall mean:
(a) the liabilities listed on SCHEDULE 1.82 hereto; and
(b) any other liabilities of Seller that are not Assumed Liabilities,
including, without limitation, the following:
(i) any liability or obligation of Seller for Taxes for any
taxable period (except with respect to property Taxes, which will be treated in
accordance with SECTION 2.02)
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and any liability for Taxes attributable to the Computer Telephony Business or
the Purchased Assets for any period or portion thereof ending on or prior to the
Closing Date regardless of whether reserved on the Year End Financial Statements
or Interim Financial Statements;
(ii) any liability of Seller for unpaid Taxes of any Person under
Reg. ss.1.1502 6 (or any similar provision of state, local or foreign law) as a
transferee or successor, or by contract;
(iii) any liability or obligation of Seller incurred prior to the
Closing Date to indemnify any Person by reason of the fact that such Person was
a director, officer, employee or agent of any of Seller or its subsidiaries or
was serving at the request of any such entity as a partner, trustee, director,
officer, employee or agent of another entity (whether such indemnification is
for judgment, damages, penalties, fines, costs, amount paid in settlement,
losses, expenses or otherwise and whether such indemnification is pursuant to
any statute, charter document, bylaw, agreement or otherwise);
(iv) any liability or obligation of Seller for costs and expenses
incurred in connection with the negotiation, drafting, execution and closing of
this Agreement and the transactions contemplated hereby, including any liability
or connection with compliance with the Bulk Transfer Laws;
(v) any liability or obligation of Seller pursuant to this
Agreement or pursuant to any side agreement between Seller on the one hand and
Buyer on the other hand entered into on or after the date of this Agreement;
(vi) any claim for injury to person to the extent not covered by
warranties relating to the Computer Telephony Business, regardless of when made
or asserted, that is imposed or asserted to be imposed in connection with any
acts or omissions, any service
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performed or any product sold, leased or delivered by or on behalf of Seller on
or prior to the Closing Date;
(vii) any liability relating to any claims, lawsuits or actions
initiated or, to Seller's Knowledge, threatened prior to the Closing, except as
otherwise expressly assumed hereunder;
(viii) any liability of Seller to ▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇ ▇▇▇▇▇
relating to any severance, separation or other payment obligations to such
individuals, whether TRP Liabilities or otherwise;
(ix) the Retained Debt;
(x) all obligations and liabilities with respect to circumstances
or events occurring prior to the Closing Date with respect to the Assumed Leases
listed on SCHEDULES 1.08(a) and 1.08(b); and
(xi) all obligations and liabilities with respect to
circumstances or events occurring prior to the Closing Date with respect to the
infringement or misappropriation of the Intellectual Property Rights of any
Person.
1.83 SELLER.
"Seller" shall mean EXECUTONE Information Systems, Inc., a Virginia
corporation.
1.84 SELLER ACQUISITION.
"Seller Acquisition" shall have the meaning assigned to it in SECTION
10.05.
1.85 SELLER TRIGGERING EVENT.
"Seller Triggering Event" shall have the meaning assigned to it in
SECTION 10.02.
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1.86 SELLER'S CLOSING CERTIFICATE.
"Seller's Closing Certificate" shall mean the certificate of Seller in
a form to be reasonably agreed upon between Buyer and Seller.
1.87 SERVICES AGREEMENT.
"Services Agreement" shall mean the transition services agreement to
be entered into pursuant to SECTION 6.10.
1.88 SEVERED EMPLOYEES.
"Severed Employees" shall have the meaning assigned to it in SECTION
6.07.
1.89 SUPERIOR PROPOSAL.
"Superior Proposal" shall have the meaning assigned to it in SECTION
6.04.
1.90 TAX OR TAXES.
For the purposes of this Agreement, "Tax" or, collectively, "Taxes,"
means any and all federal, state, local and foreign taxes, assessments and other
governmental charges, duties, impositions and liabilities, including taxes based
upon or measured by gross receipts, income, profits, sales, use and occupation,
and value added, ad valorem, transfer, franchise, withholding, payroll,
recapture, employment, excise and property taxes, together with all interest,
penalties and additions imposed with respect to such amounts and any obligations
under any agreements or arrangements with any other person with respect to such
amounts and including any liability for taxes of a predecessor entity.
1.91 TAX RETURN.
"Tax Return" shall mean any report, return, information return, or
other information required to be supplied to a taxing authority in connection
with Taxes, including any return of an affiliated or combined or unitary group.
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1.92 TECHNOLOGY.
"Technology" shall mean any or all of the following: (i) works of
authorship including, without limitation, computer programs, source code and
executable code, whether embodied in software, firmware or otherwise,
documentation, designs, files, net lists, records, data and mask works; (ii)
inventions (whether or not patentable), improvements, and technology; (iii)
proprietary and confidential information, including technical data and customer
and supplier lists, trade secrets and know how; (iv) databases, data
compilations and collections and technical data; (v) tools, methods and
processes; and all instantiations of the foregoing in any form and embodied in
any media.
1.93 TRADEMARK LICENSE AGREEMENT.
"Trademark License Agreement" shall mean the trademark license
agreement entered into between Buyer and Seller in substantially the form of
EXHIBIT E hereto.
1.94 TRANSFERRED EMPLOYEES.
"Transferred Employees" shall have the meaning assigned to it in
SECTION 6.07.
1.95 TRANSFERRED INTELLECTUAL PROPERTY RIGHTS.
"Transferred Intellectual Property Rights" shall mean all Intellectual
Property Rights that are embodied in the Transferred Technology and are used in
the Computer Telephony Business by Purchaser related to the Transferred
Technology, including without limitations all Intellectual Property Rights in
Licensed Trademarks and those Intellectual Property Rights described on SCHEDULE
1.95.
1.96 TRANSFERRED TECHNOLOGY.
"Transferred Technology" shall mean all of the following: (i) Computer
Telephony Products in both Source Code and Object Code format and any other
format; (ii) Computer Assets; (iii) all other Technology used in the operation
of the Computer Telephony
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Business by Seller including the Technology listed in SCHEDULE 1.95. Transferred
Technology shall specifically exclude the Technology used in or otherwise
related to the eLottery Business to be set forth in SCHEDULE 1.24(A).
1.97 TRP LIABILITIES.
"TRP Liabilities" shall mean any and all obligations arising out of or
in connection with Seller's Transition and Retention Plan as listed on SCHEDULE
1.27, whether in the form of stock loan guarantees, unpaid Loan Balances,
Retention Payments or Separation Payments (as those terms are defined in the
Transition and Retention Plan) or otherwise, with the exception of any
liabilities arising from obligations of ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇ to Seller.
1.98 YEAR-END FINANCIAL STATEMENTS.
"Year-End Financial Statements" shall mean the (i) balance sheets of
the Computer Telephony Business as of December 31, 1998 and 1997, (ii)
statements of cash flows of the Computer Telephony Business for the years ended
December 31, 1998 and 1997 and (iii) income statements of the Computer Telephony
Business for the years ended December 31, 1998 and 1997, listed on SCHEDULE 1.98
hereto.
1.99 YEAR 2000 COMPLIANT.
"Year 2000 Compliant" shall have the meaning assigned to it in SECTION
3.26(A).
ARTICLE II
PURCHASE AND SALE; ASSIGNMENT AND ASSUMPTION
2.01 SALE OF PURCHASED ASSETS.
(a) At the Closing, Seller shall sell, convey, transfer, assign and
deliver to Buyer the Purchased Assets, free and clear of all Liens, except for
Permitted Liens. Seller will execute and deliver the ▇▇▇▇ of Sale and such other
documents of transfer and assignment as may be necessary to consummate the
foregoing.
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(b) At the Closing, Buyer shall purchase or assume the Purchased
Assets and in full payment therefor (i) shall assume and agree to discharge all
of Seller's obligations under the Assumed Liabilities and (ii) shall pay Seller
by wire transfer in immediately available funds an amount equal to the Purchase
Price, excluding the Escrow Amount.
2.02 TRANSFER OR SALES TAXES; PROPERTY TAXES.
Seller will be responsible for and pay one hundred percent (100%) of
all sales, stamp, recordation, transfer and similar Taxes arising out of, or
related to, the transactions contemplated by this Agreement. Buyer shall
cooperate with Seller, as Seller reasonably requests, to minimize the amount of
such taxes. The parties agree that all property Taxes imposed with respect to
Purchased Assets (including, without limitation, property Taxes payable by the
tenant or lessee under any lease) will be pro-rated as of the Closing Date and
that, notwithstanding any other provision of this Agreement, the economic burden
of any such property Tax will be borne by Seller for all periods (or portions
thereof) through the Closing Date ("Pre-Closing Period") and by Buyer for all
periods (or portions thereof) after the Closing Date ("Post-Closing Period").
Accordingly, notwithstanding any other provision of this Agreement, (i) if
Seller pays a property Tax imposed with respect to Purchased Assets attributable
to a Post-Closing Period, Buyer will reimburse Seller upon demand for the amount
of such property Tax; and (ii) if Buyer pays a property Tax imposed with respect
to Purchased Assets attributable to a Pre-Closing Period, Seller will reimburse
Buyer upon demand for the amount of such property Tax.
2.03 ALLOCATION OF PURCHASE PRICE.
The Purchase Price and the Assumed Liabilities (to the extent they
constitute part of the amount realized by Seller for federal income tax
purposes) shall be allocated and determined by Buyer, subject to the review and
consent of Seller, which consent shall not be
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unreasonably withheld, in accordance with the requirements of Section 1060 of
the Code and the regulations thereunder, and no party shall take any position
inconsistent with this allocation for income tax purposes, except that Buyer's
cost for the Purchased Assets may differ from the amount so allocated to the
extent necessary to reflect Buyer's capitalized acquisition costs other than the
amount realized by Seller.
2.04 ADJUSTMENTS.
The Purchase Price will be subject to adjustment (the "Adjustment") as
follows:
(a) CLOSING BALANCE SHEET. Within 30 days following the Closing,
Seller will prepare (or cause to be prepared) and deliver to Buyer a balance
sheet (the "Closing Balance Sheet") of the Computer Telephony Business (not
reflecting any Retained Liabilities) as of the Closing Date audited or reviewed
(at the sole discretion of Buyer) by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, whose fees and
disbursements will be paid by Seller. The Closing Balance Sheet will be prepared
in accordance with GAAP and consistent with the basis of accounting and
classification procedures, judgments and estimation methodologies employed by
Seller in preparation of the Interim Financial Statements.
(b) BUYER'S REVIEW OF THE CLOSING BALANCE SHEET. Buyer and Buyer's
accountants will have 45 days from Buyer's receipt of the Closing Balance Sheet
(the "Buyer Review Period") to review the Closing Balance Sheet, and during such
Buyer Review Period Seller and its accountants will cooperate with Buyer and
Buyer's accountants and answer Buyer and Buyer's accountants' questions and
provide such additional schedules and materials as Buyer and Buyer's accountants
may reasonably request in order for Buyer and Buyer's accountants to have a
meaningful review of the Closing Balance Sheet.
(c) PURCHASE PRICE ADJUSTMENT. Subject to the provisions of SECTION
2.04(d) below, the Purchase Price will be adjusted in accordance with this
SECTION 2.04(c). If the Net
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Assets are greater than $18,070,000, then the Purchase Price shall be increased
by an amount equal to the amount by which the Net Assets are greater than
$18,070,000, which amount shall be delivered by Buyer to Seller by wire transfer
of immediately available funds, to an account of Seller at a bank specified by
Seller within five (5) days after the date on which the Closing Balance Sheet is
finally accepted. If the Net Assets are less than $15,070,000, then the Purchase
Price shall be decreased by an amount equal to the amount by which the Net
Assets are less than $15,070,000, up to $1,000,000 of which amount shall be
remitted from the Escrow Fund by the Escrow Agent to Buyer in accordance with
SECTION 9.09 hereof and the balance, if any, of which shall be delivered by
Seller to Buyer by wire transfer of immediately available funds, to an account
of Buyer within five (5) days after the date on which the Closing Balance Sheet
is finally accepted. In the event that during the Buyer Review Period Buyer
determines that additional Adjustments shall be made to the Purchase Price, then
additional amounts up to a total of $1,000,000 (taking into account all previous
payments pursuant to this Section) shall be remitted from the Escrow Fund by the
Escrow Agent to Buyer in accordance with SECTION 9.09 hereof and Seller shall
deliver the balance, if any, to Buyer by wire transfer of immediately available
funds, to an account of Buyer at a bank specified by Buyer within five (5)
business days after such a determination by Buyer is made, an amount equal to
(i) the dollar amount of such additional Adjustments, or (ii) in the event of a
dispute between Buyer and Seller relating to any additional Adjustments, amounts
otherwise determined pursuant to SECTION 2.04(d)(ii) below.
(d) DISPUTES.
(i) Subject to SECTION 2.04(d)(ii) below, the Closing Balance Sheet
delivered by Seller to Buyer will be final, binding and conclusive on the
parties hereto.
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(ii) Buyer may dispute any amounts reflected or not reflected on the
Closing Balance Sheet, PROVIDED THAT Buyer notifies Seller in writing of each
disputed item and specifies the amount thereof in dispute, not later than the
expiration of Buyer Review Period. If Buyer and Seller are able to resolve all
of the disputed items, then the Closing Balance Sheet agreed upon by Buyer and
Seller will be final, binding and conclusive on the parties hereto. Disputes
shall be limited to arithmetic errors or inconsistencies arising from the
failure of the Closing Balance Sheet to be prepared in accordance with GAAP or
consistent with the basis of accounting and classification procedures, judgments
and estimation methodologies employed by Seller in preparation of the Interim
Financial Statements. If Buyer and Seller are unable to resolve some or all of
such disputed items and are therefore unable to agree as to the Closing Balance
Sheet (and the disputed line items therein) within twenty (20) days following
the expiration of Buyer Review Period, Buyer and Seller will submit within five
(5) days the items remaining in dispute for resolution to PricewaterhouseCoopers
LLP in Chicago, Illinois (the member of which who will be primarily responsible
for resolving such dispute will have had substantial auditing experience and
substantial experience in arbitration or other dispute resolution proceedings
concerning accounting issues). In resolving any disputed item,
PricewaterhouseCoopers LLP may not assign a value to such item greater than the
greatest value for such item claimed by either party or less than the smallest
value for such item claimed by either party. The fees and disbursements of
PricewaterhouseCoopers LLP (A) will be borne by Buyer if the Net Asset Value
finally determined pursuant to this SECTION 2.04(d)(ii) shall be 100% or greater
than 100% of the Net Asset Value reflected on the Closing Balance Sheet
originally submitted to Buyer by Seller pursuant to SECTION 2.04(a) hereof or
(B) will be borne by Seller if the Net Asset Value finally determined pursuant
to this SECTION 2.04(d)(ii) shall be less than
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100% of the Net Asset Value reflected on the Closing Balance Sheet originally
submitted to Buyer by Seller pursuant to SECTION 2.04(a) hereof.
(e) ACCESS. Upon reasonable request, each of Buyer and Seller shall
provide the employees, advisors and representatives of the other with access
(including copies if so requested) to all working papers related to the
preparation and review of the Closing Balance Sheet and to all books and records
of the Computer Telephony Business necessary to prepare and review the Closing
Balance Sheet.
2.05 ESCROW.
On the Closing Date, Buyer and Seller jointly shall instruct the
Escrow Agent to place $4,000,000 of the Purchase Price into the escrow account
required by SECTION 9.09 (the "Escrow Amount").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer that:
3.01 ORGANIZATION AND GOOD STANDING.
Seller is a corporation duly organized, validly existing and in good
standing under laws of the Commonwealth of Virginia and has full corporate power
and authority to enter into and perform its obligations hereunder. Seller has
full corporate power to carry on the Computer Telephony Business as it is now
being conducted and to own, operate and hold under lease its assets and
properties as, and in the places where, such properties and assets now are
owned, operated or held.
3.02 FOREIGN QUALIFICATION.
SCHEDULE 3.02 hereto lists each foreign jurisdiction where Seller is
qualified to do business as a foreign corporation and is in good standing.
Seller is duly qualified to do business
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as a foreign corporation and is in good standing under each state or other
jurisdiction in which either the ownership or use of the properties owned or
used by it or where the nature of the activities conducted by it, requires such
qualification.
3.03 AUTHORIZATION; ENFORCEABILITY.
Other than the approval of the shareholders of Seller required under
Virginia law and receipt of the Required Consents, the execution, delivery and
performance by Seller of this Agreement and of all of the documents and
instruments contemplated hereby to which it is a party are within the corporate
power of Seller and have been duly authorized by all necessary corporate action
of Seller. This Agreement is, and the other documents and instruments required
hereby to which Seller is a party will be, when executed and delivered by Seller
and the parties thereto, subject to Article IX of the Agreement, the valid and
binding obligations of Seller, enforceable against Seller in accordance with
their respective terms.
3.04 CONFLICTS OR VIOLATIONS; REQUIRED CONSENTS.
Except as set forth in SCHEDULE 3.04(a) hereto, the execution,
delivery and performance of this Agreement by Seller do not violate or conflict
with, directly or indirectly, or give any person the right to declare a default
or exercise of any remedy under, any provision of the Articles of Incorporation
or Bylaws of Seller, as the case may be, any resolution adopted by the Board of
Directors or shareholders of Seller, any Law, judgment, order or decree binding
on Seller, or any Contract, Assumed Lease, mortgage, deed of trust, indenture,
Permit, license, franchise, commitment, authorization or concession, or other
agreement or instrument to which Seller is a party or by which it is bound or to
which any of the Purchased Assets may be subject.
Except as set forth on SCHEDULE 3.04(b) hereto, and except for the
filing of Premerger Notification and Report Forms under the HSR Act, no consent
of any Person, and no notice to, filing or registration with, or authorization,
consent or approval of, any governmental,
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regulatory or self-regulatory agency is necessary or is required to be made or
obtained by Seller other than the requisite shareholder approval in connection
with the consummation of the transactions contemplated by this Agreement.
3.05 LITIGATION.
Except as set forth on SCHEDULE 3.05 hereto, there is no litigation,
arbitration proceeding, governmental investigation, citation or action of any
kind pending or, to the Knowledge of Seller, proposed or threatened against
Seller, relating to the Computer Telephony Business, the Purchased Assets, the
Assumed Liabilities, this Agreement or the transactions contemplated by this
Agreement.
3.06 COMPLIANCE WITH LAW.
Except as set forth on SCHEDULE 3.06 hereto, the conduct of the
Computer Telephony Business, the use of the Purchased Assets, performance under
the Contracts by Seller and, to Seller's Knowledge, the Premises has not and
currently does not violate or conflict with any Law that could reasonably be
expected to cause a Material Adverse Change. Seller has not received any notice
that any investigation or review by any Governmental Entity with respect to the
Computer Telephony Business is pending or that any such investigation or review
is contemplated. This SECTION 3.06 does not relate to environmental matters (to
which SECTION 3.07 applies).
3.07 ENVIRONMENTAL MATTERS.
(a) DEFINITIONS.
(i) "ENVIRONMENTAL LAWS" shall mean any and all applicable
federal, state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, guidance documents, or requirements of any
Governmental Authority regulating, relating to or imposing liability or
standards of conduct concerning any Hazardous Materials, public health or
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environmental protection, together with any amendment or reauthorization thereto
or thereof, as now or at any time hereafter in effect; and
(ii) "HAZARDOUS MATERIALS" shall mean any solid waste, hazardous
material, hazardous waste, infectious medical waste, or hazardous or toxic
substance defined or regulated as such in or under any Environmental Law.
(b) HAZARDOUS MATERIALS ACTIVITIES. Seller has not, in connection with
the Purchased Assets or the conduct of the Computer Telephony Business, used,
stored, treated, transported, manufactured, refined, handled, produced or
disposed of any Hazardous Materials on, under, at, from or in any way affecting
any of its properties or assets except in material compliance with Environmental
Laws (including, without limitation, any properties now or previously owned or
operated by Seller in the conduct of the Computer Telephony Business, or any
Purchased Asset) and, to the Knowledge of Seller, no prior owner of any such
property or assets or any tenant, subtenant, prior tenant or prior subtenant
thereof has used Hazardous Materials on, from or in any way affecting any such
property or asset, or otherwise, in any manner which constituted or constitutes
a violation of any applicable Environmental Law.
(c) ENVIRONMENTAL LIABILITIES. Seller has not, in connection with the
Purchased Assets or the conduct of the Computer Telephony Business (i) shipped
any Hazardous Materials off-site, (ii) used, treated, stored, disposed, or
released Hazardous Materials, or assumed liability for another's use, treatment,
storage, disposal, or release, on, under, at, from, or in any way affecting any
real property, or (iii) exposed any individual to Hazardous Materials, which
off-site shipment, release, disposal or exposure gives rise to liability of the
Seller under Environmental Laws. Seller has not, in connection with the
Purchased Assets or the conduct of the Computer Telephony Business, received any
notices or claims that it is a responsible party in
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connection with any notice or claim asserted pursuant to 42 U.S.C. Section 9601
ET SEQ., or any state Superfund law.
(d) PERMITS. Seller has, in connection with the Purchased Assets and
the Computer Telephony Business, received all environmental approvals, permits,
licenses, clearances or consents as may be required under applicable
Environmental Laws to conduct the Computer Telephony Business as currently
conducted, and the Computer Telephony Business is in compliance in all material
respects with the terms and conditions of each of such environmental approvals,
permits, licenses, clearances or consents. Seller will cooperate to effect the
transfer of such environmental approvals, permits, licenses, clearances or
consents.
3.08 PERMITS.
The Permits represent all material permits, except qualifications to
do business as a foreign corporation, required to operate the Computer Telephony
Business as currently conducted and as currently proposed to be conducted by
Seller, and except as described herein, there are no additional permits the
failure of which to obtain could reasonably be expected to cause a Material
Adverse Change. The Permits are in full force and effect, and have been and are
being complied with in all material respects. Seller agrees to use its
commercially reasonable efforts to assist Buyer in effecting the renewal or
transfer to Buyer of the Permits.
3.09 TAXES.
Seller has filed or caused to be filed all required material Tax
Returns relating to the Purchased Assets, the Assumed Liabilities and the
Computer Telephony Business. There are no unpaid Taxes due and payable, the
non-payment of which would result in a lien upon any of the Purchased Assets or
could cause Buyer to incur any liability other than the Assumed Liabilities.
Except as set forth on SCHEDULE 3.09 hereto, no taxing authority has asserted
any claim for the assessment of any such Tax liability. Seller is not a foreign
person for purposes of
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Section 1445(b)(2) of the Code. There is no reasonable basis for the assertion
of any claims for Taxes which, if adversely determined, would result in a lien
or other encumbrance on the Purchased Assets or otherwise materially adversely
affect Buyer or the Purchased Assets.
3.10 TITLE TO PURCHASED ASSETS.
Seller owns or has a leasehold interest in all the Purchased Assets
(whether real, personal or mixed, and whether tangible or intangible), located
in the facilities owned or operated by Seller or reflected as owned in the books
and records of Seller, including all of the Purchased Assets reflected in the
Year-End Financial Statements and the Interim Financial Statements. Except as
set forth in SCHEDULE 3.10, the Purchased Assets reflected in the Year-End
Financial Statements and the Interim Financial Statements are free and clear of
all Liens except, with respect to all such properties and assets, Permitted
Liens which, individually or in the aggregate, do not materially impair the
continued use, value and operation of the Purchased Assets used in the Computer
Telephony Business.
3.11 CONDITION AND SUFFICIENCY OF ASSETS.
Except as set forth in SCHEDULE 3.11, the Purchased Assets comprise
all of the assets, properties and rights of every type and description, real,
personal, tangible and intangible used by Seller in the Computer Telephony
Business and, with the Services Agreement and the Computer Assets License
Agreement, are sufficient for the continued conduct of the Computer Telephony
Business after the Closing in substantially the same manner as conducted prior
to the Closing.
3.12 ACCOUNTS RECEIVABLE.
The Accounts represent or will represent valid customer obligations
arising from sales actually made or services actually performed in the ordinary
course of business consistent with past practices. Unless paid prior to the
Closing Date, the Accounts are or will be as of the
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Closing Date collectible net of the respective reserves shown on the Interim
Financial Statements or on the accounting records of Seller as of the Closing
Date (which reserves are adequate and calculated consistent with past
practices).
3.13 NO UNDISCLOSED LIABILITIES.
Except as set forth in SCHEDULE 3.13, Seller has no material
liabilities or obligations of any nature whether known or unknown and whether
absolute, accrued, contingent, or otherwise except for (a) liabilities or
obligations reflected or reserved against in the Year-End Financial Statements
or the Interim Financial Statements, (b) current liabilities incurred in the
ordinary course of business since the respective dates thereof and (c)
liabilities not expressly assumed pursuant to SECTION 2.01(b).
3.14 CONTRACTS AND ASSUMED LEASES.
(a) Except as set forth on SCHEDULE 1.27, with respect to the Computer
Telephony Business, Seller does not have, is not a party to nor is it bound by:
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain any severance
pay or post-employment liabilities or obligations,
(iii) any bonus, deferred compensation, pension, profit sharing
or retirement plans, or any other employee benefit plans or arrangements,
(iv) any employment or consulting agreement or contract with an
employee or individual consultant or salesperson or consulting or sales
agreement or contract with a firm or other organization,
(v) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation rights plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of
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any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement,
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property having a value individually
in excess of $100,000,
(viii) any agreement of indemnification or guaranty,
(ix) any agreement, contract or commitment containing any
covenant limiting the freedom of Seller to engage in any line of business or to
compete with any person,
(x) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $100,000,
(xi) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business enterprise,
(xii) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money or extension of credit, including guaranties referred to in clause
(viii) hereof,
(xiii) any purchase order or contract for the purchase of raw
materials involving $100,000 or more other than purchases in the ordinary course
of business, (xiv) any construction contracts,
(xv) any distribution, joint marketing or development agreement,
(xvi) any other agreement, contract or commitment that involves
$100,000 or more or is not cancelable without penalty within thirty (30) days,
or
(xvii) any contract not covered by clauses (i)-(xvi) above that
is material to the operation of the Computer Telephony Business.
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Seller has provided to Buyer true and complete copies of all of the
Contracts and Assumed Leases (including all amendments or modifications
thereto). Each Contract and each Assumed Lease is in full force and effect and
is enforceable in accordance with its terms, except as the enforcement thereof
may be limited or otherwise affected by bankruptcy, insolvency, reorganization,
moratorium or other laws generally affecting the rights of creditors and subject
to general equity principles (whether considered at law or in equity). Seller is
not, and to the Knowledge of Seller no other party is, in breach or violation
of, or default under, and there is no valid basis for a claim of breach or
violation of, or default under, any such Contracts or Assumed Leases, and no
event has occurred that constitutes or, with the lapse of time or the giving of
notice, or both, would constitute such a breach or violation or default by
Seller, or to the Knowledge of Seller, any other party under any of the
Contracts or Assumed Leases, thereunder. Except as set forth on SCHEDULE 3.04(B)
hereto, all obligations or services required to be performed under the Contracts
and Assumed Leases may be performed by Buyer without any further consents or
assignments. Seller has not made any prior assignment of any Contract or Assumed
Lease or any of its respective rights or obligations thereunder. Except as set
forth on SCHEDULE 1.08(A), Seller has not subleased or otherwise granted rights
of use or occupancy of any of the Premises to any other Person.
3.15 BOOKS AND RECORDS.
The Books and Records reflect all material financial and accounting
records, purchase orders and invoices, sales orders and sales order log books
and credit and collection records relating to the Computer Telephony Business
since January 1, 1997. Seller will provide Buyer reasonable access to the Books
and Records for the period prior to January 1, 1997.
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3.16 EMPLOYEE BENEFIT PLANS.
All Employee Benefit Plans are set forth in SCHEDULE 3.16. Any
Employee Benefit Plan intended to be qualified under Section 401(a) of the Code
has obtained a favorable determination letter as to its qualified status from
the Internal Revenue Service ("IRS"). To the extent any Employee Benefit Plan
with an existing determination letter from the IRS must be amended to comply
with the applicable requirements of the Tax Reform Act of 1986 and subsequent
legislation, the time period for effecting such amendments will not expire prior
to the Closing. Seller has furnished to Buyer copies of the Employee Benefit
Plans and related Employee Benefit Plan documents (including trust documents,
insurance policies or contracts, employee booklets and summary plan descriptions
and, where applicable, will provide, as soon as practicable hereafter, copies of
the most recent IRS determination letters and the most recently filed Form 5500
with respect to any such Employee Benefit Plan. No Employee Benefit Plan is
covered by Title IV of ERISA or Section 412 of the Code nor is any Employee
Benefit Plan a "multiemployer plan" (as such term is defined under Section 3(37)
of ERISA). Neither Seller nor, to the Knowledge of Seller, any officer or
director of Seller, trustee or administrator of an Employee Benefit Plan is
subject to any material liability or penalty under Sections 4975 through 4980 of
the Code or Title I of ERISA in connection with any Employee Benefit Plan. To
the Knowledge of Seller, Seller has not violated any of the health care
continuation coverage requirements of the Consolidated Omnibus Budget
Reconciliation of Act of 1985 ("COBRA") applicable to its employees. Each
Employee Benefit Plan has been maintained and administered in all respects in
compliance with its terms and with the requirements prescribed by all statutes,
orders, rules and regulations, including but not limited to ERISA and the Code,
which are applicable to such Employee Benefit Plan, except to the extent
non-compliance would not cause a Material Adverse Change on the operation of
such Employee Benefit Plan and would not cause
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any liability to Buyer. No suit, administrative proceeding, action or other
litigation has been brought, or to the Knowledge of Seller is threatened,
against or with respect to any such Employee Benefit Plan, including any audit
or inquiry by the IRS or United States Department of Labor, which could
reasonably be expected to cause a Material Adverse Change or which could result
in any liability to Buyer.
3.17 EMPLOYEE MATTERS.
All of the Employees are employed by Seller. The Employees constitute
all employees that are primarily engaged on the date of this Agreement in the
operation of the Computer Telephony Business.
Except as set forth on SCHEDULE 3.17(a) hereto and except for wages
and benefits accrued in the ordinary course of the Computer Telephony Business,
Seller is not indebted to nor a creditor of any Employee or trust or other fund
used for unemployment compensation benefits, social security or other benefits
or obligations for Employees. All of the independent contractors currently
engaged by Seller in the conduct of the Computer Telephony Business are set
forth on SCHEDULE 3.17(b) hereto and such independent contractors are all of the
independent contractors engaged in the operation of the Computer Telephony
Business on the date of this Agreement. To the Knowledge of Seller, none of the
independent contractors are common law employees of the Seller. Seller is in
compliance with all applicable federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment, and wages and hours with respect to the Employees, the noncompliance
with which could reasonably be expected to cause a Material Adverse Change.
Seller has withheld and reported all amounts required by law or by agreement to
be withheld and reported with respect to wages, salaries and other payments to
Employees. To Seller's Knowledge, no Employee has violated any employment
contract, nondisclosure agreement or non-competition agreement by which
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such employee is bound due to such employee being employed by Seller and
disclosing to Seller or using trade secrets or proprietary information of any
other person or entity. With respect to the Employees, no complaints have been
filed and, to Seller's Knowledge, there are no threatened claims or actions
against Seller with any federal, state, or local court or agency having
jurisdiction over such matters alleging that Seller has violated any Law
governing employment discrimination (of any kind), labor-management relations,
wages and hours, safety and health, immigration, contracting with government, or
any common law dealing with employment. Except as set forth on SCHEDULE 3.17(C)
hereto, no former employee of the Computer Telephony Business has filed any suit
alleging wrongful termination or under worker's compensation or long-term
disability and, to Seller's Knowledge, there are no threatened claims or actions
relating to the foregoing.
With respect to the Employees, Seller is not a party to, bound by, or
negotiating in respect of any collective bargaining agreement or any other
agreement with any labor union, association or other employee group, nor is any
Employee represented by any labor union or similar association. No labor union
or employee organization has been certified or recognized as the collective
bargaining representative of any Employee. To Seller's Knowledge, there are no
formal union organizational campaigns or representation proceedings underway or
formally threatened with respect to any Employee. Except as set forth on
SCHEDULE 3.17(d) hereto, there are no existing, pending or, to Seller's
Knowledge, threatened labor strikes, work stoppages, slowdowns, disputes,
grievances, unfair labor practice charges, labor arbitration proceedings or
other disturbances affecting any Employee. SCHEDULE 3.17(e) hereto contains a
true and complete list of the names and titles and total compensation for the
preceding fiscal year for Employees who had an annual total compensation equal
to or greater than $100,000. Seller
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has not engaged in any unfair labor practices within the meaning of the National
Labor Relations Act.
3.18 FEES AND EXPENSES OF BROKERS AND OTHERS.
Seller is not committed to any liability for any brokers' or finders'
fees or any similar fees in connection with the transactions contemplated by
this Agreement, and has not retained any broker or other intermediary to act on
its behalf in connection with the transactions contemplated by this Agreement,
except that Seller has retained ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Inc. to represent it
in connection with such transactions. Pursuant to a separate agreement with
Seller, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Inc. will be paid a fee upon the consummation
of the transactions contemplated by this Agreement. Such fee and all other fees
and expenses (including attorneys' and accountants' fees) of Seller in
connection with the transactions contemplated herein shall be the responsibility
of Seller.
3.19 INSURANCE.
All of the insurable Purchased Assets are insured for the benefit of
Seller or are self-insured by Seller in accordance with Seller's past practices
in the conduct of the Computer Telephony Business in amounts and against risks
reasonably deemed adequate by Seller and reasonable in light of the nature and
assets of the Computer Telephony Business. Seller has delivered complete copies
of such policies, which policies are in full force and effect, and any pending
applications for policies to Buyer.
3.20 INTELLECTUAL PROPERTY RIGHTS AND TECHNOLOGY.
(a) SCHEDULE 1.95 sets forth all the Intellectual Property Rights in
Transferred Technology that are the subjects of patent, trademark, copyright,
domain name or other similar applications, certificates, filings or
registrations issued by, filed with or recorded by the U.S.
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Patent & Trademark Office, the U.S. Copyright Office or other similar legal
authorities, and that are owned by or filed in the name of Seller (collectively,
the "Registered Intellectual Property").
(b) Except as reflected in certain Contracts disclosed on SCHEDULE
1.27, Seller is the exclusive owner or exclusive or nonexclusive licensee of all
Transferred Intellectual Property Rights.
(c) Except as reflected in certain Contracts disclosed on SCHEDULE
1.27, Seller has not transferred ownership of or granted any license of or right
to use or authorized the retention of any rights to use any Intellectual
Property Rights that is or was Transferred Intellectual Property Rights, to any
other Person.
(d) Transferred Intellectual Property constitutes all Intellectual
Property Rights used in and/or necessary to the conduct of the Computer
Telephony Business as currently conducted.
(e) To the extent not disclosed on SCHEDULE 1.27 or reflected in
Contracts disclosed on SCHEDULE 1.27, the operation of the Computer Telephony
Business, including but not limited to Purchaser's design, development, use,
import, manufacture and sale of the products, technology or services (including
Computer Telephony Products and products, technology or services currently under
development) does not to the Knowledge of Seller, except as set forth on
SCHEDULE 3.20 (i) infringe or misappropriate the Intellectual Property Rights of
any Person, (ii) violate the rights of any Person (including rights to privacy
or publicity) or (iii) constitute unfair competition or trade practices under
the laws of any jurisdiction. Seller has not received notice from any Person
claiming that such operation or any act, product, technology or service
(including Computer Telephony Products) infringes or misappropriates the
Intellectual
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Property Rights of any Person or constitutes unfair competition or trade
practices under the laws of any jurisdiction (nor does Seller have Knowledge of
any basis therefor).
(f) Each issued and registered item of Registered Intellectual
Property is valid and subsisting. In each case in which Seller has acquired from
any Person anyIntellectual Property Rights associated with or related to the
Computer Telephony Business, Seller has obtained, in accordance with applicable
law, a valid and enforceable assignment sufficient to transfer irrevocably all
rights in such Intellectual Property Rights to Seller and, to the maximum extent
provided for by, and in accordance with, applicable laws and regulations, Seller
has recorded each such assignment with the relevant governmental authorities,
including the PTO, the U.S. Copyright Office or their respective equivalents in
any relevant foreign jurisdiction, as the case may be.
(g) To the Knowledge of Seller, except as set forth on SCHEDULE 3.20,
no Person is infringing or misappropriating Transferred Intellectual Property.
(h) Seller has taken reasonable steps that are required to protect
Seller's rights in confidential information and trade secrets of Seller
associated with or related to the Computer Telephony Business.
(i) Except as reflected in certain Contracts disclosed on SCHEDULE
1.27, Seller is not required to make or accrue any royalty payment to any third
party in connection with the sale, distribution, license, transfer or other
disposition or exploitation of any of Computer Telephony Products (including
products currently under development).
(j) Except as reflected in certain Contracts disclosed on SCHEDULE
1.27 and provided in this Agreement, neither this Agreement nor the transactions
contemplated by this Agreement, including the assignment to Purchaser, by
operation of law or otherwise, of any
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contracts or agreements to which Seller is a party, will result in Purchaser
being bound by, or subject to, any non-compete relating to the Computer
Telephony Business.
3.21 INVENTORY.
The Inventory constitutes all raw materials, components, work in
process and finished goods used in or related to the conduct of the Computer
Telephony Business. All Inventory, whether or not reflected in the Year-End
Financial Statements or the Interim Financial Statements, conforms to Seller's
specifications and consists of a quality and quantity usable and salable in the
ordinary course of business, except for obsolete items, all of which have been
written off or written down to net realizable value in the Year-End Financial
Statements or the Interim Financial Statements or on the accounting records of
Seller as of the Closing Date and except for Inventory returned by dealers or
customers that is awaiting repair which are valued at standard cost in the
Interim Financial Statements, as the case may be. All Inventory not written off
has been priced at the lower of cost or market on a first in, first out basis.
3.22 FINANCIAL STATEMENTS.
(a) The Consolidated Statements of Operations of Seller for the six
months ended June 30, 1999 (collectively, the "Unaudited Interim Financial
Statements") have previously been delivered to Buyer and were prepared in
accordance with GAAP. The Interim Financial Statements have been derived from
the Unaudited Interim Financial Statements included as part of SCHEDULE 1.61.
(b) The Consolidated Statements of Operations of Seller for the years
ended December 31, 1998 and 1997 (collectively, the "Audited Financial
Statements") have previously been delivered to Buyer and were prepared in
accordance with GAAP. The Audited Financial Statements present fairly the
financial condition and results of operations of Seller as of the dates, and for
the periods indicated. The Year-End Financial Statements have been derived from
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the Audited Financial Statements in accordance with the methodology of the
Report of Independent Public Accountants attached to the Audited Financial
Statements and the footnotes to the Audited Financial Statements.
3.23 NO MATERIAL ADVERSE CHANGE.
Except as set forth on SCHEDULE 3.23 hereto, since December 31, 1998,
the Computer Telephony Business has been operated in the ordinary course (except
as the prosecution of a sale of the Computer Telephony Business and the
Healthcare Communications Business may have altered Seller's ordinary
operations), and to Seller's Knowledge, since the date of the Interim Financial
Statements, there has been no Material Adverse Change.
3.24 DISCLAIMERS OF SELLER.
Notwithstanding anything contained in this Article III or any other
provision of this Agreement, it is the explicit understanding of each party
hereto that Seller is making no representation or warranty whatsoever, express
or implied, beyond those expressly given in this Agreement, including but not
limited to any implied warranty or representation as to the value, condition,
merchantability or suitability as to any of the properties or assets of the
Computer Telephony Business and it is understood that Buyer takes the Computer
Telephony Business as is and where is with all faults or defects.
3.25 DISCLOSURE.
(a) No representation or warranty of Seller in this Agreement and no
statement in the Disclosure Schedules omits to state a material fact necessary
to make the statements herein or therein, in light of the circumstances in which
they were made, not misleading.
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(b) No notice given pursuant to SECTION 6.01 will contain any untrue
statement or omit to state a material fact necessary to make the statements
therein or in this Agreement, in light of the circumstances in which they were
made, not misleading.
3.26 YEAR 2000.
(a) All of the Computer Telephony Products that are indicated on
SCHEDULE 1.25 to be Year 2000 Compliant (as hereinafter defined) are Year 2000
Compliant and will not be materially adversely affected by the advent of the
year 2000, the advent of the twenty-first century or the transition from the
twentieth century through the year 2000 and into the twenty-first century.
Seller has provided to Buyer all forecasts, summaries, memoranda, schedules,
reports and other data in its possession concerning or addressing the issue of
Year 2000 Compliance relating to Seller, and Seller's customers, vendors and
suppliers, and to Seller's Knowledge, such information is true and accurate in
all material respects. "Year 2000 Compliant" means, as applied to a software
product, that: (A) such software product will operate and correctly store,
represent and process (including sort) all dates (including single and
multi-century formulae and leap year calculations), such that errors will not
occur when the date used is in the Year 2000, or in a year preceding or
following the Year 2000; (B) such software product has been written and tested
to support numeric and date transitions from the 20th century to the
twenty-first century, and back (including without limitation all calculations,
reporting, printing, displays, reversals, disaster and vital records
recoveries); and (C) such software product will function without error or
interruptions from functions which may involve date information from more than
one century, in each case.
(b) Except as set forth in SCHEDULE 3.26 and except where the same
could not reasonably be expected to cause a Material Adverse Change, (A) all of
Seller's internal computer systems comprised of software, hardware, databases or
embedded control systems
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(microprocessor controlled, robotic or other device) related to the Computer
Telephony Business that constitute any material part of, or are used in
connection with the use, operation or enjoyment of, any material tangible or
intangible asset or real property of Seller, including its accounting systems,
are Year 2000 Compliant and (B) to Seller's Knowledge, the conduct of the
Computer Telephony Business with customers and suppliers will not be materially
adversely affected by the advent of the year 2000, the advent of the
twenty-first century or the transition from the twentieth century through the
year 2000 and into the twenty-first century.
3.27 AUTHENTICITY AND ENTIRETY OF DOCUMENTS.
True and complete copies of all documents referred to in this
Agreement (including, without limitation, documents referred to in this Article
III) have been furnished or made available to Buyer by Seller.
3.28 PREMISES.
(a) Seller has not received any notice from any insurance company of
any defects or inadequacies in any Premises or any part thereof which could
materially and adversely affect the insurability of such Premises or the
premiums for the insurance thereof. Seller has not received any notice from any
insurance company which has issued a policy with respect to any portion of the
Premises or by any board of fire underwriters (or other body exercising similar
functions) requesting the performance of any repairs, alterations or other work
with which compliance has not been made.
(b) To Seller's Knowledge, there are no material structural,
electrical, mechanical, plumbing, roof, paving or other defects in the
Headquarters Facility or the Poway Facility, the roofs are free of leaks and in
sound structural condition, and the operating systems for the Headquarters
Facility and the Poway Facility are in good working order.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller that:
4.01 ORGANIZATION.
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Arizona, and has full corporate power
and authority to enter into and perform its obligations hereunder.
4.02 AUTHORIZATION; ENFORCEABILITY.
The execution, delivery and performance by Buyer of this Agreement and
of all of the documents and instruments contemplated hereby to which Buyer is a
party are within the corporate power of Buyer and have been duly authorized by
all necessary corporate action of Buyer. This Agreement is, and the other
documents and instruments required hereby to which Buyer is a party will be,
when executed and delivered by Buyer, the valid and binding obligations of
Buyer, enforceable against Buyer in accordance with their respective terms.
4.03 NO CONFLICT OR VIOLATION; REQUIRED CONSENTS.
The execution, delivery and performance of this Agreement by Buyer
does not and will not violate or conflict with directly or indirectly, or give
any person the right to declare a default or exercise of any remedy under, any
provision of the Articles of Incorporation or Bylaws of Buyer, any resolution
adopted by the Board of Directors or shareholders of Buyer, any Law, judgment,
order or decree binding on Buyer or any contract, lease, mortgage, deed of
trust, indenture, permit, license, franchise, commitment, authorization or
concession, or other agreement or instrument applicable to Buyer.
Except as set forth on SCHEDULE 4.03 hereto and except for the filing
of Premerger Notification and Request Forms under the HSR Act and any filing
requirement necessary under
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the Exchange Act, no consent of any person, and no notice to, filing or
registration with, or authorization, consent or approval of, any governmental,
regulatory or self-regulatory agency is necessary or is required to be made or
obtained by Buyer in connection with the consummation of the transactions
contemplated in this Agreement.
4.04 NO LITIGATION.
There is no litigation, arbitration proceeding, governmental
investigation, citation or action of any kind pending or, to the Knowledge of
Buyer, proposed or threatened against Buyer relating to this Agreement or the
transactions contemplated hereby.
4.05 FEES AND EXPENSES OF BROKERS AND OTHERS.
Buyer is not committed to any liability for any brokers' or finders'
fees or any similar fees in connection with the transactions contemplated by
this Agreement, and has not retained any broker or other intermediary to act on
its behalf in connection with the transactions contemplated by this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to Seller that:
5.01 ORGANIZATION.
Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Arizona, and has full corporate power
and authority to enter into and perform its obligations hereunder.
5.02 AUTHORIZATION; ENFORCEABILITY.
The execution, delivery and performance by Parent of this Agreement
and of all of the documents and instruments contemplated hereby to which Parent
is a party are within the corporate power of Parent and have been duly
authorized by all necessary corporate action of
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Parent. This Agreement is, and the other documents and instruments required
hereby to which Parent is a party will be, when executed and delivered by
Parent, the valid and binding obligations of Parent, enforceable against Parent
in accordance with their respective terms.
5.03 NO CONFLICT OR VIOLATION; REQUIRED CONSENTS.
The execution, delivery and performance of this Agreement by Parent
does not and will not violate or conflict with, directly or indirectly, or give
any person the right to declare a default or exercise of any remedy under, any
provision of the Articles of Incorporation or Bylaws of Parent, any resolution
adopted by the Board of Directors or shareholders of Parent, any Law, judgment,
order or decree binding on Parent or any contract, lease, mortgage, deed of
trust, indenture, permit, license, franchise, commitment, authorization or
concession, or other agreement or instrument applicable to Parent.
Except as set forth on SCHEDULE 5.03 hereto and except for the filing
of Premerger Notification and Request Forms under the HSR Act and any filing
requirement necessary under the Exchange Act of 1934, no consent of any person,
and no notice to, filing or registration with, or authorization, consent or
approval of, any governmental, regulatory or self-regulatory agency is necessary
or is required to be made or obtained by Parent in connection with the
consummation of the transactions contemplated in this Agreement.
5.04 NO LITIGATION.
There is no litigation, arbitration proceeding, governmental
investigation, citation or action of any kind pending or, to the Knowledge of
Parent, proposed or threatened against Parent relating to this Agreement or the
transactions contemplated hereby.
5.05 FEES AND EXPENSES OF BROKERS AND OTHERS.
Parent is not committed to any liability for any brokers' or finders'
fees or any similar fees in connection with the transactions contemplated by
this Agreement, and has not
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retained any broker or other intermediary to act on its behalf in connection
with the transactions contemplated by this Agreement.
5.06 SUFFICIENT FUNDS.
Parent will provide Buyer with sufficient funds to consummate the
acquisition by Buyer of the Purchased Assets in accordance with the terms of
this Agreement.
ARTICLE VI
CERTAIN UNDERSTANDINGS AND AGREEMENTS
6.01 CONDUCT OF SELLER PRIOR TO CLOSING.
From the date hereof through the Closing Date, Seller shall cause the
Computer Telephony Business to be conducted in the ordinary course and in
accordance with past practice, except as otherwise permitted by this Agreement
or consented to by Buyer in writing. Without limiting the generality of the
foregoing, Seller shall: (a) keep full and complete Books and Records; (b)
maintain in full force and effect the insurance policies heretofore maintained
on the Purchased Assets (or policies providing substantially the same coverage);
(c) take all actions as may be necessary to fully and validly transfer to Buyer
the Purchased Assets, and to take such commercially reasonable action to
preserve the Purchased Assets and the Premises in good condition, normal wear
and tear excepted; (d) promptly advise Buyer in writing of any Material Adverse
Change that has occurred or which Seller reasonably believes will occur; (e) use
its commercially reasonable best efforts to preserve the Computer Telephony
Business intact, and to preserve for Buyer the existing goodwill of the
suppliers, customers, landlords, creditors, employees, agents and others having
business relations with Seller in the conduct of the Computer Telephony
Business; (f) confer with Buyer concerning operational matters of a material
nature; (g) otherwise report periodically to Buyer concerning the status of the
business, operations and finances of the Computer Telephony Business; and (h)
comply with all Laws
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applicable to Seller in the conduct of the Computer Telephony Business, except
where the failure to so comply would not have an adverse change.
6.02 NEGATIVE COVENANTS.
From the date hereof through the Closing Date, Seller will not, with
respect to the Computer Telephony Business, except as otherwise permitted by
this Agreement or consented to by Buyer in writing: (i) except as required by
the Loan and Security Agreement, dated as of August 14, 1998, between Fleet
Capital Corporation and Seller, pledge or hypothecate any of the Purchased
Assets to secure any indebtedness; (ii) assign any of the Contracts or Assumed
Leases; (iii) other than in the ordinary course of the Computer Telephony
Business, increase or decrease the wages or benefits of any Employee, or enter
into any agreement to increase or decrease the wages or benefits of any such
Employee; (iv) enter into any collective bargaining agreement, or amend any
Employee Benefit Plan to increase the benefits thereunder to Employees, except
such amendments as may be required by Law, or create or modify any pension or
profit sharing plan, bonus, deferred compensation, death benefit, health, or
retirement plan, or increase the level of benefits under any such plan, or
increase any severance or termination pay benefit or any other fringe benefit;
(v) sell or dispose of any of the Purchased Assets otherwise than in the
ordinary course of the Computer Telephony Business; (vi) other than entering
into any lease transactions, make any capital expenditures outside of the
ordinary course of business in excess of $50,000 individually, or $200,000 in
the aggregate, with respect to the Computer Telephony Business; (vii) modify,
amend or terminate any Assumed Lease or Contract affecting the use, possession
or operation of any Premises; (viii) grant or otherwise create or consent to the
creation of any Lien affecting any Premises or any part thereof; or (ix) agree
or undertake to do any of the foregoing.
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6.03 ACCESS.
Between the date hereof and the Closing Date and subject to the
Confidentiality Agreement, dated May 6, 1999 (the "Confidentiality Agreement"),
between Seller and Buyer, Seller shall give to authorized representatives of
Buyer access to the the Books and Records for a reasonable number of on-site
visits to each of the Premises as determined by Buyer, all during normal
business hours and upon reasonable advance notice in a manner as not to disrupt
normal Computer Telephony Business activities or prevent strict maintenance of
confidentiality as set forth in the Confidentiality Agreement. Seller will also
cause its officers to furnish to Buyer any and all financial, technical and
operating data and other information pertaining to the Computer Telephony
Business, as Buyer shall from time to time reasonably request for such purpose,
subject to the Confidentiality Agreement between Buyer and Seller.
6.04 NO SOLICITATION.
From the date hereof through the Closing Date, Seller shall not,
directly or indirectly, through any officer or director of Seller, investment
banker or other agent or otherwise, with respect to the Computer Telephony
Business: (a) solicit, induce, facilitate in any way or initiate offers from any
Person relating to any acquisition or purchase of any of the Purchased Assets,
or any exchange offer, merger, consolidation, business combination or sale of
substantial assets, sale of securities, or similar transactions involving the
Computer Telephony Business (a "Competing Transaction"); or (b) enter into or
participate in any discussions or negotiations, furnish any information with
respect to, assist or participate in or facilitate in any manner or effort by
any reason, or seek to do any of the foregoing regarding a Competing
Transaction, or furnish to any other Person any information with respect to the
Purchased Assets, PROVIDED, HOWEVER, that nothing contained in this Agreement
shall prevent the Board of Directors of Seller from: (i) furnishing information
to a third party that has made a bona fide written
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Superior Proposal (as defined below) which did not result from a breach of this
Section, PROVIDED THAT such third party has executed an agreement with
confidentiality provisions substantially similar to those then in effect between
Buyer and Seller; (ii) subject to compliance with the other terms of this
SECTION 6.04, considering and negotiating a bona fide written Superior Proposal
not solicited in violation of this Agreement, PROVIDED THAT, as to each of
clauses (i) and (ii) above, (a) such actions occur at a time prior to approval
of this Agreement at Seller's shareholders meeting and (b) the Board of
Directors of Seller determines in good faith (after due consultation with
independent counsel) that it is required to do so in order to discharge properly
its fiduciary duties if and only to the extent that, in the case of actions
referred to in clause (i) or (ii), such Competing Transaction is a Superior
Proposal (as defined below) and Buyer is given at least five business days'
notice of the identity of the third party and all material terms and conditions
of the Superior Proposal to respond to such Superior Proposal. Seller agrees
that it will, on the date hereof, immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any Person conducted
heretofore with respect to any Competing Transaction. For the purpose of this
Agreement, a "Superior Proposal" means any proposal made by a third party to
acquire, directly or indirectly, for consideration consisting of cash and/or
securities, the Computer Telephony Business, either separately or as a part of
any of Seller's businesses, on terms that the Board of Directors of Seller in
good faith believes (i) (after consultation with a financial advisor of
nationally recognized reputation) to be more favorable from a financial point of
view to its shareholders than the transactions contemplated by this Agreement,
taking into account at the time of determination any changes to the financial
terms of this Agreement proposed by Buyer, that is not subject to a financing
condition and is from a Person that in the reasonable judgment of Seller's Board
of Directors (based on advice from a nationally
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recognized investment bank) is financially capable of consummating such
proposal, and (ii) to be more favorable to Seller than the transactions
contemplated by this Agreement after taking into account all pertinent factors
deemed relevant by the Board of Directors of Seller under the laws of the
Commonwealth of Virginia. Seller shall promptly notify Buyer in writing with all
of the material terms of any proposal relating to a Competing Transaction or if
any inquiry or contact with any Person with respect thereto is made and shall
promptly deliver to Buyer copies of any such written proposal or offer and any
communications made in response thereto. It is agreed that a sale in any form of
any assets of Seller that does not materially diminish the value of the
Purchased Assets shall not be a Competing Transaction and provided that in no
event shall the sale of the Healthcare Communications Business be deemed to
diminish the value of the Purchased Assets. Seller's obligations under SECTION
6.04 hereof shall be terminated upon termination of the Agreement by either
party.
Seller shall promptly notify Buyer (and in any event within 24 hours)
after receipt of any communication that is, or could reasonably lead to, a
Competing Transaction, or any request for nonpublic information relating to the
Company by any third party or for access to the properties, books or records of
Seller in connection with any Competing Transaction or potential Competing
Transaction. Such notice to Buyer shall be made orally and in writing and shall
indicate in reasonable detail the identity of the offeror.
6.05 FURTHER ASSURANCES.
(a) Seller and Buyer shall each use its commercially reasonable
efforts, and shall cooperate with and assist the other party in its efforts,
including the resolution of any issues arising under the HSR Act, to obtain the
Required Consents and such other consents and approvals of third parties to the
transactions contemplated hereby as may be necessary to transfer the Purchased
Assets and assign the Assumed Liabilities to Buyer.
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(b) Seller will use its commercially reasonable efforts, and Buyer
will cooperate with Seller in its efforts, to preserve the Computer Telephony
Business intact, and to preserve for Buyer the existing goodwill of the
suppliers, customers, landlords, creditors, employees, agents and others having
business relations with Seller in the conduct of the Computer Telephony
Business, including without limitation taking and consenting to the actions with
respect to the customers and distributors outlined in SCHEDULE 6.05, which
schedule shall be completed by Buyer and Seller within 30 days of the date of
this Agreement.
6.06 PUBLICITY.
Neither party shall at any time during the consummation of the
transactions contemplated hereby, make any public disclosure of the terms and
conditions of any transaction or the fact that discussions for an acquisition
are taking place, except to the extent that such disclosure is required by law
or the rules and regulations of the Securities Exchange Commission and of the
Nasdaq Stock Market and has been otherwise agreed to by the other party. In any
event, the parties will work together to ensure that any disclosure is accurate
and in the best interests of both parties.
6.07 EMPLOYEES.
(a) Buyer agrees to offer employment commencing as of the Closing Date
to each active Employee of the Computer Telephony Business listed on SCHEDULE
1.35 at substantially the same salary or hourly wage and at the same location as
in effect for such active Employee immediately prior to the Closing Date
PROVIDED THAT each active Employee passes Buyer's pre-employment drug tests. No
later than 15 days after the date hereof, Buyer shall provide Seller with the
details of such offers. Those Employees who accept the offered employment with
Buyer (the "Transferred Employees") and all other Employees of the Computer
Telephony Business immediately prior to the Effective Time (the "Severed
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Employees") shall terminate their employment with Seller as of the Effective
Time. Buyer shall assume all of Seller's rights and obligations under all
employment agreements that are Contracts in effect immediately prior to the
Effective Time.
(b) With respect to any Transferred Employee terminated by Buyer and
any Severed Employee, Buyer and Seller agree that Buyer will be financially
responsible to Seller for the entire cost of the severance benefits due to such
Employee under Seller's severance plans for Employees, as in effect immediately
prior to the Effective Time. Notwithstanding SECTION 6.07(d), Seller retains the
right, prior to the Effective Time, to modify any severance arrangement to
decrease or modify (but not increase) any severance pay obligations thereunder.
(c) With respect to any Transferred Employee, Buyer shall be solely
responsible for determining whether to terminate the employment of such
Transferred Employee or offer employment in another capacity. As to any such
Transferred Employee terminated by Buyer after the Effective Time, Buyer shall
be solely responsible for satisfying any requirement to provide notice of
termination under any Law, any requirement to provide benefits or coverage
continuation under any employee benefit plan or program and any requirement with
respect to unemployment compensation benefits. In addition, as to any such
Transferred Employee, Buyer shall be solely responsible for any liability
resulting from any termination and for defending against any claim that any such
termination was wrongful or in violation of any Law.
(d) With respect to any Severed Employee, Buyer shall indemnify and
hold Seller harmless against any liability resulting from any termination and
for defending against any claim that any such termination was wrongful or in
violation of any Law. As to any Severed Employee, Buyer, at Buyer's option under
either Buyer's or Seller's employee benefit plans as of the Closing Date, shall
assume all obligations of Seller to offer health care continuation coverage
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under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA") to such employees, excluding the administrative costs of Seller with
respect to its Employee Benefit Plans, and shall indemnify and hold Seller
harmless against any liability relating to such health care continuation
coverage obligations.
6.08 WARN ACT.
Buyer shall be responsible for any liabilities incurred by Seller in
connection with the transactions contemplated by this Agreement under the Worker
Adjustment and Retraining Notification Act ("WARN Act"), and Buyer shall
indemnify Seller against any reasonable expenses incurred by Seller, including
attorneys' fees, if applicable, in connection with the application of the WARN
Act to Seller as a result of the transactions contemplated by this Agreement;
PROVIDED THAT, prior to the Closing Date, Seller will not temporarily or
permanently close or shut down any "single site of employment" or any "facility"
or any "operating unit," "department" or "service" within a single site of
employment, as such terms are used in the WARN Act, within or constituting part
of the Computer Telephony Business. Seller represents that the Computer
Telephony Business has not had, and will not have, any layoffs which would
qualify as part of such closures or shutdowns within the period of ninety (90)
days prior to the Closing Date. Any employee who is receiving retention payments
or severance payments from Seller will not be eligible for severance payments
from Buyer.
6.09 BENEFIT OBLIGATIONS.
(a) Buyer and Seller agree that, except as specifically set forth in
this Agreement, Seller shall be solely responsible for all liabilities or
obligations of any kind with respect to the employment by Seller of the
Employees arising prior to the Effective Time, including, but not limited to,
any claims by any Employees related to their employment by Seller or to the
termination of their employment by Seller prior to the Effective Time. Without
limiting
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the generality of the foregoing sentence, Seller shall be solely responsible for
the following matters related to Seller's employment of the Employees and the
termination of such employment prior to (but not as of or after) the Effective
Time: (i) any required compliance with COBRA; and (ii) all alleged and actual
obligations and claims arising from or relating to any employment agreement,
collective bargaining agreement or Employee Benefit Plans, any grievances,
arbitrations or unfair labor practice charges relating to compliance with any
applicable state or federal labor or employment law (including, but not limited
to, all laws pertaining to discrimination, workers' compensation, unemployment
compensation, occupational safety and health, unfair labor practices, family and
medical leave, and wages, hours or employee benefits). Notwithstanding the
foregoing, Buyer shall assume all of Seller's obligations to provide the retiree
medical and life insurance benefits described on SCHEDULE 3.16, to the extent
such obligations have been fully accrued for on the balance sheet as of the
Effective Time.
(b) Buyer and Seller further agree that, except as specifically set
forth in this Agreement, Buyer shall be solely responsible for all liabilities
or obligations of any kind with respect to the Transferred Employees and the
Severed Employees arising as of or after the Effective Time, including, but not
limited to, the termination of their employment by Seller as of the Effective
Time, or by Buyer after the Effective Time. Without limiting the generality of
the foregoing sentence, Buyer shall be solely responsible for the following
matters related to the Transferred Employees' or Severed Employees' employment
and the termination of such employment as of or after the Effective Time: (i)
any required compliance with COBRA for Transferred Employees; (ii) 50% of TRP
Liabilities; and (iii) except as provided herein, all alleged and actual
obligations and claims arising from or relating to any employment agreement,
collective bargaining agreement or Employee Benefit Plans, any grievances,
arbitrations or
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unfair labor practice charges and relating to compliance with any applicable
state or federal labor or employment law (including, but not limited to, all
laws pertaining to discrimination, workers' compensation, unemployment
compensation, occupational safety and health, unfair labor practices, family and
medical leave, and wages, hours or employee benefits) with respect to an event
occurring after the Effective Date for the Transferred Employees.
(c) Buyer shall assume liability as of the Closing Date for the
accrued vacation entitlement and sick pay entitlement of each Transferred
Employee to the extent such liabilities have been fully accrued on the Closing
Balance Sheet in accordance with GAAP and shall pay each such Employee's wages
or salary during their vacation or sick pay when taken. If an Employee with
accrued vacation or sick pay terminates employment with Buyer on or before one
year of the Closing Date with personal leave (I.E. vacation and sick pay)
entitlements remaining, Buyer shall pay such Employee a lump sum in cash equal
to such personal leave entitlement, less applicable deductions for taxes and
other ordinary course payroll withholdings.
(d) If Buyer maintains a Code Section 401(k) Plan, Buyer shall permit
Transferred Employees to roll over into Buyer's Code Section 401(k) plan any
accrued benefit which is an eligible rollover distribution as to such employees
from any Employee Benefit Plan of Seller or any of its Affiliates ("Transferor
Plan"), PROVIDED THAT the Transferor Plan satisfies applicable laws including
being tax exempt under Section 401(a) of the Code so that any roll-overs will
not affect the tax qualified status of Buyer's Code Section 401(k) Plan. Seller
shall provide Buyer with all documents requested by Buyer in order to determine
whether the Transferor Plan satisfies all applicable laws.
(e) For all Transferred Employees, Buyer shall grant past service
credit for eligibility to participate under Buyer's welfare plans, with the
exception of Buyer's profit sharing
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plan, wherein Transferred Employees must satisfy applicable service periods for
eligibility with Buyer, and seniority credit for Buyer's leave programs in which
its or its affiliates' similarly situated employees are eligible to participate
for all service since last day of hire with Seller or any of its Affiliates,
shall waive any preexisting condition limitations or restrictions, evidence or
requirement of insurability and any actively at work requirement for coverage
(to the extent not applicable under the Employee Benefit Plans in which such
Transferred Employees participate immediately prior to Closing) and shall permit
entry into such plans and programs immediately after Closing (to the extent the
eligibility requirements therefor are then satisfied). Notwithstanding the
foregoing, the Employees shall not be eligible to participate in Buyer's profit
sharing plan for the year ended December 31, 1999.
6.10 SERVICES AGREEMENT.
For a period of three months after the Closing Date, Buyer will
provide Seller certain transition services upon the terms and subject to the
conditions contained in a Services Agreement to be negotiated in good faith and
entered into by Buyer and Seller as of the Closing Date (the "Services
Agreement").
6.11 HEADQUARTERS FACILITY SUBLEASE AGREEMENT.
Buyer agrees to grant a sublease or license to Seller to use, and
Seller will agree to use and pay rent for during the term, certain space located
at the Headquarters Facility for Seller's use in connection with the Healthcare
Communications Business only pursuant to and subject to the conditions described
in the Headquarters Sublease Agreement.
6.12 MANUFACTURING AGREEMENT.
On the Closing Date, Buyer and Seller will enter into a Manufacturing
Agreement containing the terms set forth in SCHEDULE 6.12 and such other terms
to which Buyer and Seller may agree. Buyer and Seller shall within 30 days of
the date of this Agreement agree upon a
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form of Manufacturing Agreement to be executed on the Closing Date. Pursuant to
the Manufacturing Agreement, Buyer will agree to provide at the Poway, Facility
and Seller will agree to pay for the following services as required by Seller:
(a) manufacturing and assembly of Healthcare Communications Business
products and parts and components thereof, at standard product cost, which
includes standard material and standard labor and overhead;
(b) product distribution services, including warranty, freight,
duties, brokerage, royalties, insurance, software manufacturing, warehousing,
material variances, labor and overhead variances, quality assurance, inventory
variances, inventoriable costs, rework and other costs related to inventory; and
(c) product repair services.
Buyer will agree to provide all such services for three (3) years from
the Closing Date.
6.13 NON COMPETE.
Buyer agrees not to engage in all or any part of the Healthcare
Communications Business, including, without limitation, the repair of the
systems and products sold by the Healthcare Communications Business except as
provided in the Manufacturing Agreement, for a period of five (5) years
commencing with the Closing Date, PROVIDED, HOWEVER, that in the event that
Seller or its assignee terminates the Manufacturing Agreement, such period shall
end two (2) years from the date of termination of the Manufacturing Agreement.
6.14 TRADEMARK LICENSE AGREEMENT.
Effective on the Closing Date, Buyer agrees to grant Seller a
non-exclusive, perpetual, royalty-free license to use the Licensed Trademarks
subject to the terms and conditions of the Trademark License Agreement. Seller
agrees that without Buyer's consent it
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will not, nor will it permit the Healthcare Communications Business after the
Closing Date to, make any use of any trade name or service ▇▇▇▇ held by Buyer in
any manner other than as specifically provided in this Agreement or the
Trademark License Agreement.
6.15 COMPUTER ASSETS LICENSE AGREEMENT.
On the Closing Date, Seller and Buyer will enter into the Computer
Assets License Agreement pursuant to which Seller and Buyer will grant and be
granted cross licenses, sublicenses, leases or subleases, as applicable, to
utilize on the terms set forth in such agreement the Computer Assets utilized by
Seller in the Healthcare Communications Business and certain Excluded Assets
utilized by Buyer in the Computer Telephony Business.
6.16 BULK TRANSFERS LAWS.
Seller shall comply in all material respects, and provide Buyer all
information required to comply, with the provisions of any applicable bulk
transfers laws of U.S. jurisdictions in which there exists a material amount of
Purchased Assets (including any similar laws relating to any Taxes). Seller
shall promptly pay and discharge when due, or contest or litigate all claims of
creditors that are asserted against Buyer by reason of Seller's non-compliance
with such laws and agrees to indemnify and hold Buyer harmless from and against
and shall on demand reimburse Buyer for any and all Losses suffered by Buyer by
reason of Seller's failure to pay and discharge any such claims (or Taxes)
PROVIDED THAT the foregoing shall not affect in any way Buyer's obligations with
respect to the Assumed Liabilities.
6.17 NOTICE OF DEVELOPMENTS.
Between the date of this Agreement and the Closing Date, Seller will
promptly give written notice to Buyer of any adverse development or fact or
condition that causes or constitutes a breach of any of its representations and
warranties or covenants in this Agreement. No disclosure by Seller pursuant to
this Section 6.17, however, shall be deemed to amend or
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supplement the Disclosure Schedules or to prevent or cure any
misrepresentations, breach of warranty, or breach of covenant. During the same
period, Seller will promptly give written notice to Buyer of the occurrence of
any condition or event that could reasonably make the satisfaction of the
conditions in Article IV impossible or impracticable.
6.18 THIRD PARTY CONSENTS.
(a) Seller shall, at Seller's cost and expense, obtain prior to the
Closing any and all consents necessary for the valid and binding assignment of
the Assumed Contracts and Leases to Buyer. All such consents will be in writing
and in form and substance reasonably satisfactory to Buyer (including without
limitation economic terms and conditions that are no less favorable to Buyer
than currently exist for Seller), and executed counterparts thereof will be
delivered to Buyer no later than the Closing.
(b) Subject to the provisions of SECTION 6.18(a) above, to the extent
that the assignment or sublease of any Assumed Contract or Lease requires the
consent of a third party, this Agreement shall not constitute an agreement to
assign or sublease the same if an attempted assignment or sublease thereof,
without the consent of a third party thereto, would constitute a breach thereof,
but Seller shall use its commercially reasonable best efforts to obtain the
consent of such other parties to all such contracts to the assignment or
sublease thereof to Buyer prior to the Closing Date; if such Consent is not
obtained or is obtainable only upon payment by Seller of amounts not otherwise
required to be paid under the terms of such contract, Buyer will cooperate with
Seller in any reasonable arrangement which is designed to provide for Buyer the
benefits under any such Assumed Contract or Lease including enforcement for the
benefit of Buyer at the sole expense of Seller, of any and all rights of Seller
against any third party thereto arising out of the failure or refusal of such
third party to consent to such assignment or sublease.
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6.19 RISK OF LOSS.
From the date of this Agreement through the Closing Date, Seller shall
bear all risks of loss to the Purchased Assets and the Premises (including,
without limitation, the Headquarters Facility and Poway Facility). Without
limiting the generality of the foregoing sentence, in the event that, prior to
the Closing Date, any Premises shall be destroyed or materially damaged, or if
condemnation proceedings are commenced against any Premises or any material part
thereof, then Buyer shall receive at Closing any and all insurance and
condemnation proceeds attributable to the casualty or condemnation.
6.20 MEETING OF SELLER'S SHAREHOLDERS.
(a) Promptly after the date hereof, Seller will take all action
necessary in accordance with Virginia Law and Seller's Articles of Incorporation
and Bylaws to convene the shareholders' meeting to be held as promptly as
practicable, and in any event (to the extent permissible under applicable law)
within 90 days after the date hereof, for the purpose of voting upon this
Agreement. Seller will use its commercially reasonable efforts to solicit from
its shareholders proxies in favor of the adoption and approval of this Agreement
and will take all other action necessary or advisable to secure the vote or
consent of its shareholders required by the rules of Nasdaq or Virginia Law to
obtain such approvals. Notwithstanding anything to the contrary contained in
this Agreement, Seller may adjourn or postpone the shareholders' meeting to the
extent necessary to ensure that any necessary supplement or amendment to the
Proxy Statement is provided to Seller's shareholders in advance of a vote on
this Agreement or, if as of the time for which the Seller's shareholders'
meeting is originally scheduled (as set forth in the Proxy Statement) there are
insufficient shares of Seller's common stock represented (either in person or by
proxy) to constitute a quorum necessary to conduct the business of the Seller's
shareholders' meeting. Seller shall ensure that the Seller's shareholders'
meeting is called,
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noticed, convened, held and conducted, and that all proxies solicited by Seller
in connection with the Seller's shareholders' meeting are solicited, in
compliance with the Virginia Law, its Articles of Incorporation and Bylaws, the
rules of Nasdaq and all other applicable legal requirements.
(b) (i) The Board of Directors of Seller shall unanimously recommend
that Seller's shareholders vote in favor of and adopt and approve this Agreement
at the Seller's shareholders' meeting; (ii) the Proxy Statement shall include a
statement to the effect that the Board of Directors of the Seller has
unanimously recommended that Seller's shareholders vote in favor of and adopt
and approve this Agreement at the Seller's shareholders' meeting; and (iii)
neither the Board of Directors of Seller nor any committee thereof shall
withdraw, amend or modify, or propose or resolve to withdraw, amend or modify in
a manner adverse to Buyer, the unanimous recommendation of the Board of
Directors of Seller that Seller's shareholders vote in favor of and adopt and
approve this Agreement and the transaction contemplated hereby. For purposes of
this Agreement, said recommendation of the Board of Directors shall be deemed to
have been modified in a manner adverse to Buyer if said recommendation shall no
longer be unanimous. Nothing herein shall be construed so as to require the
Board of Directors to violate its fiduciary duty to Seller's shareholders.
6.21 CUSTOMER LIST.
Seller shall deliver the Customer List to Buyer upon expiration of any
applicable waiting period pursuant to the HSR Act and immediately following
Seller's mailing of a definitive proxy statement to Seller's shareholders in
connection with this Agreement.
6.22 YEAR 2000 CLAIMS.
In the event that Seller enters into a settlement agreement with
respect to any claims, lawsuits or actions of current or former customers of the
Computer Telephony Business related to the Year 2000 readiness of the Computer
Telephony Products that obligates Seller to
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provide product upgrades to make such Computer Telephony Products Year 2000
Compliant, Buyer agrees to provide such product upgrades as required under any
such settlement agreement, including all labor required to install the product
upgrades, all at Buyer's cost.
6.23 EXECUTONE NAME.
Parent, Buyer and Seller agree that in the event this Agreement is
terminated for any reason, Seller, notwithstanding the consent executed by
Seller dated October 12, 1999, shall revoke its consent as to any use of the
Executone name by Parent or Buyer. Buyer acknowledges and agrees that Seller may
use, as all or part of its corporate name, trade name, or assumed name, the term
"EXECUTONE" together with the term "HEALTHCARE" or some other similar term
(E.G., without limitation, EXECUTONE HEALTHCARE, EXECUTONE HEALTHCARE
COMMUNICATIONS), and that Seller may make all filings and registrations that
Seller deems necessary or appropriate in connection with such corporate name,
trade name, or assumed name, including but not limited to corporate name
filings, assumed name filings and fictitious name filings.
6.24 POWAY FACILITY PERMITS.
Within 30 days of the date of this Agreement, Seller shall deliver
SCHEDULE 6.24 to Buyer providing a list of each of the Permits required to
operate the Poway Facility.
6.25 SCHEDULES.
Seller shall deliver SCHEDULES 1.22, 1.24(a), 1.24(b) and 1.48 to
Buyer no later than 20 days prior to the Closing. Seller shall consult with
Buyer its preparation of such schedules and Buyer may assist in Seller's review
and completion thereof.
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ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent:
7.01 ACCURACY OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of Seller set forth in this
Agreement shall be true and correct in all material respects as of the Closing
Date as if made as of such time, excepting those representations and warranties
expressly made as of a particular date which shall be true and correct in all
material respects as of such date.
7.02 HSR ACT WAITING PERIOD.
Any waiting period applicable to the consummation of the transactions
contemplated by this Agreement under the HSR Act shall have expired or
terminated.
7.03 NO LITIGATION.
No temporary restraining order, preliminary or permanent injunction,
judgment, decree or order shall have been issued by any court or
quasi-jurisdictional or administrative agency of any federal, state, local or
foreign jurisdiction, or statute, rule or regulation shall be in effect, that
would (A) prevent consummation of the transaction contemplated by this Agreement
or (B) adversely affect the right of Buyer to own the Purchased Assets, or to
operate and control the Purchased Assets.
7.04 SELLER'S PERFORMANCE.
All obligations of Seller to be performed or complied with on or
before the Closing Date, pursuant to the terms of this Agreement, shall have
been duly performed or complied with in all material respects on or before the
Closing Date.
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7.05 DELIVERIES AT CLOSING.
Seller shall have delivered, or caused to have been delivered, to
Buyer the following documents, each properly executed and dated as of the
Closing Date and reasonably satisfactory in form and substance to Buyer:
(a) the ▇▇▇▇ of Sale;
(b) the Assignment and Assumption Agreement;
(c) Seller's Closing Certificate;
(d) the Headquarters Sublease Agreement;
(e) the Manufacturing Agreement;
(f) the Trademark License Agreement;
(g) the Computer Assets License Agreement;
(h) the Services Agreement;
(i) the opinion of Seller's counsel in a form reasonably acceptable to
Buyer; and
(j) the Required Consents.
7.06 NO MATERIAL ADVERSE CHANGE.
Since August 31, 1999, there shall not have been a Material Adverse
Change with respect to Seller's Computer Telephony Business.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
Each and every obligation of Seller to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent:
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8.01 ACCURACY OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of Buyer set forth in this
Agreement shall be true and correct in all material respects as of the Closing
Date as if made as of such time.
8.02 SHAREHOLDER APPROVAL.
Seller shall have obtained shareholder approval of the Agreement and
the transaction contemplated hereby in accordance with the Virginia Stock
Corporation Act and the Seller's Articles of Incorporation.
8.03 NO LITIGATION.
No temporary restraining order, preliminary or permanent injunction,
judgment, decree or order shall have been issued by any court or
quasi-jurisdictional or administrative agency of any federal, state, local or
foreign jurisdiction, or statute, rule or regulation shall be in effect, that
would prevent consummation of the transaction contemplated by this Agreement.
8.04 HSR ACT WAITING PERIOD.
Any waiting period applicable to the consummation of the transactions
contemplated by this Agreement under the HSR Act shall have expired or
terminated.
8.05 BUYER'S PERFORMANCE.
All obligations of Buyer to be performed or complied with on or before
the Closing Date, pursuant to the terms of this Agreement, shall have been duly
performed or complied with in all material respects on or before the Closing
Date.
8.06 DELIVERIES AT CLOSING.
In addition to the payment of the Purchase Price, Buyer shall have
delivered, or caused to have been delivered, to Seller the following documents,
each properly executed and dated as of the Closing Date and reasonably
satisfactory in form and substance to Seller:
(a) the Assignment and Assumption Agreement;
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(b) Buyer's Closing Certificate;
(c) the Headquarters Sublease Agreement;
(d) the Manufacturing Agreement;
(e) the Trademark License Agreement;
(f) the Computer Assets License Agreement;
(g) the Services Agreement; and
(h) the opinion of Buyer's counsel in a form reasonably acceptable to
Seller.
ARTICLE IX
ACTIONS BY SELLER AND BUYER AFTER THE CLOSING
9.01 SELLER'S INDEMNITY.
Upon closing of the transactions contemplated herein, Seller hereby
agrees to indemnify and hold Buyer, its Affiliates, successors and assigns and
their respective representatives ("Buyer's Indemnitees") harmless from and
against, and agrees to defend promptly Buyer's Indemnitees from and reimburse
Buyer's Indemnitees for, any and all losses, damages, costs, expenses,
liabilities, obligations and claims of any kind, including, without limitation,
reasonable attorneys' fees and other legal costs and expenses (collectively, the
"Losses"), that Buyer's Indemnitees may at any time suffer or incur, or become
subject to, arising, directly or indirectly from, or in connection with: (i) any
breach or inaccuracy of any of the representations and warranties made by Seller
in or pursuant to this Agreement or any instrument or document executed by
Seller in connection with or as a result of this Agreement; (ii) any breach by
Seller of any covenant or obligation of Seller in this Agreement; (iii) any
claim by any Person for brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding alleged to have been made by
any such Person with Seller (or any Person acting on its behalf) in connection
with any of the transactions contemplated by this
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Agreement; (iv) any liability of Seller which is not an Assumed Liability
(including any liability of Seller that becomes a liability of Buyer by
operation of law under any bulk transfer law of any jurisdiction, under any
common law doctrine of de facto merger or successor liability, or otherwise);
(v) any liability in respect of any Taxes relating to the Purchased Assets
attributable to any period beginning before and ending on the Closing Date; and
(vi) the Retained Liabilities (hereinafter referred to collectively as
"Claims"); PROVIDED, HOWEVER, that Buyer's Indemnitees shall have the right to
be indemnified, held harmless from, defended or reimbursed under SECTION 9.01(a)
hereof only if Buyer has notified Seller of such Claims within one (1) year of
the Closing Date, except the time limitation with respect to the representations
set forth in SECTIONS 3.07 and 3.09 shall be upon expiration of the applicable
statute of limitations with respect to the tax or environmental matters giving
rise to a claim thereunder.
9.02 BUYER'S INDEMNITY.
Upon closing of the transactions contemplated herein, Parent and
Buyer, jointly and severally hereby agree to indemnify and hold Seller and its
Affiliates, successors and assigns and their respective representatives
(collectively, "Seller's Indemnitees") harmless from and against, and agree to
defend promptly Seller's Indemnitees from and reimburse Seller's Indemnitees
for, any and all Losses that Seller's Indemnitees may at any time suffer or
incur, or become subject to, as a result of or in connection with: (i) any
breach or inaccuracy of any of the representations and warranties made by Parent
or Buyer in or pursuant to this Agreement or any instrument or document executed
by Parent or Buyer in connection with or as a result of this Agreement; (ii) the
Assumed Liabilities; (iii) any breach by Parent or Buyer of any covenant or
obligation of Parent or Buyer in this Agreement; (iv) any claim by any Person
for brokerage or finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by any such Person with
Parent or Buyer (or any Person acting on
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their behalf) in connection with any of the transactions contemplated by this
Agreement; (v) any liability in respect of any Taxes relating to the Purchased
Assets attributable to any period beginning on or after the Closing Date; and
(vi) claims by third parties against Seller relating to operation, ownership and
performance by, Buyer of the Purchased Assets, and the conduct of Parent or
Buyer in connection with the Computer Telephony Business from and after the
Closing Date, other than with respect to the Retained Liabilities; PROVIDED,
HOWEVER, that, except in the case of the Indemnified Litigation, Seller's
Indemnitees shall have no right to be indemnified, held harmless from, defended
or reimbursed under SECTION 9.02 hereof unless Seller has notified Parent or
Buyer of such Claims within one (1) year of the Closing Date.
9.03 LIMITATIONS ON INDEMNIFICATION.
(a) Seller shall not have any obligation to indemnify Buyer's
Indemnitees in respect of Losses incurred pursuant to SECTION 9.01, and Parent
or Buyer shall not have any obligation to indemnify Seller's Indemnitees in
respect of Losses incurred pursuant to SECTION 9.02, in either case unless and
until the aggregate amount of such Losses exceeds $375,000 (the "Basket"), and
then only to the extent such Losses in the aggregate exceed $187,500; PROVIDED,
HOWEVER, that the foregoing limitation and the Basket shall not apply to Losses
in connection with the Indemnified Litigation or Taxes, and PROVIDED, FURTHER,
that the maximum amount recoverable by either party and its Affiliates in
respect of such Losses shall not exceed the Purchase Price, with Adjustments.
9.04 PROCEDURE FOR INDEMNIFICATION- THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party under SECTION 9.01
or SECTION 9.02 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement of
such claim, but the failure to notify the
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indemnifying party will not relieve the indemnifying party of any liability that
it may have to any indemnified party, except to the extent that the indemnifying
party demonstrates that the defense of such action is prejudiced by the
indemnified party's failure to give such notice.
(b) If any Proceeding referred to in SECTION 9.04(a) is brought
against an indemnified party and it gives notice to the indemnifying party of
the commencement of such Proceeding, the indemnifying party will be entitled to
participate in such Proceeding and, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such Proceeding and the indemnified party
determines in good faith that joint representation would be inappropriate, or
(ii) the indemnifying party fails to provide reasonable assurance to the
indemnified party of its financial capacity to defend such Proceeding and
provide indemnification with respect to such Proceeding), to assume the defense
of such Proceeding with counsel reasonably satisfactory to the indemnified party
and, in the event that the indemnifying party provides appropriate notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this SECTION 9.04 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding. No
compromise or settlement of such claims may be effected by either the
indemnified party or the indemnifying party without the other party's consent
(which consent shall not be unreasonably withheld) unless (i) there is no
finding or admission of any violation of Legal Requirements or any violation of
the rights of any Person and no effect on any other claims that may be made
against the other party, and (ii) the sole relief provided is monetary damages
that are paid in full by the party effecting the settlement. If notice is given
to an indemnifying party of the commencement of any Proceeding and the
indemnifying party does not, within ten days after the indemnified party's
notice is given, give notice to the indemnified
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party of its election to assume the defense of such Proceeding, the indemnifying
party will be bound by any determination made in such Proceeding or any
compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
(d) Parent, Buyer and Seller hereby consent to the non-exclusive
jurisdiction of any court in which a Proceeding is brought against any
Indemnified Person for purposes of any claim that an Indemnified Person may have
under this Agreement with respect to such Proceeding or the matters alleged
therein, and agree that process may be served on Parent, Buyer or Seller,
respectively, with respect to such a claim anywhere in the world; provided that
the indemnified party is subject to the personal jurisdiction of such court.
9.05 PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS.
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
9.06 COMPUTATION OF INDEMNITY AMOUNTS.
The amount of any indemnification payable under any of the provisions
of this ARTICLE IX shall be reduced by any insurance recoveries offsetting the
amount of the loss.
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9.07 LITIGATION SUPPORT.
In the event and for so long as Parent, Buyer or Seller actively is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with (a) any
transaction contemplated under this Agreement, or (b) the Computer Telephony
Business, the other parties will cooperate with it and its counsel in the
contest or defense, make available its personnel and provide such testimony and
access to its books and records as shall be necessary in connection with the
contest or defense, all at the sole cost and expense of the contesting or
defending party.
9.08 POST-CLOSING COOPERATION.
Following the Closing Date, each party will cooperate in good faith
with the other and will take all appropriate action and execute and deliver any
document, instrument or conveyance of any kind which may be reasonably necessary
or advisable to carry out any of the transactions contemplated hereby.
9.09 ESCROW ARRANGEMENTS.
(a) ESCROW FUND. On the Closing Date, Buyer and Seller jointly shall
instruct an escrow agent selected by Buyer and reasonably acceptable to Seller
(the "Escrow Agent") to place $4,000,000 of the Purchase Price into an escrow
account. At the Closing, Seller will be deemed to have deposited with the Escrow
Agent the Escrow Amount (together with any interest earned thereon during the
term of the escrow as set forth in SECTION 9.09(c), the "Escrow Fund"). The
Escrow Fund will be governed by the terms set forth herein. The Escrow Fund will
be available as partial security for (i) Seller's obligations to effect any
Adjustment to the Purchase Price made pursuant to SECTION 2.04 and (ii) Seller's
indemnification obligations under SECTION 9.01.
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(b) ESCROW PERIOD; DISTRIBUTION UPON TERMINATION OF ESCROW PERIOD.
Subject to the following requirements, the Escrow Fund will be in existence
immediately following the Closing Date and will terminate at 5:00 p.m., New York
time, on the earlier of the date 12 months from the Closing Date or the date the
full amount of the Escrow Fund has been disbursed pursuant to SECTION 9.09(d)
below (the "Escrow Period"); PROVIDED, THAT, the Escrow Period will not
terminate with respect to such amount (or some portion thereof) if in the
reasonable judgment of Parent or Buyer, subject to the objection of Seller and
the subsequent arbitration of the matter as provided in SECTION 9.09(f), such
amount (or some portion thereof) together with the aggregate amount remaining in
the Escrow Fund is necessary to satisfy any and all Adjustment and/or Loss
claims specified in any Officer's Certificate delivered to the Escrow Agent
prior to termination of such Escrow Period, or if there exists an ongoing
arbitration proceeding between Parent and Buyer and Seller with respect to which
party is entitled to the funds in the Escrow Fund in the manner provided in
SECTION 9.09(f) hereof. As soon as all such Adjustment and/or Loss claims have
been resolved, the Escrow Agent will deliver to Seller the remaining portion of
the Escrow Fund not required to satisfy such Adjustment and/or Loss claims.
(c) PROTECTION OF ESCROW FUND. The Escrow Agent will hold and
safeguard the Escrow Fund during the Escrow Period, will treat such fund as a
trust fund in accordance with the terms of this Agreement and not as the
property of Parent, Buyer or Seller and will hold and dispose of the Escrow Fund
only in accordance with the terms hereof. The Escrow Fund will be invested
subject to the discretion of the Escrow Agent in demand and time deposits in
banks or savings institutions, short term certificates of deposit or Treasury
bills, or money market account instruments.
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(d) PAYMENT OF ADJUSTMENT AND/OR LOSS CLAIMS UPON ESCROW FUND. Upon
receipt by the Escrow Agent at any time on or before the last day of the Escrow
Period of a certificate signed by any officer of Buyer (an "Officer's
Certificate") specifying in reasonable detail the individual items of any
Adjustment and/or claim of Losses indemnifiable under SECTION 9.01 as limited by
SECTION 9.03 ("Indemnifiable Loss"), the Escrow Agent will, subject to the
provisions of SECTION 9.09(e) AND (f) hereof, deliver to Buyer out of, and to
the extent of, the Escrow Fund, by wire transfer (within three (3) business
days) of immediately available funds to an account of Buyer at a bank specified
by Buyer, as promptly as practicable, an amount equal to, as applicable, such
Adjustment and/or Loss claim.
(e) OBJECTIONS TO ADJUSTMENT AND/OR INDEMNIFIABLE LOSS CLAIMS. At the
time of delivery of any Officer's Certificate to the Escrow Agent, a duplicate
copy of such certificate will be delivered to Seller and for a period of five
(5) days after such delivery, the Escrow Agent will make no delivery of any
Escrow Funds pursuant to SECTION 9.09(d) hereof unless the Escrow Agent shall
have received written authorization from Seller to make such delivery. After the
expiration of such five (5) day period, the Escrow Agent will make delivery from
the Escrow Fund in accordance with SECTION 9.09(d) hereof, PROVIDED, THAT, no
such payment or delivery may be made if Seller shall object in a written
statement to the Adjustment and/or Indemnifiable Loss claim made in the
Officer's Certificate, and such statement shall have been delivered to the
Escrow Agent prior to the expiration of such five (5) day period.
(f) RESOLUTION OF CONFLICTS; ARBITRATION.
(i) In case Seller shall object in a written statement to any
Adjustment and/or Loss claims or other claims made in any Officer's Certificate,
Buyer and Seller will attempt in good faith to agree upon the rights of the
respective parties with respect to each of
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such claims. If Buyer and Seller should so agree, a memorandum setting forth
such agreement will be prepared and signed by both parties and will be furnished
to the Escrow Agent. The Escrow Agent will be entitled to rely on any such
memorandum and distribute the funds from the Escrow Fund in accordance with the
terms thereof.
(ii) If no such agreement can be reached after good faith
negotiation, either Buyer or Seller may demand arbitration of the matter unless
the amount of damage or loss is at issue in pending litigation with a third
party, in which event arbitration will not be commenced until such amount is
ascertained or both parties agree to arbitration; and in either such event the
matter will be settled by arbitration conducted by three arbitrators. Buyer and
Seller will each select one arbitrator, and the two arbitrators so selected will
select a third arbitrator. The arbitrators will set a limited time period and
establish procedures designed to reduce the cost and time for discovery while
allowing the parties an opportunity, adequate in the sole judgment of the
arbitrators, to discover relevant information from the opposing parties about
the subject matter of the dispute. The arbitrators will rule upon motions to
compel or limit discovery and will have the authority to impose sanctions,
including attorneys' fees and costs, to the extent of a court of competent law
or equity, should the arbitrators determine that discovery was sought without
substantial justification or that discovery was refused or objected to without
substantial justification. The decision of a majority of the three arbitrators
as to the validity and amount of any claim in such Officer's Certificate will be
binding and conclusive upon the parties to this Agreement and, notwithstanding
anything in SECTION 9.09(e) hereof, the Escrow Agent will be entitled to act in
accordance with such decision and make or withhold payments out of the Escrow
Fund in accordance therewith. Such decision will be written and will be
supported
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by written findings of fact and conclusions that will set forth the award,
judgment, decree or order awarded by the arbitrators.
(iii) Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction. Any such arbitration will be held in
Chicago, Illinois, under the rules then in effect of the American Arbitration
Association. For purposes of this SECTION 9.09(f), in any arbitration hereunder
in respect of any Losses in which any claim or the amount thereof stated in the
Officer's Certificate is at issue, Buyer will be deemed to be the
"Non-Prevailing Party" in the event that the arbitrators award Buyer less than
the sum of seventy-five percent (75%) of the disputed amount; otherwise, Seller
will be deemed to be the Non-Prevailing Party. The "Non-Prevailing Party" to an
arbitration will pay its own expenses, the fees of each arbitrator, the
administrative fee of the American Arbitration Association, and the expenses,
including without limitation, reasonable attorneys' fees and costs incurred by
the other party to the arbitration (collectively, the "Arbitration Fees"). In
any arbitration hereunder in respect to any Adjustment in which any claim or the
amount thereof stated in the Officer's Certificate is at issue, the Arbitration
Fees will be borne by the parties in accordance with the allocation of fees and
disbursements of PricewaterhouseCoopers LLP described in SECTION 2.04.
(g) REDUCTION OF ESCROW FUND. After the expiration of six months after
the Closing Date, the Escrow Agent shall distribute to Seller from the Escrow
Fund an amount, if available, equal to half of the original Escrow Amount;
PROVIDED, HOWEVER, that the Escrow Fund shall not be reduced to an amount less
than $2,000,000 plus the aggregate of any and all outstanding Adjustment and/or
Loss claims specified in any Officer's Certificate delivered to the Escrow Agent
prior to termination of such six-month period, or to an amount less than
$2,000,000 plus the aggregate amount with respect to which there exists as of
the end of such
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six-month period an ongoing arbitration proceeding between Buyer and Seller
relating to the Escrow Fund in the manner provided in SECTION 9.09(f) hereof.
(h) ESCROW AGENT'S DUTIES.
(i) The Escrow Agent will be obligated only for the performance
of such duties as are specifically set forth herein, and as set forth in any
additional written escrow instructions which the Escrow Agent may receive after
the date of this Agreement which are signed by an officer of Buyer and an
officer of Seller, and may rely and will be protected in relying or refraining
from acting on any instrument reasonably believed to be genuine and to have been
signed or presented by the proper party or parties. The Escrow Agent will not be
liable for any act done or omitted hereunder as Escrow Agent while acting in
good faith and in the exercise of reasonable judgment, and any act done or
omitted pursuant to the advice of counsel will be conclusive evidence of such
good faith.
(ii) The Escrow Agent is hereby expressly authorized to disregard
any and all warnings given by any of the parties hereto or by any other person,
excepting only orders or process of courts of law, and is hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case the Escrow Agent obeys or complies with any such order, judgment or decree
of any court, the Escrow Agent will not be liable to any of the parties hereto
or to any other person by reason of such compliance, notwithstanding any such
order, judgment or decree being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without jurisdiction.
(iii) The Escrow Agent will not be liable, in any respect on
account of the identity, authority or rights of the parties executing or
delivering or purporting to execute or deliver this Agreement or any documents
or papers deposited or called for hereunder.
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(iv) The Escrow Agent will not be liable for the expiration of
any rights under any statute of limitations with respect to this Agreement or
any documents deposited with the Escrow Agent.
(v) In performing any duties under this Agreement, the Escrow
Agent will not be liable to any party for damages, losses or expenses, except
for gross negligence or willful misconduct on the part of the Escrow Agent. The
Escrow Agent will not incur any such liability for (A) any act or failure to act
made or omitted in good faith or (B) any action taken or omitted in reliance
upon any instrument, including any written statement or affidavit provided for
in this Agreement that the Escrow Agent shall in good faith believe to be
genuine, nor will the Escrow Agent be liable or responsible for forgeries,
fraud, impersonations or in determining the scope of any representative
authority. In addition, the Escrow Agent may consult with legal counsel in
connection with the Escrow Agent's duties under this Agreement and shall be
fully protected in any act taken, suffered or permitted by him/her in good faith
in accordance with the advice of counsel. The Escrow Agent is not responsible
for determining and verifying the authority of any person acting or purporting
to act on behalf of any party to this Agreement.
(vi) If any controversy arises between the parties to this
Agreement, or with any party, concerning the subject matter of this Agreement,
its terms or conditions, the Escrow Agent will not be required to determine the
controversy or to take any action regarding it. The Escrow Agent may hold all
documents and the Escrow Fund and may wait for settlement of any such
controversy by final appropriate legal proceedings or other means as, in the
Escrow Agent's discretion, the Escrow Agent may be required, despite what may be
set forth elsewhere in this Agreement. In such event, the Escrow Agent will not
be liable for damage.
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(vii) Furthermore, the Escrow Agent may at its option, file an
action of interpleader requiring the parties to answer and litigate any claims
and rights among themselves. The Escrow Agent is authorized to deposit with the
clerk of the court all documents and funds held in escrow, except all costs,
expenses, charges and reasonable attorney fees incurred by the Escrow Agent due
to the interpleader action and which the parties jointly and severally agree to
pay. Upon initiating such action, the Escrow Agent shall be fully released and
discharged of and from all obligations and liability imposed by the terms of
this Agreement.
(i) INDEMNIFICATION OF ESCROW AGENT. The parties and their respective
successors and assigns agree jointly and severally to indemnify and hold the
Escrow Agent harmless against any and all losses, claims, damages, liabilities
and expenses, including reasonable costs of investigation, counsel fees and
disbursements that may be imposed on the Escrow Agent or incurred by the Escrow
Agent in connection with the performance of his/her duties under this Agreement,
including but not limited to any litigation arising from this Agreement or
involving its subject matter.
(j) RESIGNATION OF ESCROW AGENT. The Escrow Agent may resign at any
time upon giving at least thirty (30) days' written notice to the parties;
PROVIDED, HOWEVER, that no such resignation will become effective until the
appointment of a successor escrow agent which will be accomplished as follows:
Buyer and Seller will use their reasonable best efforts to mutually agree upon a
successor escrow agent within thirty (30) days after receiving such notice. If
Buyer and Seller fail to agree upon a successor escrow agent within such time,
the Escrow Agent will have the right to appoint a successor escrow agent
authorized to do business in the State of New York. The successor escrow agent
will execute and deliver an instrument accepting such appointment and it will,
without further acts, be vested with all estates, properties,
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rights, powers and duties of the predecessor escrow agent as if originally named
as escrow agent. The Escrow Agent will be discharged from any further duties and
liability under this Agreement.
(k) FEES PAID TO ESCROW AGENT. Half of all fees of the Escrow Agent
for performance of its duties hereunder will be paid by Seller and half of all
such fees will be paid by Buyer. It is understood that the fees and usual
charges agreed upon for services of Escrow Agent will be considered compensation
for ordinary services as contemplated by this Agreement. In the event that the
conditions of this Agreement are not promptly fulfilled, or if the Escrow Agent
renders any service not provided for in this Agreement, or if the parties
request a substantial modification of its terms, or if any controversy arises,
or if the Escrow Agent is made a party to, or intervenes in, any litigation
pertaining to this escrow or its subject matter, the Escrow Agent will be
reasonably compensated for such extraordinary services and reimbursed for all
costs, attorneys' fees and expenses occasioned by such default, delay
controversy or litigation. Each of Buyer and Seller promises to pay one half of
these sums on demand.
9.10 TAXES.
To the extent relevant to the Purchased Assets and the Computer
Telephony Business, the parties hereto agree, that, until a date that is six
years from the Closing Date: (i) Seller shall provide Buyer and Buyer shall
provide Seller with such assistance as may reasonably be required in connection
with the preparation of any Tax Return and the conduct of any audit or other
examination by any taxing authority or in connection with judicial or
administrative proceedings relating to any liability for Taxes; (ii) Seller
shall retain and provide Buyer and Buyer shall retain and provide Seller with
all records or other information that may be relevant to the preparation of any
Tax Returns, or the conduct of any audit examination or other tax proceeding;
and (iii) Seller shall retain all relevant documents, including prior years' Tax
Returns, supporting work schedules and other records or information that may be
relevant to
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such Tax Returns and shall not destroy or otherwise dispose of any such records
without at least 30 days prior written notice to Buyer.
9.11 BOOKS AND RECORDS; PERSONNEL.
For a period of five years from the Closing Date:
(a) Buyer shall not dispose of or destroy any of the Books and Records
without first offering to turn over possession thereof to Seller by written
notice to Seller at least 30 days prior to the proposed date of such disposition
or destruction.
(b) Buyer shall allow Seller and its agents reasonable access to all
Books and Records upon five business days' advance written notice during normal
working hours at Buyer's principal place of business or at any location where
any Books and Records are stored; PROVIDED, HOWEVER, that any such access shall
be had or done in such a manner so as not to interfere with the normal conduct
of Buyer's Computer Telephony Business.
(c) Buyer shall make available to Seller upon written request (i)
copies of any Books and Records, (ii) Buyer's personnel to assist Seller in
locating and obtaining any Books and Records, and (iii) any of Buyer's personnel
whose assistance or participation is reasonably required by Seller or any of its
affiliates in anticipation of, or preparation for, existing or future
litigation, tax returns or other matters in which Seller or any of its
affiliates is involved. Seller shall reimburse Buyer for the reasonable salary
and out-of-pocket expenses incurred in performing the services for Seller
described in this SECTION 9.11.
(d) Seller will (i) provide Buyer reasonable access to the Books and
Records for the period prior to January 1, 1997 upon five business days' advance
written notice during normal working hours at Seller's principal place of
business or at any location where any such Books and Records are stored;
PROVIDED, HOWEVER, that any such access shall be had or done in such a manner so
as not to interfere with the normal conduct of Seller's business and (ii) at
least
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30 days prior to the destruction of any Books and Records relating to the
Computer Telephony Business, offer such Books and Records by written notice to
Buyer. Buyer shall reimburse Seller for the reasonable salary and out-of-pocket
expenses incurred in performing the services for Buyer contained in this SECTION
9.11.
ARTICLE X
TERMINATION
10.01 TERMINATION.
This Agreement may be terminated at any time prior to the Closing
Date, whether before or after approval by the shareholders of Seller:
(a) by mutual consent of Buyer and Seller duly authorized by the Board
of Directors of Buyer and Seller;
(b) by either Buyer or Seller if the Closing shall not have been
consummated on or before January 31, 1999 (the "End Date"), which date may be
extended (i) by the mutual written consent of the parties hereto or (ii)
provided that the Proxy Statement has been filed with the Commission by October
25, 1999, one day for each day after December 1, 1999 that the Commission fails
to clear the Proxy Statement, up to a maximum of 30 days, in the event that,
notwithstanding the good faith and diligent efforts of the parties, the
Commission has not cleared the Proxy Statement for distribution to Seller's
shareholders by December 1, 1999; provided, however, that the right to terminate
this Agreement under this SECTION 10.01(b) shall not be available to any party
whose action or failure to act has been a principal cause of or resulted in the
failure of the Closing to occur on or before such date;
(c) by either Buyer or Seller, if any court of competent jurisdiction
in the United States or other governmental body in the United States shall have
issued an order (other than a temporary restraining order), decree or ruling or
taken any other action restraining,
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enjoining or otherwise prohibiting the Closing, and such order, decree, ruling
or other action shall have become final and nonappealable; PROVIDED THAT the
party seeking to terminate this Agreement shall have used all commercially
reasonable efforts to avoid, remove or lift such order, decree, ruling or other
action; or
(d) by either Buyer or Seller, if the approval of the shareholders of
Seller is not obtained at the meeting of shareholders duly called and held
therefor; PROVIDED, HOWEVER, that the right to terminate this Agreement under
this SECTION 10.01(d) shall not be available to Seller where the failure to
obtain shareholder approval of Seller shall have been caused by the action or
failure to act of Seller and such action or failure to act constitutes a
material breach by Seller of this Agreement.
10.02 TERMINATION BY BUYER.
This Agreement may be terminated by Buyer, at any time prior to the
Closing, before or after the approval by the shareholders of Seller, if (a)
Seller shall have failed to comply with any of its obligations such that the
closing conditions set forth in SECTION 7.04 would not be satisfied; PROVIDED,
HOWEVER, that if such failure to comply is capable of being cured prior to the
End Date, such failure shall not have been cured within 15 days of delivery to
Seller of written notice of such failure, (b) there exists a breach or breaches
of any representation or warranty of Seller contained in this Agreement such
that the closing conditions set forth in SECTION 7.01 would not be satisfied;
PROVIDED, HOWEVER, that if such breach or breaches are capable of being cured
prior to the End Date, such breaches shall not have been cured within 15 days of
delivery to Seller of written notice of such breach or breaches, or (c) a Seller
Triggering Event (as defined below) shall have occurred.
For the purposes of this Agreement, a "Seller Triggering Event" shall
be deemed to have occurred if: (i) the Board of Directors of Seller or any
committee thereof shall for any
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reason have withdrawn recommendation in favor of the approval of the Agreement;
(ii) Seller shall have failed to include in the Proxy Statement the
recommendations of the Board of Directors of Seller in favor of the approval of
the Agreement and the transactions contemplated hereby; (iii) the Board of
Directors of Seller or any committee thereof shall have approved or recommended
any Superior Proposal with respect to Seller; or (iv) a tender or exchange offer
relating to securities of Seller shall have been commenced by a Person
unaffiliated with Buyer and Seller shall not have sent to its securityholders
pursuant to Rule 14e-2 promulgated under the Exchange Act, within ten (10)
business days after such tender or exchange offer is first published, sent or
given, a statement disclosing that Seller recommends rejection of such tender or
exchange offer.
10.03 TERMINATION BY SELLER.
This Agreement may be terminated at any time prior to the Closing
Date, before or after approval by the shareholders of Seller, by action of the
Board of Directors of Seller, if (a) Buyer shall have failed to comply in any
material respect with any of its obligations such that the closing conditions
set forth in SECTION 8.05 would not be satisfied; PROVIDED, HOWEVER, that if
such failure to comply is capable of being cured prior to the End Date, such
failure shall not have been cured within 15 days of delivery to Buyer of written
notice of such failure, (b) there exists a breach or breaches of any
representation or warranty of Buyer contained in this Agreement such that the
closing condition set forth in SECTION 8.01 would not be satisfied; PROVIDED,
HOWEVER, that if such breach or breaches are capable of being cured prior to the
End Date, such breaches shall not have been cured within 15 days of delivery to
Buyer of written notice of such breach or breaches or (c) (i) the Board of
Directors of Seller authorizes Seller, subject to complying with the terms of
this Agreement, to enter into a binding written agreement concerning a
transaction that constitutes a Superior Proposal and (ii) Seller upon such
termination pursuant to this
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clause (c) pays to Buyer in immediately available funds the fees required to be
paid pursuant to SECTION 10.05.
10.04 PROCEDURE FOR TERMINATION.
In the event of termination by Buyer or Seller pursuant to this
Article IX, written notice thereof shall forthwith be given to the other.
10.05 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement pursuant to this
Article X, the Agreement shall become void and of no further force or effect and
no party hereto (or any of its directors or officers) shall have any liability
or further obligation to any other party to this Agreement, except that SECTION
10.05 and SECTION 11.02 shall survive such termination.
(b) If
(i) Seller shall terminate this Agreement pursuant to SECTION
10.03(c);
(ii) Buyer shall terminate this Agreement pursuant to SECTION
10.02(c);
or
(iii) either Buyer or Seller shall terminate this Agreement
pursuant to SECTION 10.01(d) in circumstances where the requisite approval of
Seller's shareholders was not obtained at the shareholder meeting and prior to
the meeting (A) Seller received a Superior Proposal that was publicly disclosed
or (B) a Seller Acquisition proposal was publicly proposed and, within 12 months
of such proposal, Seller consummates a Seller Acquisition;
then in any case as described in clause (i), (ii) or (iii) Seller shall pay to
Buyer (by wire transfer of immediately available funds not later than the date
of termination of this Agreement (or, in the cause of clause (iii), the date of
such definitive agreement) an amount equal to $2,000,000. For purposes of this
Agreement, the term "Seller Acquisition" shall mean (i) a merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving
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Seller pursuant to which the shareholders of Seller immediately preceding such
transaction hold less than fifty percent (50%) of the aggregate equity interests
in the surviving or resulting entity of such transaction, (ii) the sale or other
disposition by Seller of the Purchased Assets or (iii) the acquisition by any
person or group (including by way of a tender offer or an exchange offer or
issuance by Seller), directly or indirectly, of beneficial ownership or a right
to acquire beneficial ownership of shares, directly or indirectly, of beneficial
ownership or a right to acquire beneficial ownership of shares representing in
excess of fifty percent (50%) of the voting power of the then outstanding shares
of capital stock of Seller.
(c) Payment of the fees provided for in SECTION 10.05 shall not be in
lieu of damages incurred in the event of a willful or intentional breach of this
Agreement by Seller and nothing herein shall relieve Buyer, Seller or Parent
from liability for any willful material breach hereof.
ARTICLE XI
MISCELLANEOUS
11.01 ENTIRE AGREEMENT; AMENDMENT.
This Agreement, the Confidentiality Agreement and the documents to be
delivered pursuant hereto constitute the entire agreement between the parties
pertaining to the subject matter hereof, and supersede all prior and
contemporaneous agreements, understandings, negotiations and discussions of the
parties, whether oral or written, and there are no warranties, representations
or other agreements between the parties in connection with the subject matter
hereof. No amendment, supplement, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision of this Agreement, whether or
not similar, nor shall such waiver constitute a continuing waiver
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unless otherwise expressly provided. The representations and warranties of each
party hereto contained in this Agreement and the documents delivered pursuant
hereto shall constitute all representations and warranties of each party hereto
and shall be deemed to be material and to have been relied upon by the other
party notwithstanding any investigation heretofore or hereafter made by the
other party.
11.02 EXPENSES.
Each of the parties hereto shall pay the fees and expenses of their
respective counsel, accountants, representatives and other experts and the other
expenses incident to the negotiation and preparation of this Agreement and
consummation of the transactions contemplated hereby. Seller will pay one-half
and Buyer will pay one-half of the filing fee required to make the HSR Act
filing. Seller will pay all amounts payable to any finder or investment banker
engaged by Seller in connection with this Agreement and the transactions
contemplated hereby.
11.03 GOVERNING LAW; CONSENT TO JURISDICTION.
This Agreement shall be construed and interpreted according to the
laws of the State of New York, without regard to the conflict of law principles
or rules thereof. Each of the parties hereto, in respect of itself and its
properties, agrees to be subject to (and hereby irrevocably submits to) the
nonexclusive jurisdiction of any United States federal or Illinois state court
sitting in Chicago, Illinois, in respect of any suit, action or proceeding
arising out of or relating to this Agreement or the transactions contemplated
herein, and irrevocably agrees that all claims in respect of any such suit,
action or proceeding may be heard and determined in any such court. Each of the
parties hereto irrevocably waives, to the fullest extent it may effectively do
so under applicable Law, any objection to the laying of the venue of any such
suit, action or proceeding
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brought in any such court and any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum. Either
party hereto may make service on the other party by sending or delivering a copy
of the process to the party to be served at the address and in the manner
provided for the giving of notices in Section 11.06 hereof. Nothing in this
SECTION 11.03, however, shall affect the right of any party to bring any action
or proceeding arising out of or relating to this Agreement in any other court or
to serve legal process in any other manner permitted by Law or in equity.
11.04 ASSIGNMENT.
This Agreement and each party's respective rights and obligations
hereunder may not be assigned by either party without the prior written consent
of the other party, except for the assignment by Buyer of its rights and
obligations hereunder to a wholly-owned subsidiary of Buyer. All agreements
entered into pursuant to this Agreement shall be assignable in accordance with
their respective terms.
11.05 AGREEMENT NOT TO COMPETE.
(a) Seller understands that Buyer shall be entitled to protect and
preserve the going concern value of the business related to the Purchased
Assets, including the Computer Telephony Business, to the extent permitted by
law and that Buyer would not have entered into this Agreement absent the
provisions of this SECTION 11.05, and therefore agrees that Seller will not (i)
after the Closing Date and prior to the third anniversary of the Closing Date,
directly or indirectly engage in, represent in any way, or be connected with,
any business that competes with the Computer Telephony Business, (ii) after the
Closing Date and prior to the second anniversary of the Closing Date, hire any
Employee or directly or indirectly induce any Employee to leave the employ of
Buyer, or to accept any other position or employment, (iii) after the second and
prior to the third anniversary of the Closing Date, directly or indirectly
include any Employee to leave the employ of Buyer, or to accept any other
position or employment and (iv) at any time
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communicate or divulge any confidential information, knowledge or data related
to the Purchased Assets or the Computer Telephony Business, all of which it
agrees to hold in a fiduciary capacity for the benefit of Buyer, to any Person
other than Buyer. Notwithstanding the foregoing, (i) Buyer acknowledges and
agrees that the Healthcare Communications Business will continue to develop,
market, license and sell in the acute care healthcare market and all other
markets in which the Healthcare Communications Business currently sells products
certain products and services substantially similar to the products and services
sold by the Computer Telephony Business, and (ii) any confidential information,
knowledge or data related to the Computer Telephony Business represented by the
Purchased Assets shall not be subject to the restrictions of this SECTION 11.05
if: (A) at the time of disclosure or thereafter such information is generally
available to and known by the public (other than as a result of its disclosure
by Seller or its representatives) or is available to Buyer on a non-confidential
basis from a source other than Seller; (B) Buyer or its representatives or
assigns become legally compelled (by deposition, interrogatory, request for
documents, subpoena, civil investigative demand or similar process) to disclose
such information; or (C) such information was in Buyer's possession prior to
disclosure by the Seller.
(b) For purposes of this SECTION 11.05, the phrase "directly or
indirectly engage in" shall include having a direct or indirect ownership
interest (other than ownership of an equity interest in DCC or ownership of less
than five percent of the outstanding voting securities of a Person who is
registered under Section 12 of the Exchange Act) in any Person that engages in
the business in question.
11.06 NOTICES.
All communications, notices and disclosures required or permitted by
this Agreement shall be in writing and shall be deemed to have been given when
received
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(a) personally or by messenger, (b) by overnight delivery service to an officer
of the other party, or (c) by United States mail, certified or registered mail,
postage prepaid, return receipt requested, in all cases addressed to the Person
for whom it is intended at his address set forth below, unless and until either
of such parties notifies the other in writing of a change of address:
If to Seller: EXECUTONE Information Systems, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esquire
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Hunton & ▇▇▇▇▇▇▇▇
Riverfront Plaza, East Tower
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Buyer: Inter-Tel, Incorporated
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, Esquire
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
▇▇▇▇▇▇ ▇. Day, Esquire
Telecopy No: (▇▇▇) ▇▇▇-▇▇▇▇
11.07 COUNTERPARTS; HEADINGS.
This Agreement may be executed in several counterparts, each of which
shall be deemed an original, but such counterparts shall together constitute but
one and the same Agreement. The Table of Contents and Article and Section
headings in this Agreement are inserted for convenience of reference only and
shall not constitute a part hereof.
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11.08 SEVERABILITY.
If any provision, clause or part of this Agreement, or the application
thereof under certain circumstances, is held invalid, the remainder of this
Agreement, or the application of such provision, clause or part under other
circumstances, shall not be affected thereby.
11.09 NO RELIANCE.
No third party is entitled to rely on any of the representations,
warranties and agreements contained in this Agreement. Buyer and Seller assume
no liability to any third party because of any reliance on the representations,
warranties and agreements of Buyer and Seller contained in this Agreement.
11.10 INTERPRETATION.
Unless the context requires otherwise, all words used in this
Agreement in the singular number shall extend to and include the plural, all
words in the plural number shall extend to and include the singular and all
words in any gender shall extend to and include all genders. All references to
contracts, agreements, leases or other understandings or arrangements shall
refer to oral as well as written matters. The specificity of any representation
or warranty contained herein shall not be deemed to limit the generality of any
other representation or warranty contained herein.
11.11 SPECIFIC PERFORMANCE.
Buyer and Seller hereby agree that irreparable damage would occur in
the event any of the provisions of this Agreement were not performed in
accordance with the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at law
or equity.
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11.12 EMPLOYEE TAX REPORTING.
Seller shall furnish to Buyer the most current on file Forms W-4 and
W-5 of each Transferred Employee as of the Closing Date. Seller shall send to
the appropriate Social Security Administration Office a duly completed Form W-3
and accompanying copies of the duly completed Form W-2. It is the intent of the
parties that the obligations of Buyer and Seller under this SECTION 11.12 shall
be carried out in accordance with Section 5 of the Internal Revenue Service's
Revenue Procedure 96-60.
11.13 FURTHER ASSURANCES.
The parties agree (a) to furnish upon request to each other such
further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other things and acts, all as the other party may
reasonably request for the purposes of carrying out the intent of this Agreement
and the transactions contemplated hereby.
11.14 DISCLOSURE SCHEDULE.
The disclosures in the Disclosure Schedule, and those in any
supplement thereto, must relate only to the representations and warranties in
the Section of the Agreement to which they expressly relate and not to any other
representation or warranty herein.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, each party has caused this Purchase Agreement to
be duly executed in its name by its duly authorized officer as of the day and
year first above written.
SELLER: EXECUTONE INFORMATION SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman, President and Chief
Executive Officer
BUYER: EXECUTONE INTER-TEL BUSINESS
INFORMATION SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: President
PARENT: INTER-TEL, INCORPORATED
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Executive Vice President and
Chief Administrative Officer
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