CONFORMED COPY
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ASSET PURCHASE AGREEMENT
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By and Among
AUDIOVOX COMMUNICATIONS CORP.
QUINTEX MOBILE COMMUNICATIONS CORPORATION
AUDIOVOX COMMUNICATIONS CANADA CO.
UTSTARCOM, INC.
UTSTARCOM CANADA COMPANY
and
with respect to Sections 2.05, 2.07,
2.09, 3.01, 3.02, 3.11(b), 3.30,
5.06, 5.08, 5.19, 5.20, 5.21, 5.22,
5.24 and Articles VII - X only,
AUDIOVOX CORPORATION
Dated as of June 11, 2004
Exhibit 99.1
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms.........................................2
SECTION 1.02. Definitions..................................................14
SECTION 1.03. Interpretation and Rules of Construction.....................15
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of Purchased Assets........................17
SECTION 2.02. Assumption and Exclusion of Liabilities......................19
SECTION 2.03. Purchase Price; Allocation of Purchase Price.................20
SECTION 2.04. Closing......................................................21
SECTION 2.05. Closing Deliveries by the Seller.............................22
SECTION 2.06. Closing Deliveries by the Purchaser..........................22
SECTION 2.07. Post-Closing Adjustment of Purchase Price....................23
SECTION 2.08. Escrow.......................................................26
SECTION 2.09. Receivables..................................................26
SECTION 2.10. Inventories..................................................28
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLER
SECTION 3.01. Organization, Authority and Qualification and
Corporate Power of the Seller and Audiovox.................28
SECTION 3.02. No Conflict..................................................29
SECTION 3.03. Governmental Consents and Approvals..........................29
SECTION 3.04. Financial Information; Books and Records.....................30
SECTION 3.05. Absence of Undisclosed Liabilities...........................30
SECTION 3.06. Receivables..................................................31
SECTION 3.07. Inventories..................................................31
SECTION 3.08. Assumed Contracts............................................31
SECTION 3.09. Sales and Purchase Order Backlog.............................32
SECTION 3.10. Conduct in the Ordinary Course; Absence of
Certain Changes, Events and Conditions.....................32
SECTION 3.11. Litigation...................................................35
SECTION 3.12. Compliance with Laws.........................................36
SECTION 3.13. Environmental and Other Permits and Licenses;
Related Matters.............................................36
Exhibit 99.1
SECTION 3.14. Material Contracts...........................................36
SECTION 3.15. Intellectual Property........................................38
SECTION 3.16. Real Property................................................40
SECTION 3.17. Tangible Personal Property...................................41
SECTION 3.18. Assets.......................................................42
SECTION 3.19. Customers....................................................42
SECTION 3.20. Suppliers....................................................42
SECTION 3.21. Employee Benefit Matters.....................................43
SECTION 3.22. Labor Matters................................................45
SECTION 3.23. Key Employees................................................46
SECTION 3.24. Certain Interests............................................46
SECTION 3.25. Taxes........................................................46
SECTION 3.26. Insurance....................................................47
SECTION 3.27. Certain Business Practices...................................47
SECTION 3.28. INTENTIONALLY OMITTED........................................48
SECTION 3.29. Brokers......................................................48
SECTION 3.30. Board Approval; Vote Required................................48
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
SECTION 4.01. Organization and Authority of the Purchaser..................49
SECTION 4.02. No Conflict..................................................49
SECTION 4.03. Governmental Consents and Approvals..........................49
SECTION 4.04. Financing....................................................50
SECTION 4.05. Litigation...................................................50
SECTION 4.06. Brokers......................................................50
SECTION 4.07. UTStarcom Canada.............................................50
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing.....................50
SECTION 5.02. Access to Information........................................51
SECTION 5.03. Confidentiality..............................................52
SECTION 5.04. Regulatory and Other Authorizations; Notices
and Consents................................................53
SECTION 5.05. Notice of Developments.......................................54
SECTION 5.06. No Solicitation or Negotiation...............................54
SECTION 5.07. Use of Intellectual Property.................................56
SECTION 5.08. Non-Competition..............................................56
SECTION 5.09. INTENTIONALLY OMITTED........................................57
SECTION 5.10. Bulk Transfer Laws...........................................57
SECTION 5.11. Inter-company Arrangements...................................58
Exhibit 99.1
SECTION 5.12. Payments on Behalf of Affiliates.............................58
SECTION 5.13. Transition Services..........................................58
SECTION 5.14. Tax Cooperation and Exchange of Information..................58
SECTION 5.15. Conveyance Taxes.............................................59
SECTION 5.16. Further Action...............................................59
SECTION 5.17. INTENTIONALLY OMITTED........................................60
SECTION 5.18. Proration of Taxes and Certain Charges.......................60
SECTION 5.19. Proxy Statement..............................................61
SECTION 5.20. Audiovox Stockholders' Meeting...............................61
SECTION 5.21. Trademark License Agreement..................................62
SECTION 5.22. Replication Service..........................................62
SECTION 5.23. Limited Updating of Disclosure Schedules.....................62
SECTION 5.24. Leases.......................................................63
SECTION 5.25. Section 404 Compliance.......................................63
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01. Offer of Employment..........................................63
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.01. Conditions to Obligations of the Seller and
Audiovox....................................................64
SECTION 7.02. Conditions to Obligations of the Purchaser...................65
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Survival of Representations and Warranties...................67
SECTION 8.02. Indemnification by the Seller and Audiovox...................67
SECTION 8.03. Indemnification by the Purchaser.............................68
SECTION 8.04. Limitation on Obligation to Indemnify........................68
SECTION 8.05. Notice of Loss; Third Party Claims...........................69
SECTION 8.06. Distributions from Escrow Fund...............................70
SECTION 8.07. Other Provisions.............................................70
SECTION 8.08. Tax Treatment................................................70
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01. Termination..................................................71
SECTION 9.02. Effect of Termination........................................72
SECTION 9.03. Expenses.....................................................72
SECTION 9.04. Amendment....................................................73
SECTION 9.05. Waiver.......................................................73
Exhibit 99.1
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Notices.....................................................74
SECTION 10.02. Public Announcements........................................76
SECTION 10.03. Severability................................................76
SECTION 10.04. Entire Agreement............................................76
SECTION 10.05. Assignment..................................................76
SECTION 10.06. No Third Party Beneficiaries................................77
SECTION 10.07. Governing Law...............................................77
SECTION 10.08. Waiver of Jury Trial........................................77
SECTION 10.09. Arbitration.................................................77
SECTION 10.10. Currency....................................................78
SECTION 10.11. Counterparts................................................78
Exhibit 99.1
EXHIBITS
Exhibit A Rules for Valuing Inventories
1.01(a) Form of Trademarks and Domain Name Assignment Form of Patent
Assignment
1.01(b) INTENTIONALLY OMITTED
1.01(c) Form of Assumption Agreement
1.01(d) Form of ▇▇▇▇ of Sale and Assignment
2.08 Form of Escrow Agreement
5.13 Form of Transition Services Agreement
5.21 Form of Trademark License Agreement
7.02(i)(i) 555 Wireless Sublease Term Sheet
7.02(i)(ii) Cerritos Lease Term Sheet
Exhibit 99.1
DISCLOSURE SCHEDULE
The Disclosure Schedule shall include the following Sections:
Section Title
1.01 Shared MIS Software
2.01(a)(x) Assumed Contracts
2.01(b)(vii) Excluded Intellectual Property
3.01(c) Organization, Authority and Qualification and Corporate
Power of the Seller and Audiovox
3.02(c) No Conflict
3.03 Governmental Consents and Approvals
3.04(a)(i) Financial Information; Book and Records
3.05 Absence of Undisclosed Liabilities
3.06 Receivables
3.07(a)(i) Inventories
3.07(a)(ii) Inventories
3.07(a)(iii) Inventories
3.07(b) Inventories
3.08 Acquired Assets
3.09(a) Sales and Purchase Order Backlog
3.09(b) Sales and Purchase Order Backlog
3.10(d) Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions
3.10(k) Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions
3.10(m) Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions
3.10(o) Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions
3.10(p) Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions
3.11(a) Litigation
3.12(a) Compliance with Laws
3.12(b) Compliance with Laws
3.13(a) Environmental and Other Permits and Licenses; Related
Matters
3.14(a) Material Contracts
3.14(b) Material Contracts
3.14(e) Material Contracts
3.15(a)(i) Intellectual Property
3.15(b) Intellectual Property
3.15(f) Intellectual Property
3.15(g) Intellectual Property
3.15(j) Intellectual Property
3.16(c) Real Property
3.16(d) Real Property
3.16(g) Real Property
3.17(a) Tangible Personal Property
3.19 Customers
3.20 Suppliers
3.21(a) Employee Benefit Matters
3.21(b) Employee Benefit Matters
3.22 Labor Matters
3.23(a) Key Employees
3.23(b) Key Employees
3.24 Certain Interests
3.25(c) Taxes
3.25(e) Taxes
3.26 Insurance
3.27(a) Certain Business Practices
5.01(a) Conduct of Business Prior to the Closing
5.01(b) Conduct of Business Prior to the Closing
5.04 Regulatory and Other Authorizations; Notices and Consents
5.08(a) Non-Competition
5.11 Inter-company Arrangements
6.01 Offer of Employment
7.02(e)(i) Conditions to Obligations of the Purchaser
7.02(e)(ii) Conditions to Obligations of the Purchaser
7.02(g) Conditions to Obligations of the Purchaser
ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of June 11, 2004, by
and among AUDIOVOX COMMUNICATIONS CORP., a Delaware corporation ("ACC"), QUINTEX
MOBILE COMMUNICATIONS CORPORATION, a Delaware corporation ("Quintex"), AUDIOVOX
COMMUNICATIONS CANADA CO., a Nova Scotia company ("ACCC"; and, together with ACC
and Quintex, collectively, the "Seller"), UTSTARCOM, INC., a Delaware
corporation ("UTStarcom"), UTSTARCOM CANADA COMPANY, a Nova Scotia company
("UTStarcom Canada" and, together with UTStarcom, the "Purchaser") and, with
respect to Sections 2.05, 2.07, 2.09, 3.01, 3.02, 3.11(b), 3.30, 5.06, 5.08,
5.19, 5.20, 5.21, 5.22, 5.24 and Articles VII - X only, AUDIOVOX CORPORATION, a
Delaware corporation ("Audiovox").
WHEREAS, the Seller is engaged in the business of marketing mobile cellular
handset systems and other wireless communications devices, including, without
limitation, personal digital assistants, transceiver PCMCIA cards and
non-telematic devices, that use the infrastructure of wireless communication
carriers ("Carriers") and are sold through the Carrier distribution channel
which is comprised of (a) a direct channel (which consists of (i) retail stores
owned by Carriers and (ii) the Carriers' sales organizations for corporate
enterprise customers) through which Seller sells products to Carriers; and (b)
an indirect channel through which Seller sells products to retailers,
distributors and agents that are authorized by Carriers to activate products, to
sell air time on behalf of Carriers, to promote products to end users and to
perform other activities that support the sale of products to end users on
behalf of Carriers. The Seller's business, however, excludes consumer
electronics products, including those with wireless communications capability,
not having as their primary function cellular telephone connectivity or cellular
telephone activation, but rather having as their primary function entertainment,
information processing, data downloading/uploading, and security (e.g., products
such as navigation devices, audio/video entertainment devices, computing devices
and security products) (hereinafter the "Business");
WHEREAS, the Seller wishes to sell to the Purchaser, and the Purchaser
wishes to purchase from the Seller, the Business, including all right, title and
interest of the Seller in and to the property and assets of the Business, and in
connection therewith the Purchaser is willing to assume certain liabilities of
the Seller relating thereto, all upon the terms and subject to the conditions
set forth herein;
WHEREAS, the Boards of Directors of the Seller, Audiovox, and the Purchaser
have determined that the transactions contemplated by this Agreement are fair to
and in the best interests of their respective corporations and stockholders and
have approved and adopted this Agreement and the transactions contemplated
hereby;
WHEREAS, as a condition to the Purchaser's willingness to enter into this
Agreement, the Purchaser and ▇▇▇▇ ▇▇▇▇▇▇ (the "Stockholder") has entered into a
voting agreement dated as of the date hereof (the "Voting Agreement"), providing
that, among other things, the Stockholder will vote all of his shares of stock
of Audiovox (a) in favor of this Agreement and the transactions contemplated in
this Agreement and (b) against any action that would result in a breach of any
covenant, representation, warranty or agreement under this Agreement;
WHEREAS, Audiovox and Toshiba Corporation, a Japanese corporation, acting
through its Mobile Communications Company ("Toshiba") in their capacity as the
sole shareholders of ACC have approved and adopted this Agreement and the
transactions contemplated hereby;
WHEREAS, as an inducement to the Purchaser to enter into this Agreement,
the Seller shall facilitate the transfer of, and hiring by the Purchaser as of
the Closing, certain of the employees employed by the Seller in connection with
the Business;
WHEREAS, ACCC and UTStarcom Canada are parties to this Agreement solely for
purposes of the transfer of the Canadian assets of the Business;
WHEREAS, as an inducement to the Purchaser to enter into this Agreement,
concurrently with the execution of this Agreement, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ has
entered into an employment agreement with the Purchaser (the "Employment
Agreement");
WHEREAS, concurrently with the consummation of the transactions
contemplated hereby, Audiovox and the Purchaser will enter into a Trademark
License Agreement substantially in the form attached hereto as Exhibit 5.21,
pursuant to which, among other things, Audiovox will license to the Purchaser
certain rights in and to the Audiovox trademark, upon the terms and subject to
the conditions set forth in the Trademark License Agreement; and
WHEREAS, Audiovox and Toshiba are direct or indirect stockholders of the
Seller.
NOW, THEREFORE, in consideration of the promises and the mutual agreements
and covenants hereinafter set forth, and intending to be legally bound, the
Seller, Audiovox and the Purchaser hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms . For purposes of this Agreement:
"ACC Internal Reporting Controls" means a process of internal financial
reporting controls, including certain control matrices, to provide reasonable
assurance regarding the reliability of financial reporting of the Business and
the preparation of financial statements of the Business in accordance with GAAP,
including the Reporting Policies and Procedures, in compliance with Section 404
and, in each case, designed to work within the policies and procedures
constituting the UTSI's Internal Reporting Controls upon the consummation of the
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transactions contemplated by this Agreement.
"Accounts Payable" means any and all accounts payable, notes and other
amounts payable to third parties, including vendors and employees, arising from
the conduct of the Business, whether or not in the ordinary course, together
with any unpaid financing charges accrued thereon as determined in accordance
with GAAP.
"Accrued Expenses" means expenses of the Business, other than Excluded
Accrued Expenses, that have been incurred, but not yet paid for as determined in
accordance with GAAP.
"Accrued Sales Incentives" means any and all amounts owed to customers
under various sales incentives programs offered to the customers of the Business
as determined in accordance with GAAP.
"Acquisition Documents" means this Agreement, the Ancillary Agreements and
the certificates delivered pursuant to Sections 2.05(h) and 2.05(i).
"Action" means any claim, action, suit, arbitration, inquiry, proceeding or
investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person; with
respect to the Seller, such other Person shall include Audiovox but expressly
exclude Toshiba.
"Ancillary Agreements" means the ▇▇▇▇ of Sale, each Assignment of Lease,
the Assignment of Intellectual Property, the Trademark License Agreement, the
Assumption Agreement, the Transition Services Agreement and the Escrow
Agreement.
"Assignment of Intellectual Property" means the assignment of Intellectual
Property to be executed by the Seller at the Closing, substantially in the form
of Exhibit 1.01(a).
"Assignment of Lease" means the Assignment of Lease to be executed by the
Seller at the Closing with respect to each parcel of Leased Real Property listed
on Section 3.16(b) of the Disclosure Schedule, in a form to be mutually agreed
by the Seller and the Purchaser.
"Assumption Agreement" means the Assumption Agreement to be executed by the
Purchaser and the Seller at the Closing, substantially in the form of Exhibit
1.01(c).
"▇▇▇▇ of Sale" means the ▇▇▇▇ of Sale and Assignment to be executed by the
Seller at the Closing, substantially in the form of Exhibit 1.01(d).
"Business Day" means any day that is not a Saturday, a Sunday or other day
on which banks are required or authorized by Law to be closed in The City of New
York.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended through the Closing.
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"Claims" means any and all administrative, regulatory or judicial actions,
suits, petitions, appeals, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations, proceedings, consent orders or
consent agreements.
"Closing Statement of Inventories" means the Statement of Inventories
prepared by the Seller setting forth the amount of Inventories, net of reserves,
of the Business as of 5:30 p.m. EST on the date of the Closing, which
Inventories, for purposes of the Closing Statement of Inventories, the
Preliminary Net Working Capital Balance and the Final Net Working Capital
Balance shall be determined in accordance with the rules set forth in Exhibit A
attached hereto.
"Closing Statement of Net Assets" means the statement of Net Assets of the
Business to be prepared pursuant to Section 2.07(a) and to be dated as of the
close of business on the date of the Closing.
"Closing Statement of Receivables" means a statement certified by an
officer of the Seller, including the information constituting the Receivables
Listing and setting forth the Receivables Reserve.
"Code" means the Internal Revenue Code of 1986, as amended through the date
hereof.
"Confidentiality Agreement" means the non-disclosure agreement, dated
February 11, 2004, among the Purchaser, Audiovox and the Seller.
"control" (including the terms "controlled by" and "under common control
with"), with respect to the relationship between or among two or more Persons,
means the possession, directly or indirectly or as trustee, personal
representative or executor, of the power to direct or cause the direction of the
affairs or management of a Person, whether through the ownership of voting
securities, as trustee, personal representative or executor, by contract, credit
arrangement or otherwise.
"Conveyance Taxes" means all sales, use, value added, transfer, stamp,
stock transfer, real property transfer or gains and similar Taxes, including,
without limitation, Canadian GST and PST.
"Copyrights" means mask works, rights of publicity and privacy, and
copyrights in works of authorship of any type, including Software, registrations
and applications for registration thereof throughout the world, all rights
therein provided by international treaties and conventions, all common law
rights thereto, and all other rights associated therewith.
"Customer" means the party on the Receivables Listing owing a Receivable to
the Seller.
"Determination of Satisfactory Controls" means a determination by the
Purchaser made reasonably and in good faith that the Seller has developed and
implemented the ACC Internal Reporting Controls and that the ACC Internal
Reporting Controls are prepared for the commencement of outside auditor testing
of compliance with Section 404.
4
"Developed Software" means Software created by, or for the use of, the
Seller or Audiovox for use in the Business that is used in conjunction with
third-party Software and hardware.
"Disclosure Schedule" means the Disclosure Schedule attached hereto, dated
as of the date hereof, delivered by the Seller to the Purchaser in connection
with this Agreement.
"Documentary Acceptances" means amounts owed by the Business for borrowed
money under unsecured lines of credit with suppliers used to finance inventory
purchases.
"Encumbrance" means any security interest, pledge, hypothecation, mortgage,
lien (including environmental and tax liens), violation, charge, lease, license,
encumbrance, servient easement, adverse claim, reversion, reverter, preferential
arrangement, restrictive covenant, condition or restriction of any kind,
including any restriction on the use, voting, transfer, receipt of income or
other exercise of any attributes of ownership.
"Environment" means surface waters, groundwaters, soil, subsurface strata
and ambient air.
"Environmental Claims" means any Claims relating in any way to any
Environmental Law or any Environmental Permit, including (a) any and all Claims
by Governmental Authorities for enforcement, cleanup, removal, response,
remedial or other actions or damages pursuant to any applicable Environmental
Law and (b) any and all Claims by any Person seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the Environment.
"Environmental Laws" means all Laws, now or hereafter in effect and as
amended, and any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent decree or judgment, relating to
the environment, health, safety, natural resources or Hazardous Materials,
including CERCLA; the Resource Conservation and Recovery Act, 42
U.S.C.ss.ss.6901 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C.
ss.ss.6901 et seq.; the Clean Water Act, 33 U.S.C.ss.ss.1251 et seq.; the Toxic
Substances Control Act, 15 U.S.C.ss.ss.2601 et seq.; the Clean Air Act, 42
U.S.C.ss.ss.7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.ss.ss.300f et
seq.; the Atomic Energy Act, 42 U.S.C.ss.ss.2011 et seq.; the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.ss.ss.136 et seq.; and the
Federal Food, Drug and Cosmetic Act, 21 U.S.C.ss.ss.301 et seq.
"Environmental Permits" means all permits, approvals, identification
numbers, licenses and other authorizations required under or issued pursuant to
any applicable Environmental Law.
"ERISA Affiliate" of any Person means any other Person that is a member of
the same controlled group of such Person for purposes of Section 4001(a)(14) of
ERISA.
"Escrow Agent" means ▇.▇. ▇▇▇▇▇▇-▇▇▇▇▇.
"Escrow Amount" means an amount equal to 5% of the Purchase Price.
5
"Escrow Fund" means the Escrow Amount deposited with the Escrow Agent as
such sum may be increased or decreased as provided in the Escrow Agreement.
"Excluded Accrued Expenses" means payroll, divisional bonuses, FICA,
withholding taxes, unemployment taxes, disability taxes, the Employee Stock
Purchase Plan, amounts due under 401(k) plan, officer's salaries, travel &
entertainment reimbursement accrual, long term disability and life insurance,
dental expense accrual, medical insurance, sales tax, GST, sales commissions
payable and accrued professional fees.
"Excluded Taxes" means (i) all Income Taxes owed by the Seller or any of
its Affiliates for any period; (ii) all Taxes relating to the Excluded Assets or
Excluded Liabilities for any period; (iii) all Taxes relating to the Purchased
Assets, the Business or the Assumed Liabilities for any Pre-Closing Tax Period;
(iv) all Taxes of Seller or any other Person by reason of being a member of a
consolidated, combined, unitary or affiliated group that includes the Seller or
any of its present or past Affiliates prior to the Closing, by reason of a tax
sharing, tax indemnity or similar agreement entered into by the Seller or any of
its present or past Affiliates prior to the Closing (other than this Agreement)
or by reason of transferee or successor liability arising in respect of a
transaction undertaken by the Seller or any of its present or past Affiliates
prior to the Closing; and (v) Taxes imposed on Purchaser as a result of any
breach of warranty or misrepresentation under Section 3.25 hereof, or breach by
the Seller of any covenant relating to Taxes. For purposes of this Agreement, in
the case of any Straddle Period, (i) Property Taxes relating to the Purchased
Assets allocable to the Pre-Closing Tax Period shall be equal to the amount of
such Property Taxes for the entire Straddle Period multiplied by a fraction, the
numerator of which is the number of days during the Straddle Period that fall
within the Pre- Closing Tax Period and the denominator of which is the number of
days in the entire Straddle Period, and (ii) Taxes (other than Property Taxes)
relating to the Purchased Assets for the Pre- Closing Tax Period shall be
computed as if such taxable period ended as of the close of business on the date
of the Closing.
"Final Net Working Capital Balance" means the Net Working Capital Balance
as reflected on the Closing Statement of Net Assets that is deemed final
pursuant to Section 2.07(c), as adjusted so that the value of the Inventory
shall be as set forth on the Closing Statement of Inventory that is deemed final
pursuant to Section 2.07(c).
"GAAP" means United States generally accepted accounting principles applied
on a basis consistent with past practices and procedures for interim and year
end financial statements of the Seller (for avoidance of doubt, in connection
with the preparation of the Closing Statement of Net Assets, the accountants, in
preparing such statement in accordance with GAAP, shall have the ability to
consider events and circumstances occurring subsequent to the Closing (but only
if those events or circumstances occurred prior to the date of the report of the
Seller's Accountants delivered pursuant to Section 2.07(a)).
"Governmental Authority" means any federal, national, supranational, state,
provincial, local, or similar government, governmental, regulatory or
administrative authority, agency or commission or any court, tribunal, or
judicial or arbitral body.
"Governmental Order" means any order, writ, judgment, injunction, decree,
6
stipulation, determination or award entered by or with any Governmental
Authority.
"Hazardous Materials" means (a) petroleum and petroleum products,
radioactive materials, asbestos-containing materials, urea formaldehyde foam
insulation, transformers or other equipment that contain polychlorinated
biphenyls and radon gas, (b) any other chemicals, materials or substances
defined as or included in the definition of "hazardous substances", "hazardous
wastes", "hazardous materials", "extremely hazardous wastes", "restricted
hazardous wastes", "toxic substances", "toxic pollutants", "contaminants" or
"pollutants", or words of similar import, under any applicable Environmental
Law, and (c) any other chemical, material or substance which is regulated by any
Environmental Law.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"Income Taxes" means Taxes imposed on or measured by reference to gross or
net income or receipts, and franchise, net worth, capital or other doing
business Taxes.
"Indebtedness" means, with respect to any Person, (a) all indebtedness of
such Person, whether or not contingent, for borrowed money, (b) all obligations
of such Person for the deferred purchase price of property or services, (c) all
obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all obligations of such Person as lessee under
leases that have been or should be, in accordance with GAAP, recorded as capital
leases, (f) all obligations, contingent or otherwise, of such Person under
banker's acceptance, letter of credit or similar facilities, (g) all obligations
of such Person to purchase, redeem, retire, defease or otherwise acquire for
value any capital stock of such Person or any warrants, rights or options to
acquire such capital stock, valued, in the case of redeemable preferred stock,
at the greater of its voluntary or involuntary liquidation preference plus
accrued and unpaid dividends, (h) all Indebtedness of others referred to in
clauses (a) through (g) above guaranteed directly or indirectly in any manner by
such Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (i) to pay or purchase such Indebtedness or to advance or
supply funds for the payment or purchase of such Indebtedness, (ii) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the holder of such Indebtedness against loss, (iii) to
supply funds to or in any other manner invest in the debtor (including any
agreement to pay for property or services irrespective of whether such property
is received or such services are rendered) or (iv) otherwise to assure a
creditor against loss, and (i) all Indebtedness referred to in clauses (a)
through (g) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Encumbrance on
property (including accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Indebtedness.
"Indemnified Party" means a Purchaser Indemnified Party or a Seller
Indemnified Party, as the case may be.
7
"Indemnifying Party" means the Seller and Audiovox, on a joint and several
basis, pursuant to Section 8.02 or the Purchaser pursuant to Section 8.03, as
the case may be.
"Intellectual Property" means (a) Patents, (b) Trademarks, (c) Copyrights,
(d) Trade Secrets and (e) Software.
"Inter-company Payables" means amounts owed by the Seller to Audiovox or
any subsidiaries, divisions, or affiliates of Audiovox as determined in
accordance with GAAP.
"Interim Milestones" means (i) the development of the written policies and
procedures, including the control matrices based on the Purchaser's standard
template for such matrices, constituting the ACC Internal Reporting Controls,
(ii) the preliminary testing/walk- through by the Purchaser's Reporting Controls
Advisors of the implemented ACC Internal Reporting Controls, (iii) the
remediation of any ACC Internal Reporting Controls not in compliance with
Section 404 and (iv) the subsequent testing/walk-through by the Purchaser's
Reporting Controls Advisors of the implemented ACC Internal Reporting Controls.
"Interim Statement Date" means February 29, 2004.
"Interim Statement of Net Assets" means the statement of Net Assets
(including a calculation of the Net Working Capital Balance) of the Business,
dated as of February 29, 2004, a copy of which is set forth in Section
3.04(a)(i) of the Disclosure Schedule.
"Inventories" means all inventory, merchandise, finished goods, raw
materials, packaging, labels, supplies and other personal property used in the
Business and maintained, held or stored by or for the Seller, and any prepaid
deposits for any of the same. Inventories are valued at the lower of the actual
cost to purchase (primarily on a weighted moving average basis) and/or the
current estimated market value of the inventory less expected costs to sell the
inventory, as determined in accordance with GAAP.
"IRS" means the Internal Revenue Service of the United States.
"Law" means any federal, national, supranational, state, provincial, local
or similar statute, law, ordinance, regulation, rule, code, order, requirement
or rule of law (including common law).
"Leased Real Property" means the real property used in the Business leased
by the Seller, as tenant, together with, to the extent leased by the Seller and
used in the Business, all buildings and other structures, facilities or
improvements located thereon, all fixtures, systems, equipment and items of
personal property of the Seller attached or appurtenant thereto and all
easements, licenses, rights and appurtenances relating to the foregoing.
"Liabilities" means any and all debts, liabilities and obligations, whether
accrued or fixed, absolute or contingent, matured or unmatured or determined or
determinable, including those arising under any Law (including any Environmental
Law), Action or Governmental Order and those arising under any contract,
agreement, arrangement, commitment or undertaking.
"Licensed Intellectual Property" means Intellectual Property licensed to
the Seller pursuant to the Transferred IP Agreements.
8
"Material Adverse Effect" means any circumstance, change in or effect on
the Business or the Seller that, individually or in the aggregate with all other
circumstances, changes in or effects on the Business or the Seller is or is
reasonably likely to be materially adverse to the business, operations, assets
or liabilities (including contingent liabilities), results of operations or the
financial condition of the Business; provided, however, that (v) effects
attributable to general or industry specific economic conditions, except those
effects that adversely affect the Business or the Seller to a materially greater
extent than they affect other entities operating in such industries, (w) a
termination of the supply arrangement between the Seller and Curitel, (x) a
decline in the market price of Audiovox common stock, in itself, (y) the
failure, in itself, to achieve estimated or projected results of the Business
(provided, that, any circumstances, change or effect on the Business giving rise
to such failure to achieve estimated or projected results may constitute a
Material Adverse Effect) and (z) changes resulting from the permitted disclosure
of this Agreement or the transactions contemplated hereby, in each case, shall
not constitute a Material Adverse Effect.
"Net Assets" means the difference between (a) the sum of Inventories,
Prepaids and other Current Assets, Property, Plant and Equipment, and Other
Long-Term Assets included in the Purchased Assets and (b) the sum of third party
Accounts Payable, Accrued Expenses, Accrued Sales Incentives, Documentary
Acceptances and Other Long-Term Liabilities (excluding long-term notes payable
to Toshiba), other than the Excluded Liabilities, as determined in accordance
with GAAP.
"Net Working Capital Balance" means the difference between (a) the sum of
Inventories and Prepaids and other Current Assets, and (b) the sum of
third-party Accounts Payable, Accrued Expenses, Accrued Sales Incentives and
Documentary Acceptances, of the Business.
"Other Long-Term Assets" means the value of non-cash assets of the Business
not due within one year as determined in accordance with GAAP.
"Other Long-Term Liabilities" means notes and other amounts payable to
third parties, including vendors, arising from the conduct of the Business,
whether or not in the ordinary course, together with any unpaid financing
charges accrued thereon not due within one year as determined in accordance with
GAAP.
"Owned Intellectual Property" means Intellectual Property owned by the
Seller and used in the Business as set forth in Section 3.15(a) of the
Disclosure Schedule.
"Owned Real Property" means the real property in which the Seller has fee
title (or equivalent) interest that is used in the Business, together with all
buildings and other structures, facilities or improvements currently or
hereafter located thereon, all fixtures, systems, equipment and items of
personal property of the Seller that are used in the Business attached or
appurtenant thereto and all easements, licenses, rights and appurtenances
relating to the foregoing.
"Patents" means United States, foreign and international patents, patent
9
applications and statutory invention registrations, including reissues,
divisions, continuations, continuations-in-part, extensions and reexaminations
thereof, and all rights therein provided by international treaties and
conventions.
"Per Customer Amount" means the aggregate amount of Receivables owed by
each Customer to the Seller, net of the Receivables Reserve for such Customer.
"Permitted Encumbrances" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced and as to which the Seller is not otherwise subject to civil or
criminal liability due to its existence: (a) liens for Taxes not yet due and
payable, for which adequate reserves have been maintained in accordance with
GAAP, (b) Encumbrances imposed by Law, such as materialmen's, mechanics',
carriers', workmen's and repairmen's liens and other similar liens arising in
the ordinary course of business securing obligations that (i) are not overdue
for a period of more than 30 days and (ii) are not in excess of $5,000 in the
case of a single property or $50,000 in the aggregate at any time; (c) pledges
or deposits to secure obligations under workers' compensation laws or similar
legislation or to secure public or statutory obligations; and (d) minor survey
exceptions, reciprocal easement agreements and other customary encumbrances on
title to real property that (i) were not incurred in connection with any
Indebtedness, (ii) do not render title to the property encumbered thereby
unmarketable and (iii) do not, individually or in the aggregate, materially
adversely affect the value of or the use of such property for its current
purposes.
"Person" means any individual, partnership, firm, corporation, limited
liability company, association, trust, unincorporated organization or other
entity, as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
"Post-Closing Tax Period" means any taxable period (or portion thereof)
beginning after the date of the Closing.
"Pre-Closing Tax Period" means any taxable period (or portion thereof)
ending on or prior to the date of the Closing.
"Preliminary Net Working Capital Balance" means the difference between (a)
the sum of Inventories and Prepaids and other Current Assets, and (b) the sum of
third-party Accounts Payable, Accrued Expenses, Accrued Sales Incentives and
Documentary Acceptances, of the Business.
"Preliminary Statement of Net Assets" means the statement of Net Assets of
the Business as of the close of business on the date of the Closing, which shall
include the Preliminary Net Working Capital Balance, prepared in good faith by
the Seller in consultation with the Seller's Accountants and certified by an
officer of the Seller.
"Prepaids and other Current Assets" means either (i) pre-payments made to
vendors of the Business related to operating costs, which have not been used and
(ii) the value of non-cash assets used in the Business due within one year as
determined in accordance with GAAP.
10
"Property, Plant and Equipment" means physical assets including, without
limitation, furniture, fixtures, displays, machinery and equipment, computer
hardware and software and automobiles, owned by the Seller and used in the
Business, as determined in accordance with GAAP.
"Property Taxes" means real and personal ad valorem property Taxes and any
other Taxes imposed on a periodic basis and measured by the value of any item.
"Purchase Price Bank Account" means a bank account in the United States to
be designated by the Seller in a written notice to the Purchaser at least two
Business Days before the Closing.
"Purchaser Material Adverse Effect" means any circumstance, change in or
effect on the Purchaser that, individually or in the aggregate with all other
circumstances, changes in or effects on the Purchaser is or is reasonably likely
to be materially adverse to the business, operations, assets or liabilities
(including contingent liabilities), results of operations or the financial
condition of the Purchaser; provided, however, that (x) effects attributable to
general or industry specific economic conditions, except those effects that
adversely affect the Purchaser to a materially greater extent than they affect
other entities operating in such industries, (y) a decline in the market price
of the Purchaser common stock, in itself, (z) changes resulting from the
permitted disclosure of this Agreement or the transactions contemplated hereby,
in each case, shall not constitute a Purchaser Material Adverse Effect.
"Purchaser's Accountants" means PricewaterhouseCoopers LLP, independent
accountants of the Purchaser.
"Purchaser's Reporting Controls Advisors" means a West-Coast based team of
advisors from Deloitte & Touche LLP.
"Receivables" means any and all accounts receivable, notes and other
amounts receivable from third parties, including Vendors, customers and
employees, arising from the conduct of the Business, whether or not in the
ordinary course, together with any unpaid financing charges accrued thereon, as
determined in accordance with GAAP.
"Receivables Listing" means a computer file containing a list setting forth
all outstanding Receivables of the Business as of 5:30 p.m. EST on the date of
the Closing, including the name of the Customer that owes the Receivable to the
Seller, the Per Customer Amount owed by each Customer and an invoice number or
other information identifying each Receivable thereon. The Receivables Listing
shall not include any Vendor Receivables.
"Receivables Reserve" means the reserve for the Receivables on a
Customer-by- Customer basis set forth in the Receivables Listing, determined in
accordance with GAAP, which amount shall be deemed to be the amount of the
Receivables Reserve set forth on the Receivables Listing, unless and until such
amount is determined to be otherwise in accordance with Section 2.07(c).
"Regulations" means the Treasury Regulations (including Temporary
Regulations) promulgated by the United States Department of Treasury with
respect to the Code or other federal tax statutes.
11
"Release" means disposing, discharging, injecting, spilling, leaking,
leaching, dumping, emitting, escaping, emptying, seeping, placing and the like
into or upon any land or water or air or otherwise entering into the
Environment.
"Remedial Action" means all action to (a) clean up, remove, treat or handle
in any other way Hazardous Materials in the Environment; (b) prevent the Release
of Hazardous Materials so that they do not migrate, endanger or threaten to
endanger public health or the Environment; or (c) perform remedial
investigations, feasibility studies, corrective actions, closures and
post-remedial or post-closure studies, investigations, operations, maintenance
and monitoring.
"Reporting Policies and Procedures" means policies and procedures that (i)
pertain to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the assets of the Purchaser
or the Business, as applicable (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP, and that receipts and expenditures of the
Purchaser or the Business, as applicable, are being made only in accordance with
authorizations of management and directors of the Purchaser or of the Seller, as
applicable and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the assets of the
Purchaser or the Business, as applicable, that could have a material effect on
the financial statements.
"SEC" means the Securities and Exchange Commission.
"Section 404" means Section 404 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002.
"Seller's Accountants" means ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, independent accountants of
the Seller.
"Seller's Prior Accountants" means KPMG LLP, prior independent accountants
of the Seller.
"Seller's Reporting Controls Advisors" means an East-Coast based team of
advisors from Deloitte & Touche LLP.
"Shared MIS Systems" means the Software and hardware owned or licensed by
Audiovox and which is used by the Seller in the operation of the Business, as
set forth in Section 1.01 of the Disclosure Schedule.
"Software" means computer software, programs and databases in any form,
including Internet web sites, web content and links, source code, object code,
operating systems and specifications, data, databases, database management code,
utilities, graphical user interfaces, menus, images, icons, forms, methods of
processing, software engines, platforms and data formats, all versions, updates,
corrections, enhancements and modifications thereof, and all related
documentation, developer notes, comments and annotations.
12
"Straddle Period" means any taxable period beginning on or prior to and
ending after the date of the Closing.
"Tax" or "Taxes" means any and all taxes, fees, levies, duties, tariffs,
imposts, and other charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect thereto)
imposed by any government or taxing authority, including taxes or other charges
on or with respect to income, franchises, windfall or other profits, gross
receipts, property, sales, use, capital stock, payroll, employment, social
security, workers' compensation, unemployment compensation, or net worth; taxes
or other charges in the nature of excise, withholding, ad valorem, stamp,
transfer, value added, or gains taxes; license, registration and documentation
fees; and customs' duties, tariffs, and similar charges.
"Tax Return" means any return, declaration, report, election, claim for
refund or information return or other statement or form filed or required to be
filed with any Governmental Authority relating to Taxes, including any schedule
or attachment thereto or any amendment thereof.
"Trade Secrets" means trade secrets, know-how and other confidential or
proprietary technical, business and other information, including manufacturing
and production processes and techniques, research and development information,
technology, drawings, specifications, designs, plans, proposals, technical data,
financial, marketing and business data, pricing and cost information, business
and marketing plans, customer and supplier lists and information, and all rights
in any jurisdiction to limit the use or disclosure thereof.
"Trademarks" means trademarks, service marks, trade dress, logos, trade
names, corporate names, URL addresses, domain names and symbols, slogans and
other indicia of source or origin, including the goodwill of the business
symbolized thereby or associated therewith, common law rights thereto,
registrations and applications for registration thereof throughout the world,
all rights therein provided by international treaties and conventions, and all
other rights associated therewith.
"Transferred IP Agreements" means (a) licenses of Owned Intellectual
Property by the Seller to third parties, (b) licenses of Intellectual Property
by third parties to the Seller and used in the Business (c) agreements between
the Seller and third parties relating to the development or use of Intellectual
Property, the development or transmission of data, or the use, modification,
framing, linking advertisement, or other practices with respect to Internet web
sites, in each case, that are used in the Business and (d) consents,
settlements, decrees, orders, injunctions, judgments or rulings governing the
use, validity or enforceability of Owned Intellectual Property, as set forth in
Section 3.15(a) of the Disclosure Schedule.
"UTSI's Internal Reporting Controls" means the process of internal
financial reporting controls, including certain control matrices, developed by
and in the process of being implemented by the Purchaser to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with GAAP, including
the Reporting Policies and Procedures, in compliance with Section 404.
13
"Vendors" means any and all vendors who are unaffiliated with the Seller
and who supply raw materials, components, spare parts, supplies, goods,
merchandise or services to the Seller (as such relate to the Business).
SECTION 1.02. Definitions. The following terms have the meanings set forth
in the Sections set forth below:
Definition Location
----------
"555 Wireless Sublease" 7.02(i)(i)
"AAA"................................................. 10.09
"Additional Reserved Receivables"..................... 2.07(d)
"Adjusted Target NWCB"................................ 2.07(c)(i)(B)
"Agreement"........................................... Preamble
"Allocation".......................................... 2.03(b)
"Ancillary Lease Documents"........................... 3.16(d)
"Assumed Contracts"................................... 2.01(a)(xi)
"Assumed Liabilities"................................. 2.02(a)
"Audiovox Board"...................................... 3.30(a)
"Audiovox Recommendation"............................. 5.19(b)
"Audiovox Stockholders' Meeting"...................... 5.19(a)
"Audiovox Triggering Event"........................... 9.01
"Business"............................................ Recitals
"Cerritos Lease" 7.02(i)(ii)
"Change in the Audiovox Recommendation"............... 5.06(c)
"Claims".............................................. 2.01(a)(ix)
"Closing"............................................. 2.04
"Collection Period"................................... 2.09(d)
"Competing Transaction"............................... 5.06(d)
"Consent Costs"....................................... 5.04(e)
"Disputed Receivable"................................. 2.09(a)
"Employee Amounts".................................... 6.02
"Employment Agreements"............................... Recitals
"ERISA"............................................... 3.21(a)
"Escrow Agreement".................................... 2.08
"Excluded Assets"..................................... 2.01(b)
"Excluded Intellectual Property"...................... 2.01(b)(vii)
"Excluded Liabilities"................................ 2.02(b)
"Expense Reimbursement" 9.01(b)
"Expenses"............................................ 9.03(a), (c)
"Fee"................................................. 9.03(b)
"Financial Statements"................................ 3.04(a)(ii)
14
Definition Location
"Independent Accounting Firm"......................... 2.07(b)(ii)
"Initial Termination Date" 9.01(b)
"Interim Financial Statements"........................ 3.04(a)(iii)
"Key Employees" 7.02(g)
"lease"............................................... 3.16
"Loss"................................................ 8.02
"Material Contracts".................................. 3.14(a)
"Notice of Superior Proposal"......................... 5.06(c)
"Options"............................................. 3.16(c)
"Plans"............................................... 3.21(a)
"PRC Antitrust Approvals" 7.01(b)
"Proxy Statement"..................................... 5.19(a)
"Preliminary Purchase Price Increase"................. 2.07(C)(i)(B)
"Preliminary Purchase Price Reduction"................ 2.07(C)(i)(K)
"Purchase Price"...................................... 2.03(a)
"Purchased Assets".................................... 2.01(a)
"Purchaser"........................................... Preamble
"Purchaser Indemnified Party"......................... 8.02
"Replication Service"................................. 5.22
"Restricted Period"................................... 5.08(a)
"Seller".............................................. Preamble
"Seller Indemnified Party"............................ 8.03
"Stockholder"......................................... Recitals
"Superior Proposal"................................... 5.06(e)
"Tangible Personal Property".......................... 3.17(a)
"Target NWCB"......................................... 2.07(C)(i)
"Third Party Claim"................................... 8.05(b)
"Trademark License Agreement"......................... 5.20
"Transferred Employee"................................ 6.01
"Transition Services Agreement"....................... 5.13
"Voting Agreement".................................... Recitals
SECTION 1.03. Interpretation and Rules of Construction. In this Agreement,
except to the extent otherwise provided or that the context otherwise requires:
(a) when a reference is made in this Agreement to an Article, Section,
Exhibit or Schedule, such reference is to an Article or Section of, or a
Schedule or Exhibit to, this Agreement unless otherwise indicated;
(b) the table of contents and headings for this Agreement are for
reference purposes only and do not affect in any way the meaning or
interpretation of this Agreement;
15
(c) whenever the words "include," "includes" or "including" are used
in this Agreement, they are deemed to be followed by the words "without
limitation";
(d) the words "hereof," "herein" and "hereunder" and words of similar
import, when used in this Agreement, refer to this Agreement as a whole and
not to any particular provision of this Agreement;
(e) all terms defined in this Agreement have the defined meanings when
used in any certificate or other document made or delivered pursuant
hereto, unless otherwise defined therein;
(f) the definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms;
(g) any Law defined or referred to herein or in any agreement or
instrument that is referred to herein means such Law or statute as from
time to time amended, modified or supplemented, including by succession of
comparable successor Laws;
(h) references to a Person are also to its successors and permitted
assigns; and (i) the use of "or" is not intended to be exclusive unless
expressly indicated otherwise.
16
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of Purchased Assets . (a) Upon the terms
and subject to the conditions of this Agreement, at the Closing, the Seller
shall sell, assign, transfer, convey and deliver, or cause to be sold, assigned,
transferred, conveyed and delivered, to the Purchaser, and the Purchaser shall
purchase from the Seller, the Seller's right, title and interest at the Closing
in and to the following (the assets to be purchased by the Purchaser, together
with the covenants contained in Section 5.08, being referred to as the
"Purchased Assets"):
(i) all rights in respect of the Leased Real Property;
(ii) all Property, Plant and Equipment;
(iii) all vehicles and rolling stock used in the Business;
(iv) all Inventories;
(v) all books of account, general, financial, and personnel
records, invoices, shipping records, supplier lists, correspondence
and other documents, records and files and any rights thereto which
are owned, or employed by the Seller primarily in connection with the
Business except for (x) organization documents, minute and stock
record books, stock certificates and the corporate seal of the Seller
and (y) those relating to the Excluded Assets or the Excluded
Liabilities (including all records relating to Taxes);
(vi) the goodwill relating to the Business;
(vii) all the Seller's right, title and interest in, to and under
the Owned Intellectual Property and the Licensed Intellectual
Property, copies and tangible embodiments thereof in whatever form or
medium, and all rights to ▇▇▇ and recover damages for past, present
and future infringement, dilution, misappropriation, violation,
unlawful imitation or breach thereof;
(viii) all claims, causes of action, choses in action, rights of
recovery and rights of setoff of any kind (including rights to
insurance proceeds and rights under and pursuant to all warranties,
representations and guarantees made by suppliers of products,
materials, or equipment, or components thereof), related to the
Business pertaining to, arising out of and inuring to the benefit of
the Seller ("Claims") including those reasonably necessary or
desirable to enforce such rights against third parties or to defend
against those seeking to enforce the Assumed Liabilities; except those
Claims which are related to the Excluded Liabilities or the Excluded
Assets;
17
(ix) all sales and promotional literature, customer lists and
other sales-related materials of the Seller used in the Business;
(x) all rights of the Seller under the contracts, licenses,
sublicenses, agreements, leases, commitments, and sales and purchase
orders, and under all bids and offers related to the Business set
forth on Section 2.01(a)(x) of the Disclosure Schedule (the "Assumed
Contracts");
(xi) all municipal, state and federal franchises, permits,
licenses, agreements, waivers and authorizations held or used by the
Seller in connection with, or required for, the Business, to the
extent transferable;
(xii) all the Seller's right, title and interest at the Closing
in, to and under all other assets, rights and claims of every kind and
nature directly or indirectly owned by the Seller or to which the
Seller is directly or indirectly entitled, in each case, used in the
operation of, or residing with, the Business;
(xiii) Prepaids and Other Current Assets;
(xiv) Other Long-Term Assets;
(xv) All Audiovox's rights, title and interest in the Shared MIS
Systems; and
(xvi) All the Seller's or Audiovox's rights, title and interest
in the replicated copy of the Developed Software replicated in
accordance with Section 5.22.
(b) Notwithstanding anything in Section 2.01(a) to the contrary, the
Purchased Assets shall exclude the following assets and properties owned by
the Seller (the "Excluded Assets"):
(i) cash and marketable securities and all bank accounts of the
Seller relating to the Business;
(ii) the Purchase Price Bank Account;
(iii) all rights of the Seller under this Agreement and the
Ancillary Agreements;
(iv) Tax Returns of the Seller (and related workpapers);
(v) except as provided in Section 5.18(a), all Tax refunds of the
Seller;
(vi) Trademarks owned by Audiovox or Toshiba, or their respective
employees, Affiliates (other than the Seller), successors or assigns;
(vii) The Intellectual Property set forth in Section 2.01(b)(vii)
of the Disclosure Schedule (the "Excluded Intellectual Property");
(viii) all Receivables of the Business as of 5:30 p.m. EST on the
date of the Closing;
18
(ix) all furniture and other tangible property used by, and in
the office of, ▇▇▇▇ ▇▇▇▇▇▇ on the date of Closing;
(x) all Claims, including Claims arising under insurance
policies, related to the Excluded Liabilities or Excluded Assets,
including those reasonably necessary or desirable to enforce rights
against third parties or defend against those seeking to enforce
Excluded Liabilities;
(xi) all rights against Compal Electronics, Inc. relating to
actions occurring prior to Closing;
(xii) any rights, software or other license or practices with
respect to websites, internet addresses or domain names used in
connection with the Business;
(xiii) the equity interests in the Seller and those entities set
forth in Section 3.01(c) of the Disclosure Schedule;
(xiv) organization documents, minute and stock record books,
stock certificates and the corporate seal of the Seller and those
entities set forth in Section 3.01(c) of the Disclosure Schedule; and
(xv) all books of account, general, financial and personnel
records, invoices, correspondence and other documents relating
exclusively to the Excluded Assets and the Excluded Liabilities
(including all records relating to Taxes).
SECTION 2.02. Assumption and Exclusion of Liabilities . (a) Upon the terms
and subject to the conditions of this Agreement, at the Closing, the Purchaser
shall assume and shall agree to pay, perform and discharge the following
Liabilities of the Seller, except for the Excluded Liabilities (the "Assumed
Liabilities"):
(i) all Liabilities reflected or reserved against on the Closing
Statement of Net Assets (other than Tax Liabilities);
(ii) all Liabilities of the Seller arising under the Assumed Contracts
(other than Liabilities or obligations attributable to (A) any failure by
the Seller to comply with the terms thereof prior to the Closing, (B)
products liability or personal injury claims arising prior to the Closing
and (C) intellectual property infringement claims arising prior to the
Closing); and
(iii) product warranties and claims thereunder relating to the
products of the Business.
(b) Notwithstanding subsection (a) above, the Seller shall retain, and
shall be responsible for paying, performing and discharging when due, and
the Purchaser shall not assume or have any responsibility for, all
19
Liabilities of the Seller as of the Closing other than the Assumed Liabilities
(the "Excluded Liabilities"), including, without limitation:
(i) all Excluded Taxes;
(ii) all Liabilities relating to or arising out of the Excluded
Assets;
(iii) claims arising prior to the Closing made by employees of the
Seller (including the Transferred Employees) relating to their employment
with the Seller;
(iv) all Inter-company Payables;
(v) all Liabilities or obligations attributable to (A) any failure by
the Seller to comply with the terms of any Assumed Contract prior to the
Closing, (B) products liability or personal injury claims arising prior to
the Closing and (C) intellectual property infringement claims arising prior
to the Closing; and
(v) all Liabilities pursuant to Environmental Law arising from or
related to any action, event, circumstance or condition related to the
Business or the Leased Real Property, in each case occurring or existing on
or before the Closing, including: (A) any Release of any Hazardous Material
into the Environment on or before the Closing at, to or from the Leased
Real Property or any property formerly owned, leased, used or occupied by
the Business (and any additional migration of such Hazardous Material after
the Closing); (B) any transportation, disposal or discharge, or the
arrangement for such activities, on or before the Closing, of any Hazardous
Material originating at the Leased Real Property or any property formerly
owned, leased, used or occupied by the Business to or at any location (and
any additional transportation, disposal or discharge of such Hazardous
Material after the Closing); and (C) any noncompliance with or violation of
any applicable Environmental Law or Environmental Permit relating in any
way to the Business on or before the Closing (and any continuation of such
noncompliance or violation after the Closing).
SECTION 2.03. Purchase Price; Allocation of Purchase Price . (a) Subject to
the adjustments set forth in Section 2.07, the purchase price for the Purchased
Assets shall be $165,100,000 (the "Purchase Price").
(b) The Purchaser and the Seller shall, in good faith, use reasonable
commercial efforts to, within 120 days after the date of Closing, reach an
agreement as to the allocation of the sum of the Purchase Price and the Assumed
Liabilities among the Purchased Assets (including the assets in Canada) (the
"Allocation"). Any subsequent adjustments to the sum of the Purchase Price and
Assumed Liabilities shall be reflected in the Allocation in a manner consistent
with Section 1060 of the Code and the Regulations thereunder. If the Purchaser
and the Seller have agreed on an Allocation, then the Purchaser and the Seller
shall each file IRS Form 8594 consistent with the Allocation and neither the
Seller nor the Purchaser will take any position inconsistent therewith in any
Tax Return, in any refund claim, in any litigation, or otherwise. If the
20
Purchaser and the Seller cannot agree on an Allocation, each party may report an
Allocation that, in its sole discretion, is consistent with Section 1060 of the
Code and the Regulations thereunder.
SECTION 2.04. Closing . Subject to the terms and conditions of this
Agreement, the sale and purchase of the Purchased Assets and the assumption of
the Assumed Liabilities contemplated by this Agreement shall take place at a
closing (the "Closing") to be held at the offices of Shearman & Sterling LLP,
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ at 1:30 P.M. New York time on the
second Business Day following the satisfaction or waiver of all conditions to
the obligations of the parties set forth in Section 7.01 and Section 7.02 (other
than conditions with respect to actions the respective parties will take at the
Closing itself, but subject to the satisfaction of those conditions) or at such
other place or at such other time or on such other date as the Seller and the
Purchaser may mutually agree upon in writing.
SECTION 2.05. Closing Deliveries by the Seller . At the Closing, Audiovox
(as to items (e), (g) and (i)) or the Seller shall deliver or cause to be
delivered to the Purchaser:
(a) the Assumption Agreement, the ▇▇▇▇ of Sale, the Assignment of
Intellectual Property, each Assignment of Lease, the Trademark License
Agreement and such other instruments, in form and substance reasonably
satisfactory to the Purchaser, as may be reasonably requested by the
Purchaser to transfer the Purchased Assets to the Purchaser or evidence
such transfer on the public records, which request shall be provided to the
Seller at least five (5) days before the Closing;
(b) executed counterparts of each Ancillary Agreement to which the
Seller is a party other than the Ancillary Agreements delivered pursuant to
Section 2.05(a);
(c) a receipt for the Purchase Price less the Escrow Amount;
(d) a true and complete copy, certified by the Secretary or an
Assistant Secretary of the Seller, of the resolutions duly and validly
adopted by the Board of Directors of the Seller evidencing its
authorization of the execution and delivery of this Agreement and the
Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby;
(e) true and complete copies, certified by the Secretary or an
Assistant Secretary of Audiovox of the resolutions duly and validly adopted
by the Board of Directors of Audiovox, evidencing its authorization of the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby;
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(f) a certificate of the Secretary or an Assistant Secretary of the
Seller certifying the names and signatures of the officers of the Seller
authorized to sign this Agreement and the Ancillary Agreements and the
other documents to be delivered hereunder and thereunder;
(g) certificates of the Secretary or an Assistant Secretary of
Audiovox certifying the names and signatures of the officers of Audiovox
authorized to sign this Agreement and the other documents to be delivered
hereunder;
(h) a certificate of a duly authorized officer of the Seller
certifying as to itself as to the matters set forth in Section 7.02(a);
(i) a certificate of a duly authorized officer of Audiovox certifying
as to itself as to the matters set forth in Section 7.02(a); and
(j) a certificate of non-foreign status (in a form reasonably
acceptable to Purchaser) pursuant to section 1.1445-2(b)(2) of the
Regulations.
SECTION 2.06. Closing Deliveries by the Purchaser . (a) At the Closing, the
Purchaser shall deliver to the Seller:
(i) the Purchase Price and the $70,000 contemplated by Section 5.22
hereof, less the Escrow Amount, by wire transfer in immediately available
funds to the Purchase Price Bank Account;
(ii) executed counterparts of the Assumption Agreement, each
Assignment of Lease, the Assignment of Intellectual Property and the
Trademark License Agreement;
(iii) executed counterparts of each Ancillary Agreement (other than
the Ancillary Agreements delivered pursuant to Section 2.06(a)(ii)) to
which the Purchaser is a party;
(iv) a true and complete copy, certified by the Secretary or an
Assistant Secretary of the Purchaser, of the resolutions duly and validly
adopted by the Board of Directors of the Purchaser evidencing its
authorization of the execution and delivery of this Agreement and the
Ancillary Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby;
(v) a certificate of the Secretary or an Assistant Secretary of the
Purchaser certifying the names and signatures of the officers of the
Purchaser authorized to sign this Agreement and the Ancillary Agreements
and the other documents to be delivered hereunder and thereunder; and
(vi) a certificate of a duly authorized officer of the Purchaser
certifying as to the matters set forth in Section 7.01(a).
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(b) At the Closing, the Purchaser shall deliver to the Escrow Agent,
in accordance with the Escrow Agreement, the Escrow Amount by wire transfer
in immediately available funds to the accounts designated therefore in the
Escrow Agreement.
SECTION 2.07. Post-Closing Adjustment of Purchase Price . The Purchase
Price shall be subject to adjustment after the Closing as specified in this
Section 2.07:
(a) Preliminary and Closing Statements of Net Assets. (i) On or before
the date that is 25 calendar days following the Closing, the Seller shall
deliver to the Purchaser the Preliminary Statement of Net Assets.
(ii) As promptly as practicable, after the date that is 90 calendar
days following the Closing, the Seller shall deliver to the Purchaser the
Closing Statement of Net Assets, together with the report thereon of the
Seller's Accountants, stating that the Closing Statement of Net Assets
fairly presents Net Assets of the Business as of the close of business on
the date of the Closing in accordance with GAAP.
(b) Disputes. (i) Subject to clause (ii) of this Section 2.07(b), the
Closing Statement of Net Assets, the Closing Statement of Inventories and
the Receivables Reserve set forth on the Closing Statement of Receivables
delivered by the Seller to the Purchaser shall be final, binding and
conclusive on the parties hereto.
(ii) The Purchaser may dispute any amounts reflected on (A) the
Closing Statement of Net Assets, but only on the basis that the amounts
reflected on the Closing Statement of Net Assets were not arrived at in
accordance with GAAP (it being understood that any adjustments, estimates,
accruals and calculations made on the Closing Statement of Net Assets that
are made on the same basis as similar items on the Interim Statement of Net
Assets shall be deemed to be made in accordance with GAAP) or were arrived
at based on mathematical or clerical error, (B) the Closing Statement of
Inventories but only on the basis that the amounts reflected on the Closing
Statement of Inventories was not calculated in accordance with the rules
set forth on Exhibit A hereto or that they were arrived at based on
mathematical or clerical error and (C) the Receivables Reserve, but only on
the basis that the Receivables Reserve was not arrived at in accordance
with GAAP (it being understood that any adjustments, estimates, accruals
and calculations made in respect of the Receivables Reserve that are made
on the same basis as similar items on the Interim Statement of Net Assets
shall be deemed to be made in accordance with GAAP) or were arrived at
based on mathematical or clerical error; provided, however, that the
Purchaser shall have notified the Seller and the Seller's Accountants in
writing of each disputed item, specifying the estimated amount thereof in
dispute and setting forth, in reasonable detail, the basis for such
dispute, within 30 Business Days of the Seller's delivery of the Closing
Statement of Net Assets to the Purchaser. In the event of such a dispute,
the Seller's Accountants and the Purchaser's Accountants shall attempt to
reconcile their differences, and any resolution by them as to any disputed
amounts shall be final, binding and conclusive on the parties hereto. If
any such resolution by the Seller's Accountants and the Purchaser's
23
Accountants regarding the Closing Statement of Net Assets or the Closing
Statement of Inventories leaves in dispute amounts the net effect of which
in the aggregate would not affect the Final Net Working Capital Balance,
all such amounts remaining in dispute shall then be deemed to have been
resolved in favor of the Closing Statement of Net Assets or the Closing
Statement of Inventories, as applicable, delivered by the Seller to the
Purchaser. If the Seller's Accountants and the Purchaser's Accountants are
unable to reach a resolution with such effect within 20 Business Days after
the receipt by the Seller and the Seller's Accountants of the Purchaser's
written notice of dispute, the Seller's Accountants and the Purchaser's
Accountants shall submit the items remaining in dispute for resolution to
Deloitte & Touche LLP (or, if such firm shall decline or is unable to act
or is not, at the time of such submission, independent of the Seller and
the Purchaser, to another independent accounting firm of international
reputation mutually acceptable to the Seller and the Purchaser) (either
Deloitte & Touche LLP or such other accounting firm being referred to
herein as the "Independent Accounting Firm"), which shall, within 30
Business Days after such submission, determine and report to the Seller and
the Purchaser upon such remaining disputed items, and such report shall be
final, binding and conclusive on the Seller and the Purchaser. The fees and
disbursements of the Independent Accounting Firm shall be allocated between
the Seller and the Purchaser in the same proportion that the aggregate
amount of such remaining disputed items so submitted to the Independent
Accounting Firm that is unsuccessfully disputed by each such party (as
finally determined by the Independent Accounting Firm) bears to the total
amount of such remaining disputed items so submitted.
(iii) In acting under this Agreement, the Seller's Accountants, the
Purchaser's Accountants and the Independent Accounting Firm shall be
entitled to the privileges and immunities of arbitrators.
(c) Purchase Price Adjustments. (i) Preliminary Purchase Price
Adjustment. (A) In the event that the Preliminary Net Working Capital
Balance set forth on the Preliminary Statement of Net Assets is less than
$40,000,000 (the "Target NWCB"), then there shall be a preliminary downward
adjustment of the Purchase Price in an amount equal to such deficiency, the
Purchaser shall deliver written notice to the Escrow Agent specifying the
amount of such preliminary downward adjustment of the Purchase Price, and
the Escrow Agent shall, within three Business Days of its receipt of such
notice and in accordance with the terms of the Escrow Agreement, pay an
amount (the "Preliminary Purchase Price Reduction") equal to seventy-five
percent (75%) of such deficiency to the Purchaser out of the Escrow Fund by
wire transfer in immediately available funds. In the event that the Escrow
Fund is insufficient to cover the amount of the Preliminary Purchase Price
Reduction, then the Escrow Agent shall distribute the entire Escrow Fund to
the Purchaser as provided above and the Seller or Audiovox, on behalf of
the Seller, shall pay, on or prior to the same date as the Escrow Agent
distributes the Escrow Fund to the Purchaser, an amount to the Purchaser,
by wire transfer in immediately available funds, equal to the amount of
such deficiency. No failure of the Purchaser to deliver a notice of the
type specified in the immediately preceding sentence shall relieve the
Seller of the obligation to pay the amount of such deficiency to the
Purchaser.
24
(B) In the event that the Preliminary Net Working Capital Balance
exceeds the Target NWCB, then there shall be a preliminary upward
adjustment of the Purchase Price in an amount equal to such excess and the
Purchaser shall pay on or before the date that is 30 days following the
date of the Closing an amount (the "Preliminary Purchase Price Increase")
equal to seventy-five percent (75%) of such excess to the Seller by wire
transfer in immediately available funds. Following the preliminary purchase
price adjustments described in this Section 2.07(c)(i), the Target NWCB
shall be adjusted to (1) subtract any Preliminary Purchase Price Reduction
previously paid to the Purchaser by the Escrow Agent or the Seller or (2)
add any Preliminary Purchase Price Increase previously paid to the Seller
by the Purchaser (as so adjusted, the "Adjusted Target NWCB")
(ii) Final Purchase Price Adjustment. Each of the Closing
Statement of Net Assets, the Closing Statement of Inventories and the
Receivables Reserve shall be deemed final for the purposes of this
Section 2.07 upon the earliest of (x) the failure of the Purchaser to
notify the Seller of a dispute within 30 Business Days of the Seller's
delivery of the Closing Statement of Net Assets to the Purchaser, (y)
the resolution of all disputes, pursuant to Section 2.07(b)(ii), by
the Seller's Accountants and the Purchaser's Accountants and (z) the
resolution of all disputes, pursuant to Section 2.07(b)(ii), relating
to the Closing Statement of Net Assets the Closing Statement of
Inventories or the Receivables Reserve, as applicable, by the
Independent Accounting Firm. Within five Business Days of both the
Closing Statement of Net Assets and the Closing Statement of
Inventories being deemed final, the Seller's Accountants shall, with
the agreement of the Purchaser's Accountants, calculate the Final Net
Working Capital Balance and the Purchase Price shall be finally
adjusted as follows:
(A) In the event that the Final Net Working Capital Balance is less
than the Adjusted Target NWCB, then the Purchaser shall deliver written
notice to the Escrow Agent and the Seller specifying the amount of such
shortfall and the Escrow Agent shall, within three Business Days of its
receipt of such notice and in accordance with the terms of the Escrow
Agreement, pay to the Purchaser the amount of such shortfall out of the
Escrow Fund by wire transfer in immediately available funds. In the event
that the Escrow Fund is insufficient to cover the amount of such shortfall,
then the Escrow Agent shall distribute the entire Escrow Fund to the
Purchaser as provided above and the Seller or Audiovox, on behalf of the
Seller, shall pay, on or prior to the same date as the Escrow Agent
distributes the Escrow Fund to the Purchaser, an amount to the Purchaser,
by wire transfer in immediately available funds, equal to the amount of
such deficiency. No failure of the Purchaser to deliver a notice of the
type specified in the immediately preceding sentence shall relieve the
Seller of the obligation to pay the amount of such deficiency to the
Purchaser.
(B) In the event that the Final Net Working Capital Balance exceeds
the Adjusted Target NWCB, then the Purchaser shall pay within three
Business Days of the Final Net Working Capital Balance being calculated by
the Seller's Accountants, with the agreement of the Purchaser's
Accountants, the amount of such excess to the Seller by wire transfer
25
in immediately available funds.
(d) Until the Closing Statement of Net Assets is deemed final pursuant
to Section 2.07(c), the Purchaser shall respond to and process warranty
claims in substantially the same manner in which the Seller responded to
and processed warranty claims prior to the Closing, including using the
same third party service providers used by the Seller and charging actual
costs for in-house repairs (which costs shall be calculated consistently
with how they were calculated by the Seller).
SECTION 2.08. Escrow . Prior to the Closing, the Seller and the Purchaser
shall enter into an Escrow Agreement with the Escrow Agent substantially in the
form of Exhibit 2.08 (the "Escrow Agreement"). In accordance with the terms of
the Escrow Agreement, the Purchaser shall deposit the Escrow Amount at the
Closing, in an account to be managed and paid out by the Escrow Agent in
accordance with the terms of the Escrow Agreement.
SECTION 2.09. Receivables .
(a) On or prior to 5:30 p.m. EST on the Business Day immediately following
the date on which the Closing occurs, the Seller shall deliver to the Purchaser
the Closing Statement of Receivables. Any amounts paid by any Customer (or any
of its wholly owned Subsidiaries) to the Purchaser (or any of its wholly-owned
Subsidiaries), whether in respect of a Receivable listed on the Receivables
Listing or otherwise, shall, no later than (i) in the case of a Receivable paid
by wire transfer, the Business Day following the day on which payment was
received and (ii) in the case of a Receivable paid other than by wire transfer,
the third Business Day following the day on which payment was received, be paid
by wire transfer of immediately available funds to the Seller; provided, however
that (i) Purchaser shall have no obligation to pay over amounts received by a
particular Customer once the aggregate amount paid to the Seller and the
Purchaser by such Customer beginning on the Business Day following the Closing
equals the Per Customer Amount and (ii) if a Customer has given notice to the
Seller or the Purchaser that such Customer is disputing its obligation to pay
any amount of the Receivable listed on the Receivables Listing as being owed by
the Customer (to the extent such Receivable is disputed, a "Disputed
Receivable") or if a Receivable is deemed to be a Disputed Receivable (as
described below), the Purchaser shall not be obligated to pay over amounts
received from such Customer in excess of such Customer's Per Customer Amount
less the amount any Disputed Receivable. Any Receivable not fully paid by a
Customer by the date that is 25 days after the date that such Receivable is due
may be deemed by the Seller or the Purchaser, upon written notice thereof, to
the other party to be a Disputed Receivable.
(b) Each of the Purchaser and the Seller shall give prompt written notice
to the other that it has received notice of a Disputed Receivable. The Seller
shall not initiate, or threaten to initiate, any legal proceedings against a
26
Customer who is the obligor of a Disputed Receivable to collect such Disputed
Receivable until at least 15 Business Days following the date of the notice of
the Disputed Receivable. If, at the end of such 15 Business Day period, such
Disputed Receivable has not been paid to the Seller (either by the Customer or
by the Purchaser on behalf of such Customer), the Seller may take any and all
legal actions it believes are desirable to cause such Disputed Receivable to be
paid to it.
(c) Prior to 6 p.m. EST on each Business Day during the Collection
Period (as hereinafter defined), the Purchaser and the Seller shall inform
each other by email of the amount of payments that it has received from
each Customer on such Business Day; provided, however that no information
need be given with respect to any Customer once the Seller has received
from such Customer the full amount of such Customer's Per Customer Amount.
All amounts paid by a Customer, whether paid to the Seller directly or
remitted to the Purchaser and then paid to the Seller shall be credited
against such Customer's Per Customer Amount. In the event that, during the
120 day period following the Closing, a Customer gives notice that a
Receivable set forth on the Receivables Listing is a Disputed Receivable
and, had such notice been given at an earlier date, the Purchaser would not
have been obligated to pay to the Seller an amount pursuant to this Section
2.09 that the Purchaser has paid over to the Seller, then the Seller shall
pay back to the Purchaser the full amount disputed by such Customer within
three Business Days by wire transfer of immediately available funds. For
120 days after the Closing, the Purchaser shall direct and instruct its
relevant employees to reasonably cooperate with the Seller in promptly
collecting all Receivables and in resolving Disputed Receivables, in each
case, in a manner consistent with the past practices of the Business.
(d) From and after the Closing until the earlier of (x) the 90th
Business Day following the Closing and (y) the date on which the Seller has
received full payment of all Receivables reflected on the Receivables
Listing, net of the aggregate Receivables Reserve and any Disputed
Receivables (such period, the "Collection Period"), the Purchaser shall
not, and it shall cause its Affiliates and representatives not to, take any
action that would reasonably be expected to interfere with the Seller's
ability to promptly collect any Receivable reflected on the Receivables
Listing, including, without limitation, by suggesting or telling any
Customer that for any reason it should not pay, or that it should delay
paying, the full amount of its Receivable reflected on the Receivables
Listing.
(e) In the event that the Receivables Reserve is adjusted upward
pursuant to Section 2.07(c), the Purchaser shall give written notice to the
Seller of any Per Customer Amounts paid over to the Seller by the Purchaser
in accordance with this Section 2.09 prior to the Receivables Reserve
having been finally determined that would be reduced by virtue of such
adjustment and the Seller shall pay back to the Purchaser such excess Per
Customer Amounts (net of any amounts that the Purchaser would be required
to pay to the Seller pursuant to this Section 2.09(e)) within two Business
Days following such adjustment by wire transfer of immediately available
funds. In the event that the Receivables Reserve is adjusted downward
pursuant to Section 2.07(c), the Purchaser shall pay over to the Seller
within two Business Days following such adjustment any amounts that the
Purchaser would have been required to pay to the Seller had the Receivables
Reserve been so adjusted immediately following the Closing (net of any
amounts that the Seller would be required to pay back to the Purchaser
pursuant to this Section 2.09(e)).
27
SECTION 2.10. Inventories. On the day immediately following the date of the
Closing, the Seller shall deliver to the Purchaser the Closing Statement of
Inventories.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLER
As an inducement to the Purchaser to enter into this Agreement, the Seller
and Audiovox (only as to itself with respect to the matters set forth in
Sections 3.01, 3.02, 3.11(b) and 3.30) hereby represent and warrant to the
Purchaser as follows:
SECTION 3.01. Organization, Authority and Qualification and Corporate Power
of the Seller and Audiovox . (a) Each of the Seller and Audiovox is a
corporation duly organized, validly existing, and in good standing under the
Laws of its jurisdiction of incorporation, has the requisite corporate power and
authority to carry on its business as it is now being conducted and to own and
operate the properties and assets now owned and operated by it. The Seller is
duly licensed or qualified to do business and is in good standing in each
jurisdiction which the properties leased by it or the operation of its business
makes such licensing or qualification necessary except where the failure to be
so qualified or in good standing will not result in a Material Adverse Effect.
(b) Each of the Seller and Audiovox has the requisite corporate power and
authority to execute, deliver and, subject to receipt of the vote of the
Audiovox stockholders contemplated in Section 3.30(b) and the approval of the
Seller's stockholders, which has been obtained, perform this Agreement and each
of the Ancillary Agreements to be executed, delivered and performed in
connection with this Agreement, and except as set forth in Sections 3.02 and
3.03, each of the Seller and Audiovox has all requisite power and authority to
transfer the Purchased Assets to the Purchaser. The execution, delivery and
performance of this Agreement and each of the Ancillary Agreements to which the
Seller and Audiovox is a party, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
action (corporate or otherwise) on the part of the Seller and Audiovox (other
than the vote of the Audiovox stockholders contemplated in Section 3.30(b) and
the approval of the Seller's stockholders, which has been obtained). This
Agreement has been, and upon their execution and delivery the Ancillary
Agreements shall have been, duly and validly executed and delivered by the
Seller and Audiovox, and (assuming due authorization, execution and delivery by
the Purchaser) this Agreement constitutes, and upon their execution and delivery
the Ancillary Agreements shall constitute, the legal, valid and binding
obligation of the Seller and Audiovox, enforceable against the Seller and
Audiovox in accordance with their respective terms, except as such enforcement
may be limited by applicable bankruptcy, insolvency, moratorium or similar laws
affecting the enforcement of creditors' rights generally. No other corporate
28
proceedings on the part of the Seller or Audiovox are necessary to authorize
this Agreement and the Ancillary Agreements (other than the vote of the Audiovox
stockholders contemplated in Section 3.30(b) and the approval of the Seller's
stockholders, which has been obtained).
(c) There are no subsidiaries or Affiliates of Audiovox, other than ACC,
Quintex and ACCC, which own, lease or have the legal right to use, or which are
a party to and enjoy the right to the benefits of the Assumed Contracts and
other arrangements which constitute, the Purchased Assets. Section 3.01(c) of
the Disclosure Schedule sets forth the subsidiaries of ACC other than Quintex
and ACCC. None of the entities set forth in Section 3.01(c) of the Disclosure
Schedule have any assets. The liabilities of GLM Wireless Communications, Inc.
exceed its assets.
SECTION 3.02. No Conflict. The execution, delivery and performance of this
Agreement and the Ancillary Agreements by each of the Seller and Audiovox do not
and will not (a) violate, conflict with or result in the breach of any provision
of the certificate of incorporation or by-laws (or similar organizational
documents) of the Seller or Audiovox, as the case may be, (b) conflict with or
violate any material Law or Governmental Order applicable to the Seller or
Audiovox, as the case may be, or any of its assets, properties or businesses,
including the Business (except as may result from any facts or circumstances
relating solely to the Purchaser), or (c) except as set forth in Section 3.02(c)
of the Disclosure Schedule, conflict with, result in any breach of, constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, require any consent under, or give to others any
rights of termination, amendment, acceleration, suspension, revocation or
cancellation of, or result in the creation of any Encumbrance on any of the
Purchased Assets pursuant to, any material note, bond, mortgage or indenture,
contract, agreement, lease, sublease, license, permit, franchise or other
instrument or arrangement to which the Seller or Audiovox is a party or by which
any of the Purchased Assets is bound or affected. The Seller knows of no reason
(except as may result from any facts or circumstances relating solely to the
Purchaser) why all consents set forth in Section 3.02(c) of the Disclosure
Schedule will not be received.
SECTION 3.03. Governmental Consents and Approvals . The execution, delivery
and performance of this Agreement and each Ancillary Agreement by the Seller do
not and will not require any material consent, approval, authorization or other
order of, action by, filing with or notification to, any Governmental Authority
applicable to the Seller or Audiovox, except (a) as described in Section 3.03 of
the Disclosure Schedule and (b) the pre- merger notification and waiting period
requirements of the HSR Act. The Seller knows of no reason why all the consents,
approvals and authorizations necessary for the consummation of the transactions
contemplated by this Agreement will not be received.
29
SECTION 3.04. Financial Information; Books and Records. (a) True and
complete copies of (i) the Interim Statement of Net Assets as set forth in
Section 3.04 of the Disclosure Schedule, (ii) the audited balance sheet of the
Seller for each of the two fiscal years ended as of November 30, 2003 and 2002
respectively, and the related audited statements of income, stockholders' equity
and cashflows of the Seller, together with all related notes and schedules
thereto, accompanied by the reports thereon of the Seller's Accountants and
Seller's Prior Accountants (collectively referred to herein as the "Financial
Statements") and (iii) the unaudited balance sheet of the Seller as of February
29, 2004, and the related statements of income, stockholders' equity and
cashflows of the Seller (collectively referred to herein as the "Interim
Financial Statements") have been delivered by the Seller to the Purchaser. The
Interim Statement of Net Assets (i) was prepared in accordance with the books of
account and other financial records of the Seller, (ii) presents fairly, in all
material respects, the Net Assets of the Business as of the date thereof (except
that it excludes the Excluded Assets and Excluded Liabilities), (iii) has been
prepared in accordance with GAAP, and (iv) includes all adjustments that are
necessary for a fair presentation of the financial condition of the Business as
of the date thereof. The Financial Statements and the Interim Financial
Statement (i) were prepared in accordance with the books of account and other
financial records of the Seller, (ii) present fairly, in all material respects,
the financial condition and results of operations of the Business as of the
dates thereof or for the periods covered thereby, (iii) have been prepared in
accordance with GAAP and (iv) in the case of the Interim Statement of Net
Assets, include all adjustments (consisting only of normal recurring accruals)
that are necessary for a fair presentation of the financial condition of the
Business and the results of the operations of the Business as of the dates
thereof or for the periods covered thereby.
(b) The books of account and other financial records of the Seller in all
material respects: (i) reflect all items of income and expense and all assets
and Liabilities required to be reflected therein in accordance with GAAP, (ii)
are complete and correct, and do not contain or reflect any material
inaccuracies or discrepancies and (iii) have been maintained in accordance with
good business and accounting practices.
(c) The Sellers have the parts that it believes are reasonably necessary to
fulfill its contractual obligations to repair products sold by the Business
prior to the Closing. There are no material liabilities relating to obligations
under the Assumed Contracts for the provision of training or technical support,
other than liabilities that are reflected on the Interim Statement of Net Assets
and will be reflected on the Closing Statement of Net Assets.
SECTION 3.05. Absence of Undisclosed Liabilities. There are no material
Liabilities of the Business, other than Liabilities (i) reflected or reserved
against on the Interim Statement of Net Assets, (ii) set forth in Section 3.05
of the Disclosure Schedule, (iii) incurred since the date of the Interim
Statement of Net Assets in the ordinary course of business, consistent with past
practice, of the Seller and which do not and could not have a Material Adverse
Effect or (iv) arising out of the Assumed Contracts.
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SECTION 3.06. Receivables. Section 3.06 of the Disclosure Schedule is an
aged list of the Receivables as of the Interim Statement Date showing separately
those Receivables that as of such date had been outstanding for (a) 30 days or
less, (b) 31 to 60 days, (c) 61 to 90 days, and (d) more than 90 days. Except to
the extent, if any, reserved for on the Interim Statement of Net Assets, all
Receivables reflected on the Interim Statement of Net Assets arose from, and the
Receivables existing as of the Closing will have arisen from, the sale of
Inventory or services to Persons not affiliated with the Seller and in the
ordinary course of business consistent with past practice and, except as
reserved against on the Interim Statement of Net Assets, constitute or will
constitute, as the case may be, only valid, undisputed claims of the Seller not
subject to valid claims of setoff or other defenses or counterclaims other than
normal cash discounts and warranty claims and customary reserves required by
GAAP accrued in the ordinary course of business consistent with past practice.
SECTION 3.07. Inventories. (a) Subject to amounts reserved therefor on the
Interim Statement of Net Assets, the values at which all Inventories are carried
on the Interim Statement of Net Assets is consistent with the last sentence of
the definition of "Inventories" herein. Except as set forth in Section
3.07(a)(i) of the Disclosure Schedule, the Seller has good and marketable title
to the Inventories free and clear of all Encumbrances. Except as set forth in
Section 3.07(ii) of the Disclosure Schedule, the Inventories do not consist of,
in any material amount, items that are obsolete, defective or slow- moving. The
Inventories do not consist of any items held on consignment. The Seller is not
under any obligation or liability with respect to accepting returns of items of
Inventory or merchandise in the possession of their customers other than in the
ordinary course of business consistent with past practice or except as set forth
in Section 3.07(a)(iii) of the Disclosure Schedule. No clearance or
extraordinary sale of the Inventories has been conducted since the Interim
Statement Date. The Seller has not acquired or committed to acquire Inventory
for sale which is not of a quality and quantity usable in the ordinary course of
business within a reasonable period of time and consistent with past practice,
nor has the Seller changed the price of any Inventory except for (i) price
reductions to reflect any reduction in the cost thereof to the Seller, (ii)
reductions and increases responsive to normal competitive conditions and
consistent with the Seller's past sales practices, (iii) increases to reflect
any increase in the cost thereof to the Seller and (iv) increases and reductions
made with the written consent of the Purchaser.
(b) Section 3.07(b) of the Disclosure Schedule includes a complete list of
the addresses of all warehouses and other facilities in which the Inventories
are located.
SECTION 3.08. Assumed Contracts. Each description of an Assumed Contract or
category of Assumed Contracts described in Part II of Section 2.01(a)(x) of the
Disclosure Schedule is accurate in all material respects.
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SECTION 3.09. Sales and Purchase Order Backlog. (a) As of the Business Day
immediately preceding the date hereof, open sales orders accepted by the Seller
and relating to the Business totaled $244,768,080. Section 3.09(a) of the
Disclosure Schedule lists all sales orders exceeding $100,000 per order which
have been accepted by the Seller (related to the Business), and which were open
as of the date hereof.
(b) As of the Business Day immediately preceding the date hereof, open
purchase orders issued by the Seller and relating to the Business, totaled
$737,911,285. Section 3.09(b) of the Disclosure Schedule lists all purchase
orders exceeding $100,000 per order which have been issued by the Seller
(related to the Business) and which were open as of the date hereof.
SECTION 3.10. Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions. Except as set forth in Section 3.10 of the Disclosure
Schedule, since the Interim Statement Date, and, except with respect to clause
(x) below (which speaks as of the date hereof and, pursuant to Section 7.02(a),
as of the date of the Closing), prior to the date hereof, the Business has been
conducted in the ordinary course and consistent with past practice. As
amplification and not limitation of the foregoing, since the Interim Statement
Date, the Seller has not:
(a) permitted or allowed any of the Purchased Assets to be subjected
to any Encumbrance, other than Permitted Encumbrances and Encumbrances that
will be released at or prior to the Closing;
(b) except in the ordinary course of business consistent with past
practice and payments under contracts entered into prior to the date hereof
as disclosed in Section 3.14 of the Disclosure Schedule, discharged or
otherwise obtained the release of any Encumbrance related to the Business,
or paid or otherwise discharged any Liability related to the Business,
other than current liabilities reflected on the Interim Statement of Net
Assets and current liabilities incurred in the ordinary course of business
consistent with past practice since the Interim Statement Date;
(c) written down or written up (or failed to write down or write up in
accordance with GAAP consistent with past practice) the value of any
Inventories or Receivables or revalued any of the Purchased Assets other
than in the ordinary course of business consistent with past practice and
in accordance with GAAP;
(d) made any change in any method of accounting or accounting practice
or policy used by the Seller and relating to the Business, other than such
changes required by GAAP;
(e) amended, terminated, cancelled or compromised any material claims
of the Seller (related to the Business) or waived any other rights of
substantial value to the Seller (related to the Business), other than with
respect to the Excluded Assets;
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(f) sold, transferred, leased, subleased, licensed or otherwise
disposed of any properties or assets, real, personal or mixed (including
leasehold interests and intangible property) of the Seller (related to the
Business), other than the sale of Inventories in the ordinary course of
business consistent with past practice, other than with respect to the
Excluded Assets;
(g) merged with, entered into a consolidation with or acquired an
interest of 5% or more in any Person engaged in a business relating to the
Business or acquired a substantial portion of the assets or business of any
Person engaged in a business relating to the Business or any division or
line of business thereof, or otherwise acquired any material assets
relating to the Business other than in the ordinary course of business
consistent with past practice;
(h) made any capital expenditure or commitment for any capital
expenditure , in each case relating to the Business, in excess of $500,000
individually or $2,000,000 in the aggregate;
(i) except in the ordinary course of business consistent with past
practice, issued any sales orders or otherwise agreed to make any
purchases, in each case relating to the Business, involving exchanges in
value in excess of $5,000,000 individually or $10,000,000 in the aggregate;
(j) made any material changes in the customary methods of operations
of the Business, including those relating to purchasing, Inventories,
marketing, booking sales or Receivables, selling and pricing;
(k) made, revoked or changed any Tax election or method of Tax
accounting, or settled or compromised any liability with respect to Taxes,
in each case relating to the Business or the Purchased Assets;
(l) incurred any material Indebtedness relating to the Business, other
than Inter-company Payables incurred in the ordinary course of business
consistent with past practice;
(m) made any loan to, guaranteed any Indebtedness of or otherwise
incurred any Indebtedness on behalf of any Person in connection with the
Business, except for any amount that will be discharged prior to the
Closing;
(n) failed to pay any creditor of the Business any material amount
owed to such creditor when due unless such amount was disputed in good
faith and subject to customary adjustments;
(o) except in the ordinary course of business consistent with past
practice or as required by Law (i) granted any increase, or announced any
increase, in the wages, salaries, compensation, bonuses, incentives,
pension or other benefits payable by the Seller to any of its employees to
whom offers of employment will be made pursuant to Section 6.01, including
any increase or change pursuant to any Plan, or (ii) established or
increased or promised to increase any benefits under any Plan;
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(p) entered into any agreement, arrangement or transaction relating to
the Business with any of its directors, officers, employees or stockholders
(or with any relative, beneficiary, spouse or Affiliate of such Persons);
(q) terminated, discontinued, closed or disposed of any plant,
facility or other business operation used in the Business, or laid off any
employees employed in connection with the Business (other than layoffs in
the ordinary course of business consistent with past practice) or
implemented any early retirement, separation or program providing early
retirement window benefits within the meaning of Section 1.401(a)-4 of the
Regulations or announced or planned any such action or program for the
future;
(r) disclosed any secret or confidential Intellectual Property
relating to the Business (except by way of issuance of a patent) or
permitted to lapse or become abandoned any Intellectual Property relating
to the Business (or any registration or grant thereof or any application
relating thereto) to which, or under which, the Seller has any right,
title, interest or license;
(s) allowed any Permit or Environmental Permit relating to the
Business to lapse or terminate or failed to renew any insurance policy,
Permit or Environmental Permit relating to the Business that is scheduled
to terminate or expire within 45 calendar days of the Closing;
(t) failed to maintain the plant, property and equipment included in
the Purchased Assets in good repair and operating condition, ordinary wear
and tear excepted;
(u) suffered any casualty loss or damage with respect to any of the
Purchased Assets which in the aggregate have a replacement cost of more
than $100,000, whether or not such loss or damage shall have been covered
by insurance;
(v) amended, modified or consented to the termination of any Material
Contract or the Seller's rights thereunder;
(w) (i) abandoned, sold, assigned, or granted any security interest in
or to any item of the Owned Intellectual Property, Licensed Intellectual
Property or Transferred IP Agreements, including failing to perform or
cause to be performed all applicable filings, recordings and other acts,
and pay or caused to be paid all required fees and taxes, to maintain and
protect its interest in such Intellectual Property, (ii) granted to any
third party any license with respect to any Owned Intellectual Property or
Licensed Intellectual Property, other than licenses of Transferred Software
to the customers of the Business in the ordinary course of its business,
(iii) developed, created or invented any Intellectual Property jointly with
any third party (other than such joint development, creation or invention
with a third party that is in progress prior to Interim Statement Date) or
(iv) disclosed, or allow to be disclosed, any confidential Intellectual
Property, unless such Intellectual Property is subject to a confidentiality
or non-disclosure covenant protecting against disclosure thereof;
(x) suffered any Material Adverse Effect;
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(y) agreed, whether in writing or otherwise, to take in a legally
enforceable manner any of the actions specified in this Section 3.10 or
granted any options to purchase, rights of first refusal, rights of first
offer or any other similar rights or commitments with respect to any of the
actions specified in this Section 3.10, except as expressly contemplated by
this Agreement and the Ancillary Agreements;
(z) terminated the employment nor received the resignation of any Key
Employees;
(aa) issued a notice of intention to terminate the employment of any
Key Employees nor received a notice of intention to resign by any Key
Employees; or
(bb) settled, or agreed to settle, any action, suit or proceeding
relating to the Business or the Purchased Assets other than in the ordinary
course of business consistent with past practice.
SECTION 3.11. Litigation. (a) Except as set forth in Section 3.11 of the
Disclosure Schedule (which, with respect to each Action set forth therein, sets
forth the parties and the date and method commenced), there are no material
Actions by or against the Seller or any Affiliate thereof and relating to the
Business or affecting any of the Purchased Assets or the Business pending before
any Governmental Authority (or, to the best knowledge of the Seller, threatened
to be brought by or before any Governmental Authority). The Seller is not
subject to any Action relating to the Business that has a Material Adverse
Effect or is reasonably likely to affect the legality, validity or
enforceability of this Agreement, any Ancillary Agreement or the consummation of
the transactions contemplated hereby or thereby. Neither the Seller nor any of
the Seller's assets or properties, including the Purchased Assets, is subject to
any Governmental Order (nor, to the best knowledge of the Seller, are there any
such Governmental Orders threatened to be imposed by any Governmental Authority)
which has a Material Adverse Effect or could affect the legality, validity or
enforceability of this Agreement, any Ancillary Agreement or the consummation of
the transactions contemplated hereby or thereby.
(b) Audiovox is not subject to any Action relating to the Business that has
a Material Adverse Effect or is reasonably likely to affect the legality,
validity or enforceability of this Agreement, any Ancillary Agreement or the
consummation of the transactions contemplated hereby or thereby. Audiovox is not
subject to any Governmental Order (nor, to the best knowledge of Audiovox, are
there any such Governmental Orders threatened to be imposed by any Governmental
Authority) which has a Material Adverse Effect or could affect the legality,
validity or enforceability of this Agreement, any Ancillary Agreement or the
consummation of the transactions contemplated hereby or thereby.
35
SECTION 3.12. Compliance with Laws. (a) The Seller has conducted and
continues to conduct the Business in accordance with all material Laws and
Governmental Orders applicable to the Seller or any of its properties or assets,
including the Purchased Assets, and the Seller is not in material violation, or
the Seller has not been in material violation during the last three years, of
any such Law or Governmental Order, except as set forth in Section 3.12 (a) of
the Disclosure Schedule.
(b) Section 3.12(b) of the Disclosure Schedule sets forth a brief
description of each Governmental Order applicable to the Seller (related to the
Business) or any of its properties or assets, including the Purchased Assets, or
the Business and no such Governmental Order has or has had a Material Adverse
Effect or is reasonably likely to affect the legality, validity or
enforceability of this Agreement, any Ancillary Agreement or the consummation of
the transactions contemplated hereby or thereby.
SECTION 3.13. Environmental and Other Permits and Licenses; Related
Matters. (a) Except as set forth in Section 3.13(a) of the Disclosure Schedule:
(i) The Seller (as it relates to the Business) is in material
compliance with all applicable Environmental Laws and all Environmental
Permits.
(ii) There has been no material Release of any Hazardous Material on
any of the Leased Real Property or, during the period of the Seller's
ownership, lease, use or occupancy thereof, on any property formerly owned,
leased, used or occupied by the Seller.
(iii) There are no Environmental Claims pending or, to the best
knowledge of the Seller, threatened against the Seller (relating to the
Business) or the Leased Real Property, and to the Seller's best knowledge
there are no circumstances that can reasonably be expected to form the
basis of any such Environmental Claim.
(iv) The Seller has no actual or alleged material liability, whether
fixed or contingent, relating to the Business under any Environmental Law.
(b) Neither the execution of this Agreement or the Ancillary Agreements nor
the consummation of the transactions contemplated hereby or thereby will require
any Remedial Action or notice to or consent of Governmental Authorities or third
parties pursuant to any applicable Environmental Law or Environmental Permit.
SECTION 3.14. Material Contracts. (a) Section 3.14(a) of the Disclosure
Schedule lists each of the following contracts and agreements (including,
without limitation, oral agreements and informal arrangements) of the Seller
relating to the Business (collectively, the "Material Contracts"):
36
(i) each contract, agreement, invoice, purchase order and other
arrangement, for the purchase of Inventory, spare parts, other materials or
personal property, with any supplier or for the furnishing of services to
the Seller or otherwise related to the Business under the terms of which
the Seller: (A) is reasonably likely to pay or otherwise give consideration
of more than $500,000 in the aggregate during the fiscal year ending
November 30, 2004, (B) is reasonably likely to pay or otherwise give
consideration of more than $120,000 in the aggregate over the remaining
term of the contract, or (C) cannot be cancelled by the Seller without
penalty or further payment and without more than 30 days' notice and is
reasonably likely to pay or otherwise give consideration of more than
$120,000 in the aggregate over the remaining term of the contract;
(ii) each contract, agreement, invoice, sales order and other
arrangement, for the sale of Inventory or other personal property, or for
the furnishing of services by the Seller which: (A) is likely to involve
consideration of more than $100,000 in the aggregate during the fiscal year
ending November 30, 2004, (B) is likely to involve consideration of more
than $500,000 in the aggregate over the remaining term of the contract or
(C) cannot be cancelled by the Seller without penalty or further payment
and without more than 30 days' notice and is likely to involve
consideration of more than $500,000 in the aggregate during the remaining
term of the contract;
(iii) all broker, distributor, dealer, manufacturer's representative,
franchise, agency, sales promotion, market research, marketing, consulting
and advertising contracts and agreements to which the Seller is a party and
which would require a payment in 2004 in excess of $120,000;
(iv) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which the Seller is
a party and which are not cancelable without penalty or further payment and
without more than 30 days' notice and which would require a payment in 2004
in excess of $120,000;
(v) all contracts and agreements relating to Indebtedness of the
Seller;
(vi) all contracts and agreements with any Governmental Authority to
which the Seller is a party;
(vii) all contracts and agreements that limit or purport to limit the
ability of the Seller to compete in any line of business or with any Person
or in any geographic area or during any period of time;
(viii) all contracts and agreements between or among the Seller and
any Affiliate of the Seller;
(ix) all contracts and agreements providing for employee benefits
under any Plan listed in Section 3.21 of the Disclosure Schedule;
(x) all employment contracts, written or oral, with any officer,
consultant, director or employee of the Business;
37
(xi) all contracts and agreements relating to restrictions on
competition of the employees of the Seller;
(xii) all joint venture contracts or arrangements or other
arrangements involving sharing of profits;
(xiii) all agreements relating to the disposition or acquisition of
assets or any interest in any business enterprise other than those entered
into in the ordinary course and consistent with past practice;
(xiv) all settlements of administrative, judicial, mediation or
arbitration proceedings;
(xv) all leases or subleases of Leased Real Property;
(xvi) all leases or subleases of Tangible Personal Property which
require a payment in 2004 in excess of $100,000;
(xvii) all Transferred IP Agreements; and
(xviii) all other contracts and agreements, whether or not made in the
ordinary course of business, which are material to the Seller or the
conduct of the Business, or the absence of which would have a Material
Adverse Effect.
(b) Except as set forth in Section 3.14(b) of the Disclosure Schedule, each
Material Contract is valid and binding on the Seller thereto and is in full
force and effect. The Seller is not in material breach of, or default under, any
Material Contract.
(c) To the best knowledge of the Seller, no other party to any Material
Contract is in material breach thereof or default thereunder and the Seller has
not received any notice of termination, cancellation, breach or default under
any Material Contract.
(d) The Seller has made available to the Purchaser true and complete copies
of all Material Contracts, including all amendments, supplements and
modifications thereto or waivers currently in effect thereunder.
(e) Except as set forth in Section 3.14(e) of the Disclosure Schedule,
there is no contract, agreement or other arrangement granting any Person any
preferential right to purchase, other than in the ordinary course of business
consistent with past practice, any of the Purchased Assets.
SECTION 3.15. Intellectual Property. (a) Section 3.15(a) of the Disclosure
Schedule sets forth a true and complete list of (i) all patents and patent
applications, registered trademarks and trademark applications, and registered
copyrights and copyright applications, and domain names included in the Owned
Intellectual Property, (ii) all Transferred IP Agreements and (iii) all other
Owned Intellectual Property (other than trade secrets) material to the Business.
38
(b) Except as set forth in Section 3.15(b) of the Disclosure Schedule to
the best knowledge of the Seller, the operation of the Business as currently
conducted or as contemplated to be conducted, the use of the Owned Intellectual
Property, the Licensed Intellectual Property, the Shared MIS Systems and the
Developed Software in connection therewith and the Seller's transmission, use,
linking and other practices related to the operation of their web sites in
connection with the Business, the content thereof and the advertisements
contained therein, do not, in any material respects, conflict with, infringe,
misappropriate or otherwise violate the Intellectual Property or other
proprietary rights, including rights of privacy, publicity and endorsement, of
any third party, and no Actions or Claims are pending or, to the best knowledge
of the Seller, threatened against the Seller alleging any of the foregoing.
(c) The Seller is the exclusive owner of the entire and unencumbered right,
title and interest in and to the Owned Intellectual Property and the Transferred
IP Agreements, and the Seller has a valid right to use the Owned Intellectual
Property and Licensed Intellectual Property in the ordinary course of the
Business as currently conducted or as contemplated to be conducted subject only
to the terms of the Transferred IP Agreements in the case of Licensed
Intellectual Property.
(d) No Owned Intellectual Property or Developed Software, or to the best
knowledge of Seller, any Licensed Intellectual Property, is subject to any
outstanding decree, order, injunction, judgment or ruling restricting the use of
such Intellectual Property or that would impair the validity or enforceability
of such Intellectual Property.
(e) Except for the Excluded Intellectual Property, the Owned Intellectual
Property and the Licensed Intellectual Property include all of the Intellectual
Property used in the ordinary day-to-day conduct of the Business, and there are
no other items of Intellectual Property that are material to the ordinary
day-to-day conduct of the Business. The Owned Intellectual Property and the
Developed Software and, to the best knowledge of the Seller, the Licensed
Intellectual Property, are subsisting, valid and enforceable, and have not been
adjudged invalid or unenforceable in whole or part.
(f) Except as set forth in Section 3.15(f) of the Disclosure Schedule, no
material Actions or Claims have been asserted or are pending or, to the best
knowledge of the Seller, are threatened against the Seller (i) based upon or
challenging or seeking to deny or restrict the use by the Seller of any of the
Owned Intellectual Property, the Licensed Intellectual Property, the Shared MIS
Systems and the Developed Software, (ii) alleging that any services provided by,
processes used by, or products manufactured or sold by the Seller (in connection
with the Business) infringe or misappropriate any Intellectual Property right of
any third party or (iii) alleging that the Licensed Intellectual Property is
being licensed or sublicensed in conflict with the terms of any license or other
agreement.
(g) To the best knowledge of the Seller, no Person is engaging in any
activity that infringes the Owned Intellectual Property or Licensed Intellectual
Property. Except as set forth in Section 3.15(g) of the Disclosure Schedule, the
Seller has not granted any license or other right to any third party with
respect to the Owned Intellectual Property or Licensed Intellectual Property.
39
(h) There is no Software (i) material to the operation of the Business or
(ii) manufactured, distributed, sold, licensed to a third party or marketed by
the Seller in connection with the Business, other than, in each case, the
Excluded Intellectual Property.
(i) The Seller has taken reasonable steps in accordance with normal
industry practice to maintain the confidentiality of the trade secrets and other
confidential Intellectual Property used in the Business. To the best knowledge
of the Seller, (i) there has been no misappropriation of any Trade Secrets used
in the Business by any Person; (ii) no employee, independent contractor or agent
of the Seller has misappropriated any Trade Secrets of any other Person in the
course of performance as an employee, independent contractor or agent of the
Business; and (iii) no employee, independent contractor or agent of the Seller
is in material default or material breach of any term of any written employment
agreement, nondisclosure agreement, assignment of invention agreement or similar
agreement or contract relating in any way to the protection, ownership,
development, use or transfer of Intellectual Property.
(j) The Shared MIS Systems and the Developed Software, together with the
Owned Intellectual Property and the Licensed Intellectual Property, includes all
of the Software necessary to enable the Business to become a fully operational
entity with all current functionality and appropriate controls to protect the
Business from any non-Business access. Upon Closing, the Purchaser shall own or
otherwise have a valid right to use (on the same terms and conditions that the
Seller or Audiovox previously had such right to use) all Shared MIS Systems and
Developed Software.
SECTION 3.16. Real Property. (a) There are no parcels of Owned Real
Property used in the Business or included in the Purchased Assets.
(b) The Seller has not leased or subleased any parcel or any portion of any
parcel of Leased Real Property to any other Person and no other Person has any
rights to the use, occupancy or enjoyment thereof pursuant to any lease,
sublease, license, occupancy or other agreement, nor has the Seller assigned its
interest under any lease or sublease of any parcel or any portion of any parcel
of Leased Real Property to any third party.
(c) Section 3.16(c) of the Disclosure Schedule sets forth a true and
complete list of all leases and subleases relating to the Leased Real Property
and any and all material ancillary documents pertaining thereto (including all
material amendments, modifications, supplements, exhibits, schedules, addenda
and restatements thereto and thereof and all consents, including consents for
alterations, assignments and sublets, documents recording variations, memoranda
of lease, options, rights of expansion, extension, first refusal and first offer
and evidence of commencement dates and expiration dates) (such leases, subleases
and ancillary documents being the "Lease Documents"). The Seller has made
available to the Purchaser copies of all written Lease Documents. With respect
to each of such leases and subleases, the Seller has not exercised or given any
notice of exercise, nor has any lessor or landlord exercised or received any
40
notice of exercise by a lessor or landlord of, any option, right of first offer
or right of first refusal contained in any such lease or sublease, including any
such option or right pertaining to purchase, expansion, renewal, extension or
relocation (collectively, "Options").
(d) Except as disclosed in Section 3.16(d) of the Disclosure Schedule, the
interests of Seller in the Leased Real Property to be transferred pursuant to
this Agreement are sufficient for the continued conduct of the Business after
the Closing in substantially the same manner as conducted prior to the Closing.
(e) To the best knowledge of the Seller, all the Leased Real Property is
occupied under a valid and current certificate of occupancy or similar permit.
(f) The rental set forth in each lease or sublease of the Leased Real
Property is the actual rental being paid, and there are no separate agreements
or understandings with respect to such rental.
(g) Except as set forth in Schedule 3.16(g) of the Disclosure Schedule, the
Seller has the full right to exercise any Option contained in the leases and
subleases pertaining to the Leased Real Property on the terms and conditions
contained therein and upon due exercise would be entitled to enjoy the full
benefit of such Options with respect thereto.
(h) To the best knowledge of the Seller, none of the Leased Real Property
to be transferred pursuant to this Agreement is the subject of any official
complaint or notice of violation of any applicable Law, zoning ordinance,
building code or regulation governing land use, and no such violation exists
which detracts from or interferes with the present use of such properties or
impairs the operations thereon; and there is no Law, zoning ordinance, building
code, use or occupancy restriction or condemnation action or proceeding pending,
or, to the best knowledge of the Seller, threatened with respect to any such
Leased Real Property which would detract from, or interfere with the present use
of, such property or impair the operations thereon, as presently conducted.
For purposes of this Section 3.16 and Sections 3.17 and 3.18, the term "lease"
shall include any and all leases, subleases, sale/leaseback agreements or
similar arrangements.
SECTION 3.17. Tangible Personal Property. (a) Section 3.17(a) of the
Disclosure Schedule lists (as of the end of the most recent calendar month for
which such data is available preceding the date of this Agreement) each item or
distinct group of machinery, equipment, tools, supplies, furniture, fixtures,
personalty, vehicles, rolling stock and other tangible personal property (the
"Tangible Personal Property") used in the Business.
(b) The Seller has the full right to exercise any renewal options contained
in the leases and subleases pertaining to the Tangible Personal Property on the
terms and conditions contained therein and upon due exercise would be entitled
to enjoy the use of each item of leased Tangible Personal Property for the full
term of such renewal options.
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SECTION 3.18. Assets. (a) The Seller owns, leases or has the legal right to
use all the properties and assets, including the Owned Intellectual Property,
the Licensed Intellectual Property, the Transferred IP Agreements, the Leased
Real Property and the Tangible Personal Property, used in the conduct of the
Business, and, with respect to contract rights, is a party to and enjoys the
right to the benefits of all such contracts, agreements and other arrangements
used by the Seller (as such relate to the Business) or in or relating to the
conduct of the Business, all of which properties, assets and rights constitute
Purchased Assets (subject to obtaining the third party consents and approvals)
except for the Excluded Assets. The Seller has good and marketable title to, or,
in the case of leased or subleased Purchased Assets, valid and subsisting
leasehold interests in, all the Purchased Assets, free and clear of all
Encumbrances, except Permitted Encumbrances.
(b) The Purchased Assets constitute all the properties, assets and rights
forming a part of, used or held in, and all such properties, assets and rights
as are necessary in the conduct of, the Business other than the Excluded
Intellectual Property.
(c) Following the consummation of the transactions contemplated by this
Agreement and the execution of the instruments of transfer contemplated by this
Agreement (and subject to the receipt of required consents and approvals), the
Purchaser will own, with good, valid and marketable title, or lease, under valid
and subsisting leases, or otherwise acquire the interests of the Seller in the
Purchased Assets, free and clear of any Encumbrances, other than Permitted
Encumbrances, and without incurring any penalty or other adverse consequence,
including any increase in rentals, royalties, or license or other fees imposed
as a result of, or arising from, the consummation of the transactions
contemplated by this Agreement.
SECTION 3.19. Customers. Listed in Section 3.19 of the Disclosure Schedule
are the names and addresses of the ten largest customers (by revenue) of the
Business for the twelve-month period ended February 29, 2004 and the amount for
which each such customer was invoiced during such period. Except as set forth in
Section 3.19 of the Disclosure Schedule, the Seller as of the date hereof has
not received any notice and has no reason to believe that any such significant
customer of the Business has ceased, or will cease, to use the products,
equipment, goods or services of the Business, or has substantially reduced, or
will substantially reduce, the use of such products, equipment, goods or
services at any time except for reasons which may be attributable to the
Purchaser.
SECTION 3.20. Suppliers. Listed in Section 3.20 of the Disclosure Schedule
are the names and addresses of each of the ten largest suppliers of raw
materials, supplies, merchandise and other goods for the Business for the
twelve-month period ended February 29, 2004 and the amount for which each such
42
supplier invoiced the Seller during such period. Except as set forth in Section
3.20 of the Disclosure Schedule, as of the date hereof the Seller has not
received any notice and has no reason to believe that any such supplier will not
sell raw materials, supplies, merchandise and other goods to the Purchaser at
any time after the Closing on terms and conditions substantially similar to
those used in its current sales to the Business, subject only to general and
customary price increases except for reasons which may be attributable to the
Purchaser. Except as set forth in Section 3.20 of the Disclosure Schedule, none
of the raw materials, supplies, merchandise or other goods supplied to the
Business are such that they are not generally available in the market from more
than one source.
SECTION 3.21. Employee Benefit Matters. (a) Plans and Material Documents.
Section 3.21(a) of the Disclosure Schedule lists (i) all employee benefit plans
(as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) and all bonus, stock option, stock purchase,
restricted stock, incentive, deferred compensation, retiree medical or life
insurance, supplemental retirement, severance or other benefit plans, programs
or arrangements, and all employment, termination, severance or other contracts
or agreements, whether legally enforceable or not, to which the Seller is a
party, with respect to which the Seller has any obligation or which are
maintained, contributed to or sponsored by the Seller, in each case, for the
benefit of any current or former employee, officer or director of the Business,
(ii) each employee benefit plan for which the Seller could incur liability under
Section 4069 of ERISA in the event such plan has been or were to be terminated,
(iii) any plan in respect of which the Seller could incur liability under
Section 4212(c) of ERISA, and (iv) any contracts, arrangements or understandings
between the Seller or any of its Affiliates and any employee of the Business,
including any contracts, arrangements or understandings relating to the sale of
the Purchased Assets (collectively, the "Plans"); provided, that there shall be
no obligation to list in Section 3.21(a) of the Disclosure Schedule any Plan
that is not material. The Seller has furnished to the Purchaser a complete and
accurate copy of each Plan that is in writing and a complete and accurate copy
of each material document prepared in connection with each such Plan, including
a copy of (i) each trust or other funding arrangement, (ii) each summary plan
description and summary of material modifications, (iii) the most recently filed
IRS Form 5500, (iv) the most recently received IRS determination letter for each
such Plan, and (v) the most recently prepared actuarial report and financial
statement in connection with each such Plan. Except as set forth in Section
3.21(a) of the Disclosure Schedule or as permitted to be excluded from the
definition of Plan, there are no other employee benefit plans, programs,
arrangements or agreements, whether formal or informal, whether in writing or
not, to which the Seller is a party, with respect to which the Seller has any
obligation or which are maintained, contributed to or sponsored by the Seller,
in each case, for the benefit of any current or former employee, officer or
director of the Business. The Seller has no express or implied commitment,
whether legally enforceable or not, to (i) create or incur liability with
respect to or cause to exist any other employee benefit plan, program or
arrangement, (ii) to enter into any contract or agreement to provide
compensation or benefits to any individual, or (iii) to modify, change or
terminate any Plan, other than with respect to a modification, change or
termination required by ERISA or the Code, in each of the foregoing cases, for
the benefit of any current or former employee, officer or director of the
Business.
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(b) Absence of Certain Types of Plans. None of the Plans is subject to
Title IV of ERISA or Section 412 of the Code and none of the Company, ACC or any
of their ERISA Affiliates currently contributes to, or during any time during
the last six years had an obligation to contribute to, or has any liability to a
plan subject to Title IV of ERISA or Section 412 of the Code. Except as set
forth in Section 3.21(b) of the Disclosure Schedule, none of the Plans provides
for the payment of separation, severance, termination or similar-type benefits
to any Person or obligates the Seller to pay separation, severance, termination
or similar-type benefits solely as a result of any transaction contemplated by
this Agreement or as a result of a change in control. Except as set forth in
Section 3.21(b) of the Disclosure Schedule, none of the Plans provides for or
promises retiree medical, disability or life insurance benefits to any current
or former employee, officer or director of the Business, other than COBRA
continuation coverage. Except as set forth in Section 3.21(b) of the Disclosure
Schedule, each of the Plans is subject only to the Laws of the United States or
a political subdivision thereof.
(c) Compliance with Applicable Law. Each Plan has been operated in all
material respects in accordance with the requirements of all applicable Law,
including ERISA and the Code, and the Seller and, to the knowledge of the Seller
after discharging its fiduciary duty to satisfy any due inquiry, all Persons who
participate in the operation of such Plans and all Plan "fiduciaries" (within
the meaning of Section 3(21) of ERISA) have acted in all material respects in
accordance with the provisions of all applicable Law, including ERISA and the
Code. The Seller has performed all obligations required to be performed by it
under, is not in any respect in default under or in violation of, and has no
knowledge of any default or violation by any party to, any Plan, in each case as
would not result in any material liability to the Seller or the Business. No
Action is pending or, to the best knowledge of the Seller, threatened with
respect to any Plan (other than claims for benefits in the ordinary course) and,
to the knowledge of the Seller, no fact or event exists that could give rise to
any such Action.
(d) Qualification of Certain Plans. Each Plan that is intended to be
qualified under Section 401(a) of the Code or Section 401(k) of the Code has
received a favorable determination letter from the IRS that it is so qualified,
and each trust established in connection with any Plan that is intended to be
exempt from federal income taxation under Section 501(a) of the Code has
received a determination letter from the IRS that it is so exempt, and, to the
knowledge of the Seller, no fact or event has occurred since the date of such
determination letter from the IRS to adversely affect the qualified status of
any such Plan or the exempt status of any such trust. Each trust maintained or
contributed to by the Seller or any of its ERISA Affiliates that is intended to
be qualified as a voluntary employees' beneficiary association and that is
intended to be exempt from federal income taxation under Section 501(c)(9) of
the Code has received a favorable determination letter from the IRS that it is
so qualified and so exempt, and, to the knowledge of the Seller, no fact or
event has occurred since the date of such determination by the IRS to adversely
affect such qualified or exempt status.
(e) Absence of Certain Liabilities and Events. The Seller has engaged in
no, and, to the knowledge of the Seller, there has been no, prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Code) with respect to any Plan. Neither the Seller nor any of its ERISA
Affiliates has incurred any liability for any penalty or tax arising under
Section 4971, 4972, 4980, 4980B or 6652 of the Code or any liability under
Section 502 of ERISA, and, to the knowledge of the Seller, no fact or event
exists that could give rise to any such liability.
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SECTION 3.22. Labor MattersThe Seller is not a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by the Seller in connection with the Business, and to the best
knowledge of the Seller currently there are no organizational campaigns,
petitions or other unionization activities seeking recognition of a collective
bargaining unit which could affect the Business. There are no strikes,
slowdowns, work stoppages or material controversies pending or, to the best
knowledge of the Seller, threatened between the Seller and any employees of the
Business, and the Seller has not experienced any such strike, slowdown or work
stoppage or material controversies within the past three years. There are no
unfair labor practice complaints pending against the Seller before the National
Labor Relations Board or any other Governmental Authority or any current union
representation questions involving Persons employed by or, to the best knowledge
of the Seller, otherwise providing services for the Seller in connection with
the Business. The Seller with respect to the Business is currently in material
compliance with all applicable Laws relating to the employment of labor,
including those related to wages, hours, collective bargaining and the payment
and withholding of Taxes and other sums as required by the appropriate
Governmental Authority and has withheld and paid to the appropriate Governmental
Authority or is holding for payment not yet due to such Governmental Authority
all material amounts required to be withheld from employees of the Business and
is not liable for any material arrears of wages, Taxes, penalties or other sums
for failure to comply with any of the foregoing. The Seller has in all material
respects paid in full to all the Persons employed by or otherwise performing
services for the Business or adequately accrued for in accordance with GAAP all
wages, salaries, commissions, bonuses, benefits and other compensation due to or
on behalf of such Persons. There is no material claim with respect to payment of
wages, salary or overtime pay that has been asserted or is now pending or, to
the best knowledge of the Seller, threatened, in each case, before any
Governmental Authority with respect to any current or former employee of the
Business. The Seller is not a party to, or otherwise bound by, any consent
decree with, or citation by, any Governmental Authority relating to employees or
employment practices with respect to the Business. Except as set forth in
Section 3.22 of the Disclosure Schedule, there is no charge or proceeding with
respect to a material violation of any occupational safety or health standard
that has been asserted or is now pending or, to the best knowledge of the
Seller, threatened with respect to the Business. Except as set forth in Section
3.22 of the Disclosure Schedule, there is no charge of discrimination in
employment or employment practices with respect to the Business, for any reason,
including age, gender, race, religion or other legally protected category, which
has been asserted or is now pending before the United States Equal Employment
Opportunity Commission, or any other Governmental Authority in any jurisdiction
in which the Seller has employed or currently employs any Person in connection
with the Business nor, to the best knowledge of the Seller has any such charge
been threatened. Except as set forth in Section 3.22 of the Disclosure Schedule,
to the best knowledge of the Seller, the Seller has not used, in connection with
the Business, the services of workers provided by third party contract labor
suppliers, temporary employees, "leased employees" (as that term is defined in
Section 414(n) of the Code), or Persons who have provided services as
independent contractors, to an extent that could reasonably be expected to
result in the disqualification of any Plan under applicable Law, or the
imposition of penalties or excise Taxes with respect to any Plan by the IRS, the
U.S. Department of Labor or any other Governmental Authority, or a claim by
45
such Person for participation or eligibility for benefits under any Plan.
SECTION 3.23. Key Employees. (a) Section 3.23 of the Disclosure Schedule
lists, for each employee of the Business, the name, title, place of employment,
hire date, actual W-2 compensation for 2002 and 2003 and annualized compensation
for 2004, accrued vacation and sick leave and paid time off as of the date of
this Agreement and a description of the position and job function of each
current salaried employee of the Seller who is employed or retained in
connection with the Business and whose annual compensation exceeded (or, in
2004, is expected to exceed) $75,000.
(b) Except as set forth in Section 3.23(b) of the Disclosure Schedule, no
director, officer, management employee or technical and professional Person who
is employed by or who otherwise perform services for the Seller in connection
with the Business are under written obligation to the Seller to maintain in
confidence all confidential or proprietary information acquired by them in the
course of their employment and to assign to the Seller all inventions made by
them within the scope of their employment during such employment and for a
reasonable period thereafter.
SECTION 3.24. Certain Interests. Except as set forth in Section 3.24 of the
Disclosure Schedule, to the best knowledge of the Seller, no stockholder,
officer or director of the Seller and no relative or spouse (or relative of such
spouse) who resides with, or is a dependent of, any such stockholder, officer or
director:
(a) has any direct or indirect material financial interest in any
competitor, supplier or customer of the Business; provided, however, that
the ownership of securities representing no more than one percent of the
outstanding voting power of any competitor, supplier or customer and that
are also listed on any national securities exchange, shall not be deemed to
be a "financial interest" so long as the Person owning such securities has
no other connection or relationship with such competitor, supplier or
customer;
(b) owns, directly or indirectly, in whole or in part, or has any
other interest in any tangible or intangible property that the Seller uses
in the conduct of the Business; or
(c) has outstanding any Indebtedness to the Seller.
SECTION 3.25. Taxes. Except as set forth in Section 3.25 of the Disclosure
Schedule, (a) all Tax Returns required to be filed by or with respect to the
Seller, the Purchased Assets or the Business (including any consolidated,
combined or unitary Tax Return that includes the Seller) have been timely filed,
46
and taxes in connection therewith have been timely paid; (b) all such Tax
Returns are true, correct and complete in all material respects; (c) no
adjustment relating to such Tax Returns has been proposed formally or informally
by any Governmental Authority and, to the best knowledge of the Seller, no basis
exists for any such adjustment; (d) there are no pending or, to the best
knowledge of the Seller, threatened Actions for the assessment or collection of
Taxes against the Seller, the Purchased Assets or the Business or any Person
that was included in the filing of a Tax Return with the Seller on a
consolidated, combined or unitary basis; (e) there are no Tax liens on any of
the Purchased Assets; (f) there are no requests for information outstanding that
could affect the Taxes relating to the Purchased Assets or the Business; (g) the
Seller has not received any notice or inquiry from any jurisdiction where the
Seller does not currently file Tax Returns to the effect that such filings may
be required with respect to the Purchased Assets or the Business or that the
Purchased Assets or the Business may otherwise be subject to taxation by such
jurisdiction; (h) the Seller has properly and timely withheld, collected or
deposited all amounts required to be withheld, collected or deposited in respect
of Taxes and (i) to the best knowledge of the Seller, there are no Tax
investigations, inquiries or audits by any Tax authority in progress relating to
the Purchased Assets or the Business, nor has the Seller received any written
notice indicating that a Governmental Authority intends to conduct such an audit
or investigation.
SECTION 3.26. Insurance. Set forth in Section 3.26 of the Disclosure
Schedule is a list of all material insurance policies related to the Business,
which policies cover all material assets, properties and reasonably anticipated
risks of the Business. All such policies are in full force and effect, all
premiums due thereon have been paid and the Seller has complied in all material
respects with the provisions of such policies. No proceeding is pending or, to
the best knowledge of the Seller, threatened to revoke or cancel or limit such
policies and no notice of cancellation of any such policies has been received by
the Seller.
SECTION 3.27. Certain Business Practices. Except as set forth in Section
3.27 of the Disclosure Schedule, neither the Seller nor any of its directors,
officers, agents, representatives or employees (in their capacity as directors,
officers, agents, representatives or employees) has: (a) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity in respect of the Business; (b) directly or indirectly,
paid or delivered any fee, commission or other sum of money or item of property,
however characterized, to any finder, agent, or other party acting on behalf of
or under the auspices of a governmental official or Governmental Authority, in
the United States or any other country, which is in any manner illegal under any
Law of the United States or any other country having jurisdiction; or (c) made
any payment to any customer or supplier of the Seller or any officer, director,
partner, employee or agent of any such customer or officer, director, partner,
employee or agent for the unlawful reciprocal practice, or made any other
unlawful payment or given any other unlawful consideration to any such customer
or supplier or any such officer, director, partner, employee or agent, in
respect of the Business.
47
SECTION 3.28. INTENTIONALLY OMITTED.
SECTION 3.29. Brokers. Except for ▇▇▇▇▇▇▇▇▇ & Company, Inc., no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
or the Ancillary Agreements based upon arrangements made by or on behalf of the
Seller or its Affiliates. The Seller is solely responsible for the fees and
expenses of ▇▇▇▇▇▇▇▇▇ & Company, Inc.
SECTION 3.30. Board Approval; Vote Required. (a) The Board of Directors of
Audiovox (the "Audiovox Board"), by resolutions duly adopted by unanimous vote
of those voting at a meeting duly called and held and not subsequently rescinded
or modified in any way, has duly (i) determined that this Agreement and the
transactions contemplated hereby are fair to and in the best interests of
Audiovox and its stockholders, (ii) approved this Agreement and the transactions
contemplated hereby and declared their advisability and (iii) recommended that
the stockholders of Audiovox approve and adopt this Agreement and approve the
transactions contemplated hereby and directed that this Agreement and the
transactions contemplated hereby be submitted for consideration by Audiovox's
stockholders at the Audiovox Stockholders' Meeting (as hereinafter defined).
(b) The only vote of the holders of any class or series of capital stock of
Audiovox necessary to approve this Agreement and the transactions contemplated
hereby is the affirmative vote of the holders of a majority of the votes under
the outstanding shares of Class A common stock and Class B common stock of
Audiovox voting as a single class in favor of the approval and adoption of this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
As an inducement to the Seller to enter into this Agreement, the Purchaser
hereby represents and warrants to the Seller as follows:
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SECTION 4.01. Organization and Authority of the Purchaser. The Purchaser is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all necessary corporate
power and authority to enter into this Agreement and the Ancillary Agreements to
which it is a party, to carry out its obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery by the Purchaser of this Agreement and the Ancillary Agreements to
which it is a party, the performance by the Purchaser of its obligations
hereunder and thereunder and the consummation by the Purchaser of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite corporate action on the part of the Purchaser. This Agreement has
been, and upon their execution the Ancillary Agreements to which the Purchaser
is a party shall have been, duly executed and delivered by the Purchaser, and
(assuming due authorization, execution and delivery by the Seller) this
Agreement constitutes, and upon their execution the Ancillary Agreements to
which the Purchaser is a party shall constitute, legal, valid and binding
obligations of the Purchaser, enforceable against the Purchaser in accordance
with their respective terms.
SECTION 4.02. No Conflict. Assuming compliance with the pre-merger
notification and waiting period requirements of the HSR Act and the making and
obtaining of all filings, notifications, consents, approvals, authorizations and
other actions referred to in Section 4.03, except as may result from any facts
or circumstances relating solely to the Seller, the execution, delivery and
performance by the Purchaser of this Agreement and the Ancillary Agreements to
which it is a party do not and will not (a) violate, conflict with or result in
the breach of any provision of the Certificate of Incorporation or By-laws of
the Purchaser, (b) conflict with or violate any material Law or Governmental
Order applicable to the Purchaser or (c) conflict with, or result in any breach
of, constitute a default (or event which with the giving of notice or lapse of
time, or both, would become a default) under, require any consent under, or give
to others any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, any material note, bond, mortgage or indenture,
contract, agreement, lease, sublease, license, permit, franchise or other
instrument or arrangement to which the Purchaser is a party, which would
adversely affect the ability of the Purchaser to carry out its obligations
under, and to consummate the transactions contemplated by, this Agreement or the
Ancillary Agreements.
SECTION 4.03. Governmental Consents and Approvals. The execution, delivery
and performance by the Purchaser of this Agreement and each Ancillary Agreement
to which the Purchaser is a party do not and will not require any material
consent, approval, authorization or other order of, action by, filing with, or
notification to any Governmental Authority applicable to the Purchaser, except
(a) as described in a writing given to the Seller by the Purchaser on the date
of this Agreement, (b) the pre-merger notification and waiting period
requirements of the HSR Act and (c) the applicable antitrust approvals in the
Peoples Republic of China.
49
SECTION 4.04. Financing. The Purchaser has, and at the Closing will have,
all funds necessary to consummate all the transactions contemplated by this
Agreement and the Ancillary Agreements.
SECTION 4.05. Litigation. Except as set forth in a writing given to the
Seller by the Purchaser on the date of this Agreement, no Action by or against
the Purchaser is pending or, to the best knowledge of the Purchaser, threatened,
which would materially and adversely affect the legality, validity or
enforceability of this Agreement, any Ancillary Agreement or the consummation of
the transactions contemplated hereby or thereby.
SECTION 4.06. Brokers. Except for ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Purchaser. The Purchaser shall be solely responsible for
payment of the fees and expenses of ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated.
SECTION 4.07. UTStarcom Canada. UTStarcom Canada is registered in Canada
and in the Province of Ontario and is eligible to apply for the certificates
necessary to exempt either the Seller or the Purchaser from paying GST and PST
taxes in Canada and in the Province of Ontario as a result of the transactions
contemplated by this Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing. (a) The Seller
covenants and agrees that, except as described in Section 5.01(a) of the
Disclosure Schedule, between the date hereof and the time of the Closing, the
Seller shall not conduct the Business other than in the ordinary course and
consistent with the Seller's prior practice. Without limiting the generality of
the foregoing, except as described in Section 5.01(a) of the Disclosure
Schedule, the Seller shall (as it relates to the Business) (i) continue its
advertising and promotional activities, and pricing and purchasing policies, in
accordance with past practice and good business judgment; (ii) not shorten or
lengthen the customary payment cycles for any of its payables or
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receivables; (iii) use its reasonable commercial efforts to (A) preserve intact
the business organization of the Business, (B) keep available to the Purchaser
(without any obligation to increase their compensation) the services of the
employees of the Seller to whom offers of employment are to be made pursuant to
Section 6.01, (C) continue in full force and effect without material
modification all existing policies or binders of insurance currently maintained
in respect of the Business and (D) preserve its current relationships with the
customers and suppliers of the Business and other persons with which the
Business has had significant business relationships; (iv) exercise, but only
after notice to the Purchaser and receipt of the Purchaser's prior written
approval (not to be unreasonably withheld), any rights of renewal pursuant to
the terms of any of the leases or subleases set forth in Section 3.16(c) of the
Disclosure Schedule which by their terms would otherwise expire; and (v) except
in accordance with Section 5.06 or Article IX, not engage in any practice, take
any action, fail to take any action or enter into any transaction which would
render it unable to satisfy the condition set forth in Section 7.02(a).
(b) Except as described in Section 5.01(b) of the Disclosure Schedule, the
Seller covenants and agrees that, between the date hereof and the time of the
Closing, without the prior written consent of the Purchaser (not to be
unreasonably withheld), the Seller will not take any of the actions enumerated
in the second sentence of Section 3.10 and all clauses thereof (other than
clauses (k), (u), (x), (z) and (aa), which shall be excluded).
SECTION 5.02. Access to Information. (a) From the date hereof until the
Closing, subject to applicable limitations under confidentiality agreements to
which the Seller is bound, upon reasonable notice, the Seller shall cause its
officers, directors, employees, agents, representatives, accountants and counsel
to: (i) afford the officers, employees, agents, accountants, counsel, financing
sources and representatives of the Purchaser reasonable access, during normal
business hours, to the offices, properties, plants, other facilities, and books
and records of the Seller relating to the Business and to those officers,
directors, employees, agents, accountants and counsel of the Seller who have any
knowledge relating to the Business and (ii) furnish to the officers, employees,
agents, accountants, counsel, financing sources and representatives of the
Purchaser such additional financial and operating data and other information
regarding the assets, properties, liabilities and goodwill of the Business (or
legible copies thereof) that are reasonably available to the Seller as the
Purchaser may from time to time reasonably request. All information disclosed
hereunder shall be subject to the Confidentiality Agreement.
(b) In order to facilitate the resolution of any claims made against or
incurred by the Seller, the making of any necessary filing by Audiovox or the
Seller or for any other reasonable purpose, for a period of seven years after
the Closing, the Purchaser shall (i) retain the books and records relating to
the Business relating to periods prior to the Closing in a manner reasonably
consistent with the prior practice of the Seller, (ii) authorize, direct and
instruct its employees with knowledge of such claims to reasonably cooperate and
assist the Seller in connection with such claims and (iii) upon reasonable
notice, afford the officers, employees, agents and representatives of Audiovox
or the Seller reasonable access (including the right to make, at the Seller's
51
expense, photocopies), during normal business hours, to such books and records.
(c) In order to facilitate the resolution of any claims made by or against
or incurred by the Purchaser after the Closing or for any other reasonable
purpose, for a period of seven years following the Closing, the Seller shall (i)
retain the books and records of the Seller which relate to the Business and its
operations for periods prior to the Closing and which shall not otherwise have
been delivered to the Purchaser, (ii) authorize, direct and instruct its
employees with knowledge of such claims to reasonably cooperate and assist the
Purchaser in connection with such claims and (iii) upon reasonable notice,
afford the officers, employees, agents and representatives of the Purchaser
reasonable access (including the right to make photocopies, at the Purchaser's
expense), during normal business hours, to such books and records.
SECTION 5.03. Confidentiality. Subject to the Seller's rights with respect
to the Excluded Assets and the Excluded Liabilities, the Seller agrees to, and
shall cause its agents, representatives, Affiliates, employees, officers and
directors to: (i) treat and hold as confidential (and not disclose or provide
access to any Person to) all information relating to trade secrets, processes,
patent applications, product development, price, customer and supplier lists,
pricing and marketing plans, policies and strategies, details of client and
consultant contracts, operations methods, product development techniques,
business acquisition plans, new personnel acquisition plans and all other
confidential or proprietary information with respect to the Business, (ii) in
the event that the Seller or any such agent, representative, Affiliate,
employee, officer or director becomes legally compelled to disclose any such
information, provide the Purchaser with prompt written notice of such
requirement so that the Purchaser may seek a protective order or other remedy or
waive compliance with this Section 5.03, and (iii) in the event that such
protective order or other remedy is not obtained, or the Purchaser waives
compliance with this Section 5.03, furnish only that portion of such
confidential information which is legally required to be provided and exercise
its reasonable commercial efforts to obtain assurances that confidential
treatment will be accorded such information; provided, however, that this
sentence shall not apply to any information that, (x) at the time of disclosure,
is available publicly and was not disclosed in breach of this Agreement by the
Seller, its agents, representatives, Affiliates, employees, officers or
directors, (y) the Seller reasonably believes is necessary or advisable in
connection with any claim against the Seller or for which the Seller is
purportedly responsible, whether by a third party or otherwise or (z) the
performance by the Seller of its obligations, or the assertion by the Seller of
any of its rights or remedies, under any Acquisition Document; and provided
further that, with respect to Intellectual Property, specific information shall
not be deemed to be within the foregoing exception merely because it is embraced
in general disclosures in the public domain. In addition, with respect to
Intellectual Property, any combination of features shall not be deemed to be
within the foregoing exception merely because the individual features are in the
public domain unless the combination itself and its principle of operation are
in the public domain. Notwithstanding the foregoing, the Seller and its
Affiliates may make such disclosures as are required under applicable securities
or state law or regulation or national stock exchange rules or regulations. The
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Seller agrees and acknowledges that remedies at law for any breach of its
obligations under this Section 5.03 are inadequate and that in addition thereto
the Purchaser shall be entitled to seek equitable relief, including injunction
and specific performance, in the event of any such breach.
SECTION 5.04. Regulatory and Other Authorizations; Notices and Consents.
(a) The Seller shall use its reasonable commercial efforts to obtain all
authorizations, consents, orders and approvals of all third parties, including
all Governmental Authorities and officials that may be or become reasonably
necessary for its execution and delivery of, and the performance of its
obligations pursuant to, this Agreement and the Ancillary Agreements and will
cooperate fully with the Purchaser in promptly seeking to obtain all such
authorizations, consents, orders and approvals. Each party hereto agrees to make
an appropriate filing, if necessary, pursuant to the HSR Act with respect to the
transactions contemplated by this Agreement within ten (10) Business Days of the
date hereof and to supply as promptly as practicable to the appropriate
Governmental Authorities any additional information and documentary material
that may be requested pursuant to the HSR Act. The filing fee for such HSR Act
filing shall be borne by the Purchaser.
(b) The Seller shall cooperate and use its reasonable commercial efforts to
obtain or assist the Purchaser in obtaining such third party consents and
estoppel certificates as may be reasonably necessary or desirable in connection
with the transactions contemplated by this Agreement.
(c) The Purchaser shall cooperate and use all reasonable efforts to assist
the Seller in giving such notices and obtaining such consents and estoppel
certificates; provided, however, that the Purchaser shall have no obligation to
give any guarantee or other consideration of any nature in connection with any
such notice, consent or estoppel certificate or to consent to any change in the
terms of any agreement or arrangement which the Purchaser in its sole discretion
may deem adverse to the interests of the Purchaser or the Business.
(d) The Seller and the Purchaser agree that, in the event that any consent,
approval or authorization reasonably necessary or desirable to preserve for the
Business any right or benefit under any Assumed Contract is not obtained prior
to the Closing, the Seller will, subsequent to the Closing, cooperate with the
Purchaser in attempting to obtain such consent, approval or authorization as
promptly thereafter as is reasonably practicable. If such consent, approval or
authorization cannot be obtained, the Seller shall use its reasonable commercial
efforts to provide the Purchaser with, or cause to be provided to the Purchaser,
the rights and benefits of the affected Assumed Contract for the term of such
Assumed Contract. To the extent that any Assumed Contract is not capable of
being assigned, transferred, subleased or sublicensed without the consent or
waiver of the other party thereto or any third party including a government or
governmental unit, or if such assignment, transfer, sublease or sublicense or
attempted assignment, transfer, sublease or sublicense would constitute a breach
thereof or a violation of any law, decree, order, regulation, or other
governmental edict, this Agreement shall not constitute an assignment, transfer,
sublease or sublicense thereof, or an attempted assignment, transfer, sublease
or sublicense of any such Assumed Contract.
53
(e) In using its reasonable commercial efforts to obtain any authorization,
order, consent, approval, assignment, estoppel certificate or waiver hereunder,
the Seller shall not be obligated to incur costs, expenses (including
third-party legal fees) and (collectively, "Consent Costs") which, along with
all other Consent Costs incurred by the Seller, (x) exceed $500,000 in the
aggregate and (y) are other than one-time costs to be paid in connection with
obtaining such authorization, order, consent, approval, assignment or waiver.
For the sake of clarity, Audiovox shall not have any obligation to incur Consent
Costs.
SECTION 5.05. Notice of Developments. Prior to the Closing, the Seller
shall promptly notify the Purchaser (a) in writing of all events, circumstances,
facts and occurrences arising subsequent to the date of this Agreement which
could reasonably be expected to result in a failure to satisfy the condition set
forth in Section 7.02(a) and (b) all other material and adverse developments
affecting the Purchased Assets, Liabilities, business, financial condition,
operations, results of operations, customer or supplier relations, employee
relations, projections or prospects of the Business.
SECTION 5.06. No Solicitation or Negotiation. (a) Each of the Seller and
Audiovox agrees that neither it nor any of its directors, officers or employees
will, and that it will cause its agents, advisors and other representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it), not to, directly or indirectly, (i) solicit, initiate or
encourage (including by way of furnishing nonpublic information), or take any
other action to facilitate, any inquiries or the making of any proposal or offer
(including, without limitation, any proposal or offer to the stockholders of
Audiovox) that constitutes, or may reasonably be expected to lead to, any
Competing Transaction (as hereinafter defined), or (ii) enter into or maintain
or continue discussions or negotiations with any person or entity in furtherance
of such inquiries or to obtain a proposal or offer for a Competing Transaction,
or (iii) agree to, approve, endorse or recommend any Competing Transaction or
enter into any letter of intent or other contract, agreement or commitment
contemplating or otherwise relating to any Competing Transaction. The Seller or
Audiovox, as applicable, shall notify the Purchaser as promptly as practicable
(and in any event within two (2) days after the Seller or Audiovox, as
applicable, attains knowledge thereof), orally and in writing, if any proposal
or offer, or any inquiry or contact with any person with respect thereto,
regarding a Competing Transaction is made, specifying the material terms and
conditions thereof and the identity of the party making such proposal or offer
or inquiry or contact (and the Seller or Audiovox, as applicable, shall notify
the Purchaser concerning any material amendments to such proposal or offer).
Audiovox shall provide the Purchaser with forty-eight (48) hours prior notice
(or such lesser prior notice as is provided to the members of the Audiovox
Board) of any meeting of the Audiovox Board at which the Audiovox Board is
reasonably expected to consider any Competing Transaction. The Seller and
Audiovox immediately shall cease and cause to be terminated all existing
discussions or negotiations with any parties conducted heretofore with respect
to a Competing Transaction. The Seller and Audiovox agree not to, without the
54
prior written consent of the Purchaser, release any Person from, or waive any
provision of, any confidentiality or standstill agreement (unless the Audiovox
Board, in order to comply with its fiduciary obligations to Audiovox and its
stockholders under applicable Law, must waive the standstill provisions so that
such Person may make a proposal or offer which may reasonably be expected to
lead to a Superior Proposal) to which the Seller and Audiovox is a party
relating to Audiovox, the Seller or the Purchased Assets.
(b) Notwithstanding anything to the contrary in Section 5.06, the Audiovox
Board may furnish information to, and enter into discussions with, a Person who
has made an unsolicited, written, bona fide proposal or offer regarding a
Competing Transaction, and the Audiovox Board has (i) determined, in its good
faith judgment (after having received the advice of a financial advisor of
nationally recognized reputation), that such proposal or offer constitutes, or
may be reasonably expected to lead to, a Superior Proposal (as hereunder
defined), (ii) determined, in its good faith judgment after consultation with
independent legal counsel (who may be Audiovox's regularly engaged independent
legal counsel), that, in light of such proposal or offer, the furnishing of such
information or entering into discussions is required to comply with its
fiduciary obligations to Audiovox and its stockholders under applicable Law,
(iii) provided written notice to the Purchaser of its intent to furnish
information or enter into discussions with such person, and (iv) obtained from
such person an executed confidentiality agreement on terms no less favorable to
Audiovox than those contained in the Confidentiality Agreement (it being
understood that such confidentiality agreement and any related agreements shall
not include any provision calling for any exclusive right to negotiate with such
party or having the effect of prohibiting Audiovox from satisfying its
obligations under this Agreement).
(c) Except as set forth in this Section 5.06(c), neither the Audiovox Board
nor any committee thereof shall withdraw or modify, or propose to withdraw or
modify, in a manner adverse to the Purchaser, the Audiovox Recommendation (a
"Change in the Audiovox Recommendation") or approve or recommend, or cause or
permit Audiovox to enter into any letter of intent, agreement or obligation with
respect to, any Competing Transaction. Notwithstanding the foregoing, if the
Audiovox Board determines, in its good faith judgment prior to the time of the
Audiovox Stockholders' Meeting and after consultation with independent legal
counsel (who may be Audiovox's regularly engaged independent legal counsel),
that it is required to make a Change in the Audiovox Recommendation to comply
with its fiduciary obligations to Audiovox and its stockholders under applicable
Law, the Audiovox Board may make a Change in the Audiovox Recommendation to
recommend a Superior Proposal, but only (i) after providing written notice to
the Purchaser (a "Notice of Superior Proposal") advising Audiovox that the
Audiovox Board has received a Superior Proposal, specifying the material terms
and conditions of such Superior Proposal and identifying the person making such
Superior Proposal and indicating that the Audiovox Board intends to effect a
Change in the Audiovox Recommendation and the manner in which it intends (or may
intend) to do so, and (ii) if the Purchaser does not, within three (3) business
days of Purchaser's receipt of the Notice of Superior Proposal, make an offer
that the Audiovox Board determines, in its good faith judgment (after having
received the advice of a financial advisor of nationally recognized reputation)
to be at least as favorable to Audiovox's stockholders as such Superior
Proposal. Any disclosure that the Audiovox Board may determine that it is
compelled to make with respect to the receipt of a proposal or offer for a
Competing Transaction or otherwise in order to comply with its fiduciary
obligations to Audiovox and its stockholders under applicable Law, including
55
under Rule 14d-9 or 14e-2 of the rules promulgated under the Securities Exchange
Act of 1934, as amended, will not constitute a violation of this Agreement.
(d) A "Competing Transaction" means any of the following (other than the
transactions contemplated by this Agreement): (i) any merger, consolidation,
share exchange, business combination, recapitalization, liquidation, dissolution
or other similar transaction involving Audiovox or the Seller; (ii) any sale,
lease, exchange, transfer or other disposition of all or a substantial part of
the assets of Audiovox or the Seller (other than a disposition of the assets of
Audiovox that do not comprise the Purchased Assets); (iii) any sale, exchange,
transfer or other disposition of 15% or more of any class of equity securities
of Audiovox or of the Seller; (iv) any tender offer or exchange offer that, if
consummated, would result in any person beneficially owning 15% or more of any
class of equity securities of Audiovox or of the Seller; or (v) any solicitation
in opposition to approval and adoption of this Agreement by Audiovox's
stockholders.
(e) A "Superior Proposal" means an unsolicited written bona fide offer made
by a third party to consummate any of the following transactions: (i) a merger,
consolidation, share exchange, business combination or other similar transaction
involving Audiovox or the Seller pursuant to which the stockholders of Audiovox
or the Seller, as the case may be, immediately preceding such transaction would
hold less than 50% of the equity interest in the surviving or resulting entity
of such transaction; (ii) the acquisition by any person or group (including by
means of a tender offer or an exchange offer or a two-step transaction involving
a tender offer followed with reasonable promptness by a cash-out merger
involving Audiovox), directly or indirectly, of ownership of 51% of the then
outstanding shares of stock of Audiovox or 90% of the then outstanding shares of
stock of the Seller, or (iii) an acquisition of 85% of the assets of the Seller,
in each case on terms (including conditions to consummation of the contemplated
transaction) that the Audiovox Board determines, in its good faith judgment
(after having received the advice of a financial advisor of nationally
recognized reputation), to be more favorable to Audiovox stockholders than
transactions contemplated by this Agreement; provided, however, that any such
offer shall not be deemed to be a "Superior Proposal" if any financing required
to consummate the transaction contemplated by such offer is not committed and is
not likely in the good faith judgment of the Audiovox Board (after having
received the advice of a financial advisor of nationally recognized reputation)
to be obtained by such third party on a timely basis.
SECTION 5.07. Use of Intellectual Property. From and after the Closing,
neither the Seller nor any of its Affiliates shall use any of the Owned
Intellectual Property or any of the Licensed Intellectual Property, except for
the Excluded Assets.
SECTION 5.08. Non-Competition. (a) For a period of five years after the
Closing (the "Restricted Period"), neither the Seller nor Audiovox shall
56
conduct, directly or indirectly, the Business or, without the prior written
consent of the Purchaser, directly or indirectly, own an interest in, manage,
operate, control, as a partner, stockholder or otherwise, any Person that
conducts the Business; provided, however, that, (x) for the purposes of this
Section 5.08, ownership of securities having no more than five percent of the
outstanding voting power of any such Person shall not be deemed to be in
violation of this Section 5.08 as long as the Person owning such securities has
no other material connection or relationship with, and no express ability to
effect the management of, such other Person and (y) ownership of a Person
hereafter acquired by the Seller or Audiovox that conducts the Business shall
not be deemed a violation of this Section 5.08, provided, that (1) such Person
is not engaged primarily in conducting the Business, (2) if Audiovox or the
Seller, as the case may be, causes that Person to cease conducting the Business
within six months of Audiovox or the Seller becoming the owner of such Person
and (3) such Person shall not use the Audiovox name to promote the Business
during such period of ownership by Audiovox or the Seller; and provided,
further, that the ownership interests described in Section 5.08(a) of the
Disclosure Schedule shall not be deemed to be in violation of this Section 5.08.
(b) As a separate and independent covenant, the Seller agrees with the
Purchaser that, for a period of five years following the Closing, neither the
Seller nor Audiovox will in any way, directly or indirectly, materially
interfere with or attempt to materially interfere with any officers, employees,
representatives or agents of the Business or solicit or attempt to solicit any
employee of the Purchaser to leave the employ of the Purchaser or violate the
terms of their contracts, or any employment arrangements, with the Purchaser;
provided, however, that the foregoing will not prohibit a general solicitation
to the public.
(c) The Restricted Period shall be extended by the length of any period
during which the Seller or Audiovox is in breach of the terms of this Section
5.08.
(d) The Seller acknowledges that the covenants of the Seller set forth in
this Section 5.08 are an essential element of this Agreement and that, but for
the agreement of the Seller to comply with these covenants, the Purchaser would
not have entered into this Agreement. The Seller acknowledges that this Section
5.08 constitutes an independent covenant that shall not be affected by
performance or nonperformance of any other provision of this Agreement by the
Purchaser. The Seller has independently consulted with its counsel and after
such consultation agrees that the covenants set forth in this Section 5.08 are
reasonable and proper.
SECTION 5.09. INTENTIONALLY OMITTED.
SECTION 5.10. Bulk Transfer Laws. The Purchaser hereby waives compliance by
the Seller with any applicable bulk sale or bulk transfer laws of any
jurisdiction in connection with the sale of the Purchased Assets to the
57
Purchaser (other than any obligations with respect to the application of the
proceeds therefrom). The Seller agrees to indemnify the Purchaser in accordance
with Article VIII against any and all liabilities (including any liabilities for
Taxes of Seller as a transferee or otherwise) which may be asserted by third
parties against the Purchaser as a result of the Seller's noncompliance with any
such law.
SECTION 5.11. Inter-company Arrangements. Prior to the Closing, the Seller
shall cause any contract or arrangement that is disclosed (or should have been
disclosed) in Section 3.14(a)(viii) of the Disclosure Schedule, other than the
Inter-company Payables and those contracts or arrangements set forth in Section
5.11 of the Disclosure Schedule, to be terminated.
SECTION 5.12. Payments on Behalf of Affiliates . Payments made or received
by the Purchaser pursuant to Article II, this Article V or Article VIII hereof
shall, in appropriate circumstances, be made on behalf of, or received in trust
for the benefit of, the relevant Affiliate of the Purchaser. The Purchaser may
direct in writing any such payment to be made by or to the appropriate
Affiliate, and the Seller shall comply with any such direction received at least
two Business Days prior to the date such payment is due.
SECTION 5.13. Transition Services . Following the Closing, the Seller shall
provide, or cause to be provided, to the Business certain services that are
currently provided by the Seller and its Affiliates to the Business, all in
accordance with the transition services agreement substantially in the form
attached hereto as Exhibit 5.13 (the "Transition Services Agreement") to be
entered into by the Seller and the Purchaser as of the Closing.
SECTION 5.14. Tax Cooperation and Exchange of Information . Upon the terms
set forth in Section 5.02 of this Agreement, the Seller and the Purchaser shall
provide each other with such cooperation and information as either of them
reasonably may request of the other in filing any Tax Return, amended Tax Return
or claim for refund, determining a liability for Taxes or a right to a refund of
Taxes, participating in or conducting any audit or other proceeding in respect
of Taxes. Such cooperation and information shall include providing copies of
relevant Tax Returns or portions thereof, together with accompanying schedules,
related work papers and documents in their possession relating to rulings or
other determinations by Tax authorities. The Seller and the Purchaser shall make
themselves (and shall direct and instruct their respective employees to be)
58
available on a basis mutually convenient to both parties to provide explanations
of any documents or information provided under this Section 5.14. Each of the
Seller and the Purchaser shall retain all Tax Returns, schedules and work
papers, records and other documents in its possession (or in the possession of
its Affiliates) relating to Tax matters relevant to the Purchased Assets or the
Business for each taxable period first ending after the Closing and for all
prior taxable periods until the later of (a) the expiration of the statute of
limitations of the taxable periods to which such Tax Returns and other documents
relate, without regard to extensions except to the extent notified by the other
party in writing of such extensions for the respective Tax periods, or (b) six
years following the due date (without extension) for such Tax Returns. After
such time, before the Seller or the Purchaser shall dispose of any such
documents in its possession (or in the possession of its Affiliates), the other
party shall be given the opportunity, after 90 days' prior written notice, to
remove and retain all or any part of such documents as such other party may
select (at such other party's expense). Any information obtained under this
Section 5.14 shall be kept confidential in accordance with Section 5.03, except
as may be otherwise necessary in connection with the filing of Tax Returns or
claims for refund or in conducting an audit or other proceeding.
The Purchaser shall, in accordance with Section 5.02(b), make available the
Transferred Employees and direct and instruct such Transferred Employees to
cooperate with the Seller in the resolution of any Tax claims made against or
incurred by the Seller prior to the Closing.
SECTION 5.15. Conveyance Taxes . The Seller shall be liable for and shall
hold the Purchaser harmless against any Conveyance Taxes which become payable in
connection with the transactions contemplated by this Agreement. The Seller,
after the review and consent by the Purchaser, shall file such applications and
documents as shall permit any such Conveyance Tax to be assessed and paid on or
prior to the Closing in accordance with any available pre-sale filing procedure.
The Purchaser shall execute and deliver all instruments and certificates
necessary to enable the Seller to comply with the foregoing. The Purchaser shall
complete and execute resale or other exemption certificates, if available, with
respect to the Purchased Assets acquired hereunder, and shall provide the Seller
with executed copies thereof. The Purchaser will use its reasonable commercial
efforts to cooperate with the Seller to take all actions reasonably necessary or
desirable in order to exempt the transactions contemplated by this Agreement
from any GST and PST taxes in Canada and in the Province of Ontario.
SECTION 5.16. Further Action . (a) If, after the Closing, the Seller
becomes aware of, or the Purchaser brings to the attention of the Seller, any
assets of the Seller that should have been transferred as of the Closing but
were not so transferred, then such assets shall be transferred to the Purchaser
(or to one or more Affiliates of the Purchaser designated by the Purchaser) as
soon as possible. This provision, however, shall not limit, in any way, the
rights and remedies of the Purchaser under this Agreement.
59
(b) Each of the parties hereto shall use all reasonable efforts to take, or
cause to be taken, all appropriate action, do or cause to be done all things
reasonably necessary under applicable Law, and to execute and deliver such
documents and other papers, as may be required to carry out the provisions of
this Agreement and the Ancillary Agreements to which it is a party and
consummate and make effective the transactions contemplated hereby and thereby.
SECTION 5.17. INTENTIONALLY OMITTED.
SECTION 5.18. Proration of Taxes and Certain Charges . (a) Except as
provided in Section 5.15, all Property Taxes levied with respect to the
Purchased Assets for any Straddle Period, whether imposed or assessed in the
Pre-Closing Tax Period or Post-Closing Tax Period, shall be prorated between the
Seller and the Purchaser as of 12:01 A.M. on the day after the date of the
Closing. If any Taxes subject to proration are paid by Purchaser, on the one
hand, or Seller, on the other hand, the proportionate amount of such Taxes paid
(or in the event a refund of any portion of such Taxes previously paid is
received, such refund) shall be paid promptly by (or to) the other after the
payment of such Taxes (or promptly following the receipt of any such refund).
(b) Except as otherwise provided in this Agreement, all installments of
special assessments or other charges on or with respect to the Purchased Assets
payable by the Seller for any period in which the Closing shall occur,
including, without limitation, base rent, common area maintenance, royalties,
all municipal, utility or authority charges for water, sewer, electric or gas
charges, garbage or waste removal, and cost of fuel, shall be apportioned as of
the Closing and each party shall pay its proportionate share promptly upon the
receipt of any ▇▇▇▇, statement or other charge with respect thereto. If such
charges or rates are assessed either based upon time or for a specified period,
such charges or rates shall be prorated between the Seller and the Purchaser as
of the 12:01 A.M. on the day after the date of the Closing. If such charges or
rates are assessed based upon usage of utility or similar services, such charges
shall be prorated based upon meter readings taken on the date of the Closing.
(c) All refunds, reimbursements, installments of base rent, additional
rent, license fees or other use related revenue receivable by any party to the
extent attributable to the operation of the Business for any period in which the
Closing shall occur shall be prorated so that the Seller shall be entitled to
that portion of any such installment applicable to any period from and after the
day after the date of the Closing, and if Purchaser or Seller, as the case may
be, shall receive any such payments after the date of the Closing, they shall
promptly remit to such other parties their share of such payments.
(d) The prorations pursuant to this Section 5.18 may be calculated after
60
the Closing, as each item to be prorated (including without limitation any such
Tax, obligation, assessment, charge, refund, reimbursement, rent installment,
fee or revenue) accrues or comes due, provided that, in any event, any such
proration shall be calculated not later than thirty (30) days after the party
requesting proration of any item obtains the information required to calculate
such proration.
SECTION 5.19. Proxy Statement . (a) As promptly as practicable after the
execution of this Agreement, Audiovox shall prepare and file with the SEC the
proxy statement to be sent to the stockholders of Audiovox relating to the
meeting of the Audiovox stockholders (the "Audiovox Stockholders' Meeting") to
be held to consider approval and adoption of this Agreement or any information
statement to be sent to such stockholders, as appropriate (such proxy statement
or information statement, as amended or supplemented, being referred to herein
as the "Proxy Statement"). The Seller shall furnish all information concerning
the Seller as Audiovox may reasonably request in connection with such actions
and the preparation of the Proxy Statement. As promptly as practicable after the
execution of this Agreement, Audiovox shall mail the Proxy Statement to its
stockholders.
(b) Except as provided in Section 5.06(c), Audiovox covenants that none of
the Audiovox Board or any committee thereof shall withdraw or modify, or propose
to withdraw or modify, in a manner adverse to the Purchaser, the approval or
recommendation by the Audiovox Board or any committee thereof of this Agreement,
or the transactions contemplated by this Agreement and the Proxy Statement shall
include, the recommendation to the stockholders of Audiovox in favor of approval
and adoption of this Agreement and approval of the transactions contemplated by
this Agreement (the "Audiovox Recommendation").
(c) Audiovox will advise the Purchaser, promptly after it receives notice
thereof, of any request by the SEC for amendment of the Proxy Statement or
comments thereon and responses thereto or requests by the SEC for additional
information.
(d) Audiovox represents that the information in the Proxy Statement shall
not, at (i) the time the Proxy Statement (or any amendment thereof or supplement
thereto) is first mailed to the stockholders of Audiovox, (ii) the time of the
Audiovox Stockholders' Meeting and (iii) the Closing, contain any untrue
statement of a material fact or fail to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. All documents that
Audiovox is responsible for filing with the SEC in connection with this
Agreement or the transactions contemplated by this Agreement will comply as to
form and substance in all material respects with the applicable requirements of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder.
SECTION 5.20. Audiovox Stockholders' Meeting . Audiovox shall, subject only
to such delays as are necessary to enable the Audiovox Board to discharge its
61
fiduciary obligations in determining whether any unsolicited offer or proposal
regarding a Competing Transaction constitutes a Superior Proposal in accordance
with Section 5.06 hereof, (i) call and hold the Audiovox Stockholders' Meeting
as promptly as practicable for the purpose of voting upon the approval and
adoption of this Agreement and Audiovox shall use its reasonable best efforts to
hold the Audiovox Stockholders' Meeting as soon as practicable after the date of
this Agreement and (ii) use its reasonable best efforts to solicit from its
stockholders proxies in favor of the approval and adoption of this Agreement and
shall take all other action necessary or advisable to secure the required vote
or consent of its stockholders.
SECTION 5.21. Trademark License Agreement . Concurrently with the Closing,
Audiovox and the Purchaser shall enter into a trademark license agreement
substantially in the form attached hereto as Exhibit 5.21 (the "Trademark
License Agreement").
SECTION 5.22. Replication Service . On or prior to the Closing, Audiovox
and the Seller shall replicate, for the Purchaser, all Developed Software,
which, together with the Shared MIS Systems, Owned Intellectual Property and
Licensed Intellectual Property, will enable the Business to become a fully
operational entity with all current functionality and appropriate controls to
protect the Business from any non- Business access (the "Replication Service").
All hardware brands and configurations used in the Replication Service shall be
approved by the Purchaser prior to such use. The Purchaser shall pay $70,000 for
the Replication Service but in no event shall the Purchaser be obligated to make
any other payments in respect of the Replication Service or the resulting
replicated environment.
SECTION 5.23. Limited Updating of Disclosure Schedules . At the Closing,
the Seller shall, to the extent necessary, update Sections 3.07(b), 3.12(b),
3.14(a), 3.14(b), 3.15(a), 3.16(c), 3.17(a) and 3.26 of the Disclosure Schedule
(provided, that, in the case of Section 3.14(b) of the Disclosure Schedule, the
Seller may only update the disclosure as to contracts which are no longer in
full force and effect due to their expiration or termination in accordance with
their terms) to reflect information arising after the date of this Agreement and
the updating of such Sections of the Disclosure Schedule shall not be deemed to
be a breach of the representations and warranties which such disclosures modify
except to the extent that (i) the actions giving rise to such updating
constitute a breach of Section 5.01 hereof or (ii) the additional information
disclosed would have a Material Adverse Effect.
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SECTION 5.24. Leases. Audiovox and the Purchaser shall use reasonable
commercial efforts to negotiate and agree upon the form of the 555 Wireless
Sublease within 45 days after the date of this Agreement. The Purchaser shall
use reasonable commercial efforts to negotiate and agree upon the form of the
Cerritos Lease within 45 days after the date of this Agreement.
SECTION 5.25. ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ . (▇) Promptly after the date of this
Agreement, the Seller shall retain the Seller's Reporting Controls Advisors, as
outside advisors, to work with the Seller to develop and implement the ACC
Internal Reporting Controls and to satisfy the Interim Milestones. The Seller
shall use its best efforts to (i) satisfy the Interim Milestones and (ii)
develop and implement the ACC Internal Reporting Controls prior to September 30,
2004. The Purchaser and the Purchaser's Reporting Controls Advisors shall work
cooperatively with the Seller and the Seller's Reporting Controls Advisors to
provide necessary information on a timely basis to the Seller concerning the
UTSI Internal Reporting Controls to enable the Seller to develop and implement
the ACC Internal Reporting Controls, meet the Interim Milestones and satisfy the
condition set forth in Section 7.02(j). All costs and expenses of the Seller and
the Seller's Reporting Controls Advisors relating to the development and
implementation of the ACC Internal Reporting Controls shall be borne by the
Seller.
(b) In the event that the Purchaser shall not have made the Determination
of Satisfactory Controls by September 30, 2004, the Purchaser and the Seller
agree that the Seller shall no longer be obligated hereunder to develop and
implement the ACC Internal Reporting Controls.
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01. Offer of Employment . As of the Closing, the Purchaser shall
offer employment to each of the then-current employees of the Seller listed on
Section 6.01 of the Disclosure Schedule providing for employee benefits (other
than equity compensation arrangements) on terms that are no less favorable than
the terms and conditions applicable to similarly situated employees of the
Purchaser, it being understood that such employees shall receive credit for all
prior periods of service with the Seller for purposes of participation in
compensation and employee benefit plans, programs or arrangements of the
Purchaser; provided, however, that such crediting of service shall not operate
to duplicate any benefit or the funding of any such benefit. At Closing,
Purchaser shall hire all employees who accept such offer of employment. As used
herein, "Transferred Employee" shall mean each employee who accepts such offer.
In addition, the Purchaser agrees to (i) credit each of the Transferred
Employees with a number of paid vacation, sick leave and personal days
immediately following the date of Closing equal to the number of such days each
such Transferred Employee has accrued but not used as of the date of Closing
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under the applicable policies of the Seller as in effect immediately prior to
the date of Closing, and (ii) allow each of the Transferred Employees to use
such days following the date of Closing in accordance with the applicable
policies of the Purchaser as are in effect from time to time. The Purchaser and
Seller shall undertake in good faith to consider the preparation and filing of
employment tax reports with respect to the Transferred Employees using the
alternative procedure set forth in Revenue Procedure 96-60 under the Code.
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.01. Conditions to Obligations of the Seller and Audiovox . The
obligations of the Seller and Audiovox to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment or written
waiver by Audiovox or the Seller, at or prior to the Closing, of each of the
following conditions:
(a) Representations, Warranties and Covenants. The representations and
warranties of the Purchaser contained in this Agreement shall have been
true and correct when made and shall be true and correct at and as of the
Closing (disregarding for these purposes any materiality or corollary
qualifications contained therein), except to the extent that any failures
of such representations and warranties to be so true and correct would not
have a Purchaser Material Adverse Effect, except to the extent such
representations and warranties are as of another date, in which case, such
representations and warranties shall be true and correct as of that date
with the same force and effect as if made as of the Closing except to the
extent that any failures of such representations and warranties to be true
and correct that would not have a Purchaser Material Adverse Effect, and
the covenants and agreements contained in this Agreement to be complied
with by the Purchaser on or before the Closing shall have been complied
with in all material respects;
(b) HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the purchase of the Purchased Assets contemplated by
this Agreement shall have expired or shall have been terminated and the
applicable approvals and/or clearances with respect to the antitrust review
in the Peoples Republic of China (the "PRC Antitrust Approvals") have been
received;
(c) No Proceeding or Litigation. No Action shall have been commenced
by or before any Governmental Authority against any of Audiovox, the Seller
or the Purchaser, seeking to restrain or materially and adversely alter the
transactions contemplated by this Agreement which, in the reasonable, good
faith determination of the Seller, is likely to render it impossible or
unlawful to consummate such transactions; provided, however, that the
provisions of this Section 7.01(c) shall not apply if the Seller has
directly or indirectly solicited or encouraged any such Action; and
(d) Audiovox Stockholders' Approval. This Agreement and the
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transactions contemplated by this Agreement have been approved and adopted
by the requisite affirmative vote of the stockholders of Audiovox in
accordance with the General Corporation Law of Delaware, and Audiovox's
certificate of incorporation, and such approval shall not have been
rescinded, revoked or otherwise withdrawn.
SECTION 7.02. Conditions to Obligations of the Purchaser . The obligations
of the Purchaser to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment or written waiver by the Purchaser, at or
prior to the Closing, of each of the following conditions:
(a) Representations, Warranties and Covenants. The representations and
warranties of the Seller and Audiovox contained in this Agreement shall
have been true and correct when made and shall be true and correct at and
as of the Closing (disregarding for these purposes any materiality,
Material Adverse Effect or corollary qualifications contained therein),
except to the extent that any failures of such representations and
warranties to be so true and correct would not have a Material Adverse
Effect, except to the extent such representations and warranties are as of
another date, in which case, such representations and warranties shall be
true and correct as of that date with the same force and effect as if made
as of the Closing except to the extent that any failures of such
representations and warranties to be true and correct that would not have a
Material Adverse Effect, and the covenants and agreements contained in this
Agreement to be complied with by the Seller and Audiovox on or before the
Closing shall have been complied with in all material respects;
(b) HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the purchase of the Purchased Assets contemplated by
this Agreement shall have expired or shall have been terminated and the PRC
Antitrust Approvals have been received];
(c) No Proceeding or Litigation. No Action shall have been commenced
by or before any Governmental Authority against any of Audiovox, the Seller
or the Purchaser, seeking to restrain or materially and adversely alter the
transactions contemplated by this Agreement which, in the reasonable, good
faith determination of the Purchaser, is likely to render it impossible or
unlawful to consummate such transactions or which is reasonably likely to
have a Material Adverse Effect; provided, however, that the provisions of
this Section 7.02(c) shall not apply if the Purchaser has directly or
indirectly solicited or encouraged any such Action;
(d) Governmental Consents and Approvals. The Purchaser and the Seller
shall have received, each in form and substance reasonably satisfactory to
the Purchaser, (i) all authorizations, consents, orders and approvals of
all Governmental Authorities and officials which are necessary for the
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements;
(e) Third Party Consents and Approvals. With respect to each agreement
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listed in Section 7.02(e)(i) of the Disclosure Schedule, the Purchaser or
Seller shall have received either (x) consent that such agreement may be
assigned to the Purchaser in connection with the transactions contemplated
by this Agreement or (y) the opportunity to enter into a new agreement that
is, in the aggregate, not materially less favorable to Purchaser than, on
the date of the Closing, is the agreement that it is replacing. With
respect to three of the five agreements listed in Section 7.02(e)(ii) of
the Disclosure Schedule, the Purchaser or Seller shall have received (x)
consent that such agreement may be assigned to the Purchaser in connection
with the transactions contemplated by this Agreement or (y) the opportunity
to enter into a new agreement that is, in the aggregate, not materially
less favorable to Purchaser than, on the date of the Closing, is the
agreement that it is replacing.
(f) Employment Agreements. The Employment Agreement shall have been
validly entered into and shall be in full force and effect and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ shall, as of Closing, become an employee of the Purchaser; and
(g) Key Employees. At least 80% of the key employees listed in Section
7.02(g) of the Disclosure Schedule ("Key Employees") to whom the Purchaser
extended offers of employment prior to the Closing shall have accepted the
Purchaser's offer of employment and shall, as of Closing, become employees
of the Purchaser.
(h) Audiovox Stockholders' Approval. This Agreement and the
transactions contemplated by this Agreement have been approved and adopted
by the requisite affirmative vote of the stockholders of Audiovox in
accordance with the General Corporation Law of Delaware, and Audiovox's
certificate of incorporation, and such approval shall not have been
rescinded, revoked or otherwise withdrawn.
(i) Leases. (i) Audiovox and the Purchaser shall have entered into a
sublease agreement (the "555 Wireless Sublease") for space at ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇., ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ in a form mutually agreed by the parties on the
terms set forth in Exhibit 7.02(i)(i) and (ii) ▇▇▇▇▇▇▇▇▇ Associates and the
Purchaser shall have entered into a lease agreement (the "Cerritos Lease")
for space at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ in a form
mutually agreed by the parties on the terms set forth in Exhibit
7.02(i)(ii).
(j) Section 404 Compliance. The Purchaser shall have made the
Determination of Satisfactory Controls on or before September 30, 2004;
provided, that, from and after January 1, 2005, this Section 7.02(j) shall
no longer be a condition to the Purchaser's obligation to consummate the
transactions contemplated by this Agreement
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ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Survival of Representations and Warranties . (a) The
representations and warranties of the Seller and Audiovox contained in this
Agreement and the Ancillary Agreements shall survive the Closing until the
second anniversary of the Closing; provided, however, that (i) the
representations and warranties made pursuant to Sections 3.01 and 3.29 shall
survive indefinitely and (ii) the representations and warranties dealing with
Tax matters shall survive until 120 days after the expiration of the relevant
statute of limitations for the Tax liabilities in question. Neither the period
of survival nor the liability of the Seller and Audiovox with respect to the
Seller's and Audiovox's representations and warranties shall be reduced by any
investigation made at any time by or on behalf of the Purchaser. If written
notice of a claim has been given prior to the expiration of the applicable
representations and warranties by the Purchaser to the Seller and Audiovox, then
the relevant representations and warranties shall survive as to such claim,
until such claim has been finally resolved.
(b) The representations and warranties of the Purchaser contained in this
Agreement and the Ancillary Agreements shall survive the Closing until the
second anniversary of the Closing. Neither the period of survival nor the
liability of the Purchaser with respect to the Purchaser's representations and
warranties shall be reduced by any investigation made at any time by or on
behalf of the Seller. If written notice of a claim has been given prior to the
expiration of the applicable representations and warranties by the Seller to the
Purchaser, then the relevant representations and warranties shall survive as to
such claim, until such claim has been finally resolved.
SECTION 8.02. Indemnification by the Seller and Audiovox . If the Closing
shall occur, the Purchaser and its Affiliates, officers, directors, employees,
agents, successors and assigns (each a "Purchaser Indemnified Party") shall be
indemnified and held harmless by the Seller and Audiovox, on a joint and several
basis, for and against any and all Liabilities, losses, damages, claims, costs
and expenses, interest, awards, judgments and penalties (including attorneys'
and consultants' fees and expenses) actually suffered or incurred by them
(including any Action brought or otherwise initiated by any of them)
(hereinafter a "Loss"), arising out of or resulting from:
(a) the breach of any representation or warranty made by the Seller
contained in the Acquisition Documents;
(b) the breach of any covenant or agreement by the Seller contained in the
Acquisition Documents;
(c) any claim or cause of action of any third party relating to any action,
inaction, event, condition, liability or obligation of the Seller occurring or
existing prior to the Closing (other than the Assumed Liabilities); and
(d) the Excluded Liabilities.
To the extent that the Seller's or Audiovox's undertakings set forth in
this Section 8.02 may be unenforceable, the Seller or Audiovox, as the case may
67
be, shall contribute the maximum amount that it is permitted to contribute under
applicable Law to the payment and satisfaction of all Losses incurred by the
Purchaser Indemnified Parties, provided, that, in no event shall the Seller's or
Audiovox's liability exceed the amounts set forth in Section 8.04 hereof.
SECTION 8.03. Indemnification by the Purchaser . If the Closing shall
occur, the Seller and its Affiliates, officers, directors, employees, agents,
successors and assigns (each a "Seller Indemnified Party") shall be indemnified
and held harmless by the Purchaser for and against any and all Losses, arising
out of or resulting from:
(a) the breach of any representation or warranty made by the Purchaser
contained in the Acquisition Documents;
(b) the breach of any covenant or agreement by the Purchaser contained in
the Acquisition Documents;
(c) Liabilities, whether arising before or after the Closing, that are
expressly assumed by the Purchaser pursuant to this Agreement, including the
Assumed Liabilities;
(d) Taxes, other than the Excluded Taxes, relating to the Purchased Assets,
the Business or the Assumed Liabilities for any Post-Closing Tax Period;
(e) claims arising after the Closing made by Transferred Employees relating
to their employment with the Purchaser; and
(f) any claim or cause of action by any third party relating to any action,
inaction, event, condition, liability or obligation relating to the operation of
the Business from and after the Closing.
To the extent that the Purchaser's undertakings set forth in this Section
8.03 may be unenforceable, the Purchaser shall contribute the maximum amount
that it is permitted to contribute under applicable Law to the payment and
satisfaction of all Losses incurred by the Seller Indemnified Parties, provided,
that, in no event shall the Purchaser's liability exceed the amounts set forth
in Section 8.04 hereof.
SECTION 8.04. Limitation on Obligation to Indemnify . Notwithstanding
anything to the contrary contained in this Agreement:
(a) an Indemnifying Party shall be liable for any claim for indemnification
pursuant to Section 8.02(a) or 8.02(b) hereof, as applicable, only to the
extent, and for the amount, that the aggregate amount of indemnifiable Losses
are in excess of $500,000; provided that, in determining the amount of such
indemnifiable Losses (but not the breach thereof giving rise to indemnification)
each representation shall be read without regard to any materiality, Material
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Adverse Effect or corollary qualifications contained therein;
(b) in no event shall the obligations of all Indemnifying Parties, in the
aggregate, to indemnify the Indemnified Party pursuant to this Article VIII
exceed: (i) 30% of the Purchase Price with respect to Losses arising from
breaches of any representation or warranty made by the Indemnifying Party
contained in the Acquisition Documents and (ii) 50% of the Purchase Price with
respect to all Losses (including those covered in clause (i) above); and
(c) the amount of Losses for which the Indemnifying Party shall be
obligated to indemnify the Indemnified Party pursuant to this Article VIII shall
be reduced by any amount received under any insurance policy by the Indemnified
Party with respect to such Losses.
SECTION 8.05. Notice of Loss; Third Party Claims . (a) An Indemnified Party
shall give the Indemnifying Party notice of any matter which an Indemnified
Party has determined has given or could give rise to a right of indemnification
under this Article VIII, promptly, but in any event, within 20 days of such
determination, stating the amount of the Loss, if known, and method of
computation thereof, and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or
arises; provided, however, that the failure to provide such notice shall not
release the Indemnifying Party from any of its obligations under this Article
VIII except to the extent that the Indemnifying Party is materially prejudiced
by such failure and shall not relieve the Indemnifying Party from any other
obligation or Liability that it may have to any Indemnified Party otherwise than
under this Article VIII.
(b) If an Indemnified Party shall receive notice of any Action, audit,
demand or assessment (each, a "Third Party Claim") against it or which may give
rise to a claim for Loss under this Article VIII, promptly, but in any event,
within 20 days of the receipt of such notice, the Indemnified Party shall give
the Indemnifying Party notice of such Third Party Claim; provided, however, that
the failure to provide such notice shall not release the Indemnifying Party from
any of its obligations under this Article VIII except to the extent that the
Indemnifying Party is materially prejudiced by such failure and shall not
relieve the Indemnifying Party from any other obligation or Liability that it
may have to any Indemnified Party otherwise than under this Article VIII. If the
Indemnifying Party acknowledges in writing its obligation to indemnify the
Indemnified Party hereunder against any Losses that may result from such Third
Party Claim, then the Indemnifying Party shall be entitled to assume and control
the defense of such Third Party Claim at its expense and through counsel of its
choice if it gives notice of its intention to do so to the Indemnified Party
within five days of the receipt of such notice from the Indemnified Party;
provided, however, that if there exists or is reasonably likely to exist a
conflict of interest that, in the opinion of the Indemnified Party's counsel (a
copy of which shall be given to the Indemnifying Party), would make it
inappropriate in the reasonable judgment of the Indemnified Party for the same
counsel to represent both the Indemnified Party and the Indemnifying Party, then
the Indemnified Party shall be entitled to retain its own counsel in each
jurisdiction for which the Indemnified Party determines counsel is required, at
the expense of the Indemnifying Party. In the event that the Indemnifying Party
69
exercises the right to undertake any such defense against any such Third Party
Claim as provided above, the Indemnified Party shall cooperate with the
Indemnifying Party in such defense and make available to the Indemnifying Party,
at the Indemnifying Party's expense, all witnesses, pertinent records, materials
and information in the Indemnified Party's possession or under the Indemnified
Party's control relating thereto as is reasonably required by the Indemnifying
Party. Similarly, in the event the Indemnified Party is, directly or indirectly,
conducting the defense against any such Third Party Claim, the Indemnifying
Party shall cooperate with the Indemnified Party in such defense and make
available to the Indemnified Party, at the Indemnifying Party's expense, all
such witnesses, records, materials and information in the Indemnifying Party's
possession or under the Indemnifying Party's control relating thereto as is
reasonably required by the Indemnified Party. No such Third Party Claim may be
settled by the Indemnifying Party without the prior written consent of the
Indemnified Party which shall not be unreasonably withheld unless such
settlement shall involve only the payment of money with no admission of
wrongdoing. In no event may an Indemnified Party settle any Third Party Claim
without the prior written consent of the Indemnifying Party.
SECTION 8.06. Distributions from Escrow Fund . The Escrow Agent shall
deliver to the Purchaser from the Escrow Fund any amount determined to be owed
to the Purchaser under this Article VIII in accordance with the Escrow
Agreement. For the purposes of clarity, to the extent that there is a shortfall
between the amount owed by the Seller to the Purchaser in respect of the
indemnification amount and the Escrow Fund, the Seller and Audiovox, jointly and
severally, shall be obligated to pay the Purchaser any such shortfall from its
own account, subject to the limitations of this Article VIII.
SECTION 8.07. Other Provisions . The indemnification provided in this
Article VIII shall be, except in the case of fraudulent misrepresentation, the
sole and exclusive remedy for any of the matters set forth in Sections 8.02 and
8.03. In no event shall the Seller or the Purchaser be liable for loss of
profits or consequential damages incurred by the Purchaser or the Seller,
respectively, or any of its respective Affiliates. Upon making any payment to an
Indemnified Party for any indemnification claim under this Agreement or any
Acquisition Document, the Indemnifying Party shall be subrogated, to the extent
of such payment, to any rights which the Indemnifying Party or its Affiliates
may have against other Persons (including under any insurance policies) with
respect to the subject matter underlying such indemnification claim. The
Indemnified Party and its Affiliates shall cooperate with the Indemnifying Party
in pursuit of such rights and shall promptly turn over to the Indemnifying Party
any payments received in respect of such rights.
SECTION 8.08. Tax Treatment . The Seller and the Purchaser agree that all
payments made by any of the Seller and Audiovox on the one hand and the
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Purchaser on the other hand to or for the benefit of the other under this
Article VIII, under other indemnity provisions of this Agreement and for any
misrepresentations or breaches of warranties or covenants shall be treated as
adjustments to the Purchase Price for Tax purposes and that such treatment shall
govern for purposes hereof except to the extent that the Laws of a particular
jurisdiction provide otherwise, in which case such payments shall be made in an
amount sufficient to indemnify the relevant party on an after-Tax basis.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01. Termination . This Agreement may be terminated at any time
prior to the Closing:
(a) by (i) the Purchaser if between the date hereof and the Closing
any representations, warranties or covenants of the Seller contained in
this Agreement shall have become untrue or incorrect such that Section
7.02(a) could not be satisfied or (ii) by the Seller or Audiovox if,
between the date hereof and the Closing any representations, warranties or
covenants of the Purchaser contained in this Agreement shall have become
untrue or incorrect such that Section 7.01(a) could not be satisfied;
(b) by either the Seller or the Purchaser if the Closing shall not
have occurred by December 15, 2004 (as such date shall be extended to
January 15, 2005, solely in the event that the condition set forth in
Section 7.02(j) shall fail to have been satisfied or waived) (either such
date being, as applicable, the "Initial Termination Date); provided,
however, that the right to terminate this Agreement under this Section
9.01(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement shall have been the cause of, or shall have
resulted in, the failure of the Closing to occur on or prior to such date;
provided, further, that at any time after the Initial Termination Date, if
the PRC Antitrust Approvals have not been received, and at such time the
Seller and Audiovox have satisfied their conditions to Closing and are
otherwise in all respects prepared to close the transactions contemplated
by this Agreement, then (i) the Seller may terminate this Agreement and
within two Business Days following such termination the Purchaser shall pay
to the Seller by wire transfer of immediately available funds $1,000,000 as
reimbursement for the Seller's expenses (the "Expense Reimbursement") and
(ii) the Purchaser may not terminate this Agreement; provided, further,
that, at any time after February 15, 2005, the Purchaser may terminate this
Agreement if on the date of such termination the Purchaser shall pay to the
Seller by wire transfer of immediately available funds the Expense
Reimbursement.
(c) by either the Seller or the Purchaser in the event that any
Governmental Authority shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling
or other action shall have become final and nonappealable;
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(d) by the Purchaser if an Audiovox Triggering Event (as defined
below) shall have occurred;
(e) by the Purchaser or Audiovox or the Seller if this Agreement shall
fail to receive the requisite vote for approval at the Audiovox
Stockholders' Meeting; provided, that neither Audiovox nor the Seller shall
be entitled to terminate this Agreement pursuant to this clause (e) if the
Stockholder shall have breached the Voting Agreement; or
(f) by Audiovox or the Seller if the Audiovox Board shall have
recommended a Superior Proposal in accordance with Section 5.06(c) or in
order to enter into a definitive agreement relating to a Superior Proposal;
or
(g) by the mutual written consent of the Seller and the Purchaser.
For purposes of this Agreement, an "Audiovox Triggering Event" shall be deemed
to have occurred if: (i) the Audiovox Board makes a Change in the Audiovox
Recommendation; (ii) the Audiovox Board shall have recommended to the
stockholders of Audiovox a Competing Transaction or shall have resolved to do
so; (iii) Audiovox shall have failed to include in the Proxy Statement the
Audiovox Recommendation; (iv) the Audiovox Board fails to reaffirm the Audiovox
Recommendation within seven Business Days after the Purchaser reasonably
requests in writing that such recommendation be reaffirmed; or (v) Audiovox
shall have intentionally breached its obligations under Section 5.06.
SECTION 9.02. Effect of Termination . In the event of termination of this
Agreement as provided in Section 9.01, this Agreement shall forthwith become
void and there shall be no liability on the part of either party hereto except
(a) as set forth in Sections 5.03 and 9.03, (b) that nothing herein shall
relieve any party from liability for any breach of this Agreement and (c) the
Purchaser shall promptly return or destroy (and cause its agents and
representatives to return or destroy) all documents (and copies thereof)
relating to the Business that were furnished to the Purchaser and all excerpts
therefrom and notes related thereto.
SECTION 9.03. Expenses . (a) Except as otherwise specified in this
Agreement, all costs and expenses, including fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with this Agreement
("Expenses") and the transactions contemplated by this Agreement shall be paid
by the party incurring such Expenses, whether or not the Closing shall have
occurred.
(b) Audiovox agrees that:
(i) if the Purchaser shall terminate this Agreement pursuant to
Section 9.01(d); or
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(ii) if Audiovox or the Seller shall terminate this Agreement pursuant
to Section 9.01(f).
then Audiovox shall pay to the Purchaser promptly (but in any event no later
than one business day after the first of such events shall have occurred) a fee
of 3.5% of the Purchase Price (the "Fee"), which amount shall be payable in
immediately available funds, plus an amount equal to the amount of the
Purchaser's Expenses, up to a maximum of $1,000,000.
(c) Audiovox acknowledges that the agreements contained in this Section
9.03 are an integral part of the transactions contemplated by this Agreement. In
the event that Audiovox shall fail to pay the Fee or any Expenses when due, the
term "Expenses" shall be deemed to include the costs and expenses actually
incurred or accrued by the Purchaser (including, without limitation, fees and
expenses of counsel) in connection with the collection under and enforcement of
this Section 9.03, together with interest on such unpaid Fee and Expenses,
commencing on the date that the Fee or such Expenses became due, at a rate equal
to the rate of interest publicly announced by Citibank, N.A., from time to time,
in The City of New York, as such bank's Prime Rate plus 1.00 %. Payment of the
fees and expenses described in this Section 9.03 shall not be in lieu of any
damages incurred in the event of willful or intentional breach of this
Agreement.
SECTION 9.04. Amendment . This Agreement may not be amended or modified
except (a) by an instrument in writing signed by, or on behalf of, the Seller,
Audiovox and the Purchaser or (b) by a waiver in accordance with Section 9.05.
SECTION 9.05. Waiver . Any term or condition to this Agreement may be
waived, or the time for the performance of any of the obligations may be
extended, at any time by the party that is entitled to the benefit thereof. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party to be bound thereby. Any waiver of any term or
condition shall not be construed as a waiver of any subsequent breach or a
subsequent waiver of the same term or condition, or a waiver of any other term
or condition of this Agreement. The failure of any party hereto to assert any of
its rights hereunder shall not constitute a waiver of any of such rights. Except
as otherwise set forth in this Agreement, all rights and remedies existing under
this Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
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ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Notices . All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by an internationally recognized overnight courier service, by facsimile
or registered or certified mail (postage prepaid, return receipt requested) to
the respective parties hereto at the following addresses (or at such other
address for a party as shall be specified in a notice given in accordance with
this Section 10.01):
(a) if to the Seller:
Audiovox Communications Corp.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
with a copy to:
Levy, Stopol & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
(b) if to Audiovox:
Audiovox Corporation
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
Levy, Stopol & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
74
(c) if to the Purchaser:
UTStarcom Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to:
Shearman & Sterling LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
SECTION 10.02. Public Announcements . Unless otherwise required by
securities exchange rule or regulation or the rules and regulations of any
national stock exchange, none of the parties hereto shall make, or cause to be
made, any press release or public announcement in respect of the Acquisition
Documents, including this Agreement and the Ancillary Agreements, or the
transactions contemplated hereby and thereby or otherwise communicate with any
news media without prior written consent of the other parties, and the parties
hereto shall cooperate as to the timing and contents of any such press release,
public announcement or communication.
SECTION 10.03. Severability . If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect for so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to either party hereto. Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.
SECTION 10.04. Entire Agreement . This Agreement and the Ancillary
Agreements constitute the entire agreement of the parties hereto with respect to
the subject matter hereof and thereof and supersede all prior agreements and
undertakings, both written and oral, among the parties with respect to the
subject matter hereof and thereof.
SECTION 10.05. Assignment . This Agreement may not be assigned by operation
of law or otherwise without the express written consent of the Seller and the
Purchaser (which consent may be granted or withheld in the sole discretion of
the Seller or the Purchaser); provided, however, that the Purchaser may assign
this Agreement or any of its rights and obligations hereunder to one or more
Affiliates of the Purchaser without the consent of the Seller but,
notwithstanding such assignment, the Purchaser shall remain fully liable
hereunder.
75
SECTION 10.06. No Third Party Beneficiaries. Except for the provisions of
Article VIII relating to indemnified parties, this Agreement shall be binding
upon and inure solely to the benefit of the parties hereto and their respective
successors and permitted assigns and nothing herein, express or implied, is
intended to or shall confer upon any other Person, including any union or any
employee or former employee of the Seller, any legal or equitable right, benefit
or remedy of any nature whatsoever, including any rights of employment for any
specified period, under or by reason of this Agreement.
SECTION 10.07. Governing Law . This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed in that State.
SECTION 10.08. Waiver of Jury Trial . Each of the parties hereto hereby
waives to the fullest extent permitted by applicable law any right it may have
to a trial by jury with respect to any litigation directly or indirectly arising
out of, under or in connection with this Agreement or the transactions
contemplated by this Agreement. Each of the parties hereto hereby (a) certifies
that no representative, agent or attorney of the other party has represented,
expressly or otherwise, that such other party would not, in the event of
litigation, seek to enforce the foregoing waiver and (b) acknowledges that it
has been induced to enter into this Agreement and the transactions contemplated
by this Agreement and the Acquisition Agreements, as applicable, by, among other
things, the mutual waivers and certifications in this Section 10.08.
SECTION 10.09. Arbitration . All disputes arising out of or in connection
with this Agreement, the Acquisition Documents, and the transactions
contemplated hereby and thereby, which cannot be resolved through the procedures
described herein or therein shall be finally resolved solely and exclusively by
means of arbitration under the Commercial Arbitration Rules of the American
Arbitration Association ("AAA") to be conducted in English in the City of New
York. The arbitration shall be conducted by three (3) arbitrators appointed by
agreement of the parties, or failing such agreement, under the Commercial
Arbitration Rules of the American Arbitration Association. The arbitration will
proceed in accordance with the AAA's Commercial Arbitration Rules. The decision
of the arbitrator shall be final, conclusive, and binding upon the parties, and
a judgment upon the award may be obtained and entered in any federal or state
court of competent jurisdiction. The parties agree that any arbitration shall be
kept confidential and any element of such arbitration (including but not limited
to any pleadings, briefs or other documents submitted or exchanged, any
testimony or other oral submissions, and any awards) shall not be disclosed
beyond the arbitral tribunal, the parties, their counsel and any person
necessary to conduct the arbitration, except as may be required in recognition
and enforcement proceedings, if any, or in order to satisfy disclosure
obligations imposed by any applicable Law. The parties agree to cooperate in
providing each other with all discovery, including but not limited to the
exchange of documents and depositions of parties and non-parties, reasonably
related to the issues in the arbitration. If the parties are unable to agree on
any matter relating to such discovery, any such difference shall be determined
by the arbitrator. The award of the arbitrator shall be final and binding upon
the parties, and shall not be subject to any appeal or review. The parties agree
that such award may be recognized and enforced in any court of competent
jurisdiction. The parties also agree to submit to the non-exclusive personal
jurisdiction of the federal and state courts sitting in New York, New York, for
the limited purpose of enforcing this arbitration agreement (including, where
76
appropriate, issuing injunctive relief) or any award resulting from arbitration
pursuant to this Section 10.09. The parties agree that the arbitration
proceeding described in this Section 10.09 is the sole and exclusive manner in
which the parties may resolve disputes arising out of or in connection with this
Agreement and the Acquisition Documents. The arbitrator has the discretion to
grant the prevailing party in any arbitration attorneys' fees and costs and make
the non-prevailing party responsible for all expenses of the arbitration.
SECTION 10.10. Currency . Unless otherwise specified in this Agreement, all
references to currency, monetary values and dollars set forth herein shall mean
United States (U.S.) dollars and all payments hereunder shall be made in United
States dollars.
SECTION 10.11. Counterparts . This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original, but all of which taken together shall
constitute one and the same agreement.
77
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized. AUDIOVOX COMMUNICATIONS CORP.
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
QUINTEX MOBILE
COMMUNICATIONS
CORPORATION
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
AUDIOVOX COMMUNICATIONS
CANADA CO.
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
UTSTARCOM, INC.
By: /s/ ▇▇▇▇▇▇▇ Sophie
Name: ▇▇▇▇▇▇▇ Sophie
Title: CFO/ Sr. Vice President
UTSTARCOM CANADA COMPANY
By: /s/ ▇▇▇▇▇▇▇ Sophie
Name: ▇▇▇▇▇▇▇ Sophie
Title: CFO/ Sr. Vice President
78
(With respect to
Sections 2.05,
2.07, 2.09, 3.01,
3.02, 3.11(b),
3.30, 5.06, 5.08,
5.19, 5.20, 5.21,
5.22, 5.24 and
Articles VII - X
only)
AUDIOVOX CORPORATION
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: CFO/ Sr. Vice President
79
EXHIBIT A
RULES FOR VALUING INVENTORIES
EXHIBIT 1.01(a)
FORM OF ASSIGNMENT OF INTELLECTUAL PROPERTY
EXHIBIT 1.01(b)
[INTENTIONALLY OMITTED]
EXHIBIT 1.01(c)
FORM OF ASSUMPTION AGREEMENT
EXHIBIT 1.01(d)
FORM OF ▇▇▇▇ OF SALE AND ASSIGNMENT
EXHIBIT 2.08
FORM OF ESCROW AGREEMENT
EXHIBIT 5.13
FORM OF TRANSITION SERVICES AGREEMENT
EXHIBIT 5.21
FORM OF TRADEMARK LICENSE AGREEMENT
EXHIBIT 7.02(i)(i)
555 WIRELESS SUBLEASE TERM SHEET
EXHIBIT 7.02(i)(ii)
CERRITOS LEASE TERM SHEET