SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant |X| Filed by a party other than the registrant
|_| Check the appropriate box:
|X| Preliminary proxy statement |_| Confidential, for use of the Commission
only (as permitted by Rule 14a-6(e)(2))
|_| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
PARKERVISION, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (Check the appropriate box):
|_| No fee required.
|X| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate amount of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:1
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(4) Proposed maximum aggregate value of transaction:
$13,750,000
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(5) Total fee paid:
$2,750
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|_| Fee paid previously with preliminary materials:
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|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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1 [Set forth the amount on which the filing fee is calculated and state how
it was determined.]
ParkerVision, Inc.
8493 Baymeadows Way
Jacksonville, Florida 32256
____________, 2004
Dear Shareholder:
You are invited to attend a special meeting of the shareholders of
ParkerVision, Inc. ("ParkerVision") to be held at the Marriott Hotel, 1501
International Parkway, Lake Mary, Florida on , 2004 at a.m., local time, to
consider and vote upon a proposal to sell substantially all of the assets and
business of our video products division, including our PVTV and CameraMan
related assets and business (the "Video Division") for $12.5 million in cash,
subject to adjustment. The board of directors of ParkerVision has approved this
sale.
At this meeting, you will be asked to consider and vote upon a proposal to
approve and adopt an Asset Purchase Agreement, dated as of February 25, 2004, by
and among ParkerVision, as seller, and each of Thomson Broadcast & Media
Solutions, Inc. ("TBM"), and Thomson Licensing, S.A. ("TL" and, together with
TBM, "Purchasers"), as purchasers. Each of TBM and TL are affiliates of Thomson
S.A., a leading global provider of integrated technology and service solutions
for entertainment and media companies through its Technicolor, Grass Valley,
Thomson and RCA brands ("Thomson"). The Asset Purchase Agreement is attached to
the Proxy Statement enclosed herewith as Appendix A.
The sale of the Video Division will enable us to focus all of our resources
and efforts on our wireless division (the "Wireless Division") and will provide
us with working capital for the development of our wireless business and
products. We believe that our Wireless Division's proprietary technologies
embody industry advances that can be significantly commercialized in the near
term and that our Wireless Division now provides far greater growth potential
for ParkerVision than the Video Division.
Wells Fargo Securities, LLC, an investment banking firm retained by our
board of directors, has opined that the consideration to be received by us
through the sale of the Video Division is fair to ParkerVision from a financial
point of view. A copy of Wells Fargo Securities' opinion is attached to the
Proxy Statement enclosed herewith as Appendix B.
AFTER CAREFUL CONSIDERATION, OUR BOARD OF DIRECTORS HAS APPROVED THE SALE
OF THE VIDEO DIVISION AND DETERMINED THAT IT IS FAIR AND IN THE BEST INTERESTS
OF PARKERVISION AND OUR SHAREHOLDERS. CONSEQUENTLY, THE BOARD OF DIRECTORS
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE SALE OF THE VIDEO DIVISION.
I, and certain other members of my family and affiliates of ParkerVision,
have agreed to vote our shares in favor of the sale of the Video Division.
Because the Video Division historically has generated substantially all our
revenues, the Video Division sale could be deemed a sale of substantially all of
our assets under Florida corporate law and we are accordingly hereby seeking
approval of our shareholders for the Video Division sale as a sale of all or
substantially all of our assets. Our shareholders shall not be entitled to
appraisal rights under Chapter 607, Florida Statues, with respect to the Video
Division sale.
Attached to this letter you will find a formal Notice of Special Meeting, a
Proxy Statement, a proxy card and various attachments. Collectively, these
documents more fully describe the Asset Purchase Agreement and the Video
Division sale pursuant to such agreement. IN ORDER TO HELP US ACHIEVE OUR
STRATEGIC GOALS THROUGH THE SALE OF THE VIDEO DIVISION, PLEASE COMPLETE AND
RETURN THE PROXY WITH YOUR VOTE IN FAVOR OF THE VIDEO DIVISION SALE AS SOON AS
POSSIBLE.
Sincerely,
Jeffrey Parker
Chairman and Chief Executive Officer
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YOUR VOTE IS VERY IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. TO VOTE
YOUR SHARES, YOU MAY USE THE ENCLOSED PROXY CARD OR ATTEND THE SPECIAL MEETING
IN PERSON. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, YOU ARE URGED
TO SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. THE
EXECUTION OF YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ARE
PRESENT AT THE MEETING. FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR VOTE
AT THE SPECIAL MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE APPROVAL
OF THE ASSET PURCHASE AGREEMENT AND THE VIDEO DIVISION SALE.
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PARKERVISION, INC.
8493 BAYMEADOWS WAY
JACKSONVILLE, FLORIDA 32256
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NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
TO BE HELD [______, 2004 ___________]
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NOTICE IS HEREBY GIVEN that a special meeting of the shareholders of
ParkerVision, Inc., will be held at the Marriott Hotel, 1501 International
Parkway, Lake Mary, Florida on [_______, ________, 2004 at _____] a.m. local
time, for the following purposes:
o To consider and vote on a proposal to approve the Asset Purchase
Agreement, dated as of February 25, 2004, by and among ParkerVision,
as seller, and each of Thomson Broadcast & Media Solutions, Inc.
("TBM") and Thomson Licensing, S.A. ("TL" and, together with TBM,
"Purchasers"), as purchasers, and the sale of our video products
division ("Video Division") contemplated by the Asset Purchase
Agreement (the "Video Division Sale"); and
o To transact such other business as may properly come before the
special meeting or any adjournments thereof.
Our transfer books will not be closed for the special meeting. Only
shareholders of record at the close of business on ______________, 2004 will be
entitled to notice of, and to vote at, the meeting and any adjournments thereof.
Our shareholders shall not be entitled to any appraisal rights in connection
with the Video Division Sale under Chapter 607, Florida Statutes.
The above matters are more fully described in the accompanying Proxy
Statement and you are urged to read it carefully. In particular, you should
carefully consider the discussion entitled "Risk Factors" in the attached Proxy
Statement. Historically, substantially all our revenues have been generated by
our Video Division. Revenues generated by our Wireless Division have been
nominal to date. Accordingly, the Video Division Sale could be deemed a sale of
substantially all of the assets of ParkerVision.
WHILE ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING
IN PERSON, YOU ARE URGED TO SIGN AND DATE THE ACCOMPANYING PROXY CARD AND MAIL
IT PROMPTLY IN THE ENCLOSED ADDRESSED, POSTAGE PREPAID ENVELOPE. YOU MAY REVOKE
YOUR PROXY IF YOU SO DESIRE AT ANY TIME BEFORE IT IS VOTED.
AFTER CAREFUL CONSIDERATION, OUR BOARD OF DIRECTORS HAS DETERMINED THAT THE
VIDEO DIVISION SALE IS FAIR AND IN THE BEST INTERESTS OF PARKERVISION AND OUR
SHAREHOLDERS, HAS APPROVED THE ASSET PURCHASE AGREEMENT AND RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE ADOPTION OF THE ASSET PURCHASE AGREEMENT AND
APPROVAL OF THE VIDEO DIVISION SALE.
By order of the board of directors,
Stacie Wilf
Secretary
Jacksonville, Florida
_____________________, 2004
This Proxy Statement is dated March 25, 2004 and is first being mailed to
our shareholders on or about ______________________ , 2004.
PARKERVISION, INC.
_______________________
PROXY STATEMENT
_______________________
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON _________________, 2004
________________________
This Proxy Statement and the enclosed form of proxy are being furnished in
connection with the solicitation of proxies by our board of directors to be used
at a special meeting of shareholders of ParkerVision and any adjournments
thereof. At the special meeting, shareholders will be asked to consider and vote
on a proposal to approve and adopt an Asset Purchase Agreement, dated as of
February 25, 2004, by and among ParkerVision, as seller, and each of Thomson
Broadcast & Media Solutions, Inc. ("TBM"), and Thomson Licensing, S.A. ("TL"
and, together with TBM, "Purchasers"), as purchasers for the sale of our video
products division ("Video Division"). Each of TBM and TL are affiliates of
Thomson S.A. ("Thomson"). The Asset Purchase Agreement is attached hereto as
Appendix A.
SUMMARY OF TERMS OF ASSET AGREEMENT AND PROPOSED TRANSACTION
Asset Purchase Agreement and the Video Division Sale If the Asset Purchase Agreement is approved by our
(see pages 7 through 13 generally) shareholders and the Video Division Sale is
consummated, substantially all the assets comprising
our Video Division will be sold to Purchasers. After
closing, TBM will directly employ a number of persons
who currently work in the Video Division.
Purchasers TL will purchase the intellectual property assets and
TBM will purchase the other assets of our Video
Division. Each of the Purchasers is an affiliate of
Thomson, a leading provider of technology and service
solutions for integrated entertainment and media
companies through its Technicolor, Grass Valley,
Thomson and RCA brands.
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Asset not being sold (see page 7) The assets used in the current or proposed operations
of our wireless division (the "Wireless Division"),
assets relating to our general corporate and management
functions, our real property and all receivables and
cash shall be retained by us and shall not be sold in
the Video Division Sale.
Retention of liabilities (see page 7) Other than post-closing liabilities and certain
outstanding contractual liabilities, the existing
liabilities of our Video Division will not be assumed
by Purchasers and instead will be retained by us.
Purchase price (see page 8) The purchase price for the assets of our Video Division
will be $12.5 million, subject to adjustment as
provided in the Asset Purchase Agreement. Thomson
Inc., an affiliate of Thomson, has guaranteed the
payment obligations of Purchasers under the Asset
Purchase Agreement.
Holdback (see page 8) In order to secure our indemnification obligations
under the Asset Purchase Agreement, $1.25 million,
representing 10% of the purchase price, shall be held
back by Purchasers at closing and shall be released to
us, to the extent not compromised by such
indemnification obligations, on the first anniversary
of the closing.
Use of proceeds (see page 20) All of the purchase price received by ParkerVision
shall be retained for use as working capital in our
Wireless Division and general corporate purposes.
Reasons for the Video Division Sale Our board of directors has determined that the
(see page 16) objective of maximizing shareholder value in the
long-term is best served by focusing our resources and
efforts on our Wireless Division. The Video Division
Sale is integral to this strategy and will also provide
ParkerVision with significant capital for these focused
efforts.
Closing conditions (see page 10) The Asset Purchase Agreement contains closing
conditions, including the approval of the Video
Division Sale by our shareholders, the performance of
specific covenants and the receipt of specified
consents.
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The closing (see page 7) The closing of the Video Division Sale will occur
within five business days following the satisfaction or
waiver of the conditions set forth in the Asset
Purchase Agreement, unless the parties agree to a
different date. We currently expect the closing to
occur on or about ,
2004.
No-shop obligations (see page 9) Prior to the closing, we may not solicit or facilitate
offers from any third party for the sale of the Video
Division. If we receive an unsolicited offer to
purchase the Video Division for cash on terms more
favorable than the Video Division Sale from a third
party that is capable of consummating such offer (a
"Superior Offer"), we are entitled, upon payment of the
termination fee described below, to act on the Superior
Offer provided our board of directors determines that
it is obligated to so act pursuant to its fiduciary
duties under Florida corporate law. Purchasers must be
notified of any Superior Offer no less than five (5)
days prior to termination of the Asset Purchase
Agreement.
Termination (see page 11) The Asset Purchase Agreement may be terminated in
certain situations, including by the Purchasers if the
shareholders of ParkerVision have not approved the
Asset Purchase Agreement by July 5, 2004, by any party
if the Video Division Sale has not been closed by July
9, 2004 or the other party is in breach, and by us, if
we elect to accept a Superior Offer as described above
and pay the termination fee described below.
Termination fees (see page 11) If we terminate the Asset Purchase Agreement in
connection with a Superior Offer to sell the Video
Division to another party, fail to obtain shareholder
approval prior to July 5, 2004 or elect to terminate
the Asset Purchase Agreement because the Video Division
Sale has not been closed prior to July 9, 2004, or if
the Asset Purchase Agreement is terminated for other
enumerated reasons, we must pay Purchasers a
termination fee of $1,000,000 in cash (or in certain
circumstances, either cash or shares of our common
stock, at our election).
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Right of first refusal (see page 12) If the Asset Purchase Agreement is terminated in
certain circumstances, during the one-year period after
such termination, if we receive an offer from a third
party to sell or license the assets of our Video
Division, Purchasers will receive a right of first
refusal to purchase or license the assets of our Video
Division.
Corporate accounting treatment The Video Division Sale will be accounted for as a
(see page 21) discontinued operation.
Transition Agreements In connection with the closing of the Video Division
(see page 10) Sale, we have entered into a Transition Services
Agreement whereby we will assist TBM in certain areas
of the operations of the Video Division during a three-
to six-month transition period following the closing.
We will receive compensation for the services on a
cost, and in some instances, cost-plus basis.
As part of the Video Division Sale, TBM will sublet
from us for a prescribed rental certain space in our
Jacksonville, Florida headquarters during the
transition period.
Interest of certain persons Each of our executive officers and directors owns
in the Video Division Sale shares of our common stock and/or options to purchase
(see page 13) shares of our common stock. By virtue of this
ownership, these persons will receive the same benefit
from the Video Division Sale as any other shareholder
of ParkerVision.
Voting agreement (see page 13) Members of the Parker family and one director who are
shareholders of ParkerVision have agreed to vote all of
their respective shares for the approval of the Asset
Purchase Agreement and the Video Division Sale. As a
group, they hold approximately 27.5% of our outstanding
common stock.
Tax consequences (see page 28) Consummation of the Video Division Sale could have
federal and state income tax consequences to
ParkerVision, although these are not likely to be
substantial.
Appraisal rights (see page 21) Our shareholders will not be entitled to appraisal
rights with respect to the Video Division Sale under
Chapter 607, Florida Statutes.
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GENERAL INFORMATION ABOUT THE SPECIAL MEETING
DATE, PLACE AND TIME OF THE SPECIAL MEETING
The meeting will be held at ________ a.m. local time, on _____________,
2004. The special meeting will take place at the Marriott Hotel, 1501
International Parkway, Lake Mary, Florida. This Proxy Statement, the attachments
hereto and the enclosed form of proxy are first being sent to our shareholders
on or about ________________, 2004.
VOTE REQUIRED; RECORD DATE; OUTSTANDING SHARES
The Asset Purchase Agreement and the Video Division Sale can only be
approved by the affirmative vote of at least a majority of the outstanding
shares of common stock of ParkerVision. Our board of directors has fixed the
close of business on _______________, 2004 as the record date for determination
of shareholders entitled to notice of, and to vote at, the annual meeting. As of
the record date, we had issued and outstanding 17,959,504 shares of common
stock, par value $.01 per share, our only class of voting securities
outstanding. Each of our shareholders is entitled to one vote for each share of
common stock registered in his or her name on the record date.
AGREEMENTS TO VOTE
Jeffrey Parker, our chairman of the board and chief executive officer, Todd
Parker, president of our Video Division and a director, Stacie Wilf, our
corporate secretary and certain members of their immediate family and certain
affiliates, together with William Sammons, a director of the Company, own an
aggregate of 4,931,747 shares, or 27.5% of the currently outstanding shares of
common stock (without giving effect to any options to purchase common stock they
may own) and each of them has agreed to vote all of his or her shares "FOR"
approval of the Asset Purchase Agreement and the Video Division Sale in
connection with the special meeting. Accordingly, their votes, combined with the
affirmative vote of the holders of an additional 4,048,006 shares, will be
sufficient to approve the proposal at the special meeting.
VOTING OF PROXIES
Proxies in the form enclosed are solicited by and on behalf of our board of
directors. The persons named in the proxy have been designated as proxies by our
board of directors. Any proxy given pursuant to this solicitation and received
in time for the meeting will be voted as specified in the returned proxy. If no
instructions are given, proxies returned by shareholders will be voted "FOR" the
proposal to approve the Asset Purchase Agreement and the Video Division Sale.
Once given, your proxy may be revoked only by written notice received by
our corporate secretary at any time prior to the voting at the meeting, by
submitting a subsequent proxy or by attending the special meeting and voting in
person.
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QUORUM REQUIREMENT; ABSTENTIONS; AND BROKER NON-VOTING
The presence, in person or by proxy, of a majority of the votes entitled to
be cast at the meeting will constitute a quorum at the meeting. A proxy
submitted by a shareholder may indicate that all or a portion of the shares
represented by his or her proxy are not being voted ("shareholder withholding")
with respect to a particular matter. Brokers may not be permitted to vote stock
("broker non-vote") held in street name in the absence of instructions from the
beneficial owner of the stock. The shares subject to a proxy that are not being
voted because of either shareholder withholding or broker non-vote will not be
considered shares present and entitled to vote on the matter and will not be
counted for purposes of determining the presence of a quorum.
Since the Asset Purchase Agreement and the Video Division Sale can only be
approved by the affirmative vote of at least a majority of the outstanding
common stock of ParkerVision, abstentions from voting, shareholder withholding
or broker non-voting will have the same effect as a vote against the proposal.
PROXY SOLICITATION
We will bear the cost of the solicitation of proxies from our shareholders
and the cost of printing and mailing this Proxy Statement. In addition to
solicitation by mail, our directors, officers and employees may contact our
shareholders to solicit their proxies. Those directors, officers and employees
will not be paid any additional compensation for doing so.
ADJOURNMENT
Any decision to adjourn the meeting would be made by a vote of the
shareholders present in person or by proxy at the meeting. It is the intention
of the persons named in the proxy, unless otherwise specifically instructed in
the proxy, to vote in favor of adjournment if a quorum is not present. If a
quorum is present, but insufficient votes have been cast in favor of a proposal
to approve it, proxies will be voted in favor of adjournment only if the board
of directors determines that adjournment and the additional solicitation of
proxies is reasonable and in the best interests of shareholders. In making this
determination the board would consider:
o the nature of the proposal;
o the votes already cast as a percentage of the vote required;
o the percentage of negative votes cast; and
o the nature of any further solicitation that might be made.
CONTACT INFORMATION
Our principal offices are located at 8493 Baymeadows Way, Jacksonville,
Florida 32256 and our phone number is 904-737-1367.
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PROPOSAL: APPROVAL AND ADOPTION OF THE ASSET PURCHASE
AGREEMENT AND APPROVAL OF THE PROPOSED TRANSACTION
At the special meeting, you will be asked to consider and vote upon a
proposal to approve and adopt the Asset Purchase Agreement and Video Division
Sale. Purchasers will purchase substantially all the assets of our Video
Division following approval of the Asset Purchase Agreement and the Video
Division Sale by our shareholders and satisfaction of the other customary
conditions to closing.
THE ASSET PURCHASE AGREEMENT
The following summary of the Asset Purchase Agreement does not purport to
be complete and is qualified in its entirety by reference to the Asset Purchase
Agreement, which is attached as Appendix A to this Proxy Statement and is
incorporated by reference herein. All shareholders are urged to read the Asset
Purchase Agreement in its entirety. Defined terms that are not expressly defined
in the following summary have the meanings provided in the Asset Purchase
Agreement.
General
On February 25, 2004, ParkerVision entered into the Asset Purchase
Agreement with Purchasers. Purchasers are affiliates of Thomson, a leading
provider of technology and service solutions for integrated entertainment and
media companies. Thomson provides end-to-end solutions to content creators,
video network operators and manufacturers and retailers through its Technicolor,
Grass Valley, THOMSON and RCA brands. The Video Division Sale is expected to
close in the second quarter of 2004 following approval of our shareholders at
the special meeting.
Assets being sold
In the Video Division Sale, we would sell to Purchasers substantially all
the assets of our Video Division, excluding certain contracts and incidental
properties. Generally, the assets to be sold are those used in connection with
and relating to our PVTV and CameraMan products and services, including patents,
patent applications, tradenames, trademarks and other intellectual property,
inventory, specified design, development and manufacturing equipment, and
obligations under outstanding contracts for products and services. We will
retain all liabilities of the Video Division other than certain liabilities
arising after closing under the terms of contracts that comprise a portion of
the assets being acquired ("Post-Closing Contractual Liabilities").
Excluded assets
The assets used in the current or proposed operations of our Wireless
Division, assets relating to our general corporate and management functions, our
real property and all receivables and cash shall be retained by us and shall not
be sold in the Video Division Sale. These retained assets will be the foundation
of our operations following the closing of the Video Division Sale.
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Consideration
The purchase price for the assets of the Video Division will be $12.5
million, subject to adjustment upon verification of the book value of the
certain tangible and current assets that will be transferred, minus certain
liabilities (warranty reserves, deferred income and amounts required to satisfy
certain assumed liabilities). Thomson Inc., an affiliate of Thomson, has agreed
to guarantee the payment obligations of Purchasers under the Asset Purchase
Agreement.
The upward adjustment to the purchase price, if any, cannot exceed $2.75
million. We currently believe that the adjustment will be approximately $1.5
million. The actual amount of the adjustment will be determined within 45 days
after the closing and will be paid when the final valuation is agreed upon.
In order to secure our indemnification obligations to Purchasers under the
Asset Purchase Agreement, $1.25 million of the purchase price will be held by
Purchasers until the first anniversary of the closing. This amount will earn
interest until paid.
Representations
ParkerVision has made customary representations and warranties to
Purchasers with respect to the assets being acquired, our overall business and
the business of the Video Division. These include representations relating to:
o the corporate status and authority of ParkerVision,
o the financial statements of ParkerVision and the Video Division,
o the non-contravention of outstanding contracts and obligations of
ParkerVision, laws and regulations affecting the business and arising
because of the transaction,
o the inventory and personal property of the Video Division,
o the intellectual property owned by or licensed to ParkerVision and
used by the Video Division,
o certain employee-related matters,
o taxes and insurance matters relating to ParkerVision and the Video
Division,
o the sufficiency of the assets to operate the Video Division after the
sale,
o the adequacy of the title to the assets being sold,
o the material contracts of the Video Division,
o government approvals and compliance with applicable laws, including
FCC compliance,
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o products, services and related warranties,
o customers, suppliers and distributors,
o the operations of the Video Division since January 1, 2004, including
any material adverse change since that date,
o the general conduct of the Video Division, and
o various other matters.
Covenants
ParkerVision has entered into numerous customary covenants under the Asset
Purchase Agreement. These include obligations to:
o solicit the approval of the Asset Purchase Agreement and the Video
Division Sale from our shareholders,
o operate the Video Division in the ordinary course until the closing,
o take all necessary action to be able to transfer the assets, including
obtaining approvals under various contracts and from regulatory bodies
and making various assignments, and
o use all commercially reasonable efforts to fulfill the conditions
within our control to complete the sale of the Video Division.
We have agreed not to initiate or solicit or take any action designed to
encourage or facilitate any inquires or offers with respect to the Video
Division from, or discuss such inquiries and offers with, any other parties,
unless required under corporate law fiduciary duties after receiving a bona
fide, written, unsolicited cash offer which the board of directors determines is
superior to the terms of the Asset Purchase Agreement, and subject to payment of
a termination fee as described below.
We also agreed not to compete with the business of the Video Division for
five years after the closing. In addition, during such period, we are generally
obligated to refrain from soliciting Purchasers' employees or otherwise
interfering in the relationships between Purchasers and their employees.
We also agreed not to seek legal recourse against Purchasers in respect of
any intellectual property that will be transferred or should have been
transferred in connection with the Video Division.
Employees of Video Division
TBM is obligated to offer, prior to closing of the Video Division Sale,
employment to a certain number of our employees who currently work in our Video
Division. A condition to Purchasers' obligations to close the Video Division
Sale is the acceptance of the offers by a
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prescribed number of employees. The offers of employment must be on terms no
less favorable to such employees than have been agreed to by TBM and
ParkerVision. The parties also have agreed upon the components of a retention
plan intended to promote acceptance of the offers of employment, including the
buyback of certain accrued benefits and cash and equity incentives.
Other agreements
Under a Transition Services Agreement, to be entered into upon Closing, we
will provide Purchasers' employees with training in the Video Division's
business, products and services, contract manufacturing to Purchasers and
certain general administrative functions. We will also provide services and
resources relating to the transitioning of the business of the Video Division
into TBM's operations. The transition phase will last for up to six months after
the closing. We will be reimbursed at cost and at cost-plus depending on the
service and length of time it is being provided.
Under a Sublease, to be entered into upon Closing, we will provide the
Purchasers' employees with office space at our headquarters in Jacksonville,
Florida. The term of the Sublease will run concurrently with the transition
phase contemplated by the Transition Services Agreement.
Purchasers also will be granted a license to use the "ParkerVision" name
for a limited time in connection with the transition and integration of the
Video Division into the operations of the Purchaser.
Conditions to closing
There are a number of customary conditions to be satisfied in order to
close. These include the following:
o accuracy of representations and warranties in all material respects at
closing,
o absence of materially adverse changes in the business of the Video
Division,
o satisfactory performance of various covenants,
o absence of any pending litigation which seeks to materially restrain,
modify or invalidate the Video Division Sale,
o receipt of required consents, including those relating to various
suppliers and customers,
o continued approval by the board of directors of the Video Division
Sale and receipt of the vote of our shareholders approving the Asset
Purchase Agreement and the Video Division Sale, and
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o TBM's offer of employment to a certain number of employees of the
Video Division and the acceptance of same by a prescribed percentage
thereof.
Termination
The Asset Purchase Agreement may be terminated in the following
circumstances (subject to payment of a termination fee in certain instances as
described below):
o by mutual consent,
o by the non-breaching party, after a material breach by the other
party,
o by either party, after issuance of certain orders enjoining or
otherwise prohibiting the transaction,
o by either party, if the closing has not occurred by July 9, 2004,
o by Purchasers, if the shareholders of ParkerVision have not approved
the Asset Purchase Agreement and the Video Division Sale by July 5,
2004,
o by Purchasers, if the board of directors of ParkerVision fails to
recommend or it withdraws, modifies or amends in any respect adverse
to Purchasers its approval or recommendation of the Asset Purchase
Agreement and the Video Division Sale, or the board of directors
approves an alternative acquisition proposal,
o by ParkerVision, upon receipt by ParkerVision of a Superior Offer for
the assets which the directors are bound to accept under their
fiduciary duty to ParkerVision and the shareholders, and following
prior notice by ParkerVision to Purchasers, and
o by Purchasers, subject to certain limitations, if there is a material
adverse change in the business, financial condition or prospects of
the Video Division.
In the event of a termination for breach, the non-breaching party may seek
damages from the breaching party.
Termination Fees
If the Asset Purchase Agreement is terminated as a result of the:
o withdrawal of our board of directors' recommendation for the
transaction,
o issuance of an order enjoining or prohibiting the Video Division Sale,
o acceptance of a Superior Offer,
11
o failure to close by July 9, 2004, where ParkerVision acts to
terminate, or
o failure to obtain our shareholder approval by July 5, 2004
then, ParkerVision will be obligated to pay a fee of $1,000,000 in cash, or at
its election only in the case of the last two items above, by the issuance of
that number of shares of common stock of ParkerVision with an equivalent value
to the cash amount. If we issue our common stock, we will register the shares
for re-offer and resale by Purchasers, and also have agreed to a make-whole
provision to assure Purchasers of getting at least $1,000,000 from its sale of
the shares within a certain period of time.
Right of first refusal
Purchasers will receive a right of first refusal for one year after
termination of the Asset Purchase Agreement, if such termination occurs in any
of the following circumstances:
o acceptance of a Superior Offer that ultimately is not closed by
ParkerVision,
o withdrawal of the recommendation of our board of directors for the
Video Division Sale,
o failure to obtain shareholder approval by July 5, 2004
o failure to close the Video Division Sale by July 9, 2004, where
ParkerVision acts to terminate, or
o court order or similar directive enjoining or prohibiting the Video
Division Sale.
The right of first refusal will be triggered by any written proposal from a
third party to acquire the business of the Video Division, to acquire all or a
material portion of the assets being sold under the Asset Purchase Agreement, or
to exclusively license all or a material portion of the intellectual property of
the Video Division.
Indemnification
The Asset Purchase Agreement provides that each party must indemnify the
other for damages incurred as a result of the breach of their respective
representations and warranties and failure to observe their covenants. In
general, the representations and warranties will survive for 18 months after the
closing and will not be affected by any investigation by the other party. Each
party is obligated to indemnify the other up to $4,000,000, once a threshold of
$150,000 in damages is achieved. ParkerVision also must indemnify Purchasers
against intellectual property claims for an unlimited period of time, without
any minimum threshold, and with a separate maximum of $5,000,000.
We shall also indemnify Purchasers with respect to other specific items
without time or amount limitations. These items include, but are not limited to:
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o the liabilities of the Video Division that are not being assumed by
Purchasers,
o the failure to comply with any applicable bulk sales requirements,
o breaches under the Transition Services Agreement, and
o costs of replacement of third-party software necessary to conduct the
business of the Video Division that is not transferable or assignable
in the Video Division Sale.
Purchasers shall also indemnify us with respect to certain specific items
without time or amount limitations. These items include, but are not limited to:
o the limited liabilities of the Video Division being assumed by
Purchasers, such as the Post-Closing Contractual Liabilities,
o the failure to pay back any amounts of the purchase price held back at
closing when and as due,
o the failure to pay any adjustment to purchase price when and as due,
and
o breaches under the Transition Services Agreement.
VOTING AGREEMENT
Jeffrey Parker, our chief executive officer and chairman of the board, Todd
Parker, president of our Video Division and a director, Stacie Wilf, our
corporate secretary, and certain members of their immediate family and certain
of their other affiliates, together and William Sammons, a director, have each
entered into a Voting Agreement with Purchasers, dated February 25, 2004.
Collectively, these persons and entities own an aggregate of 4,931,747 shares,
representing 27.5% of the outstanding shares of our common stock and each of
them has agreed to vote "FOR" the adoption of the Asset Purchase Agreement and
the approval of the Video Division Sale. Each of these persons and entities has
appointed Purchasers as their proxies with respect to the voting of their shares
at the special meeting if they do not act in accordance with the Voting
Agreement.
INTERESTS OF MANAGEMENT
Except in their capacity as shareholders or holders of options to buy
common stock of ParkerVision, no director or executive officer of ParkerVision
or any of their affiliates has any substantial interest, direct or indirect, in
the Video Division Sale, nor will any such person derive any extra or special
benefit.
BACKGROUND OF THE VIDEO DIVISION SALE
The following summarizes our operating divisions and the events and reasons
leading to our decision to sell our Video Division and focus our resources and
efforts on our Wireless Division.
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Our Business Divisions
WIRELESS DIVISION. We have developed radio frequency transceivers based on
what we believe to be an entirely new electronic circuit configuration and
design. We market these under the names Direct2Data or D2D. We believe our D2D
technology enables the creation of practical, high performance transceivers that
reduce or eliminate transmission and receiving problems when compared to
fundamental circuit configurations based on solutions developed over fifty years
ago. Transceiver products using the current widely accepted radio technology
have inherent transmission and receiving limitations. These limitations
compromise the overall performance of the transceivers, use more power to drive
them, are more expensive to manufacture and must be larger in size (which also
means heavier) to function at levels similar to products using the D2D
technology. Wireless products employing D2D technology, when compared to other
products, have the ability to function at farther distances, with fewer dead
zones, with increased connection reliability, may be manufactured less
expensively, and use less power to drive them.
In September and December 2003, we introduced our first D2D-based products,
which include a wireless local area networking card, a wireless four-port router
and a wireless universal serial bus adaptor. We promote and sell our wireless
consumer products on our website and through an Internet based retailer. We are
exploring additional channels of commercial product distribution. We also are
marketing our designs and semiconductor products to product manufacturers for
integration into their products.
VIDEO DIVISION. The Video Division encompasses our automated live
television production systems, marketed under the tradename PVTV(TM), and
automated video camera control systems, marketed under the tradename
CameraMan(R). ParkerVision provides training, support and other services related
to these products.
PVTV systems are marketed to broadcasters in the US and Canada and are
designed specifically to meet the needs of studio production markets. The PVTV
product line combines a professional television broadcast video production
system that integrates video, audio, teleprompter, machine control, character
generators and still stores and control functions. PVTV systems, at the election
of the customer, also may incorporate ParkerVision camera systems. With the PVTV
system, broadcasters are able to economize resources by maximizing their
production capabilities with many fewer employee operators.
The CameraMan systems permit non-professional video users to create
professional-quality video communications. We principally market the CameraMan
systems to educational and videoconferencing segments of the commercial market
and to the broadcast and professional video user.
Pre-signing activities
In 2002, our board of directors and management began to evaluate our
business divisions, assets, prospects and costs in an effort to maximize the
potential of our company and shareholder value. The declining sales of the
CameraMan products, the time frame for achieving sales of the PVTV products, the
impact of the recession and Iraqi war on budget commitments by television
broadcasters and the continued losses of the Video Division were considered.
Also taken into
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consideration were the commercial potential represented by the technology of our
Wireless Division and the expenses and resources that would be required to
realize this potential.
Management sought advice with respect to its efforts to maximize company
potential and shareholder value and, in this regard, consulted with and
interviewed several corporate strategists and investment banking firms. In March
2003, ParkerVision engaged Wells Fargo Securities, LLC to assist ParkerVision in
the development of our corporate strategies, including with respect to our Video
Division.
In order to strengthen our capital position and fund the ongoing research
and development costs associated with our Wireless Division as well as our other
operations, we consummated a private placement in November 2003, selling
2,310,714 shares of common stock at $8.75 per share for an aggregate purchase
price of approximately $20.2 million. Wells Fargo Securities served as sole
placement agent for the transaction. Wells Fargo Securities was paid fees and
expenses of $1,243,124 from the gross proceeds of this offering.
Through the efforts of Wells Fargo Securities, in April 2003, we began
preliminary discussions with representatives of the Purchasers. In connection
with these discussions, we signed a mutual confidentiality agreement on May 23,
2003. Thereafter, during the period from May 2003 to December 2003, executives
and technical personnel of Purchasers and ParkerVision had two face-to-face
meetings and several telephonic conferences with respect to the prospects of the
Video Division and the design, manufacturing, marketing and support capabilities
of the Video Division.
As a result of the preliminary due diligence investigations by the
Purchasers and the discussions, the Purchasers made an offer to acquire the
assets of the Video Division in a written term sheet delivered to ParkerVision
on December 9, 2003. From December 10, 2003 to December 17, 2003, Purchasers and
ParkerVision discussed the offer terms and signed a definitive letter of intent
on December 18, 2003.
There were further discussions in early January 2004 between Jean Marc
Hoffer and John Stuckey, representatives of Purchasers, and Jeffrey Parker and
Todd Parker, officers of ParkerVision, during which several of the original
terms of the Video Division Sale were modified.
Immediately thereafter, counsel for the Purchasers commenced their "due
diligence" review and drafting the acquisition agreements.
From January 27, 2004 through January 30, 2004, management of Purchasers
and ParkerVision met in New York for the preliminary negotiation of the
transaction documents. Present at these meetings were Jean Marc Hoffer, John
Stuckey, Jeff Rosica and Tom Collins of the Purchasers, and Jeffrey Parker, our
chief executive officer and chairman of the board, and Todd Parker, president of
our Video Division and a director. Counsel for each of the parties also was
present.
On January 28, 2004, the board of directors of ParkerVision met to receive
a report of the face-to-face negotiations and respond to several provisions of
the transaction documents being proposed. The board authorized continued
negotiations, subject to certain parameters.
15
During the period from February 2, 2004 to February 24, 2004, the parties
and counsel negotiated and finalized the transaction documents by telephonic
conferences, exchange of written transaction documents, memoranda and emails.
During this time, ParkerVision provided Purchasers with additional due diligence
documentation and disclosure and prepared the disclosure schedules to the Asset
Purchase Agreement which clarified the representations and warranties being made
by ParkerVision.
On February 17, 2004, the board met to consider the transaction documents.
Counsel for ParkerVision and management reviewed the terms of the transaction
documents. The representative of Wells Fargo Securities reviewed the terms and
fairness of the Video Division Sale with our board of directors.
On February 24, 2004, the board of directors convened again to evaluate the
Video Division Sale and the transaction documents. For this meeting, the board
was provided with the final forms of transaction documents and the supporting
data in respect of the draft fairness opinion to be rendered by Wells Fargo
Securities. At this meeting, the board of directors approved the Asset Purchase
Agreement, the various ancillary transaction agreements and the Video Division
Sale.
On February 25, 2004, Purchasers and ParkerVision entered into the Asset
Purchase Agreement and Thomson Inc. delivered its guarantee of the Purchasers'
payment obligations thereunder. Simultaneously, certain shareholders of
ParkerVision executed and delivered the Voting Agreement to Purchasers.
On February 26, 2004, Thomson and ParkerVision jointly announced the
execution of the agreements through press releases.
Reasons for the Video Division Sale
ParkerVision has offered video products since 1990 and these products were
the original core of our business. In 1995, we started our Wireless Division,
which made what we believe to be important technological advances in wireless
and chip architecture technologies. During the ensuing years, we engaged in
significant research and obtained extensive patent protection related to these
wireless technology advances and, in the fourth quarter of 2003, we began
selling the first products based on our wireless technologies. Although revenues
for our Wireless Division have been insignificant to date, we believe this
division has significant growth potential far greater than that of the Video
Division.
As a result of the sale of our Video Division, we will be able to focus all
of our resources and attention on our wireless technologies and products and
will obtain at least an additional $12.5 million in cash for use in our Wireless
Division's operations.
Our board approved the Video Division Sale and the Asset Purchase Agreement
based on a number of factors, including the following:
o the consideration is all cash, which provides certainty of value
compared to a transaction involving receipt of stock or other non-cash
consideration, especially in light of the volatility of the stock
market;
16
o the cash consideration provides us with proceeds that are immediately
usable in the continued rollout of our initial wireless products;
o the opinion of Wells Fargo Securities that the purchase price is fair
to ParkerVision from a financial point of view; and
o the need to generate sufficient capital resources to continue our
operations with a focus on our Wireless Division.
OPINION OF WELLS FARGO
Under an engagement letter dated as of March 3, 2003, ParkerVision retained
Wells Fargo Securities to provide it with advisory services with respect to the
maximization of the value of the company, including its Video Division.
In March 2003, ParkerVision authorized Wells Fargo Securities to prepare a
selling memorandum with respect to the Video Division. This memorandum was
prepared and five potential purchasers were approached, including Thomson.
Ultimately, the other four parties declined to proceed, with Thomson electing to
proceed. Thomson submitted a letter of intent to ParkerVision in December 2003,
which subsequently was negotiated to a draft Asset Purchase Agreement.
At the meeting of ParkerVision's board of directors on February 17, 2004,
Wells Fargo Securities rendered its oral opinion, subsequently confirmed in
writing, to the effect that, as of February 25, 2004 and subject to and based
upon the assumptions and other considerations set forth in its written opinion,
the purchase price to be paid to ParkerVision in the Video Division Sale was
fair to ParkerVision from a financial point of view.
The full text of the written opinion of Wells Fargo Securities, dated as of
February 25, 2004, is attached as Appendix B to this Proxy Statement. The
opinion sets forth, among other things, the assumptions made, procedures
followed, matters considered and limitations on the scope of the review
undertaken by Wells Fargo Securities in rendering its opinion. Wells Fargo
Securities' opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof. Events occurring after the date hereof could materially affect this
opinion. Wells Fargo Securities was not requested to consider, and its opinion
does not address, the relative merits of the Video Division Sale as compared to
any alternative business strategies that might exist for ParkerVision. Wells
Fargo Securities' opinion is, in any event, limited to the fairness, from a
financial point of view, of the purchase price in the Video Division Sale and
does not address ParkerVision's underlying business decision to affect the Video
Division Sale. Wells Fargo Securities has not undertaken to update, revise or
reaffirm this opinion or otherwise comment upon events occurring after the date
hereof. The summary of the opinion of Wells Fargo Securities set forth in this
document is qualified in its entirety by reference to the full text of the
opinion.
In connection with rendering its opinion, Wells Fargo Securities reviewed,
among other things:
o a draft of the Asset Purchase Agreement and exhibits thereto
substantially similar to the final forms;
17
o the financial statements of the Video Division and other historical
financial information provided by ParkerVision that we deemed
relevant;
o audited financial statements of ParkerVision for the years 2002, 2001,
2000 and 1999 and other historical financial information provided by
ParkerVision that we deemed relevant;
o certain financial analyses and forecasts of the Video Division
prepared by and reviewed with management of ParkerVision and the views
of senior management of ParkerVision regarding the Video Division's
past and current business operations, results thereof, financial
condition and future prospects;
o a comparison of certain financial information for the Video Division
with similar publicly available information for certain other publicly
traded companies;
o the financial terms of recent business combinations deemed generally
relevant to their analysis; and
o such other information, financial studies, analyses and investigations
and financial, economic and market criteria as Wells Fargo Securities
considered relevant.
Wells Fargo Securities' opinion did not in any manner address the prices at
which ParkerVision's common stock will actually trade following the consummation
of the Video Division Sale. Wells Fargo Securities expressed no opinion or
recommendation as to how the shareholders of ParkerVision should vote at the
shareholders' meeting to be held in connection with the Video Division Sale.
The following is a summary of the financial analyses performed by Wells
Fargo Securities in connection with its oral opinion and the preparation of its
written opinion, which represent all of the financial analyses considered by
Wells Fargo Securities in arriving at its opinion. Some of these summaries of
financial analyses include information presented in tabular format. In order to
fully understand the financial analyses used by Wells Fargo Securities, the
tables must be read together with the text of each summary. The tables alone do
not constitute a complete description of the financial analyses.
Comparable Company Trading Analysis. Wells Fargo Securities compared
certain publicly available financial information for ParkerVision and four
companies were selected. The four comparable companies were:
o Avid Technology Inc.
o Harris Corp.
o Pinnacle Systems Inc.
o Thomson
18
Wells Fargo Securities then analyzed the ratio of aggregate value, defined
as market capitalization plus total debt less cash and cash equivalents, for
each of these companies to trailing twelve months revenues. This analysis showed
the following:
AGGREGATE VALUE TO TRAILING
COMPANY TWELVE MONTHS REVENUE
------- ---------------------
Avid Technology Inc. 2.2x
Harris Corp. 1.3x
Pinnacle Systems Inc. 1.3x
Thomson 0.7x
--------------------------------------
Mean: 1.4x
Median: 1.3x
--------------------------------------
No company utilized in the comparable company analysis is identical to
the Video Division. In evaluating the comparable companies, Wells Fargo
Securities made judgments and assumptions with regard to industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of ParkerVision. Mathematical analysis,
such as determining the average or median, is not in itself a meaningful method
of using comparable company data.
Discounted Cash Flow Analysis. Wells Fargo Securities attempted to
calculate equity values for the Video Division based on a discounted cash flow
analysis, but deemed the resulting equity values as immaterial due to the lack
of information and pertinent projections.
Analysis of Purchase Price as a Multiple of Revenue. Wells Fargo
Securities compared publicly available statistics for 20 selected transactions
announced between January 1, 1998 and December 31, 2003 involving public
companies in the broadcasting equipment industry and in which transaction values
ranged up to $250 million. Of these transactions, there were five in which the
transactions were most comparable to the Video Division Sale. The transactions
reviewed were:
DATE ANNOUNCED ACQUIROR TARGET
-------------- -------- ------
12/14/01 Thomson Multimedia Grass Valley Group
01/26/01 Dielectric Communications TCI International
11/30/99 Harris Corp. Louth Automation
09/05/00 Leitch Technology Digital Processing Systems
09/05/00 Unique Broadband Systems ProTeleVision Technology
19
For each of these transactions, Wells Fargo Securities analyzed the
purchase price as a multiple of trailing twelve months revenues. Wells Fargo
Securities then applied the results from this analysis to the relevant financial
statistic for the Video Division.
RELEVANT
REFERRAL MULTIPLES MULTIPLE RANGES MEDIAN MEAN
------------------ --------------- ------ ----
Transaction value to last 0.5x - 3.1x 1.3x 1.7x
twelve month revenue
No company or transaction utilized in the analysis of the purchase price in
the Video Division Sale as a multiple of revenue is identical to the Video
Division or the Video Division Sale. In evaluating the purchase price in the
Video Division Sale as a multiple of revenue, Wells Fargo Securities made
judgments and assumptions with regard to general business, market and financial
conditions and other matters, which are beyond the control of ParkerVision and
which could affect the public trading value of the companies and the aggregate
value of the transactions to which they are being compared.
Wells Fargo Securities conducted the analyses described above solely as
part of its analysis of the fairness to ParkerVision from a financial point of
view of the purchase price to be paid for the Video Division and in connection
with the delivery of its opinion to ParkerVision's board of directors. These
analyses do not purport to be appraisals or to reflect the prices at which
shares of common stock of ParkerVision might actually trade.
The purchase price to be paid for the Video Division was determined through
arm's-length negotiations between ParkerVision and Purchasers and was approved
by ParkerVision's board of directors. Wells Fargo Securities provided advice to
ParkerVision during these negotiations. Wells Fargo Securities did not, however,
recommend any specific purchase price to ParkerVision.
In addition, as described elsewhere in this document, Wells Fargo
Securities' opinion and its presentation to ParkerVision's board of directors
was one of many factors taken into consideration by ParkerVision's board of
directors in deciding to approve the Purchase. Consequently, the analyses as
described above should not be viewed as determinative of the opinion of
ParkerVision's board of directors.
Under the engagement letter, ParkerVision paid Wells Fargo Securities an
initial retainer of $75,000 upon signing of the letter. ParkerVision also agreed
to pay Wells Fargo Securities a fee for its services equal to 2% of the value of
any sales transaction introduced to ParkerVision by Wells Fargo Securities. In
connection with the Video Division Sale, this fee will be between $250,000 if
there is no upward adjustment to the purchase price, and $305,000 if the maximum
upward adjustment is applied. This fee will be paid upon closing of the Video
Division Sale. In addition, ParkerVision paid Wells Fargo Securities $150,000
for the fairness opinion. ParkerVision has also agreed to reimburse Wells Fargo
Securities for its expenses incurred in performing its services. ParkerVision
will indemnify Wells Fargo Securities and its affiliates, their respective
directors, officers, agents and employees and each person, if any, controlling
Wells Fargo Securities or any of its affiliates against certain liabilities and
expenses, including certain liabilities under the federal securities laws,
related to or arising out of Wells Fargo Securities' engagement.
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USE OF PROCEEDS
If the Video Division Sale is approved and consummated, the net proceeds
received by ParkerVision will be used for working capital in the Wireless
Division and general corporate purposes. No distributions of the purchase price
proceeds to the shareholders of ParkerVision are contemplated.
ABSENCE OF APPRAISAL RIGHTS
Under Chapter 607, Florida Statutes, ParkerVision's shareholders will have
no rights in connection with the Video Division Sale to seek appraisal for the
fair value of their shares of common stock.
ACCOUNTING TREATMENT OF PROPOSED TRANSACTION
Following approval of the Video Division Sale by the shareholders, the
Video Division will be accounted for "as a discontinued operation" in accordance
with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" during the quarter in which the closing occurs.
BOARD OF DIRECTORS RECOMMENDATION
AFTER CAREFUL CONSIDERATION, PARKERVISION'S BOARD HAS DETERMINED THAT THE
ASSET PURCHASE AGREEMENT IS ADVISABLE, FAIR TO, AND IN THE BEST INTERESTS OF,
PARKERVISION AND ITS SHAREHOLDERS. ACCORDINGLY, OUR BOARD APPROVED THE ASSET
PURCHASE AGREEMENT AND THE VIDEO DIVISION SALE, AND RECOMMENDS THAT YOU VOTE
"FOR" APPROVAL OF THE ASSET PURCHASE AGREEMENT AND THE VIDEO DIVISION SALE.
RISK FACTORS RELATING TO THE
PROPOSED TRANSACTION AND OUR CONTINUING BUSINESS
You are urged to read the following risk factors relating to the Video
Division Sale and the continued operation of, and focus on, our Wireless
Division following the consummation of the Video Division Sale.
WE HAVE A HISTORY OF LOSSES THAT WE MAY NOT BE ABLE TO REVERSE.
ParkerVision has had losses in each year since our inception in 1989. For
the fiscal years 2001, 2002 and 2003, our losses were approximately $16.6
million, $17.3 million and $22.0 million, respectively. We had an accumulated
deficit of approximately $95.7 million at December 31, 2003. Our recent
operating losses resulted from declining revenues of our video products and
insufficient sales of our wireless products. Our expenditures are likely to
continue to outpace our revenues in the near term and we may never be able to
generate sufficient revenues to support operations.
21
THE RISK THAT WE WILL CONTINUE TO EXPERIENCE LOSSES COULD BE EXACERBATED BY THE
DISCONTINUATION OF OUR VIDEO DIVISION REVENUE STREAM.
After the sale of our Video Division, we will no longer generate revenues
from the sale of our video products and will rely solely on our ability to
generate revenues through the commercialization of our D2D technology to support
our operations. Revenues from our Wireless Division have been nominal to date,
while expenditures for such division have been, and likely will continue to be,
significant. We may never be able to generate revenues through our Wireless
Division that are sufficient to cover operational expenses or which result in
net profits.
IF WE REQUIRE ADDITIONAL CAPITAL IN THE FUTURE AND CANNOT RAISE IT, WE WILL NOT
BE ABLE TO IMPLEMENT OUR CURRENT BUSINESS PLAN.
We anticipate that we will continue to operate at a loss in the near term
and to make significant expenditures for research and development, patent
protection, manufacturing, marketing and general operations. We believe that our
existing resources, together with the net proceeds from the Video Division Sale,
will be sufficient to fund our business plan for 2004. After such time, if
revenues generated by our Wireless Division are not sufficient to support our
operations, we will be required to obtain financing. Financing, if any, may be
in the form of loans, additional sales of equity securities or one or more joint
ventures. A loan, the sale of preferred stock or a joint venture may result in
the imposition of operational limitations and other covenants and payment
obligations, any of which may be burdensome to ParkerVision. The sale of any of
our equity securities will result in dilution to our then existing shareholders.
ParkerVision does not have any plans or arrangements for additional financing at
this time.
OUR WIRELESS DIVISION HAS NO MEANINGFUL COMMERCIAL HISTORY ON WHICH TO EVALUATE
ITS PROSPECTS.
Our first wireless products were introduced in late 2003 and revenues for
our Wireless Division have been insignificant to date. There is no long-term
business history on which you can evaluate our Wireless Division and its
prospects. Our Wireless Division must therefore be evaluated in light of the
risks, uncertainties, expenses and difficulties frequently encountered by
companies in development, particularly companies in the technology industries.
These risks include:
o limited or no proven market acceptance of our existing and future
products;
o our need to develop sales and support organizations for newly
introduced products and technologies;
o competition from numerous sources, the substantial majority of which
have greater resources than ParkerVision;
o our need to manage changing operations in an efficient and timely
manner; and
22
o our likely need to rely on strategic relationships for the
exploitation of our technology and distribution of our products.
OUR D2D TECHNOLOGY REPRESENTS A RADICAL CHANGE FROM PREVIOUSLY ACCEPTED
TECHNOLOGIES AND MAY MEET WITH RESISTANCE OR NONACCEPTANCE IN THE INDUSTRY.
Our wireless technology represents a significant change in the circuit
design of wireless radio-frequency communications. To achieve market acceptance,
we will need to prove to the marketplace that our technology can be utilized to
produce products and solutions that are desirable or superior alternatives to
existing products and solutions. We may not be able to do this, and we cannot
predict the ultimate competitive, operational or economic benefits, if any, that
our technology would provide. If we are not able to establish our D2D technology
in the market place as a desirable or superior alternative to current,
traditional solutions in wireless communications, our business and financial
condition will be adversely affected.
IF WE CANNOT KEEP PACE WITH RAPID CHANGES IN TECHNOLOGY, WE WILL BE AT A
COMPETITIVE DISADVANTAGE AND COULD LOSE IMPORTANT MARKET OPPORTUNITIES.
The microelectronics industry in which our D2D technology applies is
characterized by rapid technological developments, changes and demand shifts. We
must continually dedicate substantial resources to the development and
improvement of our technology and must regularly introduce new products and
related technologies to stay ahead or apace with these changes. For example, in
fiscal year 2003, we spent approximately $13 million on wireless research and
development, and in the coming year, we expect to spend a significant additional
amount. If other companies offer better products or technologies than those
offered by ParkerVision or our own product and technology development lags or
fails to produce viable products and solutions, our competitive position will be
compromised and we may not be able to capitalize on important market
opportunities as they arise.
IF OUR PRODUCTS ARE NOT COMMERCIALLY ACCEPTED, OUR RESEARCH AND DEVELOPMENT
INVESTMENT WILL BE LOST AND OUR ABILITY TO CONTINUE OPERATIONS WILL BE IMPAIRED.
There can be no assurance that our Wireless Division's technology can be
harnessed to create commercially viable or desirable products. If new products
are not developed by us or by third parties under license to us, or such
products are not commercially accepted, the funds we have expended and will
continue to expend on research and development will not be recoverable, and our
competitive and financial position will be adversely affected.
IF OUR PATENTS DO NOT PROVIDE US WITH THE PROTECTION WE ANTICIPATE, OUR
COMPETITIVE POSITION, BUSINESS AND PROSPECTS WILL BE IMPAIRED.
We have been awarded 29 United States and foreign patents and have more
than 90 patent applications pending relating to our D2D technologies. We rely on
these to provide us with competitive advantage and to protect us from theft of
our intellectual property. We believe that many of these patents are for
entirely new technologies. If the pending patents are not issued, or issued
patents are later shown not to be as broad as currently believed or otherwise
challenged such that some or all of the protection is lost, any competitive
advantage that we possess will be diminished or lost and our ability to offer
unique products and technologies could be substantially harmed.
23
OUR D2D TECHNOLOGY WILL COMPETE WITH THE TECHNOLOGIES OF NUMEROUS OTHER
COMPANIES.
Our technology, and the products and solutions based on such technology,
will necessarily be judged against, and will compete with, the technologies of
other companies in our industry. We face competition from chip suppliers, such
as Philips, Texas Instruments, Analog Devices and Broadcom, as well as from
finished products suppliers, such as Netgear, Cisco, Proxim and D.Link. It also
is likely that we will face competition from entities such as Qualcom, Nokia,
Panasonic, Sony and Samsung, as well as other existing and future companies that
are developing or which will develop other technologies. Many of our competitors
have far greater resources and more established brand names than we do and may
be able to use such resources and brand identity to capture significant market
share, even in circumstances where their technology is inferior to ours.
WE OBTAIN CRITICAL PRODUCTION COMPONENTS FROM VARIOUS SUPPLIERS WHO MAY NOT BE
ABLE TO FULFILL OUR REQUIREMENTS AS AND WHEN NEEDED OR WHO MAY IMPLEMENT PRICE
INCREASES THAT WE CANNOT PASS ON TO OUR CUSTOMERS.
We obtain critical components from various suppliers, some of which are
single sources. We may not obtain components on a timely basis or at all as a
result of lack of capacity, parts shortages and other disruptions at these
sources or in the overall marketplace. To date, we have not experienced any
significant problems with sources of components that have affected our ability
to fulfill our obligations in a timely fashion. In addition, we have never ended
or had terminated any supply arrangements for critical components where an
alternative has not been readily available. Notwithstanding this history, if we
are unable to obtain components from current sources as and when needed, our
business could be disrupted, and we would have to expend some of our resources
to modify our products or find new suppliers and work with them to develop
appropriate components. Although we have been able to pass on price increases we
have encountered to date, we have no control over the level or timing of future
price increases and may not always be able to pass on such increases, which
could have an adverse effect on our financial condition.
WE WILL SEEK TO ESTABLISH RELATIONSHIPS WITH THIRD PARTIES FOR THE
COMMERCIALIZATION OF OUR D2D TECHNOLOGY AND MAY NOT BE ABLE TO ACHIEVE MARKET
ACCEPTANCE WITHOUT THEM.
To achieve wide market awareness and acceptance of our D2D technology, we
will seek to enter into business relationships with third parties by which our
D2D technology would be incorporated into their products under license or by
which our own products would be marketed through their marketing channels. From
time to time, we have had discussions for OEM and other types of arrangements,
but to date, none have been successfully concluded. The successful
commercialization of our D2D technology will depend in part on our ability to
enter into, and then meet our obligations under, such agreements.
OUR LIMITED EXPERIENCE IN THE COMMERCIAL DESIGN OF ELECTRONIC CHIPS AND NEED TO
OUT-SOURCE THEIR PRODUCTION COULD RESULT IN DESIGN ERRORS, PRODUCTION DELAYS AND
PRODUCT REJECTIONS.
We have limited experience in the commercial design and manufacture of
electronic chips. Our inexperience in chip design could result in fundamental
design or manufacturing flaws. Our chips are manufactured through a foundry
relationship with Texas Instruments. Since we do not control the actual
manufacturing process, there could be deficiencies or delays
24
in manufacturing that are outside of our control and which we may not be able to
identify or remedy on a timely basis. Design errors, manufacturing deficiencies
or production delays could lead to the rejection of finished product by our end
customers.
WE ARE HIGHLY DEPENDENT ON JEFFREY PARKER, OUR CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD.
Because of Mr. Parker's position in the company and the respect he has
garnered in the industries in which we operate and the investment community, the
loss of his services would likely impede our ability to execute our business
plan, establish and maintain relationships in our industries and obtain future
financing if needed. Mr. Parker has an employment agreement that expires in
September 2005. ParkerVision maintains key-man life insurance for its benefit on
Mr. Parker.
WE ARE DEPENDENT ON HIRING HIGHLY SKILLED EMPLOYEES.
Our Wireless Division is very specialized and we are dependent on having
skilled and specialized employees to conduct our research and development,
manufacturing, marketing and support activities. There tends to be relatively
few persons available that meet our requirements. ParkerVision encounters
intense competition from other telecommunications, electronics and technically
orientated companies for these employees. We are often required to fashion
superior compensation packages and to develop a working environment conducive to
attracting the kinds of person the company needs. We also have to pay recruiting
fees. The inability to obtain appropriately skilled employees on a commercially
reasonable basis would have an adverse impact on our business and development.
THIS PROXY STATEMENT CONTAINS FORWARD-LOOKING STATEMENTS THAT MAY PROVE
INACCURATE.
In connection with the Private Securities Litigation Reform Act of 1995
(the "Litigation Reform Act"), we are disclosing certain cautionary information
in connection with this Proxy Statement that may contain "forward-looking
statements" within the meaning of the Litigation Reform Act. Such statements
consist of any statement other than a recitation of historical fact and can be
identified by the use of forward-looking terminology such as "may," "expect,"
"anticipate," "estimate" or "continue" or the negative thereof or other
variations thereon or comparable terminology.
You are cautioned that all forward-looking statements are necessarily
speculative and there are numerous risks and uncertainties that could cause
actual events or results to differ materially from those referred to in such
forward-looking statements. The discussion above highlights some of the more
important risks identified by us, but should not be assumed to be the only
factors that could affect future performance. We do not have a policy of
updating or revising forward-looking statements.
25
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of the record date
with respect to the stock ownership of (i) those persons or groups who
beneficially own more than 5% of our common stock, (ii) each of our directors,
(iii) each executive officer whose compensation exceeded $100,000 in 2003, and
(iv) all of our directors and executive officers as a group (based upon
information furnished by those persons).
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS(1)
------------------------ -------------------- --------
Jeffrey L. Parker(2) 3,314,342 (3)(4) 17.76%
J-Parker Family Limited Partnership(5) 2,376,974 (4) 13.24%
Todd Parker(2) 1,100,588 (6)(7) 6.08%
T-Parker Family Limited Partnership(5) 876,255 (7) 4.88%
Stacie Wilf(2) 1,033,416 (8)(9) 5.73%
S-Parker Wilf Family Limited Partnership(5) 905,811 (9) 5.04%
David F. Sorrells(2) 549,500 (10) 2.97%
William A. Hightower 162,500 (11) 0.90%
Richard A. Kashnow 115,000 (12) 0.64%
William L. Sammons 169,750 (13) 0.94%
Nam P. Suh -- (14) --
Papken S. der Torossian 15,000 (15) 0.08%
Cynthia Poehlman(2) 61,200 (16) 0.34%
Wellington Management Company, LLP(17) 2,064,600 (17) 11.5%
Leucadia National Corporation(18) 1,607,973 (18) 8.72%
Banca del Gottardo(19) 1,197,439 (19) 6.25%
Arbor Capital Management, LLC(20) 1,310,800 (20) 6.80%
Tyco International Ltd.(21) 1,058,949 (21) 5.73%
Tyco Sigma Limited(21) 1,058,949 (21) 5.73%
All directors and executive officers as a group (10 persons) 6,521,296 (22) 32.72%
__________________________________
(1) Percentage includes all outstanding shares of common stock plus, for each
person or group, any shares of common stock that the person or the group
has the right to acquire within 60 days pursuant to options, warrants,
conversion privileges or other rights.
(2) The person's address is 8493 Baymeadows Way, Jacksonville, Florida 32256.
(3) Includes 700,000 shares of common stock issuable upon currently exercisable
options and 9,501 shares owned of record by Mr. Parker's three children
over which he disclaims ownership. Excludes 60,000 shares of common stock
issuable upon options that may become exercisable in the future.
(4) J-Parker Family Limited Partnership is the record owner of 2,376,974 shares
of common stock. Mr. Jeffrey L. Parker has sole voting and dispositive
power over the shares of common stock owned by the J-Parker Family Limited
Partnership, as a result of which Mr. Jeffrey Parker is deemed to be the
beneficial owner of such shares.
26
(5) The entity's address is 409 S. 17th Street, Omaha, Nebraska 68102.
(6) Includes 127,500 shares of common stock issuable upon currently exercisable
options and 10,000 shares owned of record by Mr. Parker's spouse and 100
shares owned of record by Mr. Parker's child. Excludes 40,000 shares of
common stock issuable upon options that may become exercisable in the
future.
(7) T-Parker Family Limited Partnership is the record owner of 876,255 shares
of common stock. Mr. Todd Parker has sole voting and dispositive power over
the shares of common stock owned by the T-Parker Family Limited
Partnership, as a result of which Mr. Todd Parker is deemed to be the
beneficial owner of such shares.
(8) Includes 87,500 shares of common stock issuable upon currently exercisable
options and 10,600 shares owned of record by Ms. Wilf's two children over
which she disclaims ownership.
(9) S-Parker Wilf Family Limited Partnership is the owner of 905,811 shares of
common stock. Ms. Wilf has sole voting and dispositive power over the
shares of common stock owned by the S-Parker Wilf Family Limited
Partnership, as a result of which Ms. Wilf is deemed to be the beneficial
owner of such shares.
(10) Includes 549,500 shares of common stock issuable upon currently exercisable
options. Excludes 300,000 shares of common stock issuable upon options that
may become exercisable in the future.
(11) Includes 162,500 shares of common stock issuable upon currently exercisable
options. Excludes 500,000 shares of common stock issuable upon options that
may become exercisable in the future.
(12) Includes 115,000 shares of common stock issuable upon currently exercisable
options.
(13) Includes 150,000 shares of common stock issuable upon currently exercisable
options.
(14) Excludes 100,000 shares of common stock issuable upon options that may
become exercisable in the future.
(15) Includes 15,000 shares of common stock issuable upon currently exercisable
options. Excludes 100,000 shares of common stock issuable upon options that
may become exercisable in the future.
(16) Includes 61,200 shares of common stock issuable upon currently exercisable
options. Excludes 27,300 shares of common stock issuable upon options that
may become exercisable in the future.
(17) The business address of Wellington Management Company, LLP is 75 State
Street, Boston, Massachusetts 02109. Wellington has shared voting authority
over 974,300 shares of common stock and has shared dispositive power over
2,064,600 shares of common stock. Wellington has reported beneficial
ownership of 2,064,600 shares of common stock. The foregoing information
was derived from a Schedule 13G/A filed with the SEC on December 31, 2003.
27
(18) The business address of Leucadia National Corporation is 315 Park Avenue
South, New York, New York 10010. The information for Leucadia National
Corporation was derived from a Schedule 13G filed with the SEC on April 1,
2003. The number of shares reported as beneficially owned includes 484,293
shares underlying a currently exercisable warrant.
(19) The address is Banca del Gottardo, Viale S. Franscini 8, CH-6901 Lungano,
Switzerland. The foregoing information was derived from an amendment to
Schedule 13G filed with the SEC and is based on information as of December
31, 2003.
(20) The address is One Financial Plaza, 120 South Sixth Street, Suite 100,
Minneapolis, Minnesota 55402. The foregoing information was derived from a
Schedule 13G filed with the SEC and is based on information as of December
31, 2003.
(21) The business address of each of Tyco International Ltd. and Tyco Sigma
Limited is The Zurich Center, Second Floor, 90 Pitts Bay Road, Pembroke, HM
08, Bermuda. These shares are held of record by Tyco Sigma Limited, a
wholly owned subsidiary of Tyco International Ltd. Tyco International Ltd.
and Tyco Sigma Limited share voting and dispositive power over these
shares. The foregoing information was derived from a Schedule 13G filed
with the SEC on March 6, 2003. The number of shares reported as
beneficially owned includes 529,475 shares underlying a currently
exercisable warrant.
(22) Includes 1,968,200 shares of common stock issuable upon currently
exercisable options held by directors and officers and 1,127,300 shares of
common stock issuable upon options that may vest in the future held by
directors and officers (see notes 3, 6, 8, 10, 11, 12, 13, 14, 15 and 16,
above).
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
OF THE PROPOSED TRANSACTION
The Video Division Sale will have no immediate direct income tax
consequences to ParkerVision's shareholders. The Video Division Sale will be
reported by ParkerVision as a sale of assets for federal and state income tax
purposes in 2004.
To the extent that the purchase price allocated to an asset exceeds its tax
basis, we will recognize gain. To the extent that the purchase price allocated
to an asset is less than our tax basis in that asset, we will recognize a loss.
We should be able to offset taxable gain arising from the sale of the assets
with operating losses, expenses and net operating loss carry-forwards. The asset
sale may also result in state or local income, franchise, sales, use or other
tax liabilities to ParkerVision in states or local tax jurisdictions in which we
file tax returns. Overall, we do not expect the tax obligations of the Company
to be significant.
Holders of our common stock will not recognize any gain or loss solely as a
result of the Video Division Sale. Our shareholders may be taxed on subsequent
distributions (i.e., dividends) of the proceeds of the Video Division Sale, if
any. Such distributions are not contemplated.
28
FINANCIAL STATEMENTS AND
OTHER INFORMATION INCORPORATED BY REFERENCE
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. Our SEC filings are
available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we filed at the
SEC's public reference room at 450 Fifth Street, N.W., Washington, DC 20549.
Please call the SEC at 1-800-SEC-0330 for further information about the public
reference room.
The SEC allows us to incorporate by reference the information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is an
important part of this proxy statement, and information that we file later with
the SEC will automatically update and supersede this information. This proxy
statement incorporates by reference our documents listed below and any future
filings we make with the SEC under Sections 13(a), 13(c), 14 or15(d) of the
Securities Exchange Act of 1934, as amended.
o Annual Report on Form 10-K for the fiscal year ended December 31,
2003;
o Current Report on Form 8-K dated February 25, 2004 and filed March 2,
2004;
o Current Report on Form 8-K dated March 11, 2004 and filed March 11,
2004; and
o Form 8-A declared effective on November 30, 1993, registering our
common stock, under Section 12(g) of the Securities Exchange Act of
1934, as amended.
You may obtain a copy of any of our SEC filings, excluding exhibits,
without charge by written or oral request directed to ParkerVision, Inc.,
Attention: Investor Relations, 8493 Baymeadows Way, Jacksonville, Florida 32256.
29
SELECTED FINANCIAL DATA
The following table sets forth consolidated financial data for ParkerVision
as of the dates and for the periods indicated. The data has been derived from
the audited consolidated financial statements of ParkerVision. The selected
financial data should be read in conjunction with the consolidated financial
statements of Parkervision and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Form 10-K for the fiscal
year ended December 31, 2003 incorporated by reference into this proxy
statement.
For the years ended December 31,
-------------------------------------------------------------------------
2003 2002 2001 2000 1999
-------- ------- ------- -------- -------
(in thousands, except per share amounts)
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues, net $ 6,738 $11,912 $ 9,315 $ 15,965 $10,549
Gross margin 2,072 4,703 3,262 7,474 3,609
Operating expenses 24,563 22,880 21,613 22,445 14,647
Interest and other income 476 905 1,741 1,949 1,297
Net loss (22,015) (17,272) (16,610) (13,022) (9,741)
Basic and diluted net loss per
common share (1.43) (1.24) (1.20) (1.03) (0.83)
CONSOLIDATED BALANCE SHEET DATA:
Total assets $42,483 $37,745 $54,144 $ 63,468 $32,741
Shareholders' equity 39,399 34,047 50,547 60,020 30,136
Working capital 23,225 18,992 36,161 45,460 22,703
30
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following pro forma financial data should be read in conjunction with
the selected financial data of ParkerVision found elsewhere in this proxy
statement and the financial statements of ParkerVision incorporated by reference
in this proxy statement and available on the SEC website or from the company.
The following pro forma information below has not been audited.
The unaudited pro forma consolidated balance sheet as of December 31, 2003
has been prepared to illustrate the estimated effects of the sale of the video
business and related assets as of December 31, 2003. The unaudited pro forma
consolidated statements of operations for the years ended December 31, 2003,
2002 and 2001 have been prepared to illustrate the estimated effects of the sale
of the video business and related assets at January 1, 2001. The pro forma
consolidated statements of operations for each of the years ending December 31,
2001, 2002 and 2003 were derived by adjusting the historical financial
statements of ParkerVision for certain transactions pursuant to the sale
transaction described in the notes to the unaudited pro forma consolidated
financial statements.
The pro forma financial data does not purport to be indicative of the
results which actually could have been obtained had the sale transaction been
completed as of the assumed dates or which may be obtained in the future. The
future financial results will be primarily those of the Wireless Division.
31
PARKERVISION, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
Historical Video Division Proforma
------------ ------------ ------------
Product revenue $ 5,576,472 $ 5,555,582 a $ 20,890
Support and other services revenue 1,161,597 1,161,597 a 0
------------ ------------ ------------
Net revenues 6,738,069 6,717,179 20,890
------------ ------------ ------------
Cost of goods sold - products 3,500,064 3,470,411 a 29,653
Cost of goods sold - support and other services 1,165,609 1,165,609 a 0
------------ ------------ ------------
Total cost of goods sold 4,665,673 4,636,020 29,653
------------ ------------ ------------
Gross margin 2,072,396 2,081,159 (8,763)
------------ ------------ ------------
Research and development expenses 15,025,747 1,708,268 b 13,317,479
Marketing and selling expenses 3,679,203 2,681,329 c 997,874
General and administrative expenses 5,774,239 0 5,774,239
Other expense 84,007 0 84,007
------------ ------------ ------------
------------
Total operating expenses, net 24,563,196 4,389,597 20,173,599
------------ ------------ ------------
Loss from operations (22,490,800) (2,308,438) (20,182,362)
Interest and other income 476,002 0 476,002
------------ ------------ ------------
Loss from continuing operations $(22,014,798) $ (2,308,438) $(19,706,360)
============ ============ ============
32
PARKERVISION, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2002
Historical Video Division Pro Forma
------------ ------------ ------------
Product revenue $ 10,733,769 $ 10,733,769 a $ 0
Support and other services revenue 1,178,144 1,178,144 a 0
------------ ------------ ------------
Net revenues 11,911,913 11,913,913 0
------------ ------------ ------------
Cost of goods sold - products 6,031,027 6,031,027 a 0
Cost of goods sold - support and other services 1,178,258 1,178,258 a 0
------------ ------------ ------------
Total cost of goods sold 7,209,285 7,209,285 0
------------ ------------ ------------
Gross margin 4,702,628 4,702,628 0
------------ ------------ ------------
Research and development expenses 13,939,480 1,814,726 b 12,124,754
Marketing and selling expenses 3,568,208 2,878,046 c 690,162
General and administrative expenses 5,320,557 0 5,320,557
Other expense 51,643 51,643 0
------------ ------------ ------------
Total operating expenses, net 22,879,888 4,744,415 18,135,473
------------ ------------ ------------
Loss from operations (18,177,260) (41,787) (18,135,473)
Interest and other income 905,438 0 905,438
------------ ------------ ------------
Loss from continuing operations $(17,271,822) $ (41,787) $(17,230,035)
============ ============ ============
33
PARKERVISION, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2001
Historical Video Division Pro Forma
------------ ------------ ------------
Product revenue $ 8,340,528 $ 8,340,528 a $ 0
Support and other services revenue 974,917 974,917 a 0
------------ ------------ ------------
Net revenues 9,315,445 9,315,445 0
------------ ------------ ------------
Cost of goods sold - products 5,005,121 5,005,121 a 0
Cost of goods sold - support and other services 1,048,683 1,048,683 a 0
------------ ------------ ------------
Total cost of goods sold 6,053,804 6,053,084 0
------------ ------------ ------------
Gross margin 3,261,641 3,261,641 0
------------ ------------ ------------
Research and development expenses 12,796,442 1,590,179 b 11,206,263
Marketing and selling expenses 3,835,724 2,817,131 c 1,018,593
General and administrative expenses 4,972,889 0 4,972,889
Other expense 8,241 7,871 370
------------ ------------ ------------
Total operating expenses, net 21,613,296 4,415,181 17,198,115
------------ ------------ ------------
Loss from operations (18,351,655) (1,153,540) (17,198,115)
Interest and other income 1,741,188 0 1,741,188
------------ ------------ ------------
Loss from continuing operations $(16,610,467) $ (1,153,540) $(15,456,927)
============ ============ ============
____________________________________
a. Reflects the discontinued revenues and corresponding cost of sales
attributable to the video business being sold.
b. Reflects the elimination of research and development costs attributable to
the video business being sold.
c. Reflects the elimination of marketing and selling costs attributable to the
video business being sold.
34
UNAUDITED PRO FORMA CONSOLIDATED
BALANCE SHEET AS OF DECEMBER 31, 2003
ParkerVision, ParkerVision,
Inc. Inc.
Historical Pro Forma Adjustments Pro Forma
12/31/2003 Debit Credit 12/31/2003
------------------------------------------------------------------------------
Cash and cash equivalents 17,467,875 11,250,000 a 28,717,875
Investments in US government
securities 3,008,427 3,008,427
Accounts receivable, net 988,849 988,849
Note receivable - Purchase price
adjustment 0 1,194,526 b 1,194,526
Note receivable - purchase price
holdback 0 1,250,000 c 1,250,000
Inventories, net 2,476,985 1,449,857 d 1,027,128
Prepaid expenses and other 2,366,792 154,201 e 2,212,591
------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 26,308,928 13,694,526 1,604,058 38,399,396
PROPERTY & EQUIPMENT, net 4,860,261 766,481 f 4,093,780
------------------------------------------------------------------------------
Deposits and other 549,990 549,990
Prepaid license fees 2,030,000 2,030,000
Patents and copyrights, net 8,733,631 657,394 g 8,076,237
------------------------------------------------------------------------------
OTHER ASSETS, net 11,313,621 - 657,394 10,656,227
------------------------------------------------------------------------------
TOTAL ASSETS 42,482,810 13,694,526 3,027,933 53,149,403
==============================================================================
CURRENT LIABILITIES
Accounts payable 693,820 693,820
Salaries and wages payable 592,369 592,369
Warranty reserves 199,084 199,084 h 0
Other accrued expenses 371,950 371,950
Deferred revenue 1,226,929 976,929 i 250,000
------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 3,084,152 1,176,013 1,908,139
STOCKHOLDERS' EQUITY
Common stock 179,595 179,595
Preferred stock 0 0
Additional paid in capital 118,048,964 118,048,964
Unrealized gains 31,746 31,746
Warrants 16,807,505 16,807,505
Ending retained earnings (95,669,152) 11,842,606 j (83,826,546)
------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 39,398,658 - 11,842,606 51,241,264
------------------------------------------------------------------------------
0 0
TOTAL LIABILITY AND EQUITY 42,482,810 1,176,013 0 11,842,606 0 53,149,403
==============================================================================
a. Represents 90% of the purchase price of $12,500,000 payable at the closing
for the video business and related assets being sold to the Purchasers. The
remaining 10%, or $1,250,000, is payable by the Purchasers one year after
the closing, subject to deduction for indemnification amounts claimed by
such date, and is accounted for by the company as a purchase price holdback
receivable.
b. Represents the estimated purchase price adjustment receivable, due within
45 days after closing, for the book value of the inventories, prepaid
expenses, and equipment transferred to the Purchasers, less liabilities
assumed for warranty reserves and deferred revenue.
35
c. Represents 10%, or $1,250,000, payable by the Purchasers one year after the
closing, subject to deduction for indemnification amounts claimed by such
date.
d. Represents the estimated inventories to be sold to the Purchasers and is a
portion of the purchase price adjustment receivable.
e. Represents the estimated current prepaid assets to be assigned to the
Purchasers and is a portion of the purchase price adjustment receivable.
f. Represents the estimated equipment to be sold to the Purchasers and is a
portion of the purchase price adjustment receivable.
g. Represents the estimated book value of the patents and other intangible
assets to be sold to the Purchasers, which amount is included in the
purchase price payable at the closing.
h. Represents the estimated warranty reserves liability assumed by the
Purchasers and is a portion of the purchase price adjustment receivable.
i. Represents the estimated deferred revenue assumed by the Purchasers and is
a portion of the purchase price adjustment receivable.
j. Represents the estimated gain on sale to the Purchasers of the video
business and related assets.
36
APPENDIX A
ASSET PURCHASE AGREEMENT
BETWEEN
THOMSON BROADCAST & MEDIA SOLUTIONS, INC.
AND
THOMSON LICENSING, S.A.
AS PURCHASERS,
AND
PARKERVISION, INC.
AS SELLER,
DATED AS OF
FEBRUARY 25, 2004
MORRISON & FOERSTER LLP
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
February 25, 2004 (the "Effective Date"), by and between Thomson Broadcast &
Media Solutions, Inc., a corporation organized in Delaware ("Lead Purchaser"),
Thomson Licensing, S.A., a corporation organized in France ("Patent Purchaser,"
and collectively with Lead Purchaser, "Purchasers"), and ParkerVision, Inc., a
corporation organized in the State of Florida ("Seller"). Certain capitalized
terms used in this Agreement and the recitals below are defined in Exhibit A
hereto.
RECITALS
WHEREAS, the Seller, through its video division (the "Video Division"), is
engaged in the design, development, marketing, sales, service and support of
hardware and software products and systems for (i) producing live news and other
television programs (which products and systems currently utilize no wireless
communications technology), including as marketed under the trade name "PVTV,"
and (ii) controlling live video cameras (which products and systems do not
currently utilize wireless communications technologies except for super
heterodyne and infrared wireless communications technologies), including as
marketed under the trade name "CameraMan" (collectively with related support,
training and other services, but excluding the related Manufacturing Operations,
the "Business");
WHEREAS, the Business as conducted by Seller at or prior to Closing and as
Proposed to be Conducted by Seller includes no wireless technologies other than
super heterodyne and infrared wireless technologies in connection with PVTV and
CameraMan related Products and Services and, for clarification purposes,
excludes all direct conversion technology;
WHEREAS, Seller, through its wireless division (the "Wireless Division"),
is also engaged in the business of designing, developing, marketing, selling,
servicing and supporting wireless communications products utilizing Seller's
direct conversion and related wireless technology;
WHEREAS, Seller desires to sell, and Purchasers desire to purchase, the
Business and all related Assets, excluding (i) Seller's Wireless Division and
the Assets used by Seller in its Wireless Division and (ii) Seller's general
management and administrative operations and the Assets used by Seller in such
operations, in each case on the terms and conditions hereof;
WHEREAS, of the Assets acquired from Seller by Purchasers, Patent
Purchaser will acquire the Patent Assets, and Lead Purchaser will acquire the
Non-Patent Assets;
WHEREAS, in connection with the purchase and sale of the Business,
Purchasers shall assume no Liabilities other than the Assumed Liabilities;
WHEREAS, in connection with the purchase and sale of the Business, Seller
and the applicable Purchasers will enter into certain related agreements,
including (i) the Retained Trademark License, (ii) the Transition Services
Agreement, (iii) the Patent Assignment Agreement, (iv) the Assignment and
Assumption Agreement and (v) the Sublease; and
WHEREAS, simultaneously with the execution of this Agreement and as an
inducement to Purchasers to enter into this Agreement, certain of the major
shareholders of Seller have entered into and delivered to Purchasers duly
executed voting agreements whereby such shareholders have agreed to vote in
favor of approving this Transaction;
WHEREAS, an Affiliate of Purchasers has agreed to guarantee the payment
obligations of Purchasers set forth herein pursuant to a guarantee agreement
executed simultaneously with this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
representations, warranties, covenants and promises contained herein, the
adequacy and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
AGREEMENT
ARTICLE 1
PURCHASE AND SALE OF ACQUIRED ASSETS
1.1 Acquired Assets. Subject to the terms and conditions of this
Agreement, effective at Closing, Seller hereby sells, transfers, conveys,
assigns and delivers all of Seller's right, title and interest in, to and under
the Non-Patent Assets (as defined below) to Lead Purchaser and, effective at
Closing and subject to the terms and conditions hereof, Lead Purchaser hereby
purchases all such right, title and interest in, to and under the Non-Patent
Assets. "Non-Patent Assets" means all Assets of Seller related to the Business,
including as conducted at or prior to Closing or as Proposed to be Conducted by
Seller, except for the Excluded Assets and the Patent Assets being acquired by
Patent Purchaser pursuant to Section 1.2. Acquired Assets further include
(except for the Excluded Assets and the Patent Assets being acquired by Patent
Purchaser pursuant to Section 1.2):
(a) Products and Services. The Products and Services related to the
Business, including as set forth on Schedule 1.1(a);
(b) Personal Property. (i) The Inventory related to the Business,
including as set forth on Schedule 1.1(b)(i), and (ii) the research,
development, testing, training and product-qualification equipment and any other
Personal Property (except for furniture) owned or leased (including any of the
foregoing subject to any conditional sales or title retention agreement in favor
of any other Person) by Seller in connection with the Business, including any
such equipment which is attached to or permanently installed in any facility of
the Business (except for the Los Angeles demonstration facility) or located at
third-party facilities, and further including as set forth on Schedule
1.1(b)(ii);
(c) Software. (i) The Third-Party Embedded Software related to the
Business, including as set forth on Schedule 1.1(c)(i); (ii) the proprietary
Development Environment related to the Business, including as set forth on
Schedule 1.1(c)(ii); (iii) the Third-Party Development Environment related to
the Business, including as set forth on Schedule 1.1(c)(iii); (iv) any Other
Licensed Software related to the Business, including as set forth on Schedule
1.1(c)(iv); and (v) any other Software related to the Business, including as set
forth on Schedule 1.1(c)(v);
(d) Technical Documentation. The Technical Documentation related to
the Business, including as set forth on Schedule 1.1(d);
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(e) Domain Names. The domain names related to the Business
(excluding any such domain names utilizing the name "Parkervision"), including
as set forth on Schedule 1.1(e);
(f) Intellectual Property Rights. Except for the Patent Assets
transferred pursuant to Section 1.2, (i) the Acquired Registered Intellectual
Property Rights, including as set forth on Schedule 1.1(f)(i), and (ii) all
other Acquired Intellectual Property Rights;
(g) Contracts. The Material Contracts and any other Contracts
related to the Business, including as set forth on Section 4.15(a) of Seller's
Disclosure Schedule, but excluding the Contracts set forth on Section 4.15(c) of
Seller's Disclosure Schedule;
(h) Governmental Approvals. The Governmental Approvals related to
the Business, including as set forth on Section 4.16 of Seller's Disclosure
Schedule;
(i) Deposits and Advances. The Deposits and Advances of Seller with
third parties that are related to the Business, including as set forth on
Schedule 1.1(i);
(j) Rebates and Credits. The Rebates and Credits related to the
Business, including as set forth on Schedule 1.1(j), but excluding (A)
Receivables generated prior to Closing, (B) Tax refunds or rebates for Taxes
previously paid by Seller to the extent applicable to the pre-Closing period and
(C) to the extent applicable to the pre-Closing period, Rebates and Credits
directly pertaining to Excluded Liabilities;
(k) Claims. The Claims related to the Business, including as set
forth on Schedule 1.1(k), but excluding (A) rights to tender claims or demands
to insurance companies and rights to any insurance proceeds with respect to the
insurance policies of Seller, (B) any Claims related to Receivables of the
Business generated prior to Closing, (C) any Claims related to Taxes previously
paid by Seller to the extent applicable to the pre-Closing period and (D) to the
extent related to the pre-Closing period, any Claims directly pertaining to
Excluded Liabilities;
(l) Acquired Records. The Acquired Records, including as set forth
on Schedule 1.1(l);
(m) Security Information. The Software keys, passwords, security and
encryption codes and other security information related to the Business,
including with respect to any security systems incorporated in Seller's Products
and Services related to the Business and as necessary to access the acquired
computer systems and other Acquired Assets;
(n) Customized Manufacturing Operations Assets. (i) The customized
tooling, assembly, testing and any other equipment utilized in the Manufacturing
Operations for the Products and Services of the Business and the components and
subcomponents thereof, including any of the foregoing located at third-party
facilities, and further including as set forth on Schedule 1.1(n), (ii) any
other equipment utilized in such Manufacturing Operations and set forth on
Schedule 1.1(n), and (iii) the Intellectual Property Rights and instructions,
documentation, records and any other Technical Documentation related to the
Products and Services of the Business and the components and subcomponents
thereof; and
(o) Other Assets. Any other Assets related to the Business,
including as listed on Schedule 1.1(o).
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1.2 Patent Assets. Subject to the terms and conditions of this Agreement,
effective at Closing, Seller hereby sells, transfers, conveys, assigns and
delivers all of Seller's right, title and interest in, to and under the Patent
Assets (as defined below) to Patent Purchaser and, effective at Closing and
subject to the terms and conditions hereof, Patent Purchaser hereby purchases
all such right, title and interest in, to and under the Patent Assets. "Patent
Assets" means all Patents of Seller related to the Business, including as
conducted at or prior to Closing, as Proposed to be Conducted by Seller or as
set forth on Schedule 1.2. Seller and Patent Purchaser shall at Closing enter
into a Patent Assignment Agreement substantially in the form attached hereto as
Exhibit B (the "Patent Assignment Agreement"). Collectively, the Non-Patent
Assets and the Patent Assets are the "Acquired Assets."
1.3 Excluded Assets. The following Assets of Seller shall be retained by
Seller and not included in the definition of Acquired Assets and the purchase
and sale of the Business hereunder (the "Excluded Assets"):
(a) Wireless Assets. The Assets of Seller utilized in the business
currently conducted or as proposed to be conducted by Seller in the Wireless
Division, including Personal Property, Software, Intellectual Property Rights,
Technical Documentation, Governmental Approvals, Real Property, Receivables,
Deposits and Advances, Rebates and Credits, Claims, domain names, and Contracts,
but in each case (unless otherwise described in this Section 1.3) only to the
extent that any of the foregoing are unrelated to the Business, including as
conducted at or prior to Closing or as Proposed to be Conducted by Seller.
(b) Administrative Assets. All Assets primarily pertaining to the
general financial, legal, accounting, human resources and other general
administration and management of Seller;
(c) Employee Contracts Benefits. Seller's Employee Benefit Plans,
contracts of insurance for employee group medical, dental and life insurance
plans, and any stock option, employment or similar plans with respect to
employees of Seller (expressly excluding invention assignment and similar
contracts related to the Business);
(d) Real Property. All offices, warehouses, production and other
facilities and other Real Property owned or leased by Seller and all related
leases;
(e) Unrelated Manufacturing Operations Equipment. All equipment and
other Assets of Seller utilized in Manufacturing Operations unrelated to the
Business;
(f) Business Manufacturing Operations Equipment. The non-customized
equipment of Seller utilized in the Manufacturing Operations for the Products
and Services of the Business and the components and subcomponents thereof
(except as set forth on Schedule 1.1(n));
(g) Receivables. All Receivables of Seller, including those
generated by the Business prior to Closing;
(h) Other Asset Categories. For the avoidance of doubt, the
following Assets shall also be Excluded Assets:
(i) Transaction Agreements. All of Seller's rights under any
Transaction Agreement;
4
(ii) Corporate Documents. Corporate seals, certificates of
incorporation, minute books, stock transfer records, or other records related to
the corporate organization of Seller;
(iii) Treasury Shares. Any shares of Seller's capital stock
held in treasury;
(iv) Bank Accounts. All bank accounts of Seller;
(v) Insurance Policies. All insurance policies of Seller; and
(vi) Cash. All cash, securities, certificates of deposit, bank
accounts and any other cash equivalents of Seller, including those used in or
generated by the Business prior to Closing;
(i) Seller's information technology systems and telephone systems
primarily pertaining to Manufacturing Operations, inventory management or the
general financial, legal, accounting, human resources or other general
administration or management of Seller (excluding data on such systems which is
Acquired Records); and
(j) Other Assets. Seller's reseller Contracts, including those
related to the Business, and the equipment, Personal Property and other Assets
located at the Los Angeles demonstration facility of the Business and the Los
Angeles facility itself, the furniture related to the Business, and any other
Assets specifically set forth on Schedule 1.3(j).
1.4 Assumed Liabilities.
(a) Lead Purchaser. Subject to the terms and conditions of this
Agreement, effective at Closing, Seller hereby assigns to Lead Purchaser, and,
effective at Closing, Lead Purchaser hereby assumes and agrees to pay and
discharge when due in accordance with their terms, only the following
Liabilities of Seller exclusively pertaining to the Acquired Assets (the
"Assumed Liabilities"):
(i) Certain Post-Closing Liabilities. Any Liabilities arising
in connection with the operation of the Business by Purchasers subsequent to
Closing, except for (A) any Liabilities related to any breach by Seller of any
representation, warranty, or covenant set forth herein or in a Transaction
Agreement or (B) any Excluded Liability.
(ii) Contractual Liabilities. Those Liabilities pursuant to
Contracts included in the Acquired Assets that arise subsequent to Closing, but
only to the extent related to the post-Closing period; provided that, with
respect to any Contract constituting a Non-Assignable Asset, Lead Purchaser
shall assume such Contract only to the extent set forth in Section 1.6; and
provided, further, that Lead Purchaser shall not assume or be otherwise
responsible for any obligation or Liability (A) related to any breach of
Contract occurring prior to the Closing, (B) resulting from Seller's performance
or non-performance prior to the Closing, (C) pursuant to an amendment,
modification or other agreement, a copy of which was not provided to Purchasers
prior to the Effective Date or (D) with respect to Contracts which were not
executed and delivered to Seller by the third party(ies) thereto, or a fully
executed copy of which was not retained by Seller and delivered to Purchasers,
resulting from any difference between (x) the terms and conditions such
Contracts are deemed or interpreted to contain at law or in equity and (y) the
terms and conditions of the applicable form agreement provided to Purchasers
prior to the Effective Date. The scope of contractual Liabilities assumed by
Lead Purchaser as set forth herein shall not be expanded by virtue of any
contractual consent to assignment or similar agreement entered into with third
parties to Seller's Contracts by Seller or Purchasers.
5
(b) Patent Purchaser. Patent Purchaser shall not assume any
Liability hereunder or under any other Transaction Agreement.
1.5 Excluded Liabilities. Except for the Assumed Liabilities, Lead
Purchaser shall not assume or be otherwise responsible for any other Liabilities
of Seller, and Seller shall satisfy in the ordinary course of business and in
accordance with their terms all of the Liabilities described below and its other
Liabilities (the "Excluded Liabilities"), including:
(a) Any Liability related to any Excluded Asset;
(b) Any Liability related to a Non-Assignable Asset unless, until
and to the extent such Non-Assignable Asset is assumed by the applicable
Purchaser pursuant to Section 1.6;
(c) Any Liability under any Contract of Seller that is not an
Assumed Liability pursuant to Section 1.4(a)(ii);
(d) Any Liability for Seller's accounts or notes payable, including
with respect to the Business;
(e) Any Liability for Taxes (i) attributable to or imposed upon
Seller, (ii) attributable to or imposed upon the Acquired Assets, the Business
or the Assumed Liabilities for the pre-Closing period or (iii) arising at
Closing or as a result of the Closing or the Transaction, including any
applicable Transfer Taxes;
(f) Any Liability of Seller to any Affiliate of Seller;
(g) Any Liability related to or arising from accidents, occurrences,
misconduct, negligence, breach of fiduciary duty or statements made or omitted
to be made (including libelous or defamatory statements) or other action or
inaction by Seller on or prior to the Closing Date;
(h) Any Liability arising as a result of any Claim or Proceeding
related to the conduct of the Business prior to Closing, including for (i)
infringement or misappropriation of any Intellectual Property Rights or any
other rights of any Person (including any right of privacy or publicity) or any
contractual indemnification claim related thereto; (ii) breach of product
warranties; or (iii) injury, death, property damage or other Liabilities arising
with respect to or caused by Seller or Seller's Products and Services or the
manufacture/development or design thereof;
(i) Any Liability arising out of any Seller's Employee Benefit Plans
or any contract of insurance for employee group medical, dental or life
insurance plans, any formal or informal profit-sharing plans or programs
maintained by Seller, or similar Seller plans or arrangements;
(j) Any Liability related to any restructuring of Seller in
connection with or as a result of the Transaction, including any shutting down,
deinstalling or removing (subject to Section 7.12) of equipment or other Assets
or facilities or terminating or restructuring any Contracts (including
applicable Seller agreements with its resellers, distributors and suppliers),
any termination by Seller of any Seller employee in connection with the
Transaction or for any compensation, bonuses, sales or other commissions or
benefits owed or otherwise payable by Seller to any of its employees, including
with respect to Transferred Employees (subject to applicable Purchasers'
obligations in Section 8.2);
6
(k) Any Liability incurred by Seller in connection with the making
or performance of this Agreement or the Transaction or for expenses and fees
incurred by Seller incidental to the preparation of the Transaction Agreements,
the preparation or delivery of materials or information requested by Purchasers,
or the consummation of the Transaction, including any and all broker, investment
banker, counsel and accounting fees;
(l) Any Environmental Liability related to the conduct of the
Business prior to Closing;
(m) Any violation by Seller of any Legal Requirement applicable to
Seller, including with respect to the Business, the Acquired Assets or the
Assumed Liabilities; and further including (i) any noncompliance by Seller prior
to the Closing with any technical, product labeling, record-keeping, or other
Legal Requirements established by the Federal Communications Commission ("FCC")
or other Governmental Authorities, (ii) any failure by Seller prior to the
Closing to obtain necessary FCC Governmental Approvals for any Products or
Services related to the Business or (iii) any noncompliance by Seller prior to
the Closing with the terms and conditions of any such Governmental Approval;
(n) Any Liability related to disputes, Claims or Proceedings between
or among the Seller and any of its Affiliates or shareholders, including with
respect to the Transaction; and
(o) all of Seller's agreements with resellers related to the
Business and those Liabilities set forth on Schedule 1.5(o), which sets forth a
non-exclusive list of certain excluded Liabilities.
1.6 Non-Assignable Assets.
(a) Non-Assignable Assets. Notwithstanding Section 1.1 and Section
1.2, if any Contract, Governmental Approval or other Acquired Asset is not
assignable or transferable (each, a "Non-Assignable Asset") without the Consent
of a third party (each, an "Assignment Consent"), as a result either of the
provisions thereof or of applicable Legal Requirements, and any such Assignment
Consent is not obtained by Seller on or prior to the Closing Date, Purchasers
may prior to or after Closing elect (on an Asset-by-Asset basis) to either (i)
have Seller permanently retain such Non-Assignable Asset and all Liabilities
relating thereto (in which case such Non-Assignable Asset shall be an Excluded
Asset and all related Liabilities shall be Excluded Liabilities) or (ii) have
Seller continue its efforts (at Seller's expense) to obtain the Assignment
Consent, in form and substance reasonably acceptable to Purchasers, after
Closing. In either case, this Agreement and the related instruments of transfer
shall not constitute an assignment or transfer of such Non-Assignable Asset, and
Purchasers shall not assume Seller's rights or obligations under such
Non-Assignable Asset unless and until the applicable Assignment Consent has been
obtained. Unless Purchasers elect for Seller to retain a Non-Assignable Asset,
and without limiting Seller's obligations under Section 6.8, Seller shall use
all commercially reasonable efforts, at Purchasers' reasonable direction, to
obtain all applicable Assignment Consents as soon as reasonably possible after
the Closing. In such case, upon the receipt of an Assignment Consent in
accordance with this section, the applicable Non-Assignable Asset shall be
deemed an Acquired Asset for purposes of this Agreement and shall be
automatically assigned to such Purchaser as designated by Purchasers, without
any further action on the part of any party. Seller shall consult with
Purchasers, and keep Purchasers updated, with respect to all material
developments relating to Assignment Consents and Non-Assignable Assets and shall
seek Purchasers' consent, not to be unreasonably withheld or delayed, before
taking any material action related thereto. Schedule 1.6(a) lists all applicable
Assignment Consents.
7
(b) Alternative Arrangements. After the Closing (unless and to the
extent Purchasers have elected for Seller to retain any Non-Assignable Assets),
Seller shall, at Seller's expense and until such time as the applicable
Assignment Consent has been obtained, follow Purchasers' reasonable instructions
with respect to the applicable Non-Assignable Asset and take all steps
reasonably necessary to preserve such Non-Assignable Asset for the benefit of
Purchasers and to allow performance under the Contracts included in the
Non-Assignable Assets, including: (i) not assigning, transferring or encumbering
such Non-Assignable Asset; (ii) cooperating with Purchasers in any lawful and
commercially reasonable arrangement to provide that the applicable Purchaser
shall receive Seller's interest in the benefits under the Non-Assignable Asset;
(iii) enforcing Seller's rights with respect to such Non-Assignable Asset; (iv)
paying over to the applicable Purchaser all monies or other assets collected by
or paid to Seller in respect of such Non-Assignable Asset with respect to the
post-Closing period; and (v) not amending or altering any Non-Assignable Asset
in any material way without Purchasers' prior written consent. For avoidance of
doubt and without limiting the foregoing, this Section 1.6(b) shall apply with
respect to customer Contracts and supply Contracts that are Non-Assignable
Assets (unless and to the extent Purchasers have elected for Seller to retain
any such Non-Assignable Assets) in accordance with this Section 1.6.
(c) Obligations. The applicable Purchaser shall undertake to perform
the obligations of Seller under the Non-Assignable Assets that Purchasers have
not elected for Seller to retain and that arise in the Ordinary Course of
Business during the post-Closing period and, if such obligations are related to
Contracts, that would be Assumed Liabilities if the applicable Contract were
assigned to the applicable Purchaser in accordance herewith.
(d) Consents. Notwithstanding any other provision hereof, (i) unless
Purchasers elect for Seller to retain any Non-Assignable Asset pursuant to
Section 1.6(a), Seller shall obtain all necessary Consents to assign the
Non-Assignable Assets within ninety (90) days of the Closing Date and (ii) all
Non-Assignable Assets shall be deemed to be Acquired Assets (and in particular,
in the case of Contracts, a Material Contract) for the purposes of the
representations and warranties hereof.
(e) Closing Conditions. This Section 1.6 shall at all times remain
subject to Article 9 (Conditions to Closing) and shall not affect Purchasers'
conditions to closing set forth therein.
ARTICLE 2
PAYMENT AND RELATED MATTERS
2.1 Purchase Price. The purchase price of the Acquired Assets and the
Business shall be Twelve Million Five Hundred Thousand Dollars ($12,500,000)
(the "Fixed Purchase Price"), as adjusted pursuant to Section 2.5(c) (the
"Purchase Price"). At Closing, Purchasers shall deliver to Seller, in accordance
with Section 2.3, ninety percent (90%) of the Fixed Purchase Price, equal to
Eleven Million Two Hundred Fifty Thousand Dollars ($11,250,000). Any amount of
adjustment to the Fixed Purchase Price pursuant to Section 2.5(c) shall be
delivered in accordance with Section 2.5. Purchasers shall be jointly and
severally liable for payment of the Fixed Purchase Price, the amount of any
upward adjustment to the Fixed Purchase Price pursuant to Section 2.5(c), and
any indemnification payments owed by Purchasers pursuant to Section 11.3 or
Section 11.4(b).
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2.2 Holdback. The remaining ten percent (10%) of the Fixed Purchase Price,
equal to One Million Two Hundred Fifty Thousand Dollars ($1,250,000) (the
"Holdback Amount"), shall be withheld by Purchasers at Closing as security for
the indemnification obligations of Seller set forth in Article 11. Subject to
the remainder of this Section 2.2, on the first anniversary of the Closing Date
(or, if such date is not a Business Day, the first Business Day thereafter),
Purchasers shall deliver, in accordance with Section 2.3, the Holdback Amount to
Seller. Purchasers may withhold from such delivery the equivalent of any amount
then in dispute related to Seller's indemnification obligations arising pursuant
to Article 11 or for which Purchasers have notified Seller of an indemnification
Claim pursuant to Section 11.6. Any such withheld Holdback Amount, to the extent
not ultimately applied by Purchasers in satisfaction of such indemnification
obligations, shall be paid to Seller promptly upon resolution of any such
dispute or Claim. Nothing in this section shall be construed as limiting the
liability of Seller for indemnification claims or otherwise to the Holdback
Amount, nor shall payments from the Holdback Amount be considered as liquidated
damages for any breach under this Agreement or any other Transaction Agreement.
Purchasers shall pay interest on the amount of the Holdback Amount delivered to
Seller as set forth above from and including the Closing Date but excluding the
date of such delivery at the prime rate published in the "Money Rates" table of
The Wall Street Journal, as that rate may vary from time to time, or if no
longer published, a comparable rate, and computed on the basis of a 365/366-day
year. Interest shall be paid together with payment of the applicable Holdback
Amount and in accordance with Section 2.3.
2.3 Payment Mechanics. Unless otherwise agreed in writing by Purchasers
and Seller, and subject to the terms and conditions hereof, the Fixed Purchase
Price, the Holdback Amount and any adjustment to the Fixed Purchase Price
pursuant to Section 2.5(c) shall be paid in immediately available funds by wire
transfer to such U.S. bank account or accounts reasonably designated in advance
by the receiving party to the transferring party.
2.4 Currency. The Fixed Purchase Price, the Holdback Amount, any amount of
adjustment to the Fixed Purchase Price pursuant to Section 2.5(c), and all other
amounts required to be paid or calculated hereunder or pursuant to another
Transaction Agreement shall be in U.S. dollars and in immediately available
funds unless otherwise stated herein or in such other Transaction Agreement.
2.5 Purchase Price Adjustment.
(a) As promptly as practicable, but in no event later than
forty-five (45) days following the Closing Date, Purchasers shall cause the
following to be prepared and delivered to Seller (the "Certified Closing
Report"): (i) a balance sheet of the Non-Patent Assets and the Assumed
Liabilities as of the Closing Date (the "Closing Balance Sheet") certified by an
executive officer of Lead Purchaser and setting forth the actual Net Assets
transferred to Lead Purchaser at Closing ("Reported Net Assets"), (ii) a
statement based on such balance sheet which sets forth a reasonably detailed
supporting calculation of Net Assets and (iii) a statement of the proposed
adjustment to the Fixed Purchase Price calculated in accordance with this
Section 2.5. The Certified Closing Report and related calculations shall be
prepared independently by Lead Purchaser based on its own review of the
financial information of the Business, in good faith and in accordance with
GAAP. The Certified Closing Report shall be deemed to be and shall be final,
binding and conclusive on the parties hereto upon the earliest of (the "Final
Resolution Date"): (w) Seller's delivery of a written notice to Purchasers of
Seller's approval of the Certified Closing Report; (x) the failure of Seller to
notify Purchasers in writing of a dispute regarding the Certified Closing Report
within thirty (30) days of the delivery of such report to Seller; (y) the
resolution of all disputes pursuant to Section 2.5(b) by the parties hereto; and
(z) the resolution of all disputes pursuant to Section 2.5(b) by the Independent
Accounting Firm.
9
(b) Seller may dispute the Certified Closing Report (and the amount
of any item included in or forming the basis of any such report) by delivery of
a written notice to Purchasers setting forth each specific matter to be disputed
and describing the dispute and the underlying facts in reasonable detail (the
"Certified Closing Report Dispute Notice"). If Seller delivers a Certified
Closing Report Dispute Notice to Purchasers, Purchasers and Seller, together
with their accountants, shall attempt to reconcile such parties' differences,
and any resolution by them approved in writing by all parties hereto as to any
disputed amounts shall be final, binding and conclusive on such parties. If the
parties hereto are unable to reach a resolution within forty-five (45) days
after the delivery of any Certified Closing Report Dispute Notice, such parties
shall submit their respective determinations and calculations and the items
remaining in dispute for resolution to Deloitte & Touche LLP, unless one or more
of the parties have developed a material relationship with such accounting firm,
in which case the parties hereto shall select within five (5) days another
mutually acceptable independent accounting firm of national or international
reputation which does not have a material relationship with any party
("Independent Accounting Firm"). The parties shall cause the Independent
Accounting Firm to submit a report to Purchasers and Seller, based on the
submissions of the parties hereto and any additional examination deemed
reasonably necessary by the Independent Accounting Firm, with a determination
regarding the disputed items, within twenty (20) days after submission of the
matter, and such report shall be final, binding and conclusive on Purchasers and
Seller. The fees, costs and expenses of the Independent Accounting Firm shall be
shared equally by Seller, on one hand, and Purchasers, on the other hand. As
finally determined pursuant to Section 2.5(a) or this Section 2.5(b), Reported
Net Assets shall be "Final Net Assets".
(c) The Fixed Purchase Price shall be adjusted as set forth below in
this Section 2.5(c) and, as so adjusted, shall be the Purchase Price. The Fixed
Purchase Price shall:
(i) be increased, by the amount that Final Net Assets are
greater than zero; provided that the maximum increase shall be Two Million Seven
Hundred Fifty Thousand Dollars ($2,750,000);
(ii) be decreased, by the amount that Final Net Assets are
less than zero; or
(iii) remained unchanged, in the event that Final Net Assets
equal zero.
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If the Fixed Purchase Price increases pursuant to Section 2.5(c)(i), Purchasers
shall promptly pay the amount of such increase to Seller in accordance with
Section 2.3. If the Fixed Purchase Price decreases pursuant to Section
2.5(c)(ii), Seller shall promptly pay the amount of such decrease to Purchasers
in accordance with Section 2.3.
(d) The following terms shall have the meanings set forth below:
(i) "Net Assets" shall mean the amount which is (A) the sum of
(B) Net Inventory, (C) Prepaid Assets and (D) Fixed Assets, minus (E) Offsetting
Liabilities;
(ii) "Net Inventory" shall mean the gross book value (except
with respect to the categories of Inventory referenced in Section 2.5(d)(vi)(D),
which shall be included in Net Inventory based on net book value) of the
Inventory included in Non-Patent Assets and actually transferred to Lead
Purchaser at Closing that is not Excess or Obsolete or otherwise unusable in the
Business following Closing as conducted in the Ordinary Course of Business.
(iii) "Prepaid Assets" shall mean the book value of prepaid
assets included in Non-Patent Assets and actually transferred to Lead Purchaser
at Closing hereunder, to the extent usable in the Business following Closing as
conducted in the Ordinary Course of Business;
(iv) "Fixed Assets" shall mean the book value of the equipment
and other fixed assets (A) that are included in Non-Patent Assets and actually
transferred to Lead Purchaser hereunder and (B) that to the extent required to
be scheduled on Schedule 1.1(b)(ii), are so scheduled, in each case excluding
any equipment or other fixed assets which are (A) damaged, obsolete or otherwise
unusable in the Business as conducted following Closing in the Ordinary Course
of Business or (B) acquired by Seller between the Effective Date and the Closing
Date outside of the Ordinary Course of Business or, with respect to any material
acquisitions, without the prior written approval of Purchasers, not to be
unreasonably withheld; and
(v) "Offsetting Liabilities" means the dollar amount
calculated as the sum of (A) the adequate warranty reserve for the warranty
obligations of the Acquired Assets and the Business following Closing, (B) to
the extent any amount is not included in the foregoing clause, the amount of
deferred revenue of the Business, including for training and other services that
Lead Purchaser will be obligated to perform following Closing, and (C) to the
extent any amount is not included in the foregoing clauses, the amount
reasonably estimated to be incurred (other than general overhead) to satisfy any
other contractual Liabilities (x) assumed by Lead Purchaser as Assumed
Liabilities pursuant to Section 1.4(a)(ii) or (y) incurred by Lead Purchaser
following Closing with respect to Contracts that are Non-Assignable Assets and
that Purchasers' have not elected for Seller to retain pursuant to Section
1.6(a), but only to the extent that Seller does not satisfy any such Liability
pursuant to Section 1.6(b).
(vi) "Excess or Obsolete":
(A) means, with respect to the "manufacturing/raw
materials/subcomponents" and the "finished goods" categories of Inventory set
forth on Schedule 1.1(b)(i), the gross book value of the applicable Inventory in
such category in excess of one third of (A) 1.25 times (B) the gross book value
of the Inventory in such categories that was actually incorporated by Seller in
the Products and Services of the Business produced during 2003;
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(B) means, all of the Inventory included in the
"obsolete equipment for resale" and the "obsolete parts in active locations"
categories of Inventory set forth on Schedule 1.1(b)(i) and any other Inventory
otherwise classified or categorized by Seller as obsolete;
(C) means, with respect to the "service warranty parts"
and the "service" categories of Inventory set forth on Schedule 1.1(b)(i), the
gross book value of the applicable Inventory in such category in excess of (A)
..75 times (B) the gross book value of the Inventory in such categories that was
actually utilized by Seller in the repair and service of the Products and
Services of the Business during 2003; and
(D) does not include any net book value or other value
of Inventory in the "demonstration/spare modules/loaner equipment" category of
Inventory set forth on Schedule 1.1(b)(i).
(e) Seller shall update Schedule 1.1(b)(i) to reflect the
operations of the Business between the Effective Date and the Closing Date and
provide such updated schedule to Purchasers reasonably in advance of Closing.
Seller shall not between the Effective Date and the Closing recharacterize the
placement of Inventory on such schedule. Purchasers and Seller may in their
respective sole discretion discuss following Closing including additional items
of Inventory in Net Inventory.
(f) Promptly following the Final Resolution Date, Lead
Purchaser shall transfer to Seller ownership of, on an "as-is" basis and without
any representations and warranties made with respect thereto, all Inventory
included in Acquired Assets actually acquired by Lead Purchaser at Closing
hereunder (and not lost while in Seller's possession or control following
Closing) but not included in the final calculation of Net Assets. At the
reasonable request of Seller, Lead Purchaser and Seller shall enter into a
customary bill of sale for such returned Inventory in form and substance
reasonably acceptable to both parties. Seller may resell such returned Inventory
in its discretion, provided such Inventory does not constitute, nor is
incorporated in, any PVTV, CameraMan or other Products and Services of the
Business and otherwise not sold in violation of Section 7.1. Following Closing,
Lead Purchaser and Seller may discuss in their respective discretion a supply
arrangement whereby Purchaser may purchase returned Inventory from Seller on
market terms and conditions.
(g) Seller shall provide Purchasers with such supporting data
with respect to the Certified Closing Report and related matters as reasonably
requested by Purchasers, and Purchasers shall provide such information to Seller
as reasonably requested by Seller.
2.6 Allocation of Purchase Price. The parties hereto agree to
allocate the consideration to be delivered by Purchasers at Closing among the
Acquired Assets as specified on Schedule 2.6, which schedule shall be adjusted,
following Closing, as agreed by the parties, to take into account the payment of
any purchase price adjustment pursuant to Section 2.5(c). The allocation set
forth on Schedule 2.6 is intended to comply with the requirements of Section
1060 of the Code. The parties covenant and agree that (a) such allocation was
determined in an arm's-length negotiation, and none of the parties shall take a
position on any Tax Return (including IRS Form 8594), before any Tax Authority,
or in any judicial proceeding that is in any way inconsistent with such
allocation without the written consent of the other parties to this Agreement or
unless specifically required pursuant to a determination by an applicable Tax
Authority; (b) they shall cooperate with each other in connection with the
preparation, execution and filing of all Tax Returns related to such allocation;
and (c) they shall promptly advise each other regarding the existence of any Tax
audit, controversy or litigation related to such allocation.
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2.7 Set-Off. Any party hereto shall have the right to set off any
amount to which such party is entitled hereunder for indemnification pursuant to
Article 11 against any payment such party is required to make hereunder or under
any Transaction Agreement except for any amount payable for an adjustment to the
Fixed Purchase Price pursuant to Section 2.5(c).
2.8 Cooperation. Purchasers, on one hand, and Seller, on the other,
shall (subject to the terms and conditions hereof) use all commercially
reasonable efforts to exchange information and otherwise cooperate to effectuate
the provisions of this Article 2.
ARTICLE 3
CLOSING AND CLOSING DELIVERIES
3.1 Closing; Time and Place. The closing of the Transaction (the
"Closing") shall occur at the offices of Purchasers' counsel at 10:00 a.m. on
the third (3rd) Business Day after the day on which all of the conditions to
closing set forth in Article 9 are satisfied or waived by the applicable party
(other than any conditions that are intended to be satisfied at the Closing), or
at such other date, time or place as the parties may agree in writing (the
"Closing Date"). At the Closing, the deliverables set forth in Sections 3.2, 3.3
and 3.4 shall be deemed to be delivered in the State of Florida, and the actions
set forth in such sections shall be deemed to occur simultaneously, and none of
such deliveries and actions shall be legally effective unless all such
deliveries and actions have been taken or waived by the applicable party in
accordance herewith.
3.2 Deliveries by Seller. At the Closing, Seller shall (i) take all steps
necessary or appropriate to place Purchasers in actual possession and operating
control of the Business, the Acquired Assets and the Assumed Liabilities in
accordance herewith as reasonably requested by Purchasers in advance and (ii)
deliver to Purchasers (A) the Acquired Assets capable of transfer by delivery or
physical transfer and (B) the following items, duly executed by Seller or a
third party as applicable, all of which shall be in form and substance
reasonably acceptable to Purchasers and Purchasers' counsel in accordance
herewith:
(a) Closing Certificate. A certificate executed on behalf of Seller
by its chief executive officer and president (i) certifying the matters set
forth in Section 9.1(a)-(d) and (ii) certifying that the board of directors and
shareholders of Seller have approved this Agreement, the other Transaction
Agreements and the Transaction and that such approvals have not been superceded,
and attaching and certifying (A) a copy of the duly executed written consent of
the board of directors or the minutes of a meeting of the board of directors
with respect to such board approval and (B) a copy of the minutes of the meeting
of the shareholders with respect to such shareholder approval; and
(b) Certificate of Good Standing. A certificate from the Secretary
of State of Florida as to Seller's corporate good standing through a date
reasonably proximate to the Closing Date, which date shall be no less than three
(3) Business Days prior to Closing.
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3.3 Deliveries by Purchasers. At the Closing, the applicable Purchaser
shall deliver the following items, duly executed by such Purchaser and third
parties as applicable, all of which shall be in form and substance reasonably
acceptable to Seller and Seller's counsel in accordance herewith, and shall take
such other actions as are set forth below:
(a) Fixed Purchase Price. Subject to the terms and conditions of
this Agreement, the portion of the Fixed Purchase Price required to be paid at
Closing pursuant to Section 2.1;
(b) Lead Purchaser Certificate. A certificate executed on behalf of
Lead Purchaser by a duly authorized executive officer certifying the matters in
Section 9.2(a)-(c); and
(c) Patent Purchaser Certificate. A certificate executed on behalf
of Patent Purchaser by a duly authorized executive officer certifying the
matters in Section 9.2(a)-(c).
3.4 Deliveries by Purchasers and Seller. At the Closing, the applicable
Purchaser and Seller shall each deliver the following items, duly executed as
applicable, all of which shall be in form and substance reasonably acceptable to
the parties and their counsel in accordance herewith:
(a) The Patent Assignment Agreement. The Patent Assignment
Agreement, as defined in Section 1.2 to be substantially in the form attached
hereto as Exhibit B;
(b) Assignment and Assumption Agreement. An assignment and
assumption agreement executed by Seller and Lead Purchaser, and including
attached Trademark, Copyright and domain name assignment agreements,
substantially in the form attached hereto as Exhibit C (the "Assignment and
Assumption Agreement");
(c) Retained Trademark License. A license agreement executed by
Seller and Lead Purchaser, granting Lead Purchaser a temporary license to names
that are used by Seller in connection with the Business but that are Excluded
Assets, in substantially the form attached hereto as Exhibit D (the "Retained
Trademark License");
(d) Transition Services Agreement. A transition services agreement
executed by Lead Purchaser and Seller, covering information technology,
accounting, manufacturing, human resources, and other functions, in
substantially the form attached hereto as Exhibit E (the "Transition Services
Agreement"); and
(e) Sublease. A Sublease to certain facilities of Seller in
Jacksonville, Florida, executed by Seller and Lead Purchaser, in substantially
the form attached hereto as Exhibit F (the "Sublease").
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchasers, without limiting any other
representations or warranties made by Seller in this Agreement or any other
Transaction Agreement, as follows (except as expressly disclosed in the
corresponding section of the disclosure schedule attached hereto as Schedule 4
("Seller's Disclosure Schedule") or on such other section of Seller's Disclosure
Schedule to which it is readily apparent that such disclosure pertains) as of
the Effective Date and the Closing Date:
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4.1 Organization, Good Standing, Qualification.
(a) Corporate Jurisdictions. Seller is incorporated in the State of
Florida. Section 4.1(b) of Seller's Disclosure Schedule lists each state or
other jurisdiction in which Seller is qualified to do business or has obtained a
similar Governmental Approval with respect to the Business.
(b) Good Standing and Qualification. Seller (i) is a corporation
duly organized, validly existing and in good standing under the corporation law
of the State of Florida, (ii) is duly qualified to conduct business and is in
corporate and tax good standing under the laws of each jurisdiction in which the
ownership or operation of its Assets or the conduct of its business requires
such qualification, except to the extent that failure to so qualify and remain
in good standing would not have a Material Adverse Effect, and (iii) has full
corporate power and authority to own, lease and operate the Business and the
Acquired Assets and to perform its obligations hereunder and under the other
Transaction Agreements.
4.2 Authorization. Seller has full corporate power and authority to
execute and deliver this Agreement and the other Transaction Agreements and to
consummate the transactions contemplated hereby or thereby. The execution and
delivery of this Agreement and the other Transaction Agreements by Seller, and
the consummation of the transactions contemplated hereby or thereby, have been
duly adopted and approved by all necessary corporate action (including approval
of the board of directors of Seller); subject to the approval of this Agreement
by the affirmative vote of the holders of a majority of the outstanding shares
of the Seller Common Stock (the "Required Seller Vote"). Prior to Closing, the
Required Seller Vote shall have been obtained. The Required Seller Vote is the
only vote of the holders of any class or series of Seller capital stock
necessary to approve this Agreement, the acquisition of the Business, the
Closing and the other transactions contemplated hereby. This Agreement and the
other Transaction Agreements to which Seller is a party have been, or will be at
the Closing, as the case may be, duly executed and delivered by Seller. Upon
execution and delivery in accordance herewith, this Agreement and the other
Transaction Agreements to which Seller is a party are, or will be, as the case
may be (assuming such agreements constitute legal, valid and binding obligations
of the applicable Purchasers), the legal, valid and binding obligations of
Seller enforceable against Seller in accordance with their terms.
4.3 Non-Contravention/Proceedings.
(a) Non-Contravention. Except as set forth in Section 4.3 of
Seller's Disclosure Schedule, the execution, delivery and performance of this
Agreement and the applicable Transaction Agreements to which Seller is party,
the performance of such agreements by Seller, and the consummation of the
Transaction do not and will not (with or without notice or lapse of time):
(i) contravene, conflict with, violate or result in any breach
of or default under the certificate of incorporation, bylaws or other applicable
Charter Documents of Seller;
(ii) require Seller to obtain any Consent from, or to make or
deliver any Consent to, any Governmental Authority, including in connection with
the transfer of any Governmental Approval applicable to the Seller or the
Business;
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(iii) violate, contravene, or conflict with any Legal
Requirement or Order or otherwise give any Governmental Authority or other
Person the right to challenge the Transaction;
(iv) create a Material Adverse Effect on the ability of Seller
to enter into and perform its obligations under this Agreement or the
Transaction Agreements to which Seller is a party; or
(v) contravene, conflict with or result in the violation of
any of the terms or requirements of, or give any Governmental Authority the
right to revoke, withdraw, suspend, cancel, terminate or modify the terms and
requirements of, any Governmental Approval that is held by Seller in connection
with the Business or by which Seller (in connection with the Business), the
Acquired Assets or the Assumed Liabilities are bound or affected;
(vi) except for consents to assignment required for the
Contracts which are Non-Assignable Assets as listed on Schedule 1.6(a), (A)
conflict with or result in a breach or default under any Material Contract, (B)
give any third Person the right to accelerate the maturity, performance,
payment, repayment or other obligation under any Material Contract, (C) give any
third Person the right to cancel, terminate or modify, or otherwise exercise any
remedy under, or receive any payment under, any Material Contract or (D)
otherwise require any Consent under any Material Contract;
(vii) result in or permit the creation of any Encumbrance upon
the Acquired Assets, the Assumed Liabilities or the Business or violate or
conflict with any other restriction of any kind or character to which Seller is
subject, or by which any of its Assets may be bound or affected;
(viii) give any third Person the right to any payment by
Seller or Purchasers, or give rise to any acceleration or change in the award,
grant, vesting or determination of any bonuses, options, warrants, rights,
severance payments or other contingent obligations of any nature whatsoever of
Seller in favor of any Person;
(ix) cause Seller to become subject to, or to become liable
for, the payment of any Tax.
(b) Proceedings. Seller is not engaged in, nor is a party to, any
Proceeding, nor, to the Knowledge of Seller, is threatened with any Proceeding,
Order or Claim, that seeks to restrain, materially modify or invalidate the
Transaction.
(c) Schedule 1.6(a) sets forth all applicable Assignment Consents.
4.4 Financial Statements.
(a) Financial Statements. Seller has previously delivered to
Purchasers true, accurate and complete copies of (i) a consolidated, audited
balance sheet of Seller, with any related notes, as at December 31, 2002, and a
consolidated, audited statement of operations, stockholders' equity, income and
cash flows of Seller, for the fiscal year ended December 31, 2002, together with
any related notes, and (ii) a consolidated balance sheet of Seller, reviewed by
Seller's outside accountants, with any related notes, as at September 30, 2003,
and the consolidated statement of operations, stockholders' equity, income and
cash flows of Seller, reviewed by Seller's outside accountants, for the period
beginning January 1, 2003 and ending September 30, 2003, together with any
related notes. Collectively the financial statements described in clauses (i)
and (ii) above are the "Financial Statements." The Financial Statements, and any
quarterly or year-end balance sheets, related statements of operations,
stockholders' equity, income and cash flows, and any other financial information
of Seller publicly disclosed by Seller between the Effective Date and the
Closing Date (the "Publicly Disclosed Periodic Financial Information"), (A) are,
or will be in the case of Publicly Disclosed Periodic Financial Information,
true, accurate and complete in all material respects; (B) are, or will be in the
case of Publicly Disclosed Periodic Financial Information, consistent with the
books of account, financial records and other applicable books and records of
Seller; and (C) fairly present, or will present in the case of Publicly
Disclosed Periodic Financial Information, in all material respects the Assets,
Liabilities, and consolidated financial condition of Seller at the dates of, and
the results of the operations and the changes in stockholders' equity, cash
flows and financial condition for Seller for the periods covered by, such
Financial Statements in accordance with GAAP consistently applied with prior
periods.
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(b) Pro Forma Financial Statements. Seller has previously delivered
to Purchasers a true, accurate and complete balance sheet of the Business, the
Acquired Assets and the Assumed Liabilities, reflecting the exclusion of the
Excluded Assets and the Excluded Liabilities, as of December 31, 2003 (the "Pro
Forma Balance Sheet"), and a statement of income, operations and cash flows of
the Business, (the "Pro Forma Income Statement," and collectively with the Pro
Forma Balance Sheet, the "Pro Forma Financial Statements"), certified by a duly
authorized executive officer of Seller, and prepared on a basis consistent with
GAAP applied consistently with prior periods. The Pro Forma Financial Statements
(and in particular the amount of warranty, inventory and any other reserves set
forth therein and the amount of deferred revenue set forth therein) and any
Interim Pro Forma Financial Information provided to Purchasers pursuant to
Section 6.10 (i) are, or will be, as the case may be, true, accurate and
complete in all material respects; (ii) are, or will be, as the case may be,
consistent with the books of account, financial records and other applicable
books and records of Seller; and (iii) fairly present, or will present, as the
case may be, in all material respects (A) the Acquired Assets, the Assumed
Liabilities and the financial condition and performance of the Business
reflecting the exclusion of the Excluded Assets and the Excluded Liabilities,
and (B) the results of the operations and income and the changes in the
financial condition for the Business for the periods covered by such Pro Forma
Financial Statements in accordance with GAAP applied consistently with prior
periods. Section 4.4(b)(i) of Seller's Disclosure Schedule sets forth a true and
complete list of each item of deferred revenue reflected in the Pro Forma
Balance Sheet. Section 4.4(b)(ii) of Seller's Disclosure Schedule sets forth a
true and complete list of each item included in the warranty reserve reflected
in the Pro Forma Balance Sheet. Section 4.4(b)(iii) of Seller's Disclosure
Schedule sets forth a true and complete list of each item included in the
inventory reserve reflected in the Pro Forma Balance Sheet.
(c) Other Interim Financial Information. The Other Interim Financial
Information provided pursuant to Section 6.11(ii) shall be (A) true, accurate
and complete in all material respects and (B) consistent with the books of
account, financial records and other applicable books and records of Seller.
4.5 Absence of Undisclosed Liabilities. Except as set forth in the Pro
Forma Balance Sheet, Seller has no Liabilities with respect to the Business, the
Acquired Assets and the Assumed Liabilities, except Liabilities arising in the
Ordinary Course of Business after the date of the Pro Forma Balance Sheet which
individually or in the aggregate are not material.
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4.6 Work-in-Progress; Inventory. All Software code and other
work-in-progress, inventory, raw materials, samples, packaging, supplies,
service parts, purchased parts, goods and the finished products and any other
elements of Seller's Inventory are (a) correctly valued on the Pro Forma Balance
Sheet in accordance with GAAP consistently applied with prior periods; (b) of
good and merchantable quality, fit for the purpose for which they are intended,
and salable and usable in the Ordinary Course of Business; (c) free of material
defects and damage; (d) adequate for the operation of the Business in the
Ordinary Course of Business and to satisfy obligations to customers under
customer Contracts; and (e) at levels consistent with past practices of the
Business.
4.7 Personal Property.
(a) Description. As of the Effective Date, and as of the Closing
Date reflecting any changes since the Effective Date made in the Ordinary Course
of Business and in compliance with Section 6.1 and Section 6.2, Schedule
1.1(b)(ii) sets forth a complete and accurate list or description of all
Computer Equipment and other Personal Property which Seller owns or leases with
respect to the Business, has agreed (or has an option) to purchase, sell or
lease, or may be obligated to purchase, sell or lease or that is otherwise used
in or necessary for the operation of the Business (collectively "Acquired
Personal Property") having a current individual value of more than $1,000, or as
a category or type of property, more than $2,500, specifying in the case of
leased property, the name of the lessor, licensor or other grantor, the
description of the property covered thereby, the basic annual rental and other
amounts paid or payable with respect thereto and a summary of the other terms
thereof. True, accurate and complete copies of all leases for such leased
Personal Property have been delivered to Purchasers.
(b) Condition. All Acquired Personal Property is (i) in good
operating condition and repair, ordinary wear and tear excepted; (ii) suitable
and adequate for continued use in the manner in which it is presently being
used; (iii) reasonably adequate to meet all present requirements of the
Business; and (iv) free of material defects (latent and patent).
4.8 Title to Personal Property and Inventory. Seller has, and, immediately
after giving effect to the Transaction, Lead Purchaser will have, good and
marketable title and all beneficial interest in, or, as the case may be, a valid
leasehold interest in, all Acquired Personal Property and Inventory included in
Non-Patent Assets.
4.9 Intellectual Property.
(a) Registered Intellectual Property Rights. Seller has provided
Purchasers with complete and accurate copies of all Registered Intellectual
Property Rights of Seller and its Affiliates. Schedules 1.1(f)(i) and 1.2
contain an accurate and complete list of all Acquired Registered Intellectual
Property Rights, specifying as to each (i) the nature of such right, (ii) the
ownership thereof, (iii) the Governmental Authority that has issued or recorded
a registration or certificate or similar document with respect thereto or with
which an application for such a registration, certificate or similar document is
pending, and (iv) any applicable registration, certificate or application
number.
(b) Unregistered Trademarks. To the Knowledge of Seller, Section
4.9(b) of Seller's Disclosure Schedule contains an accurate and complete list of
all unregistered Trademarks used in or necessary to conduct the Business,
including as conducted at or prior to Closing or as Proposed to be Conducted by
Seller, together with a designation of the ownership thereof.
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(c) Other Material Intellectual Property Rights. Section 4.9(c) of
Seller's Disclosure Schedule contains an accurate and complete list, together
with a designation of ownership, of all material inventions and trade secrets
that Seller has formally documented and that are owned, used, controlled,
authorized for use or held by, or licensed to, Seller and not otherwise listed
in Schedule 1.1(f)(i), Schedule 1.2 or Section 4.9(b) of Seller's Disclosure
Schedule.
(d) Material Software. Section 4.9(d) of Seller's Disclosure
Schedule contains an accurate and complete list, together with a designation of
ownership, of all Software material to the operation of the Business, including
as conducted at or prior to Closing or as Proposed to be Conducted by Seller.
(e) Out-Bound Licenses. Section 4.9(e) of Seller's Disclosure
Schedule contains an accurate and complete list of all licenses, sublicenses,
and other Contracts pursuant to which (i) any Person is authorized to use any
Acquired Intellectual Property Right or (ii) any right of Seller in, or Seller's
use of, any Acquired Intellectual Property Right is otherwise materially
affected.
(f) In-Bound Licenses. Section 4.9(f) of Seller's Disclosure
Schedule contains an accurate and complete list of all licenses, sublicenses,
and other Contracts pursuant to which Seller is authorized to use, or can be
authorized to use (through, for example, the grant of a sublicense), any
Intellectual Property Right owned by any Affiliate of Seller or by any other
Person (including any rights enjoyed by Seller by reason of its relationship
with one of its Affiliates) in connection with the Business.
(g) Ownership. Seller (i) owns all right, title and interest in and
to all Acquired Intellectual Property Rights designated (and that should have
been designated) in Schedule 1.1(f), Schedule 1.2 and Sections 4.9(b), 4.9(c)
and 4.9(d) of Seller's Disclosure Schedule as owned by Seller, and such Acquired
Intellectual Property Rights were developed and created solely by employees of
Seller acting within the scope of their employment or by third parties (all of
which employees and third parties have validly and irrevocably assigned all of
their rights, including Intellectual Property Rights, therein to Seller) and
(ii) is duly and validly licensed to use all other Acquired Intellectual
Property Rights, free and clear of royalties (except as otherwise set forth in
Section 4.9(i) of Seller's Disclosure Schedule), as necessary to conduct the
Business, including as conducted at or prior to Closing or as Proposed to be
Conducted by Seller. Upon Closing, Seller will assign and transfer to
Purchasers, to the full extent of its ownership or interest in, all Acquired
Intellectual Property Rights. Upon Closing, and except for the off-the-shelf
third-party software license agreements set forth in Schedule 1.6(a), all
Acquired Intellectual Property Rights will be owned by Purchasers or, with
respect to Acquired Intellectual Property Rights that are licensed to Seller,
will be immediately available for use by Purchasers on terms and conditions
identical to those under which Seller presently uses such Acquired Intellectual
Property Rights, without any affirmative act by Purchasers or any other person.
Such ownership and right to use are (and upon Closing, will be) free and clear
of, and without liability under, all liens, Encumbrances and security interests
of any Person. Seller has not assigned or transferred ownership of, agreed to so
assign or transfer ownership of, or granted any exclusive license of or
exclusive right to use, any Acquired Intellectual Property Rights.
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(h) No Breaches. Except for any breaches and events described in
Section 4.9(h) of Seller's Disclosure Schedule, to the Knowledge of Seller, no
party to any license, sublicense, or other Contract included in the Acquired
Assets is (or will be upon Closing) in material breach or default, and no event
has occurred (or will have occurred upon Closing) which with notice or lapse of
time would constitute a material breach or default or permit termination,
modification or acceleration thereunder.
(i) Royalties. Except for licenses listed in Section 4.9(i) of
Seller's Disclosure Schedule as royalty-bearing, there are (and will be upon
Closing) no royalties, honoraria, fees, or other payments payable by Seller to
any Person by reason of the ownership, use, license, sale, or disposition of any
Acquired Intellectual Property Right.
(j) Infringement. Infringement. The Acquired Technology, the
Trademarks included in the Acquired Intellectual Property Rights, the Products
and Services of the Business and all other aspects of the Business (including as
conducted at or prior to Closing or as Proposed to be Conducted by Seller),
excluding unregistered Trademarks, do not and, when manufactured, sold, used,
otherwise exploited, operated or conducted by Purchasers substantially in the
same manner following the Closing, will not: (i) infringe or misappropriate any
Intellectual Property Rights of any Person (other than Patents and Trademarks)
under the laws of any jurisdiction; (ii) to the Knowledge of Seller, infringe
any Patent of any Person under the laws of any jurisdiction; (iii) infringe any
registered Trademark of any Person under the laws of any jurisdiction in North
America; (iv) to the Knowledge of Seller, infringe any unregistered Trademark of
any Person under the laws of any jurisdiction in North America, (v) to the
Knowledge of Seller, defame any Person under the laws of any jurisdiction; or
(vi) to the Knowledge of Seller, constitute unfair competition or trade
practices under the laws of any jurisdiction in North America. To the Knowledge
of Seller, the unregistered Trademarks included in the Acquired Intellectual
Property Rights do not and, when used or otherwise exploited by Purchasers
substantially in the same manner following the Closing, will not, (x) infringe
any Trademark of any Person under the laws of any jurisdiction in North America
or (y) constitute unfair competition or trade practices under the laws of any
jurisdiction in North America. To its Knowledge Seller has not received any
notice, claim or other communication (in writing or otherwise) from any Person:
(A) asserting any ownership interest in any material Acquired Intellectual
Property Right; (B) of any actual, alleged, possible or potential infringement,
misappropriation or unauthorized use or disclosure of any Intellectual Property
Right, defamation of any Person, or violation of any other right of any Person
(including any right to privacy or publicity) by Seller or relating to the
Acquired Technology, Seller's Products and Services related to the Business, or
any other aspect of the Business, including as conducted at or prior to Closing
or as Proposed to be Conducted by Seller; or (C) suggesting or inviting Seller
to take a license or otherwise obtain the right to use any Intellectual Property
Right in connection with the Business, including as conducted at or prior to
Closing or as Proposed to be Conducted by Seller. To the Knowledge of Seller, no
Person is infringing, misappropriating, using or disclosing in an unauthorized
manner any Acquired Intellectual Property Rights owned by, exclusively licensed
to, held by or for the benefit of, or otherwise controlled by Seller.
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(k) Proceedings. Except as set forth on Section 4.9(k) of Seller's
Disclosure Schedule, there are no current or, to the Knowledge of Seller
(including the knowledge of Seller's outside intellectual property counsel),
threatened Proceedings (including but not limited to any interference,
reexamination, cancellation, or opposition proceedings) arising out of a right
or claimed right of any person before any Governmental Authority (including
before the United States Patent and Trademark Office (the "PTO")) anywhere in
the world related to any Acquired Intellectual Property Right owned by,
exclusively licensed to, held by or for the benefit of, or otherwise controlled
by Seller (including any Acquired Registered Intellectual Property Rights).
(l) Indemnity Obligations. Section 4.9(l) of Seller's Disclosure
Schedule contains a complete list of all agreements currently in force under
which Seller has agreed to, or assigned any obligation or duty to, indemnify,
hold harmless, defend, guarantee or otherwise assume any obligation or liability
with respect to the infringement or misappropriation of any Acquired
Intellectual Property Right.
(m) Orders. Except as set forth on Section 4.9(m) of Seller's
Disclosure Schedule, no (i) Acquired Intellectual Property Right owned,
exclusively licensed to, held by or for the benefit of, or otherwise controlled
by Seller or (ii) Product and Service of Seller, is subject to any outstanding
decree, Order, judgment, office action or settlement agreement or stipulation
that restricts in any manner the use, transfer or licensing thereof by Seller or
that may affect its validity, use or enforceability.
(n) Prosecution. To the Knowledge of Seller (including the knowledge
of Seller's outside intellectual property counsel), all Acquired Registered
Intellectual Property Rights are valid, are in full force and were prosecuted in
good faith. Seller has not misrepresented, and to the Knowledge of Seller
(including the knowledge of Seller's outside intellectual property counsel)
there has been no failure to disclose, any fact or circumstance in any
application for any Seller Registered Intellectual Property Right that would
constitute fraud or a misrepresentation with respect to such application or that
would otherwise affect the validity or enforceability of any Seller Registered
Intellectual Property Right or application therefor. All necessary registration,
maintenance and renewal fees in connection with Acquired Registered Intellectual
Property Rights have been paid to, and all necessary documents and certificates
in connection with all Acquired Registered Intellectual Property Rights have
been filed with, the relevant patent, copyright, trademark or other authorities
or registrars in the United States or foreign jurisdictions, as the case may be,
for the purposes of maintaining such Acquired Registered Intellectual Property
Rights. There are no actions that must be taken by Seller within one hundred
twenty (120) days following the Closing Date, including the payment of any
registration, maintenance or renewal fees or the filing of any responses to
office actions, documents, applications or certificates for the purposes of
obtaining, maintaining, perfecting, preserving or renewing any Seller Registered
Intellectual Property Right. To the maximum extent provided for by, and in
accordance with, applicable laws and regulations, Seller has recorded in a
timely manner each assignment of a Seller Registered Intellectual Property Right
assigned to Seller with the relevant Governmental Authority, including the PTO,
the U.S. Copyright Office or their respective counterparts in any relevant
foreign jurisdiction, as the case may be.
(o) Enforceability. Except for what may be of record in patent
offices with respect to the specific Patent in question, Seller has no Knowledge
of any facts, circumstances or information that (i) would render any Acquired
Intellectual Property Right invalid or unenforceable, (ii) would materially
adversely affect any pending application for any Seller Registered Intellectual
Property Right, or (iii) would materially adversely affect or impede the ability
of Seller to use any Acquired Intellectual Property Right in the conduct of the
Business, including as conducted at or prior to Closing or as Proposed to be
Conducted by Seller.
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(p) Protection. Seller has taken commercially reasonable measures
and precautions necessary to safeguard, maintain and protect the confidentiality
of, and its proprietary rights in, all Acquired Intellectual Property Rights.
Without limiting the generality of the foregoing, (i) any disclosures to third
parties of Confidential Information have been pursuant to executed written
confidentiality agreements at least as protective as to disclosure and use as
those included in the forms set forth in Section 4.9(p)(i) of Seller's
Disclosure Schedule, and (ii) all current employees, consultants and contractors
of Seller (and all former employees, consultants and contractors of Seller that
have contributed to the development of any Product, Service, Technology, or
Acquired Intellectual Property Right) have executed appropriate confidentiality
and assignment agreements, in one or more forms at least as protective with
respect to the disclosure and use of Confidential Information, and with respect
to the assignment and protection of Intellectual Property Rights, as those
included in the forms set forth in Section 4.9(p)(ii) of Seller's Disclosure
Schedule. To the Knowledge of Seller, copies of all executed versions of such
agreements have been provided to Purchasers.
(q) Transaction. Except as set forth and described in Section 4.9(q)
of Seller's Disclosure Schedule, the execution, delivery, and performance of
this Agreement, and the consummation of the transactions contemplated hereby,
will not: (i) materially breach, violate, or conflict with any agreement
governing any Acquired Intellectual Property Right; (ii) cause any loss of,
material diminishment in the value of, or forfeiture or termination of (or give
rise to a right of forfeiture or termination of), any Acquired Intellectual
Property Right; (iii) in any way impair the right to use, or bring any action
for the unauthorized use or disclosure, infringement, or misappropriation of,
any Acquired Intellectual Property Right; (iv) cause or require either Purchaser
to grant any Person any right or license in, to or under any Intellectual
Property; (v) cause or require either Purchaser to be bound by, or subject to,
any non-compete or other restriction on the operation or scope of its
businesses, including the Business; or (vi) cause or require either Purchaser to
pay any royalties or other amounts to any Person.
(r) Acquired Technology Systems. The Acquired Technology systems are
adequate and, upon the Closing, will be adequate and available (under identical
conditions and without payment by Purchasers) for the operation of the Business,
including as conducted at or prior to Closing or as Proposed to be Conducted by
Seller. Except as set forth in Section 4.9(r) of Seller's Disclosure Schedule,
any Acquired Technology system currently under development by or for Seller
relating to the Business as presently conducted and as Proposed to be Conducted
by Seller will not require any additional material development effort or
expenditure following the Closing for the completion of such Acquired Technology
system. There has not been any material malfunction with respect to any of the
Acquired Technology systems that has not been remedied in all material respects.
(s) Open Source Issues. Except as set forth on Section 4.9(s) of
Seller's Disclosure Schedule, the Acquired Technology and Seller's Products and
Services related to the Business do not contain any software covered by a GNU
license or other "open source" license, or any software that would impose
limitations on the exercise of, or otherwise compromise or interfere in any way
with, the Intellectual Property Rights in the materials that may come in contact
or be used with such software.
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(t) Effectiveness; Encumbrances. Except as set forth in Section
4.9(t) of Seller's Disclosure Schedule, each Acquired Intellectual Property
Right owned by, exclusively licensed to, held by or for the benefit of, or
otherwise controlled by, Seller (i) to Seller's Knowledge (including the
knowledge of Seller's outside intellectual property counsel) is valid,
subsisting and in full force and effect, (ii) has not been abandoned or passed
into the public domain and (iii) is free and clear of any Encumbrances, except
for non-exclusive licenses granted to end-user customers in the Ordinary Course
of Business.
(u) Sufficiency. (A) The Intellectual Property Rights acquired by
Purchasers under Section 1.1 and Section 1.2 (together with the Trademark
license granted under the Retained Trademark License Agreement) constitute all
the Intellectual Property Rights used in or necessary to the conduct of the
Business, including as conducted at or prior to Closing or as Proposed to be
Conducted by Seller. As of the Closing, Seller and its Affiliates do not own or
control any Intellectual Property Rights (other than trademarks and domain names
subject to the Retained Trademark License Agreement) related to the Business,
including as conducted at or prior to Closing or as Proposed to be Conducted by
Seller. (B) There is no wireless technology utilized by, incorporated in or
otherwise embodied in any PVTV Product and Service, CameraMan Product and
Service or similar Product and Service of Seller, nor in any other Product and
Service being designed, developed, marketed, sold, serviced or supported by the
Video Division, other than the super heterodyne and infrared wireless
technologies currently incorporated into the CameraMan Products and Services and
PVTV Products and Services. Without limitation of the foregoing, no aspect of
direct conversion technology is utilized by, incorporated in or otherwise
embodied in any PVTV Product and Service, CameraMan Product and Service or
similar Product and Service of Seller, nor in any other Product and Service
being designed, developed, marketed, sold, serviced or supported by the Video
Division.
(v) Transferability. Except as set forth in Section 4.9(v) of
Seller's Disclosure Schedule, at Closing all Acquired Intellectual Property
Rights will be fully transferable, alienable and licensable by Purchasers
without restriction and without payment of any kind to any third party.
(w) Use Defined. For purposes of this Section 4.9, "use" includes,
without limitation, use (including in commerce), make, have made, reproduce,
display or perform (publicly or otherwise), prepare derivative works based on,
offer for sale, sell, distribute, transmit, import, disclose, license,
sublicense, dispose of, and otherwise exploit in any media now known or
hereafter discovered.
4.10 Employees and Consultants.
(a) Employees and Contractors. None of the Transferred Employees has
been granted the right to continued employment by Seller or to any material
compensation following termination of employment with Seller, subject to Section
4.10(a)(i) of Seller's Disclosure Schedule. Seller has no Knowledge that any
Transferred Employee intends to terminate his or her employment or other
engagement with Seller. Seller does not have a present intention to terminate
the employment or engagement of any employee of Seller (other than the
Transferred Employees in accordance herewith) in connection with the Transaction
or otherwise. Section 4.10(a)(i) of Seller's Disclosure Schedule lists (i) any
employment, consulting, or similar agreement, and any written individual benefit
arrangement with respect to each Transferred Employee, (ii) all other material
employee benefit, bonus or other incentive compensation, severance pay, layoff
or reduction in force, change in control, sick pay, vacation pay, salary
continuation, retainer, leave of absence, educational assistance, service award,
employee discount or fringe benefit plans or written arrangements with respect
to each Transferred Employee and (iii) any joint-employment or similar agreement
with third parties with respect to each Transferred Employee. Except as set
forth on Section 4.10(a)(ii) of Seller's Disclosure Schedule, the Transferred
Employees constitute the only employees engaged in the Business currently or in
the year prior to Closing. Any joint employment or similar arrangement or
Contract between Seller and any third party with respect to the Transferred
Employees will not interfere or conflict with (A) Seller's ability to satisfy
its obligations with respect to the Transferred Employees as set forth in
Article 8 or (B) to Seller's Knowledge, the employment by Lead Purchaser of the
Transferred Employees to whom Lead Purchaser extends offers of employment in
accordance with Article 8. Subject to Lead Purchaser's obligations to Seller in
Article 8, Lead Purchaser shall have no Liability with respect to any such
joint-employment relationship for the Transferred Employees.
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(b) Compensation. Section 4.10(a)(i) of Seller's Disclosure Schedule
sets forth an accurate, correct and complete list of all (i) Transferred
Employees, including each employee's name, title or position, present annual
compensation (including bonuses, commissions and deferred compensation), accrued
and unused paid vacation and other paid leave, years of service, interests in
any incentive compensation plan, and estimated entitlements to receive
supplementary retirement benefits or allowances (whether pursuant to a
contractual obligation or otherwise) and (ii) individuals who are currently
performing services for Seller related to the Business and who are classified as
"consultants" or "independent contractors." Section 4.10(b)(i) of Seller's
Disclosure Schedule sets forth all (A) bonuses, severance payments, termination
pay and other special compensation of any kind paid to, accrued with respect to,
or that would be payable to (including as a result of the Transaction), any
present or former Transferred Employee since January 1, 2003; (B) increases in
any Transferred Employee's wage or salary since December 31, 2003; and (C)
increases or changes in any other benefits or insurance provided to any
Transferred Employees since January 1, 2003. No Transferred Employee is eligible
for payments that would constitute "parachute payments" under Section 280G of
the Code. Section 4.10(b)(ii) of Seller's Disclosure Schedule sets forth all
outstanding amounts (for each individual and with aggregate summaries) owed or
promised to Transferred Employees pursuant to any mandatory or discretionary
bonus arrangement, severance payments, termination pay and other compensation of
any kind paid to, accrued with respect to, or that would be payable to any
Transferred Employee.
(c) Compliance with Legal Requirements. Except as set forth in
Section 4.10(c) of Seller's Disclosure Schedule, there are no outstanding class
action claims arising out of any law relating to discrimination against
Transferred Employees or any other employment practices related to such
Employees, including, but not limited to, claims arising under Title VII of the
Civil Rights Act of 1964, the Age Discrimination in Employment Act, the
Americans with Disabilities Act, the Fair Labor Standards Act, and any other
state or federal discrimination, wage and hour or labor laws. There are no
charges, investigations (of which Seller has been notified or otherwise has
Knowledge), administrative proceedings or formal complaints of discrimination
(including discrimination based upon sex, age, marital status, race, national
origin, sexual preference, handicap or veteran status) pending, or to Seller's
Knowledge threatened, before the Equal Employment Opportunity Commission or any
federal, state or local agency or court against Seller pertaining to the
Transferred Employees. Seller has complied in all material respects with all
Legal Requirements related to the employment of the Transferred Employees,
including provisions related to wages, hours, leaves of absence, equal
opportunity, occupational health and safety, workers' compensation, severance,
employee handbooks or manuals, collective bargaining and the payment of social
security and other Taxes. Seller has no Liability under any Legal Requirements
related to such employment and attributable to an event occurring or a state of
facts existing prior to the date hereof.
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(d) WARN Act. As of the date hereof, Seller is in full compliance
with the Worker Readjustment and Notification Act (the "WARN Act") (29 USC
ss.2101) and any similar state Legal Requirements with respect to the
Transferred Employees, including all obligations to promptly and correctly
furnish all notices required to be given thereunder in connection with any
"plant closing" or "mass layoff" to "affected employees," "representatives" and
any state dislocated worker unit and local government officials. As of the date
hereof, no reduction in the notification period under the WARN Act or such state
Legal Requirement is being relied upon or intended to be relied upon by Seller.
Section 4.10(d) of Seller's Disclosure Schedule sets forth an accurate, correct
and complete list of all employees terminated (except with cause, by voluntary
departure or by normal retirement), laid off or subjected to a reduction of more
than fifty percent (50%) in hours or work during the two (2) full calendar
months and the partial month preceding the date hereof. Seller does not intend
to terminate any employees, other than the Transferred Employees who accept
offers of employment with Lead Purchaser, in connection with this Transaction.
(e) Unions. Except as set forth in Section 4.10(e) of Seller's
Disclosure Schedule, and, in each case with respect to the Transferred
Employees, (i) to the Knowledge of Seller, no union organizational campaign is
in progress with respect to the Transferred Employees, and no question
concerning representation exists or has existed within the past two (2) years
respecting the Transferred Employees; (ii) Seller has no Knowledge of, and has
not received written notice during the past year of, the intent of any
Governmental Authority responsible for the enforcement of labor or employment
Legal Requirements to conduct an investigation of Seller with respect to the
Transferred Employees and, to the Knowledge of Seller, no such investigation is
in progress; (iii) Seller is not a party to or bound by any Contract or
collective bargaining agreement with any labor union, trade union or similar
organization; (iv) there is no unfair labor practice charge or complaint or any
other matter against or involving Seller pending or to Seller's Knowledge
threatened before the National Labor Relations Board or any court or other
governmental agency pertaining to Seller; and (v) there is no pending or to
Seller's Knowledge threatened, nor has there been for the past five (5) years
any, labor strike, dispute, walkout, work stoppage, slowdown or lockout
involving Seller, nor is Seller engaged in any unfair labor practice or other
violation within the meaning of the National Labor Relations Act with respect to
its employees. Seller has provided to Purchasers true and complete copies of any
labor and collective bargaining agreements with respect to the Transferred
Employees to which Seller is a party or to which Seller is otherwise bound.
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4.11 Seller's Benefit Plans.
(a) Employee Benefit Plans. Section 4.11(a) of Seller's Disclosure
Schedule lists, in each case only to the extent applicable to the Transferred
Employees, (i) all Employee Benefit Plans, (ii) each stock option, stock
purchase, or deferred compensation plan, employee share scheme, employee share
option scheme or arrangement, (iii) each employment agreement, including, but
not limited to, any individual benefit arrangement, policy or practice with
respect to any current or former employee or director, and (iv) any other
employee benefit, profit-related pay scheme, bonus or other incentive
compensation, severance pay, layoff or reduction in force, change in control,
sick pay, vacation pay, salary continuation, retainer, leave of absence,
educational assistance, service award, employee discount, fringe benefit plans,
arrangements, policies or practices (whether or not subject to ERISA) that are
currently maintained, or otherwise contributed to, by Seller or any ERISA
Affiliate (collectively, the "Seller's Employee Plans"). For the avoidance of
doubt, the term "Seller's Employee Plans" shall include any Employee Benefit
Plans sponsored or maintained by a professional employer organization, employee
leasing company, or similar entity (each a "PEO") on behalf of Seller and
covering any of the Transferred Employees.
(b) Compliance. To Seller's Knowledge, except as set forth in
Section 4.11(b) of Seller's Disclosure Schedule, each Seller's Employee Plan
that is an Employee Benefit Plan complies in all material respects by its terms
and in operation with any and all Legal Requirements currently in effect and
applicable to the Seller's Employee Plan, including but not limited to ERISA and
the Code.
(c) Multiemployer Plans/Defined Benefit Plans. None of the Seller's
Employee Plans is a Multiemployer Plan, and neither Seller nor any PEO acting on
behalf of Seller nor any ERISA Affiliate has ever contributed to, or ever been
obligated to contribute to, a Multiemployer Plan. None of the Seller's Employee
Plans is a Pension Plan, and neither Seller nor any PEO acting on behalf of
Seller nor any ERISA Affiliate has ever contributed to, or ever been obligated
to contribute to, a Pension Plan.
(d) Post-Retirement Benefits. With respect to the Transferred
Employees, neither Seller nor any PEO acting on behalf of Seller maintains or
contributes to any plan that provides health or other welfare benefits to an
employee after the employee's termination of employment or retirement, except as
required under Section 4980B of the Code and Sections 601 through 608 of ERISA
or other applicable Legal Requirements.
(e) Foreign Plans. Neither Seller nor any PEO acting on behalf of
Seller maintains any Seller's Employee Plan outside the United States.
(f) Independent Contractors. Seller has at all times (i) properly
classified its workers as employees and independent contractors under the
applicable IRS regulations; (ii) properly withheld and paid over to the IRS all
applicable employment taxes and other required payments; and (iii) provided
benefits under each Seller's Employee Plan to all eligible persons in accordance
with the provisions of such plan.
4.12 Environmental Matters. Seller does not have any Environmental
Liabilities related to the Business, the Acquired Assets or the Assumed
Liabilities, and Purchasers shall have no Environmental Liability related to
Seller's operation of the Business prior to Closing.
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4.13 Taxes. Except as disclosed in Section 4.13 of Seller's Disclosure
Schedule:
(a) Returns. Seller has timely filed all Tax Returns required to be
filed that relate to the Business, the Patent Assets or the Non-Patent Assets,
and all such Tax Returns are true, complete and accurate in all material
respects. Seller has timely paid all Taxes due relating to the Business, the
Patent Assets and the Non-Patent Assets, whether or not shown on such Tax
Returns.
(b) Audits and Claims. No claims, actions, audits or other
proceedings with any Taxing Authority are presently pending or, to the Knowledge
of Seller, threatened in respect of any Taxes of Seller relating to the
Business, the Patent Assets or the Non-Patent Assets. There are no outstanding
waivers extending the statutory period of limitation relating to such Taxes.
(c) Tax Agreements. Seller is not a party to or bound by any tax
indemnity agreement, tax-sharing agreement or similar contract. Seller is not a
party to any joint venture, partnership, or other arrangement or contract which
could be treated as a partnership or "disregarded entity" for United States
federal income tax purposes.
(d) Ownership of Assets. There are no Encumbrances for Taxes (other
than Encumbrances for Taxes not yet due and payable) on the Patent Assets or the
Non-Patent Assets. None of the Patent Assets or the Non-Patent Assets are
required to be treated for Tax purposes as owned by any Person, other than
Seller.
(e) Employment Matters. Seller has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, partner, or other third
party, that relate to the Business, the Patent Assets or the Non-Patent Assets,
and all Forms W-2 and 1099 required with respect thereto have been properly
completed by Seller and timely filed by Seller.
(f) Tax Status. Seller is a "United States person" within the
meaning of Section 7701(a)(30) of the Code.
4.14 Sufficiency of and Title to Assets; Conduct of Business.
(a) Sufficiency. Except for (A) the trademark license provided
pursuant to the Retained Trademark License, (B) the reseller agreements,
insurance policies and other Contracts set forth on Section 4.15(c) of Seller's
Disclosure Schedule, (C) those Contracts subject to consent requirements in
connection with the transfer of such Contracts pursuant to this Transaction as
set forth on Schedule 1.6(a) and for which such consent has not been obtained,
and (D) the Software listed on Schedule 1.3(j), the Acquired Assets include all
Assets used in or necessary for the conduct of the Business as currently
conducted and as conducted in the previous year.
(b) Title. Seller has good and marketable title to, and all
beneficial interest in, or, as the case may be, a valid lease or license
interest in, all of the Acquired Assets, free and clear of all Encumbrances, and
immediately after the Closing, the applicable Purchaser shall have good and
marketable title to, and all beneficial interest in, or, as the case may be, a
valid leasehold interest in, the applicable Acquired Assets, free and clear of
all Encumbrances.
(c) Conduct of Business. Seller is the only Person conducting the
Business, and none of the Business is conducted by any Affiliate of Seller.
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(d) Business Transfer. Through the purchase and sale of the Acquired
Assets as set forth herein, Purchasers shall acquire at the Closing all legal
and beneficial ownership of the Business free and clear of any Encumbrances.
4.15 Material Contracts.
(a) Except for the Contracts included in Section 4.15(c) of Seller's
Disclosure Schedule and which are thus Excluded Assets, and except for Contracts
that have prior to the Effective Date expired or been terminated in accordance
with their terms, in each case with no continuing Liabilities on the part of
Seller, Section 4.15(a) of Seller's Disclosure Schedule (or, if another section
of Seller's Disclosure Schedule is referenced below, such other section) lists
each Contract, as of the Effective Date, and as of the Closing Date reflecting
any changes since the Effective Date made in the Ordinary Course of Business and
in compliance with Section 6.1 and Section 6.2, (i) to which Seller is a party
in connection with the Business, (ii) which any other Person has entered into on
behalf of or for the benefit of Seller in connection with the Business, (iii)
pursuant to which the Business otherwise benefits or (iv) pursuant to which the
Acquired Assets or the Assumed Liabilities are otherwise bound or affected, and
in each case that falls within one of the following categories (collectively,
the "Material Contracts"):
(A) Personal Property leases and conditional sales and title
retention agreements for Personal Property, in each case involving payments of
more than $1,000 individually or $2,500 in the aggregate for related leases;
(B) Real Property leases and subleases and any other Contract
affecting any right, title or interest in or to Real Property;
(C) any Customer Contract, including (1) any Contract
obligating Seller to sell, deliver, license or otherwise provide any product or
service at a price which does not cover the cost (including labor, materials and
production overhead) plus the customary profit margin associated with such
product or service and (2) any requirement or output Contract;
(D) any in-bound licenses and related Contracts scheduled, or
which should be scheduled, on Section 4.9(f) of Seller's Disclosure Schedule;
(E) any out-bound licenses and related Contracts scheduled, or
which should be scheduled, on Section 4.9(e) of Seller's Disclosure Schedule;
(F) any Contract relating to any sales, agency, distribution,
marketing, service/product tie-in, barter and in-kind agreement (except for the
Reseller agreements of Seller related to the Business, which shall be Excluded
Assets);
(G) any Contract for the manufacture, service or maintenance
of any Products and Services or equipment or other Personal Property of Seller
related to the Business involving payments of more than $1,000;
(H) any other Contract for capital expenditures or for the
purchase of goods or services in excess of $1,000 for individual items or more
than $2,500 for a category or type of goods or services;
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(I) any mortgage or other Contract involving financing or
borrowing of money, or evidencing indebtedness, any liability for borrowed money
or any obligation for the deferred purchase price of property (excluding normal
trade payables);
(J) any Contract to indemnify any Person, to share in or
contribute to the liability of any Person or to guarantee any Liability of any
Person;
(K) any joint venture, partnership, cooperative arrangement or
similar Contract and any other Contract involving a sharing of profits;
(L) any Contract related to the acquisition of a business or
the equity of any other Person;
(M) any Contract with respect to the Business for the purchase
or sale of any assets or for the option or preferential rights to purchase or
sell any assets, in any case other than in the Ordinary Course of Business of
the Seller with respect to the Business;
(N) any Contract with or with respect to any consultant or
employee of the Business, including with respect to bonus, stock options or
other incentive equity, termination payments or other compensation, and further
including any Contract with any labor union;
(O) any Contract with any Governmental Authority;
(P) any insurance policy or other Contract pertaining to
insurance with respect to the Business (it being understood that such policies
and Contracts will be Excluded Assets);
(Q) any Contract containing covenants not to compete
applicable to the Business, as currently conducted or as Proposed to be
Conducted by Seller, with any Person in any geographical area;
(R) any power of attorney, proxy or similar instrument related
to the Business;
(S) any Contract for the purchase or sale of foreign currency
or otherwise involving foreign exchange transactions;
(T) any Contract containing a "most-favored nation" or other
provision requiring adjustment of cost, pricing, priority or other terms or
conditions of the Contract, or performance obligations under such Contract;
(U) any Contract requiring Seller to "pass through" or
otherwise provide any party to such Contract the full or partial benefit of
reduced royalty rates, production or other costs applicable to the Business;
(V) any "offload" Contract or other Contract involving the
production of products by or for the Business;
(W) any Contract between Seller and an Affiliate with respect
to the Business;
(X) any proprietary information, non-disclosure, invention
assignment or similar Contract between Seller and any Transferred Employee, any
former employee of Seller whose service to Seller was primarily related to the
Business, or any current or former consultant whose service to Seller is or was
primarily related to the Business (it being understood that Seller shall only be
required to schedule agreements with former consultants and employees to the
extent Seller has Knowledge that it has retained such agreements in its
records);
29
(Y) any confidentiality, non-disclosure or similar Contract
between Seller and any third party that primarily pertains to the Business (it
being understood that Seller shall only be required to schedule agreements with
respect to past relationships and proposed relationships to the extent Seller
has Knowledge that it has retained such agreements in its records); and
(Z) (1) Any other Contract which provides for payment or
performance by any party thereto having an aggregate value of $2,500 or more,
including future payments, performance of services or delivery of goods or
materials to or by Seller of an aggregate amount or value in excess of $2,500 on
an annual basis, (2) any other Contract that is otherwise material to the
Business, (3) any other Contract outside the ordinary course of business of
Seller and (4) any Contract the terms of which are not arm's-length.
(b) Proposed Contracts. As of the Effective Date, and as of the
Closing Date reflecting any changes since the Effective Date made in the
Ordinary Course of Business and in compliance with Section 6.1 and Section 6.2,
Section 4.15(b) of Seller's Disclosure Schedule sets forth any proposed Contract
under negotiation or discussion that would fall under any of the categories in
subsection (a) above if it is executed or otherwise becomes legally binding at
any time in the future.
(c) Excluded Contracts. Section 4.15(c) of Seller's Disclosure
Schedule sets forth any Contract included in the Excluded Assets that relates to
the Business. Except for the Contracts set forth on Section 4.15(c) of Seller's
Disclosure Schedule, the Material Contracts constitute all of the material
contracts used in or necessary for the conduct of the Business as currently
conducted or as conducted in the previous year. Seller has provided Purchasers
with true and complete copies of all of the reseller and similar agreements of
the Business, and all amendments, modifications and supplements thereto.
(d) Disclosures. Seller has provided to Purchasers true, accurate
and complete copies of all of the Material Contracts, and there are no oral or
written amendments, modifications, side-letters, supplements or other
arrangements or agreements in existence with respect to the Material Contracts
which have not been provided to Purchasers or their counsel.
(e) Valid and Binding Obligation. Each Material Contract is in full
force and effect and is valid and legally binding on Seller and, to Seller's
Knowledge, the other parties thereto, and each Material Contract is enforceable
in accordance with its terms with respect to Seller and, to the Knowledge of
Seller, with respect to each other party to such Material Contract. Seller has
no Knowledge of any pending or threatened bankruptcy, insolvency or similar
Proceeding with respect to any party to any Material Contract.
(f) Audits. To the Knowledge of Seller, no audit or similar review
or investigation has been or is being conducted by any party to a Material
Contract. Seller has no Knowledge of, and has not received any written notice or
written request with respect to, any such audit, review or investigation, and
Seller has no Knowledge of any facts that are reasonably likely to lead to the
commencement of any such audit, review or investigation.
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(g) Default. Seller is not in material violation or material breach
of or material default under any Material Contract. To the Knowledge of Seller,
no third party to any Material Contract is in material violation or breach of or
material default under any Material Contract. No action by Seller has been
taken, or to Seller's Knowledge, no action has been taken by another Person,
which would, with or without notice or lapse of time, (i) result in a violation
or breach of any of the provisions of any Material Contract other than
immaterial violations or breaches, (ii) give any Person the right to declare a
default under or exercise any remedy under any Material Contract, (iii) give any
Person the right to accelerate the maturity or performance of any Material
Contract, or (iv) give any Person the right to cancel, terminate or modify any
Material Contract or assert a counterclaim, defense or offsetting claim under a
Material Contract. Seller has no Knowledge of, and has received no written
notice of, any of the foregoing, and Seller has no Knowledge of facts that are
reasonably likely to result in any of the foregoing.
(h) Other Matters. No Person (i) is materially renegotiating, or
(ii) has requested a renegotiation of, any material amount paid or payable to
Seller under any Material Contract or any other term or provision of any
Material Contract. Seller has not waived any of its material rights under any
Material Contract. Performance of the Material Contracts by Seller as of the
Closing Date will not result in any violation of or failure to comply with any
Legal Requirement. Except for the software escrow agreement set forth on Section
4.15(h) of Seller's Disclosure Schedule, Seller has not, with respect to the
Business, guaranteed or otherwise agreed to insure or become liable for in any
way any Contract or Liability of another Person, or pledged any of Seller's
Assets to secure the performance or payment of any Material Contract. Neither
Seller nor any of its Affiliates or officers, nor, to the Knowledge of Seller,
any employee or agent of Seller or any other Person acting on Seller's behalf,
has directly or indirectly within the last five (5) years provided, or agreed to
provide, any tangible or intangible benefit to any customer, supplier,
Governmental Authority, employee or other Person that would result in any
violation of any Legal Requirement.
4.16 Governmental Approvals. As of the Effective Date, and as of the
Closing Date reflecting any changes since the Effective Date made in the
Ordinary Course of Business and in compliance with Section 6.1 and Section 6.2,
Section 4.16 of Seller's Disclosure Schedule contains a true, accurate and
complete list and summary description of each Governmental Approval held by
Seller that relates to the Business or that is otherwise material to the
operation of the Business. Seller has delivered to Purchasers a true, accurate
and complete copy of each such Governmental Approval and provided Purchasers
with true, accurate and complete copies of all material correspondence with
Government Authorities pertaining to such Governmental Approvals (excluding any
Governmental Approval pertaining to Seller's general corporate existence or
status). Seller currently holds, and has at all times held, all Governmental
Approvals necessary or appropriate in connection with the operation of the
Business. Seller is in compliance with the terms of Governmental Approvals
relating to the Business, no violations exist with respect to Governmental
Approvals relating to the Business, and no fines or penalties are owed by Seller
with respect to Governmental Approvals relating to the Business. All such
Governmental Approvals are in full force and effect. Seller has received no
written notice of any, and there is no pending, or to Seller's Knowledge
threatened, Proceeding which could result in the suspension, termination,
revocation, cancellation, limitation or impairment of any such Governmental
Approval. To the Knowledge of Seller, (i) no event or circumstance exists that
would cause Seller to be deemed to be out of compliance with, or would cause the
suspension, termination, revocation, cancellation, limitation or impairment of,
any such Governmental Approval and (ii) Seller has not received any notice of
any of the foregoing. Notwithstanding Section 4.20, all Products and Services
related to the Business either (i) are authorized under the Governmental
Approvals specified in Section 4.16 of Seller's Disclosure Schedule, or (ii) are
not required to be authorized under any Governmental Approval or (iii) consist
of individual components that have been manufactured pursuant to all necessary
Governmental Approvals and that do not require any additional Governmental
Approval. Notwithstanding Section 4.20, all Products and Services of the
Business have been (i) sold only in the United States and any other countries
not requiring Governmental Approvals other than those specified in Section 4.16
of Seller's Disclosure Schedule and (ii) manufactured and sold in compliance
with all applicable technical, product-labeling, record-keeping, or other
Governmental Approvals. Notwithstanding Section 4.20, Seller has not modified
any of the Products authorized under the Governmental Approvals specified in
Section 4.16 of Seller's Disclosure Schedule, except as permitted under those
Governmental Approvals or pursuant to applicable FCC rules or other Legal
Requirements. The representations and warranties in this Section 4.16 are
qualified, as applicable, by the FCC certification item set forth on Section
4.17 of Seller's Disclosure Schedule.
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4.17 Compliance with Laws. Seller has provided Purchasers with true,
accurate and complete copies of all material correspondence with Government
Authorities pertaining to Seller's compliance or non-compliance with Legal
Requirements with respect to the Business. Notwithstanding anything to the
contrary herein, except as set forth in Section 4.17 of Seller's Disclosure
Schedule, Seller at all times has been in compliance with, and has made all
required filings and given all required notifications with respect to, all such
Legal Requirements, including all technical, product labeling, record-keeping,
and other regulatory requirements established by the FCC or other Governmental
Authorities with respect to the Products and Services of the Business. To the
Knowledge of Seller, and except as set forth on Schedule 4.17 of Sellers
Disclosure Schedule, no event has occurred, and no condition or circumstance
exists, that might (with or without notice or lapse of time) constitute, or
result directly or indirectly in, a default under, a breach or violation of, or
a failure to comply with, any such Legal Requirement. Except as set forth on
Schedule 4.17 of Sellers Disclosure Schedule, Seller has not received any
written notice from any Person regarding, and has no Knowledge of, any actual,
alleged or potential violation by Seller of any such Legal Requirement. To the
Knowledge of Seller, no Governmental Authority has proposed or is considering
any Legal Requirement that may materially affect the Acquired Assets, the
Assumed Liabilities or the Business. No fines or penalties are owed by Seller in
respect of any Legal Requirement applicable to the Business or any violation
thereof.
4.18 Litigation - Proceedings and Orders.
(a) Proceedings. Section 4.18 of Seller's Disclosure Schedule
contains a true, accurate and complete list and summary description of each
Proceeding related to the Business that Seller is engaged in, or is a party to,
whether as a plaintiff or defendant, or, to the Knowledge of Seller, threatened
with, and Seller does not have any Knowledge of any threatened Claim, dispute or
other facts or circumstances that are reasonably likely to lead to the
initiation of any Proceeding with respect to Seller related to the Business.
Seller has provided to Purchasers true, accurate and complete copies of all
material filings and correspondence related to any Proceeding described above.
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(b) Orders. Seller has no Knowledge of any Orders (including
arbitration settlements or findings by or with any Governmental Authority)
(other than through general application) applicable to Seller and related to the
Business. Seller is not in default of any Order related to the Business, and
there is no reasonable basis in the Knowledge of Seller for any such action that
may result in any such default.
4.19 Insurance.
(a) Policies. Section 4.19 of Seller's Disclosure Schedule contains
a true, accurate and complete list and summary description of currently
effective insurance policies or binders of insurance or programs of
self-insurance of Seller that relate to the Business (the "Insurance Policies").
The coverage under each such Insurance Policy is in full force and effect, and
no notice of cancellation or nonrenewal with respect to, or disallowance of any
claim under, or material increase of premium for, any such Insurance Policy has
been received by Seller. Seller has no Knowledge of any facts or the occurrence
of any event which (i) reasonably might form the basis of any claim against
Seller relating to the conduct or operations of the Business or the Acquired
Assets, including as covered by any of the Insurance Policies, or (ii) would be
reasonably likely to materially increase the insurance premiums payable under
any Insurance Policy. The Insurance Policies are not self-insurance programs,
and, to Seller's Knowledge, are with financially sound and reputable insurance
companies.
(b) Notices. Except as disclosed in Section 4.19(b) of Seller's
Disclosure Schedule, Seller has not received in the preceding twelve (12)
months:
(i) except in respect of director and officer insurance, any
notice or other communication regarding the actual or possible cancellation or
invalidation of any of the Insurance Policies or regarding any actual or
possible material adjustment in the amount of the premiums payable with respect
to any of said policies relating to the Business;
(ii) any notice or other communication regarding any actual or
possible refusal of coverage under, or any actual or possible rejection of any
material claim under, any of the Insurance Policies relating to the Business; or
(iii) any indication that the issuer of any of the Insurance
Policies may be unwilling or unable to perform any of its obligations
thereunder.
(c) Continuity of Coverage. During the past five (5) years, there
has been no period during which Seller has not maintained insurance coverage
relating to the Business of the nature and scope of and in dollar amounts
equivalent to the current Insurance Policies.
4.20 Products and Services; Warranties; Liability.
(a) Conformity with Warranties. All Products and Services related to
the Business have been in conformity with all applicable contractual commitments
and all other express or implied warranties. No Liability of Seller exists for
repair, replacement, damage or otherwise in connection with Seller's Products
and Services related to the Business.
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(b) Warranties. Section 4.20(b)(i) of Seller's Disclosure Schedule
sets forth an accurate, correct and complete statement of all written
warranties, warranty policies, and service and maintenance Contracts of the
Seller related to the Business. Except as set forth in Section 4.20(b)(ii) of
Seller's Disclosure Schedule, no Products and Services related to the Business
heretofore developed, processed, distributed, sold or delivered by the Seller
are subject to any guarantee, warranty, claim for product liability, or patent
or other indemnity. All of Seller's Products and Services related to the
Business and all warranties related thereto are in material conformity with any
labeling and other requirements of applicable Legal Requirements. A list of
Seller's Products and Services related to the Business warranty claims' history
(stating aggregate annual totals) for the last five (5) years is set forth in
Section 4.20(b)(iii) of Seller's Disclosure Schedule.
(c) No Liabilities. Seller is not subject to any Liability arising
from any injury to Person or property or as a result of ownership, possession,
distribution or use of any of Seller's Products and Services related to the
Business. There have been no recalls of any of Seller's Products and Services
related to the Business, and none are pending or, to the Knowledge of Seller,
threatened, and no report has been filed or is required to have been filed with
respect to any of the Seller's Products and Services related to the Business
under applicable Legal Requirements. To the Knowledge of Seller, no facts or
circumstances exist involving any aspect of any of the Seller's Products and
Services related to the Business that would cause any obligation to report to
any Governmental Authority. There are no pending claims, and within the last
five (5) years there have not been any material claims, related to product or
other Liability against or involving any of Seller's Products and Services
related to the Business.
(d) Defects; Recalls; Returns. To Seller's Knowledge, there are no
Governmental Approvals stating or implying that any of Seller's Products and
Services related to the Business (i) are defective or unsafe or (ii) fail to
meet any standards promulgated by any Governmental Authority. There is no (A) to
the Knowledge of Seller, fact or circumstance related to any of Seller's
Products and Services related to the Business that would impose upon Seller a
duty to recall any such Products and Services or (B) Liability for returns or
other product liability claims with respect to any such Products and Services,
except as set forth in the customer and other Contracts scheduled in Section
4.15(a) of Sellers Disclosure Schedule to the extent consistent with any
applicable form agreements provided by Seller to Purchasers.
4.21 Subsequent Operations of Business. Since January 1, 2004:
(a) Seller has conducted the Business in the Ordinary Course of
Business, and Except as set forth in Section 4.21 of Seller's Disclosure
Schedule, there has not been any occurrence, event, incident, action, failure to
act or transaction outside the Ordinary Course of the Business;
(b) Except as set forth in Section 4.21 of Seller's Disclosure
Schedule, there has not been any material adverse change, or circumstances or
developments likely to result in a material adverse change, in the business,
financial condition, operations or results of operations of the Business;
(c) There has not been any material damage, destruction or other
casualty loss with respect to any Acquired Assets of the Business;
(d) Seller has not violated any Legal Requirement applicable to
Seller that has had or is reasonably likely to have a Material Adverse Effect;
34
(e) Seller has not entered into any Contract, negotiations or
discussions regarding any sale of the Business or of the Acquired Assets (other
than sales in the Ordinary Course of Business), nor has Seller entered into any
Contract, negotiations or discussions with respect to any acquisition by Seller
of any Person or Assets that would materially affect or relate to the Business;
(f) There has not been, with respect to the Business and except as
required by any change in GAAP, any change by Seller in its accounting
principles, practices or methods, its material Tax practices or principles or in
the practices or standards used to maintain Seller's books, accounts or business
records;
(g) Seller has not (i) hired or terminated any significant employee
with respect to the Business or materially changed the position of employment or
the terms and conditions of any Transferred Employee, or (ii) except as may be
set forth in Section 4.10(a)(i) of Seller's Disclosure Schedule, materially
increased the compensation payable or to become payable, directly or indirectly,
by Seller to any Transferred Employee or the other benefits or compensation of
any Transferred Employee under, or pursuant to the adoption of, any bonus,
compensation, insurance, pension, retirement, collective bargaining,
profit-sharing, deferred compensation, stock option, incentive equity or other
similar plan or agreement;
(h) Except for the FCC certification matter disclosed on Section
4.17 to Sellers Disclosure Schedule, Seller has not violated, entered into,
terminated or materially modified any Material Contract or Governmental Approval
with respect to the Business, and no Governmental Authority or other Person has
amended, accelerated, terminated or modified any Material Contract or
Governmental Approval;
(i) To Seller's Knowledge, no Proceeding has been commenced against
Seller, and Seller has not commenced any Proceeding against any other Person
with respect to the Business other than for the routine collection of
Receivables in the Ordinary Course of Business;
(j) Seller has not, with respect to the Business, (A) delayed or
postponed the payment of accounts payable and other Liabilities outside the
Ordinary Course of Business, (B) delayed or postponed the purchase of Inventory
outside the Ordinary Course of Business or otherwise failed to maintain all
Inventory at current levels, or failed to maintain the Acquired Assets in good
repair, order and condition, reasonable wear and tear excepted, (C) accelerated
the collection of any Receivables included in Acquired Assets outside the
Ordinary Course of Business, (D) made any sale of any such Receivable or any
accrual of liabilities not in the Ordinary Course of Business, written off any
such Receivables or portions thereof as uncollectible outside the Ordinary
Course of Business or established an extraordinary reserve with respect thereto,
or (E) made any provision for markdowns or shrinkage with respect to Inventory
other than in the Ordinary Course of Business;
(k) Except as set forth Section 4.21 to Seller's Disclosure
Schedule, Seller has not, with respect to the Business, and other than the
purchase of Inventory in the Ordinary Course of Business, purchased, leased,
licensed or otherwise acquired any Assets outside the Ordinary Course of
Business or with an individual cost of more than $10,000 or $25,000 in the
aggregate or made any other expenditure with respect to the Business, on an
individual basis or in the aggregate, in excess of such respective amounts;
35
(l) Seller has not sold, leased, transferred or assigned any
material Acquired Asset, other than sales of Inventory in the Ordinary Course of
Business;
(m) Seller has not assigned, nor granted any license or sublicense
of any rights under or with respect to, any Acquired Intellectual Property Right
or granted any license with respect to any such right (other than non-exclusive
licenses to customers of the Business in the Ordinary Course of Business as
necessary for the customers to normally operate the Products and Services of the
Business);
(n) Seller has not, with respect to the Business, made any material
gifts or sold, transferred or exchanged any material property for less than the
fair value thereof;
(o) Seller has not, with respect to the Business, mortgaged, pledged
or subjected any Acquired Asset to any Encumbrance;
(p) Seller has not, with respect to the Business, forgiven any
material debt or otherwise released or waived any material right or Claim nor
discharged any material lien nor paid any obligation or Liability;
(q) Seller has not suffered any material loss in respect of the
Business not otherwise reflected on the Pro Forma Income Statement or, to the
Knowledge of Seller, any prospective loss of or harm to relationship with, any
material dealer, customer or supplier or other third Person material to the
Business, or materially altered any contractual arrangement with any such
person;
(r) Except as set forth Section 4.21 to Seller's Disclosure
Schedule, Seller has not materially changed, or announced any change to,
Seller's Products and Services related to the Business, or taken any material
action, not announced prior to the date of this Agreement with respect to its
Products and Services related to the Business or the customers, suppliers,
distributors or similar third Persons with material business relations with
Seller, including providing promotions, coupons, discounts or price increases;
(s) Seller has not made any other material change affecting the
operation of the Business, including (A) changes in distributor alignments,
management organization or personnel arrangements with sales brokers,
advertising agencies, market research projects, advertising and promotion
budgets or the content of advertisements or working capital levels; (B) changes
in discretionary costs, such as advertising, maintenance and repairs, research
and development, and training; (C) any capital expenditures or deferrals of
capital expenditures; (D) deviations from operating budgets or plans on sales
and profitability; and (E) changes to any of its business policies, including
advertising, investments, marketing, pricing, purchasing, production, sales,
returns, budget or product acquisition policies;
(t) Seller has not taken, or failed to take, any other action that
would have a Material Adverse Effect; and
(u) Seller has not entered into any Contract or otherwise agreed, in
writing or otherwise, to take any of the actions that are described above or
that would be reasonably likely to lead to the occurrence of any of the events
or conditions described above.
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4.22 Customers, Distributors and Suppliers.
(a) Customers. Section 4.22(a) of Seller's Disclosure Schedule sets
forth an accurate, correct and complete list of (i) the ten (10) largest
customers of Seller with respect to the Business, determined on the basis of
Seller's sales revenues, for 2003, and (ii) the ten largest customers of Seller
with respect to the Business determined on the basis of Seller's sales revenues
during the three (3) months ended on the Closing Date, showing the approximate
total sales to each such customer during the fiscal year ended 2003 and the
three (3) months ended on the Closing Date. There is no Contract which provides
that any Person will be the exclusive customer or licensee of any product or
service of Seller in any respect.
(b) Suppliers. Section 4.22(b) of Seller's Disclosure Schedule sets
forth an accurate, correct and complete list of (i) the ten (10) largest
suppliers of Seller with respect to the Business, determined on the basis of
costs of items purchased or licensed by Seller, for 2003, (ii) the ten (10)
largest suppliers of Seller with respect to the Business determined on the basis
of cost of items purchased or licensed during the three (3) months ended on the
Closing Date, showing the approximate total purchases from such supplier during
the fiscal year ended 2003 and the three (3) months ended on the Closing Date,
and (iii) all sole-source suppliers of any product or service in any respect.
Seller has received no written notice that, and Seller has no Knowledge that,
any supplier of key components or Inventory utilized in producing the Products
and Services of the Business plans to cease providing such components or
Inventory or to materially reduce the volume of such components or Inventory
provided.
(c) Distributors. Section 4.22(c) of Seller's Disclosure Schedule
sets forth an accurate, complete and complete list, to the extent existing, of
(i) the ten (10) largest distributors of Seller with respect to the Business,
determined on the basis of revenues received by Seller, for 2003, (ii) the ten
(10) largest distributors of Seller with respect to the Business determined on
the basis of sales revenues with Seller during the three (3) months ended on the
Closing Date, and (iii) all exclusive distributors of Seller or any of its
Subsidiaries in any geographical area, product, service or other respect.
(d) Relationships. The Seller has not received any written notice
of, and Seller has no Knowledge of, facts or circumstances indicating that any
current customer, supplier or distributor of the Business, including in
connection with the consummation of the Transaction, (i) may cease dealing with
Seller, (ii) may otherwise materially reduce the volume of business transacted
by such Person with Seller, (iii) is otherwise materially dissatisfied with the
service Seller provides such Person or otherwise with the relationship with
Seller, or (iv) is threatened with bankruptcy or insolvency.
(e) Rights. Seller has not granted material rights to develop,
produce, assemble, license, sublicense, market, or distribute any of Seller's
Products and Services with respect to the Business to any other Person, nor is
Seller bound by any Contract that affects Seller's exclusive right to (A)
develop, manufacture, or assemble or (B) except for the reseller agreements set
forth on Section 4.15(c) of Seller's Disclosure Schedule, distribute, market or
sell, such Products and Services.
4.23 Conduct of Business.
(a) Restrictive Covenants. There is no Contract, Order or Legal
Requirement binding upon or applicable to Seller which has or would reasonably
be expected to have the effect of (i) prohibiting or materially impairing any
business practice material to Seller with respect to the Business, (ii)
prohibiting or materially impairing any acquisition of property by Seller with
respect to the Business, or (iii) restricting or prohibiting, through a
non-competition or similar obligation or otherwise, the Seller from conducting
business or competing in any line of business with any Person or in any
geographic area.
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(b) Competing Business. Neither Seller nor any officer, director (or
any family member thereof) or controlled Affiliate of Seller directly or
indirectly holds any interest in (excepting not more than five-percent (5%)
stockholdings for investment purposes in securities of publicly held and traded
companies), or is, or is an officer, director, employee or consultant of, or
otherwise receives remuneration from, any Person that is, or is engaged in
business as, a competitor, lessor, lessee, customer or supplier of Seller or is
party to any Contract with the Seller, in each case with respect to the
Business.
4.24 Transactions with Affiliates. No Affiliate of Seller (i) has any
direct interest in any Acquired Asset or the Business; (ii) has any Claim or
right against Seller with respect to the Business, and no event has occurred,
and no condition or circumstance exists, that might (with or without notice or
lapse of time) directly or indirectly give rise to or serve as a basis for any
Claim or right in favor of any such Person against Seller with respect to the
Business; (iii) is a party to any Material Contract or has had any direct
interest in any Material Contract; or (iv) has received from or furnished to
Seller any material goods or services (with or without consideration) with
respect to the Business.
4.25 Export Controls Antiboycott Laws. Seller has at all times been in
compliance with all Legal Requirements relating to export controls, trade
embargoes and similar matters in connection with the Business. To Seller's
Knowledge, no product sold or service provided by Seller during the last five
(5) years has been, directly or indirectly, sold to or performed on behalf of
Cuba, Iraq, Iran, Libya or North Korea. Seller has not violated the antiboycott
prohibitions contained in 50 U.S.C. ss. 2401 et seq. or taken any action that
can be penalized under similar federal law.
4.26 Foreign Corrupt Practices Act. Seller, and to Seller's Knowledge any
Persons acting on its behalf, has not in connection with the Business and in
order to obtain or retain business, directly or indirectly offered, paid or
promised to pay, or authorized the payment of, any money or other thing of value
(including any fee, gift, sample, travel expense or entertainment with a value
in excess of one hundred dollars ($100.00) in the aggregate to any one
individual in any year) or any commission payment to (i) any person who is an
official, officer, agent, employee or representative of any Governmental
Authority or of any existing or prospective customer (whether government-owned
or nongovernment-owned), (ii) any political party or official thereof, (iii) any
candidate for political office or political party office, or (iv) any other
Person while knowing or having reason to believe that all or any portion of such
money or thing of value would be offered, given, or promised, directly or
indirectly, to any such official, officer, agent, employee, representative,
political party, political party official, candidate, individual, or any entity
affiliated with such customer, political party or official or political office.
4.27 Bulk Sales. There are no "bulk sales" Legal Requirements applicable
to the Transaction.
38
4.28 Brokers. Except for its arrangement with Wells Fargo Securities and
the fees and expenses due to Wells Fargo Securities by Seller, Seller has not
retained any broker or finder or incurred any liability or obligation for any
brokerage fees, commissions or finder's fees with respect to this Agreement or
the Transaction.
4.29 Solvency. Seller is not entering into the Transaction with the intent
to hinder, delay or defraud any Person to which it is, or may become, indebted.
Seller's assets, at a fair valuation, exceed its Liabilities, and Seller is
able, and will continue to be able after the Closing of the Transaction, to meet
its debts and other obligations as they mature and will not become insolvent as
a result of the Transaction.
4.30 Opinion of Seller's Financial Advisor. Seller has received the
opinion of Wells Fargo Securities, dated as of a date reasonably proximate to
the Effective Date, to the effect that the Transaction is fair, from a financial
point of view, to Seller, a copy of which opinion has been made available to
Purchasers.
4.31 Securities and Exchange Commission Filings. Purchasers have been
furnished with or have had public access to accurate and complete copies of the
filings that Seller has made with the SEC since the filing of Seller's most
recent annual report on Form 10-K (including any amendments thereto and
documents filed as attachments thereto), each annual report on Form 10-K that
Seller has filed with the SEC since January 1, 1999, and all filings, reports
and documents, including all amendments and supplements thereto, required to be
filed by Seller pursuant to Section 13 of the Exchange Act since the filing of
the most recent annual report on Form 10-K and Seller's most recent annual
report to its stockholders. No such filings have been made with the SEC by
Seller between February 15, 2004 and the Effective Date. The filings and reports
(and all documents filed as attachments thereto) described in this Section 4.31
do not contain any material false statements relating to the Business or any
misstatements of any material fact relating to the Business and do not omit to
state any fact necessary to make the statements relating to the Business set
forth therein not misleading in any material respect.
4.32 Seller Common Stock. Any Seller Common Stock to be issued to
Purchasers in accordance with Section 10.4 will be, when issued, duly
authorized, validly issued, fully paid, and non-assessable, and will not have
been issued in violation of any pre-emptive rights of stockholders or other
Persons or of any applicable securities laws or other Legal Requirements,
Charter Documents of Seller or any Contract to which Seller is a party. Seller
has a sufficient number of shares of duly authorized and unissued (and
unreserved for issuance) shares of Seller Common Stock to comply with its
obligations pursuant to Section 10.4. The Seller Common Stock is registered for
trading through the facilities of the Nasdaq Market, and Seller is in compliance
with all of the material requirements of the Nasdaq Market in connection with
the maintenance of such registration of the Seller Common Stock.
4.33 Full Disclosure. Neither this Agreement nor any of the other
Transaction Agreements, nor any certificate or document required to be furnished
by or on behalf of Seller in connection herewith or therewith, contains or will
contain as of the Closing Date any materially untrue statement of fact relating
to the Business.
4.34 No Other Representations. Except for the representations and
warranties set forth herein and in the other Transaction Agreements, Seller is
making no other representations and warranties, express or implied.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASERs
Purchasers hereby jointly and severally represent and warrant as of the
date hereof and as of the Closing Date to Seller as follows:
5.1 Organization and Good Standing. Each Purchaser is duly organized,
validly existing and in good standing (or, in the case of Patent Purchaser, has
equivalent status) under the laws of its jurisdiction of organization.
5.2 Authority; Binding Nature of Agreements. Each Purchaser has all
requisite corporate power and authority to execute and deliver this Agreement
and all other Transaction Agreements to which it is a party and to carry out the
provisions of this Agreement and such other Transaction Agreements. The
execution, delivery and performance by each Purchaser of this Agreement and the
other applicable Transaction Agreements have been, or will be prior to the
execution and delivery of such agreements, as the case may be, approved by all
requisite corporate action on the part of such Purchaser. This Agreement and the
other Transaction Agreements to which each Purchaser is a party have been, or
will be at the Closing, as the case may be, duly executed and delivered by such
Purchaser. This Agreement and the other Transaction Agreements to which each
Purchaser is a party constitute, or upon execution and delivery will constitute
(assuming such agreements constitute legal, valid and binding obligations of
Seller), the legal, valid and binding obligations of such Purchaser, enforceable
against such Purchaser in accordance with their terms.
5.3 No Conflicts; Required Consents.
(a) Non-Contravention. The execution, delivery and performance of
this Agreement and the applicable Transaction Agreements to which each Purchaser
is a party, the performance of such agreements by such Purchaser, and the
consummation of the Transaction by such Purchaser do not and will not (with or
without notice or lapse of time):
(i) contravene, conflict with, violate or result in any breach
of or default under the certificate of incorporation, bylaws or any other
applicable Charter Documents of such Purchaser;
(ii) require such Purchaser to obtain any Consent from, or to
make or deliver any Consent to, any Governmental Authority (except with respect
to any Governmental Approvals held by Seller or otherwise applicable to the
Business as conducted by Seller);
(iii) violate, contravene or conflict with any Legal
Requirement, Governmental Approvals held by Purchasers or necessary to for
Purchasers to enter into this Agreement and the other Transaction Agreement and
to perform their obligations hereunder or thereunder, or Order or otherwise give
any Governmental Authority or other Person the right to challenge the
Transaction (except with respect to any Legal Requirements, Governmental
Approvals or Orders applicable to Seller or otherwise related to the Business);
or
(iv) create a material adverse effect on the ability of such
Purchaser to enter into and perform its obligations under this Agreement and the
Transaction Agreements to which it is a party.
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(b) Proceedings. No Purchaser is engaged in, nor is a party to, any
Proceeding, or, to the Knowledge of any Purchaser, is threatened with any
Proceeding or Claim, which seeks to restrain, materially modify or invalidate
the Transaction.
5.4 Brokers. No Purchaser has retained any broker or finder or incurred
any liability or obligation for any brokerage fees, commissions or finder's fees
with respect to this Agreement or the Transaction.
5.5 Full Disclosure. Neither this Agreement nor any of the other
Transaction Agreements, nor any certificate or document furnished or to be
furnished by or on behalf of any Purchaser in connection therewith, contains or
will contain as of the Closing Date any materially untrue statement of fact.
5.6 Financial Capacity. Lead Purchaser has sufficient funds available to
consummate the transactions described herein and to pay the amounts due to
Seller hereunder, at the times provided. Lead Purchaser has provided financial
statements as of December 31, 2003 to Seller prior to the Effective Date.
ARTICLE 6
PRE-CLOSING COVENANTS
6.1 Seller's Conduct of the Business Prior to Closing. From the Effective
Date until the Closing, Seller shall, and shall cause its officers, directors,
employees, consultants and advisors to:
(i) Conduct the Business in the Ordinary Course of Business;
(ii) Pay all of its Liabilities and Taxes with respect to the
Business when due;
(iii) Maintain insurance coverage in amounts adequate to cover the
reasonably anticipated risks of Seller in connection with the Business
consistent with past practice; and
(iv) Use all commercially reasonable efforts to (A) preserve intact
the Acquired Assets, the Assumed Liabilities and all rights of the Business and
to retain the Transferred Employees and (B) otherwise maintain good
relationships with employees, licensors, licensees, suppliers, contractors,
distributors, customers, and others having relations with the Business.
6.2 Interim Operations. From the Effective Date until the Closing, Seller
shall not, and shall cause its officers, directors, employees, consultants and
advisors not to (in each case without the written consent of Purchasers, which
consent shall not be unreasonably withheld), (i) take any action that would
constitute a breach of the representations and warranties of Seller set forth in
Section 4.21 (Subsequent Operations of Business) or otherwise herein or in
another Transaction Agreement, regardless of whether such action is or would be
disclosed on Seller's Disclosure Schedule (the operation of this section shall
in no way impair or affect the representations and warranties in Section 4.21 or
elsewhere hereunder), (ii) take any other action material to the Business other
than in the Ordinary Course of Business, (iii) except as may be permitted
pursuant to Section 6.3 hereof, take any action that would prevent it from
performing or cause it not to perform its covenants hereunder or under the other
Transaction Agreements or (iv) enter into any Contract to or otherwise agree to,
in writing or otherwise, take any of the actions described above. Seller shall
use all commercially reasonable efforts, to the extent reasonably requested by
Purchasers, to educate, train, cooperate with and otherwise assist Purchasers
and their designated employees and representatives in understanding all aspects
of the Business (including relationships with third parties) and preparing for
the transition of the Business to Purchasers' ownership following Closing.
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6.3 Acquisition Proposals. From the Effective Date until Closing, Seller
agrees that neither it nor any of its Subsidiaries nor any of the officers and
directors of it or its Subsidiaries shall, and that it shall direct and cause
its and its Subsidiaries' employees, agents and representatives (including any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries) not to, directly or indirectly, initiate or solicit or take any
action designed to encourage or facilitate (including by way of furnishing
information) any inquiries or the making of any proposal or offer with respect
to (i) a sale or issuance of stock involving a change or acquisition of control
of Seller, a merger, reorganization, share exchange, consolidation, business
combination, recapitalization, liquidation, dissolution, or similar transaction
involving Seller or any of its Subsidiaries, or (ii) any purchase or sale (or
exclusive license) of all or any significant portion of the Business or the
Acquired Assets (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal"). Seller further agrees that, except as may be permitted
pursuant to the following sentence, neither it nor any of its Subsidiaries nor
any of the officers and directors of it or its Subsidiaries shall, and that it
shall direct and cause its and its Subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, directly or indirectly, have
any discussion with or provide any Confidential Information or data to any
Person relating to an Acquisition Proposal, or engage in any negotiations
concerning an Acquisition Proposal. Notwithstanding the foregoing, Seller or its
board of directors or any committee thereof shall be permitted (A) to the extent
applicable, to comply with Rule 14e-2(a) promulgated under the Exchange Act with
regard to an Acquisition Proposal, and (B) to engage in any discussions or
negotiations with, or provide any information to, any Person in response to an
unsolicited bona fide written Acquisition Proposal by any such Person, if and
only to the extent that, in the case of the actions referred to in clause (B),
(i) the board of directors or any committee thereof of Seller concludes in good
faith, after having received the advice of counsel, that the provision of such
information or the engaging in such negotiations or discussions is obligated by
the directors' fiduciary duties in accordance with Florida law, (ii) the board
of directors of Seller determines in good faith that the Acquisition Proposal in
question constitutes a Superior Proposal (as defined below), (iii) prior to
providing any information or data to any Person in connection with an
Acquisition Proposal by any such Person, the board of directors or any board
committee thereof of Seller receives from such Person an executed
confidentiality agreement containing customary terms and provisions and (iv)
prior to providing any information or data to any Person or entering into
discussions or negotiations with any Person, the board of directors or any
committee thereof notifies Purchasers promptly of such inquiries, proposals or
offers received by, any such information requested from, or any such discussions
or negotiations sought to be initiated or continued with, any of its
representatives indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any proposals or offers.
"Superior Proposal" means any bona fide written proposal, not solicited,
initiated or encouraged in violation of this Section 6.3, made by a third Person
with respect to an Acquisition Proposal, for consideration consisting of cash,
if and only if the board of directors of Seller reasonably determines (after
consultation with its financial advisor and outside counsel) (x) that the
proposed transaction would be more favorable from a financial point of view to
Seller or its stockholders than the Transaction, taking into account at the time
of determination any changes to the terms of this Agreement that as of that time
had been proposed by Purchasers, and (y) that the Person making such Superior
Proposal is capable of consummating such Acquisition Proposal (based upon, among
other things, the availability of financing and the degree of certainty of
obtaining financing, the expectation of obtaining required regulatory approvals
and the identity and background of such Person). Seller agrees that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal or similar transaction or arrangement and will not
waive any rights under any confidentiality agreements entered into with such
parties. Seller agrees that it will take the necessary steps to promptly inform
the individuals and Entities referred to in the first sentence of this Section
6.3 of their obligations under this Section 6.3.
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6.4 Certain Notifications. From the Effective Date until Closing, Seller
shall promptly notify Purchasers in writing regarding any:
(i) action taken by Seller with respect to the Business not in the
Ordinary Course of Business and any circumstance or event that could reasonably
be expected to have a Material Adverse Effect;
(ii) fact, circumstance, event, or action by Seller (A) which, if
known on the date of this Agreement, would have been required to be disclosed in
or pursuant to this Agreement or (B) the existence, occurrence, or taking of
which would result in any of the representations and warranties of Seller
contained in this Agreement or in any Transaction Agreement not being true and
correct when made or at Closing;
(iii) breach of any covenant or obligation of Seller hereunder; or
(iv) circumstance or event that results in, or could reasonably be
expected to result in, the failure of Seller to timely satisfy any of the
closing conditions in Article 9 of this Agreement.
6.5 Updating the Seller's Disclosure Schedule. From the Effective Date
until the Closing, if any event, condition, fact or circumstance that is
required to be disclosed pursuant to Section 6.4 would require a change to the
Seller's Disclosure Schedule if the Seller's Disclosure Schedule were dated as
of the date of the occurrence, existence or discovery of such event, condition,
fact or circumstance, then Seller shall promptly deliver to Purchasers an update
to the Seller's Disclosure Schedule specifying such change and shall use all
commercially reasonable efforts to remedy same, as applicable; provided,
however, that no such update (nor any information provided to Purchasers by
Seller pursuant to Section 6.4) shall be deemed to supplement or amend the
Seller's Disclosure Schedule for the purpose of (i) determining the accuracy of
any of the representations and warranties made by Seller in this Agreement or
(ii) determining whether any of the closing conditions set forth in Article 9
have been satisfied.
6.6 Access to Information. From the Effective Date until the Closing,
Seller shall (i) provide Purchasers and their Representatives with prompt and
reasonable access during regular business hours, and in a manner so as not to
interfere with the normal business operations of Seller, to all premises,
properties, key personnel, Persons having business relationships with Seller
(including suppliers, licensees, customers and distributors), books, records
(including Tax records), contracts, and documents of or pertaining to the
Business; (ii) furnish Purchasers with all financial, operating and other data
and information related to the Business (including copies thereof), as
Purchasers may reasonably request; and (iii) otherwise cooperate and assist, to
the extent reasonably requested by Purchasers, with Purchasers' investigation of
the Business, the Acquired Assets and the Assumed Liabilities. No information or
knowledge obtained in any investigation pursuant to this Section 6.6 shall
affect or be deemed to modify any representation or warranty contained herein or
the conditions to the obligations of the parties to close the Transaction in
Article 9.
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6.7 All Commercially Reasonable Efforts. From the Effective Date until the
earlier of the Closing or termination of this Agreement pursuant to Article 10,
each of Seller and Purchasers shall use all commercially reasonable efforts to
cause to be fulfilled and satisfied all of the other party's conditions to
Closing set forth in Article 9.
6.8 Consents. As promptly as possible after the Effective Date, Seller
shall use all commercially reasonable efforts to obtain all Assignment Consents
and any other Consents necessary or appropriate to consummate the Transaction on
the terms and conditions hereof with respect to Seller and the Business, and
Purchasers shall use all commercially reasonable efforts to obtain any Consents
and make and deliver all filings and notices to consummate the transaction on
the terms and conditions hereof that apply to Purchasers (for the avoidance of
doubt, not including any Assignment Consent or other Consent necessary to
transfer the Business or which Seller is otherwise obligated to obtain
hereunder). Purchasers shall not be required to, as a condition to Seller's
obtaining any Consent, (i) agree to any material changes in, or the imposition
of any material condition to the transfer to the applicable Purchaser of, any
Material Contract, Non-Assignable Asset, Governmental Approval or other Acquired
Asset, (ii) dispose of or make any changes to the Business, or (iii) expend any
funds or incur any burden.
6.9 Further Assurances. From the Effective Date to the Closing, the
parties hereto shall execute such documents and other papers and take such
further actions as may be reasonably requested by Seller, on one hand, and
Purchasers, on the other hand, to facilitate the Closing as set forth herein.
6.10 Interim Pro Forma Financial Information. Within thirty (30) days
after each monthly anniversary of the date of the Pro Forma Balance Sheet
(unless the parties agree in writing on other date(s)) (each such anniversary
date or date agreed by the parties, an "Interim Reporting Date") that occurs
between the Effective Date and the Closing Date, Seller shall provide to
Purchasers, certified by an executive officer of Seller, an updated version of
(i) the Pro Forma Balance Sheet as at such Interim Reporting Date and (ii) the
Pro Forma Income Statement as of and for the period beginning on the date
following the date of the Pro Forma Balance Sheet or the last Interim Reporting
Date, as the case may be, and ending on such Interim Reporting Date.
Collectively all information provided above pursuant to this Section 6.10 shall
be the "Interim Pro Forma Financial Information." Seller shall also use
commercially reasonable efforts to provide the select financial information set
forth on Schedule 6.10 to Purchasers within five (5) Business Days after the end
of each month that ends between the Effective Date and the Closing Date, it
being understood that Seller shall prepare such information in good faith but
shall make no other representations and warranties with respect to such
financial information.
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6.11 Additional Interim Financial Information. From the Effective Date to
the Closing, Seller shall provide Purchasers with (i) any Publicly Disclosed
Periodic Financial Information within two (2) Business Days after its public
disclosure and (ii) Seller's monthly internal management report of financial
information relating to the Business, at the same time such report is provided
to management of Seller. The financial information provided pursuant to Section
6.11(ii) shall be the "Other Interim Financial Information."
6.12 Third-Party Contacts. From the Effective Date to the Closing, without
Seller's consent, not to be unreasonably withheld or delayed, Purchasers shall
not knowingly contact any material customer, supplier or other third party with
a material business relationship with Seller in connection with the Business
with respect to the Transaction.
6.13 Shareholder Approval.
(a) Proxy Statement. As soon as reasonably practicable following the
Effective Date, Seller shall file a proxy statement for the Shareholders Meeting
(the "Proxy Statement") with the SEC under the Securities and Exchange Act of
1934, as amended (the "Exchange Act"), and shall use all commercially reasonable
efforts to have the Proxy Statement cleared by the SEC as soon as possible.
Seller shall cause the Proxy Statement to be mailed to its stockholders as
promptly as practicable after SEC clearance. Purchasers and the Seller shall
cooperate with each other in the preparation of the Proxy Statement, and Seller
shall notify Purchasers of the receipt of any comments of the SEC with respect
to the Proxy Statement and of any requests by the SEC for any amendment or
supplement thereto or for additional information. Seller shall promptly provide
to Purchasers copies of all correspondence between the Seller or any
representative of the Seller and the SEC with respect to the Proxy Statement.
The Seller shall provide Purchasers and their counsel the opportunity to review
the Proxy Statement, including all amendments and supplements thereto, prior to
its being filed with the SEC and shall give Purchasers and their counsel the
opportunity to review all responses to requests for additional information and
replies to comments prior to their being filed with, or sent to, the SEC. Each
of the Seller, on one hand, and the Purchasers, on the other, agrees to use all
commercially reasonable efforts, after consultation with the other parties
hereto, to respond promptly to all such comments of and requests by the SEC.
Sellers shall cause the Proxy Statement and all required amendments and
supplements thereto to be mailed by Seller to the holders of shares entitled to
vote at the Shareholders Meeting at the earliest practicable time. Each of
Purchasers, on one hand, and Seller, on the other, shall furnish all information
concerning itself or themselves to the other as may be reasonably requested in
connection with any such action and the preparation, filing and distribution of
the Proxy Statement. Seller and Purchasers agree to correct any information
provided by them for use in the Proxy Statement which shall have become false or
misleading.
(b) Shareholders Meeting. Seller, acting through its board of
directors, shall, in accordance with applicable Legal Requirements and Seller's
Charter Documents, (i) duly call, give notice of, convene and hold a special or
annual meeting of its shareholders for the purpose of obtaining the Required
Seller Vote (the "Shareholders Meeting"), (ii) recommend approval and adoption
of this Agreement and the Transaction to the shareholders of Seller and include
in the Proxy Statement such recommendation, (iii) take all reasonable and lawful
action to solicit and obtain the Required Seller Vote, and (iv) not subsequently
withdraw or modify in any manner adverse to the Purchasers, the unanimous
recommendation of the board of directors of Seller that the shareholders of
Seller approve and adopt this Agreement and the Transaction.
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6.14 Reseller Certificate. Prior to Closing, Lead Purchaser shall provide
Seller with a copy of a valid resale certificate issued to Lead Purchaser and
recognized by the State of Florida. To the extent that Lead Purchaser does not
have a valid resale certificate recognized by the State of Florida at Closing,
Lead Purchaser shall be responsible for the amount of any sales Tax pertaining
to the transfer of the Inventory included in Non-Patent Assets that would have
been exempt from Florida sales Tax had Lead Purchaser possessed such a
certificate.
6.15 Resellers. From the Effective Date to the Closing, Seller shall use
all commercially reasonable efforts to (i) introduce Lead Purchaser to the
resellers of the Business, (ii) assist Lead Purchaser in reviewing performance
and other matters with respect to each such reseller and provide such
information as is reasonably requested by Lead Purchaser, (iii) assist Lead
Purchaser in extending offers to any and all of such resellers as Lead Purchaser
may determine to enter into reseller or similar agreements with Lead Purchaser
on terms and conditions acceptable to Lead Purchaser and (iv) take any such
related action as reasonably requested by Lead Purchaser.
ARTICLE 7
ADDITIONAL COVENANTS
7.1 Covenant Not to Compete.
(a) General. For a period of five (5) years following the Closing,
Seller shall not (and shall cause its controlled Affiliates not to), directly or
indirectly, anywhere in the world: (i) engage or assist in any Prohibited
Activity (as defined below), (ii) own or purchase any more than a 5% interest in
any Person conducting a Prohibited Activity or (iii) manage, operate, control,
finance, or act as an officer, director or employee of any Person that engages
in, any Prohibited Activity. "Prohibited Activity" means any of the following:
(A) the design, development, production, manufacture, marketing, sales, service
or support of any hardware, software or integrated systems Products and Services
for (y) live news or other broadcast or video program production (including
automated program production, television programming and any video programming
broadcasted over the Internet) or (z) automated or other video camera control;
(B) the design, development, production, manufacture, marketing, sales, service
or support of any consumer or commercial video camera (or component thereof
other than auxiliary add-on components that are not themselves items covered
under (A) above or (C) below); (C) any material Product and Service of the
Business not described above, or such other operation or aspect of the Business
as conducted at or prior to Closing, or as Proposed to be Conducted by Seller,
that is not described above; (D) any Product and Service that incorporates a
Product and Service that is, or that is similar to, a Product and Service
covered under items (A), (B) or (C) above; and (E) any training, support,
service or other activity related to any of the foregoing.
(b) Covenants. The covenants contained in subsection (a) above shall
be construed as a series of identical (except for geographic coverage) separate
covenants, one for each city, county, state and country throughout the world.
If, in any Proceeding, a court refuses to enforce any of such separate covenants
(or any part thereof), then such unenforceable covenant (or such part) shall be
eliminated from this Agreement to the extent necessary to permit the remaining
separate covenants (or portions thereof) to be enforced. In the event that the
provisions of subsection (a) are deemed to exceed the time, geographic or scope
limitations permitted by applicable Legal Requirements, then such provisions
shall be reformed to the maximum time, geographic or scope limitations, as the
case may be, permitted by applicable Legal Requirements.
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(c) Acknowledgements. Seller acknowledges that (i) the goodwill
associated with the Acquired Assets and customer relationships prior to the
Transaction is an integral component of the value of the Acquired Assets and the
Business to Purchasers and is reflected in the consideration for the Acquired
Assets and the Business paid by Purchasers and (ii) Seller's agreement as set
forth in this Section 7.1 is necessary to preserve the value of the Business,
including its goodwill and customer relationships, for Purchasers following the
Closing. Seller also acknowledges and agrees that (A) that the limitations of
time, geographic scope and scope of activity agreed to in this Section 7.1 are
reasonable because, among other things, (y) Seller is engaged in a highly
competitive industry and (z) Seller has unique access to the trade secrets,
know-how and information related to the Business and (B) that Purchasers shall
be entitled to specific performance and other injunctive relief for any breach
by Seller of this Section 7.1.
7.2 Non-Solicitation. After the Closing, Seller shall not directly or
indirectly, and shall cause its controlled Affiliates not to, either for
themselves or for any other Person, for a period of five (5) years following the
Closing, (i) induce or attempt to induce any Transferred Employee to leave the
employ of Purchasers or their respective successors, assigns and Affiliates or
(ii) in any way knowingly interfere with the relationship between any Purchaser
and its Affiliates and any employee of such Person; provided, however, that
general solicitations of employment published in a journal, newspaper, web site
or other publication of general circulation shall not be deemed a violation of
the foregoing provisions; provided, further, that nothing herein shall prohibit
Seller or its Affiliates from employing any employee of Purchasers or their
Affiliates at any time where there has not been a violation of this Section 7.2.
7.3 Confidentiality.
(a) Confidential Information of the Business. Seller acknowledges
that, following Closing, all Confidential Information related to the Business
(except as it may pertain to the Excluded Assets or the Excluded Liabilities)
shall be owned by the applicable Purchaser by virtue of the transfer of the
Acquired Assets set forth herein and, following Closing, Seller shall treat all
such Confidential Information as the Confidential Information of Purchasers.
Following Closing Seller shall (i) not disclose any such Confidential
Information to any third party, other than to its employees, Affiliates, agents,
consultants, accountants, counsel and other representatives who have a clearly
demonstrable need to know such information and who agree to comply with
disclosure obligations comparable to and no less restrictive than those provided
herein, (ii) not use any such Confidential Information for any purpose, and
(iii) not knowingly retain any document, database or other media embodying any
such Confidential Information. The obligations in this Section 7.3(a) shall not
apply with respect to any Confidential Information to the extent such
Confidential Information (x) is or becomes publicly known through no wrongful
act or omission of Seller or (y) becomes rightfully known to Seller without
confidential or proprietary restriction from a source other than Purchasers that
does not owe a duty of confidentiality with respect to such Confidential
Information.
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(b) Other Confidential Information. Subject to Section 7.3(a),
without the prior written consent of Seller, in the case of Purchasers, and
Purchasers, in the case of Seller, (i) Seller shall not disclose or use any
Confidential Information of Purchasers, and (ii) Purchasers shall not disclose
or use the Confidential Information of Seller, in each case except as reasonably
required in connection with this Agreement and the Transaction. Each of Seller,
on one hand, and Purchasers, on the other, shall use no less than reasonable
care in protecting any such Confidential Information received. Information shall
not be deemed Confidential Information under this Section 7.3(b) if it: (w) is
or becomes publicly known through no wrongful act or omission of the receiving
party; (x) was rightfully known by the recipient before receipt from the
disclosing party; (y) becomes rightfully known to the receiving party without
confidential or proprietary restriction from a source other than the disclosing
party that does not owe a duty of confidentiality to the disclosing party with
respect to such Confidential Information; or (z) is independently developed by
the receiving party without the use of or reference to the Confidential
Information of the disclosing party. This Section 7.3(b) shall not apply to the
Confidential Information of the Business covered by Section 7.3(a) above.
(c) Remedies. Notwithstanding anything to the contrary herein,
Purchasers and Seller shall be entitled to seek equitable relief to protect
their interest in any of their Confidential Information, including injunctive
relief.
(d) Required Disclosure. Notwithstanding subsections (a) and (b)
above, in the event a party is required to disclose the Confidential Information
of another party (in such event, such party is a "Nondisclosing Party" and the
party required to disclose is the "Disclosing Party") pursuant to Legal
Requirements or an Order, and would otherwise be prohibited from doing so under
this Section 7.3, the Disclosing Party shall: (i) promptly notify the
Nondisclosing Party of the existence, terms and circumstances surrounding such
requirement; (ii) consult with the Nondisclosing Party on the advisability of
taking legally available steps to resist or narrow such request; and (iii) if
disclosure of such Confidential Information is required, furnish only that
portion of the Confidential Information which the Disclosing Party is legally
compelled to disclose and advise the Nondisclosing Party reasonably in advance
of such disclosure so that the Nondisclosing Party may seek an appropriate
protective order or other reliable assurance that confidential treatment will be
accorded such Confidential Information. The Disclosing Party shall not oppose
actions by the Nondisclosing Party to obtain an appropriate protective order or
other reliable assurance that confidential treatment will be accorded such
Confidential Information.
(e) Residual Information. Notwithstanding anything herein to the
contrary, if this Agreement terminates without a Closing, no party shall be
restricted from, or have any liability for, inadvertently using the Residual
Information of another party. "Residual Information" shall mean any Confidential
Information or other information that is retained in the unaided memory of a
person after access to the tangible embodiment of the other party's Confidential
Information. For purposes of this Section 7.3(e), a person's memory is unaided
if such person has not intentionally memorized the Confidential Information for
the purpose of retaining and subsequently using or disclosing it.
7.4 Acquired Intellectual Property.
(a) Use. Seller agrees that, from and after the Closing, it shall
not, and it shall cause its Representatives and employees not to, use any
Acquired Intellectual Property Rights. If Seller or any assignee of Seller owns
or has any right or interest in any Acquired Intellectual Property Rights that
cannot be, or for any reason is not, assigned to the applicable Purchaser at the
Closing, Seller shall grant or cause to be granted to such Purchaser, at the
Closing, a worldwide, royalty-free, fully paid-up, perpetual, irrevocable,
transferable, sublicensable, and exclusive license to exercise all rights in and
to such Acquired Intellectual Property Rights.
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(b) Enforcement. If any Purchaser is unable to enforce its
Intellectual Property Rights acquired hereunder or under another Transaction
Agreement against a third party as a result of any Legal Requirement that
prohibits enforcement of such rights by a transferee of such rights, Seller
agrees to assign to such Purchaser such rights as may be required by such
Purchaser to enforce its Intellectual Property Rights in its own name. If such
assignment still does not permit such Purchaser to enforce its Intellectual
Property Rights against the third party, Seller agrees, to the extent requested
by such Purchaser, to initiate and maintain proceedings against such third party
in Seller's name; provided, however, that such Purchaser shall be entitled to
participate in and control such proceedings, and provided, further, that such
Purchaser shall be responsible for the reasonable costs and expenses of Seller
related to such proceedings to the extent such enforcement inability is not
related to any breach of representation, warranty or obligation of Seller
hereunder or under another Transaction Agreement.
7.5 Further Assurances. After the Closing, Seller shall: (i) upon the
request of Purchasers, execute and deliver any and all further materials,
documents and instruments of conveyance, transfer or assignment as may
reasonably be requested by Purchasers to effect, record or verify the transfer
to, and vesting in, the applicable Purchaser of Seller's right, title and
interest in and to the Acquired Assets, free and clear of all Encumbrances, in
accordance with the terms of this Agreement and the Transaction Agreements; (ii)
upon the request of Purchasers, cooperate with Purchasers, at Purchasers'
expense and direction, to enforce the terms of any Material Contracts including
terms relating to confidentiality and Intellectual Property Rights (provided
Purchasers shall not be responsible for any expense for which Seller is
obligated to indemnify Purchasers); (iii) upon the reasonable request of
Purchasers and at Purchasers' expense, use all commercially reasonable efforts
to cooperate with Purchasers in their efforts to continue and maintain for the
benefit of Purchasers those business relationships of Seller existing prior to
the Closing and relating to the Business to be operated by Purchasers after the
Closing; (iv) satisfy any applicable Excluded Liabilities in a manner that is
not detrimental to any of such relationships; (v) refer to Purchasers all
inquiries relating to the Business; (vi) promptly deliver to Purchasers (A) any
mail, packages and other communications addressed to Seller relating to the
Business and (B) any property that Seller receives and that properly belongs to
Purchasers as an Acquired Asset. Neither Seller nor any of its officers,
employees or agents shall take any action that would tend to diminish the value
of the Acquired Assets after the Closing or that would interfere with the
business of Purchasers to be engaged in after the Closing, including disparaging
the name or business of Purchasers; (vii) upon the reasonable request of
Purchasers, cooperate with Purchasers in obtaining for Lead Purchaser or its
designated Affiliates the FCC or other Governmental Approvals necessary or
appropriate for Lead Purchaser to manufacture, market and sell the Products and
Services of the Business (including with respect to the preparation and
submission of the documentation necessary for Lead Purchaser or a designated
Affiliate to obtain the FCC certifications, authorizations, identifier numbers,
and other Government Approvals). In the event that any retesting of the Products
and Services of the Business is required in order for Lead Purchaser or any
designated Affiliate to obtain any FCC-related Governmental Approvals for those
Products and Services held by Seller prior to Closing to Lead Purchaser, Lead
Purchaser shall notify Seller in writing, and at Seller's written request
provided to Lead Purchaser within five (5) Business Days of such notification,
attempt to utilize the services of the same certification and testing service
providers that Seller utilized prior to Closing with respect to the applicable
Products and Services; provided (i) Seller shall pay the testing, certification
and related costs of such service providers, (ii) such providers provide the
services without delay, and on competitive terms and conditions, and (iii)
Purchasers do not reasonably determine that utilizing such providers will
materially hinder or delay the required testing, authorization, certification
and related matters. For the avoidance of doubt, the preceding sentence shall
not restrict Lead Purchaser in otherwise having the Products and Services of the
Business tested, authorized, certified or similarly treated, nor limit Seller's
representations, warranties and covenants hereunder.
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7.6 Records and Documents. For a period of five (5) years after the
Closing, at Purchasers' request, Seller shall provide Purchasers and their
Representatives and employees with access to and the right to make copies of any
records and documents related to the Business, possession of which is retained
by Seller, as may be necessary or useful in connection with Purchasers' conduct
of the Business after the Closing. If during such period or thereafter Seller
elects to dispose of such records and documents, Seller shall give Purchasers
sixty (60) days' prior written notice, during which period Purchasers shall have
the right to take such records and documents without further consideration.
7.7 Insurance and Warranty Claims. For a period of one (1) year after the
Closing, Seller shall maintain in full force and effect product liability
insurance on all of Seller's Products and Services provided prior to the Closing
Date with respect to the Business, in a form and with such limits as maintained
by Seller in the Ordinary Course of Business prior to Closing. Such policy(ies)
shall name Lead Purchaser as an additional named insured and provide that it may
not be cancelled without prior notice to Lead Purchaser. Seller shall provide,
at Purchasers' request, reasonably satisfactory evidence that such insurance
policy continues to be in effect and that all premiums have been paid.
7.8 Customer Retention. To the extent reasonably requested by Purchasers,
Seller shall use all commercially reasonable efforts, for a period of six (6)
months following Closing and at Purchasers' expense (with respect to the
out-of-pocket expenses of Seller), to assist Purchasers in transitioning the
customer, supplier and other third-party relationships of the Business to Lead
Purchaser.
7.9 Public Announcements. From and including the Effective Date, Seller
and Purchasers shall cooperate in good faith to jointly prepare all press
releases and public announcements pertaining to this Agreement and the
Transaction (including the initial respective press releases of Seller and
Purchasers), and neither Seller nor its Affiliates, nor Purchasers nor their
Affiliates, shall issue or otherwise make any public announcement or
communication pertaining to this Agreement or the Transaction without the prior
consent of Purchasers (in the case of Seller and its Affiliates) or Seller (in
the case of any Purchasers and their Affiliates), except as required by Legal
Requirements or by the rules and regulations of, or pursuant to any agreement
with, any stock exchange. Each party shall not unreasonably withhold approval
from the others with respect to any such press release or public announcement.
If any party determines, with the advice of counsel, that it is required by any
Legal Requirement to make this Agreement, the other Transaction Agreements or
any terms hereof or thereof public or otherwise issue a press release or make a
similar public disclosure with respect thereto, it shall, at a reasonable time
before making any public disclosure, consult with the other party regarding such
disclosure, seek such confidential treatment for such terms or portions of this
Agreement or the other Transaction Agreements as may be reasonably requested by
the other party and disclose only such information as is legally compelled to be
disclosed. For the avoidance of doubt, the restrictions set forth in this
section shall not apply to communications by any party to customers, potential
customers and other third parties of the Business in connection with performance
of this Agreement and the Transaction Agreements and other communications that
are communications in the Ordinary Course of Business and are not generally made
to the public.
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7.10 Receivables Collection. Seller shall collect any Receivables related
to the Business and included in Excluded Assets in the Ordinary Course of
Business and will consult with Purchasers in advance prior to taking or
threatening any collection Proceeding with respect thereto. If Purchasers should
receive any payment of Receivables included in Excluded Assets, Purchasers shall
promptly notify Seller and remit the amount paid to Seller.
7.11 Enforcement of Confidentiality and Similar Agreements. Seller shall
use all commercially reasonable efforts to enforce, at Purchasers' request,
direction and expense, any Seller rights applicable to the Business under any
confidentiality, non-disclosure, invention assignment or similar Contracts that
are not Acquired Assets and that are between Seller and any current or former
employee or consultant of Seller or its Affiliates.
7.12 Removal and Delivery of Acquired Assets. Following Closing, Seller
shall, within ten (10) days of Closing (or, with respect to manufacturing
equipment necessary for Seller to perform its obligations pursuant to the
Transition Services Agreement, promptly following the time when such equipment
is no longer needed by Seller to so perform) and at Purchasers' reasonable
direction, (i) remove and package for shipment any Acquired Assets designated by
Purchaser and (ii) remove all data included in Acquired Records from all
retained information technology systems and provide such data to Purchasers in
an electronic or tangible medium and in a manner that is well organized and
easily readable. Damage to the Acquired Assets related to Seller's foregoing
obligations (including inadequate packaging) shall be the responsibility of
Seller. Purchasers shall be responsible for shipping any Acquired Assets removed
and packaged by Seller pursuant to this Section 7.12.
7.13 Covenant Not to Sue.
(a) Covenant Not to Sue. From and after the Closing, Seller agrees,
on behalf of itself and its Affiliates, that neither Seller nor any of its
Affiliates will assert, or assist in the assertion of, any claim or action
before any federal, state, local or foreign judicial, arbitration,
administrative, executive or other type of body or tribunal against Purchasers
or their Affiliates that is based in whole or in part on the infringement or
misappropriation (whether direct, contributory, induced or otherwise) of any
Intellectual Property Right in the Excluded Assets in connection with (i) the
making, having made, using, selling, offering to sell, leasing, offering for
lease, importing, deploying, distributing, or otherwise commercializing or
disposing of throughout the world, any Currently Commercially Available PVTV
Product and Service, Currently Commercially Available CameraMan Product and
Service or other Currently Commercially Available Product and Service marketed,
sold, serviced or supported by the Video Division, or any component thereof, or
(ii) otherwise conducting any aspect of the Business that was conducted at any
time prior to Closing or that is within the scope of the Business as Proposed to
be Conducted by Seller.
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(b) Application of Immunity. The grants of immunity set forth in
this Section 7.13: (i) are irrevocable; (ii) shall survive indefinitely; (iii)
shall inure to the benefit of direct and indirect distributors, resellers,
manufacturers, suppliers, customers and other users and (iv) with respect to
such distributors, resellers, manufacturers, suppliers, customers and other
users, include an immunity from suit based on claims of infringement or
misappropriation (whether direct, contributory, induced or otherwise) of
Intellectual Property Rights in the Excluded Assets in connection with any
Product and Service (or portion thereof) made, sold or otherwise disposed of or
provided by or for Purchasers or any of their Affiliates where such Product and
Service or portion thereof was a Currently Commercially Available PVTV Product
and Service, CameraMan Product or Service, or other Currently Commercially
Available Product or Service marketed, sold, serviced or supported by the Video
Division, or a component of any of the foregoing.
(c) Nature of Immunities. The immunities set forth above in this
Section 7.13 shall apply to and be binding on any assignees, licensees or other
transferees of Seller's Intellectual Property Rights.
(d) Currently Commercially Available Definition. In this Section
7.13, "Currently Commercially Available" means commercially available from the
Video Division as of or at any time prior to Closing.
7.14 Tax Audits and Investigations. For the avoidance of doubt, Seller
shall be responsible for any audits, investigations or other Proceedings related
to sales, use or other Taxes to the extent related to the pre-Closing period or
the Transaction, as well as the administration and payment of any sales, use or
other Taxes to the extent related to the pre-Closing period or the Transaction.
7.15 FFC Matters. Seller authorizes Lead Purchaser to manufacture, market,
lease, sell, and distribute the Products and Services of the Business as they
exist prior to or at Closing or as developed in the conduct of the Business
following Closing as Proposed to be Conducted by Seller (including existing
Inventory and Products and Services produced following Closing) under the FCC
identifiers (as defined under the FCC's rules and regulations) ("FCC IDs")
applicable to those Products as of Closing and Seller shall remain responsible
to the FCC for those Products and Services and take all related action
reasonably necessary with respect thereto. These obligations of Seller shall
terminate after a reasonable period of time during which Lead Purchaser shall
apply for and receive new FCC IDs for such Products and Services. Upon
Purchasers' receipt of new FCC IDs, Lead Purchaser shall discontinue its use of
the existing Seller FCC IDs with respect to newly manufactured Products and
Services, but may continue marketing, leasing, selling, and distributing
Products and Services of the Business that have already been manufactured and
labeled using the existing FCC IDs. Seller shall by Closing have obtained all
necessary FCC Governmental Approvals with respect to the Seller Product and
Service to which the disclosure on Section 4.17 of Seller's Disclosure Schedule
applies.
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ARTICLE 8
EMPLOYEES
8.1 Transferred Employees. Lead Purchaser may, but shall have no
obligation to, offer employment, to be effective as of the Closing Date and
contingent upon the Closing, to each employee of Seller (and the one independent
contractor of Seller) set forth on Schedule 8.1 (collectively, the "Transferred
Employees"); provided that Lead Purchaser shall extend offers of employment to
at least eighty percent (80%) of the Transferred Employees. Lead Purchaser may
elect to offer employment to each Transferred Employee on an individual basis.
The offers extended by Lead Purchaser shall include a salary (excluding bonuses)
no less than that set forth on Schedule 4.10(a)(i) for each applicable
Transferred Employee, benefits in the aggregate no less favorable than those
that are standard or generally made available to similarly situated existing
employees of Lead Purchaser (as reasonably determined by Lead Purchaser) and
with vacation and service credits in the aggregate no less favorable than those
Lead Purchaser is obligated to provide pursuant to Section 8.2(b). No other
Seller personnel will be transferred in connection with the Business. Seller
shall (at its own cost and expense and in compliance with all applicable Legal
Requirements) terminate the employment, to be effective as of the Closing Date,
of all Transferred Employees to whom Lead Purchaser extends an offer of
employment and who accept such offer. Seller shall use all commercially
reasonable efforts (i) to encourage the Transferred Employees to whom Lead
Purchaser extends an offer of employment to continue their employment with
Seller until Closing and thereupon to accept employment with Lead Purchaser,
(ii) to assist Lead Purchaser in extending offers of employment to such
Transferred Employees, (iii) to reasonably assist in transitioning such
Transferred Employees to employment with Lead Purchaser and (iv) to take any
action reasonably necessary with respect to any joint-employer of the
Transferred Employees to effectuate the employment by Lead Purchaser (and any
related provision of benefits by Lead Purchaser) of the Transferred Employees to
whom Lead Purchaser extends offers of employment and who accept such offers.
Seller shall not offer any financial or other incentives or take any other
action to discourage any Transferred Employee from accepting an offer of
employment from Lead Purchaser. For the avoidance of doubt, Patent Purchaser
shall not at Closing hire any Transferred Employee or other employee of Seller
in connection with the Transaction and shall not assume any Liability with
respect to such employees or any related matter.
8.2 Employee Benefit Arrangements.
(a) In order to secure an orderly and effective transition of
employee benefits for the Transferred Employees and their respective
beneficiaries and dependents, Seller and Purchasers shall cooperate, both before
and after the Closing Date, to exchange information related to the Transferred
Employees, all to the extent reasonably requested by Purchasers and in
compliance with any applicable Legal Requirements.
(b) Lead Purchaser shall recognize prior employment service
completed by the Transferred Employees from their initial date of hire with
Seller for the purposes of: (i) accrual of vacation under Lead Purchaser's
vacation policy; (ii) eligibility for severance benefits which may be provided
from time to time by Lead Purchaser; (iii) vesting under the applicable Lead
Purchaser benefits plans as reasonably designated by Lead Purchaser; and (iv)
eligibility for coverage under the Lead Purchaser's applicable retirement and
health and welfare plans. For the avoidance of doubt, such prior service credit
shall include periods of service with Seller and with any PEO that employed
(jointly or otherwise) any of the Transferred Employees.
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(c) In connection with its employment of the Transferred Employees,
Lead Purchaser agrees that, with the approval of the plan administrator of the
applicable Lead Purchaser 401(k) plan (the "Purchaser 401(k) Plan"), which
approval will not be unreasonably withheld, the Purchaser 401(k) Plan will
accept direct or indirect rollovers of "eligible rollover distributions" within
the meaning of Section 402(c) of the Code made from the applicable Seller 401(k)
Plan with respect to electing Transferred Employees by reason of their
"severance from employment" (within the meaning of Section 401(k)(2)(B)(i)(I) of
the Code) with Seller.
(d) For the avoidance of doubt, Seller (or the applicable PEO) shall
retain the obligation to provide the notice required by Section 4980B(f)(6) of
the Code to all "M&A Qualified Beneficiaries" (as defined in Section 54.4980B-9
Q&A-4(a) of the Treasury Regulations) and shall make available to such
individuals continuation coverage under its group health plan in accordance with
Section 54.4980B-9 Q&A-7 of the Treasury Regulations.
(e) As soon as practicable, but in no event more than thirty (30)
days after the Closing Date, Seller shall pay all retention or "stay" bonuses
accrued or earned by the Transferred Employees as of the Closing Date.
(f) As soon as practicable, but in no event more than thirty (30)
days after the Closing Date, Seller shall pay out the accrued vacation credited
to each of the Transferred Employees as of the Closing Date up to a maximum of
eighty (80) hours. Any accrued vacation credited to a Transferred Employee in
excess of eighty (80) hours shall be forfeited with respect to the Seller as of
the Closing Date, but Lead Purchaser shall credit each applicable employee with
the amount of hours in excess of eighty (80) hours properly listed on Section
4.10(a)(i) of Seller's Disclosure Schedule or properly accrued between the
Effective Date and Closing Date by each such Transferred Employee in a manner
consistent with Seller's past practices and policies.
(g) With respect to any bona fide customer orders procured by a
Transferred Employee prior to the Closing Date but which are shipped on or after
the Closing Date (and with respect to which Seller has not received payment or
generated a Receivable included in the Excluded Assets), Lead Purchaser shall
pay any properly due and owing sales commission to such Transferred Employee
pursuant to the terms of any applicable Seller's sales commission plans as in
effect on the Closing Date in the Ordinary Course of Business and to the extent
such commissions are payable according to the commission plans described on
Schedule 4.10(b)(i). Seller shall be responsible for, and shall pay, all other
sales and similar commissions related to the pre-Closing period. Following the
Closing, Lead Purchaser shall pay sales commissions, if any, in its sole
discretion.
8.3 Compliance with Legal Requirements and Other Obligations. At its sole
cost and expense, Seller shall take all actions necessary to comply with all
appropriate Legal Requirements in connection with Seller's employment of its
employees, including any Legal Requirements under the WARN Act (and any similar
state Legal Requirements). Seller shall be solely responsible, before and after
the Closing, for the payment of any amounts required to be paid under any Legal
Requirement, including the WARN Act and any similar state Legal Requirements,
and further including with respect to any accrued vacation and any other accrued
compensation or benefits, as a result of the termination or layoff by Seller of
any Transferred Employee or any other employee of Seller who is not a
Transferred Employee but is terminated by Seller or laid off by Seller in
connection with this Transaction. Seller shall perform all of its contractual
and other obligations in connection with the employment of the Transferred
Employees and other employees in connection with the Transaction.
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8.4 No Benefit to Seller's Employees Intended. This Article 8 is not
intended to, and does not, create any rights or obligations to or for the
benefit of anyone other than Purchasers and Seller. Nothing herein shall be
construed to entitle any Transferred Employee to continue his or her employment
with Lead Purchaser for any period of time, nor to interfere with the rights of
Lead Purchaser or Seller to discharge or discipline any Transferred Employee, to
change the terms of any Transferred Employee's employment, or to amend or
terminate any employee benefit plans at any time.
ARTICLE 9
CONDITIONS TO CLOSING
9.1 Conditions to Purchasers' Obligations to Close. The obligation of
Purchasers to consummate the Closing is subject to the satisfaction, or waiver
in writing by Purchasers, on or prior to the Closing Date, of the following
conditions.
(a) Accuracy of Representations and Warranties. The representations
and warranties of Seller set forth in this Agreement qualified as to materiality
shall be true and accurate, and those not so qualified shall be true and
accurate in all material respects, at and as of the Closing Date with the same
force and effect as if made as of the Closing Date (other than such
representations and warranties as are made as of another date, which, if
qualified as to materiality, shall be true and accurate as of such date, and, if
not so qualified, shall be true and accurate in all material respects as of such
date).
(b) Material Adverse Change. Since January 1, 2004, there shall have
been no change in the Business having or reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect.
(c) Performance of Covenants. Each and all of the covenants and
agreements of Seller to be performed or complied with prior to or on the Closing
Date shall have been performed or complied with in all material respects by
Seller.
(d) Seller's Deliveries. Seller shall have delivered to Purchasers
the executed agreements and other items, and taken any other actions, set forth
in Section 3.2, and, to the extent applicable to Seller, Section 3.4.
(e) No Pending Litigation; Laws. There shall not be pending any
Order, Proceeding or other action against any party hereto brought by any
Governmental Authority which seeks to materially restrain, materially modify or
invalidate the transactions contemplated by this Agreement or the other
Transaction Agreements. No Governmental Authority shall have issued,
promulgated, enforced or enacted any Legal Requirement or Order that is then in
effect or pending and has, or would have, the effect of making the transactions
contemplated by this Agreement or any of the other Transaction Agreements
illegal or otherwise prohibit consummation of such transactions, would
materially modify or restrain such transactions, or otherwise materially
adversely affects the right or ability of the applicable Purchaser to own,
operate or control the Business in whole or material part.
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(f) Consents. To the extent set forth on Schedule 9.1(f), Seller
shall have (A) delivered, duly executed by the applicable parties, to Purchasers
all Assignment Consents and any other Consents required (i) for the transfer of
the Business and the Acquired Assets to Purchasers and the assumption of the
Assumed Liabilities by the applicable Purchaser, (ii) for the consummation of
the Transaction or (iii) to otherwise prevent a breach, termination, or material
adverse consequence under any Acquired Asset, including Material Contracts and
Governmental Approvals applicable to the Business or (B) with respect to each
required Consent set forth on Schedule 9.1(f), otherwise complied with any
applicable alternative conditions set forth on such Schedule with respect to
such consent.
(g) Opinion of Counsel. Seller shall have delivered to Purchasers
(i) an Opinion of Seller's counsel, substantially in the form attached hereto as
Exhibit G (the "Primary Legal Opinion") and (ii) the opinion of Florida counsel
referenced in the Primary Legal Opinion, which opinion of Florida counsel shall
be reasonably acceptable to Purchasers.
(h) Required Seller Vote/Other Corporate Approvals. Seller shall
have obtained the Required Seller Vote, the approval of the board of directors
of Seller, and any other Consents and approvals required under applicable Legal
Requirements or the certificate of incorporation, bylaws and any other
applicable Charter Document or Contracts of Seller for this Agreement and the
Transaction; and such Consents and approvals shall not have been superseded and
shall be fully effective at Closing.
(i) Employee Acceptances. A minimum of seventy-five percent (75%) of
the "Group A" Transferred Employees and seventy-five percent (75%) of the "Group
B" Transferred Employees identified on Schedule 9.1(i) shall have accepted
employment with Lead Purchaser and shall have executed employee offer letters,
proprietary information agreements, arbitration agreements and similar
agreements as are reasonably requested by Lead Purchaser, each in form and
substance reasonably acceptable to Lead Purchaser, and each to be effective and
conditioned upon Closing.
9.2 Conditions to Seller's Obligation to Close. The obligations of the
Seller to consummate the Closing are subject to the satisfaction, or waiver in
writing by Seller, on or prior to the Closing Date, of the following conditions.
(a) Accuracy of Representations and Warranties. The representations
and warranties of Purchasers set forth in this Agreement qualified as to
materiality shall be true and accurate, and those not so qualified shall be true
and accurate in all material respects, at and as of the Closing Date with the
same force and effect as if made as of the Closing Date (other than
representations and warranties as are made as of another date, which, if
qualified as to materiality, shall be true and accurate as of such date, and, if
not so qualified, shall be true and accurate in all material respects as of such
date).
(b) Performance of Covenants. Each and all of the covenants and
agreements of Purchasers to be performed or complied with prior to or on the
Closing Date shall have been performed or complied with in all material respects
by Purchasers.
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(c) Purchasers' Deliveries. Purchasers shall have delivered to
Seller the executed agreements and other items, and taken any other actions, set
forth in Section 3.3 and, to the extent applicable to Purchasers, Section 3.4.
(d) No Pending Litigation; Laws. There shall not be pending any
Order, Proceeding or action against any party hereto brought by any Governmental
Authority which seeks to materially restrain, materially modify or invalidate
the transactions contemplated by this Agreement or the other Transaction
Agreements. No Governmental Authority shall have issued, promulgated, enforced
or enacted any Legal Requirement or Order that is then in effect or pending and
has, or would have, the effect of making the transactions contemplated by this
Agreement or any of the other Transaction Agreements illegal or otherwise
prohibits consummation of such transactions.
(e) Required Seller Vote. Seller shall have obtained the Required
Seller Vote in connection with the approval of this Agreement by the
shareholders of Seller.
ARTICLE 10
TERMINATION
10.1 Termination. This Agreement may be terminated prior to Closing as
follows:
(a) Agreement. By mutual written agreement of Seller and Purchasers.
(b) Purchasers' Breach. At the election of Seller, if Purchasers
have breached any representation, warranty, covenant or agreement contained in
this Agreement in any material respect; provided, however, Seller shall have no
termination right hereunder unless the breach of such representation, warranty,
covenant or agreement shall not have been cured by Purchasers (unless such
breach is incapable of cure) within fifteen (15) days after Purchasers shall
have received notice from Seller that Seller intends to exercise its right to
terminate under this Section 10.1(b).
(c) Seller's Breach. At the election of Purchasers, if Seller has
breached any representation, warranty, covenant or agreement contained in this
Agreement in any material respect; provided, however, Purchasers shall have no
termination right hereunder unless the breach of such representation, warranty,
covenant or agreement shall not have been cured by Seller (unless such breach is
incapable of cure) within fifteen (15) days after Seller shall have received
notice from Purchasers that Purchasers intend to exercise their right to
terminate under this Section 10.1(c).
(d) Orders. At the election of Seller or Purchasers, if any court of
competent jurisdiction shall have issued an Order enjoining or otherwise
prohibiting the transactions contemplated under this Agreement and such Order
shall have become final and nonappealable; provided, if Seller elects to
terminate in connection with an Order concerning a Superior Proposal or other
Acquisition Proposal, the Required Seller Vote, the Shareholders Meeting or the
Proxy Statement (such Orders, "Designated Orders"), it shall be a condition
precedent to such termination that Seller shall have made the payment required
by Section 10.3, or Seller shall make such payment simultaneously with such
termination and as a condition to such termination.
(e) Deadline. At the election of either Seller or Purchasers, if the
Closing has not occurred on or before July 9, 2004, provided that the party
seeking to terminate pursuant to this section has performed all its obligations
hereunder and diligently cooperated as required to fulfill all applicable
conditions to Closing; and provided, further, that if Seller elects to
terminate, Seller's compliance with Section 10.4(a) shall be a condition to
termination.
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(f) Shareholders Approval. At the election of Purchasers on written
notice to Seller, if Seller for any reason shall not have obtained the Required
Seller Vote in connection with the approval of this Agreement and the
Transaction by the shareholders of Seller at the Shareholders Meeting or any
adjournment thereof by July 5, 2004.
(g) Directors' Recommendation. At the election of Purchasers on
written notice to Seller, if (A) the board of directors of Seller or any
committee thereof shall have failed to recommend or shall have withdrawn,
modified or amended in any respect adverse to Purchasers its approval or
recommendation of this Agreement and the Transaction to the shareholders of
Seller, (B) the board of directors of Seller or any committee thereof shall have
approved or recommended an Acquisition Proposal from a person other than
Purchasers (or resolved to do so) or (C) Seller breaches its obligations
pursuant to Section 6.3 (Acquisition Proposals).
(h) Superior Proposal. At the election of Seller on at least five
(5) Business Days' written notice to Purchasers, if as a result of an
Acquisition Proposal the board of directors of Seller or any committee thereof
shall have determined in good faith, following receipt of the advice of outside
legal counsel and otherwise in accordance with Section 6.3, that (i) the
Acquisition Proposal is a Superior Proposal and (ii) the directors are obligated
by their fiduciary duties in accordance with Florida law to terminate this
Agreement and to approve such Superior Proposal; provided, however, that it
shall be a condition precedent to the termination of this Agreement by Seller
pursuant to this Section 10.1(h) that Seller shall have made the payment of the
fee and expenses required by Section 10.3 or Seller shall make such payment
simultaneously with such termination and as a condition to such termination.
(i) Breaching Party. The right to terminate this Agreement under
this Section 10.1 shall not be available to any party whose failure (or the
failure of its applicable Affiliates) to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the transactions
contemplated herein to occur or of the transactions being delayed.
(j) Material Adverse Effect. Purchasers may terminate this Agreement
if pursuant to Section 6.4 or Section 6.5 they receive notice of a Material
Adverse Effect or if Purchasers otherwise become aware of a Material Adverse
Effect; provided, if such a Material Adverse Effect is reasonably susceptible of
cure within thirty (30) days, Seller shall have thirty (30) days from the time
Seller's learn of such Material Adverse Effect or receive notice from Purchasers
that they intend to terminate this Agreement pursuant to this section to cure
such Material Adverse Effect.
10.2 Effect of Termination. In the event of the termination of this
Agreement in accordance with Section 10.1 hereof, this Agreement shall
thereafter become void and have no effect, and no party hereto shall have any
Liability to any other party hereto or its Affiliates, directors, officers or
employees, except for the obligations of the parties hereto contained in Section
7.3 (Confidentiality), Section 7.9 (Public Announcements), this Article 10
(Termination) (for the avoidance of doubt, including Sections 10.3, 10.4 and
10.5 and the other sections of Article 10), Article 11 (Indemnification) and
Article 12 (Miscellaneous) and except that nothing herein will relieve any party
of Liability for any breach of this Agreement prior to such termination.
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10.3 Cash Fee. Seller shall pay Purchasers a fee of One Million Dollars
($1,000,000) in cash in immediately available funds by wire transfer to an
account designated by Purchasers (i) within one (1) Business Day after receiving
Purchasers' notice of termination in accordance herewith pursuant to Section
10.1(g) (Directors' Recommendation) or pursuant to Section 10.1(d) (Orders) in
connection with a Designated Order or (ii) simultaneously with any termination
by Seller pursuant to Section 10.1(h) (Superior Proposal) or Section 10.1(d)
(Orders) in connection with a Designated Order.
10.4 Cash or Stock Fee.
(a) Cash or Stock Payment. In the event of any termination of this
Agreement by Seller pursuant to Section 10.1(e) (Deadline) or by Purchasers
pursuant to Section 10.1(f) (Shareholder Approval), Seller shall, at its option,
comply with either clause (i) or (ii) below:
(i)
(A) if Seller has elected to terminate pursuant to Section
10.1(e), Seller shall pay Purchasers simultaneously with and as a condition to
such termination a fee of One Million Dollars ($1,000,000) (the "Cash Amount")
in cash in immediately available funds by wire transfer to an account designated
by Purchasers, or
(B) if Purchasers have elected to terminate pursuant to
Section 10.1(f), Seller shall pay the Cash Amount to Purchasers within one (1)
Business Day after receiving Purchasers' notice of termination in accordance
herewith, or
(ii)
(A) if Seller has elected to terminate pursuant to Section
10.1(e), Seller shall, simultaneously with and as a condition to such
termination, (y) provide Purchasers with written notice of Seller's election to
pay the Cash Amount by issuing Seller Common Stock in accordance with this
Section 10.4 (the "Stock Payment Notice") and (z) issue and deliver the Initial
Shares (as defined below) to Lead Purchaser, or
(B) if Purchasers have elected to terminate pursuant to
Section 10.1(f), Seller shall within two (2) Business Days after receiving
Purchasers' notice of termination in accordance herewith (y) provide Purchasers
with the Stock Payment Notice and (z) issue the Initial Shares to Lead
Purchaser.
Notwithstanding the foregoing, if any Seller shareholder approval or other
Consent is necessary pursuant to NASDAQ Market listing requirements or otherwise
in order to issue Seller Common Stock to Lead Purchaser as contemplated by this
Section 10.4(a) (or if for any other reason Seller is unable to issue such stock
to Lead Purchaser in accordance herewith), Seller shall comply with clause (i)
above.
(b) Initial Shares. In the event that Seller elects pursuant to
Section 10.4(a) to pay the Cash Amount by issuing Seller Common Stock, the
number of shares of Seller Common Stock to be initially issued to Lead Purchaser
pursuant to Section 10.4(a)(ii) shall equal (i) the Cash Amount divided by (ii)
the average of the last sale price of a share of Seller Common Stock on the
Nasdaq Market on the ten (10) trading days immediately preceding the date of the
Stock Payment Notice (the "Initial Shares"). Seller will in advance of such
issuance prepare and deliver instructions to its transfer agent for the issuance
of the Initial Shares to Lead Purchaser.
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(c) Adjustment to Number of Initial Shares. Three (3) days prior to
the effectiveness of the Registration Statement (as defined below), the parties
will determine the number of shares of Seller Common Stock equal to (i) the Cash
Amount divided by (ii) the average of the last sale price of a share of Seller
Common Stock on the Nasdaq Market on the ten (10) trading days immediately
preceding the fourth Business Day preceding the effective date of the
Registration Statement. If the number determined by the preceding sentence is
greater than the number of Initial Shares previously issued to Lead Purchaser,
then Seller will issue additional shares of Seller Common Stock to Lead
Purchaser equal to such difference and amend the Registration Statement to
include such additional shares of Seller Common Stock. If the number determined
by the first sentence of this Section 10.4(c) is less than the number of Initial
Shares issued hereunder to Lead Purchaser, then Lead Purchaser will surrender to
Seller that number of Initial Shares equal to the difference for cancellation,
and the Seller will amend the Registration Statement to reduce the number of
Initial Shares being registered. As adjusted pursuant to this section, the
Initial Shares are the "Shares."
(d) Legends. Purchasers understand that the Seller will instruct its
transfer agent to place a stop transfer order with respect to the certificates
representing the Shares and that such certificates will bear the following
legends:
(i) "The shares represented by this certificate have been
acquired for investment and have not been registered under the Securities Act of
1933, as amended (the `Securities Act'). Transfer of these shares is prohibited
except pursuant to registration under the Securities Act or pursuant to an
available exemption from registration."
(ii) "The shares represented by this certificate are subject
to resale limitations set forth in Section 10.4(f) of the Asset Purchase
Agreement dated __________, 2004."
Following the expiration of the public resale limitation in Section 10.4(f),
Seller shall cause its transfer agent to promptly remove the legend in clause
(ii) above if Lead Purchaser still holds Shares and Lead Purchaser so requests.
(e) Registration. The Seller shall file a registration statement
under the Securities Act ("Registration Statement") with the SEC registering the
Shares for re-offer and re-sale as soon as practicable, but in no event later
than the thirtieth day after the date on which Seller provides the Stock Payment
Notice, and shall use all commercially reasonable efforts to have the
Registration Statement declared effective as soon as possible. Once the
Registration Statement is declared effective, Seller shall keep the Registration
Statement effective and current until all the securities registered thereunder
are sold or may be sold freely by Lead Purchaser in any 90-day period without
registration under an appropriate exemption under the Securities Act. Seller
shall bear all fees and expenses attendant to registering the Shares, including
all underwriting expenses (it being understood that Purchasers shall not
initiate an underwritten offering). Promptly upon request, Seller will provide
to Lead Purchaser such number of copies of the prospectus forming a part of the
Registration Statement as are reasonably requested by Lead Purchaser, and all
supplements to such prospectus. Seller will promptly notify Lead Purchaser at
any time if the Registration Statement or the prospectus may not be used either
due to any change in the material information contained therein or due to the
omission of material information therefrom or upon the receipt by the Seller of
a cease-and-desist or stop order of the SEC. The Seller will use all
commercially reasonably efforts to amend or supplement the Registration
Statement to permit its continued use by Lead Purchaser.
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(f) Public Resale Limitation. During the period beginning on the
effective date of the Registration Statement and ending on the date which is the
later of (A) one hundred twenty (120) days from the effective date of the
Registration Statement and (B) thirty (30) days from the date on which Lead
Purchaser would be able to sell all of the Shares in accordance with the
restrictions set forth in this Section 10.4(f) if Lead Purchaser sold the
maximum number of Shares permitted pursuant to such restrictions on each trading
day (the "Resale Limitation Period"), Purchasers agree that on any one trading
day Lead Purchaser will sell no more than the greater of (x) 2,500 of the Shares
or (y) that number of Shares equal to five percent (5%) of the reported average
daily trading volume of the Seller Common Stock for the immediately preceding
ten (10) trading days.
(g) Net Proceeds. If Lead Purchaser (A) sells all the Shares within
the Resale Limitation Period, (B) attempts to sell all of the Shares on the
Nasdaq Market (or any other market where the Shares may be publicly traded) in
accordance with Section 10.4(f) utilizing customary trading practices but such
sales cannot be accomplished or (C) is unable to sell in compliance with
securities laws and any other applicable Legal Requirements for any reason
(including due to any inability of Lead Purchaser to comply with Section 10.4(p)
or for any representation and warranty of Lead Purchaser set forth in such
section to not be true and correct), and in any case if the net proceeds, if
any, of such sales or attempted sales (being any sales price less customary
commissions, selling costs and taxes ("Net Proceeds")) are less than the Cash
Amount, then upon written request by Lead Purchaser to the Seller, which request
must be made by Lead Purchaser no later than the tenth (10th) Business Day after
the end of the Resale Limitation Period, and in exchange for return by Lead
Purchaser to Seller of any unsold Shares, or Initial Shares, as the case may be,
Seller shall promptly pay to Lead Purchaser, in cash in immediately available
funds by wire transfer to an account designated by Lead Purchaser, the
difference between the Net Proceeds actually realized by Lead Purchaser and the
Cash Amount (the "Additional Cash Amount"). Lead Purchaser shall provide such
supporting documentation of the Net Proceeds amount as may be reasonably
requested by Seller.
(h) Failure to Make the Registration Statement Effective. In the
event that, for whatever reason, the Registration Statement is not made
effective within ninety (90) days of the Stock Payment Notice, Seller shall pay
Lead Purchaser, in exchange for return by Lead Purchaser to Seller of the
Shares, or the Initial Shares, as the case may be, and within two (2) Business
Days of Lead Purchaser's written demand to Seller made within the later of One
Hundred Ten (110) days of the date the Stock Payment Notice is delivered to Lead
Purchaser or twenty (20) days following any extension of the ninety (90) day
period above that may be agreed by Purchasers and Seller, the Cash Amount in
cash by wire transfer in immediately available funds to a bank account
designated by Lead Purchaser.
(i) Nasdaq Market. Seller undertakes to use commercially reasonable
efforts to maintain the listing of the Seller Common Stock on the Nasdaq Market
until completion of the sale by Lead Purchaser of the Shares within the Resale
Limitation Period.
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(j) Rule 144. With a view to making available to the Lead Purchaser
the benefits of Rule 144 promulgated under the Securities Act ("Rule 144"), so
long as Lead Investor or any Affiliate holds any Shares, the Seller agrees to:
(i) comply with the provisions of paragraph (c)(1) of Rule
144; and
(ii) file with the SEC in a timely manner all reports and
other documents required to be filed with the SEC pursuant to Section 13 or
15(d) under the Exchange Act by companies subject to either of such sections,
irrespective of whether Seller is then subject to such reporting requirements.
(k) Full Satisfaction. The Cash Amount, or the Shares issued
pursuant to this Section 10.4 and the Additional Cash Amount, if any, as the
case may be, will be in full satisfaction of the fee due to Purchasers pursuant
to this Section 10.4. The parties acknowledge and agree that, except for any
adjustment in the number of Shares as provided in this Section 10.4, if the
value of the Shares increases after the date of receipt of the Shares by the
Purchasers, Seller will not have any right to credit or otherwise set off the
amount of such increase against any other payment or amount Seller owes
Purchasers under this Agreement, the other Transaction Agreements, or otherwise.
The parties further acknowledge and agree that, if the value of the Shares
decreases after the date of receipt of the Shares by Lead Purchaser, except for
any adjustment in the number of Shares (and any payment of the Cash Amount and
the Additional Cash Amount, if any) as provided in this Section 10.4, Purchasers
will not have any right of further payment in cash or shares of Seller Common
Stock in respect of the amount due under this Section 10.4.
(l) Seller Indemnification. The Seller agrees to indemnify, defend
and hold harmless Purchasers, their respective directors and officers and each
Person, if any, who controls a Purchaser within the meaning of the Securities
Act or the Exchange Act, against any Damages, joint or several, to which
Purchasers or such person may become subject, under the Securities Act, Exchange
Act or otherwise, insofar as such Damages relate to (i) any untrue statement or
alleged untrue statement of a material fact contained in any prospectus or
registration statement for the Shares, (ii) the omission or alleged omission by
the Seller to state in any prospectus or registration statement for the Shares a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or (iii) any violation by the Seller of the Securities Act, the
Exchange Act, any rule or regulation promulgated thereunder or any other
applicable Legal Requirement relating to any action or inaction by the Seller in
connection with the issuance or registration of the Shares; provided, however,
that the Seller will not be liable in any such case to the extent that any such
Damages arise out of or are based upon an untrue material statement or material
omission made by Seller in reasonable reliance upon and in conformity with
written information regarding Lead Purchaser which is furnished in writing to
the Seller by Lead Purchaser or its representatives specifically for inclusion
in any registration statement for the Shares ("Non-Indemnity Events").
(m) Lead Purchaser Indemnification. Lead Purchaser agrees to
indemnify, defend and hold harmless the Seller, each officer and director of the
Seller, and each person, if any, who controls the Seller within the meaning of
the Securities Act or the Exchange Act against any Damages, joint or several, to
which the Seller or such person may become subject, under the Securities Act,
Exchange Act or otherwise insofar as such Damages arise out of or are based upon
any Non-Indemnity Event; provided that the maximum aggregate indemnification
obligation by Lead Purchaser shall not exceed the Net Proceeds resulting from
Shares sold by Lead Purchaser pursuant to this Section 10.4 (the "Lead Purchaser
Stock Indemnification and Contribution Cap").
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(n) Indemnification Procedure. Claims for indemnification pursuant
to Section 10.4(l) or (m) above relating to claims by third parties shall be
governed by Section 11.7.
(o) Contribution. If the indemnification provided for in this
Section 10.4 is unavailable to any indemnified party in respect of any Damages
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, will contribute to the amount paid or payable by such
indemnified party as a result of such Damages in such proportion as is
appropriate to reflect the relative fault of the Seller on the one hand, and of
the Lead Purchaser on the other hand, in connection with the statements or
omissions which resulted in such Damages as well as any other relevant equitable
considerations. The relative fault of the Seller on the one hand, and the Lead
Purchaser on the other hand, will be determined with reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by a party,
and such party's relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. Seller and Lead
Purchaser agree that it would not be just and equitable if contribution pursuant
to this Section 10.4(o) were determined by pro rata allocation or by any other
method of allocation which does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding anything to the contrary herein, the aggregate amount for which
Lead Purchaser shall be liable for contribution pursuant to this Section 10.4(o)
and for indemnification obligations pursuant to Section 10.4(m) shall not exceed
the Lead Purchaser Stock Indemnification and Contribution Cap.
(p) Purchasers Representations. Lead Purchaser represents and
warrants to, and covenants with, Seller that: (i) Lead Purchaser is an
"accredited investor" as defined in Regulation D under the Securities Act and
knowledgeable, sophisticated and experienced in making, and is qualified to make
decisions with respect to investments similar to that of the Shares, and has
reviewed and considered such information it deems relevant in making an informed
decision; (ii) Lead Purchaser is acquiring the Shares for its own account, and,
except for sales of Shares as contemplated by Section 10.4, with no present
intention of distributing any such Shares or pursuant to any arrangement or
understanding with any other persons regarding the distribution of such Shares;
(iii) Lead Purchaser will not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) any of the Shares except in compliance
with the Securities Act and Exchange Act, applicable state securities laws and
the respective rules and regulations promulgated thereunder; (iv) the Lead
Purchaser upon request, will expeditiously answer all reasonable questions on an
investor questionnaire typically requested of a selling shareholder for use in
preparation of any registration statement relating to the Shares and the answers
thereto will be materially true, correct and complete as of the date thereof;
(v) Lead Purchaser will notify the Seller promptly of any material change in any
of such information in the questionnaire until such time as Lead Purchaser has
sold all of the Shares or until the Seller is no longer required to keep the
registration statement effective. The Lead Purchaser understands that (until the
Registration Statement is filed) its acquisition of the Shares has not been
registered under the Securities Act or registered or qualified under any state
securities law in reliance on specific exemptions therefrom. Lead Purchaser
hereby covenants (except for sales contemplated by and in accordance with
Section 10.4) with the Seller not to make any sale of the Shares without
complying with the provisions of this Agreement and the Exchange Act and without
causing the prospectus delivery requirement under the Securities Act to be
satisfied (whether by delivery of the Prospectus or pursuant to and in
compliance with an exemption from such requirement). The parties acknowledge and
agree that Lead Purchaser is making the representations and warranties, and
entering into the covenants, set forth in this Section 10.4(q) in order to
facilitate the sale of the Shares pursuant to this Section 10.4, and that if any
representation and warranty of Lead Purchaser set forth in this Section 10.4 is
untrue, or if Lead Purchaser cannot in good faith comply with its obligations in
this Section 10.4(q) or otherwise sell any or all of the Shares in compliance
with securities laws and any other applicable Legal Requirements, Lead Purchaser
shall not be required to sell any Shares (and shall be entitled, upon return to
Seller of any Shares or Initial Shares issued to Lead Purchaser to the Cash
Amount minus the amount of any Net Proceeds received by Lead Purchaser.
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10.5 Right of First Refusal. In the event of termination pursuant to (i)
Section 10.1(h) (Superior Proposal), (ii) Section 10.1(g) (Directors'
Recommendation), (iii) Section 10.1(f) (Shareholder Approval), (iv) Section
10.1(e) (Deadline), but only in case of termination by Seller, or (v) Section
10.1(d) (Orders) in connection with a Designated Order, Purchasers shall have a
right of first refusal as set forth in this Section 10.5.
(a) If in the twelve-month period beginning on the date of
termination hereof, Seller (or any of its Subsidiaries, or any employees,
officers or directors of Seller or of any Subsidiary of Seller, or any
Representatives of Seller or any of its Subsidiaries) receives any written
proposal from a third party concerning the sale of the Business or the Acquired
Assets or a material portion thereof (or an exclusive license of the Acquired
Intellectual Property Rights or a significant portion thereof) (each, a
"Competing Transaction", and any of the foregoing communications, an
"Acquisition Contact"), Seller shall promptly (in any event within three (3)
business days of the first Acquisition Contact) inform Purchasers in writing and
in reasonable detail regarding such Acquisition Contact, including any
subsequent oral or written communications.
(b) Seller shall not enter into any agreement concerning a Competing
Transaction nor otherwise consummate any Competing Transaction unless Seller
first offers to enter into a transaction with Purchasers (or any Affiliate
reasonably designated by Purchasers) on substantially the same terms and
conditions as such Competing Transaction by sending Purchasers (i) written
notice of the proposed Competing Transaction and the terms and conditions
thereof (the "Seller Offer") and (ii) evidence reasonably satisfactory to
Purchasers (A) that the third party has a genuine interest in entering into such
Competing Transaction on such terms and conditions and possesses the financial
resources to do so and (B) that consummation of the Competing Transaction by
Seller or the third party is not prohibited or restricted by any legal
requirement.
(c) If Purchasers (or any designated Affiliate), within twenty (20)
days of receiving such notice from Seller, accept the Seller Offer by sending
Seller written notice to such effect, then Seller, as soon as possible and
subject only to such closing conditions as are set forth in the Seller Offer,
shall sell the portion of the Business and the Acquired Assets, or as the case
may be, license the Acquired Intellectual Property Rights, covered by the Seller
Offer in accordance with such offer (and provide any other consideration,
including the performance of any covenants of Seller in the terms of the
Competing Transaction) to Purchasers in return for the consideration set forth
in the Seller Offer. Purchasers and Seller shall select a closing to be held for
this purpose at a time and place to be reasonably agreed to by the parties in
accordance herewith and enter into any agreements reasonably necessary to
effectuate the transaction on reasonable and customary terms and conditions.
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(d) If any of the Purchasers (or any designated Affiliate) does not,
within twenty (20) days of receiving the notice from Seller, accept the Seller
Offer by sending Seller written notice to such effect, then (A) Seller may
proceed with the Competing Transaction on the same terms and conditions
described in the Seller Offer. If the terms of the Competing Transaction are
materially changed (it being understood that, without limiting the
interpretation of material, any change in price will be material) in a manner
favorable to the Person extending the Seller Offer, following provision of the
notice to Purchasers, Seller shall send Purchasers another notice describing
such changed terms in reasonable detail and Purchasers shall have twenty (20)
days to accept or decline to enter into the competing transaction in accordance
herewith.
(e) The right of first refusal in this Section 10.5 (i) shall
terminate upon the consummation by Seller of a Competing Transaction with a
third Person made in compliance with this Section 10.5 and (ii) for the
avoidance of doubt, shall not apply to any Superior Transaction which causes
Seller to terminate this Agreement pursuant to Section 10.1(h) (Superior
Proposal).
ARTICLE 11
INDEMNIFICATION
11.1 Survival of Representations, Warranties and Covenants.
(a) Representations and Warranties. All representations and
warranties of Seller on one hand, and Purchasers on the other, in this Agreement
or any other Transaction Agreement (i) shall survive the Closing, any
investigation at any time made and the consummation of the Transaction and (ii)
shall terminate and expire at the end of eighteen (18) months following Closing,
except with respect to (A) any claims as to which written notice identifying
such claim and the basis thereof with reasonable specificity shall have been
delivered pursuant to the applicable provisions of this Agreement on or prior to
such date, (B) any claims related to fraud or intentional misrepresentation or
(C) as set forth in subsections (d) or (e) below. The representations and
warranties contained in this Agreement (and any right to indemnification for
breach thereof or other right to indemnification hereunder) shall not be
affected by any investigation, verification or examination by any party hereto
or by any Representative or employee of any such party or by any such party's
Knowledge or the knowledge of any such Representative or employee of any facts
with respect to the accuracy or inaccuracy of any such representation or
warranty.
(b) Covenants. The covenants and agreements of the parties shall
survive the Closing and any investigation at any time made and the consummation
of the Transaction until fully performed, unless limited by their terms or
purpose.
(c) Effect of Expiration. On expiration or termination, the
representations, warranties and covenants described in subsections (a) and (b)
above shall be of no further force or effect, except with respect to any claim
as to which written notice identifying such claim and the basis thereof with
reasonable specificity shall have been delivered pursuant to the applicable
provisions of this Agreement on or prior to expiration or termination.
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(d) Statute of Limitations. Seller's representations and warranties
with respect to Section 4.10 (Employees and Consultants), Section 4.11 (Seller's
Benefit Plans), and Section 4.13 (Taxes) shall survive until the expiration of
the applicable statute of limitations, including any extensions thereof, except
with respect to any claim as to which written notice identifying such claim and
the basis thereof with reasonable specificity shall have been delivered pursuant
to the applicable provisions of this Agreement on or prior to such date.
(e) Extended Expiration. Seller's representations and warranties in
Section 4.2 (Authorization) and Section 4.9 (Intellectual Property) and
Purchasers' representations and warranties in Section 5.2 (Authorization) shall
not terminate or expire and shall survive for an unlimited period.
11.2 Indemnification by Seller. Subject to the limitations set forth in
Section 11.5, Seller shall indemnify, defend and hold harmless Purchasers and
their Representatives and employees (the "Purchasers Indemnified Parties") from
and against any and all Damages incurred by either or both Purchasers or their
Representatives, whether or not involving a third-party claim, including
reasonable attorneys' fees, arising out of, relating to or resulting from (i)
any breach of a representation or warranty of Seller contained in this Agreement
or in any other Transaction Agreement or (ii) any breach of a covenant of Seller
contained in this Agreement or in any other Transaction Agreement (collectively,
"Purchasers Damages"). On expiration or termination of the underlying
representations, warranties and covenants, the obligations of Seller in this
Section 11.2 shall be of no further force or effect with respect to any such
expired or terminated representation, warranty or covenant, except with respect
to any claim as to which written notice identifying such claim and the basis
thereof with reasonable specificity shall have been delivered pursuant to the
applicable provisions of this Agreement on or prior to such expiration or
termination. Seller shall not be required to indemnify Purchasers Indemnified
Parties pursuant to this Section 11.2 for Damages for which the Purchasers
Indemnified Parties are indemnified pursuant to Section 11.4.
11.3 Indemnification by Purchasers. Subject to the limitations set forth
in Section 11.5, Purchasers shall indemnify, defend and hold harmless Seller and
its Representatives and employees (the "Seller Indemnified Parties") from and
against any and all Damages, whether or not involving a third-party claim,
including reasonable attorneys' fees, arising out of, relating to or resulting
from (i) any breach of a representation or warranty of Purchasers contained in
this Agreement or in any other Transaction Agreement or (ii) any breach of a
covenant of Purchasers contained in this Agreement or in any other Transaction
Agreement (collectively, "Seller Damages"). On expiration or termination of the
underlying representations, warranties and covenants, the obligations of
Purchasers in this Section 11.3 shall be of no further force or effect with
respect to such expired or terminated representation, warranty or covenant,
except with respect to any claim as to which written notice identifying such
claim and the basis thereof with reasonable specificity shall have been
delivered pursuant to the applicable provisions of this Agreement on or prior to
such expiration or termination.
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11.4 Special Indemnification.
(a) Seller Special Indemnification. Notwithstanding Section 11.2 or
Section 11.5, Seller shall indemnify, defend and hold harmless, without regard
to any limitations or any materiality, Knowledge or other qualifications in the
representations and warranties or in Seller's Disclosure Schedule, the
Purchasers Indemnified Parties from and against any and all Damages, whether or
not involving a third-party claim, including reasonable attorneys' fees, arising
out of, relating to or resulting from:
(i) the Excluded Assets (including applicable Claims brought
directly against Purchasers or alleging direct Liability on the part of
Purchasers);
(ii) the Excluded Liabilities (including applicable Claims
brought directly against Purchasers or alleging direct Liability on the part of
Purchasers);
(iii) any noncompliance with applicable bulk sales or
fraudulent transfer related Legal Requirements in connection with the
Transaction;
(iv) any Claims for Transfer Taxes made against Purchasers in
connection with the Transaction;
(v) any breach of Section 6.3 (Acquisition Proposals);
(vi) any breach of Section 7.13 (Covenant Not to Sue);
(vii) any material breach by Seller of the Transition Services
Agreement;
(viii) the cost reasonably incurred by Purchasers to replace
any third-party Software used in or necessary to conduct the Business as
conducted at Closing in the Ordinary Course of Business, but which is not
assignable to Lead Purchaser pursuant to a contractual restriction on assignment
or transfer and for which consent to such assignment has not been obtained from
the licensor by Closing; provided that the maximum amount payable pursuant to
this Section 11.4(a)(viii) for off-the-shelf or other commercially readily
available Software shall be Two Hundred Thousand Dollars ($200,000); and
provided, further, that this limitation shall not restrict Purchasers from
making claims for breaches of Seller's representations and warranties with
respect to Damages in excess of such limit or limit Seller's applicable
obligations hereunder and pursuant to the Transaction Agreements;
(ix) any breach of Section 4.9(u)(B);
(x) any Seller breach of Section 10.3 (Cash Fee), Section 10.4
(Cash or Stock Fee) or Section 10.5 (Right of First Refusal);
(xi) any Seller breach of Section 4.32 (Seller Common Stock).
(b) Purchasers Special Indemnification. Notwithstanding Section 11.3
and Section 11.5, Purchasers shall indemnify, defend and hold harmless, without
regard to any limitations or any materiality, Knowledge or other qualifications
in the representations and warranties or in Purchasers' Disclosure Schedule, if
any, the Seller Indemnified Parties from and against (i) any and all Damages,
whether or not involving a third-party claim, including reasonable attorneys'
fees, arising out of, relating to or resulting from a breach of Section 1.4
(Assumed Liabilities) by Lead Purchaser, (ii) the amount of any portion of the
Holdback Amount (and any applicable interest pursuant to Section 2.2) not paid
by Purchasers in violation of Section 2.2, (iii) any amount of any adjustment to
the Fixed Purchase Price which Purchasers are obligated to pay Seller pursuant
to Section 2.5(c) and which is not paid to Seller, in violation of Section 2.5,
(iv) the amount of any indemnification payment pursuant to Section 10.4(m) or
contribution payment pursuant to Section 10.4(o), up to, in the aggregate, the
amount of the Lead Purchaser Stock Indemnification and Contribution Cap and (v)
any material breach by Lead Purchaser of the Transition Services Agreement.
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(c) Survival. The special indemnities in this Section 11.4 shall not
terminate or expire, shall survive for an unlimited period, and for the
avoidance of doubt shall not be subject to the limitations set forth in Section
11.5.
11.5 Indemnification Limits.
(a) Threshold. Seller shall not be obligated to indemnify the
Purchasers Indemnified Parties pursuant to Section 11.2 (Indemnification by
Seller), and Purchasers shall not be obligated to indemnify the Seller
Indemnified Parties pursuant to Section 11.3 (Indemnification by Purchasers),
unless in each case the aggregate of all Purchasers Damages or Seller Damages,
respectively, exceeds One Hundred Fifty Thousand Dollars ($150,000) (the
"Indemnification Threshold"), in which case the Seller Indemnified Parties or
the Purchasers Indemnified Parties, as the case may be, shall be entitled to
recover all of their Seller Damages or Purchasers Damages, as the case may be,
including the amount of the Indemnification Threshold. For the purposes of
determining whether a representation, warranty, covenant or agreement has been
breached and for determining the Indemnification Threshold, qualifications to
any representation, warranty, covenant or agreement regarding "material,"
"materiality," "Material Adverse Effect," or words of similar import shall be
disregarded and have no effect.
(b) Seller's General Indemnification Cap. The maximum aggregate
Liability of Seller pursuant to Section 11.2 shall not exceed Four Million
Dollars ($4,000,000) (the "General Indemnification Cap"); provided that this
limitation shall not apply with respect to (i) fraud or intentional
misrepresentation by Seller, (ii) willful breaches of covenants or (iii)
breaches of Section 4.9 (Intellectual Property).
(c) Intellectual Property Representations Cap. The maximum aggregate
Liability of Seller pursuant to Section 4.9 (Intellectual Property) shall not
exceed Five Million Dollars ($5,000,000) (the "Intellectual Property Rights
Representation Cap"); provided that this limitation shall not apply with respect
to fraud or intentional misrepresentation by Seller; and provided, further, that
Purchasers shall not be entitled to additional indemnification for breach of
Section 4.9 (Intellectual Property) under the General Indemnification Cap.
(d) Purchasers' Indemnification Cap. The maximum aggregate Liability
of Purchasers pursuant to Section 11.3 shall not exceed Four Million Dollars
($4,000,000); provided that this limitation shall not apply with respect to (i)
fraud or intentional misrepresentation by Purchasers or (ii) willful breaches of
covenants.
(e) Final Net Assets. For the avoidance of doubt, Purchasers' remedy
for any difference between (A) the value of the Acquired Assets included in the
Net Assets calculation pursuant to Section 2.5(c) as stated on the Pro Forma
Balance Sheet and in Seller's other financial information and (B) the final
amount of Net Assets as determined pursuant to Section 2.5 shall be the
adjustment to the Fixed Purchase Price set forth in Section 2.5(c).
68
(f) Injunctive Relief. For the avoidance of doubt, this Section 11.5
shall not be deemed to limit the right of any party to seek specific performance
or other injunctive relief.
11.6 Procedures for Indemnification. Promptly after receipt by a party
entitled to indemnification hereunder (the "Indemnitee") of written notice of
the assertion or the commencement of any Proceeding by a third party with
respect to any matter for which indemnification may be sought hereunder, the
Indemnitee shall give written notice thereof to the party obligated to indemnify
the Indemnitee (the "Indemnitor"), and thereafter shall keep the Indemnitor
reasonably informed with respect thereto in accordance with Section 11.7;
provided, however, that failure of the Indemnitee to give the Indemnitor notice
as provided herein shall not relieve the Indemnitor of its obligations hereunder
except to the extent that the Indemnitor is prejudiced thereby. A claim for
indemnification for any matter not involving a third-party Proceeding may be
asserted by notice to the party from whom indemnification is sought and shall be
paid promptly after such notice. Disputes shall be governed by Section 12.16
hereof.
11.7 Defense by Indemnitor. In connection with any claim giving rise to
indemnity hereunder or resulting from or arising out of any Claim by a Person
who is not a party to this Agreement, the Indemnitor at its sole cost and
expense may, upon written notice to the Indemnitee, assume the defense of any
such claim if the Indemnitor acknowledges to the Indemnitee in writing
Indemnitee's obligation to indemnify the Indemnitee with respect to all elements
of such claim, and thereafter diligently conducts the defense thereof with
counsel of recognized standing reasonably acceptable to the Indemnitee. The
Indemnitee shall be entitled to employ counsel separate from counsel employed by
the Indemnitor in any such action and to participate therein, but the fees and
expenses of such counsel employed by the Indemnitee shall be at its expense
(unless the Indemnitee reasonably determines there is a conflict between the
Indemnitee and Indemnitor with respect to such action, in which case such fees
and expenses shall be at the Indemnitor's expense), and the Indemnitor shall
retain control of such defense. Without the consent of the Indemnitee, not to be
unreasonably withheld, Indemnitor shall not consent to the entry of any judgment
or enter into any settlement in each case including anything other than monetary
damages which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to all Indemnitees a release from all Liability with
respect to such claims. Except as set forth in this Section 11.7, Indemnitor
shall have no Liability for any settlement entered into by any Indemnitee
without the prior written consent of the Indemnitor so long as the Indemnitor is
reasonably complying with its obligations under this Section 11.7. If the
Indemnitor does not assume the defense of such claim within thirty (30) days
after written notice thereof from the Indemnitee or does not thereafter
diligently conduct such defense, the Indemnitee may defend against such claim at
the sole cost and expense of the Indemnitor. Notwithstanding the foregoing terms
of this Section 11.7, if there is any threat of a temporary, preliminary or
permanent injunction in any claim, action or proceeding for which
indemnification may be sought with respect to Acquired Intellectual Property
Rights, Purchasers shall have the option to control the defense and settlement
of such claim, action or proceeding.
11.8 Exclusive Remedy. Unless otherwise set forth in another Transaction
Agreement, and without limiting any rights of any party to (i) make claims based
upon fraud or intentional misrepresentation or (ii) bring an action for specific
performance or other injunctive relief, the rights of the parties to assert
indemnification claims and to be indemnified, defended and held harmless
pursuant to this Article 11 will be the sole and exclusive right and remedy
exercisable by Purchasers Indemnified Parties and Seller Indemnified Parties
with respect to any breach by Purchasers, on the one hand, or Seller, on the
other hand, of any representation, warranty, covenant or agreement contained in
this Agreement or in the other Transaction Agreements.
69
11.9 Holdback Amount. Purchasers may apply all or a portion of the
Holdback Amount to satisfy any Claim for indemnification pursuant to this
Article 11; provided that Purchasers shall provide Seller with notice of such
Claim and such application of the Holdback Amount in accordance with Section
11.6; and provided, further, that if Seller provides Purchasers with a written
notice of dispute within fifteen (15) days after receiving Purchasers' notice,
Purchasers shall not apply such portion of the Holdback Amount until resolution
of such dispute. Purchasers shall continue to hold the applicable portion of the
Holdback Amount until resolution of such dispute. Nothing in this Agreement
shall be construed as limiting the liability of Seller for indemnification
claims or otherwise to the Holdback Amount, nor shall payments from the Holdback
Amount be considered as liquidated damages for any breach under this Agreement
or any other Transaction Agreement.
ARTICLE 12
MISCELLANEOUS
12.1 Notices.
(a) Procedures. Any notice, request, consent, waiver, or other
communication required or permitted hereunder or under another Transaction
Agreement shall be effective only if it is in writing and (i) personally
delivered or sent by certified or registered mail, postage prepaid, addressed as
set forth in Section 12.1(b), or to such other person or address as the
addressee may have specified in a notice duly given to the sender as provided
herein, or (ii) transmitted by facsimile, with confirmation of receipt received.
If personally delivered or sent by mail, such notice or communication shall be
deemed to have been given as of the date so personally delivered or mailed. If
transmitted by facsimile, such notice or communication shall be deemed to have
been given on the date sent if such date is a Business Day and confirmation of
receipt is received and such notice is also promptly mailed by registered or
certified mail (return receipt requested); otherwise such notice will be deemed
to be delivered and received on the next Business Day on which such notice is
also promptly mailed by registered or certified mail (return receipt requested).
(b) Address Information. Notices shall be addressed as follows:
IF TO PURCHASERS:
Thomson Broadcast & Media Solutions, Inc.
3233 E. Mission Oaks Boulevard
Camarillo, CA 93012
Facsimile: +805-445-1964
Attention: General Counsel
70
and
Thomson Licensing, S.A.
46, Quai Alphonse LeGallo
92100 Boulogne-Billancourt
France
Facsimile: +33 1 4186 5638
Attention: Vice President --
Licensing and Intellectual Property
with a mandatory copy to:
Morrison & Foerster LLP
Attention: Robert Townsend, Esq.
425 Market Street
San Francisco, CA 94105
Facsimile: (415) 268-7522
IF TO SELLER:
ParkerVision, Inc.
8493 Baymeadows Way
Jacksonville, Florida 32256
Attn: Chief Executive Officer
with a mandatory copy to:
Graubard Miller
Attention: David Alan Miller
600 Third Avenue
New York, NY 10016
Facsimile: (212) 818-8881
12.2 Entire Agreement. This Agreement, the other Transaction Agreements
and any other agreements referenced herein or therein (and including the
schedules and exhibits attached hereto and thereto) shall constitute the entire
agreement and understanding of the parties relating to the subject matter hereof
and thereof and shall supersede all agreements and understandings that have an
effective date prior to or contemporaneous with this Agreement, whether oral or
written, relating to the subject matter hereof and thereof, including the
non-binding indicative offer letter of intent dated on or about December 18,
2003 and the confidentially agreement between Lead Purchaser and Seller dated on
or about September 4, 2003.
12.3 No Third-Party Beneficiaries. Nothing in this Agreement or the other
Transaction Agreements will be construed as giving any Person, other than the
parties and their successors and permitted assigns, any right, remedy, or claim
under or in respect of this Agreement or the other Transaction Agreements or any
provision hereof or thereof.
12.4 Headings. The headings in this Agreement and the other Transaction
Agreements are included for convenience of reference only and shall not in any
way affect the meaning or interpretation of this Agreement.
71
12.5 Counterparts. This Agreement and the other Transaction Agreements may
be executed in any number of counterparts, each of which shall be deemed to be
an original, but all of which together shall constitute one and the same
instrument.
12.6 Effectiveness. This Agreement and the other Transaction Agreements
shall become effective only when signed and delivered by each of the parties
hereto.
12.7 Amendment; Waiver; Requirement of Writing. This Agreement and the
other Transaction Agreements cannot be amended or changed nor any performance,
term, or condition waived in whole or in part except by a writing signed by the
party against whom enforcement of the amendment, change or waiver is sought. Any
term or condition of this Agreement or the other Transaction Agreements may be
waived at any time by the party hereto entitled to the benefit thereof, and any
such term or condition may be modified at any time by an agreement in writing
executed by each of the parties hereto entitled to the benefit thereof. No delay
or failure on the part of any party in exercising any rights hereunder or under
another Transaction Agreement, and no partial or single exercise thereof, will
constitute a waiver of such rights or of any other rights hereunder or
thereunder.
12.8 Expenses. Each of the parties hereto shall pay, without right of
reimbursement from Purchasers, in the case of Seller, and Seller, in the case of
Purchasers, all the costs and expenses (including legal and other advisor fees)
incurred by it incident to the preparation, execution, and delivery of this
Agreement or the other Transaction Agreements and the performance of its
obligations hereunder or thereunder, whether or not the transactions
contemplated by this Agreement shall be consummated.
12.9 Assignment. Unless otherwise set forth in another Transaction
Agreement (with respect to such agreement only), this Agreement and the other
Transaction Agreements and the rights and obligations of each party hereunder or
thereunder shall be binding upon, and inure to the benefit of, the parties
hereto and their respective successors and permitted assigns; provided (i) prior
to Closing no party hereto shall assign this Agreement or another Transaction
Agreement without the prior written consent, in the case of Seller, of
Purchasers, and in the case of Purchasers, of Seller (except that Purchasers may
assign this Agreement and the other Transaction Agreements without the consent
of Seller to Affiliates of a Purchaser; provided that Purchasers shall not be
released from their obligations hereunder without the consent of Seller); (ii)
following Closing, Seller shall not assign this Agreement or any other
Transaction Agreement without the prior written consent of Purchasers, except in
connection with a sale of all or substantially all of the assets of Seller or a
merger, consolidation, change of control or similar corporate transaction
involving Seller (provided, further, that in each such case Seller shall not be
released from its obligations hereunder without the prior written consent of
Purchasers); and (iii) following Closing, neither Purchaser shall assign this
Agreement or any other Transaction Agreement without the prior written consent
of Seller, except in connection with (A) a sale of all or substantially all of
the assets of such Purchaser or a merger, consolidation, change of control or
similar corporate transaction involving such Purchaser, (B) with respect to Lead
Purchaser, a sale or license of all or a significant portion of the Business or
Non-Patent Assets, or (C) with respect to Patent Purchaser, a sale or license of
all or a significant portion of the Patent Assets; provided that in each of the
foregoing cases, the applicable Purchaser shall not be released from its
obligations hereunder without the prior written consent of Seller.
72
12.10 Severability; Enforcement. Whenever possible, each provision of this
Agreement and the other Transaction Agreements will be interpreted in such a
manner as to be effective and valid under applicable Legal Requirements, but if
any provision of this Agreement or another Transaction Agreement is held to be
invalid, illegal, or unenforceable under any Applicable Legal Requirement in any
jurisdiction, such provision will be construed in, or replaced by, a provision
implementing the intent of the parties manifested herein, and will be
ineffective only to the extent of such invalidity, illegality, or
unenforceability in such jurisdiction, without invalidating the remainder of
this Agreement or such other Transaction Agreement in such jurisdiction or any
provision hereof in any other jurisdiction.
12.11 Interpretation and Construction of Transaction Agreements.
(a) Interpretation. Unless the context shall otherwise requires, any
pronoun shall include the corresponding masculine, feminine, and neuter forms,
and words using the singular or plural number shall also include the plural or
singular number, respectively. The words "include," "includes" and "including"
shall be deemed to be followed by the phrase "without limitation," and the word
"or" shall include the meaning "either or both." All references herein to
sections, exhibits, and schedules shall be deemed to be references to sections
of, and exhibits and schedules to, this Agreement unless the context shall
otherwise require. The table of contents and the headings of the sections are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement. Unless the context
shall otherwise require, any reference to any agreement or other instrument or
statute or regulation is to such agreement, instrument, statute or regulation as
amended and supplemented from time to time (and, in the case of a statute or
regulation, to any successor provision). This Section 12.11 shall apply to this
Agreement, the other Transaction Agreements and the schedules and documents
referenced herein or therein.
(b) Drafting. The parties acknowledge that each party has
participated in the drafting of this Agreement and the other Transaction
Agreements, and that any rule of construction to the effect that ambiguities are
to be resolved against the drafting party shall not be applied in the
construction or interpretation of this Agreement or any of the other Transaction
Agreements.
(c) Days. Any reference herein or in another Transaction Agreement
to a "day" or a number of "days" (without the explicit qualification of
"business") shall be interpreted as a reference to a calendar day or number of
calendar days. If any action or notice is to be taken or given on or by a
particular calendar day, and such calendar day is not a Business Day, then such
action or notice shall be deferred until, or may be taken or given on, the next
Business Day.
12.12 Disclaimer of Agency. Except for any provisions herein or in the
other Transaction Agreements expressly authorizing one party to act for another,
this Agreement shall not constitute any party as a legal representative or agent
of any other party, nor shall a party have the right or authority to assume,
create, or incur any Liability of any kind, expressed or implied, against or in
the name or on behalf of the other parties or any of their Affiliates.
12.13 Relationship of the Parties. Nothing contained in this Agreement or
the other Transaction Agreements is intended to, or shall be deemed to, create a
partnership or joint venture relationship among the parties or any of their
Affiliates for any purpose, including tax purposes. None of the parties or any
of their Affiliates will take a position contrary to the foregoing.
73
12.14 Specific Performance. Each party agrees that irreparable harm, for
which there may be no adequate remedy at law and for which the ascertainment of
damages would be difficult, would occur in the event any of the provisions of
this Agreement or the other Transaction Agreements were not performed in
accordance with their specific terms or were otherwise breached. Each party
accordingly agrees that each other party shall be entitled to obtain an
injunction or injunctions to prevent breaches of the provisions of this
Agreement or any other Transaction Agreement and to enforce specifically the
terms and provisions hereof or thereof, in each instance without being required
to post bond or other security and in addition to, and without having to prove
the adequacy of, other remedies at law.
12.15 Language. The parties have negotiated this Agreement and the other
Transaction Agreements in the English language, which shall be the governing
language of this Agreement and the other Transaction Agreements.
12.16 Governing Law/Disputes. This Agreement and, except as otherwise
stated therein, the other Transaction Agreements will be construed and
interpreted in accordance with and governed by the law of the State of New York,
U.S.A., without regard to the choice-of-law provisions thereof. All actions and
proceedings arising out of or relating to this Agreement and the other
Transaction Agreements shall be heard and determined exclusively in any New York
state or federal court sitting in the County of New York, New York. Each of the
parties hereto irrevocably and unconditionally waives all right to trial by jury
in any Proceeding arising out of or relating to this Agreement or the other
Transaction Agreements.
[Rest of Page Intentionally Left Blank]
74
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by it or by an officer or representative thereunto duly
authorized, all as of the date first written above.
SELLER
PARKERVISION, INC.
By:
--------------------------
Name:
-------------------------
Title:
------------------------
LEAD PURCHASER
THOMSON BROADCAST & MEDIA SOLUTIONS, INC.
By:
--------------------------
Name:
-------------------------
Title:
------------------------
PATENT PURCHASER
THOMSON LICENSING, S.A.
By:
--------------------------
Name:
-------------------------
Title:
------------------------
75
INDEX OF EXHIBITS AND SCHEDULES
Exhibits
--------
Exhibit A - Defined Terms
Exhibit B - Patent Assignment Agreement
Exhibit C - Assignment and Assumption Agreement
Exhibit D - Retained Trademark License
Exhibit E - Transition Services Agreement
Exhibit F - Sublease
Exhibit G - Form of Seller Opinion of Counsel
Exhibit I - Specified Individuals for Knowledge Definition
Schedules
---------
Schedule 1.1 - Non-Patent Assets
Schedule 1.2 - Patent Assets
Schedule 1.3(i) - Certain Excluded Assets
Schedule 1.5(o) - Certain Excluded Liabilities
Schedule 1.6(a) - Assignment Consents
Schedule 2.5(a) - Net Assets Calculation
Schedule 2.6 - Purchase Price Allocation
Schedule 4 - Seller's Disclosure Schedule
Schedule 6.10 - Select Financial Information
Schedule 8.1 - Transferred Employees
Schedule 9.1(f) - List of Required Closing Consents
Schedule 9.1(i) - List of Required Employee Acceptances
-i-
EXHIBIT A
CERTAIN DEFINITIONS
"Acquired Assets" shall have the meaning specified in Section 1.2.
"Acquired Intellectual Property Rights" shall mean (i) all Acquired Registered
Intellectual Property Rights; and (ii) any other Intellectual Property Rights
owned, used, controlled, authorized for use or held by Seller that are used in
or necessary to conduct the Business as presently conducted, as conducted since
the inception of the Business or as Proposed to be Conducted by Seller.
"Acquired Personal Property" shall have the meaning specified in Section 4.7(a).
"Acquired Records" means all the files, books, records, manuals, correspondence,
price lists, mailing lists, customer lists and information, distribution lists,
technical support, information technology, production data, sales and
promotional materials and records, purchasing materials and records, research
and development files and data, accounting records, sales order files, papers,
data and other records of Seller recorded in any means or manner pertaining to
the Business, but excluding any of the foregoing exclusively pertaining to the
Excluded Assets.
"Acquired Registered Intellectual Property Rights" shall mean all Registered
Intellectual Property Rights at any time owned by, filed in the name of or
applied for by Seller in connection with the Business or that are related to,
used in or necessary to conduct the Business as presently conducted, as
conducted since the inception of the Business as Proposed to be Conducted by
Seller.
"Acquired Technology" shall mean all Technology owned, used, controlled,
authorized for use or held by Seller that is used in or necessary to conduct the
Business as presently conducted, as conducted since the inception of the
Business or as Proposed to be Conducted by Seller.
"Acquisition Contact" shall have the meaning specified in Section 10.5(a).
"Acquisition Proposal" shall have the meaning specified in Section 6.3.
"Additional Cash Amount" shall have the meaning specified in Section 10.4(g).
"Affiliate" shall mean, with respect to a Person, (i) any member of the
immediate family (including spouse, brother, sister, descendant, ancestor or
in-law) of such Person, (ii) any officer, director or stockholder of such
Person, (iii) any corporation, partnership, trust or other Entity in which any
such Person or any such family member of such Person has a five percent (5%) or
greater interest or is a director, officer, partner or trustee or (iv) any
Person that controls, or is controlled by, or is under common control with, such
Person.
-ii-
"Agreement" is defined in the preamble hereto.
"Assets" means assets, properties, goodwill, Contracts and rights, whether
tangible or intangible, and whether real, personal or mixed, of any nature, kind
and description, wherever located and whether or not carried on the books of the
owner.
"Assignment and Assumption Agreement" shall have the meaning specified in
Section 3.4(b).
"Assignment Consent" shall have the meaning specified in Section 1.6(a).
"Assumed Liabilities" shall have the meaning specified in Section 1.4.
"Business" shall have the meaning set forth in the Recitals.
"Business Day" means any day other than (i) a Saturday or a Sunday or (ii) a day
on which banking and savings and loan institutions are authorized or required by
law to be closed in the United States.
"CameraMan" shall have the meaning set forth in the Recitals.
"Cash Amount" Section 10.4(a).
"Certified Closing Report" shall have the meaning set forth in Section 2.5(a).
"Certified Closing Report Dispute Notice" shall have the meaning set forth in
Section 2.5(b).
"Charter Documents" means a company's certificate of incorporation and bylaws
(and equivalent documents in the case of foreign corporations, to the extent
applicable), including all amendments thereto, as currently in effect, to the
extent applicable to such company, and all applicable Resolutions.
"Claims" means choses-in-action, rights in action and other claims.
"Closing" shall have the meaning specified in Section 3.1.
"Closing Balance Sheet" shall have the meaning set forth in Section 2.5(a).
"Closing Date" shall have the meaning specified in Section 3.1.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Competing Transaction" shall have the meaning specified in Section 10.5(a).
"Computer Equipment" means computer equipment and related devices (including
data processing hardware and media), but excluding any and all Software thereon
or used therewith.
-ii-
"Confidential Information" shall mean all Trade Secrets and other confidential
or proprietary information of a Person, including information derived from
reports, investigations, research, work in progress, codes, marketing and sales
programs, financial projections, cost summaries, pricing formulas, contract
analyses, financial information, projections, confidential filings with any
state or federal agency, and all other confidential concepts, methods of doing
business, ideas, materials or information prepared or performed for, by or on
behalf of such Person by its employees, officers, directors, agents,
representatives, or consultants.
"Consent" means any (i) approval, authorization, certificate, concession,
consent, declaration, grant, exemption, license, permit, variance, vote or
waiver, (ii) registration or filing or (iii) report or notice, including all
renewals, amendments and extensions of any of the foregoing and any similar
matters.
"Contract" shall mean any agreement, contract, consensual obligation, promise,
understanding, arrangement, commitment or undertaking of any nature (whether
written or oral and whether express or implied), whether or not legally binding,
and including any amendment, modification, side letter, supplement or other
agreement or change with respect to the foregoing, whether written or oral.
"Copyrights" shall mean all copyrights, including rights in and to works of
authorship and all other rights corresponding thereto throughout the world,
whether published or unpublished, including rights to prepare, reproduce,
perform, display and distribute copyrighted works and copies, compilations and
derivative works thereof.
"Customer Contracts" means any and all Contracts with customers of the Business,
including, sales agreements, supply agreements, service agreements, license
agreements, maintenance and development agreements, consulting agreements,
source code escrow agreements related to any of the foregoing.
"Damages" shall mean and include any loss, Liability, damage, injury, decline in
value, lost opportunity, claim, demand, settlement, judgment, award, fine,
penalty, Tax, fee (including any legal fee, accounting fee, expert fee or
advisory fee), charge, cost (including any cost of investigation) or expense of
any nature.
"Defined Benefit Plan" shall mean either a plan described in Section 3(35) of
ERISA or a plan subject to the minimum funding standards set forth in Section
302 of ERISA and Section 412 of the Code.
"Deposits and Advances" means performance and other bonds, security and other
deposits, advances, advance payments, prepaid credits, deferred charges and
similar amounts.
"Designated Orders" has the meaning set forth in Section 10.1(d).
"Development Environment" means all Software, development tools, data bases,
data-base tools, utilities, libraries, compilers, assemblers, expert systems,
rules-based engines, performance-based engines, other engines, procedures,
methodologies, techniques, information and related Intellectual Property Rights,
whether or not proprietary, used in or related to design, development,
maintenance or quality assurance of Software, including as related to or
encompassing source code management, piloting and testing, regression test cases
and test suites.
-iv-
"Disclosing Party" shall have the meaning specified in Section 7.3(d).
"Effective Date" shall have the meaning set forth in the preamble hereto.
"Employee Benefit Plan" shall have the meaning specified in Section 3(3) of
ERISA.
"Encumbrance" shall mean any lien, pledge, hypothecation, charge, mortgage,
security interest, encumbrance, equity, trust, equitable interest, claim,
preference, right of possession, lease, tenancy, license, encroachment,
covenant, Order, proxy, option, right of first refusal, preemptive right,
community property interest, legend, defect, impediment, exception, reservation,
limitation, impairment, imperfection of title, condition or restriction of any
nature (including any restriction on the voting of any security, any restriction
on the transfer of any security or other asset, any restriction on the receipt
of any income derived from any asset, any restriction on the use of any asset
and any restriction on the possession, exercise or transfer of any other
attribute of ownership of any asset).
"Entity" shall mean any corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership, joint
venture, estate, trust company (including any limited liability company or joint
stock company) or other legal entity.
"Environmental Liability" means any Liability related to the violation of any
Legal Requirement or Governmental Approval relating to the protection of the
environment (including air, water, soil and natural resources) or health and
safety aspects associated with environmental protection ("Environmental Laws"),
including any presence or release of any Hazardous Substance at, on, under, from
or to any property currently or formerly owned, operated or leased by Seller or
any other location (and any migration therefrom).
"Equity Interest" means (i) the capital stock of or other equity or ownership
interest in an Entity (including partnership interests and limited liability
company membership interests and similar interests and any similar or equivalent
rights) and any document evidencing any of the foregoing and (ii) any
securities, shares or rights convertible into or exercisable for, and any
preemptive, subscription, acquisition or other outstanding right, option,
warrant, conversion right, exercise right, stock appreciation right, redemption
right, repurchase right, phantom security, or Contract of any nature related to
the capital stock or other interest described in clause (i) above.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean each trade or business, whether or not
incorporated, that would be treated as a single employer with Seller under
Section 4001 of ERISA or Section 414(b), (c), (m) or (o) of the Code.
-v-
"Exchange Act" shall have the meaning specified in Section 6.13(a).
"Excluded Assets" shall have the meaning specified in Section 1.3.
"Excluded Liabilities" shall have the meaning specified in Section 1.5.
"FCC" has the meaning set forth in Section 1.5(m).
"FCC IDs" has the meaning set forth in Section 7.15.
"Final Net Assets" shall have the meaning set forth in Section 2.5(b).
"Final Resolution Date" shall have the meaning set forth in Section 2.5(a).
"Financial Statements" shall have the meaning specified in Section 4.4(a).
"Fixed Assets" shall have the meaning set forth in Section 2.5(d).
"Fixed Purchase Price" shall have the meaning set forth in Section 2.1.
"GAAP" means U.S. generally accepted accounting principles in effect on the date
on which they are to be applied pursuant to this Agreement, applied consistently
throughout the relevant periods.
"General Indemnification Cap" shall have the meaning set forth in Section
11.5(b).
"Governmental Approval" shall mean any: (a) permit, license, certificate,
concession, approval, consent, ratification, permission, clearance,
confirmation, exemption, waiver, franchise, certification, designation, rating,
registration, variance, qualification, accreditation or authorization issued,
granted, given, required by or otherwise made available by or under the
authority of any Governmental Authority or pursuant to any Legal Requirement
(including as required by the FCC or any other Governmental Authority with
respect to compliance with technical, product labeling, record-keeping, or other
Legal Requirements such as documentation required under verification,
declaration of conformity, and other equipment self-approval requirements); (b)
right under any Contract with any Governmental Authority; (c) any pending
application or request for any of the foregoing in (a) or (b) above.
"Governmental Authority" shall mean any: (a) nation, principality, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; (c) federal, state, local, municipal, foreign or other court,
arbitrator, or judicial or governmental or quasi-judicial or quasi-governmental
authority of any nature (including any governmental division, subdivision,
department, agency, bureau, branch, office, commission, council, board,
instrumentality, officer, official, representative, organization, unit, body or
Entity and any court or other tribunal); (d) multinational organization or body,
(e) individual, Entity or body exercising, or entitled to exercise, any
executive, legislative, judicial, administrative, regulatory, police, military
or taxing authority or power of any nature, or (f) any arbitrator or arbitral
panel.
-vi-
"Hazardous Substance" means any material, substance or waste listed, defined,
designated or classified by or pursuant to Environmental Law as hazardous,
toxic, pollutant, contaminant or words of similar meaning or effect, including
petroleum or petroleum products (including crude oil) and any derivative or
by-products thereof, natural gas, synthetic gas and any mixtures thereof,
radioactive material or any substance that is or contains polychlorinated
biphenyls (PCBs), radon gas, urea formaldehyde, asbestos-containing materials
(ACMs) or lead.
"Holdback Amount" shall have the meaning set forth in Section 2.2.
"Indemnification Threshold" shall have the meaning set forth in Section 11.5(a).
"Insurance Policies" shall have the meaning specified in Section 11.6.
"Indemnitee" shall have the meaning specified in Section 11.6.
"Indemnitor" shall have the meaning specified in Section 11.6.
"Independent Accounting Firm" shall have the meaning set forth in Section
2.5(b).
"Initial Shares" shall have the meaning specified in Section 10.4(b).
"Intellectual Property Rights" shall mean any intellectual property rights,
including, without limitation, Patents, Copyrights, Mask Works, moral rights,
Trade Secrets, Trademarks, designs, and Technology, together with (a) all
registrations and applications for registrations therefore and (b) all rights to
any of the foregoing (including: (i) all rights received under any license or
other arrangement with respect to the foregoing, (ii) all rights or causes of
action for infringement or misappropriation (past, present or future) of any of
the foregoing and (iii) all rights to apply for or register any of the
foregoing).
"Intellectual Property Rights Representation Cap" shall have the meaning set
forth in Section 11.5(c).
"Interim Pro Forma Financial Information" shall have the meaning specified in
Section 6.10.
"Interim Reporting Date" shall have the meaning specified in Section 6.10.
"Inventory" means any finished products, any work-in-progress or other
inventory, wherever located and whether held by Seller or third parties,
including all product descriptions, works-in-process, samples, packaging,
supplies, service parts, raw materials, purchased parts and goods and damaged or
fragmented inventory.
"IRS" means the Internal Revenue Service.
-vii-
"Knowledge" means any fact or matter (i) with respect to a Person, known by such
Person or any of its officers or directors, (ii) in addition, with respect to
Seller, known by those employees of Seller set forth on Exhibit I, or (iii)
which any of the foregoing Persons or individuals could be reasonably expected
to discover or otherwise become aware in the course of performing his duties
with reasonable care.
"Lead Purchaser" has the meaning set forth in the preamble hereto.
"Lead Purchaser Stock Indemnification and Contribution Cap" has the meaning set
forth in Section 10.4(m).
"Legal Requirement" shall mean any federal, state, local, municipal, foreign or
other law, statute, legislation, constitution, ordinance, code, Order, edict,
decree, proclamation, treaty, convention, rule, regulation, permit, ruling,
directive, requirement (licensing or otherwise), specification, determination,
decision, opinion or interpretation that is or has been issued, enacted,
adopted, passed, approved, promulgated, made, implemented or otherwise put into
effect by or under the authority of any Governmental Authority.
"Liability" shall mean any debt, obligation, duty or liability of any nature
(including any unknown, undisclosed, unmatured, unaccrued, unasserted,
contingent, indirect, conditional, implied, vicarious, derivative, joint,
several or secondary liability, debt, obligation, or duty), regardless of
whether such debt, obligation, duty, or liability would be required to be
disclosed on a balance sheet prepared in accordance with generally accepted
accounting principles and regardless of whether such debt, obligation, duty or
liability is immediately due and payable.
"Manufacturing Operations" shall mean the manufacture of circuit boards on
Seller's circuit board manufacturing line, the assembly of circuit boards and
third party components into the Products and Services of the Business that
Seller conducts in its facility, and Seller's ancillary activities in its
machine shop and paint booth; provided that, for the avoidance of doubt,
"Manufacturing Operations" shall not include (x) research and development,
testing, quality assurance and any other operations related to the Products and
Services of the Business, (y) any Intellectual Property Rights or their use or
creation, and (z) any supply, Contract manufacturing, outsourcing, and other
Contracts, relationships or arrangements with third parties.
"Mask Works" shall mean all mask works, mask work registrations and applications
therefor, and any equivalent or similar rights in semiconductor masks, layouts,
architectures or topology.
"Material Adverse Effect" shall mean a material adverse effect on (i) the
Business, its prospects or financial condition, (ii) the Acquired Assets or
(iii) the ability of Seller to enter into this Agreement or the other
Transaction Agreements, to consummate the Transaction, or to perform its
obligations hereunder or under another Transaction Agreement.
"Material Contracts" shall have the meaning set forth in Section 4.15.
"Multiemployer Plan" shall mean a plan described in Section 3(37) of ERISA.
-viii-
"Nasdaq Market" means the Nasdaq National Market System.
"Net Assets" shall have the meaning set forth in Section 2.5(d).
"Net Inventory" shall have the meaning set forth in Section 2.5(d).
"Net Proceeds" shall have the meaning set forth in Section 10.4(g).
"Non-Assignable Asset" shall have the meaning specified in Section 1.6(a).
"Non-Indemnity Events" shall have the meaning set forth in Section 10.4(l).
"Non-Patent Asset" shall have the meaning specified in Section 1.1.
"Nondisclosing Party" shall have the meaning set forth in Section 7.3(d).
"North America" means the United States, Canada and Mexico.
"Offsetting Liabilities" shall have the meaning set forth in Section 2.5(d).
"Order" shall mean any: (a) temporary, preliminary or permanent order, judgment,
injunction, edict, decree, ruling, pronouncement, determination, decision,
opinion, verdict, sentence, stipulation, subpoena, writ, award or similar action
that is or has been issued, made, entered, rendered or otherwise put into effect
by or under the authority of any court, administrative agency or other
Governmental Authority or any arbitrator or arbitration panel; or (b) Contract
with any Governmental Authority that is or has been entered into in connection
with any Proceeding.
"Ordinary Course of Business" shall describe any action taken by a party if (a)
such action is consistent with such party's past practices and is taken in the
ordinary course of such party's normal day-to-day operations; (b) such action is
not required to be authorized by such party's stockholders, board of directors
or any committee thereof and does not require any other separate or special
authorization of any nature; and (c) such action is similar in nature and
magnitude to actions customarily taken, without any separate or special
authorization, in the ordinary course of the normal day-to-day operations of
other Entities that are engaged in businesses similar to such party's business.
"Other Interim Financial Information" has the meaning set forth in Section 6.11.
"Other Licensed Software" means Software licensed from third parties utilized
for word-processing, accounting or other office or similar purposes.
"Patent Assets" has the meaning set forth in Section 1.2.
"Patent Assignment Agreement" has the meaning set forth in Section 1.2.
-ix-
"Patent Purchaser" has the meaning set forth in the preamble hereto.
"Patents" shall mean all United States and foreign patents and utility models
and applications therefor and all reissues, divisions, re-examinations,
renewals, extensions, provisionals, continuations and continuations-in-part
thereof, and equivalent or similar rights anywhere in the world in inventions
and discoveries.
"PEO" has the meaning set forth in Section 4.11(a).
"Pension Plan" shall mean either a defined benefit pension plan described in
Section 3(35) of ERISA and subject to Title IV of ERISA or a plan subject to the
minimum funding standards set forth in Section 302 of ERISA and Section 412 of
the Code.
"Person" shall mean any individual, Entity or Government Authority.
"Personal Property" means Inventory, Computer Equipment, vehicles, equipment,
supplies, parts, telecommunications equipment, office furniture, and other
personal property or tangible arrests.
"Prepaid Assets" shall have the meaning set forth in Section 2.5(d).
"Pro Forma Balance Sheet" shall have the meaning specified in Section 4.4(b).
"Pro Forma Financial Statements" shall have the meaning specified in Section
4.4(b).
"Pro Forma Income Statement" shall have the meaning specified in Section 4.4(b).
"Proceeding" shall mean any action, suit, litigation, arbitration, proceeding
(including any civil, criminal, administrative, investigative or appellate
proceeding), prosecution, contest, hearing, inquiry, inquest, audit, examination
or investigation that is, has been or may in the future be commenced, brought,
conducted or heard at law or in equity or before any Governmental Authority or
any arbitrator or arbitration panel.
"Products and Services" shall mean all hardware, software, integrated systems or
other products or services manufactured, made, designed, maintained, supported,
developed, sold, licensed, marketed, or otherwise distributed or provided (or
planned or envisioned to be manufactured, made, designed, maintained, supported,
developed, sold, licensed, marketed, or otherwise distributed or provided)
(including all versions and releases thereof, whether already distributed or
provided, under development, planned or conceived, or otherwise), together with
any related materials, information or data, including the names, numbers (e.g.,
part numbers) and packaging associated with such products and services.
"Prohibited Activity" shall have the meaning specified in Section 7.1(a).
"Proposed to be Conducted by Seller" means the conduct of the Business following
Closing as contemplated or proposed to be conducted by Seller (including the
proposed Webstation product line); provided no development, incorporation or
utilization of wireless technologies other than super heterodyne or infrared
wireless technologies shall be included in such conduct; and provided, further,
that no development, incorporation or utilization of direct conversion
technology shall be included in such conduct.
-x-
"Proxy Statement" shall have the meaning specified in Section 6.13(a).
"PTO" shall have the meaning specified in Section 4.9(k).
"Publicly Disclosed Periodic Financial Information" shall have the meaning set
forth in Section 4.4(a).
"Purchase Price" has the meaning set forth in Section 2.1.
"Purchaser 401(k) Plan" Section 8.2(c).
"Purchasers" shall have the meaning set forth in the preamble hereto.
"Purchasers Damages" shall have the meaning specified in Section 11.2.
"Purchasers Indemnified Parties" shall have the meaning set forth in Section
11.2. "PVTV" shall have the meaning set forth in the recitals.
"Real Property" shall mean all real property and all structures, buildings,
building systems (including roof, HVAC, electrical, plumbing, sprinkler and fire
safety systems), irrigation systems, fixtures and other improvements, together
with the systems and facilities servicing such structures, located thereon.
"Rebates and Credits" means refunds, rebates or other discounts due from
suppliers, vendors, or other Persons and rights to offset and claims in respect
thereof.
"Receivables" means all billed and unbilled accounts and notes receivable,
checks, negotiable instruments and chattel papers.
"Registered Intellectual Property Rights" shall mean all United States,
international and foreign: (i) Patents, including applications therefor; (ii)
registered Trademarks, applications to register Trademarks, including
intent-to-use applications, or other registrations or applications related to
Trademarks; (iii) Copyright registrations and applications to register
Copyrights; (iv) Mask Work registrations and applications to register Mask
Works; and (v) any other Intellectual Property Rights that are the subject of an
application, certificate, filing, registration or other document issued by,
filed with, or recorded by, any state, government or other public legal
authority at any time.
"Registration Statement" shall have the meaning set forth in Section 10.4(e).
-xi-
"Reported Net Assets" shall have the meaning set forth in Section 2.5(a).
"Representatives" shall mean officers, directors, attorneys, accountants,
advisors, shareholders, subsidiaries, parent entities and similar Persons.
"Required Seller Vote" shall have the meaning specified in Section 4.2.
"Resale Limitation Period" shall have the meaning set forth in Section 10.4(f).
"Residual Information" Section 7.3(e).
"Resolutions" means, with respect to a Person, true, accurate and complete
copies of the minutes and any other records that accurately and completely
reflect all meetings, proceedings and other actions (including actions by
written consent) of such Person's (i) holders of capital stock, members and
holders of any other Equity Interest and (ii) board of directors, managers or
similar persons and any committees or similar bodies of any of the foregoing,
and any equivalent records and amendments thereto.
"Retained Trademark License" shall have the meaning set forth in Section 3.4(c).
"SEC" shall mean the U.S. Securities and Exchange Commission.
"Securities Act" has the meaning in Section 10.4(d).
"Seller" shall have the meaning set forth in the preamble hereto.
"Seller Common Stock" means the common stock of Seller, par value $.01.
"Seller Damages" shall have the meaning specified in Section 11.3.
"Seller Indemnified Parties" shall have the meaning set forth in Section 11.3.
"Seller Offer" shall have the meaning specified in Section 10.5(b).
"Seller's Disclosure Schedule" shall have the meaning specified in Article 4.
"Seller's Employee Plans" shall have the meaning specified in Section 4.11(a).
"Shareholders Meeting" shall have the meaning specified in Section 6.13(b).
"Shares" shall have the meaning set forth in Section 10.4(c).
"Software" means all software, in object, human-readable or source code, whether
previously completed or now under development, including: programs,
applications, databases, data files, coding and other software; components or
elements thereof; programmer annotations; and all versions, upgrades, updates,
enhancements and error corrections of all of the foregoing.
-xii-
"Stock Payment Notice" shall have the meaning set forth in Section 10.4(a).
"Sublease" shall have the meaning set forth in Section 3.4(f).
"Subsidiary" means, with respect to any Entity, another Entity (i) of which more
than fifty percent (50%) of the securities or other ownership interests having
by their terms ordinary voting power to elect a majority of the board of
directors, or other body performing similar functions, of such other Entity is
directly or indirectly owned or controlled by such Entity, (ii) which such
Entity otherwise directly or indirectly owns or controls or (iii) which is
consolidated in the financial statements of such Entity.
"Superior Proposal" shall have the meaning set forth in Section 6.3.
"Tax" (and, with correlative meaning, "Taxes" and "Taxable") means any net
income, alternative or add-on minimum tax, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount and any interest
on such penalty, addition to tax or additional amount, imposed by any Tax
Authority. For purposes of this Agreement, "Taxes" also includes any obligations
under any agreements or arrangements with any other person or entity with
respect to Taxes of such other person or entity (including pursuant to Treas.
Reg. ss. 1.1502-6 or comparable provisions of state, local or foreign tax Law)
and including any Liability for Taxes of any predecessor entity.
"Tax Authority" means Governmental Authority responsible for the imposition,
assessment or collection of any Tax (domestic or foreign).
"Tax Return" shall mean any return, statement, declaration, notice, certificate
or other document that is or has been filed with or submitted to, or required to
be filed with or submitted to, any Governmental Authority in connection with the
determination, assessment, collection or payment of any Tax or in connection
with the administration, implementation or enforcement of or compliance with any
Legal Requirement related to any Tax.
"Technical Documentation" means all technical and descriptive materials, however
recorded, including those related to the acquisition, design, development, use
or maintenance of Software and its interface with Computer Equipment, as well as
(i) architectural designs, high-level designs, detailed designs, release notes
and other design documents, (ii) system administration/management documentation,
(iii) end-user documentation, (iv) installation guides, (v) functional and
technical specifications, (vi) user interface specifications, (vii)
documentation pertaining to piloting or testing, (viii) documentation pertaining
to new functions, new versions, new releases, developments, creations or
improvements, (ix) quality assurance or development documentation and (x)
programmer annotation.
-xiii-
"Technology" shall mean any know-how, confidential or proprietary information,
name, data, discovery, formulae, idea, method, process, procedure, other
invention, record of invention, model, research, Software, technique,
technology, test information, market survey, website, or information or material
of a like nature, whether patentable or unpatentable and whether or not reduced
to practice.
"Third-Party Development Environment" means Development Environment licensed
from third parties.
"Third-Party Embedded Software" means all third-party Software incorporated or
embedded in, or otherwise distributed with or needed by customers to operate or
utilize Products or Services or other proprietary Software of the Business.
"Trade Secrets" shall mean all trade secrets under applicable law and other
rights in know-how and confidential or proprietary information, processing,
manufacturing or marketing information, including new developments, inventions,
processes, ideas or other proprietary information that provides advantages over
competitors who do not know or use it and documentation thereof (including
related papers, blueprints, drawings, chemical compositions, formulae, diaries,
notebooks, specifications, designs, methods of manufacture and data processing
software and compilations of information) and all claims and rights related
thereto.
"Trademarks" shall mean any and all U.S. and foreign trademarks, service marks,
logos, trade names, corporate names, and Internet domain names and addresses,
and all goodwill associated therewith throughout the world.
"Transaction" shall mean, collectively, the transactions contemplated by this
Agreement, the other Transaction Agreements and the agreements and documents
referenced herein and therein.
"Transaction Agreements" shall mean this Agreement and all other agreements
referenced herein, including the Patent Assignment Agreement, the Assignment and
Assumption Agreement, the Transition Services Agreement, the Retained Trademark
License, and the Sublease.
"Transfer Taxes" shall mean all federal, state, local or foreign sales, use,
transfer, Real Property transfer, mortgage recording, stamp duty, value-added or
similar Taxes that may be imposed in connection with the transfer of Acquired
Assets or assumption of Assumed Liabilities, together with any interest,
additions to Tax or penalties with respect thereto and any interest in respect
of such additions to Tax or penalties.
"Transferred Employees" shall have the meaning specified in Section 8.1. For the
avoidance of doubt, the term
"Transferred Employees" shall include Seller's common-law employees as well as
any "leased employees" (within the meaning of Section 414(n) of the Code) and
any "worksite employees" (within the meaning of IRS Revenue Procedure 2002-21).
"Transition Services Agreement" shall have the meaning set forth in Section
3.4(e).
-xiv-
"Video Division" shall have the meaning set forth in the recitals.
"WARN Act" shall have the meaning specified in Section 4.10(d).
"Wireless Division" shall have the meaning set forth in the recitals.
-xv-
APPENDIX B
[WELLS FARGO SECURITIES LETTERHEAD]
February 25, 2004
Board of Directors
ParkerVision, Inc.
8493 Baymeadows Way
Jacksonville, FL 32256
Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to ParkerVision, Inc. ("ParkerVision" or the "Company") of the
Consideration (as defined below) to be paid to ParkerVision contemplated by the
Draft Asset Purchase Agreement dated as of February 23, 2004 (the "Draft
Agreement"), pursuant to which Thomson will purchase the Business (as defined in
the Draft Agreement) and all related assets of the Company's video division
("Video Division") (the "Purchase").
We understand that ParkerVision and Thomson intend to execute the Agreement
when finalized. Under the terms of the Draft Agreement, upon consummation of the
Purchase, Thomson will pay to ParkerVision an aggregate amount in cash equal to
$12.5 million plus an additional amount equal to ParkerVision's final "Net
Assets" as defined in the Draft Agreement as well as assume certain liabilities
(referred to herein as the "Consideration"). The terms and conditions of the
Purchase are more fully set forth in the Draft Agreement.
In arriving at our opinion, Wells Fargo Securities, LLC ("Wells Fargo
Securities") reviewed, among other things: (i) the Draft Agreement and exhibits
thereto; (ii) certain publicly available financial statements of ParkerVision
and other historical financial information provided by ParkerVision that we
deemed relevant; (iii) certain financial analyses and forecasts of the "Video
Division" prepared by and reviewed with management of ParkerVision and the views
of senior management of the "Video Division" regarding the Video Division's past
and current business operations, results thereof, financial condition and future
prospects; (iv) a comparison of certain financial information for the Video
Division with similar publicly available information for certain other publicly
traded companies; (v) the financial terms of recent business combinations deemed
generally relevant to our analysis; and (vi) such other information, financial
studies, analyses and investigations and financial, economic and market criteria
as we considered relevant.
Board of Directors
ParkerVision, Inc.
February 25, 2004
Page 2 of 2
In rendering its fairness opinion, Wells Fargo Securities has assumed and
relied upon, without independent verification, the accuracy and completeness of
all the financial information, analyses and other information that was publicly
available or otherwise furnished to, reviewed by or discussed with us, and we do
not assume any responsibility or liability therefore. We did not make an
independent evaluation or appraisal of the specific assets or the liabilities
(contingent or otherwise) of the Video Division nor have we been furnished with
any such evaluations or appraisals. With respect to financial forecasts and
other information and data provided to or otherwise reviewed by or discussed
with us, we have been advised by the management of the Company that such
forecasts and other information and data were reasonably prepared based on the
best currently available estimates and judgments of the management of the
Company as to the future financial performance of the Video Division and have
assumed that such performances will be achieved. We express no opinion as to
such financial projections or the assumptions on which they are based. We have
also assumed that there has been no material change in the Video Division's
assets, results of operations, financial condition, business or prospects since
the date of the last financial statements made available to us. We have assumed,
that all of the representations and warranties contained in the Draft Agreement
and all related agreements are true and correct, that each party to such
agreements will perform all of the covenants required to be performed by such
party under such agreements and that the conditions precedent in the Draft
Agreement are not waived. We have further assumed that the Purchase will be
completed in a timely fashion and that the final terms will not vary materially
from the Draft Agreement.
Our opinion is necessarily based on economic, market and other conditions
as in effect on, and the information made available to us as of, the date
hereof. Events occurring after the date hereof could materially affect this
opinion. We were not requested to consider, and our opinion does not address,
the relative merits of the Purchase as compared to any alternative business
strategies that might exist for the Company. Our opinion is, in any event,
limited to the fairness, from a financial point of view, of the Consideration in
the Purchase and does not address the Company's underlying business decision to
effect the Purchase. We have not undertaken to update, revise or reaffirm this
opinion or otherwise comment upon events occurring after the date hereof. We are
expressing no opinion herein as to what the likely trading range of
ParkerVision's common stock subsequent to the completion of the Purchase.
Wells Fargo Securities, as part of its investment banking business, is
customarily engaged in the valuation of businesses, including financial
institutions, and their securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of listed and unlisted
securities, and other corporate transactions. We have acted as ParkerVision's
financial advisor in connection with the Purchase and will receive a fee for our
services, a significant portion of which is contingent upon consummation of the
Purchase. In the past, we have also provided, and may in the future provide,
certain other investment banking services to ParkerVision and have received, and
will receive, compensation for such services.
In the ordinary course of our business, we may actively trade the equity
securities of ParkerVision for our own account and for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
This fairness opinion is directed to the Board of Directors of ParkerVision
in connection with its consideration of the Purchase and does not constitute a
recommendation of the Purchase to the Company. Neither this Opinion nor any
copies or excerpts herefrom may be publicly distributed or disclosed to any
third person, firm or corporation without the express prior written consent of
Wells Fargo Securities, except that the Opinion may be embodied in Securities
and Exchange Commission disclosure documents (including any proxy or information
statement delivered to shareholders of ParkerVision in connection with the
Purchase); provided, however that the description of Wells Fargo Securities, the
Opinion and related matters shall be subject to the prior reasonable and timely
review of Wells Fargo Securities and its counsel.
Based upon and subject to the foregoing, it is our opinion, as of the date
hereof, that the Consideration is fair, from a financial point of view, to
ParkerVision.
Very truly yours,
/s/ Wells Fargo Securities, LLC
Wells Fargo Securities, LLC
PARKERVISION, INC. - PROXY
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON __, 2004
The undersigned Shareholder(s) of PARKERVISION, INC., a Florida
P corporation ("Company"), hereby appoints Jeffrey L. Parker, Todd
Parker, David Sorrells and William Hightower, or any of them, with
full power of substitution and to act without the other, as the
agents, attorneys and proxies of the undersigned, to vote the shares
standing in the name of the undersigned at the Special Meeting of
R Shareholders of the Company to be held on _____ __, 2004 and at all
adjournments thereof. The Board of Directors of the Company has called
this Special Meeting of Shareholders and is soliciting this proxy in
order to obtain approval of the shareholders of the Company for the
sale of the Company's video division, as described in the Proxy
O Statement enclosed herewith. The Board of Directors has previously
approved the sale of the video division. This proxy will be voted in
accordance with the instructions given below. If no instructions are
given, this proxy will be voted FOR all of the following proposals.
X 1. Approval and adoption of the asset purchase agreement and the
proposed sale of the Company's video division, as described in
the Proxy Statement enclosed herewith.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Y
2. In their discretion, the proxies are authorized to vote upon such
other business as may lawfully come before the meeting or any
adjournment thereof.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
[ ] I plan on attending the Special Meeting.
Date: ___________________, 2004
______________________________
Signature
______________________________
Signature if held jointly
Please sign exactly as name
appears above. When shares
are held by joint tenants,
both should sign. When
signing as attorney,
executor, administrator,
trustee or guardian, please
give full title as such. If
a corporation, please sign
in full corporate name by
President or other
authorized officer. If a
partnership, please sign in
partnership name by
authorized person.