<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended December 31, 1998
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from
Commission File Number 0-021403
VOXWARE, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 36-3934824
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
305 College Road East
Princeton, New Jersey 08540
609-514-4100
(Address, including zip code, and telephone
number (including area code) of registrant's
principal executive office)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the last 90 days. YES [X] NO [_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Shares Outstanding at February 12, 1998
- ----------------------------- ----------------------------------------
Common Stock, $.001 par value 13,343,851
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VOXWARE, INC.
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited) Page No.
-------
Statements of Operations
<S> <C>
Three and Six Months Ended December 31, 1998 and 1997 ... 3
Balance Sheets
December 31, 1998 and June 30, 1998 ................... 4
Statements of Cash Flows
Six Months Ended
December 31, 1998 and 1997 .............................. 5
Notes to Financial Statements ........................... 6
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition ..................................... 7
PART II - OTHER INFORMATION
Item 5. Other Information .................................. 13
Item 6. Exhibits and Reports on Form 8-K ................... 13
SIGNATURES ................................................................ 14
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Voxware, Inc.
Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1998 1997 1998 1997
-------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues:
Product revenues:
License fees .................................... $ 207 $ 1,037 $ 451 $ 2,042
Royalties and recurring revenues ................ 181 581 322 1,232
-------- -------- -------- --------
Total product revenues .................. 388 1,618 773 3,274
Service revenues ..................................... 324 239 490 395
-------- -------- -------- --------
Total revenues .................................. 712 1,857 1,263 3,669
-------- -------- -------- --------
Cost of revenues:
Cost of product revenues ............................. -- 46 -- 97
Cost of service revenues ............................. 164 92 237 146
-------- -------- -------- --------
Total cost of revenues .......................... 164 138 237 243
-------- -------- -------- --------
Gross profit ............................ 548 1,719 1,026 3,426
-------- -------- -------- --------
Operating expenses:
Research and development ............................. 434 1,331 1,111 2,775
Sales and marketing .................................. 725 995 1,370 2,054
General and administrative ........................... 395 553 858 1,150
-------- -------- -------- --------
Total operating expenses ........................ 1,554 2,879 3,339 5,979
-------- -------- -------- --------
Operating loss .................................. (1,006) (1,160) (2,313) (2,553)
Interest income ........................................ 171 220 355 442
-------- -------- -------- --------
Net loss ............................................... $ (835) $ (940) $ (1,958) $ (2,111)
======== ======== ======== ========
Basic and diluted net loss
per common share ....................................... $ (0.06) $ (0.07) $ (0.15) $ (0.17)
======== ======== ======== ========
Weighted average number of common
shares outstanding ..................................... 13,318 12,780 13,310 12,664
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements
3
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Voxware, Inc.
Balance Sheets
<TABLE>
<CAPTION>
December 31, June 30,
1998 1998
------------ --------
(unaudited)
(In thousands, except share and per share data)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................................. $ 6,370 $ 9,149
Short-term investments ............................................... 5,382 4,388
Accounts receivable, net .............................................. 828 1,254
Prepaid expenses and other current assets ............................. 387 268
-------- --------
Total current assets ........................................... 12,967 15,059
Property and equipment, net .................................................. 349 407
Other assets, net ............................................................ 126 91
-------- --------
$ 13,442 $ 15,557
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ................................. $ 999 $ 1,097
Deferred revenues ..................................................... 148 219
-------- --------
Total current liabilities ...................................... 1,147 1,316
-------- --------
Deferred rent ................................................................ 294 328
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 10,000,000 shares authorized;
none issued and outstanding ........................................ -- --
Common stock, $.001 par value, 30,000,000 shares authorized; 13,343,851
and 13,292,524 shares issued and outstanding at
December 31, 1998 and June 30, 1998, respectively ................. 13 13
Additional paid-in capital ............................................ 29,965 29,915
Unrealized gain (loss) on available-for-sale securities .............. (2) 2
Accumulated deficit ................................................... (17,975) (16,017)
-------- --------
Total stockholders' equity ..................................... 12,001 13,913
-------- --------
$ 13,442 $ 15,557
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
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Voxware, Inc.
Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended December 31,
------------------------------
1998 1997
-------- --------
(in thousands)
<S> <C> <C>
Operating Activities:
Net loss ........................................................................... $ (1,958) $ (2,111)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ...................................................... 109 114
Provision for doubtful accounts .................................................... 84 210
Changes in assets and liabilities:
Accounts receivable ............................................................. 342 64
Prepaid expenses and other current assets ....................................... (119) (105)
Other assets .................................................................... (35) (2)
Accounts payable and accrued expenses ........................................... (98) (573)
Deferred revenues ............................................................... (71) 60
Deferred rent ................................................................... (34) 50
-------- --------
Net cash used in operating activities ........................................ (1,780) (2,293)
-------- --------
Investing Activities:
Purchases of short-term investments ................................................ (9,829) (37,612)
Sales and maturities of short-term investments ..................................... 8,831 33,996
Purchases of property and equipment ................................................ (51) (49)
-------- --------
Net cash used in investing activities ........................................ (1,049) (3,665)
-------- --------
Financing Activities:
Proceeds from exercises of common stock options .................................... 19 644
Issuance of common stock pursuant to Employee
Stock Purchase Plan ............................................................ 31 111
-------- --------
Net cash provided by financing activities .................................... 50 755
-------- --------
Decrease in cash and cash equivalents .................................................. (2,779) (5,203)
Cash and cash equivalents, beginning of period ......................................... 9,149 10,627
-------- --------
Cash and cash equivalents, end of period ............................................... 6,370 5,424
Short-term investments, end of period .................................................. 5,382 9,461
-------- --------
Cash, cash equivalents and short-term investments,
end of period ...................................................................... $ 11,752 $ 14,885
======== ========
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:
Unrealized loss on short-term investments .................................... $ (4) $ 3
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
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Voxware, Inc.
Notes To Financial Statements
1. BASIS OF PRESENTATION
The financial statements as of December 31, 1998 and for the three and
six month periods ended December 31, 1998 and 1997 are unaudited and
reflect all adjustments (consisting only of normal recurring adjustments)
which are, in the opinion of management, necessary for a fair presentation
of the financial position and operating results for the interim periods.
The financial statements should be read in conjunction with the financial
statements and notes thereto, together with management's discussion and
analysis of financial condition and results of operations, contained in the
Company's Annual Report on Form 10-K which was filed on September 28, 1998,
as amended on Form 10-K/A which was filed on October 28, 1998.
The results of operations for the interim periods ended December 31,
1998 are not necessarily indicative of the results to be expected for the
fiscal year ending June 30, 1999 or any other future periods.
2. NET LOSS PER SHARE
The Company has presented net loss per share for the three and six
months ended December 31, 1998 and 1997 pursuant to Statement of Financial
Accounting Standards (SFAS) No. 128 "Earnings per Share." Net loss per
share was computed by dividing the net loss by the weighted average number
of common shares outstanding during the three and six months ended December
31, 1998 and 1997. Due to the Company's net losses for the three and six
months ended December 31, 1998 and 1997, the effect of including
outstanding common stock options in the calculation of net loss per share
would be anti-dilutive. Therefore, outstanding common stock options have
not been included in the calculation of net loss per share, and as a
result, basic net loss per share is the same as diluted net loss per share
for all periods presented.
3. REVENUE RECOGNITION
The Company generates revenues from two sources: fees from product
licenses and fees for services provided. Product revenues consist of
license fees and royalties and recurring revenues. Product revenues from
license fees are generally recognized upon shipment, provided that there
are no significant post-delivery obligations, persuasive evidence of an
arrangement exists, pricing is fixed or determinable, the payment is due
within one year and collection of the resulting receivable is deemed
probable. Royalties and recurring revenues include royalties, which are
generally based on a percentage of licensees' sales or units shipped, and
pre-determined periodic license fees. Royalty revenues are recognized at
the time of the customer's shipment of products incorporating the Company's
technology. Recurring product license fees are generally recognized at the
inception of the renewal period, provided that there are no significant
post-delivery obligations, persuasive evidence of an arrangement exists,
pricing is fixed or determinable, the payment is due within one year and
collection of the resulting receivable is deemed probable. Service revenues
from customer maintenance support, including the amounts bundled with
initial or recurring revenues, are recognized over the term of the
maintenance support period, which is typically one year. Service revenues
from engineering fees are recognized upon customer acceptance or over the
period in which services are provided if customer acceptance is not
required.
4. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENT
Effective July 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"). Comprehensive income is a more inclusive financial
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reporting methodology that includes disclosure of certain financial
information that historically has not been recognized in the calculation of
net income (loss). SFAS 130 requires that all items defined as
comprehensive income, including changes in the amounts of unrealized gains
and losses on available-for-sale securities, be shown as a component of
comprehensive loss. In the Company's annual financial statements,
comprehensive loss will be required to be presented either in a separate
financial statement or as part of either the statement of operations or
statement of stockholders' equity. The only comprehensive income item the
Company has is unrealized gains and losses on available-for-sale
securities.
The following reconciles net loss to comprehensive net loss for the
three and six month periods ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
-------------------------------------------------------------
1998 1997 1998 1997
------- ------- ------- -------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Net loss ......................................... $ (835) $ (940) $(1,958) $(2,111)
Other comprehensive income:
Unrealized gain (loss) on
available-for-sale securities .................... (12) 3 (4) 3
------- ------- ------- -------
Comprehensive net loss ........................... $ (847) $ (937) $(1,962) $(2,108)
======= ======= ======= =======
</TABLE>
5. SUBSEQUENT EVENT
On February 4, 1999, the Company entered into a definitive agreement
with Ascend Communications, Inc. ("Ascend") to sell to Ascend for
approximately $5.1 million in cash substantially all of its assets relating
to what has historically been the Company's primary business of developing
and commercializing voice processing technologies and products. Also on
February 4, 1999, Voxware entered into a definitive agreement with Verbex
Voice Systems, Inc. ("Verbex") to acquire substantially all of the assets
of Verbex for approximately $5.2 million in cash. The Company believes that
the Verbex transaction will be consummated on or about February 18, 1999
and that the Ascend transaction will be consummated, subject to stockholder
approval, in May or June 1999. After consummation of the transactions,
Voxware will focus its efforts on the development of Verbex's business,
which is the development and commercialization of speech recognition
systems for the warehousing and manufacturing markets. This will include
the exploration of strategic alternatives to augment Verbex's business,
including potential acquisitions and joint ventures. In addition, the sale
to Ascend does not include Voxware's rights and obligations under its
existing license agreements and, as part of the transaction, Voxware will
receive a license back from Ascend of the Voxware technologies necessary to
service its existing licensees. The license will also allow Voxware, with
the consent of Ascend, to license those technologies to new licensees for
certain limited uses. Therefore, after the sale to Ascend, Voxware expects
to continue to have limited licensing revenue and to engage in a limited
amount of additional licensing activity relating to the voice processing
technologies sold to Ascend.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
This report contains forward-looking statements which involve risks
and uncertainties. Such statements are subject to certain factors which may
cause the Company's plans and results to differ. Factors that may cause
such differences include, but are not limited to, the approval of the
Company's sale of its current business to Ascend Communications, Inc.
("Ascend"), the Company's acquisition of substantially all of the assets of
Verbex Voice Systems, Inc. ("Verbex") and the Company's ability to compete
in Verbex's business, which is a new line of business for the Company,
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the rate of progress, if any, of the Company's product development programs
and the uncertainty of acceptance of the Company's products in the
marketplace, the highly competitive nature of the Company's industry and
the Company's ability to compete successfully, the Company's ability to
attract and retain qualified personnel, the Company's ability to
successfully enter into and maintain relationships with third parties and
the Company's dependence on such third parties to develop and market
products using the Company's technology and to develop a recurring revenue
stream to the Company, the Company's ability to manage its growth, the
costs involved in obtaining and enforcing patents and any necessary
licenses, the Company's ability to obtain additional funds as necessary,
and those other risks discussed in the Company's Annual Report on Form
10-K.
Overview
On February 4, 1999, Voxware entered into a definitive agreement with
Ascend Communications, Inc. to sell to Ascend substantially all of its
assets relating to what has historically been the Company's primary
business of developing and commercializing voice processing technologies
and products. Also on February 4, 1999, Voxware entered into a definitive
agreement with Verbex Voice Systems, Inc. to acquire substantially all of
the assets of Verbex. The Company believes that the Verbex transaction will
be consummated on or about February 18, 1999 and that the Ascend
transaction will be consummated, subject to stockholder approval, in May or
June 1999. After consummation of the transactions, Voxware will focus its
efforts on the development of Verbex's business, which is the development
and commercialization of speech recognition systems for the warehousing and
manufacturing markets. This will include the exploration of strategic
alternatives to augment Verbex's business, including potential acquisitions
and joint ventures. In addition, the sale to Ascend does not include
Voxware's rights and obligations under its existing license agreements and,
as part of the transaction, Voxware will receive a license back from Ascend
of the Voxware technologies necessary to service its existing licensees.
The license will also allow Voxware, with the consent of Ascend, to license
those technologies to new licensees for certain limited uses. Therefore,
after the sale to Ascend, Voxware expects to continue to have limited
licensing revenue and to engage in a limited amount of additional licensing
activity relating to the voice processing technologies sold to Ascend.
Voxware's current business, which is being sold to Ascend, has been to
develop, market, license and support digital speech and audio technologies
and solutions. MetaVoice, the Company's innovative speech coding
technology, is designed to reproduce high quality speech while requiring
very low communications bandwidth and processing power. MetaSound, the
Company's general audio coding technology built on core technology licensed
from Nippon Telegraph and Telephone Corporation is specifically suitable
for high quality music compression. The Company has licensed its
technologies to software and hardware companies for a wide range of
applications and services.
Since Voxware's inception in August 1993, the Company has raised net
proceeds of approximately $29,898,000 as follows: approximately $8,838,000
through private placements; approximately $18,517,000 through the Initial
Public Offering which was declared effective on October 30, 1996; and
approximately $2,543,000 through other sales of equity securities,
including exercises of common stock options and common stock warrants, and
issuances of common stock pursuant to the Company's Employee Stock Purchase
Plan.
The Company has historically generated revenues from two sources: fees
from product licenses and fees for services provided. Product revenues
consist of two components: license fees, and royalties and recurring
revenues. Voxware has licensed its products primarily to software and
hardware companies which incorporate the Company's products and
technologies into their products. Arrangements with customers, which were
negotiated on a case-by-case basis, have historically included one or more
of the following: initial license fees, quarterly license fees, annual
license fees or royalties based on the licensee's revenue generated or
units shipped of products incorporating the Company's technologies. One of
the Company's objectives has been to develop recurring revenue through
entering into licensing agreements with third parties which provide for
royalties or other recurring payments. As a result, the timing and amount
of the Company's revenues are substantially dependent on the timing and
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efforts of the Company's licensees in developing and marketing products
incorporating the Company's products and technologies. There can be no
assurance as to the timing or success of any licensee implementation or the
timing or amount of recurring revenues, if any, from any licensee product.
A majority of the Company's existing licensees compete in the
multimedia Internet software market, which is a relatively new market, and
many of the companies compete against much more established companies
and/or have businesses that are relatively immature. Many of the licenses
entered into in the multimedia Internet software market have been in
existence for a significant period of time and the Company believes that a
significant number of its licensees which compete in this market have not
incorporated, and may never incorporate, Voxware's technologies into their
products. Therefore, the Company may never derive royalties or other
recurring revenues from many of its existing license agreements in the
multimedia Internet software market. With respect to Internet Protocol (IP)
telephony, deployments in that market have primarily utilized standardized
codec technologies (and not Voxware's proprietary codec technologies). In
addition, deployments in IP telephony have been characterized by bandwidth-
rich managed networks (Intranets), which networks generally do not benefit
significantly from low bandwidth solutions such as Voxware's technologies.
As a result of these factors, demand for Voxware's technologies in the IP
telephony market has not been significant. In connection with the
aforementioned definitive agreement in which Voxware agreed to sell to
Ascend substantially all of its assets relating to what has historically
been its primary business of developing and commercializing voice
processing technologies and products, the Company expects to discontinue
its activities in the IP telephony market. As a result of the circumstances
surrounding development and status of the multimedia and IP telephony
markets, among other things, the Company wrote-off approximately $688,000
in accounts receivable during the year ended June 30, 1998. The Company
believes that all or a portion of the written-off receivables may have been
recoverable through certain legal enforcement of the underlying contractual
arrangements. However, the Company made a business decision not to sue or
aggressively pursue collection of outstanding payment obligations from
these customers because (1) it believes that the impact on the Company's
reputation for initiating certain lawsuits or other aggressive collection
actions against companies which could potentially be future customers may
be more costly than the benefit that could be derived from recoveries of
accounts receivable through these means, and (2) the costs of pursuing
legal recourse and effectuating collection efforts would likely offset
collections, if any. As a result of these factors, the Company deemed
certain of its accounts in multimedia and IP telephony uncollectible, and
wrote-off those accounts during fiscal 1998.
Software product revenues are generally recognized upon shipment,
provided that there are no significant post-delivery obligations,
persuasive evidence of an arrangement exists, pricing is fixed or
determinable, the payment is due within one year and collection of the
resulting receivable is deemed probable. If an acceptance period is
required, revenues are recognized upon customer acceptance. Royalty
revenues are recognized in the period of customer shipment.
Service revenues consist of customer maintenance support and
engineering fees. Customer maintenance support services include providing
updates and technical support to licensees of the Company's products.
Engineering services include providing technical resources and technical
assistance to support customer-specific development efforts, which include
porting the Company's technologies to specific hardware platforms and
providing customized speech and audio solutions to customers. Customer
maintenance support revenues are recognized over the term of the support
period, which typically lasts for one year. Engineering fees are generally
recognized upon customer acceptance or upon delivery if customer acceptance
is not required. All research and development costs are expensed as
incurred.
The Company has only a limited operating history upon which an
evaluation of the Company and its prospects can be based. Since its
inception, the Company has incurred significant losses and, as of December
31, 1998, the Company had an accumulated deficit of $17,975,000. In at
least the near term quarters, the
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Company expects to incur net losses as it pursues a new line of business.
The limited operating history of the Company makes the prediction of future
results of operations impossible, particularly in light of the Company's
pending sale of its existing business to Ascend and pending acquisition of
the speech recognition systems business of Verbex. Therefore, the Company's
historical revenues should not be taken as indicative of future revenues.
In addition, the Company's operating results may fluctuate significantly in
the future as a result of a variety of factors, including, but not limited
to, the entrance into a new line of business, the budgeting cycles of
potential customers, the volume of, and revenues derived from sales of
products by the Company's licensees that incorporate the Company's
products, the rate of new licensing activity, as well as the termination of
existing license agreements, the introduction of new products or services
by the Company or its competitors, pricing changes in the industry, the
degree of success of the Company's efforts to penetrate its target markets,
technical difficulties with respect to the use of products developed by the
Company or its licensees, the level of usage of the Internet, and general
economic conditions.
Results of Operations
Revenues
Total revenues decreased $1,145,000 from $1,857,000 in the three
months ended December 31, 1997 to $712,000 in the three months ended
December 31, 1998, reflecting a decrease in the amount of license fees
recognized and a decrease in the amount of royalties and recurring revenues
recognized from customers who licensed the Company's products in previous
periods, partially offset by an increase in service revenues. On a year-to-
date basis, total revenues decreased $2,406,000 from $3,669,000 for the six
months ended December 31, 1997 to $1,263,000 for the six months ended
December 31, 1998. The Company believes that a variety of factors
contributed to the overall decrease in revenues including, among other
things, the aforementioned factors and circumstances affecting most of the
Company's licensees which compete in the multimedia Internet software
market, and the transition of the Company's strategic focus to markets
other than multimedia software. With respect to that transition, in
targeting customers in the electronic devices market, and in aiming to
provide customized solutions to customers in that market, the Company was
selective in marketing and licensing to customers which the Company
believed more likely to provide opportunities for high quality, prosperous
OEM relationships than its existing licensees in the multimedia Internet
software market. In connection with the aforementioned definitive
agreements in which Voxware agreed on February 4, 1999 to (i) sell to
Ascend substantially all of its assets relating to what has historically
been its primary business of developing and commercializing voice
processing technologies and products, and (ii) acquire substantially all of
the assets of Verbex Voice Systems, Inc., Voxware expects to focus its
future efforts on the development of Verbex's business, which is the
development and commercialization of speech recognition systems for the
warehousing and manufacturing markets. In that regard, the Company expects
to significantly reduce its activities in the multimedia Internet software
and the electronic devices markets, and expects to discontinue its
activities in the IP telephony market.
One of the Company's former customers, Netscape Communications
Corporation ("Netscape"), accounted for 26% of total revenues in the three
month period ended December 31, 1997, and accounted for 23% of total
revenues in the six month period ended December 31, 1997. As disclosed in
the Company's report on Form 8-K dated September 30, 1997 and in the
Company's report on Form 10-Q for the three months ended December 31, 1997
dated February 13, 1998, Netscape discontinued certain of its products,
including products which would incorporate the Company's technologies, and
consequently Voxware and Netscape entered into a second amendment of their
software license agreement which terminated certain of Netscape's rights
pursuant to their software license agreement.
Product revenues decreased $1,230,000 from $1,618,000 in the three
months ended December 31, 1997 to $388,000 in the three months ended
December 31, 1998. In the six month period ended December 31, 1998, product
revenues totaled $773,000, reflecting a decrease of $2,501,000 from product
revenues of $3,274,000 for the six months ended December 31, 1997. The
decreases in product revenues reflect a
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decrease in the amount of license fees recognized during the three and six
months ended December 31, 1998 compared to the amount of license fees
recognized during the three and six months ended December 31, 1997, and a
decrease in the amount of royalties and recurring revenues recognized from
customers who licensed the Company's products in previous periods. The
Company believes that the factors discussed in the preceding paragraphs,
among other things, contributed to the overall decrease in product
revenues. For the three month periods ended December 31, 1998 and 1997,
approximately 53% and 64% of the Company's product revenues were
attributable to license fees, respectively, and 47% and 36% were
attributable to royalties and recurring revenues, respectively. For the six
month periods ended December 31, 1998 and 1997, approximately 58% and 62%
of the Company's product revenues were attributable to license fees,
respectively, and 42% and 38% were attributable to royalties and recurring
revenues, respectively.
During the three months ended December 31, 1998, the Company
recognized $207,000 in license fees related to two agreements, reflecting a
decrease of $830,000 from $1,037,000 in license fees related to ten
agreements for the three months ended December 31, 1997. During the six
months ended December 31, 1998, the Company recognized $451,000 of license
fees, reflecting a decrease of $1,591,000 from $2,042,000 for the six
months ended December 31, 1997. For the three months ended December 31,
1998, the Company recognized $181,000 in royalties and recurring revenues,
which were derived from a total of six customers. These amounts compare to
$581,000 in royalties and recurring revenues which were derived from a
total of seven customers during the three months ended December 31, 1997.
For the six months ended December 31, 1998, the Company recognized $322,000
in royalties and recurring revenues, reflecting a decrease of $910,000 from
$1,232,000 for the six months ended December 31, 1997.
Service revenues were primarily attributable to customer maintenance
support and fees for engineering services. For the three months ended
December 31, 1998, service revenues totaled $324,000, reflecting an
increase of $85,000 over service revenues of $239,000 for the three months
ended December 31, 1997. For the six months ended December 31, 1998,
service revenues totaled $490,000, reflecting an increase of $95,000 over
service revenues of $395,000 for the six months ended December 31, 1997
These increases are primarily attributable to the shift in business focus
over the last several quarters prior to the Ascend and Verbex agreements
toward hardware-based transactions in the consumer devices market.
Hardware-based consumer devices transactions generally require more upfront
engineering services than do multimedia software arrangements, which were
the primary Company's focus in the three and six months ended December 31,
1997.
Cost of Revenues
Cost of revenues increased $26,000 from $138,000 for the three months
ended December 31, 1997 to $164,000 for the three months ended December 31,
1998. The increase in cost of revenues was directly attributable to the
increase in service revenues described above, offset by the impact of the
decrease in product revenues. Cost of product revenues decreased $46,000
from the three months ended December 31, 1997 compared to the same period
in 1998, reflecting a decrease in royalties due to a third party vendor for
products which incorporate that vendor's technologies. No such products
were sold during the three months ended December 31, 1998. For the fiscal
year-to-date periods, cost of revenues remained relatively flat at $237,000
for the six months ended December 31, 1998 compared to $243,000 for the six
months ended December 31, 1997. This result is attributable to an increase
in cost of service revenues, offset by a decrease in cost of product
revenues.
Cost of service revenues consists primarily of the expenses associated
with customer maintenance support and engineering services, including
employee compensation and equipment depreciation. Cost of service revenues
increased $72,000 from $92,000 in the three months ended December 31, 1997
to $164,000 in the three months ended December 31, 1998. Cost of service
revenues increased $91,000 from $146,000 for the six months ended December
31, 1997 to $237,000 in the six months ended December 31, 1998. These
increases in cost of service revenues are primarily a result of the
increase in service revenues recognized and the composition of the
underlying service revenues during those periods. Engineering fees
generally require a
11
<PAGE>
greater cost of revenues as a percentage of service revenues than
maintenance support revenues. In the three and six months ended December
31, 1998, a greater portion of service revenues was derived from
engineering fees than maintenance support revenues in comparison to the
three and six month periods ended December 31, 1997. This change in
composition of service revenues resulted in a greater cost of service
revenues as a percentage of service revenues for the three and six month
periods ended December 31, 1998 compared to the three and six month periods
ended December 31, 1997.
Operating Expenses
Total operating expenses decreased by $1,325,000 (46%) from $2,879,000
in the three months ended December 31, 1997 to $1,554,000 in the three
months ended December 31, 1998. In the six month period ended December 31,
1998, total operating expenses totaled $3,339,000, reflecting a $2,640,000
(44%) decrease from total operating expenses of $5,979,000 for the six
month period ended December 31, 1997. These decreases in total operating
expenses primarily reflect headcount reductions in application development
and support and other cost reductions associated with the restructuring of
the Company's business focus from consumer application software toward an
OEM (original equipment manufacturer) model over the last several quarters
prior to the Ascend and Verbex agreements, including reductions in outside
professional services. As of December 31, 1998, the Company's headcount
totaled 33, compared to total headcount of 86 as of December 31, 1997.
Research and development expenses primarily consist of employee
compensation and equipment depreciation and lease expenditures related to
product research and development. Research and development expenses
decreased $897,000 (67%) from $1,331,000 in the three months ended December
31, 1997 to $434,000 in the three months ended December 31, 1998. In the
six month period ended December 31, 1998, research and development expenses
totaled $1,111,000, reflecting a $1,664,000 (60%) decrease from research
and development expenses of $2,775,000 for the six month period ended
December 31, 1997. These decreases in research and development expenses
primarily resulted from restructuring the Company's business focus from
consumer application software toward an OEM model over the last several
quarters prior to the Ascend and Verbex agreements, which required fewer
personnel (including employees and independent contractors) than a consumer
application software business model. As of December 31, 1998 the Company
had a research and development staff of 16 compared to 45 at December 31,
1997.
Sales and marketing expenses primarily consist of employee
compensation (including direct sales commissions), travel expenses and
trade shows. Sales and marketing expenses decreased $270,000 (27%) from
$995,000 in the three months ended December 31, 1997 to $725,000 in the
three months ended December 31, 1998. In the six month period ended
December 31, 1998, sales and marketing expenses totaled $1,370,000,
reflecting a $684,000 (33%) decrease from sales and marketing expenses of
$2,054,000 for the six month period ended December 31, 1997. These
decreases in sales and marketing expenses primarily resulted from
restructuring the Company's focus to an OEM model over the last several
quarters prior to the Ascend and Verbex agreements, which required less
promotion and marketing than a consumer application software business
model, as well as a decrease in the size of the Company's sales force and
marketing staff from 27 at December 31, 1997 to 9 at December 31, 1998.
General and administrative expenses consist primarily of employee
compensation and fees for insurance, rent, office expenses and professional
services. General and administrative expenses decreased $158,000 (29%) from
$553,000 in the three months ended December 31, 1997 to $395,000 in the
three months ended December 31, 1998. In the six month period ended
December 31, 1998, general and administrative expenses totaled $858,000,
reflecting a $292,000 (25%) decrease from general and administrative
expenses of $1,150,000 for the six month period ended December 31, 1997.
These decreases in general and administrative expenses were primarily
realized through reductions in personnel, recruitment and general cost
savings achieved through expense management. As of December 31, 1998 the
Company had a general and administrative staff of 8 compared to 14 at
December 31, 1997.
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<PAGE>
Interest Income
Interest income decreased $49,000 to $171,000 for the three months
ended December 31, 1998 from $220,000 for the three months ended December
31, 1997. In the six month period ended December 31, 1998, interest income
totaled $355,000, reflecting a $87,000 decrease from interest income of
$442,000 for the six month period ended December 31, 1997. These decreases
are primarily related to the decrease in the Company's total cash, cash
equivalents and short-term investments portfolio balance. As of December
31, 1998, the Company's cash, cash equivalents and short-term investments
portfolio totaled $11,752,000 compared to $14,885,000 at December 31, 1997.
Income Taxes
As of December 31, 1998, the Company had approximately $15,900,000 of
federal net operating loss carryforwards which will begin to expire in 2009
if not utilized. As of December 31, 1998, the Company has provided a full
valuation allowance on the net deferred tax asset because of the
uncertainty regarding realization of the deferred asset, primarily as a
result of considering such factors as the Company's limited operating
history, the volatility of the market in which it competes, the operating
losses incurred to date and the operating losses anticipated in future
periods.
Liquidity and Capital Resources
As of December 31, 1998, the Company had a total of $11,752,000 in
cash, cash equivalents and short-term investments consisting of $6,370,000
of cash and cash equivalents and $5,382,000 in short-term investments. The
Company's cash, cash equivalents and short-term investments portfolio is
liquid and investment grade, consisting of high-grade money-market funds,
United States Government-backed securities and commercial paper and
corporate obligations. Since inception, the Company has primarily financed
its operations through the sale of equity securities.
Cash of $1,780,000 and $2,293,000 was used to fund operations for the
six months ended December 31, 1998 and 1997, respectively. The decrease in
cash used to fund operations was primarily attributable to the decrease in
the net loss for the six months ended December 31, 1998 compared to the net
loss for the six months ended December 31, 1997, and changes in certain
operating assets. For the six months ended December 31, 1998, cash used in
investing activities was $1,049,000, which consisted of $998,000 in net
purchases of short-term investments and $51,000 in purchases of property
and equipment. Cash used in investing activities totaled $3,665,000 for the
six months ended December 31, 1997, which reflected $3,616,000 in net
purchases of short-term investments and $49,000 in equipment purchases. For
the six months ended December 31, 1998 and 1997, cash provided by financing
activities totaled $50,000 and $755,000, respectively. These amounts
reflect proceeds from exercises of common stock options of $19,000 and
$644,000, respectively, for the six months ended December 31, 1998 and
1997, and proceeds from the issuance of common stock pursuant to the
Company's Employee Stock Purchase Plan of $31,000 and $111,000,
respectively, for the six months ended December 31, 1998 and 1997.
The Company has a $2,000,000 revolving line of credit with Silicon Valley
Bank, as amended (the "Credit Facility"). Borrowings under the Credit
Facility will bear interest at the bank's prime lending rate. As amended on
February 1, 1999, the Credit Facility requires the Company to secure all
indebtedness with cash held at the Bank's offices in an amount not less
that 100% of the outstanding amount of all indebtedness the Company owes to
Lender. The Credit Facility requires payment of all outstanding principal,
if any, plus all accrued interest on March 30, 2000. In connection with the
lease of the Company's office facility, the Company has outstanding a
$300,000 standby letter of credit at December 31, 1998 naming the lessor of
the office facility beneficiary of the standby letter of credit in the
event that the Company defaults on the lease.
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<PAGE>
In addition to the Credit Facility, the agreement with Silicon Valley Bank
provides a lease component in the amount of $1,500,000 (the "Lease
Facility") for the purpose of providing a facility for the financing of the
lease payments that the Company owes to an equipment lessor, of which
approximately $119,000 was outstanding as of December 31, 1998.
Other than the agreement to purchase substantially all the assets of
Verbex for approximately $5.2 million, the Company has no material
commitments other than those under normal building and equipment operating
leases. At December 31, 1998, the Company's working capital totaled
approximately $11,820,000. The Company believes that its current cash, cash
equivalents and short-term investments balances, together with the
approximately $5,100,000 in cash to be received assuming consummation of
the Ascend transaction, will be sufficient to fund its working capital and
capital expenditures requirements, exclusive of cash required for possible
acquisitions of, or investments in businesses, products and technologies
for at least twelve months beyond December 31, 1998.
Year 2000 Compliance
The efficient operation of the Company's business is dependent in part on
computer software programs and operating systems which it uses internally
(collectively, the "Internal Programs and Systems"). The Company has been
evaluating its Internal Programs and Systems to identify potential Year
2000 compliance problems, and has primarily conducted these evaluations and
assessments using the Company's information technology personnel. These
actions are necessary to ensure that the Internal Programs and Systems will
be Year 2000 compliant. It is anticipated that modification or replacement
of some of the Internal Programs and Systems may be necessary to make such
Programs and Systems Year 2000 compliant. The Company is also communicating
with its suppliers and others to coordinate Year 2000 conversion. To date,
costs incurred in evaluating its Internal Programs and Systems have not
been material, and anticipated costs necessary to complete such
evaluations, modifications and/or replacements are not expected to be
material. Based on present information, the Company believes that it will
be able to achieve Year 2000 compliance through a combination of
modification of some existing Internal Programs and Systems and the
replacement of other Internal Programs and Systems with new programs and
systems that are already Year 2000 compliant. However, there can be no
assurance that these efforts will be successful. With respect to software
programs which the Company licenses externally to customers (collectively,
the "External Programs"), these programs are primarily not date-dependent
and, as such, the Company does not expect significant, if any, Year 2000
problems related to its External Programs. Although Verbex has not yet
completed its assessment of the extent to which Verbex's systems are Year
2000 compliant, Verbex has taken certain actions to make its Internal
Programs and Systems Year 2000 compliant, and Verbex has informed the
Company that it believes that its Internal Programs and Systems are Year
2000 compliant. However, there can be no assurance that Verbex's Internal
Programs and Systems are Year 2000 compliant. With respect to Verbex's
External Programs, Verbex has identified certain Year 2000 related issues,
and has contacted its existing customers with instructions which Verbex
believes to be adequate to mitigate or avert Year 2000 issues. Verbex
believes that, if those instructions are followed, then its External
Programs will not be materially affected by Year 2000 issues. However,
there can be no assurance that these instructions will adequately address
all Year 2000 issues related to Verbex's External Programs.
Costs incurred to date to evaluate and identify potential Year 2000
compliance problems contained in the Company's Internal Programs and
Systems and External Programs have totaled less than $15,000, and the
Company expects that future expenses and capital expenditures associated
with achieving Year 2000 compliance will be less than $25,000, excluding
the costs required to achieve Year 2000 compliance with respect to Verbex,
which the Company has not completely evaluated, identified or quantified.
These amounts do not include payroll and other costs of internal
information technology personnel working to assess and resolve Year 2000
issues, and those costs have not been estimated. While the Company is not
yet aware of any Year 2000 issues that are expected to have a material
financial impact on the Company as a result of its assessments to date,
some of the Company's suppliers continue to assess their programs, and the
Company continues to assess its External Programs. As a result, and due to
uncertainty of the potential impact that Year 2000 issues may have on the
Company, there can be no assurance that Year 2000 issues will not have a
material impact on the Company's future results of operations or financial
condition.
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PART II - OTHER INFORMATION
- ---------------------------
Item 5. Other Information.
On February 4, 1999, the Company entered into a definitive agreement with
Ascend Communications, Inc. ("Ascend") to sell to Ascend for approximately
$5.1 million in cash consideration substantially all of its assets relating
to what has historically been its primary business of developing and
commercializing voice processing technologies and products. Also on
February 4, 1999, Voxware entered into a definitive agreement with Verbex
Voice Systems, Inc. ("Verbex") to acquire substantially all of the assets
of Verbex for approximately $5.2 million in cash. The Company believes that
the Verbex transaction will be consummated on or about February 18, 1999
and that the Ascend transaction will be consummated, subject to stockholder
approval, in May or June 1999. After consummation of the transactions,
Voxware will focus its efforts on the development of Verbex's business,
which is the development and commercialization of speech recognition
systems for the warehousing and manufacturing markets. This will include
the exploration of strategic alternatives to augment Verbex's business,
including potential acquisitions and joint ventures. In addition, the sale
to Ascend does not include Voxware's rights and obligations under its
existing license agreements and, as part of the transaction, Voxware will
receive a license back from Ascend of the Voxware technologies necessary to
service its existing licensees. The license will also allow Voxware, with
the consent of Ascend, to license those technologies to new licensees for
certain limited uses. Therefore, after the sale to Ascend, Voxware expects
to continue to have limited licensing revenue and to engage in a limited
amount of additional licensing activity relating to the voice processing
technologies sold to Ascend.
Item 6. Exhibits and Reports on Form 8-K.
Exhibits:
2.1 Asset Purchase Agreement dated as of February 4, 1999 by and
between Ascend Communications, Inc. and Voxware, Inc.
2.2 Acquisition Agreement by and among Voxware, Inc., Verbex
Acquisition Corporation and Verbex Voice Systems, Inc. dated as
of February 4, 1999.
10.1 Loan Modification Agreement dated February 1, 1999 between
Silicon Valley Bank and the Company.
27.1 Financial Data Schedule (FDS) for current reporting periods ended
December 31, 1998.
(b) Reports on Form 8-K. Current Report on Form 8-K filed on February 9,
1999 (relating to the sale of the Company's speech coding technology
to Ascend Communications, Inc. and the purchase of certain assets and
liabilities of Verbex Voice Systems, Inc.).
================================================================================
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: February 12, 1999
VOXWARE, INC.
(Registrant)
By: /s/ Bathsheba J. Malsheen
------------------------------------------
Bathsheba Malsheen, President and
Chief Executive Officer
By: /s/ Nicholas Narlis
------------------------------------------
Nicholas Narlis, Vice President,
Chief Financial Officer, Treasurer and
Secretary
(Principal Financial Officer and Principal
Accounting Officer)
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<PAGE>
Exhibit 10.2
ASSET PURCHASE AGREEMENT
dated as of February 4, 1999
by and between
ASCEND COMMUNICATIONS, INC.
and
VOXWARE, INC.
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT dated as of February 4, 1999 is made and entered
into by and between ASCEND COMMUNICATIONS, INC., a Delaware corporation
("Purchaser"), and VOXWARE, INC., a Delaware corporation ("Seller"). Capitalized
terms not otherwise defined herein have the meanings set forth in Section 11.1.
RECITALS
A. Seller is engaged in, among other things, the business of developing and
commercializing digital speech communications technologies based on speech
coding algorithms (the "Business"); and
B. Seller desires to sell, transfer and assign to Purchaser, and Purchaser
desires to purchase and acquire from Seller, certain of the assets of Seller
relating to the operation of the Business, and in connection therewith,
Purchaser has agreed to assume certain of the liabilities of Seller relating to
the Business, all on the terms set forth herein.
AGREEMENT
ARTICLE I
SALE OF ASSETS AND CLOSING
1.1 Assets.
(a) Assets Transferred. On the terms and subject to the conditions set
forth in this Agreement, Seller will sell, transfer, convey, assign
and deliver to Purchaser, and Purchaser will purchase and pay for, at
the Closing, free and clear of all Liens other than Permitted Liens,
all of Seller's right, title and interest in, to and under the
following Assets and Properties of Seller as the same shall exist on
the Closing Date (collectively, the "Assets"); provided, however, that
certain of the Assets identified in Schedule 1.1(a)(ii) shall be
subject to a license agreement between Purchaser and Seller,
substantially in the form attached hereto as Exhibit A (the "License
Agreement"):
(i) Tangible Personal Property. All furniture, fixtures,
equipment, machinery and other tangible personal property listed in Schedule
1.1(a)(i), including any of the foregoing purchased subject to any conditional
sales or title retention agreement in favor of any other Person (the "Tangible
Personal Property");
(ii) Intangible Personal Property. All Intellectual Property
(including Seller's goodwill therein) and all rights, privileges, claims, causes
of action and options relating or pertaining to the Assets listed in Schedule
1.1(a)(ii) (the "Intangible Personal Property");
(iii) Contracts. All Contracts listed on Schedule 1.1(a)(iii)
(the "Business Contracts");
(iv) Immigration Cases. All rights of Seller under immigration
cases, including petitions and applications pending before governmental agencies
such as the Immigration and Naturalization Service, Department of Labor or State
Department, filed by Seller on behalf of each of David Campana, Xiaoqin Sun,
Epiphany Vera and Robert Zopf, unless such individual has not become an employee
of Purchaser as of the Closing Date (the "Immigration Cases"); and
(v) Registrations. All Registrations and applications for
Registrations listed in Schedule 1.1(a)(v) (the "Business Registrations").
(b) Excluded Assets. Notwithstanding anything in this Agreement to the
contrary, all assets of the Seller not listed in Section 1.1(a) shall
be "Excluded Assets."
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<PAGE>
1.2 Liabilities.
(a) Assumed Liabilities. In connection with the sale, transfer,
conveyance, assignment and delivery of the Assets pursuant to this
Agreement, on the terms and subject to the conditions set forth in
this Agreement, at the Closing, Purchaser will assume and agree to
pay, perform and discharge when due the following obligations of
Seller, as the same shall exist on the Closing Date (the "Assumed
Liabilities"), and no others:
(i) Obligations under Contracts and Registrations. All
obligations of Seller under the Business Contracts and the Business
Registrations arising and to be performed on or after the Closing Date, and
excluding any such obligations arising or to be performed prior to the Closing
Date;
(ii) Obligations under Immigration Cases. All obligations of
Seller under the Immigration Cases, to the extent transferred and assigned to
Purchaser hereunder; and
(iii) Obligations for Transfer Taxes. All obligations of Seller
for the Transfer Taxes.
(b) Retained Liabilities. Except for the Assumed Liabilities, Purchaser
shall not assume by virtue of this Agreement or the transactions
contemplated hereby, and shall have no liability for, any Liabilities
of Seller (including, without limitation, Liabilities related to the
Business and Liabilities of Seller owed to the Employees through the
Closing Date, including obligations for salary, commissions, bonus
compensation, payroll, taxes, fringe benefits and severance pay) of
any kind, character or description whatsoever (the "Retained
Liabilities").
(c) Defenses. Nothing herein shall be deemed to deprive Purchaser of any
defenses, set-offs or counterclaims that Seller may have had with
respect to any of the Assumed Liabilities. Effective as of the
Closing, Seller agrees to assign, transfer and convey to Purchaser all
such defenses, set-offs and counterclaims and agrees to cooperate with
Purchaser to maintain, secure, perfect and enforce such defenses,
set-offs and counterclaims, including the execution of any documents,
the giving of any testimony or the taking of any such other action as
is reasonably requested by Purchaser in connection with such defenses,
set-offs and counterclaims.
1.3 Purchase Price; Allocation.
(a) Purchase Price. The aggregate purchase price for the Assets and for
the covenant of Seller contained in Section 4.9 is $5,100,000 (the
"Purchase Price"), payable in the manner provided in Section 1.4.
(b) Allocation of Purchase Price. The allocation of the consideration paid
by Purchaser for the Assets and for the covenant of Seller contained
in Section 4.9 shall be as set forth in Schedule 1.3(b). Neither
Purchaser or Seller will take a position on any income, transfer or
gains Tax Return, before any Governmental or Regulatory Authority
charged with the collection of any such Tax or in any judicial
proceeding, that is in any manner inconsistent with the terms of any
such allocation.
1.4 Payment; Escrow; Closing.
(a) Purchaser has, prior to the date of this Agreement, paid Seller
$204,000 of the Purchase Price. Purchaser will pay Seller $4,146,000
of the Purchase Price at Closing. The remaining $750,000 of the
Purchase Price shall be held in escrow in connection with the
provisions set forth in Article IX, pursuant to an escrow agreement
(the "Escrow Agreement") to be entered into as of the Closing Date by
Seller, Purchaser and an escrow agent mutually acceptable to Seller
and Purchaser (the "Escrow Agent").
2
<PAGE>
(b) The Closing will take place at the offices of Gray Cary Ware &
Freidenrich LLP, 400 Hamilton Avenue, Palo Alto, California or at such
other place as Purchaser and Seller mutually agree, at 10:00 a.m.
local time, on the Closing Date. Simultaneously, (a) Seller will
assign and transfer to Purchaser good and valid title in and to the
Assets (free and clear of all Liens, other than Permitted Liens) by
delivery of (i) a General Assignment and Bill of Sale substantially in
the form of Exhibit B hereto (the "General Assignment"), duly executed
by Seller, (ii) an assignment of the Intellectual Property in form and
substance reasonably satisfactory to Purchaser, (iii) such other good
and sufficient instruments of conveyance, assignment and transfer, in
form and substance reasonably acceptable to Purchaser's counsel, as
shall be effective to vest in Purchaser good title to the Assets (the
General Assignment and the other instruments referred to in clauses
(ii) and (iii) being collectively referred to herein as the
"Assignment Instruments"), and (b) Purchaser will assume from Seller
the due payment, performance and discharge of the Assumed Liabilities
by delivery of (i) an Assumption Agreement substantially in the form
of Exhibit C hereto (the "Assumption Agreement"), duly executed by
Purchaser, and (ii) such other good and sufficient instruments of
assumption, in form and substance reasonably acceptable to Seller's
counsel, as shall be effective to cause Purchaser to assume the
Assumed Liabilities as, and to the extent provided in, Section 1.2(a)
(the Assumption Agreement and such other instruments referred to in
clause (ii) being collectively referred to herein as the "Assumption
Instruments"). At the Closing, there shall also be delivered to Seller
and Purchaser the opinions, certificates and other contracts,
documents and instruments required to be delivered under Articles VI
and VII.
1.5 Further Assurances; Post-Closing Cooperation.
(a) At any time or from time to time after the Closing, at Purchaser's
request and without further consideration, Seller shall execute and
deliver to Purchaser such other instruments of sale, transfer,
conveyance, assignment and confirmation, provide such materials and
information and take such other actions as Purchaser may reasonably
deem necessary or desirable in order more effectively to transfer,
convey and assign to Purchaser, and to confirm Purchaser's title to,
all of the Assets, and, to the full extent permitted by Law, to put
Purchaser in actual possession and operating control of the Assets and
to assist Purchaser in exercising all rights with respect thereto, and
otherwise to cause Seller to fulfill its obligations under this
Agreement and the Operative Agreements.
(b) Effective on the Closing Date, Seller hereby constitutes and appoints
Purchaser the true and lawful attorney of Seller, with full power of
substitution, in the name of Seller or Purchaser, but on behalf of and
for the benefit of Purchaser: (i) to demand and receive from time to
time any and all the Assets and to make endorsements and give receipts
and releases for and in respect of the same and any part thereof; (ii)
to institute, prosecute, compromise and settle any and all Actions or
Proceedings that Purchaser may deem proper in order to assert or
enforce any claim, right or title of any kind in or to the Assets;
(iii) to defend or compromise any or all Actions or Proceedings in
respect of any of the Assets; and (iv) to do all such acts and things
in relation to the matters set forth in the preceding clauses (i)
through (iii) as Purchaser shall deem desirable. Seller hereby
acknowledges that the appointment hereby made and the powers hereby
granted are coupled with an interest and are not and shall not be
revocable by it in any manner or for any reason. Seller shall deliver
to Purchaser at Closing an acknowledged power of attorney to the
foregoing effect executed by Seller. Purchaser shall indemnify and
hold harmless Seller from any and all Losses caused by or arising out
of any breach of Law by Purchaser in its exercise of such power of
attorney.
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<PAGE>
(c) Following the Closing, each party will afford the other party, its
counsel and its accountants, during normal business hours, reasonable
access to the books, records and other data relating to the Assets in
its possession with respect to periods prior to the Closing and the
right to make copies and extracts therefrom, to the extent that such
access may be reasonably required by the requesting party in
connection with (i) the preparation of Tax Returns, (ii) the
determination or enforcement of rights and obligations under this
Agreement, (iii) compliance with the requirements of any Governmental
or Regulatory Authority, (iv) the determination or enforcement of the
rights and obligations of any Indemnified Party or (v) in connection
with any actual or threatened Action or Proceeding involving the party
seeking access or the Assets. Further each party agrees for a period
extending six (6) years after the Closing Date not to destroy or
otherwise dispose of any such books, records and other data unless
such party shall first offer in writing to surrender such books,
records and other data to the other party and such other party shall
not agree in writing to take possession thereof during the ten (10)
business day period after such offer is made.
4
<PAGE>
(d) If, in order properly to prepare its Tax Returns, other documents or
reports required to be filed with Governmental or Regulatory
Authorities or its financial statements or to fulfill its obligations
hereunder, it is necessary that a party be furnished with additional
information, documents or records relating to the Assets not referred
to in paragraph (c) above, and such information, documents or records
are in the possession or control of the other party, such other party
shall use its best efforts to furnish or make available such
information, documents or records (or copies thereof) at the
recipient's request, cost and expense. Any information obtained by
Seller or Purchaser in accordance with this paragraph shall be held
confidential by Seller or Purchaser as the case may be in accordance
with Section 12.4.
1.6 Third-Party Consents. To the extent that any Business Contract or Business
Registration is not assignable without the consent of another party, this
Agreement shall not constitute an assignment or an attempted assignment thereof
if such assignment or attempted assignment would constitute a breach thereof.
Seller and Purchaser shall use their best efforts to obtain the consent of such
other party to the assignment of any such Business Contract or Business
Registration to Purchaser in all cases in which such consent is or may be
required for such assignment. If any such consent shall not be obtained, Seller
shall cooperate with Purchaser in any reasonable arrangement designed to provide
for Purchaser the benefits intended to be assigned to Purchaser under the
relevant Business Contract or Business Registration, including enforcement at
the cost and for the account of Purchaser of any and all rights of Seller
against the other party thereto arising out of the breach or cancellation
thereof by such other party or otherwise. If and to the extent that such
arrangement cannot be made, Purchaser shall have no obligation pursuant to
Section 1.2 or otherwise with respect to any such Business Contract or Business
Registration. The provisions of this Section 1.6 shall not affect the right of
Purchaser not to consummate the transactions contemplated by this Agreement if
the condition to its obligations hereunder contained in Section 6.8 has not been
fulfilled.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Subject to and except for the information that is set forth on a list of
exceptions, identified by the section of this Article II to which they pertain
and contained in the Disclosure Schedule attached hereto, Seller hereby
represents and warrants to Purchaser as follows:
2.1 Organization of Seller; No Subsidiaries. Seller is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware, and has full corporate power and authority to conduct the Business as
and to the extent now conducted and to own and use the Assets. Seller is duly
qualified or licensed to do business as a foreign corporation in each state of
the United States and each foreign jurisdiction in which it is required to be so
qualified or licensed, except where the failure to be so qualified or licensed
would not have a material adverse effect on the Assets. Seller does not own any
equity interest, directly or indirectly, in any corporation, partnership,
limited liability company, joint venture, business trust or other entity,
whether incorporated or not, that is engaged in any aspect of the Business or
owns or has rights with respect to the Assets.
2.2 Authority. Seller has full corporate power and authority to execute and
deliver this Agreement and the Operative Agreements to which it is a party, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby, including without limitation to
sell and transfer (pursuant to this Agreement) the Assets. The execution and
delivery by Seller of this Agreement and the Operative Agreements to which it is
a party have been duly and validly authorized by the Board of Directors of
Seller. The performance by Seller of its obligations under this Agreement and
the Operative Agreements have been or will be duly and validly authorized by the
stockholders of Seller. This Agreement has been duly and validly executed and
delivered by Seller and constitutes, and upon the execution and delivery by
Seller of the Operative Agreements to which Seller is a party, such Operative
Agreements will constitute, legal, valid and binding obligations of Seller
enforceable against Seller in accordance with the terms of this Agreement and
the Operative Agreements.
2.3 No Conflicts. The execution and delivery by Seller of this Agreement does
not, and the execution and delivery by Seller of the Operative Agreements to
which it is a party, the performance by Seller of its obligations under this
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Agreement and such Operative Agreements and the consummation of the transactions
contemplated hereby and thereby will not:
(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the certificate of incorporation or
by-laws of Seller;
(b) subject to obtaining the consents, approvals and actions, making the
filings and giving the notices disclosed in Section 2.4 of the
Disclosure Schedule, conflict with or result in a violation or breach
of any term or provision of any Law or Order applicable to Seller or
any of the Assets; or
(c) except as disclosed in Section 2.3 of the Disclosure Schedule, (i)
conflict with or result in a violation or breach of, (ii) constitute
(with or without notice or lapse of time or both) a default under,
(iii) require Seller to obtain any consent, approval or action of,
make any filing with or give any notice to any Person as a result or
under the terms of, or (iv) result in the creation or imposition of
any Lien upon Seller or any of the Assets under, any Contract or
License to which Seller is a party or by which any of the Assets are
bound.
2.4 Governmental Approvals and Filings. Except as disclosed in Section 2.4 of
the Disclosure Schedule, no consent, approval or action of, filing with or
notice to any Governmental or Regulatory Authority on the part of Seller is
required in connection with the execution, delivery and performance of this
Agreement or any of the Operative Agreements to which it is a party or the
consummation of the transactions contemplated hereby or thereby.
2.5 Absence of Changes. Except for the execution and delivery of this Agreement
and the transactions to take place pursuant hereto on or prior to the Closing
Date, since September 30, 1998, there has not been any material adverse change,
or any event or development which, individually or together with other such
events, could reasonably be expected to result in a material adverse change, in
the Condition of the Business or in the Assets or Assumed Liabilities. Without
limiting the foregoing, except as disclosed in Section 2.5 of the Disclosure
Schedule, since September 30, 1998, there has not occurred any of the following:
(i) any physical damage, destruction or other casualty loss
(whether or not covered by insurance) affecting any of the Assets;
(ii) any acquisition or any sale, assignment, transfer, license
or other disposition of any of the Assets, other than in the ordinary course of
business consistent with past practice; or any creation or incurrence of a Lien,
other than a Permitted Lien, on any Assets;
(iii) any amendment, modification, termination (partial or
complete) or granting of a waiver under or giving any consent with respect to
any Business Contract or any Business Registration;
(iv) any entering into of a Contract to do or engage in any of
the foregoing after the date hereof; or
(v) any other transaction involving, or development affecting,
the Business or the Assets outside the ordinary course of business consistent
with past practice.
2.6 No Undisclosed Liabilities. Except for Permitted Liens or as disclosed in
Section 2.6 of the Disclosure Schedule, there are no Liabilities against,
relating to or affecting any of the Assets.
2.7 Taxes.
(a) Tax Returns. All Tax Returns relating to the Business or the Assets
required to be filed by Seller have been duly filed on a timely basis
and such Tax Returns are true, correct and complete in all respects.
All Taxes relating to the Business and the Assets owed by Seller
(whether or not shown on any Tax Return) have been paid. No claim has
ever been made by any Governmental or Regulatory Authority in a
jurisdiction where Seller does not file Tax Returns that the Seller is
or may be subject to taxation by that jurisdiction. There are no liens
or security interests on any
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of the Assets with respect to Taxes, other than liens for Taxes not
yet due and payable.
(b) No Other Tax Audits and No Tax Deficiencies. Except as set forth in
Section 2.7(b) of the Disclosure Schedule, Seller's Tax Returns
relating to the Business or the Assets have never been audited by any
Governmental or Regulatory Authority, nor is any such audit in
process, pending or , to Seller's Knowledge, threatened (either in
writing or verbally, formally or informally). No deficiencies exist
(whether or not asserted by any Governmental or Regulatory Authority)
or have been asserted (either in writing or verbally, formally or
informally) or are expected to be asserted with respect to Taxes of
Seller relating to the Business and the Assets. Seller has not
received notice (either in writing or verbally, formally or
informally) and does not expect to receive notice that it has not
filed a Tax Return or paid Taxes required to be filed or paid by it
with respect to and including its taxable income or activities
relating to the Business or the Assets. Seller is not a party to any
action or proceeding for assessment or collection of Taxes, nor has
such an action or proceeding been asserted or, to Seller's Knowledge,
threatened (either in writing or verbally, formally or informally)
against Seller or the Assets.
2.8 Legal Proceedings. Except as disclosed in Section 2.8 of the Disclosure
Schedule:
(a) there are no Actions or Proceedings pending or, to the Knowledge of
Seller, threatened that relate to or affect the Business, the Assets
or the Assumed Liabilities, including but not limited to Actions or
Proceedings that could reasonably be expected to result in the
issuance of an Order restraining, enjoining or otherwise prohibiting
or making illegal the consummation of any of the transactions
contemplated by this Agreement or any of the Operative Agreements or
otherwise result in a material diminution of the benefits contemplated
by this Agreement or any of the Operative Agreements;
(b) there are no facts or circumstances Known to Seller that could
reasonably be expected to give rise to any Action or Proceeding that
would be required to be disclosed pursuant to clause (a) above; and
(c) there are no Orders outstanding against Seller with respect to the
Business, the Assets or the Assumed Liabilities.
2.9 Compliance With Laws and Orders. Except as disclosed in Section 2.9 of the
Disclosure Schedule, Seller is not, nor has it at any time within the last five
(5) years been, nor has it received any notice that it is or has at any time
within the last five (5) years been, in violation of or in default under, in any
material respect, any Law or Order applicable to the Business or the Assets.
2.10 Tangible Personal Property; Title.
(a) Seller is in possession of, and has good and marketable title to, all
the Tangible Personal Property. All the Tangible Personal Property is
free and clear of all Liens, other than Permitted Liens and Liens
disclosed in Section 2.10 of the Disclosure Schedule, and is in good
working order and condition, ordinary wear and tear excepted, and its
use complies in all material respects with all applicable Laws.
(b) At the Closing, Seller will sell, convey, assign, transfer and deliver
to Purchaser good, valid and marketable title and all the Seller's
right and interest in and to all of the Assets, free and clear of any
Liens except for Permitted Liens.
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2.11 Intellectual Property Rights.
(a) Seller owns all right, title and interest in and to all of the
Intangible Personal Property (other than the Third Party Technology,
as defined below), free and clear of all claims and Liens (including
without limitation distribution rights). All Intellectual Property of
third parties ("Third Party Technology") contained in the Intangible
Personal Property is subject to Third Party Licenses (as defined
below), each of which is valid and enforceable and in full force and
effect, and which grant Seller such rights to Third Party Technology
as are necessary to unrestricted utilization of the Intangible
Personal Property.
(b) Section 2.11(b) of the Disclosure Schedule contains a list of all
licenses and other agreements with third parties (the "Third Party
Licenses") relating to any Third Party Technology that Seller is
licensed or otherwise authorized by such third parties to incorporate
into the Intangible Personal Property.
(c) All of Seller's trademark or tradename registrations related to the
Assets and all of Seller's copyrights in any of the Assets are valid
and in full force and effect; and consummation of the transactions
contemplated hereby, except as contemplated hereby, will not alter or
impair any such rights.
(d) Except as disclosed in Section 2.11(d) of the Disclosure Schedule, no
claims have been asserted against Seller (and Seller is not aware of
any claims that are likely to be asserted against Seller or which have
been asserted against others) by any person challenging Seller's use
or distribution of any patents, trademarks, trade names, copyrights,
trade secrets, software, technology, know-how or processes related to
the Assets (including, without limitation, the Third Party Technology)
or challenging or questioning the validity or effectiveness of any
license or agreement relating thereto (including, without limitation,
the Third Party Licenses). To the Knowledge of Seller, there is no
valid basis for any claim of the type specified in the immediately
preceding sentence that could in any material way relate to or
interfere with the continued enhancement and exploitation by Purchaser
of any of the Assets.
(e) To the Knowledge of Seller, none of the Assets or the use of the
Intangible Personal Property by Seller in the conduct of the Business
infringes on the rights of, constitutes misappropriation of, or
involves unfair competition with respect to, any proprietary
information or intangible property right of any third person or
entity, including without limitation any patent, trade secret,
copyright, trademark or trade name.
(f) Except as disclosed in Section 2.11(f) of the Disclosure Schedule,
Seller has not granted any third party any right or license to
manufacture, reproduce, distribute, market or exploit any of the
Intangible Personal Property or any adaptations, translations, or
derivative works based on the Intangible Personal Property or any
portion thereof
(g) All designs, drawings, specifications, source code, object code,
documentation, flow charts and diagrams incorporating, embodying or
reflecting any of the Intangible Personal Property at any stage of
their development were written, developed and created solely and
exclusively by employees of Seller without the assistance of any third
party, or were created by third parties who assigned ownership of
their rights to Seller in valid and enforceable agreements, which are
included in the Business Contracts to be assigned and transferred to
Purchaser hereunder. Seller has at all times used commercially
reasonable efforts to treat the Intangible Personal Property as
containing trade secrets and has not disclosed or otherwise dealt with
such items
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in such a manner as to cause the loss of such trade secrets by release
thereof into the public domain.
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(h) To the Knowledge of Seller, each person currently or formerly employed
by Seller (including independent contractors, if any) that has or had
access to confidential information of Seller relating to the
Intangible Personal Property has executed a confidentiality and
non-disclosure agreement in the form previously provided to counsel
for Purchaser. Such confidentiality and non-disclosure agreements
constitute valid and binding obligations of Seller and, to Seller's
Knowledge, such person, enforceable in accordance with their
respective terms, except as enforceability may be limited by general
equitable principles or the exercise of judicial discretion in
accordance with such principles.
(i) No product liability or warranty claim with respect to any products
related to the Business has been communicated to or overtly threatened
against Seller nor, to the Knowledge of Seller, is there any specific
situation, set of facts or occurrence that provides a basis for any
such claim.
2.12 Contracts.
(a) Section 2.12(a) of the Disclosure Schedule contains a true and
complete list of each Contract or other arrangements (true and
complete copies or, if none, reasonably complete and accurate written
descriptions of which, together with all amendments and supplements
thereto and all waivers of any terms thereof, have been delivered to
Purchaser prior to the execution of this Agreement) in any way
affecting the Business, the Assets or the Assumed Liabilities.
(b) Each Business Contract required to be disclosed in Section 2.12(a) of
the Disclosure Schedule is in full force and effect and constitutes a
legal, valid and binding agreement, enforceable in accordance with its
terms, of Seller and, to Seller's Knowledge, of each other party
thereto; and except as disclosed in Section 2.12(b) of the Disclosure
Schedule neither Seller nor, to the Knowledge of Seller, any other
party to such Contract is, or has received notice that it is, in
violation or breach of or default under any such Contract (or with
notice or lapse of time or both, would be in violation or breach of or
default under any such Contract) in any material respect.
(c) Except as disclosed in Section 2.12(c) of the Disclosure Schedule, the
execution, delivery and performance by Seller of this Agreement and
the Operative Agreements to which it is a party, and the consummation
of the transactions contemplated hereby and thereby, will not (a)
result in or give to any Person any right of termination,
cancellation, acceleration or modification in or with respect to, (b)
result in or give to any Person any additional rights or entitlement
to increased, additional, accelerated or guaranteed payments under, or
(c) result in the creation or imposition of any Lien upon Seller or
any of the Assets under, any Business Contract.
2.13 Registrations Section 2.13 of the Disclosure Schedule contains a true and
complete list of all Registrations used or held for use in the Business
(including all pending applications for such Registrations), setting forth the
grantor, the grantee, the function and the
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expiration and renewal date of each. Prior to the execution of this Agreement,
Seller has delivered to Purchaser true and complete copies of all such
Registrations. Except as disclosed in Section 2.13 of the Disclosure Schedule:
Seller owns or validly holds all Registrations that are material, individually
or in the aggregate, to the Business;
each Business Registration is valid, binding and in full force and effect;
Seller is not, nor has it received any notice that it is, in default (or with
the giving of notice or lapse of time or both, would be in default) under any
Business Registration; and
the execution, delivery and performance by Seller of this Agreement and the
Operative Agreements to which it is a party, and the consummation of the
transactions contemplated hereby and thereby, will not (a) result in or give to
any Person any right of termination, cancellation, acceleration or modification
in or with respect to, (b) result in or give to any Person any additional rights
or entitlement to increased, additional, accelerated or guaranteed payments
under, or (c) result in the creation or imposition of any Lien upon Seller or
any of the Assets under, any Business Registration.
2.14 Employees
(a) Section 2.14(a) of the Disclosure Schedule contains a list of the name
of each employee employed in the Business at the date hereof (an
"Employee"), together with such Employee's position or function,
annual base salary or wages and any incentive or bonus arrangement
with respect to such Employee in effect on such date.
(b) Except as disclosed in Section 2.14(b) of the Disclosure Schedule, (i)
no Employee is currently a member of a collective bargaining unit and,
to the Knowledge of Seller, there are no threatened or contemplated
attempts to organize for collective bargaining purposes any of the
Employees, and (ii) no unfair labor practice complaint or sex, age,
race or other discrimination claim has been brought during the last
five (5) years against Seller with respect to the conduct of the
Business before the National Labor Relations Board, the Equal
Employment Opportunity Commission or any other Governmental or
Regulatory Authority. During the last five (5) years, there has been
no work stoppage, strike or other concerted action by employees of
Seller engaged in the Business. During that period, Seller has
complied in all material respects with all applicable Laws relating to
the employment of the Seller's employees, including, without
limitation those relating to wages, hours and collective bargaining.
2.15 Brokers. All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by Seller directly with Purchaser
without the intervention of any Person on behalf of Seller in such manner as to
give rise to any valid claim
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by any Person against Purchaser for a finder's fee, brokerage commission or
similar payment except for amounts owed by Seller to Ladenberg for services that
Ladenberg rendered in connection with the transactions contemplated by this
Agreement.
2.16 Proxy Statement The information supplied by Seller for inclusion in the
proxy statement (the "Proxy Statement") to be sent to the stockholders of Seller
in connection with the special meeting of Seller's stockholders to consider this
Agreement (the "Seller Stockholders Meeting") shall not, on the date the Proxy
Statement is first mailed to stockholders of Seller or at the time of the Seller
Stockholders Meeting, contain any untrue statement of a material fact, or omit
to state any material fact necessary in order to make the statements made in the
Proxy Statement, in light of the circumstances under which they were made, not
misleading.
2.17 Opinion of Financial Advisor. The financial advisor to Seller has delivered
to Seller an opinion dated as of or immediately prior to the date of this
Agreement to the effect that the transactions contemplated by this Agreement are
fair from a financial point of view to Seller's stockholders.
2.18 Disclosure. No representation or warranty contained in this Agreement, and
no statement contained in the Disclosure Schedule or in any certificate, list or
other writing furnished to Purchaser pursuant to any provision of this
Agreement, in each case relating to the Assets, Assumed Liabilities or the
Business, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein or therein, in
the light of the circumstances under which they were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
3.1 Organization. Purchaser is a corporation duly organized, validly existing
and in good standing under the Laws of the State of Delaware. Purchaser has full
corporate power and authority to enter into this Agreement and the Operative
Agreements to which it is a party, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
3.2 Authority. The execution and delivery by Purchaser of this Agreement and the
Operative Agreements to which it is a party, and the performance by Purchaser of
its obligations hereunder and thereunder, have been duly and validly authorized
by the Board of Directors of Purchaser, no other corporate action on the part of
Purchaser or its stockholders being necessary. This Agreement has been duly and
validly executed and delivered by Purchaser and constitutes, and upon the
execution and delivery by Purchaser of the Operative Agreements to which it is a
party, such Operative Agreements will constitute, legal, valid and binding
obligations of Purchaser enforceable against Purchaser in accordance with their
terms.
3.3 No Conflicts. The execution and delivery by Purchaser of this Agreement do
not, and the execution and delivery by Purchaser of the Operative Agreements to
which it is a party, the performance by Purchaser of its obligations under this
Agreement and such Operative Agreements and the consummation of the transactions
contemplated hereby and thereby will not:
(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the certificate of incorporation or
by-laws of Purchaser;
(b) subject to obtaining the consents, approvals and actions, making the
filings and giving the notices disclosed in Schedule 3.4 hereto,
conflict with or result in a violation or breach of any term or
provision of any Law or Order applicable to Purchaser or any of its
Assets and Properties; or
(c) except as disclosed in Schedule 3.3 hereto, (i) conflict with or
result in a violation or breach of, (ii) constitute (with or without
notice or lapse of time or both) a default under, (iii) require
Purchaser to obtain any consent, approval or action of, make any
filing with or give any notice to any Person as a result or under the
terms of, or
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(iv) result in the creation or imposition of any Lien upon Purchaser
or any of its Assets or Properties under, any Contract or License to
which Purchaser is a party or by which any of its Assets and
Properties is bound.
3.4 Governmental Approvals and Filings. Except as disclosed in Schedule 3.4
hereto, no consent, approval or action of, filing with or notice to any
Governmental or Regulatory Authority on the part of Purchaser is required in
connection with the execution, delivery and performance of this Agreement or the
Operative Agreements to which it is a party or the consummation of the
transactions contemplated hereby or thereby.
3.5 Legal Proceedings. There are no Actions or Proceedings pending or, to the
knowledge of Purchaser, threatened against, relating to or affecting Purchaser
which could reasonably be expected to result in the issuance of an Order
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or any of
the Operative Agreements.
3.6 Brokers. All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by Purchaser directly with Seller
without the intervention of any Person on behalf of Purchaser in such manner as
to give rise to any valid claim by any Person against Seller for a finder's fee,
brokerage commission or similar payment.
ARTICLE IV
COVENANTS OF SELLER
Seller covenants and agrees with Purchaser that, at all times from and after the
date hereof until the Closing and, with respect to any covenant or agreement by
its terms to be performed in whole or in part after the Closing, for the period
specified herein or, if no period is specified herein, indefinitely, Seller will
comply with all covenants and provisions of this Article IV, except to the
extent Purchaser may otherwise consent in writing.
4.1 Regulatory and Other Approvals. Seller will (a) take all commercially
reasonable steps necessary or desirable, and proceed diligently and in good
faith and use all commercially reasonable efforts, as promptly as practicable to
obtain all consents, approvals or actions of, to make all filings with and to
give all notices to Governmental or Regulatory Authorities or any other Person
required of Seller to consummate the transactions contemplated hereby and by the
Operative Agreements, including without limitation those described in Sections
2.3 and 2.4 of the Disclosure Schedule, (b) provide such other information and
communications to such Governmental or Regulatory Authorities or other Persons
as Purchaser or such Governmental or Regulatory Authorities or other Persons may
reasonably request in connection therewith and (c) cooperate with Purchaser as
promptly as practicable in obtaining all consents, approvals or actions of,
making all filings with and giving all notices to Governmental or Regulatory
Authorities or other Persons required of Purchaser to consummate the
transactions contemplated hereby and by the Operative Agreements. Seller will
provide prompt notification to Purchaser when any such consent, approval,
action, filing or notice referred to in clause (a) above is obtained, taken,
made or given, as applicable, and will advise Purchaser of any communications
(and, unless precluded by Law, provide copies of any such communications that
are in writing) with any Governmental or Regulatory Authority or other Person
regarding any of the transactions contemplated by this Agreement or any of the
Operative Agreements.
4.2 Investigation by Purchaser. Subject to Section 12.4 hereof, Seller will (a)
provide Purchaser and its officers, directors, employees, agents, counsel,
accountants, financial advisors, consultants and other representatives
(collectively, "Representatives") with full access, upon reasonable prior notice
and during normal business hours, to the Employees and such other officers,
employees and agents of Seller who have any responsibility for the conduct of
the Business, to Seller's accountants and to the Assets, and (b) furnish
Purchaser and its Representatives with all such information and data concerning
the Business, the Assets and the Assumed Liabilities as Purchaser or any of such
other Persons reasonably may request in connection with such investigation.
4.3 No Solicitations. Seller will not take, nor will it permit any Affiliate of
Seller (or authorize or permit any investment banker, financial advisor,
attorney, accountant or other Person retained by or acting for or on behalf of
Seller or any such Affiliate) to take, directly or indirectly, any action to
solicit, encourage, receive, negotiate, assist or otherwise facilitate
(including by furnishing confidential information with respect to the Business
or permitting access to the
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Assets and Books and Records of Seller) any Acquisition Proposal (as hereinafter
defined); provided, however, that if, at any time prior to obtaining stockholder
approval of the Transaction, Seller's Board of Directors determines in
reasonable good faith, with the advice of outside counsel, that it would be a
violation of its fiduciary duties to Seller's stockholders under applicable law
not to do so, Seller may, in response to a Superior Proposal (as hereinafter
defined), furnish information to and participate in negotiations with the third
party making such Superior Proposal. For purposes of this Agreement,
"Acquisition Proposal" means any inquiry, proposal, offer, discussions or
negotiations looking toward (i) an acquisition of Seller or any material amount
of stock or assets of Seller (other than in the ordinary course of business
consistent with past practice) or all or substantially all of the assets of
Seller related to the Business, (ii) a merger, consolidation, share exchange or
other business combination transaction with or involving Seller, or (iii) an
option or right to effect any transaction within the scope of the foregoing
clauses (i) or (ii). For purposes of this Agreement, a "Superior Proposal" means
a bona fide Acquisition Proposal from a third party on terms which Seller's
Board of Directors determines in its reasonable good faith judgment (after
consultation with Ladenburg Thalmann or another independent investment banking
adviser of nationally recognized reputation) to be more favorable from a
financial point of view to Seller's stockholders than the transactions
contemplated by this Agreement and for which financing, to the extent required,
is then committed or reasonably capable of being obtained by such third party.
Seller shall notify Purchaser no later than twenty-four (24) hours after receipt
by Seller (or its advisors) of any Acquisition Proposal or any request for
nonpublic information in connection with an Acquisition Proposal or for access
to the properties, books or records of Seller by any person or entity that
informs such party that it is considering making, or has made, a Acquisition
Proposal (the "Competing Offeror"). Such notice to Purchaser shall be made
orally and in writing and shall indicate in reasonable detail the identity of
the Competing Offeror and the terms and conditions of such proposal, inquiry or
contact. Seller shall notify Purchaser of the occurrence and substance of any
discussions held with any such Competing Offeror within twenty-four (24) hours
of the occurrence of such discussions. Seller shall notify Purchaser at least
forty-eight (48) hours prior to accepting or agreeing to a Superior Proposal or
making any public announcement of its intention to do so or to recommend a
Superior Proposal to its stockholders or to withdraw its recommendation for
approval of this Agreement and the transactions contemplated herein or to engage
in a Superior Proposal.
4.4 Conduct of Business. Subject to the restrictions set forth in Section 4.6,
prior to the Closing Seller will operate the Business only in the ordinary
course consistent with past practice. Without limiting the generality of the
foregoing, Seller will:
(a) use commercially reasonable efforts to (i) preserve intact the present
business organization and reputation of the Business, (ii) keep
available (subject to dismissals and retirements in the ordinary
course of business consistent with past practice) the services of the
Employees, (iii) take all necessary steps to preserve, and avoid any
loss of rights to, the Intellectual Property relating to or pertaining
to the Assets. and (iv) maintain the Assets in good working order and
condition, ordinary wear and tear excepted;
(b) except to the extent required by applicable Law or the SEC, (i) cause
the Business Books and Records to be maintained in the usual, regular
and ordinary manner and (ii) not permit any material change in any
pricing, investment, accounting, financial reporting, inventory,
credit, allowance or Tax practice or policy of Seller that would
adversely affect the Business, the Assets or the Assumed Liabilities;
(c) comply, in all material respects, with all Laws and Orders applicable
to the Business and promptly following receipt thereof to give
Purchaser copies of any notice received from any Governmental or
Regulatory Authority or other Person alleging any violation of any
such Law or Order.
(d) deliver copies to Purchaser of all Registration applications and other
filings made by Seller in connection with the operation of the
Business after the date hereof and before the Closing Date with any
Governmental or Regulatory Authority.
4.5 Employee Matters. Seller recognizes that Purchaser may make offers of
employment to, and may employ at its sole discretion, the Employees listed on
Schedule 4.5 (the "Designated Employees") hereto prior to the Closing. Seller
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will release any Designated Employee hired by Purchaser from any and all
obligations, including obligations of confidentiality, owed to Seller relating
to the Assets or the Business. Promptly following the date of this Agreement,
Seller will provide Purchaser with all contact information in the possession of
Seller for all prior employees of Seller that were employed in the Business or
worked with the Assets.
4.6 Certain Restrictions. Seller will refrain from, without the prior written
consent of Purchaser, which will not be unreasonably withheld:
(a) except in accordance with those valid and binding license agreements
identified in Section 2.11(f) of the Disclosure Schedule, selling,
assigning, transferring, licensing or otherwise disposing of any of
the Assets or creating or incurring any Lien, other than a Permitted
Lien, on any of the Assets;
(b) amending, modifying, terminating (partially or completely), granting
any waiver under or giving any consent with respect to any Business
Contract or any material Business Registration;
(c) violating, breaching or defaulting under in any material respect, or
taking or failing to take any action that (with or without notice or
lapse of time or both) would constitute a material violation or breach
of, or default under, any term or provision of any Business Contract
or any Business Registration;
(d) waiving or releasing any right or claim related to the Assets; and
(e) entering into any Contract to do or engage in any of the foregoing.
4.7 Proxy Statement. As promptly as practicable after the execution of this
Agreement, Seller shall prepare and file with the SEC the Proxy Statement.
Seller shall use all reasonable efforts to obtain the approval of the SEC to
circulate the Proxy Statement as soon after such filing as reasonably
practicable. If at any time prior to the Closing Date any event relating to
Seller or any of its Affiliates, officers or directors should be discovered by
Seller which should be set forth in a supplement to the Proxy Statement, Seller
shall promptly inform Purchaser and shall prepare and provide such supplement to
its stockholders. Unless Seller's Board of Directors determines in reasonable
good faith after consultation with outside corporate counsel that to do so would
be contrary to the fiduciary duties of Seller's Board of Directors to Seller's
stockholders under applicable law, the Proxy Statement shall include the
recommendation of Seller's Board of Directors in favor of approval and adoption
of this Agreement and the Operative Agreements and the transactions contemplated
herein and therein.
4.8 Stockholders Meeting Seller shall call and hold the Seller Stockholders
Meeting as promptly as practicable after the date hereof for the purpose of
voting upon the adoption of this Agreement and the approval of the transactions
contemplated herein. Unless Seller's Board of Directors determines in reasonable
good faith after consultation with outside corporate counsel that to do so would
be contrary to the fiduciary duties of Seller's Board of Directors to Seller's
stockholders under applicable law, Seller's Board of Directors shall recommend
that Seller stockholders vote in favor of the adoption of this Agreement and the
approval of the transactions contemplated herein, and Seller shall otherwise use
all reasonable efforts, including but not limited to participating in
presentations to stockholders, to obtain the requisite approval of Seller
stockholders. Seller agrees to retain a proxy solicitor to assist Seller in
obtaining the requisite approval of Seller stockholders if, in the reasonable
estimation of Purchaser, a proxy solicitor will make a material difference in
Seller's ability to obtain such approval.
4.9 Nonsolicitation; Noncompetition
(a) Seller will, for a period of three (3) years from the Closing Date,
refrain from, either alone or in conjunction with any other Person, or
directly or indirectly through its present or future Affiliates:
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(i) employing, engaging or seeking to employ or engage any
Employee hired by Purchaser, without the prior written consent of Purchaser; and
(ii) participating or engaging, as owner, partner, stockholder,
joint venturer, consultant or licensor, or in any capacity whatsoever become
financially interested (other than through the ownership of 5% or less of any
class of securities registered under the Securities Exchange Act of 1934, as
amended) in any business developing or commercializing technologies or products
in the following areas or any business providing consulting services relating to
any of the following areas: (i) voice coders for real-time interactive
applications, (ii) noise filters, (iii) echo cancellers, (iv) packet loss
recovery, (v) voice over IP/FR/ATM gateways, access devices and backbone
transport, (vi) software to support gateways described in (v) or other
packet-to-circuit products, and (vii) any other packet-to-circuit voice/video
gateways.
(b) Seller agrees that the time period provided for and the geographical
area and the areas of business encompassed by the covenants
contained in this Section are necessary and reasonable in order to
protect the Purchaser in the utilization of the Assets.
(c) The parties hereto recognize that the Laws and public policies of
the various states of the United States may differ as to the
validity and enforceability of covenants similar to those set forth
in this Section. It is the intention of the parties that the
provisions of this Section be enforced to the fullest extent
permissible under the Laws and policies of each jurisdiction in
which enforcement may be sought, and that the unenforceability (or
the modification to conform to such Laws or policies) of any
provisions of this Section shall not render unenforceable, or
impair, the remainder of the provisions of this Section.
Accordingly, if any provision of this Section shall be determined to
be invalid or unenforceable, such invalidity
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or unenforceability shall be deemed to apply only with respect to
the operation of such provision in the particular jurisdiction in
which such determination is made and not with respect to any other
provision or jurisdiction.
(d) The parties hereto acknowledge and agree that any remedy at Law for
any breach of the provisions of this Section would be inadequate,
and Seller hereby consents to the granting by any court of an
injunction or other equitable relief, without the necessity of
actual monetary loss being proved, in order that the breach or
threatened breach of such provisions may be effectively restrained.
4.10 Confidentiality; Enforcement of Contracts. Except as expressly permitted
under this Agreement or the License Agreement and except in accordance with
those valid and binding license agreements identified in Section 2.11(f) of the
Disclosure Schedule, Seller agrees that it will not make use of, disseminate or
in any way disclose any information relating to or included in the Assets,
including but not limited to the software, know-how, trade secrets and
algorithms included in the Assets. Seller will immediately give notice to
Purchaser of any unauthorized use or disclosure of such information. Seller also
agrees that Seller will enforce any Contracts of Seller that are not assumed by
Purchaser hereunder so as to preserve the value of the Assets, including but not
limited to (a) Contracts with employees and consultants relating to
confidentiality and ownership matters related to the Assets and (b) Contracts
with other Persons pursuant to which Seller has granted rights relating to the
Assets to such Persons.
4.11 Lucent Agreement. At Purchaser's request following the Closing, Seller will
use reasonable commercial efforts and will cooperate with Purchaser to assign to
Purchaser that certain Agreement between Seller and Lucent Technologies, Inc.
("Lucent") dated August 4, 1997. Any additional fees that Lucent requires to
assign said agreement will be paid by Purchaser.
4.12 License Grants to Purchaser.
(a) Seller will give Purchaser immediate access to the source code and
object code for Seller's technologies known as TNT, RT24 and AES/AEC for Windows
95 and NT 4.0 platforms, and Seller hereby grants Purchaser a royalty free,
worldwide license to use this source and object code internally, to develop
derivative works thereof (other than derivative works that change the bit-stream
or bit-rate of these technologies) and to sublicense end users to use, for beta
test purposes only, this object code and derivatives thereof contained within
products developed, manufactured or distributed by Purchaser. To the extent that
Purchaser does not enter into a license agreement pursuant to (b) or (c) below,
then the license granted under this subsection (a) will immediately terminate
and Purchaser shall return to Seller or destroy all copies of such technologies
in its possession.
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(b) In the event this Agreement is terminated pursuant to Section 10.1(a)
and Purchaser wishes to continue to use Seller's technologies known as TNT, RT24
and AES/AEC, then Seller promptly will grant to Purchaser a license at the
prices listed in the table in subsection (c) and consistent with the other
license terms set forth in subsection (c). The other terms of this license will
be negotiated in good faith by Purchaser and Seller.
(c) In the event this Agreement is terminated pursuant to any subsection of
Section 10.1 other than Section 10.1(a) or Section 10.1(h), Seller promptly
shall sell and Purchaser in its sole discretion and at its option may buy a
perpetual, non-exclusive, worldwide license for up to five of Seller's
technologies listed in the table below, including source code and related tools
and documentation, for the prices listed in the table below. This license shall
permit Purchaser to use source and object code for the licensed technologies
internally, to develop derivative works thereof (other than derivative works
that change the bit-stream or bit-rate of these technologies), to distribute and
sublicense object code versions of these technologies where these object code
versions are distributed or sublicensed only within other products developed,
manufactured or distributed by Purchaser, and to sublicense source code versions
of these technologies for the sole purpose of permitting customers to maintain
these technologies, consistent with Ascend's normal practices for sublicensing
its source code. Other terms of this license will be negotiated in good faith by
Purchaser and Seller. Additionally, with the written consent of Seller,
Purchaser may purchase a license to any additional technologies of Seller listed
on the following table, including source code and related tools and
documentation for the prices listed in the table below.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Seller Technologies Prices
- --------------------------------------------------------------------------------
<S> <C>
Transparent coder $175,000
- --------------------------------------------------------------------------------
Variable Rate coder $175,000
- --------------------------------------------------------------------------------
Endpoint RT24 $ 20,000
- --------------------------------------------------------------------------------
AEC/AES $150,000
- --------------------------------------------------------------------------------
Noise Filter $150,000
- --------------------------------------------------------------------------------
Packet Loss Recovery $150,000
- --------------------------------------------------------------------------------
AGC $ 50,000
- --------------------------------------------------------------------------------
TNT $ 50,000
- --------------------------------------------------------------------------------
</TABLE>
(d) Commencing on the Closing Date, Seller grants Purchaser a royalty free,
worldwide non-exclusive license (with the right to sublicense) under Seller's
rights under Application for United States Patent serial number 08/943,515
"Voice Transformation System and Method Using Frequency Domain Spectral Warping"
(and all patents issuing thereunder and all continuations, continuations in
part, divisionals, reissues and foreign counterparts thereof) solely for the
purposes of making, using and selling products for voice over IP applications.
4.13 Notice and Cure. Seller will notify Purchaser in writing of, and
contemporaneously will provide Purchaser with true and complete copies of any
and all information or documents relating to, and will use all commercially
reasonable efforts to cure before the Closing, any event, transaction or
circumstance, as soon as practicable after it becomes Known to Seller, occurring
after the date of this Agreement that causes or will cause any covenant or
agreement of Seller under this Agreement to be breached or that renders or will
render untrue any representation or warranty of Seller contained in this
Agreement as if the same were made on or as of the date of such event,
transaction or circumstance. Seller also will notify Purchaser in writing of,
and will use all commercially reasonable efforts to cure, before the Closing,
any violation or breach, as soon as practicable after it becomes Known to
Seller, of any representation, warranty, covenant or agreement made by Seller in
this Agreement, whether occurring or arising before, on or after the date of
this Agreement. No notice given pursuant to this Section (i) shall have any
effect on the representations, warranties, covenants or agreements contained in
this Agreement for purposes of determining satisfaction of any condition
contained herein or (ii) shall in any way limit Purchaser's right to seek
indemnity under Article IX.
4.14 Fulfillment of Conditions. Seller will execute and deliver at the Closing
each Operative Agreement that Seller is required hereby to execute and deliver
as a condition to the Closing, will take all commercially reasonable steps
necessary or desirable and proceed diligently and in good faith to satisfy each
other condition to the obligations of Purchaser contained in this Agreement and
will not take or fail to take any action that could reasonably be expected to
result in the nonfulfillment of any such condition.
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ARTICLE V
COVENANTS OF PURCHASER
Purchaser covenants and agrees with Seller that, at all times from and after the
date hereof until the Closing, Purchaser will comply with all covenants and
provisions of this Article V, except to the extent Seller may otherwise consent
in writing.
5.1 Regulatory and Other Approvals. Purchaser will (a) take all commercially
reasonable steps necessary or desirable, and proceed diligently and in good
faith and use all commercially reasonable efforts, as promptly as practicable to
obtain all consents, approvals or actions of, to make all filings with and to
give all notices to Governmental or Regulatory Authorities or any other Person
required of Purchaser to consummate the transactions contemplated hereby and by
the Operative Agreements, including without limitation those described in
Schedules 3.3 and 3.4 hereto, (b) provide such other information and
communications to such Governmental or Regulatory Authorities or other Persons
as Seller or such Governmental or Regulatory Authorities or other Persons may
reasonably request in connection therewith and (c) cooperate with Seller as
promptly as practicable in obtaining all consents, approvals or actions of,
making all filings with and giving all notices to Governmental or Regulatory
Authorities or other Persons required of Seller to consummate the transactions
contemplated hereby and by the Operative Agreements. Purchaser will provide
prompt notification to Seller when any such consent, approval, action, filing or
notice referred to in clause (a) above is obtained, taken, made or given, as
applicable, and will advise Seller of any communications (and, unless precluded
by Law, provide copies of any such communications that are in writing) with any
Governmental or Regulatory Authority or other Person regarding any of the
transactions contemplated by this Agreement or any of the Operative Agreements.
5.2 Notice and Cure. Purchaser will notify Seller in writing of, and
contemporaneously will provide Seller with true and complete copies of any and
all information or documents relating to, and will use all commercially
reasonable efforts to cure before the Closing, any event, transaction or
circumstance, as soon as practicable after it becomes known to Purchaser,
occurring after the date of this Agreement that causes or will cause any
covenant or agreement of Purchaser under this Agreement to be breached or that
renders or will render untrue any representation or warranty of Purchaser
contained in this Agreement as if the same were made on or as of the date of
such event, transaction or circumstance. Purchaser also will notify Seller in
writing of, and will use all commercially reasonable efforts to cure, before the
Closing, any violation or breach, as soon as practicable after it becomes known
to Purchaser, of any representation, warranty, covenant or agreement made by
Purchaser in this Agreement, whether occurring or arising before, on or after
the date of this Agreement. No notice given pursuant to this Section shall have
any effect on the representations, warranties, covenants or agreements contained
in this Agreement for purposes of determining satisfaction of any condition
contained herein or shall in any way limit Seller's right to seek indemnity
under Article IX.
5.3 Employee Matters. Prior to the Closing Date, Purchaser may make offers of
employment (to be effective prior to, on or after the date of this Agreement) to
such Designated Employees as it shall determine in its sole discretion.
Purchaser may condition such offers upon consummation of the transactions
contemplated herein. All employment arrangements between Purchaser and any
Designated Employee will be negotiated directly between Purchaser and such
Designated Employee; provided, however, that Purchaser agrees that it will pay
to each Designated Employee that it hires as an employee of Purchaser a signing
bonus of $5,000.
5.4 Nonsolicitation of Employees. If this Agreement is terminated pursuant to
Section 10.1, Purchaser will, for a period of six (6) months from the date of
such termination, refrain from, either alone or in conjunction with any other
Person, or directly or indirectly through its present or future Affiliates,
employing, engaging or seeking to employ or engage any employee of Seller as of
the date of such termination, unless such employee (a) resigns voluntarily from
Seller (without any solicitation from Purchaser or any of its Affiliates) or (b)
is terminated by Seller or any of its Affiliates after the date of such
termination.
5.5 Fulfillment of Conditions. Purchaser will execute and deliver at the Closing
each Operative Agreement that Purchaser is hereby required to execute and
deliver as a condition to the Closing, will take all commercially reasonable
steps necessary or desirable and proceed diligently and in good faith to satisfy
each other condition to the obligations of Seller contained in this Agreement
and will not take or fail to take any action that could reasonably be expected
to result in the nonfulfillment of any such condition.
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ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder to purchase the Assets and to assume and
to pay, perform and discharge the Assumed Liabilities are subject to the
fulfillment, at or before the Closing, of each of the following conditions (all
or any of which may be waived in whole or in part by Purchaser in its sole
discretion):
6.1 Representations and Warranties. Each of the representations and warranties
made by Seller in this Agreement shall be true and correct in all material
respects (without regard for any materiality qualifiers contained therein) on
and as of the Closing Date as though such representation or warranty was made on
and as of the Closing Date.
6.2 Performance. Seller shall have performed and complied with, in all material
respects, each agreement, covenant and obligation required by this Agreement to
be so performed or complied with by Seller at or before the Closing.
6.3 Stockholder Approval. This Agreement and the Operative Agreements, and the
transactions contemplated herein and therein, shall have been approved by the
stockholders of Seller as required in the Seller's charter documents or by
relevant statute and law.
6.4 Officers' Certificates. Seller shall have delivered to Purchaser a
certificate, dated the Closing Date and executed by the Chairman of the Board or
the President of Seller, substantially in the form and to the effect of Exhibit
D hereto, and a certificate, dated the Closing Date and executed by the
Secretary or any Assistant Secretary of Seller, substantially in the form and to
the effect of Exhibit E hereto.
6.5 Lack of Adverse Change. Since the date of this Agreement, there has not
occurred any incident or event that, individually or in the aggregate, has had a
material adverse effect on the Assets or the Business.
6.6 Orders and Laws. There shall not be in effect on the Closing Date any Order
or Law restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or any of
the Operative Agreements or which could reasonably be expected to otherwise
result in a material diminution of the benefits of the transactions contemplated
by this Agreement or any of the Operative Agreements to Purchaser, and there
shall not be pending or threatened on the Closing Date any Action or Proceeding
or any other action in, before or by any Governmental or Regulatory Authority
which could reasonably be expected to result in the issuance of any such Order
or the enactment, promulgation or deemed applicability to Purchaser or the
transactions contemplated by this Agreement or any of the Operative Agreements
of any such Law.
6.7 Regulatory Consents and Approvals. All consents, approvals and actions of,
filings with and notices to any Governmental or Regulatory Authority necessary
to permit Purchaser and Seller to perform their obligations under this Agreement
and the Operative Agreements and to consummate the transactions contemplated
hereby and thereby (a) shall have been duly obtained, made or given, (b) shall
be in form and substance reasonably satisfactory to Purchaser, (c) shall not be
subject to the satisfaction of any condition that has not been satisfied or
waived and (d) shall be in full force and effect, and all terminations or
expirations of waiting periods imposed by any Governmental or Regulatory
Authority necessary for the consummation of the transactions contemplated by
this Agreement and the Operative Agreements, shall have occurred.
6.8 Third Party Consents. The consents (or in lieu thereof waivers) listed in
Schedule 6.8 hereto and all other consents (or in lieu thereof waivers) to the
performance by Seller of its obligations under this Agreement and the Operative
Agreements or to the consummation of the transactions contemplated hereby and
thereby as are required under any Contract to which Seller is a party or by
which any of its Assets and Properties are bound, other than consents to the
transfer to Purchaser of Seller's software licenses for Entropic xwaves,
Metrowerks Code Warrior Analysis Tools (Release 1) and Development Tools, PVCS
and Trace Point, (a) shall have been obtained, (b) shall be in form and
substance reasonably satisfactory to Purchaser, (c) shall not be subject to the
satisfaction of any condition that has not been satisfied or waived and (d)
shall be in full force and effect, except where the failure to obtain any such
consent (or in lieu thereof waiver) could not reasonably be expected,
individually or in the aggregate with other such failures, to materially
adversely affect Purchaser, the Assets, the Assumed Liabilities or the Business
or otherwise result in a material diminution of the benefits of the transactions
contemplated by this Agreement and the Operative Agreements to Purchaser.
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6.9 Opinion of Counsel. Purchaser shall have received the opinion of Fulbright &
Jaworski L.L.P., counsel to Seller, dated the Closing Date, substantially in the
form and to the effect of Exhibit F hereto, and to such further effect as
Purchaser may reasonably request.
6.10 Escrow Agreement. Seller, Purchaser and the Escrow Agent shall have entered
into the Escrow Agreement, which agreement shall be substantially in the form
attached hereto as Exhibit G.
6.11 Deliveries. Seller shall have delivered to Purchaser the General Assignment
and the other Assignment Instruments.
6.12 Proceedings. All proceedings to be taken on the part of Seller in
connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Purchaser, and Purchaser shall have received copies of all such
documents and other evidences as Purchaser may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
6.13 License Agreement. Seller and Purchaser shall have entered into the License
Agreement.
21
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ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller hereunder to sell the Assets are subject to the
fulfillment, at or before the Closing, of each of the following conditions (all
or any of which may be waived in whole or in part by Seller in its sole
discretion):
7.1 Representations and Warranties. Each of the representations and warranties
made by Purchaser in this Agreement shall be true and correct in all material
respects (without regard for any materiality qualifiers contained therein) on
and as of the Closing Date as though such representation or warranty was made on
and as of the Closing Date.
7.2 Performance. Purchaser shall have performed and complied with, in all
material respects, each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by Purchaser at or before the
Closing.
7.3 Officers' Certificates. Purchaser shall have delivered to Seller a
certificate, dated the Closing Date and executed by the Chairman of the Board,
the President or any Executive or Senior Vice President of Purchaser,
substantially in the form and to the effect of Exhibit H hereto.
7.4 Orders and Laws. There shall not be in effect on the Closing Date any Order
or Law that became effective after the date of this Agreement restraining,
enjoining or otherwise prohibiting or making illegal the consummation of any of
the transactions contemplated by this Agreement or any of the Operative
Agreements.
7.5 Regulatory Consents and Approvals. All consents, approvals and actions of,
filings with and notices to any Governmental or Regulatory Authority necessary
to permit Seller and Purchaser to perform their obligations under this Agreement
and the Operative Agreements and to consummate the transactions contemplated
hereby and thereby (a) shall have been duly obtained, made or given, (b) shall
not be subject to the satisfaction of any condition that has not been satisfied
or waived and (c) shall be in full force and effect, and all terminations or
expirations of waiting periods imposed by any Governmental or Regulatory
Authority necessary for the consummation of the transactions contemplated by
this Agreement and the Operative Agreements shall have occurred.
7.6 Deliveries. Purchaser shall have delivered to Seller the Assumption
Agreement and the other Assumption Instruments.
7.7 Stockholder Approval. This Agreement and the Operative Agreements, and the
transactions contemplated herein and therein, shall have been approved by the
stockholders of Seller as required in the Seller's charter documents or by
relevant statute and law.
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7.8 Proceedings. All proceedings to be taken on the part of Purchaser in
connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Seller, and Seller shall have received copies of all such documents
and other evidences as Seller may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
8.1 Survival of Representations, Warranties, Covenants and Agreements.
Notwithstanding any right of Purchaser (whether or not exercised) to investigate
the Business or the Assets or any right of any party (whether or not exercised)
to investigate the accuracy of the representations and warranties of the other
party contained in this Agreement, Seller and Purchaser have the right to rely
fully upon the representations, warranties, covenants and agreements of the
other contained in this Agreement. The representations, warranties, covenants
and agreements of Seller and Purchaser contained in this Agreement will survive
the Closing (i) indefinitely with respect to the representations and warranties
contained in Section 2.11 or (ii) with respect to all other representations,
warranties, covenants and agreements, for a period of eighteen (18) months from
the Closing Date, except that any representation, warranty, covenant or
agreement that would otherwise terminate in accordance with clause (ii) above
will continue to survive if a claim for indemnity shall have been made under
Article IX on or prior to such termination date, until such claim has been
satisfied or otherwise resolved.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification.
(a) Subject to the other Sections of this Article IX, Seller shall
indemnify the Purchaser Indemnified Parties in respect of, and hold
each of them harmless from and against, any and all Losses suffered,
incurred or sustained by any of them or to which any of them becomes
subject, resulting from, arising out of or relating to (i) any
misrepresentation, breach of warranty or nonfulfillment of or failure
to perform any covenant or agreement on the part of Seller contained
in this Agreement or (ii) a Retained Liability.
(b) Subject to the other Sections of this Article IX, Purchaser shall
indemnify the Seller Indemnified Parties in respect of, and hold each
of them harmless from and against, any and all Losses suffered,
incurred or sustained by any of them or to which any of them becomes
subject, resulting from, arising out of or relating to (i) any
misrepresentation, breach of warranty or nonfulfillment of or failure
to perform any covenant or agreement on the part of Purchaser
contained in this Agreement or (ii) an Assumed Liability.
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(c) No amounts of indemnity shall be payable in the case of a claim by a
Purchaser Indemnified Party under Section 9.1(a)(i) or a Seller
Indemnified Party under Section 9.1(b)(i), as the case may be, unless
and until the Purchaser Indemnified Parties or Seller Indemnified
Parties, as the case may be, have suffered, incurred, sustained or
become subject to Losses referred to in such Sections in excess of
$50,000 in the aggregate, in which event Purchaser Indemnified Parties
or Seller Indemnified Parties, as the case may be, shall be entitled
to claim indemnity for the amount of such Losses exceeding $25,000,
provided that this paragraph (c) shall not apply to a
misrepresentation or breach of warranty by Seller of Seller's
representations and warranties made in Section 2.10 or Section 2.11.
(d) That portion of the Purchase Price deposited in escrow with the Escrow
Agent and governed by the terms and conditions of the Escrow Agreement
shall be the sole and exclusive remedy available to the Purchaser
Indemnified Parties for all Losses by a Purchaser Indemnified Party as
a result of any misrepresentation, breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement on
the part of Seller contained in this Agreement, provided that this
paragraph (d) shall not apply to Losses by a Purchaser Indemnified
Party as a result of any misrepresentation or breach of warranty by
Seller of Seller's representations and warranties in Section 2.10 or
Section 2.11.
9.2 Method of Asserting Claims. All claims for indemnification by any
Indemnified Party under Section 9.1 will be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which an Indemnified
Party might seek indemnity under Section 9.1 is asserted against or
sought to be collected from such Indemnified Party by a Person other
than Seller, Purchaser or any Affiliate of Seller or Purchaser (a
"Third Party Claim"), the Indemnified Party shall deliver a Claim
Notice with reasonable promptness to the Indemnifying Party. If the
Indemnified Party fails to provide the Claim Notice with reasonable
promptness after the Indemnified Party receives notice of such Third
Party Claim, the Indemnifying Party will not be obligated to indemnify
the Indemnified Party with respect to such Third Party Claim to the
extent that the Indemnifying Party's ability to defend has been
irreparably prejudiced by such failure of the Indemnified Party. The
Indemnifying Party will notify the Indemnified Party as soon as
practicable within the Dispute Period whether the Indemnifying Party
disputes its liability to the Indemnified Party under Section 9.1 and
whether the Indemnifying Party desires, at its sole cost and expense,
to defend the Indemnified Party against such Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified Party
within the Dispute Period that the Indemnifying Party
desires to defend the Indemnified Party with respect to
the Third Party Claim pursuant to this Section 9.2(a),
then the Indemnifying Party will have the right to defend,
with counsel reasonably satisfactory to the Indemnified
Party, at the sole cost and expense of the Indemnifying
Party, such Third Party Claim by all appropriate
proceedings, which proceedings will be vigorously and
diligently prosecuted by the Indemnifying Party to a final
conclusion or will be settled at the discretion of the
Indemnifying Party (but only with the consent of the
Indemnified Party in the case of any settlement that
provides for any relief other than the payment of monetary
damages). The Indemnifying Party will have full control of
such defense and proceedings, including any compromise or
settlement thereof; provided, however, that the
Indemnified Party may, at the sole cost and expense of the
Indemnified Party, at any time prior to the Indemnifying
Party's delivery of the notice referred to in the first
sentence of this Section 9.2(a)(i), file any motion,
answer or other pleadings or take any other action that
the Indemnified Party reasonably believes to be necessary
or appropriate to protect its interests; and provided
further, that if requested by the Indemnifying Party, the
Indemnified Party will, at the sole cost and expense of
the Indemnifying Party, provide reasonable cooperation to
the Indemnifying Party in contesting any Third Party Claim
that the Indemnifying Party elects to contest. The
Indemnified Party may participate in, but not control, any
defense or settlement of any Third Party Claim controlled
by the Indemnifying Party pursuant to this Section
9.2(a)(i), and except as provided in the preceding
sentence, the Indemnified Party will bear its own costs
and expenses with respect to such participation.
Notwithstanding the
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foregoing, the Indemnified Party may take over the control
of the defense or settlement of a Third Party Claim at any
time if it irrevocably waives its right to indemnity under
Section 9.1 with respect to such Third Party Claim.
(ii) If the Indemnifying Party fails to notify the Indemnified
Party within the Dispute Period that the Indemnifying
Party desires to defend the Third Party Claim pursuant to
Section 9.2(a), or if the Indemnifying Party gives such
notice but fails to prosecute vigorously and diligently or
settle the Third Party Claim, or if the Indemnifying Party
fails to give any notice whatsoever within the Dispute
Period, then the Indemnified Party will have the right to
defend, at the sole cost and expense of the Indemnifying
Party, the Third Party Claim by all appropriate
proceedings, which proceedings will be prosecuted by the
Indemnified Party in a reasonable manner and in good faith
or will be settled at the discretion of the Indemnified
Party (with the consent of the Indemnifying Party, which
consent will not be unreasonably withheld). The
Indemnified Party will have full control of such defense
and proceedings, including any compromise or settlement
thereof; provided, however, that if requested by the
Indemnified Party, the Indemnifying Party will, at the
sole cost and expense of the Indemnifying Party, provide
reasonable cooperation to the Indemnified Party and its
counsel in contesting any Third Party Claim which the
Indemnified Party is contesting. Notwithstanding the
foregoing provisions of this Section 9.2(a)(ii), if the
Indemnifying Party has notified the Indemnified Party
within the Dispute Period that the Indemnifying Party
disputes its liability hereunder to the Indemnified Party
with respect to such Third Party Claim and if such dispute
is resolved in favor of the Indemnifying Party in the
manner provided in clause (iii) below, the Indemnifying
Party will not be required to bear the costs and expenses
of the Indemnified Party's defense pursuant to this
Section 9.2(a)(ii) or of the Indemnifying Party's
participation therein at the Indemnified Party's request,
and the Indemnified Party will reimburse the Indemnifying
Party in full for all reasonable costs and expenses
incurred by the Indemnifying Party in connection with such
litigation. The Indemnifying Party may participate in, but
not control, any defense or settlement controlled by the
Indemnified Party pursuant to this Section 9.2(a)(ii), and
the Indemnifying Party will bear its own costs and
expenses with respect to such participation.
(iii) If the Indemnifying Party notifies the Indemnified Party
that it does not dispute its liability to the Indemnified
Party with respect to the Third Party Claim under Section
9.1 or fails to notify the Indemnified Party within the
Dispute Period whether the Indemnifying Party disputes its
liability to the Indemnified Party with respect to such
Third Party Claim, the Loss in the amount specified in the
Claim Notice will be conclusively deemed a liability of
the Indemnifying Party under Section 9.1 and the
Indemnifying Party shall pay the amount of such Loss to
the Indemnified Party on demand. If the Indemnifying Party
has timely disputed its liability with respect to such
claim, the Indemnifying Party and the Indemnified Party
will proceed in good faith to negotiate a resolution of
such dispute, and if not resolved through negotiations
within the Resolution Period, such dispute shall be
resolved by arbitration in accordance with Section 9.2(c).
(b) In the event any Indemnified Party should have a claim under Section
9.1 against any Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver an Indemnity Notice with
reasonable promptness to the Indemnifying Party. The failure by any
Indemnified Party to give the Indemnity Notice shall not impair such
party's rights hereunder except to the extent that an Indemnifying
Party demonstrates that it has been irreparably prejudiced thereby. If
the Indemnifying Party notifies the Indemnified Party that it does not
dispute the claim described in such Indemnity Notice or fails to
notify the Indemnified Party within the Dispute Period whether the
Indemnifying Party disputes the claim described in such Indemnity
Notice, the Loss in the amount specified in the Indemnity Notice will
be conclusively deemed a liability of the Indemnifying Party under
Section 9.1 and the Indemnifying Party shall pay the amount of such
Loss to the Indemnified Party on demand. If the Indemnifying Party has
timely disputed its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party will proceed in good
faith to negotiate a resolution of such dispute, and if not resolved
through negotiations within the Resolution Period, such dispute shall
be resolved by arbitration in accordance with Section 9.2(c).
(c) Any dispute submitted to arbitration pursuant to this Section 9.2
shall be finally and conclusively determined by the decision of a
board of arbitration consisting of three (3) members (hereinafter
sometimes called the "Board of Arbitration") selected as hereinafter
provided. Each of the Indemnified Party and the Indemnifying Party
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shall select one (1) member and the third member shall be selected by
mutual agreement of the other members, or if the other members fail to
reach agreement on a third member within twenty (20) days after their
selection, such third member shall thereafter be selected by the
American Arbitration Association upon application made to it for such
purpose by the Indemnified Party. The Board of Arbitration shall meet
in Alameda, California or in Princeton, New Jersey or such other place
as a majority of the members of the Board of Arbitration determines
more appropriate, and shall reach and render a decision in writing
(concurred in by a majority of the members of the Board of
Arbitration) with respect to the amount, if any, which the
Indemnifying Party is required to pay to the Indemnified Party in
respect of a claim filed by the Indemnified Party. In connection with
rendering its decisions, the Board of Arbitration shall adopt and
follow such rules and procedures as a majority of the members of the
Board of Arbitration deems necessary or appropriate. To the extent
practical, decisions of the Board of Arbitration shall be rendered no
more than thirty (30) days following commencement of proceedings with
respect thereto. The Board of Arbitration shall cause its written
decision to be delivered to the Indemnified Party and the Indemnifying
Party. Any decision made by the Board of Arbitration (either prior to
or after the expiration of such thirty (30) day period) shall be
final, binding and conclusive on the Indemnified Party and the
Indemnifying Party and entitled to be enforced to the fullest extent
permitted by law and entered in any court of competent jurisdiction.
Each party to any arbitration shall bear its own expense in relation
thereto, including but not limited to such party's attorneys' fees, if
any, and the expenses and fees of the Board of Arbitration shall be
divided between the Indemnifying Party and the Indemnified Party in
the same proportion as the portion of the related claim determined by
the Board of Arbitration to be payable to the Indemnified Party bears
to the portion of such claim determined not to be so payable.
ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date (with respect to Section 10.1(b) through Section 10.1(h), by
written notice by the terminating party to the other party), whether before or
after approval of the matters presented in connection with this Agreement by the
stockholders of Seller:
(a) by mutual written consent of Purchaser and Seller; or
(b) by either Purchaser or Seller if the Closing shall not have occurred
by June 26, 1999 (provided, however, that the right to terminate this
Agreement under this Section 10.1(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has
been the cause of or resulted in the failure of the Closing to occur
on or before such date); or
(c) by either Purchaser or Seller if a court of competent jurisdiction or
other Governmental or Regulatory Authority shall have issued a final
order, decree or ruling, or taken any other action, having the effect
of permanently restraining, enjoining or otherwise prohibiting the
Closing, and all appeals with respect to such order, decree, ruling or
action have been exhausted or the time for appeal of such order,
decree, ruling or action shall have expired (provided, however, that
the right to terminate this Agreement under this Section 10.1(c) shall
not be available to any party which has not complied with its
obligations under Sections 4.1 and Section 5.1); or
(d) by either Purchaser or Seller if, at the Seller Stockholders Meeting
(including any adjournment or postponement thereof), the requisite
vote of Seller's stockholders in
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favor of this Agreement and approval of the transactions contemplated
hereby shall not have been obtained; or
(e) by Purchaser if (i) the Board of Directors of Seller shall have
withdrawn or modified its recommendation of this Agreement or the
transactions contemplated herein in a manner adverse to Purchaser or
shall have resolved or publicly announced or disclosed its intention
to do so; or (ii) the Board of Directors of Seller shall have
recommended a Superior Proposal to the stockholders of Seller or shall
have resolved or publicly announced its intention to recommend or
accept a Superior Proposal; or (iii) a tender offer or exchange offer
which if completed would result in the ownership by any person and
such person's affiliates of fifty percent (50%) or more of the
outstanding shares of Seller Common Stock shall have been commenced
and the Board of Directors of Seller shall have filed a Statement on
Form 14D-9 recommending acceptance of such tender or exchange offer or
shall have resolved or publicly announced its intention to recommend
acceptance of such tender or exchange offer; or
(f) by Purchaser if a breach of any representation, warranty, covenant or
agreement on the part of Seller set forth in this Agreement shall have
occurred which if uncured would cause any condition set forth in
Section 6.1 or Section 6.2 not to be satisfied, and such breach is
incapable of being cured or, if capable of being cured, shall not have
been cured within ten (10) business days following receipt by Seller
of written notice of such breach from Purchaser; or
(g) by Seller if it shall have accepted, approved or resolved to accept
or approve a Superior Proposal in compliance with the terms of Section
4.3; or
(h) by Seller, if a breach of any representation, warranty, covenant or
agreement on the part of Purchaser set forth in this Agreement shall
have occurred which if uncured would cause any condition set forth in
Section 7.1 or Section 7.2 not to be satisfied, and such breach is
incapable of being cured or, if capable of being cured, shall not have
been cured within ten (10) business days following receipt by
Purchaser of written notice of such breach from Seller.
10.2 Effect of Termination. In the event of any termination of this Agreement
pursuant to Section 10.1, there shall be no liability or obligation on the part
of Seller or Purchaser or any of their respective officers, directors,
stockholders or Affiliates, except as set forth in Section 10.3. The foregoing
limitations shall not apply to the extent that such termination results from the
willful breach by a party of any of its representations, warranties, covenants
or agreements in this Agreement. The provisions of Section 4.12, Section 5.4,
Section 10.3 and Section 12.4 of this Agreement shall remain in full force and
effect and survive any termination of this Agreement
10.3 Fees and Expenses.
(a) Except as set forth in this Section 10.3, all fees and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such
expenses, whether or not the transactions contemplated herein are
consummated.
(b) If this Agreement is terminated (i) by Purchaser pursuant to Section
10.1(e) or Section 10.1(f), or (ii) by Seller pursuant to Section
10.1(g), or (iii) by Seller or Purchaser pursuant to Section 10.1(d)
as a result of the failure to obtain the requisite vote for adoption
of this Agreement and approval of the transactions contemplated herein
by the stockholders of Seller and (in the case of clause (iii)) (x) at
the time of such failure an Alternative Transaction involving Seller
shall have been announced or publicly proposed and (y) within one year
of such failure Seller or its Board of Directors accepts, recommends
or enters into or announces any definitive or
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preliminary agreement or letter of intent with respect to an
Alternative Transaction or an Alternative Transaction is consummated,
Seller shall pay to Purchaser a termination fee of $204,000 (the
"Termination Fee"). The Termination Fee shall be paid in cash by wire
transfer of immediately available funds to an account designated by
Purchaser and shall be payable: (x) in the case of termination by
Seller pursuant to Section 10.1(g), prior to and as a condition
precedent to the effectiveness of such termination; (y) in the case of
termination by Purchaser pursuant to Section 10.1(e) or Section
10.1(f), promptly after such termination; and (z) in the case of
termination by Seller or Purchaser pursuant to Section 10.1(d) in the
circumstances set forth in clause (iii) of the preceding sentence, not
later than the earliest such time as (A) Seller or its Board of
Directors accepts, recommends or enters into or announces any
definitive or preliminary agreement or letter of intent with respect
to such Alternative Transaction, or (B) an Alternative Transaction is
consummated.
(c) If this Agreement is terminated by Seller pursuant to Section
10.1(h), Purchaser shall pay to Seller a termination fee of $204,000.
(d) As used in this Agreement, an "Alternative Transaction" with respect
to Seller means (i) a transaction or series of transactions pursuant
to which any person or group (as such term is defined under the
Exchange Act), other than Purchaser, or any affiliate thereof (a
"Third Party"), acquires (or would acquire upon completion of such
transaction or series of transactions) more than fifty percent (50%)
of the equity securities or voting power of Seller or any of its
material subsidiaries, pursuant to a tender offer or exchange offer or
otherwise, (ii) a merger, consolidation, share exchange or other
business combination involving Seller or any of its material
subsidiaries pursuant to which any Third Party acquires ownership (or
would acquire ownership upon consummation of such merger,
consolidation, share exchange or other business combination) of more
than fifty percent (50%) of the outstanding equity securities or
voting power of Seller or any of its material subsidiaries or of the
entity surviving such merger or business combination or resulting form
such consolidation, or (iii) any other transaction or series of
transactions pursuant to which any Third Party acquires (or would
acquire upon completion of such transaction or series of transactions)
control of assets of Seller or any of its material subsidiaries
(including, for this purpose, outstanding equity securities of
subsidiaries of Seller) having a fair market value equal to more than
fifty percent (50%) of the fair market value of all the consolidated
assets of Seller immediately prior to such transaction or series of
transactions
10.4 Late Payment of Fees. If any fee or expense due under Section 10.3 is not
timely paid, the defaulting party shall pay the costs and expenses (including
reasonable documented legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of any unpaid fee at the publicly
announced prime rate of Citibank, N.A. from the date such fee was required to be
paid.
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ARTICLE XI
DEFINITIONS
11.1 Definitions.
(a) Defined terms. As used in this Agreement, the following defined terms
have the meanings indicated below:
"Acquisition Proposal" has the meaning ascribed to it in Section 4.3.
"Actions or Proceedings" means any action, suit, proceeding, arbitration or
Governmental or Regulatory Authority investigation or audit.
"Affiliate" means any Person that directly, or indirectly through one of more
intermediaries, controls or is controlled by or is under common control with the
Person specified. For purposes of this definition, control of a Person means the
power, direct or indirect, to direct or cause the direction of the management
and policies of such Person whether by Contract or otherwise and, in any event
and without limitation of the previous sentence, any Person owning ten percent
(10%) or more of the voting securities of another Person shall be deemed to
control that Person. "Agreement" means this Asset Purchase Agreement and the
Exhibits, the Disclosure Schedule and the Schedules hereto and the certificates
delivered in accordance with Sections 6.4 and 7.3, as the same shall be amended
from time to time.
"Alternate Transaction" has the meaning ascribed to it in Section 10.3(d).
"Assets" has the meaning ascribed to it in Section 1.1(a).
"Assets and Properties" of any Person means all assets and properties of every
kind, nature, character and description (whether real, personal or mixed,
whether tangible or intangible, whether absolute, accrued, contingent, fixed or
otherwise and wherever situated), including the goodwill related thereto,
operated, owned or leased by such Person, including without limitation cash,
cash equivalents, Investment Assets, accounts and notes receivable, chattel
paper, documents, instruments, general intangibles, real estate, equipment,
inventory, goods and Intellectual Property.
"Assignment Instruments" has the meaning ascribed to it in Section 1.4(b).
"Associate" means, with respect to any Person, any corporation or other business
organization of which such Person is an officer or partner or is the beneficial
owner, directly or indirectly, of ten percent (10%) or more of any class of
equity securities, any trust or estate in which such Person has a substantial
beneficial interest or as to which such Person serves as a trustee or in a
similar capacity and any relative or spouse of such Person, or any relative of
such spouse, who has the same home as such Person.
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"Assumed Liabilities" has the meaning ascribed to it in Section 1.2(a).
"Assumption Agreement" has the meaning ascribed to it in Section 1.4(b).
"Assumption Instruments" has the meaning ascribed to it in Section 1.4(b).
"Board of Arbitration" has the meaning ascribed to it in Section 9.2(c).
"Books and Records" of any Person means all files, documents, instruments,
papers, books and records relating to the business, operations, condition of
(financial or other), results of operations and Assets and Properties of such
Person, including without limitation financial statements, Tax Returns and
related work papers and letters from accountants, budgets, pricing guidelines,
ledgers, journals, deeds, title policies, minute books, stock certificates and
books, stock transfer ledgers, Contracts, Registrations, customer lists,
computer files and programs, retrieval programs, operating data and plans and
environmental studies and plans.
"Business" has the meaning ascribed to it in the forepart of this Agreement.
"Business Contracts" has the meaning ascribed to it in Section 1.1(a)(iii).
"Business Day" means a day other than Saturday, Sunday or any day on which banks
located in the location of Seller's principal executive offices and location of
Purchaser's principal executive offices are authorized or obligated to close.
"Business Registrations" has the meaning ascribed to it in Section 1.1(a)(v).
"Claim Notice" means written notification pursuant to Section 9.2(a) of a Third
Party Claim as to which indemnity under Section 9.1 is sought by an Indemnified
Party, enclosing a copy of all papers served, if any, and specifying the nature
of and basis for such Third Party Claim and for the Indemnified Party's claim
against the Indemnifying Party under Section 9.2, together with the amount or,
if not then reasonably ascertainable, the estimated amount, determined in good
faith, of such Third Party Claim.
"Closing" means the closing of the transactions contemplated by Section 1.4.
"Closing Date" means (a) the second Business Day after the day on which the last
of the consents, approvals, actions, filings, notices or waiting periods
described in or related to the filings described in Sections 6.3, 6.5 through
6.8 and Section 7.4 through 7.7 has been obtained, made or given or has expired,
as applicable, or (b) such other date as Purchaser and Seller mutually agree
upon in writing.
"Code" means the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.
"Competing Offer" has the meaning ascribed to it in Section 4.3.
"Condition of the Business" means the business, condition (financial or
otherwise), results of operations, Assets and Properties of the Business.
"Contract" means any agreement, lease, license, evidence of Indebtedness,
mortgage, indenture, security agreement or other contract (whether written or
oral).
"Designated Employees" has the meaning ascribed to it in Section 4.5.
"Disclosure Schedule" means the record delivered to Purchaser by Seller herewith
and dated as of the date hereof, containing all lists, descriptions, exceptions
and other information and materials as are required to be included therein by
Seller pursuant to this Agreement.
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"Dispute Period" means the period ending thirty (30) days following receipt by
an Indemnifying Party of either a Claim Notice or an Indemnity Notice.
"Employee" means the employees of Seller listed on Section 2.14 of the
Disclosure Schedule.
"Escrow Agent" and "Escrow Agreement" have the respective meanings ascribed to
them in Section 1.4(a).
"Excluded Assets" has the meaning ascribed to it in Section 1.1(b).
"General Assignment" has the meaning ascribed to it Section 1.4(b).
"Governmental or Regulatory Authority" means any court, tribunal, arbitrator,
authority, agency, commission, official or other instrumentality of the United
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision.
"Immigration Cases" has the meaning ascribed to it in Section 1.1(a)(iv).
"Indebtedness" of any Person means all obligations of such Person (i) for
borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any other Person.
"Indemnified Party" means any Person claiming indemnification under any
provision of Article IX, including without limitation a Person asserting a claim
pursuant to Section 9.3(c).
"Indemnifying Party" means any Person against whom a claim for indemnification
is being asserted under any provision of Article IX, including without
limitation a Person against whom a claim is asserted pursuant to Section 9.3(c).
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"Indemnity Notice" means written notification pursuant to Section 9.2(b) of a
claim for indemnity under Article IX by an Indemnified Party, specifying the
nature of and basis for such claim, together with the amount or, if not then
reasonably ascertainable, the estimated amount, determined in good faith, of
such claim.
"Intangible Personal Property" has the meaning ascribed to it in Section
1.1(a)(ii).
"Intellectual Property" means all patents and patent rights, trademarks and
trademark rights, trade names and trade name rights, service marks and service
mark rights, service names and service name rights, brand names, inventions,
processes, formulae, algorithms, copyrights and copyright rights, trade dress,
business and product names, logos, slogans, trade secrets, industrial models,
processes, designs, methodologies, computer programs (including all source
codes) and related documentation, technical information, manufacturing,
engineering and technical drawings, know-how, archival data, tapes, programs and
documentation and all pending applications for and registrations of patents,
trademarks, service marks and copyrights.
"Investment Assets" means all debentures, notes and other evidences of
Indebtedness, stocks, securities (including rights to purchase and securities
convertible into or exchangeable for other securities), interests in joint
ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by Seller (other
than trade receivables generated in the ordinary course of business of the
Seller).
"IRS" means the United States Internal Revenue Service.
"Knowledge of Seller" or "Known to Seller" means the knowledge of any officer or
director or Gerard Aguilar, James Allington, David A. Campana, Juin-Hwey Chen,
David Most, Vipul Parikh, Xiaoqin Sun, Takahiro Unno, Epiphany Vera, Wei Wang
and Robert Zopf.
"Laws" means all laws, statutes, rules, regulations, ordinances and other
pronouncements having the effect of law of the United States, any foreign
country or any domestic or foreign state, county, city or other political
subdivision or of any Governmental or Regulatory Authority.
"Liabilities" means all Indebtedness, obligations and other liabilities of a
Person (whether absolute, accrued, contingent, fixed or otherwise, or whether
due or to become due).
"Liens" means any mortgage, pledge, assessment, security interest, lease, lien,
adverse claim, levy, charge or other encumbrance of any kind, or any conditional
sale Contract, title retention Contract or other Contract to give any of the
foregoing.
"Loss" means any and all damages, fines, fees, penalties, deficiencies, losses
and expenses (including without limitation interest, court costs, fees of
attorneys, accountants and other experts or other expenses of litigation or
other proceedings or of any claim, default or assessment).
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"Operative Agreements" means, collectively, the General Assignment and the other
Assignment Instruments, the Assumption Agreement and the other Assumption
Instruments, the Escrow Agreement and any support or other agreements to be
entered into in connection with the transaction.
"Order" means any writ, judgment, decree, injunction or similar order of any
Governmental or Regulatory Authority (in each such case whether preliminary or
final).
"Permitted Lien" means (i) any Lien for Taxes not yet due or delinquent or being
contested in good faith by appropriate proceedings for which adequate reserves
have been established in accordance with GAAP, (ii) any statutory Lien arising
in the ordinary course of business by operation of Law with respect to a
Liability that is not yet due or delinquent, (iii) any minor imperfection of
title or similar Lien which individually or in the aggregate with other such
Liens does not materially impair the value of the property subject to such Lien
or the use of such property in the conduct of the Business, and (iv) with
respect to the Intangible Personal Property, those valid and binding software
license agreements listed on Section 2.11(f) of the Disclosure Schedule.
"Person" means any natural person, corporation, general partnership, limited
partnership, proprietorship, other business organization, trust, union,
association or Governmental or Regulatory Authority.
"Property" or "Properties" means Intellectual Property, Tangible Personal
Property and property subject to Personal Property Leases.
"Proxy Statement" has the meaning ascribed to it in Section 2.16.
"Purchase Price" has the meaning ascribed to it in Section 1.3(a).
"Purchaser" has the meaning ascribed to it in the forepart of this Agreement.
"Purchaser Indemnified Parties" means Purchaser and its officers, directors,
employees, agents and Affiliates.
"Registrations" means all Registrations, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority.
"Representatives" has the meaning ascribed to it in Section 4.2.
"Resolution Period" means the period ending thirty (30) days following receipt
by an Indemnified Party of a written notice from an Indemnifying Party stating
that it disputes all or any portion of a claim set forth in a Claim Notice or an
Indemnity Notice.
"Retained Liabilities" has the meaning ascribed to it in Section 1.2(b).
"SEC" means the Securities and Exchange Commission.
"Seller" has the meaning ascribed to it in the forepart of this Agreement.
"Seller Indemnified Parties" means Seller and its officers, directors,
employees, agents and Affiliates.
"Seller Stockholders Meeting" has the meaning ascribed to it in Section 2.16.
"Superior Proposal" has the meaning ascribed to it in Section 4.3.
"Tangible Personal Property" has the meaning ascribed to it in Section
1.1(a)(i).
"Tax Returns" means shall mean any return, declaration, report, estimates, claim
for refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof, covering or
relating to the Assets or the Business.
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"Taxes" means shall mean any federal, provincial, territorial, local, or foreign
income, profits, gross receipts, capital gains taxes, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental, customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, Business Registration, occupation,
value added, goods and service, alternative or add-on minimum, estimated, or
other tax or governmental charge of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not, relating to the Assets or
the Business.
"Termination Fee" has the meaning ascribed to it in Section 10.3(b).
"Third Party" has the meaning ascribed to it in Section 10.3(d).
"Third Party Claim" has the meaning ascribed to it in Section 9.2(a).
"Third Party Licenses" has the meaning ascribed to it in Section 2.11(b).
"Third Party Technology" has the meaning ascribed to it in Section 2.11(a).
"Transfer Taxes" shall mean all sales taxes, use taxes, conveyance taxes,
transfer taxes, filing fees, recording fees, reporting fees and other similar
duties, taxes and fees, if any, imposed upon, or resulting from, the transfer of
the Assets hereunder, except for federal, state or local income or similar taxes
based upon or measured by revenue, income, profit or gain from the transfer of
the Assets or the operation of the Business prior to the Closing or by any
increase in the value of any of the Assets through the Closing Date.
(b) Construction of Certain Terms and Phrases. Unless the context of this
Agreement otherwise requires, (i) words of any gender include each
other gender; (ii) words using the singular or plural number also
include the plural or singular number, respectively; (iii) the terms
"hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement; (iv) the terms "Article" or "Section" refer to
the specified Article or Section of this Agreement; and (v) the
phrases "ordinary course of business" and "ordinary course of business
consistent with past practice" refer to the business and practice of
Seller in connection with the Business. Whenever this Agreement refers
to a number of days, such number shall refer to calendar days unless
Business Days are specified. All accounting terms used herein and not
expressly defined herein shall have the meanings given to them under
GAAP.
ARTICLE XII
MISCELLANEOUS
12.1 Notices. All notices, requests and other communications hereunder must be
in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
If to Purchaser, to:
Ascend Communications, Inc.
One Ascend Plaza
1275 Harbor Bay Parkway
Alameda, CA 94502
Facsimile No.: (510) 747.6621
Attn.: General Counsel
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with a copy to:
Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue, Palo Alto, CA 94301
Facsimile No.: (650) 327-3699
Attn.: Thomas Furlong, Esq.
If to Seller, to:
Voxware, Inc.
305 College Road East
Princeton, NJ 08540
Facsimile No.: 609.514.4103
Attn.: Bathsheba J. Malsheen
with a copy to:
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, NY 10103
Facsimile No.: (212) 752.5958
Attn.: Lawrence A. Spector
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice, request or other communication is to be delivered pursuant
to this Section). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other party hereto.
12.2 Entire Agreement. This Agreement and the Operative Agreements supersede all
prior discussions and agreements between the parties with respect to the subject
matter hereof and thereof and contain the sole and entire agreement between the
parties hereto with respect to the subject matter hereof and thereof.
12.3 Public Disclosure. Purchaser and Seller shall consult with each other
before issuing any press release or otherwise making any public statement with
respect to this Agreement or the transactions contemplated herein and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or by the rules of the NASD or
the stock exchanges on which their respective securities are listed
12.4 Confidentiality. Each party hereto will hold, and will use its best efforts
to cause its Affiliates, and their respective Representatives to hold, in strict
confidence from any Person (other than any such Affiliate or Representative),
unless (i) compelled to disclose by judicial or administrative process
(including without limitation in connection with obtaining the necessary
approvals of this Agreement and the transactions contemplated hereby of
Governmental or Regulatory Authorities) or by other requirements of Law or (ii)
disclosed in an Action or Proceeding brought by a party hereto in pursuit of its
rights or in the exercise of its remedies hereunder, all documents and
information concerning the other party or any of its Affiliates furnished to it
by the other party or such other party's Representatives in connection with this
Agreement or the transactions contemplated hereby, except to the extent that
such documents or information can be shown to have been (a) previously known by
the party receiving such documents or information, (b) in the public domain
(either prior to or after the furnishing of such documents or information
hereunder) through no fault of such receiving party or (c) later acquired by the
receiving party from another source if the receiving party is not aware that
such source is under an obligation to another party hereto to keep such
documents and information confidential; provided that following the Closing the
foregoing restrictions will not apply to Purchaser's use of documents and
information concerning the Business, the Assets or the Assumed Liabilities
furnished by Seller hereunder. In the event the transactions contemplated hereby
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are not consummated, upon the request of the other party, each party hereto
will, and will cause its Affiliates and their respective Representatives to,
promptly (and in no event later than five (5) Business Days after such request)
redeliver or cause to be redelivered all copies of documents and information
furnished by the other party in connection with this Agreement or the
transactions contemplated hereby and destroy or cause to be destroyed all notes,
memoranda, summaries, analyses, compilations and other writings related thereto
or based thereon prepared by the party furnished such documents and information
or its Representatives. Notwithstanding the foregoing, Purchaser shall be
entitled to disclose this Agreement to Lucent Technologies, Inc. subject to a
nondisclosure obligation on the part of Lucent Technologies, Inc.
12.5 Waiver. Any term or condition of this Agreement may be waived at any time
by the party that is entitled to the benefit thereof, but no such waiver shall
be effective unless set forth in a written instrument duly executed by or on
behalf of the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. All remedies, either under this
Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
12.6 Amendment. This Agreement may be amended, supplemented or modified only by
a written instrument duly executed by or on behalf of each party hereto.
12.7 No Third Party Beneficiary. The terms and provisions of this Agreement are
intended solely for the benefit of each party hereto and their respective
successors or permitted assigns, and it is not the intention of the parties to
confer third-party beneficiary rights upon any other Person other than any
Person entitled to indemnity under Article IX.
12.8 No Assignment; Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned by any party hereto without the
prior written consent of the other party hereto and any attempt to do so will be
void, except (a) for assignments and transfers by operation of Law and (b) that
Purchaser may assign any or all of its rights, interests and obligations
hereunder (including without limitation its rights under Article IX) to (i) a
wholly-owned subsidiary, provided that any such subsidiary agrees in writing to
be bound by all of the terms, conditions and provisions contained herein, (ii)
any post-Closing purchaser of all or a substantial part of the Assets or (iii)
any financial institution providing purchase money or other financing to
Purchaser from time to time as collateral security for such financing, but no
such assignment referred to in clause (i) or (ii) shall relieve Purchaser of its
obligations hereunder. Subject to the preceding sentence, this Agreement is
binding upon, inures to the benefit of and is enforceable by the parties hereto
and their respective successors and assigns.
12.9 Headings. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
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12.10 Consent to Jurisdiction and Service of Process. Subject to the arbitration
provisions contained in Section 9.2(c), each party hereby irrevocably submits to
the non-exclusive jurisdiction of the United States District Court for the
Northern District of California or any court of the State of California located
in San Francisco, San Jose or Oakland in any action, suit or proceeding arising
out of or relating to this Agreement or any of the Operative Agreements or any
of the transactions contemplated hereby or thereby, and agrees that any such
action, suit or proceeding shall be brought only in such court, provided,
however, that such consent to jurisdiction is solely for the purpose referred to
in this Section and not be deemed to be a general submission to the jurisdiction
of said courts or in the State of California other than for such purpose. Each
party hereby irrevocably waives, to the fullest extent permitted by Law, any
objection that it may now or hereafter have to the laying of the venue of any
such action, suit or proceeding brought in such a court and any claim that any
such action, suit or proceeding brought in such a court has been brought in an
inconvenient forum. Nothing herein shall affect the right of any party to serve
process in any other manner permitted by Law or to commence legal proceedings or
otherwise proceed against the other in any other jurisdiction.
12.11 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance here from and (d) in lieu of such illegal, invalid or
unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
12.12 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of California applicable to a contract
executed and performed in such State, without giving effect to the conflicts of
laws principles thereof.
12.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly authorized officer of each party as of the date first above written.
ASCEND COMMUNICATIONS, INC.
By: /s/ Roger Boyce
---------------------------------
Name: Roger Boyce
-------------------------------
Title: Vice President and General Manager
-----------------------------------
VOXWARE, INC.
By: /s/ Bathsheba J. Malsheen
---------------------------------
Name: Bathsheba J. Malsheen
-------------------------------
Title: President and CEO
-------------------------------
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EXHIBITS
Exhibit A License Agreement
Exhibit B General Assignment and Bill of Sale
Exhibit C Assumption Agreement
Exhibit D Officer's Certificate of Seller
Exhibit E Secretary's Certificate of Seller
Exhibit F Opinion of Counsel to Seller
Exhibit G Escrow Agreement
Exhibit H Officer's Certificate of Purchaser
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Exhibit A License Agreement
SOFTWARE LICENSE AGREEMENT
This Software License Agreement (the "Agreement") is made and entered into by
and between Voxware, Inc. ("Licensee"), a Delaware corporation, having its
principal place of business at 305 College Road East, Princeton, New Jersey
08540, and Ascend Communications, Inc. ("Ascend"), a Delaware corporation having
its principal place of business at 1701 Harbor Bay Parkway, Alameda, California
94502, and is dated as of February 3, 1999 (the "Effective Date").
RECITALS
A. Pursuant to an Asset Purchase Agreement dated as of even date herewith
between Licensee and Ascend (the "Asset Agreement"), Licensee has sold to
Ascend, and Ascend has acquired from Licensee, right and title to certain voice
communications software.
B. Certain portions of this software is licensed to Licensee's customers.
C. Subject to the terms of this Agreement, Licensee desires to obtain a license
and Ascend desires to grant a license to certain portions of this software for
the limited purposes of permitting Licensee (i) to continue to fulfill its
obligations under existing license agreements; and (ii) to grant new licenses
permitting use of such technologies in specified fields of use. NOW, THEREFORE,
in consideration of the promises in this Agreement, Licensee and Ascend agree as
follows:
AGREEMENT
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1. DEFINITIONS. Certain of the defined terms used in this Agreement are as
follows:
1.1 "Affiliate" shall mean a corporation, domestic or foreign, including
parents, subsidiaries and sister companies, which directly or indirectly
Control, are Controlled by, or are under common Control with an entity.
1.2 "Control" shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and operating policies of an
entity through ownership of a majority (more than fifty percent (50%)) of the
voting and/or equity securities of an entity.
1.3 "Derivative Work" "Derivative Work "Derivative Work shall mean a work that
is based upon one or more preexisting works, such as a revision, modification,
translation (including compilation or recapitulation by computer), abridgment,
condensation, expansion, or any other form in which such a preexisting work may
be recast, transformed, or adapted, and that, if prepared without authorization
by the owner of the preexisting work, would constitute a copyright infringement.
1.4 "Documentation" shall mean the documentation, instructions and user's
guides, including updates thereto, relating to the Software, whether in printed
or electronic format.
1.5 "End Users" shall mean those persons who acquire the Software for their own
business or personal use.
1.6 "Existing License Agreement" shall mean the agreements set forth on Exhibit
A (Existing License Agreements) between Licensee and third parties.
1.7 "Intellectual Property Rights" means all rights in, to, or arising out of:
(i) any U.S., international or foreign patent or any application therefor and
any and all reissues, divisions, continuations, renewals, extensions and
continuations-in-part thereof; (ii) inventions (whether patentable or not in any
country), invention disclosures, improvements, trade secrets, proprietary
information, know-how, technology and technical data; (iii) copyrights,
copyright registrations, mask works, mask work registrations, and applications
therefor in the U.S. or any foreign country, and all other rights corresponding
thereto throughout the world; and (iv) any other proprietary rights.
1.8 "Licensee" shall mean Voxware, Inc. and its Affiliates
1.9 "Object Code" shall mean the object code form of the Software, including all
modifications of the Object Code created by Licensee hereunder.
1.10 "Permitted Uses" shall mean the specific applications and fields of use set
forth on Exhibit B (License Restrictions) hereto.
1.11 "Prohibited Uses" shall mean the specific applications and fields of use
set forth on Exhibit B (License Restrictions) hereto.
1.12 "Software" shall mean the Source Code and the Object Code for the computer
software described in Exhibit C (Software) hereto
1.13 "Source Code" shall mean the source code form of the Software, including
both the Source Documentation and all modifications of the Source Code created
by Licensee hereunder.
1.14 "Source Documentation" shall mean the documentation, including flow charts,
annotations, schematics and other explanatory material, relating to the Source
Code.
2. LICENSE GRANTS.
2.1 Source Code.
(a) Source Code License Grant. Ascend grants to Licensee a nonexclusive,
nontransferable, royalty-free, paid-up right and license under Ascend's
Intellectual Property Rights to:
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(i) use internally, modify and sublicense the Source Code for the sole
purpose of fulfilling its obligations existing as of the date hereof under
Existing License Agreements; and
(ii) use internally and modify the Source Code for the sole purpose of
creating Derivative Works, the object code versions of which can be
licensed by Licensee pursuant to Section 2.2(a)(ii) below.
Except for Source Code licenses that have been granted by Licensee prior to the
date hereof and that are identified as Source Code licenses on Exhibit A hereto
(the "Existing Source Licenses"), Licensee may not sublicense the Source Code
without Ascend's prior written consent, which will not be unreasonably withheld.
(b) Protection of Source Code. Except where Licensee has licensed the
Source Code pursuant to Existing Source Licenses, Licensee agrees to take all
reasonably necessary steps to prevent the unauthorized disclosure of the Source
Code, including but not limited to the following: (a) Licensee will use the
Source Code only at the buildings at the sites specified in Exhibit D
(Authorized Sites) hereto, which have restricted access twenty-four (24) hours a
day, and Licensee shall not use the Source Code at any other building or site
without Ascend's prior written consent, which shall not be unreasonably
withheld; (b) the Source Code shall be used only in a location such that access
is restricted only to persons authorized to use the Source Code as provided in
this Agreement; (c) Licensee shall prevent telephone or other remote access to
the Source Code from any location other than through secure, dedicated
transmission lines between the sites specified in Exhibit D (Authorized Sites),
or such other sites as are consented to by Ascend pursuant to clause (a) above;
and (d) the Source Code shall be installed only on a single computer system at
each site specified in Exhibit D (Authorized Sites), or such other sites as are
consented to by Ascend pursuant to clause (a) above, which is password
protected; all Source Code files will be password protected; and only persons
authorized to use the Source Code as provided in this Agreement shall know or
have access to the passwords. Licensee agrees to allow Ascend representatives
immediate access to all sites, buildings, rooms and computers (including
passwords) where the Source Code is kept during normal business hours to ensure
that Licensee is complying with its obligations with respect to the Source Code.
(c) Employees with Access to Source Code. Except where Licensee has
licensed the Source Code pursuant to Existing Source Licenses, Licensee agrees
to restrict access to the Source Code solely to those of its employees who have
a need to know and have access to such Source Code solely for the purposes set
forth in this Agreement. (As used in this Agreement, "access" means having the
capability to view, copy, display, print, transfer or otherwise manipulate or
have exposure to any form of the Source Code). Licensee shall require that each
authorized employee, prior to that employee's access to the Source Code, shall
have signed a confidentiality agreement pertaining to protection of the Source
Code with terms consistent with the protection of Licensee's proprietary
information of the same nature and character as the Source Code.
(d) Derivative Works. Licensee agrees to deliver to Ascend copies of any
Derivative Works of the Source Code promptly following their creation by
Licensee, and such Derivative Works shall be considered part of the Software and
shall be owned exclusively by Ascend.
2.2 Object Code.
(a) Object Code License. Ascend grants to Licensee a nonexclusive,
nontransferable, royalty-free, paid-up right and license under Ascend's
Intellectual Property Rights to:
(i) use internally, reproduce, distribute (including through multiple
tiers of distribution) and sublicense the use of the Object Code, including
the Object Code of any Derivative Work produced by Licensee pursuant to
Section 2.1(a)(i) above, for the sole purpose of fulfilling its obligations
existing as of the date hereof under Existing License Agreements; and
(ii) use internally, reproduce, distribute (including through multiple
tiers of distribution) and sublicense the use of the Object Code, including
the object code versions of any Derivative Work produced by Licensee
pursuant to Section 2.1(a)(ii) above, only for the Permitted Uses; provided
that this right to sublicense is subject to the approval of Ascend as set
forth in Section 2.2 (b) and the licensing restrictions as set forth in
Section 2.2(c) below.
(b) Written Consent of Ascend. Prior to sublicensing the Object Code
pursuant to Section 2.2(a)(ii) above, Licensee shall deliver a written request
(the "Licensee Request") to Voice-Over IP Managing
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Director of Product Management at Ascend (who is currently Jose Garcia) with the
following information: (1) the name of the prospective licensee (the
"Prospective Licensee"); (2) a description of how the Prospective Licensee's
will use the Software; and (3) the applicable portions of the Software to be
licensed. Within ten (10) business days of receipt of a Licensee Request, Ascend
shall deliver to Licensee its written consent to or rejection of such request,
provided that Ascend shall be deemed to have consented to such request if it
fails to respond to a Licensee Request within such ten (10) business day period.
Ascend may not withhold its consent unless Ascend has a reasonable business
purpose for withholding its consent, which reasonable business purposes shall
include, but not be limited to, (1) the Prospective Licensee is a competitor of
Ascend or its Affiliates, and (2) the proposed use of the Software by the
Prospective Licensee would compete with products of Ascend or its Affiliates.
(c) License Restrictions. Any sublicense granted by Licensee pursuant to
Section 2.2(a)(ii) shall require that the sublicensee agrees in writing (i) to
only use the Software for Permitted Uses, (ii) to not use the Software for
Prohibited Uses and (iii) to make Ascend a third party beneficiary to the
sublicense agreement with respect to provisions protecting Ascend's proprietary
rights in the Software. All licenses granted by Licensee pursuant to this
agreement, including distribution and use licenses, shall be in writing and
shall include provisions consistent with protecting Ascend's proprietary rights
in the Software, including but not limited to provisions substantially similar
to Sections 2.2(c) ("License Restrictions"), 5 ("Proprietary Rights"), 6
("Confidentiality") (in the case of any license of Source Code), 11.6 ("Export")
and 11.7 ("Government End Users").
2.3 Documentation. Ascend grants to Licensee a worldwide, nonexclusive,
nontransferable, royalty-free, paid-up right and license to use the
Documentation internally and to reproduce the Documentation solely for the
purpose of distributing the End User portions of the Documentation (which shall
not include any of the Source Documentation).
2.4 Restrictions. Except to the extent expressly permitted in this Agreement,
Licensee shall not sell, rent, sublicense, distribute, assign or otherwise
transfer any rights in the Software without Ascend's prior written consent.
2.5 Covenant to Enforce Agreements. Licensee will promptly notify Ascend in
writing of any breach violation of any Sublicense Agreement or Existing License
Agreement of which it becomes aware, and will take commercially reasonable
efforts to enforce all such agreements.
3. DELIVERY OF SOFTWARE. Licensee acknowledges that it already possesses copies
of the Software and Documentation.
4. SOFTWARE SUPPORT SERVICES.
4.1 Software Support Services. For a period of ninety (90) days from the date
hereof, Licensee shall, upon the reasonable request of Licensee, receive up to a
maximum of one-hundred (100) hours of technical services from Ascend for the
sole purpose of assisting Licensee to fulfill its obligations under the Existing
Licenses. Such support shall be provided primarily by Gerard Aguilar and David
Campana, or if neither is available, by Ascend personnel of similar
qualifications and ability. ALL SERVICES AND GOODS PROVIDED BY ASCEND UNDER THIS
SECTION ARE PROVIDED ON AN "AS IS" BASIS AND ASCEND DISCLAIMS ALL WARRANTIES,
EXPRESS OR IMPLIED, CONCERNING SUCH GOODS AND SERVICES.
4.2 Support Fees. For the support services provided by Ascend pursuant to this
Section, Licensee shall pay Ascend one hundred dollars ($100) per staff hour and
twenty percent (20%) of any fees received by Licensee from third parties
relating to such services. Licensee shall also reimburse Ascend for the cost of
all materials expended by Ascend in providing these services. Payment for these
services shall be due and payable by Licensee within thirty (30) days of receipt
of an Ascend invoice for such services.
5. PROPRIETARY RIGHTS. Title and ownership of all proprietary rights in the
Software and any Derivative Works thereof, including any copyright, patent,
trade secret, trademark or other intellectual property rights, will at all times
remain the property of Ascend. Licensee agrees not to remove or obliterate any
copyright, trademark or proprietary rights notices from the Software or
Documentation and shall reproduce all such notices on all authorized copies of
the Software and Documentation. Except as otherwise permitted herein, Licensee
shall not modify, translate, disassemble, decompile, reverse engineer or cause
or allow discovery of the Source Code in any way.
6. CONFIDENTIALITY.
6.1 Definition of Confidential Information. "Confidential Information" as used
in this Agreement shall mean (a) the Source Code, Source Documentation and any
know-how, inventions and trade secrets relating to the Software, and
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(b) any information exchanged by the parties pursuant to Section 2.2(b). Such
information disclosed by the disclosing party ("Discloser") will be considered
Confidential Information by the receiving party ("Recipient"), only if such
information is conspicuously designated as "Confidential", or if provided
orally, identified as confidential at the time of disclosure and confirmed in
writing within thirty (30) days of disclosure; provided Licensee will consider
the information described in Section 6.1(a) as the Confidential Information of
Ascend notwithstanding any other provision of this Agreement.
6.2. Nondisclosure and Nonuse Obligation. Each of the parties agrees that it
will not make use of, disseminate, or in any way disclose any Confidential
Information of the other party to any person, firm or business except as
expressly contemplated hereby or for a purpose the other party may hereafter
authorize in writing. Each of the parties agrees that it shall treat all
Confidential Information of the other party with the same degree of care as it
accords to its own Confidential Information, and each of the parties represents
that it exercises reasonable care to protect its own Confidential Information.
Each party agrees that it shall disclose Confidential Information of the other
party only to those of its employees who need to know such information and
certifies that such employees have previously agreed, either as a condition to
employment or in order to obtain the Confidential Information, to be bound by
terms and conditions substantially similar to those of this Agreement. Recipient
will immediately give notice to Discloser of any unauthorized use or disclosure
of the Confidential Information. Recipient agrees to assist Discloser in
remedying any such unauthorized use or disclosure of the Confidential
Information.
7. EXCLUSION OF WARRANTY. THE SOFTWARE IS LICENSED ON AN "AS IS" BASIS.
ACCORDINGLY, ASCEND MAKES NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR
STATUTORY, INCLUDING WITHOUT LIMITATION ANY REPRESENTATION OR WARRANTY AS TO THE
SOFTWARE'S MERCHANTABILITY, FITNESS FOR ANY INTENDED USE, OR NON-INFRINGEMENT OF
THIRD PARTY RIGHTS. LICENSEE MAY NOT MAKE ANY WARRANTY ON BEHALF OF ASCEND WITH
RESPECT TO THE SOFTWARE.
8. LIMITATION OF LIABILITY. IN NO EVENT WILL ASCEND OR ITS LICENSORS HAVE ANY
LIABILITY UNDER THIS AGREEMENT OR ARISING FROM OR RELATED TO THE SOFTWARE FOR
ANY INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES, INCLUDING ANY LOST PROFITS OR
LOST SAVINGS, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY
CLAIM BY ANY THIRD PARTY.
9. INDEMNIFICATION. Licensee shall defend, indemnify and hold harmless Ascend
from and against any claims by any third party arising out of (i) the
distribution, operation or use of the Software, or (ii) Licensee's failure to
obtain a valid license agreement for the Software or Licensees failure to
enforce any agreements granted by Licensee for the Software, including Existing
Licenses; or (iii) Licensee's making representations or warranties regarding the
Software. The foregoing indemnification obligation of Licensee is subject to the
following: (i) Ascend shall notify Licensee in writing promptly upon Ascend
first becoming aware of a claim; (ii) Licensee has sole control of the
settlement, compromise, negotiation and defense of any such action; and (iii)
Ascend gives Licensee all reasonably available information, assistance and
authority, at Licensee's expense, to enable Licensee to do so. Ascend shall have
no obligation to indemnify or defend Licensee against any claim made against
Licensee or any other third parties regarding the Software.
10. TERMINATION. This Agreement may be terminated by either party on sixty (60)
written days notice to the other party if the other party fails to materially
perform any obligation hereunder and such failure is not cured within such sixty
(60) day period. Upon termination or expiration, Licensee shall no longer have
any rights to the Software; provided that (i) any license granted by Licensee
for the Software existing as of the date of notice that is consistent with the
terms of this Agreement shall remain in force and effect, (ii) Licensee shall
retain such rights under this Agreement as are required solely to permit
Licensee to fulfill its obligations under any such license, and (iii) Licensee
will use reasonably commercial efforts to enforce such licenses. The obligations
of Licensee under Sections 2.1 ("Source Code"), 2.2 ("Object Code"), 2.4
("Restrictions"), 2.5 ("Covenant to Enforce Agreements"), 5 ("Proprietary
Rights"), 7 ("Exclusion of Warranty"), 8 ("Limitation of Liability"), 9
("Indemnification"), and 10 ("Termination"), and the obligations of both parties
under Sections 6 ("Confidentiality") and 11 ("Miscellaneous"), shall survive
termination of this Agreement.
11. MISCELLANEOUS.
11.1 Assignment. Except in the case of an assignment by Licensee to an Affiliate
(subject to the execution of a written assumption of all the obligations
hereunder by such Affiliate and Licensee's agreement to remain secondarily
liable for the performance and compliance of such Affiliate to all the terms
hereof), Licensee may not transfer or assign this Agreement, including any
transfer by merger, acquisition, sale of assets or operation of law, without the
prior written consent of Ascend. Licensee agrees that notwithstanding the
execution of a confidentiality or non-disclosure
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agreement with a potential acquirer, assignee or transferee, in no event will
Licensee disclose any portion of the Source Code to any such party in the course
of such party conducting its due diligence with respect to a proposed
transaction without first obtaining Ascend's written consent to an assignment of
this Agreement in conjunction with the consummation of such transaction. In the
event Ascend grants such consent, Licensee may disclose the Source Code to the
potential acquirer, assignee or transferee solely for the purposes of allowing
such party to conduct its due diligence and further that Licensee has entered
into a written non-disclosure agreement pertaining to protection of the Source
Code with terms consistent with the protection of Licensee's proprietary
information of the same nature and character as the Source Code.
11.2 Notices. Any notice required under this Agreement shall be given in writing
and shall be deemed effective upon delivery to the party to whom addressed by
(i) express courier upon written verification of actual receipt; (ii) facsimile
upon confirmation of receipt generated by the sending device; or (iii)
registered or certified mail, return receipt requested, upon the fifth (5th) day
after deposit in the mail. All notices shall be sent to the applicable address
on the cover page hereof or to such other address as the parties may designate
in writing, with a copy to the President and to the legal department of such
party.
11.3 Governing Law. This Agreement shall be governed and interpreted by the laws
of the State of California, without giving effect to any conflict of laws rules.
In the event an action is brought to enforce any provision or declare a breach
of this Agreement, the prevailing party shall be entitled to recover, in
addition to any other amounts awarded, reasonable legal and other related costs
and expenses, including attorney's fees, incurred thereby.
11.4 Injunctive Relief. It is expressly agreed that a material breach of this
Agreement may cause irreparable harm to Ascend and that a remedy at law may be
inadequate. Therefore, in addition to any and all remedies available at law,
Ascend shall be entitled to injunctive relief against Licensee in the event of
any threatened or actual violation of any or all provisions in this Agreement.
11.5 Independent Contractor. Licensee is an independent contractor and nothing
in this Agreement shall be deemed to create a joint venture, partnership, or
agency relationship between the parties. Neither party has the right or
authority to assume or create any obligation or responsibility on behalf of the
other.
11.6 Export. Licensee agrees that it will not export or reexport the Software
without the appropriate United States Government or any other government
licenses.
11.7 Government End Users. If the Software is licensed hereunder by Licensee to
the United States Government or any contractor therefor, Licensee agrees to take
all steps necessary to ensure: (a) for acquisition by or on behalf of civilian
agencies, protection as "commercial computer software" and related documentation
in accordance with the terms of this Agreement as specified in 48 C.F.R. 12.212
of the Federal Acquisition Regulations and its successors; and (b) for
acquisition by or on behalf of units of the Department of Defense ("DoD"),
protection as "commercial computer software" and related documentation in
accordance with the terms of this agreement as specified in 48 C.F.R. 227-7202-2
of the DoD F.A.R. Supplement and its successors.
11.8 Entire Agreement. If any portion of this Agreement is determined to be or
becomes unenforceable or illegal, such portion shall be deemed eliminated and
the remainder of this Agreement shall remain in effect in accordance with its
terms as modified by such deletion. No waiver of any breach of this Agreement
shall be effective unless in writing, nor shall any breach constitute a waiver
of any subsequent breach of any provision of this Agreement. This Agreement and
the exhibits hereto contain the entire agreement and understanding between the
parties with respect to the subject matter hereof, and supersede all prior
agreements, negotiations, proposals and communications between the parties.
45
<PAGE>
The foregoing is agreed to by:
Voxware, Inc. Ascend Communications, Inc.
By:/s/ Bathseba J. Malsheen By:/s/ Roger Boyce
---------------------------- ------------------------
Name: Bathsheba J. Malsheen Name: Roger Boyce
-------------------------- ----------------------
Title: President and CEO Title: Vice President and
------------------------- General Manager
-------------------
Date: 2/4/99 Date: 2/4/99
-------------------------- ----------------------
46
<PAGE>
ASCEND COMMUNICATIONS, INC.
Technology License Agreement
EXHIBIT A
EXISTING LICENSE AGREEMENTS
Those license agreements listed in Section 2.11(f) of the Disclosure Schedule to
the Asset Agreement.
1
<PAGE>
ASCEND COMMUNICATIONS, INC.
Technology License Agreement
- --------------------------------------------------------------------------------
EXHIBIT B
LICENSE RESTRICTIONS
1. Permitted Uses
a. Unidirectional and/or store-and-forward sound in the following types of
products: gaming, audio streaming, pocket translators, PIMs, PDAs, toys,
and other consumer devices, where a consumer device is defined to have a
list price under US $2,000. Note that licensing to IXCs, CLECs, ISPs, and
NSPs is specifically prohibited.
b. Real-time audio mixing in audio conferencing and voice chat
applications.
c. Non-real-time audio applications for smart phones and set top boxes.
2. Prohibited Uses
a. Any kind of packet to circuit voice or MM gateway, including VoIP, VoFR,
and VoATM, H.320 to H.323, or other such gateway as may come to exist.
b. Any kind of telephone, telephone like device, videophone, voice/data
phone or MM endpoint, for 2-way RT communication including set-top boxes
except as specifically permitted above.
c. Licensing to IXCs, CLECs, ISPs, and NSPs is specifically prohibited.
1
<PAGE>
ASCEND COMMUNICATIONS, INC.
Technology License Agreement
- --------------------------------------------------------------------------------
EXHIBIT C
SOFTWARE
Sec 3.1.2 Voxchat
Sec 3.1.3 VoxPhone (subject to rights of E-Tech Canada Limited).
Sec 3.2.1 MetaVoice (RT24, ULC15, VR15, RT28, RT29)
Sec. 3.2.2 MetaVoice 2 (SC3/6)
Sec 3.2.5 - MetaSound-2 LC
Sec 3.3 everything but 3.3.10
Sec 3.5.3 - VCT
Sec 3.5.4 - VCP
Sec. 3.5.3 - TNT including G723.1 coder
Sec 3.5.4 - VCI (not including ITU4 and Satcom16)
1
<PAGE>
ASCEND COMMUNICATIONS, INC.
Technology License Agreement
- --------------------------------------------------------------------------------
EXHIBIT D
AUTHORIZED SITES
305 College Road East, Princeton, New Jersey, or such other location which
hereafter becomes the headquarters of Licensee.
1
<PAGE>
EXHIBIT B
GENERAL ASSIGNMENT AND BILL OF SALE
THIS GENERAL ASSIGNMENT AND BILL OF SALE is entered into this ____ day of
_________, ____ by and between Ascend Communications, Inc., a Delaware
corporation ("Purchaser"), and Voxware, Inc., a Delaware corporation ("Seller").
WHEREAS, Purchaser and Seller have entered into an Asset Purchase
Agreement, dated as of February 4, 1999 (the "Asset Purchase Agreement";
capitalized terms not defined herein shall have the meanings ascribed to them in
the Asset Purchase Agreement), pursuant to which Seller has agreed to sell,
transfer, convey, assign and deliver to Purchaser and Purchaser has agreed to
purchase from Seller certain assets used or held for use by Seller in connection
with the Seller's business of developing and commercializing digital speech
communication technologies based on speech coding algorithms, and Purchaser has
agreed, in partial consideration therefor, to assume certain obligations in
connection therewith by executing an Assumption Agreement of even date herewith;
WHEREAS, Seller desires to transfer and assign to Purchaser the assets
described below pursuant to Section 1.1 of the Asset Purchase Agreement and
Purchaser desires to accept the sale, transfer, conveyance, assignment and
delivery thereof;
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein and other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, Seller hereby irrevocably sells, transfers,
conveys, assigns and delivers to Purchaser free and clear of all Liens, other
than Permitted Liens, all of Seller's right, title and interest in, to and under
the following Assets and Properties of Seller used or held for use in connection
with the Business, other than the Excluded Assets, as the same shall exist on
the date hereof: (i) the Tangible Personal Property, (ii) the Business
Contracts, (iii) the Intangible Personal Property, (iv) the Business
Registrations and (v) the Immigration Cases (collectively, the "Assigned
Assets"), TO HAVE AND TO HOLD the same unto Purchaser, its successors and
assigns, forever.
Purchaser hereby accepts the sale, transfer, conveyance, assignment and
delivery of the Assigned Assets.
2
<PAGE>
Seller represents, warrants, covenants and agrees that it will warrant and
defend the sale of the Assigned Assets against all and every Person or Persons
whomsoever claiming against any or all of the same, subject to the terms and
provisions of the Asset Purchase Agreement
This General Assignment and Bill of Sale may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
This General Assignment and Bill of Sale shall be governed by and construed
in accordance with the laws of the State of California applicable to a contract
executed and performed in such State without giving effect to the conflicts of
laws principles thereof, except that if it is necessary in any other
jurisdiction to have the law of such other jurisdiction govern this General
Assignment and Bill of Sale in order for this General Assignment and Bill of
Sale to be effective in any respect, then the laws of such other jurisdiction
shall govern this General Assignment and Bill of Sale to such extent.
IN WITNESS WHEREOF, the undersigned have caused their duly authorized
officers to execute this General Assignment and Bill of Sale on the day and year
first above written.
ASCEND COMMUNICATIONS, INC.
By:
----------------------------------
Name:
Title:
VOXWARE, INC.
By:
----------------------------------
Name:
Title:
SIGNATURE PAGE TO GENERAL ASSIGNMENT AND BILL OF SALE
3
<PAGE>
EXHIBIT C
ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT is entered into this ____ day of _________, 1999
by and between Ascend Communications, Inc., a Delaware corporation
("Purchaser"), and Voxware, Inc., a Delaware corporation ("Seller").
WHEREAS, Purchaser and Seller have entered into an Asset Purchase
Agreement, dated as of February 4, 1999 (the "Asset Purchase Agreement";
capitalized terms not defined herein shall have the meanings ascribed to them in
the Asset Purchase Agreement), pursuant to which Seller has agreed to sell,
transfer, convey, assign and deliver to Purchaser and Purchaser has agreed to
purchase from Seller certain assets used or held for use by Seller in connection
with Seller's business of developing and commercializing digital speech
communication technologies based on speech coding algorithms, and Purchaser has
agreed, in partial consideration therefor, to assume certain obligations in
connection therewith by executing this Assumption Agreement;
WHEREAS, pursuant to Section 1.2(a) of the Asset Purchase Agreement,
Purchaser is required to execute and deliver to Seller this Agreement whereby
Purchaser assumes such obligations;
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein and other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, Purchaser hereby undertakes and agrees from and
after the date hereof, subject to the limitations contained herein, to assume
and to pay, perform and discharge when due the Assumed Liabilities.
Nothing contained herein shall require Purchaser to pay or discharge any
debts or obligations expressly assumed hereby so long as Purchaser shall in good
faith contest or cause to be contested the amount or validity thereof.
Other than as specifically stated above or in the Asset Purchase Agreement,
Purchaser assumes no debt, liability or obligation of Seller, including without
limitation the Retained Liabilities, by this Assumption Agreement, and it is
expressly understood and agreed that all debts, liabilities and obligations not
assumed hereby by Purchaser shall remain the sole obligation of Seller, its
successors and assigns.
No Person other than Seller, its successors and assigns shall have any
rights under this Assumption Agreement or the provisions contained herein.
1
<PAGE>
This Assumption Agreement may be executed in any number of counterparts,
each of which will be deemed an original, but all of which together will
constitute one and the same instrument.
This Assumption Agreement shall be governed by and construed in accordance
with the laws of the State of California applicable to a contract executed and
performed in such State without giving effect to the conflicts of laws
principles thereof, except that if it is necessary in any other jurisdiction to
have the law of such other jurisdiction govern this Assumption Agreement in
order for this Assumption Agreement to be effective in any respect, then the
laws of such other jurisdiction shall govern this Assumption Agreement to such
extent.
IN WITNESS WHEREOF, the undersigned have caused their duly authorized
officers to execute this Assumption Agreement on the day and year first above
written.
ASCEND COMMUNICATIONS, INC.
By:
----------------------------------
Name:
Title:
VOXWARE, INC.
By:
---------------------------------
Name:
Title:
SIGNATURE PAGE TO ASSUMPTION AGREEMENT
2
<PAGE>
EXHIBIT D
VOXWARE, INC.
Officer's Certificate
I, Bathsheba J. Malsheen, President and Chief Executive Officer of Voxware,
Inc., a Delaware corporation ("Seller"), pursuant to Section 6.4 of the Asset
Purchase Agreement dated as of February 4, 1999 (the "Asset Purchase Agreement";
capitalized terms not defined herein shall have the meanings ascribed to them in
the Asset Purchase Agreement) between Ascend Communications, Inc., a Delaware
corporation, and Seller, DO HEREBY CERTIFY on behalf of Seller that:
(1) Each of the representations and warranties made by Seller in the Asset
Purchase Agreement is true and correct in all material respects (without regard
for any materiality qualifiers contained therein) on and as of the date hereof
as though made on and as of the date hereof.
(2) Each of the agreements, covenants and obligations required by the Asset
Purchase Agreement to be performed or complied with by Seller at or before the
Closing has been duly performed or complied with in all material respects.
IN WITNESS WHEREOF, Seller has caused this Certificate to be executed on
its behalf by the undersigned on and as of the ____ day of ____________, 1999.
VOXWARE, INC.
By:
---------------------------------
Name: Bathsheba J. Malsheen
Title: President and Chief Executive
Officer
<PAGE>
[Date]
Page 2
EXHIBIT E
VOXWARE, INC.
Secretary's Certificate
I, Nicolas Narlis, Secretary of Voxware, Inc., a Delaware corporation
("Seller"), pursuant to Section 6.4 of the Asset Purchase Agreement dated as of
February 4, 1999 (the "Asset Purchase Agreement") between Ascend Communications,
Inc., a Delaware corporation, and Seller, DO HEREBY CERTIFY on behalf of Seller
as follows:
(1) Attached hereto as Exhibit A is a true, complete and correct copy of
the Certificate of Incorporation of Seller and all amendments thereto (as so
amended, the "Certificate of Incorporation"), and no amendment to the
Certificate of Incorporation has been authorized or become effective since the
date of the last of such amendments, no amendment or other document relating to
or affecting the Certificate of Incorporation has been filed in the office of
the Secretary of State of the State of Delaware since such date and no action
has been taken by Seller, its stockholders, directors or officers in
contemplation of the filing of any such amendment or other document or in
contemplation of the liquidation or dissolution of Seller.
(2) Attached hereto as Exhibit B is a true, complete and correct copy of
the Bylaws of Seller as in full force and effect on the date hereof and at all
times since [insert date of last amendment].
(3) Attached hereto as Exhibit C is a true, complete and correct copy of
resolutions adopted by the Board of Directors of Seller with respect to the
Asset Purchase Agreement and the Operative Agreements to which it is a party and
the transactions contemplated thereby, which resolutions were duly and validly
adopted at a meeting of the Board of Directors of Seller on February 4, 1999, at
which a quorum was present and acting throughout. All such resolutions are in
full force and effect on the date hereof in the form in which adopted and no
other resolutions have been adopted by the Board of Directors of Seller or any
committee thereof relating to the Asset Purchase Agreement and the Operative
Agreements to which it is a party and the transactions contemplated thereby.
3
<PAGE>
[Date]
Page 3
(4) Attached hereto as Exhibit D is a true, complete and correct copy of
resolutions adopted by the stockholders of Seller with respect to the Asset
Purchase Agreement and the Operative Agreements and the transactions
contemplated thereby, which resolutions were duly and validly adopted at a
meeting of the stockholders of Seller on _______, 1999, at which a quorum was
present and acting throughout. All such resolutions are in full force and effect
on the date hereof in the form in which adopted and no other resolutions have
been adopted by the stockholders of Seller relating to the Asset Purchase
Agreement and the Operative Agreements and the transactions contemplated thereby
(5) Each of the following named individuals is a duly elected or appointed,
qualified and acting officer of Seller who holds, and at all times since January
__, 1999 has held, the offices set opposite such individual's name, and the
signature written opposite the name and title of such officer is such officer's
genuine signature:
Bathsheba J. Malsheen
President and Chief Executive Officer
------------------------------
[Name] ---------------------------
[Title]
[Name] ---------------------------
[Title]
[Name] ---------------------------
[Title]
<PAGE>
[Date]
Page 4
IN WITNESS WHEREOF, Seller has caused this Certificate to be executed on
its behalf by the undersigned on and as of the ____ day of ______________, 1999.
VOXWARE, INC.
By:
------------------------
Name: Nicholas Narlis
Title: Vice President, Chief Financial
Officer, Secretary and Treasurer
I, Bathsheba J. Malsheen, President and Chief Executive Officer of Seller,
DO HEREBY CERTIFY on behalf of Seller that Nicholas Narlis is the duly elected
or appointed, qualified and acting Secretary of Seller, and the signature set
forth above is the genuine signature of such officer.
-------------------------
Name: Bathsheba J. Malsheen
Title: President and Chief Executive
Officer
____________, 1999
SIGNATURE PAGE TO SECRETARY'S CERTIFICATE
<PAGE>
[Date]
Page 5
EXHIBIT F
[Form of Opinion of Counsel to Seller]
_________, 1999
[Name and Address of Purchaser]
Ladies and Gentlemen:
We have acted as counsel to Voxware, Inc., a Delaware corporation
("Seller"), in connection with the Asset Purchase Agreement dated as of January
__, 1999 (such agreement, excluding schedules and exhibits thereto is
hereinafter referred to as the "Asset Purchase Agreement"), by and between
_______________, a Delaware corporation, and Seller and the transactions
contemplated thereby. Capitalized terms used but not defined herein shall have
the respective meanings given to such terms in the Asset Purchase Agreement.
In rendering the opinions expressed below, we have examined (a) the Asset
Purchase Agreement and the Operative Agreements (collectively, the "Documents")
and (b) such corporate records of Seller and such other documents as we have
deemed necessary as a basis for the opinions expressed below. In our
examination, we have assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals and the conformity with the
authentic original documents of all documents submitted to us as copies. As to
matters of fact, we have relied upon certificates of government officials and of
Seller and its officers and upon representations and warranties made in or
pursuant to the Documents.
In rendering the opinions expressed below, we have assumed (other than as
to Seller) that all of the documents referred to in this opinion have been duly
authorized by, have been duly executed and delivered by, and constitute legal,
valid, binding and enforceable obligations of, all of the parties to such
documents, that all signatories to such documents have been duly authorized and
that all such parties are duly organized and validly existing and have the power
and authority (corporate or other) to execute, deliver and perform such
documents.
Based upon and subject to the foregoing and subject also to the comments
and qualifications set forth below, and having considered such questions of law
as we deemed necessary as a basis for the opinions expressed below, we are of
the opinion that:
1. Seller is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, and has full corporate power
and authority to own and use the Assets. Seller is qualified to do business as a
foreign corporation in the Sate of New Jersey. Seller has full corporate power
and authority to execute and deliver the Documents to which it is a party, to
perform its obligations thereunder and to consummate the transactions
contemplated thereby, including without limitation to sell and transfer
(pursuant to the Asset Purchase Agreement) the Assets.
2. The execution and delivery by Seller of the Documents to which it is a
party, and the performance by Seller of its obligations thereunder, have been
duly and validly authorized by the Board of Directors and the stockholders of
Seller, no other corporate action on the part of Seller or its stockholders
being necessary. The Asset Purchase Agreement and such Operative Agreements have
been duly and validly executed and delivered by Seller and constitute legal,
valid and binding obligations of Seller, enforceable against Seller in
accordance with their terms.
3. The execution, delivery and performance by Seller of the Asset Purchase
Agreement and the Operative Agreements to which it is a party and the
consummation of the transactions contemplated thereby did not and will not (a)
conflict with or result in a violation or breach of any of the terms, conditions
or provisions of
<PAGE>
[Date]
Page 6
the certificate of incorporation or by-laws of Seller, (b) conflict with or
result in a violation or breach of any term or provision of any law, statute,
rule or regulation, or any Order known to us, applicable to Seller or any of its
Assets and Properties or (c) (i) conflict with or result in a violation or
breach of, (ii) constitute (with or without notice or lapse of time or both) a
default under, (iii) except as set forth in Schedules 2.3 and 2.4 to the Asset
Purchase Agreement, require Seller to obtain any consent, approval or action of,
make any filing with or give any notice to any Person as a result or under the
terms of, or (iv) result in the creation or imposition of any Lien upon Seller
or any of the Assets under, any Contract to which Seller is a party or by which
any of its Assets and Properties is bound which is filed as an Exhibit to
Seller's registration statements and other filings with the Securities and
Exchange Commission.
4. To our knowledge, no consent, approval or action of, filing with or
notice to any Governmental or Regulatory Authority on the part of Seller is
required in connection with the execution, delivery and performance of the Asset
Purchase Agreement or any of the Operative Agreements to which it is a party or
the consummation of the transactions contemplated thereby, except as disclosed
in Section 2.4 of the Disclosure Schedule.
5. Except as disclosed in Section 2.8 of the Disclosure Schedule, to our
knowledge there are no Actions or Proceedings pending or threatened against,
relating to or affecting Seller or any of its Assets and Properties.
The foregoing opinions are also subject to the following comments and
qualifications:
<PAGE>
[Date]
Page 1
a. The foregoing opinions are expressly limited to matters under and
governed by the internal laws of the State of New York (exclusive of
conflict of law principles), the internal corporate law of the State
of Delaware and applicable Federal laws of the United States of
America. We note that the Documents are governed by the laws of the
State of California. With respect to the legality, validity, binding
nature or enforceability of these documents, we have assumed, without
any investigation, that the laws of the State of California are
identical to the laws of the State of New York in all respects. We
note that the laws of the State of California are likely to differ
from the laws of the State of New York with respect to the matters
covered by this opinion, that even if such laws were the same as the
laws of the State of New York, judicial interpretations thereto in
California may differ from judicial interpretations by New York
courts, and that such differences may be material. With respect to
laws, regulations and the like referred to herein, in addition to all
other limitations set forth herein, such references are limited to
laws, regulations and the like of the State of New York (exclusive of
conflict of law principles), the internal corporate law of the State
of Delaware and such applicable Federal laws of the United States of
America as each is in effect and force as of even date of this
opinion.
b. In rendering the opinion expressed in paragraph 1 above regarding
existence and good standing, we have relied solely on certificates of
public officials, and have conducted no further investigation. Such
opinions are limited to the dates of such certificates.
c. The foregoing opinions regarding the enforceability of the
Documents are subject to the following:
(1) The enforceability of the Documents may be limited or affected by
(a) bankruptcy, insolvency, reorganization, moratorium,
liquidation, rearrangement, probate, conservatorship, fraudulent
transfer, fraudulent conveyance and other similar laws (including
court decisions) now or hereafter in effect and affecting the
rights and remedies of creditors generally or providing for the
relief of debtors, (b) the refusal of a particular court to grant
(i) equitable remedies, including, without limiting the
generality of the foregoing, specific performance and injunctive
relief, or (ii) a particular remedy sought under any Document as
opposed to another remedy provided for therein or another remedy
available at law or in equity, (c) general principles of equity
(regardless of whether such remedies are sought in a proceeding
in equity or at law), and (d) judicial discretion.
(2) In rendering the foregoing opinions, we express no opinion as to
the availability of certain equitable remedies, including
specific performance, and further, we express no opinion as to
the legality, validity, enforceability or binding effect of
provisions of each Document relating to indemnities and rights of
contribution to the extent prohibited by public policy or which
might require indemnification for losses or expenses caused by
negligence, gross negligence, willful misconduct, fraud or
illegality of an indemnified party.
d. Our opinions expressed in paragraphs 3 and 4 above as to (i)
conflicts with or violations or breaches of any term or provision of
any law, statute, rule or regulation, or of any other Law or Order
applicable to Seller or any of its Assets and Properties and (ii)
consents, approvals or actions of, filings with or notices to any
Governmental or Regulatory Authority on the part of Seller required in
connection with the execution, delivery and performance of the Asset
Purchase Agreement or any of the Operative Agreements or the
consummation of the transactions contemplated thereby, is based upon a
review of those laws, statutes, rules or regulations that, in our
experience, are normally applicable to the transactions contemplated
by the Documents.
e. With respect to references herein to "known to us", "to our
knowledge" or words or phrases of similar import (whether modified by
any additional phrases), such references mean the actual, current
knowledge that those attorneys of this Firm who devoted substantive
attention to the transactions to which this opinion relates have
obtained from: (i) their review of documents in
<PAGE>
[Date]
Page 2
connection with rendering this opinion, and the due diligence
performed in connection therewith, which review and due diligence were
limited to reviewing the Documents, the exhibits and Schedules
thereto, the minute books of the Company, and a certificate of
Bathsheba Malsheen, President and Chief Executive Officer of the
Company, and Nicholas Narlis, Vice President and Chief Financial
Officer of the Company, and which due diligence did not include any
examination of courts, boards, other tribunals or public records with
respect to any litigation, investigation or proceedings, or judgments,
orders or decrees, in any event applicable to the Company or any of
its properties; and (ii) representations and warranties of the Company
set forth in the Documents, or otherwise made to us in certifications
and other writings.
The opinions expressed herein are solely for the benefit of, and may
only be relied upon by, you. This opinion may not be furnished to (except in
connection with any legal or arbitral proceedings or as may be required by
applicable law, and in any such events, as shall be directed or required
incident thereto pursuant to a duly issued subpoena, writ, order or other legal
process), or relied upon by, any other person without the prior written consent
of this Firm. The opinions expressed herein are as of the date hereof (and not
as of any other date) or, to the extent a reference to a certificate or other
document is made herein, to such date, and we make no undertaking to amend or
supplement such opinions as facts and circumstances come to our attention or
changes in the law occur which could affect such opinions.
Very truly yours,
2
<PAGE>
[Date]
Page 3
EXHIBIT G
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of ________ __, 1999 among Ascend
Communications, Inc., a Delaware corporation ("Purchaser"), Voxware, Inc., a
Delaware corporation ("Seller"), and _____________________________, a
__________________________, as escrow agent (the "Escrow Agent").
WHEREAS, concurrently with the execution and delivery of this Agreement and
pursuant to an Asset Purchase Agreement dated as of February 4, 1999 (the "Asset
Purchase Agreement"; capitalized terms not defined herein shall have the
meanings ascribed to them in the Asset Purchase Agreement) between Purchaser and
Seller relating to Purchaser's acquisition of certain assets and liabilities of
Seller (the "Assets"); and
WHEREAS, the Asset Purchase Agreement requires as a condition to the sale
of the Assets that Purchaser, Seller and the Escrow Agent enter into this
Agreement and that Purchaser deposit a portion of the Purchase Price with the
Escrow Agent in order to provide a fund for indemnity payments that Seller
becomes obligated to make to Purchaser or its officers, directors, employees,
agents or Affiliates (together, the "Indemnified Parties") as and to the extent
provided in Article IX of the Asset Purchase Agreement.
NOW, THEREFORE, Purchaser, Seller and the Escrow Agent hereby agree as
follows:
1. Appointment of the Escrow Agent; Deposit of Escrow Amount. Seller and
Purchaser hereby constitute and appoint the Escrow Agent as, and the Escrow
Agent hereby agrees to assume and perform the duties of, the escrow agent under
and pursuant to this Agreement. The Escrow Agent acknowledges receipt of an
executed copy of the Asset Purchase Agreement and of the amount of Seven Hundred
and Fifty Thousand Dollars ($750,000) (the "Escrow Amount") from Purchaser as
provided in Section 1.4 of the Asset Purchase Agreement.
2. The Escrow Fund. The Escrow Amount and all earnings thereon (the
Escrow Amount and all such earnings being referred to herein together as the
"Escrow Fund") shall be held by the Escrow Agent as a trust fund in a separate
account maintained for the purpose, on the terms and subject to the conditions
of this Agreement. The Escrow Fund shall not be subject to lien or attachment by
any creditor of any party hereto and shall be used solely for the purpose set
forth in this Agreement. Amounts held in the Escrow Fund shall not be available
to, and shall not be used by, the Escrow Agent to set off any obligations of
either Purchaser or Seller owing to the Escrow Agent in any capacity.
3. Investment of the Escrow Fund; Taxes.
(a) The Escrow Agent shall invest and reinvest all cash funds held from
time to time as part of the Escrow Fund, in its discretion, in any of the
following kinds of investments, or in any combination thereof: (i) bonds or
other obligations of, or guaranteed by, the government of the United States of
America or any State thereof or the District of Columbia, or agencies of any of
the foregoing, having maturities of not greater than ninety (90) days (or, if
earlier, the Termination Date (as hereinafter defined)); (ii) commercial paper
rated, at the time of the Escrow Agent's investment therein or contractual
commitment providing for such investment, at least P-1 by Moody's Investors
Service, Inc. ("Moody's") and A-1 by Standard & Poor's Corporation ("S&P") and
having maturities of not greater than ninety (90) days (or, if earlier, the
Termination Date); (iii) demand or time deposits in, certificates of deposit of
or bankers' acceptances issued by (A) a depository institution or trust company
incorporated under the laws of the United States of America, any State thereof
or the District of Columbia or (B) a United States branch office or agency of a
foreign depository institution or trust company if, in any such case, the
depository institution, trust company or office or agency has combined capital
and surplus of not less than One Hundred Million Dollars ($100,000,000) (any
such institution being herein called a "Permitted Bank") having maturities of
not greater than ninety (90) days (or, if earlier, the Termination Date); or
(iv) such other investments as Purchaser and Seller shall approve in writing.
3
<PAGE>
(b) All taxes in respect of earnings on the Escrow Fund shall be the
obligation of, and shall be paid when due by, Seller who shall indemnify and
hold Purchaser and the Escrow Agent harmless from and against all such taxes.
4. Claims Against the Escrow Fund.
(a) Concurrently with the delivery of a Claim Notice or an Indemnity Notice
to Seller pursuant to Article IX of the Asset Purchase Agreement, Purchaser will
deliver to the Escrow Agent a certificate in substantially the form of Annex I
attached hereto (a "Certificate of Instruction"). No Certificate of Instruction
may be delivered by Purchaser after the close of business on the business day
immediately preceding the Termination Date. The Escrow Agent shall give written
notice to Seller of its receipt of a Certificate of Instruction not later than
the second business day next following receipt thereof, together with a copy of
such Certificate of Instruction.
(b) If the Escrow Agent (i) shall not, within thirty (30) calendar days
following its receipt of a Certificate of Instruction (the "Objection Period"),
have received from Seller a certificate in substantially the form of Annex II
attached hereto (an "Objection Certificate") disputing Seller's obligation to
pay the Owed Amount referred to in such Certificate of Instruction, or (ii)
shall have received such an Objection Certificate within the Objection Period
and shall thereafter have received either (x) a certificate from Purchaser and
Seller substantially in the form of Annex III attached hereto (a "Resolution
Certificate") stating that Purchaser and Seller have agreed that the Owed Amount
referred to in such Certificate of Instruction (or a specified portion thereof)
is payable to one or more of the Indemnified Parties or (y) a copy of final
order of a Board of Arbitration (accompanied by a certificate of Purchaser
substantially in the form of Annex IV attached hereto (an "Arbitration
Certificate")) stating that the Owed Amount referred to in such Certificate of
Instruction (or a specified portion thereof) is payable to one or more of the
Indemnified Parties by Seller, then the Escrow Agent shall, on the second
business day next following (x) the expiration of the Objection Period or (y)
the Escrow Agent's receipt of a Resolution Certificate or an Arbitration
Certificate, as the case may be, pay over to Purchaser from the Escrow Fund, by
wire transfer of immediately available funds to a bank account of Purchaser's
designation, the amount set forth in said Certificate of Instruction or, if such
Resolution Certificate or Arbitration Certificate specifies that a lesser amount
than such Owed Amount is payable, such lesser amount (or the entire Escrow
Amount if it is less than the foregoing amounts).
(c) The Escrow Agent shall give written notice to Purchaser of its receipt
of an Objection Certificate not later than the second business day next
following receipt thereof, together with a copy of such Objection Certificate.
The Escrow Agent shall give written notice to Seller of its receipt of an
Arbitration Certificate not later than the second business day next following
receipt thereof, together with a copy of such Arbitration Certificate.
(d) Upon the payment by the Escrow Agent of the Owed Amount referred to in
a Certificate of Instruction, such Certificate of Instruction shall be deemed
canceled. Upon the receipt by the Escrow Agent of a Resolution Certificate or an
Arbitration Certificate and the payment by the Escrow Agent of the Owed Amount
referred to therein, the related Certificate of Instruction shall be deemed
canceled.
(e) Upon Purchaser's determination that it has no claim or has released its
claim with respect to an Owed Amount referred to in a Certificate of Instruction
(or a specified portion thereof), Purchaser will promptly deliver to the Escrow
Agent a certificate substantially in the form of Annex V attached hereto (a
"Purchaser Cancellation Certificate") canceling such Certificate of Instruction
(or such specified portion thereof, as the case may be), and such Certificate of
Instruction (or portion thereof) shall thereupon be deemed canceled. The Escrow
Agent shall give written notice to Seller of its receipt of a Purchaser
Cancellation Certificate not later than the second business day next following
receipt thereof, together with a copy of such Purchaser Cancellation
Certificate.
(f) Upon receipt of a final order of a Board of Arbitration stating that
none of the Owed Amount referred to in a Certificate of Instruction as to which
Seller delivered an Objection Certificate within the Objection Period is payable
to any Indemnified Party by Seller, Seller may deliver a copy of such order
(accompanied by a certificate of Seller substantially in the form of Annex VI
attached hereto (a "Seller Cancellation Certificate")) canceling such
Certificate of Instruction, and such Certificate of Instruction shall thereupon
be deemed canceled. The Escrow Agent shall give written notice to Purchaser of
its receipt of a Seller Cancellation Certificate
4
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[Date]
Page 5
not later than the second business day next following receipt thereof, together
with a copy of such Seller Cancellation Certificate.
5. Release of Escrow Fund. The Escrow Agent shall on [DATE 18 MONTHS AFTER
CLOSING] (the "Termination Date") pay over to Seller from the Escrow Fund all
amounts that remain in the Escrow Fund, by wire transfer of immediately
available funds to a bank account of Seller's designation, less the sum of any
amounts designated in Certificates of Instruction received by the Escrow Agent
prior to the Termination Date that have not been canceled in accordance with
paragraph (d), (e) or (f) of Section 4. If at any time after the Termination
Date the entire balance remaining in the Escrow Fund exceeds the sum at that
time of the amounts designated in Certificates of Instruction received by the
Escrow Agent prior to the Termination Date that have not been canceled in
accordance with paragraph (d), (e) or (f) of Section 4, the Escrow Agent shall
promptly pay over to Seller from the Escrow Fund, by wire transfer of
immediately available funds to a bank account of Seller's designation, the
amount of such excess. At such time on or following the Termination Date as all
Certificates of Instruction received by the Escrow Agent prior to the
Termination Date have been canceled in accordance with paragraph (d), (e) or (f)
of Section 4, the Escrow Agent shall promptly pay over to Seller the balance in
the Escrow Fund, by wire transfer of immediately available funds to a bank
account of Seller's designation, and this Agreement (other than Sections 6, 7
and 8) shall automatically terminate.
6. Duties and Obligations of the Escrow Agent. The duties and obligations
of the Escrow Agent shall be limited to and determined solely by the provisions
of this Agreement and the certificates delivered in accordance herewith, and the
Escrow Agent is not charged with knowledge of or any duties or responsibilities
in respect of any other agreement or document. In furtherance and not in
limitation of the foregoing:
(i) the Escrow Agent shall not be liable for any loss of interest sustained
as a result of investments made hereunder in accordance with the terms
hereof, including any liquidation of any investment of the Escrow Fund
prior to its maturity effected in order to make a payment required by the
terms of this Agreement;
(ii) the Escrow Agent shall be fully protected in relying in good
faith upon any written certification, notice, direction, request, waiver,
consent, receipt or other document that the Escrow Agent reasonably
believes to be genuine and duly authorized, executed and delivered;
(iii) the Escrow Agent shall not be liable for any error of judgment,
or for any act done or omitted by it, or for any mistake in fact or law, or
for anything that it may do or refrain from doing in connection herewith;
provided, however, that notwithstanding any other provision in this
Agreement, the Escrow Agent shall be liable for its willful misconduct or
gross negligence or breach of this Agreement;
5
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[Date]
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(iv) the Escrow Agent may seek the advice of legal counsel selected
with reasonable care in the event of any dispute or question as to the
construction of any of the provisions of this Agreement or its duties
hereunder, and it shall incur no liability and shall be fully protected in
respect of any action taken, omitted or suffered by it in good faith in
accordance with the opinion of such counsel;
(v) in the event that the Escrow Agent shall in any instance, after
seeking the advice of legal counsel pursuant to the immediately preceding
clause, in good faith be uncertain as to its duties or rights hereunder, it
shall be entitled to refrain from taking any action in that instance and
its sole obligation, in addition to those of its duties hereunder as to
which there is no such uncertainty, shall be to keep safely all property
held in the Escrow Fund until it shall be directed otherwise in writing by
each of the parties hereto or by a final, nonappealable order of a court of
competent jurisdiction; provided, however, in the event that the Escrow
Agent has not received such written direction or court order within one
hundred eighty (180) calendar days after requesting the same, it shall have
the right to interplead Purchaser and Seller in any court of competent
jurisdiction and request that such court determine its rights and duties
hereunder; and
(vi) the Escrow Agent may execute any of its powers or
responsibilities hereunder and exercise any rights hereunder either
directly or by or through agents or attorneys selected with reasonable
care, nothing in this Agreement shall be deemed to impose upon the Escrow
Agent any duty to qualify to do business or to act as fiduciary or
otherwise in any jurisdiction other than the State of ___________ and the
Escrow Agent shall not be responsible for and shall not be under a duty to
examine into or pass upon the validity, binding effect, execution or
sufficiency of this Agreement or of any agreement amendatory or
supplemental hereto.
7. Cooperation. Purchaser and Seller shall provide to the Escrow Agent all
instruments and documents within their respective powers to provide that are
necessary for the Escrow Agent to perform its duties and responsibilities
hereunder.
8. Fees and Expenses; Indemnity. Purchaser shall pay the fees of the Escrow
Agent for its services hereunder as and when billed by the Escrow Agent, and
Purchaser shall reimburse and indemnify the Escrow Agent for, and hold it
harmless against, any loss, damages, cost or expense, including but not limited
to reasonable attorneys' fees, reasonably incurred by the Escrow Agent in
connection with the Escrow Agent's performance of its duties and obligations
under this Agreement, as well as the reasonable costs and expenses of defending
against any claim or liability relating to this Agreement; provided that
notwithstanding the foregoing, Purchaser shall not be required to indemnify the
Escrow Agent for any such loss, liability, cost or expense arising as a result
of the Escrow Agent's willful misconduct or gross negligence or breach of this
Agreement.
9. Resignation and Removal of the Escrow Agent.
(a) The Escrow Agent may resign as such thirty (30) calendar days following
the giving of prior written notice thereof to Seller and Purchaser. In addition,
the Escrow Agent may be removed and replaced on a date designated in a written
instrument signed by Seller and Purchaser and delivered to the Escrow Agent.
Notwithstanding the foregoing, no such resignation or removal shall be effective
until a successor escrow agent has acknowledged its appointment as such as
provided in paragraph (c) below. In either event, upon the effective date of
such resignation or removal, the Escrow Agent shall deliver the property
comprising the Escrow Fund to such successor escrow agent, together with such
records maintained by the Escrow Agent in connection with its duties hereunder
and other information with respect to the Escrow Fund as such successor may
reasonably request.
(b) If a successor escrow agent shall not have acknowledged its appointment
as such as provided in paragraph (c) below, in the case of a resignation, prior
to the expiration of thirty (30) calendar days following the date of a notice of
resignation or, in the case of a removal, on the date designated for the Escrow
Agent's removal, as the case may be, because Seller and Purchaser are unable to
agree on a successor escrow agent, or for any other reason, the Escrow Agent may
select a successor escrow agent and any such resulting appointment shall be
binding upon all of the parties to this Agreement, provided that any such
successor selected by the Escrow Agent shall be a Permitted Bank referred to in
subclause (A) of clause (iii) of paragraph (a) of Section 3.
6
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[Date]
Page 7
(c) Upon written acknowledgment by a successor escrow agent appointed in
accordance with the foregoing provisions of this Section 9 of its agreement to
serve as escrow agent hereunder and the receipt of the property then comprising
the Escrow Fund, the Escrow Agent shall be fully released and relieved of all
duties, responsibilities and obligations under this Agreement, subject to the
proviso contained in clause (iii) of Section 6, and such successor escrow agent
shall for all purposes hereof be the Escrow Agent.
10. Notices. All notices, requests and other communications hereunder must
be in writing and will be deemed to have been duly given if delivered personally
or by facsimile transmission or mailed (first class postage prepaid) to the
parties at the following addresses or facsimile numbers:
If to Purchaser, to:
Ascend Communications, Inc.
One Ascend Plaza
1275 Harbor Bay Parkway
Alameda, CA 94502
Facsimile No.: (510) 747-6621
Attn: General Counsel
with a copy to:
Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue, Palo Alto, CA 94301-1825
Facsimile No.: (650) 327-3699
Attn: Thomas Furlong, Esq.
If to Seller, to:
Voxware, Inc.
305 College Road East
Princeton, NJ 08540
Facsimile No.:
Attn:
with a copy to:
Fulbright & Jaworski, L.L.P.
666 Fifth Avenue
New York, NY 10103
Facsimile No.: (212) 752-5958
Attn: Lawrence A. Spector
If to the Escrow Agent, to:
[Name]
[Address]
Facsimile No.:
Attn:
with a copy to:
[Name]
[Address]
Facsimile No.:
Attn:
7
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[Date]
Page 8
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or
8
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[Date]
Page 9
other communication is received by any other Person to whom a copy of such
notice is to be delivered pursuant to this Section). Any party from time to time
may change its address, facsimile number or other information for the purpose of
notices to that party by giving notice specifying such change to the other
parties hereto.
11. Amendments, etc. This Agreement may be amended or modified, and any of
the terms hereof may be waived, only by a written instrument duly executed by or
on behalf of Purchaser and Seller and, with respect to any amendment that would
adversely affect the Escrow Agent, the Escrow Agent. No waiver by any party of
any term or condition contained of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion.
12. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to a contract
executed and performed in such State, without giving effect to the conflicts of
laws principles thereof.
13. Business Day. For all purposes of this Agreement, the term "business
day" shall mean a day other than Saturday, Sunday or any day on which banks
located in the State of California are authorized or obligated to close.
14. Miscellaneous. This Agreement is binding upon and will inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. The headings used in this Agreement have been inserted for convenience
of reference only and do not define or limit the provisions hereof. This
Agreement may be executed in any number of counterparts, each of which will be
deemed an original, but all of which together will constitute one and the same
instrument.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
ASCEND COMMUNICATIONS, INC.
By:
---------------------------------
Name:
Title:
VOXWARE, INC.
By:
---------------------------------
Name:
Title:
[ESCROW AGENT]
By:
---------------------------------
Name:
Title:
10
<PAGE>
[Date]
Page 1
ANNEX I
CERTIFICATE OF INSTRUCTION
to
------------------------------,
as Escrow Agent
The undersigned, Ascend Communications, Inc., a Delaware corporation
("Purchaser"), pursuant to Section 4(a) of the Escrow Agreement dated as of
_____________, 1999 among Purchaser, Voxware, Inc., a Delaware corporation
("Seller"), and you (terms defined in said Escrow Agreement have the same
meanings when used herein), hereby:
(a) certifies that (i) Purchaser or another Indemnified Party has sent
to Seller a Claim Notice or an Indemnity Notice (as such terms are defined
in the Asset Purchase Agreement), a copy of which is attached hereto, and
(ii) the amount of $___________ (the "Owed Amount") is payable to the
Indemnified Parties by Seller pursuant to Article IX of the Asset Purchase
Agreement by reason of the matter described in such Claim Notice or
Indemnity Notice; and
(b) instructs you to pay to Purchaser from the Escrow Fund the Owed
Amount, by wire transfer of immediately available funds to Purchaser's
account at _________________, __________________, _________, _________
(Account No.:_________), (i) unless you receive an Objection Certificate
from Seller prior to the expiration of the Objection Period, within two
business days following the expiration of the Objection Period, or (ii) if
you receive an Objection Certificate within the Objection Period, within
two business days following your receipt of a Resolution Certificate or a
Litigation Certificate.
ASCEND COMMUNICATIONS, INC.
By:
----------------------------------
Name:
Title:
Dated:_________, ____
<PAGE>
[Date]
Page 1
ANNEX II
OBJECTION CERTIFICATE
to
------------------------------,
as Escrow Agent
The undersigned, Voxware, Inc., a Delaware corporation ("Seller"), pursuant
to Section 4(b) of the Escrow Agreement dated as of __________, 1999 among
Ascend Communications, Inc., a Delaware corporation ("Purchaser"), Seller and
you (terms defined in said Escrow Agreement have the same meanings when used
herein), hereby:
(a) disputes that the Owed Amount referred to in the Certificate of
Instruction dated _________, ____ is payable to the Indemnified Parties by
the undersigned pursuant to Article IX of the Asset Purchase Agreement;
(b) certifies that the undersigned has sent to Purchaser a written
statement dated ___________, ____ of the undersigned, a copy of which is
attached hereto, disputing its liability to the Indemnified Parties for the
Owed Amount; and
(c) objects to your making payment to Purchaser as provided in such
Certificate of Instruction.
VOXWARE, INC.
By:
-----------------------------------
Name:
Title:
Dated: __________, ____
<PAGE>
[Date]
Page 1
ANNEX III
RESOLUTION CERTIFICATE
to
------------------------------------,
as Escrow Agent
The undersigned, Ascend Communications, Inc., a Delaware corporation
("Purchaser"), and Voxware, Inc., a Delaware corporation ("Seller"), pursuant to
Section 4(b) of the Escrow Agreement dated as of ____________, 1999 among
Purchaser, Seller and you (terms defined in said Escrow Agreement have the same
meanings when used herein), hereby:
(a) certify that (i) Purchaser and Seller have resolved their dispute
as to the matter described in the Certificate of Instruction dated
__________, ____ and the related Objection Certificate dated ___________,
____ and (ii) the final Owed Amount with respect to the matter described in
such Certificates is $______________;
(b) instruct you to pay to Purchaser from the Escrow Fund the Owed
Amount referred to in clause (ii) of paragraph (a) above, by wire transfer
of immediately available funds to Purchaser's account at
____________________, _________________, ________, ________ (Account No.:
___________), within two business days of your receipt of this Certificate;
and
(c) agree that the Owed Amount designated in such Certificate of
Instruction, to the extent, if any, it exceeds the Owed Amount referred to
in clause (ii) of paragraph (a) above, shall be deemed not payable to the
Indemnified Parties and such Certificate of Instruction is hereby canceled.
ASCEND COMMUNICATIONS, INC.
By:
----------------------------
Name:
Title:
VOXWARE, INC.
By:
---------------------------
Name:
Title:
Dated:________, ____
<PAGE>
[Date]
Page 1
ANNEX IV
ARBITRATION CERTIFICATE
to
-----------------------------,
as Escrow Agent
The undersigned, Ascend Communications, Inc., a Delaware corporation
("Purchaser"), pursuant to Section 4(b) of the Escrow Agreement dated as of
____________, 1999 among Purchaser, Voxware, Inc., a Delaware corporation
("Seller"), and you (terms defined in said Escrow Agreement have the same
meanings when used herein), hereby:
(a) certifies that (i) attached hereto is a final order of a Board of
Arbitration in accordance with Section 11.03(d) of the Asset Purchase
Agreement resolving the dispute between Purchaser and Seller as to the
matter described in the Certificate of Instruction dated ____________, ____
and the related Objection Certificate dated ____________, ____ and (ii) the
final Owed Amount with respect to the matter described in such
Certificates, as provided in such order, is $______________;
(b) instructs you to pay to Purchaser from the Escrow Fund the Owed
Amount referred to in clause (ii) of paragraph (a) above, by wire transfer
of immediately available funds to Purchaser's account at
_____________________, ________________, _______, _______ (Account No.:
____________), within two business days of your receipt of this
Certificate; and
(c) agrees that the Owed Amount designated in such Certificate of
Instruction, to the extent, if any, it exceeds the Owed Amount referred to
in clause (ii) of paragraph (a) above, shall be deemed not payable to the
Indemnified Parties and such Certificate of Instruction is hereby canceled.
ASCEND COMMUNICATIONS, INC.
By:
------------------------------
Name:
Title:
Dated:__________, ____
<PAGE>
[Date]
Page 1
ANNEX V
PURCHASER CANCELLATION CERTIFICATE
to
----------------------------,
as Escrow Agent
The undersigned, Ascend Communications, Inc., a Delaware corporation
("Purchaser"), pursuant to Section 4(e) of the Escrow Agreement dated as of
____________, 1999 among Purchaser, Voxware, Inc., a Delaware corporation
("Seller"), and you (terms defined in said Escrow Agreement have the same
meanings when used herein), hereby:
(a) certifies that (i) it hereby releases its claim against Seller
with respect to [all] [specify portion] of the Owed Amount designated in
the Certificate of Instruction dated _____________, ____ and (ii) as a
result the Owed Amount with respect to such Certificate of Instruction is
$__________; and
(b) agrees that such Certificate of Instruction is, to the extent
released as provided in clause (i) of paragraph (a) above, canceled.
ASCEND COMMUNICATIONS, INC.
By:
-----------------------------
Name:
Title:
Dated:__________, ____
<PAGE>
ANNEX VI
SELLER CANCELLATION CERTIFICATE
to
-----------------------------,
as Escrow Agent
The undersigned, Voxware, Inc., a Delaware corporation ("Seller"),
pursuant to Section 4(f) of the Escrow Agreement dated as of ____________, 1999
among Ascend Communications, Inc., a Delaware corporation ("Purchaser"), Seller
and you (terms defined in said Escrow Agreement have the same meanings when used
herein), hereby certifies that (i) attached hereto is a final order of a Board
of Arbitration in accordance with Section 11.03(d) of the Asset Purchase
Agreement resolving the dispute between Purchaser and Seller as to the matter
described in the Certificate of Instruction dated ____________, ____ and the
related Objection Certificate dated ____________, ____ and (ii) as provided in
such order, there is no Owed Amount with respect to the matter described in such
Certificates.
VOXWARE, INC.
By:
-----------------------------
Name:
Title:
Dated:__________, ____
<PAGE>
EXHIBIT H
ASCEND COMMUNICATIONS, INC.
Officer's Certificate
I, Michael F.G. Ashby, Executive Vice President, Chief Financial Officer
and Secretary of Ascend Communications, Inc., a Delaware corporation
("Purchaser"), pursuant to Section 7.03 of the Asset Purchase Agreement dated as
of February 4, 1999 (the "Asset Purchase Agreement"; capitalized terms not
defined herein shall have the meanings ascribed to them in the Asset Purchase
Agreement) between Purchaser and Voxware, Inc., a Delaware corporation, DO
HEREBY CERTIFY on behalf of Purchaser that:
(1) Each of the representations and warranties made by Purchaser in the
Asset Purchase Agreement is true and correct in all material respects (without
regard for any materiality qualifiers contained therein) on and as of the date
hereof as though made on and as of the date hereof.
(2) Each of the agreements, covenants and obligations required by the Asset
Purchase Agreement to be performed or complied with by Purchaser at or before
the Closing has been duly performed or complied with in all material respects.
IN WITNESS WHEREOF, Purchaser has caused this Certificate to be executed on
its behalf by the undersigned on and as of the ____ day of _____________, 1999.
ASCEND COMMUNICATIONS, INC.
By:
------------------------
Name: Michael F.G. Ashby
Title: Executive Vice President, Chief
Financial Officer and Secretary
<PAGE>
SCHEDULES*
---------
Schedule 1.1(a)(i) Tangible Personal Property
Schedule 1.1(a)(ii) Intangible Personal Property
Schedule 1.1(a)(iii) Contracts
Schedule 1.1(a)(v) Registrations
Schedule 4.5 Designated Employees
Schedule 6.8 Third Party Consents
- ---------
* These schedules have been omitted in accordance with the rules of the
Securities and Exchange Commission. The Company agrees to furnish supplementally
a copy of any omitted schedule to the Securities and Exchange Commission upon
request.
<PAGE>
Exhibit 10.3
ACQUISITION AGREEMENT
by and among
VOXWARE, INC.,
VERBEX ACQUISITION CORPORATION
and
VERBEX VOICE SYSTEMS, INC.
Dated as of February 4, 1999
<PAGE>
Page
TABLE OF CONTENTS
Page
I. DEFINITIONS
II. PURCHASE AND SALE OF ASSETS
Section 2.1. Purchase and Sale of Assets .................................. 4
Section 2.2. Excluded Assets .............................................. 5
Section 2.3. Assumption of Liabilities .................................... 5
Section 2.4. Excluded Liabilities ......................................... 5
Section 2.5. Closing ...................................................... 7
Section 2.6. Purchase Price; Purchase Price Adjustment .................... 7
Section 2.7. Delivery of Purchase Price and Transfer of Assets ............ 9
Section 2.8. Allocation of Purchase Price ................................. 10
Section 2.9. Charter Amendments ........................................... 10
III. CONDITIONS PRECEDENT TO
OBLIGATIONS OF PURCHASER
Section 3.1. Representations and Warranties Accurate ...................... 11
Section 3.2. Performance by Seller 11
Section 3.3. Certificate .................................................. 11
Section 3.4. Opinion of Counsel for Seller ................................ 11
Section 3.5. Legal Prohibition ............................................ 11
Section 3.6. Permits, Waivers, Orders, Et ................................. 11
Section 3.7. No Material Adverse Change ................................... 11
Section 3.8. Financial Statements ......................................... 12
Section 3.9. Secretary's Certificate ...................................... 12
Section 3.10. Closing Matters ............................................. 12
Section 3.11. Supplemental Disclosure ..................................... 12
Section 3.12. Escrow Agreement ............................................ 12
Section 3.13. UCC-3 Termination Statements ................................ 12
Section 3.14. Non-Disclosure Agreements ................................... 12
Section 3.15. Bulk Sales Notice ........................................... 12
IV. CONDITIONS PRECEDENT TO
OBLIGATIONS OF SELLER
Section 4.1. Representations and Warranties Accurate ...................... 13
Section 4.2. Performance by Purchaser ..................................... 13
Section 4.3. Certificate .................................................. 13
Section 4.4. Legal Prohibition ............................................ 13
Section 4.5. Closing Matters .............................................. 13
Section 4.6. Escrow Agreement ............................................. 13
V. INDEMNIFICATION
Section 5.1. Survival of Representations and Warranties ................... 14
i
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Page
Section 5.2. Seller's Indemnity ........................................... 14
Section 5.3. Purchaser's Indemnity ........................................ 14
Section 5.4. Limitation ................................................... 15
Section 5.5. Subsequent Tax Liability Indemnification ..................... 15
Section 5.6. Notice and Defense of Claims ................................. 15
VI. REPRESENTATIONS AND
WARRANTIES OF SELLER
Section 6.1. Organization and Qualification ............................... 16
Section 6.2. Due Authorization ............................................ 16
Section 6.3. No Conflict .................................................. 17
Section 6.4. Title to and Condition of Assets ............................. 17
Section 6.5. Financial Information 18
Section 6.6. Taxes ........................................................ 20
Section 6.7. Contracts, Obligations and Commitments ....................... 21
Section 6.8. Litigation ................................................... 21
Section 6.9. Compliance with Law .......................................... 22
Section 6.10. Permits ..................................................... 22
Section 6.11. Brokers ..................................................... 22
Section 6.12. Intellectual Property ....................................... 22
Section 6.13. Plans and Agreements Relating to Employees .................. 23
Section 6.14. No Illegal or Improper Transactions ......................... 24
Section 6.15. Related Transactions 24
Section 6.16. No Product Liabilities; Product Warranties .................. 24
Section 6.17. Suppliers and Customers ..................................... 25
Section 6.18. Availability of Documents ................................... 25
Section 6.19. Disclosure .................................................. 25
VII. REPRESENTATIONS AND WARRANTIES
OF VOXWARE AND PURCHASER
Section 7.1. Organization ................................................. 26
Section 7.2. Due Authorization; No-Conflict ............................... 26
Section 7.3. Brokers ...................................................... 27
VIII. COVENANTS
Section 8.1. Conduct and Preservation of Business ........................ 27
Section 8.2. Access to Information; Confidentiality ...................... 28
Section 8.3. Filings and Authorizations .................................. 28
Section 8.4. Public Announcements ........................................ 28
Section 8.5. Hiring of Employees ......................................... 29
Section 8.6. Schedules ................................................... 29
Section 8.7. Financial Statements ........................................ 29
Section 8.8. Non-Solicitation by Voxware and Purchaser ................... 29
IX. CERTAIN ACTIONS AFTER THE CLOSING
ii
<PAGE>
Page
Section 9.1. Employee Benefits ........................................... 30
Section 9.2. Non-Solicitation by Seller .................................. 30
Section 9.3. Maintenance of Books and Records ............................ 30
Section 9.4. Use of Name ................................................. 31
Section 9.5. Non-Competition ............................................. 31
Section 9.6. Payment of Liabilities; Accounts Receivable and Inventory ... 31
Section 9.7. Tax Returns Through Closing ................................. 31
Section 9.8. Purchaser to Act as Agent for Seller ........................ 31
Section 9.9. Delivery of Property Received by Seller or
Purchaser After Closing .................................. 32
Section 9.10. Purchaser Appointed Attorney for Seller ..................... 32
Section 9.11. Subrogation of Purchaser .................................... 32
Section 9.12. Further Assurances .......................................... 32
X. TERMINATION
Section 10.1. Termination Events ......................................... 33
Section 10.2. Effect of Termination ...................................... 33
XI. MISCELLANEOUS
Section 11.1. Expenses ................................................... 34
Section 11.2. Risk of Loss ............................................... 34
Section 11.3. Amendment .................................................. 34
Section 11.4. Entire Agreement ........................................... 34
Section 11.5. Headings ................................................... 34
Section 11.6. Notices .................................................... 34
Section 11.7. Severability ............................................... 35
Section 11.8. Waiver ..................................................... 36
Section 11.9. Governing Law .............................................. 36
Section 11.10. Remedies .................................................. 36
Section 11.11. Third Parties ............................................. 36
Section 11.12. Counterparts .............................................. 36
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EXHIBITS
Exhibit 3.4 Form of Opinion of Counsel for Seller
Exhibit 3.12 Form of Escrow Agreement
SCHEDULES
Schedule 2.1(a) Tangible Assets
Schedule 2.1(e) Contracts
Schedule 2.1(g) Intellectual Property
Schedule 2.2 Excluded Assets
Schedule 2.3(b) Section 2.3(b) Liabilities
Schedule 2.6(b)(i) Inventory
Schedule 3.6 Consents
Schedule 6.3 Seller Conflicts
Schedule 6.5(a) Interim Balance Sheet
Schedule 6.5(d) Value of Inventory
Schedule 6.7 Contract Exceptions
Schedule 6.13 Plans and Agreements Relating to Employees
Schedule 6.15 Related Transactions
Schedule 6.17 Suppliers and Customers
Schedule 7.2 Purchaser Conflicts
Schedule 9.5 Non-Competition
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ACQUISITION AGREEMENT, dated as of February 4, 1999, by and among Voxware,
Inc., a Delaware corporation ("Voxware") with its principal executive offices at
305 College Road East, Princeton, New Jersey 08540, Verbex Acquisition
Corporation, a Delaware corporation ("Purchaser") and a wholly-owned subsidiary
of Voxware with its principal executive offices at 305 College Road East,
Princeton, New Jersey 08540, and Verbex Voice Systems, Inc., a Delaware
corporation ("Seller") with its principal executive offices at 275 Raritan
Center Parkway, Edison, New Jersey 08837.
WHEREAS, Purchaser desires to purchase, and Seller desires to sell, certain
assets used in connection with the conduct of the Business (as defined herein),
including the value of the Business as a going concern; and
WHEREAS, in order to effectuate the sale and purchase of the Business as
described above and as more fully described herein, Seller shall sell and
Purchaser shall purchase substantially all the assets of Seller used in the
Business, all upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in reliance upon the covenants and agreements set forth
herein, the parties hereto agree as follows:
1. DEFINITIONS
The following terms shall have the following respective meanings for all
purposes of this Agreement:
"Acquisition Transaction" has the meaning set forth in Section 8.1.
"Affiliate" or "affiliate" means, with respect to any Person, any other
Person that, directly or indirectly, controls or is controlled by or is under
common control with such Person. As used in this definition of "Affiliate", the
term "control" and any derivatives thereof mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, by
contract, or otherwise.
"Agreement" means this Acquisition Agreement, as it may be from time to
time amended.
"Assets" has the meaning set forth in Section 2.1.
"Assumed Contracts" has the meaning set forth in Section 6.7.
"Assumed Liabilities" has the meaning set forth in Section 2.3.
"Business" means the business conducted by Seller relating to speech
recognition technology.
"Cambridge Facility" means the facility located at 185 Alewife Brook
Parkway, Cambridge, Massachusetts 02138-1101, and leased by Seller in connection
with the Business.
"Closing" means the completion of the acquisition of the Assets pursuant to
this Agreement.
"Closing Date" means the date the Closing takes place.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Convertible Notes" means Seller's convertible subordinated promissory
notes issued to various investors in the aggregate principal amount of
$3,999,945 and which were issued at various times between May 1994 and May 1998.
"Employee Plans" has the meaning set forth in Section 6.13.
"Environmental Laws" means all laws, rules, regulations, statutes,
ordinances, decrees or orders of any governmental entity relating to (a) the
control of any potential pollutant or protection of the air, water or land, (b)
solid, gaseous or liquid waste generation, handling, treatment, storage,
disposal or transportation, and (c) exposure to hazardous, toxic or other
substances alleged to be harmful, and includes without limitation final and
binding requirements related to the foregoing imposed by (i) the terms and
conditions of any license, permit, approval or other authorization by any
governmental entity, and (ii) applicable judicial, administrative or other
regulatory decrees, judgments and orders of any governmental entity.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means The Bank of New York or such other Person as may be
mutually agreed upon.
"Escrow Agreement" means that certain Escrow Agreement to be dated the
Closing Date and to be entered into by and among Purchaser, Seller and the
Escrow Agent, substantially in the form attached hereto as Exhibit 3.12.
"Escrow Fund" has the meaning set forth in Section 2.7(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Liabilities" has the meaning set forth in Section 2.4.
"Indemnified Party" has the meaning set forth in Section 5.6.
"Indemnifying Party" has the meaning set forth in Section 5.6.
"Intellectual Property" has the meaning set forth in Section 2.1(g).
"Interim Balance Sheet" has the meaning set forth in Section 6.5.
"Interim Balance Sheet Date" has the meaning set forth in Section 6.5.
"Material Adverse Change" means an occurrence or event which has had or is
reasonably likely to have a material adverse effect on the Assets, the Assumed
Liabilities or the Business. In light of the fact that Seller is reducing the
level of its operations related to the Business, it is understood and agreed
that changes in the levels of Seller's inventory, accounts receivable and/or
accounts payable arising in the ordinary course of business, consistent with
past practice, or in the ordinary course of such reduction in the level of such
operations shall not constitute a Material Adverse Change.
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"Permits" means all permits, licenses, registrations, approvals,
qualifications, consents and other necessary authorizations necessary for the
lawful conduct, ownership and operation of the Assets and the Business.
"Permitted Encumbrances" has the meaning set forth in Section 6.4(a).
"Person" means an individual, partnership, corporation, joint venture,
unincorporated organization, cooperative or a governmental entity or agency
thereof.
"Purchase Price" has the meaning set forth in Section 2.6(a).
"Retained Employees" has the meaning set forth in Section 9.2.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Seller Financial Statements" has the meaning set forth in Section 6.5(a).
"Taxes" has the meaning set forth in Section 6.6.
"Transaction Costs" mean all financial, tax, accounting, consulting,
finders, brokers, investment banking, legal, advisory and similar fees,
commissions and expenses incurred by Seller in connection with the consummation
of the transactions contemplated hereby.
II. PURCHASE AND SALE OF ASSETS
2.1. Section Purchase and Sale of Assets . At the Closing, upon the terms and
subject to the conditions contained herein, Seller shall sell, transfer,
convey, assign and deliver to Purchaser, effective as of the Closing, and
Purchaser shall purchase and accept from Seller, all right, title and
interest of Seller in and to all of the properties, business and assets of
Seller related to the Business, of every kind and description, real,
personal and mixed, tangible and intangible, wherever located, whether or
not appearing on the Interim Balance Sheet, free and clear of all liens,
mortgages, pledges, encumbrances and charges of every kind except for the
Permitted Encumbrances, except the Excluded Assets (collectively, the
"Assets"). Without limiting the generality of the definition of the Assets
being purchased by Purchaser, the Assets shall include the following:
(a) all machinery, equipment, furniture and fixtures, computers, computer
hardware and software, tools, supplies, construction in progress and other
tangible assets of Seller related to the Business, including, without
limitation, those described in Schedule 2.1(a) (collectively, the "Tangible
Assets");
(b) all prepaid items, unbilled costs and fees, and accounts, notes and other
receivables;
(c) all Seller's inventories of raw materials, work-in-process, intermediates,
finished goods and packaging materials used or useful in the conduct of the
Business, including the inventory set forth on Schedule 2.1(c);
(d) all the interest of and the rights and benefits accruing to Seller as
lessee under (i) the leases relating to the Cambridge Facility and Seller's
office space located in Centerville, Utah, and all leasehold improvements
and fixtures relating thereto, and (ii) all leases or rental agreements
covering machinery, equipment, furniture and fixtures, computers, computer
hardware and software, tools, supplies and other tangible assets used in
the Business which are specifically set forth on Schedule 2.1(e);
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(e) all of the rights and benefits accruing to Seller under all written
agreements and contracts entered into in connection with the conduct of the
Business which are specifically set forth on Schedule 2.1(e) hereto;
(f) all operating data and records of Seller relating to the ownership or the
operation of the Assets or the Assumed Liabilities, including, without
limitation, customer and distribution lists and records, production reports
and records, equipment logs, operating guides and manuals, copies of
personnel records for all Retained Employees, correspondence and other
similar documents and records (other than correspondence relating to any
Acquisition Transaction(s));
(g) all industrial and intellectual property rights owned or controlled by
Seller, including, without limitation, products, patents, patent
applications, patent rights, trademarks, trademark applications,
tradenames, service marks, service mark applications, copyrights, know-how,
franchises, licenses, trade secrets, proprietary processes and formulae,
technologies, methods, plans, research data, marketing plans and
strategies, forecasts, product designs, fabrication data, research and
development, operating rights, software (including, without limitation, all
source codes and object codes), permits, licenses and other intellectual
property relating to the conduct of the Business (collectively
"Intellectual Property"), including, without limitation, all such property
and rights listed on Schedule 2.1(g);
(h) all non-competition agreements relating to the Business;
(i) all claims, warranty rights, causes of action and other similar rights
arising in the conduct of the Business; and
(j) all goodwill and going concern value of the Business, including, without
limitation, all rights to the name "Verbex," "Listen(TM) for Windows(TM),"
"Speech Commander(TM) "and the other names listed on Schedule 2.1(g). (t)
Section 2.2. Excluded Assets . Anything to the contrary in Section 2.1
notwithstanding, the Assets shall exclude and Purchaser shall not acquire
any cash or cash equivalents in hand or in bank accounts (including those
funds received by a bank and awaiting clearance) and those items
specifically set forth in Schedule 2.2 hereto (the "Excluded Assets").
Section 2.3. Assumption of Liabilities . At the Closing, upon the terms and
subject to the conditions contained herein, Purchaser shall assume,
effective as of the Closing, and discharge in accordance with their terms,
only the following liabilities and obligations of Seller to the extent that
they shall remain uncompleted and outstanding at the Closing Date:
(a) Seller's obligations under the Assumed Contracts arising after the Closing
Date and all outstanding development and support commitments (as identified
on Schedule 2.1(e)) and warranties extended by Seller prior to the Closing
Date with respect to its products in the ordinary course of business
consistent with past practice; and
(b) the liabilities identified on Schedule 2.3(b) in such amounts as reflected
on Seller's books and records as of the Closing Date, but in no event to
exceed the amounts set forth on Schedule 2.3(b) (collectively, the "Section
2.3(b) Liabilities").
(c) For convenience of reference, the foregoing liabilities and obligations of
Seller assumed by Purchaser are collectively referred to herein as the
"Assumed Liabilities."
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Section 2.4. Excluded Liabilities . The parties hereto agree that Purchaser
shall not assume, pay, discharge, become liable for or perform when due,
and Seller shall not cause Purchaser so to assume, pay, discharge, become
liable for or perform, any liabilities (contingent or otherwise), debts,
contracts, commitments and other obligations of Seller of any nature
whatsoever except the Assumed Liabilities (the "Excluded Liabilities").
Without limiting the foregoing, Purchaser shall not assume, pay or
discharge, and shall not be liable for, any liability, commitment or
expense of Seller as a result of or arising from any of the following:
(a) Seller's obligations and any liabilities arising under this Agreement;
(b) the Convertible Notes (including accrued interest thereon), stock option
accruals and employee interest;
(c) commissions, payroll and payroll taxes, and health insurance relating to
Seller's employment of its employees;
(d) any obligation of Seller for federal, state, local or foreign tax liability
(including interest, penalties or additions to tax relating thereto)
arising from the operation of the Business up to the Closing Date or
arising out of the sale by Seller of the Assets pursuant hereto;
(e) Seller's Transaction Costs;
(f) any liability or obligation to any employee or former employee of Seller or
to any third party, under any pension, insurance, bonus, profit-sharing or
other employee benefit plan or arrangement (whether written, oral or
otherwise) or any obligation relating to salaries, bonuses, vacation
(except as specifically assumed pursuant to Section 2.3) or severance pay,
including, without limitation, any liability or obligation related to
Seller's retention/severance program, or any obligation under any statute,
rule or regulation, including, without limitation, ERISA;
(g) any liability, contract, commitment or other obligation of Seller, known or
unknown, fixed or contingent, the existence of which constitutes or will
constitute a breach of any representation or warranty of Seller contained
in or made pursuant to this Agreement or which Purchaser is not assuming
hereunder;
(h) any liabilities or obligations of Seller under any contracts or agreements
relating to the Excluded Assets;
(i) any violation by Seller of any law or governmental regulation;
(j) FICA and other employee withholding taxes incurred (i) on or prior to the
Closing Date and (ii) after the Closing Date with respect to all employees
who are not Retained Employees;
(k) except with respect to the Accounts Receivable Note (as provided in and
defined on Schedule 2.3(b)), liabilities and obligations of Seller for
borrowed money and guarantees of borrowed money or letters of credit;
(l) other than the Assumed Liabilities, any product liability or similar claim
for injury to person or property, regardless of when made or asserted,
which arises out of or is based upon any express or implied representation,
warranty, agreement or guarantee made by Seller, or alleged to have been
made by Seller, or which is imposed or asserted to be imposed by operation
of law, in connection with any service performed or product sold or leased
by or on behalf of Seller on or prior to the Closing Date, including,
without limitation, any claim relating to any product delivered in
connection with the performance of such service and any claim seeking
recovery for consequential damages, lost revenue or lost profit; and
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(m) any liability or obligation, other than the Assumed Liabilities, arising
out of the conduct of the Business prior to the Closing Date, including,
without limitation, liabilities and obligations arising out of transactions
entered into prior to the Closing Date (including, without limitation,
liabilities or obligations arising out of any breach by Seller of any
provision of any agreement, contract, commitment or lease included in the
Assets, including but not limited to liabilities or obligations arising out
of Seller's failure to perform any agreement, contract, commitment or lease
in accordance with its terms prior to the Closing), any action or inaction
prior to the Closing Date or any state of facts existing prior to the
Closing Date (regardless of when asserted) not expressly assumed by
Purchaser pursuant to this Agreement.
Section 2.5. Closing . The Closing shall take place at the offices of
Verbex Acquisition Corporation, 305 College Road East, Princeton, New
Jersey 08540, subject to satisfaction or waiver of the conditions set forth
in Articles III and IV hereof, at the opening of business on February 16,
1999, or at such other date, time and place as the parties may agree. Each
party hereto agrees to use its reasonable efforts to satisfy promptly the
conditions to the obligations of the respective parties hereto in order to
expedite the Closing.
Section 2.6. Purchase Price; Purchase Price Adjustment (a). The purchase
price (the "Purchase Price") for the Assets shall consist of (i)
$5,200,000, subject to adjustment as set forth in Section 2.6(b) and (ii)
the assumption of the Assumed Liabilities.
(b) The Purchase Price will be subject to adjustment as follows:
(i) As soon as practicable and in any event no later than 20 days
following the date six full calendar months after the Closing Date (the
"Determination Date"), Purchaser shall deliver to Seller a statement (the
"Adjusted Net Asset Value Statement") of its calculation of Adjusted Net
Asset Value (as defined below) as of the Determination Date. Purchaser
shall bear the costs of preparing the Adjusted Net Asset Value Statement.
For purposes hereof:
(x) "Adjusted Net Asset Value" means (A) the sum of (i) the
amount of cash actually received by Purchaser (including those funds
received by a bank and awaiting clearance) during the period between
the Closing Date and the Determination Date (the "Initial Escrow
Period") from the sale of inventory included in the Assets acquired
hereunder (the "Inventory Realization Amount") and from the collection
of accounts receivable included in the Assets acquired hereunder, (ii)
the lesser of $40,000 or the value of any inventory included in the
Assets which remains unsold as of the Determination Date, if any,
(such lesser amount being the "Inventory Credit") and (iii) the
Estimated Fair Market Value (as defined below) of the noncurrent
Assets listed on Schedule 2.1(a) and acquired by Purchaser at Closing
minus (B) the sum of (i) the aggregate amount of the Section 2.3(b)
Liabilities, including any and all other liabilities related thereto
which arise after the Closing Date and relate to the period prior to
the Closing Date, and (ii) any damage, loss, cost, expense or
liability for which Purchaser has made or shall (as of the
Determination Date) be entitled to make an indemnification claim under
Section 5.2 hereof.
(y) "Estimated Fair Market Value" means (A) with respect to
equipment, furniture and improvements, 50% of net book value as of
December 31, 1998 and (B) with respect to all other noncurrent Assets,
100% of net book value as of December 31, 1998.
(ii) (x) If the Adjusted Net Asset Value is greater than or equal to
$400,000, the Escrow Agent shall disburse to Seller the entire Escrow
Fund.
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(y) If the Adjusted Net Asset Value is less than $400,000, the
Escrow Agent shall: (1) disburse to Seller the Adjusted Net Asset
Value; (2) subject to subsection (iii) below, retain that portion of
the remaining Escrow Fund equal to the lesser of (A) the value of any
inventory included in the Assets which remains unsold as of the
Determination Date, if any, less the Inventory Credit or (B) $50,000,
provided that, in either event, the Escrow Agent shall not retain any
more than the remaining Escrow Fund; then (3) disburse to Purchaser
the balance of the Escrow Fund, if any.
(z) In the event of either (x) or (y) above, the Escrow Agent
shall disburse the Escrow Fund or any portion thereof subject to
subsection (iv) below and in accordance with the provisions of the
Escrow Agreement. The Escrow Agent shall pay the applicable interest
on the Escrow Fund or any portion thereof to the party receiving the
Escrow Fund or such portion thereof.
(iii) With respect to any portion of the Escrow Fund retained by the
Escrow Agent following the Determination Date (the "Retained Escrow Fund"),
such portion shall be retained for an additional six months following the
Determination Date. At the end of such additional six-month period, if the
amount of cash actually received by Purchaser (including those funds
received by a bank and awaiting clearance) during this period from the sale
of any remaining inventory included in the Assets acquired hereunder minus
any damage, loss, cost, expense or liability for which Purchaser has made
or shall (as of the end of such period) be entitled to make an
indemnification claim under Section 5.2 hereof (the "Final Inventory
Adjustment") is greater than the Retained Escrow Fund, the Escrow Agent
shall disburse to Seller the entire Retained Escrow Fund. If the Final
Inventory Adjustment is less than the Retained Escrow Fund, the Escrow
Agent shall disburse to Purchaser the difference between the Retained
Escrow Fund and the Final Inventory Adjustment and the balance of the
Retained Escrow Fund, if any, to Seller. In all cases, the Escrow Agent
shall disburse the Retained Escrow Fund or any portion thereof subject to
subsection (iv) below (i.e., using the Final Inventory Adjustment in lieu
of the Adjusted Net Asset Value) and in accordance with the provisions of
the Escrow Agreement. The Escrow Agent shall pay the applicable interest on
the Retained Escrow Fund or any portion thereof to the party receiving the
Retained Escrow Fund or such portion thereof.
(iv) Within 20 days after receipt of the Adjusted Net Asset Value
Statement, Seller shall notify Purchaser in writing if it disagrees with
such Statement and the calculation of Adjusted Net Asset Value, including a
specific description of Seller's objections; it being understood and agreed
that Seller shall be deemed to have accepted all other items and amounts
set forth in the Adjusted Net Asset Value Statement. Failure of Seller to
deliver such written notice to Purchaser within such 20-day period shall be
deemed acceptance by Seller of the Adjusted Net Asset Value Statement and
such calculation of Adjusted Net Asset Value. If Seller objects as provided
above and Purchaser does not agree with Seller's objections, and if such
disagreements are not resolved on a mutually agreeable basis within five
days after Purchaser's receipt of Seller's objections, any such
disagreements shall be promptly submitted to a mutually acceptable
"big-five" accounting firm (the "Unaffiliated Firm"). The Unaffiliated Firm
shall resolve within 30 days after said Unaffiliated Firm's engagement by
the parties the differences regarding the Adjusted Net Asset Value
Statement and the calculation of Adjusted Net Asset Value in accordance
with generally accepted accounting principles consistently applied and this
Agreement. The decision of such Unaffiliated Firm shall be final and
binding upon Seller and Purchaser. The fees, costs and expenses of the
Unaffiliated Firm shall be borne equally by Seller and Purchaser. Each
party hereto shall bear the fees, costs and expenses of its own
accountants.
Section 2.7. Delivery of Purchase Price and Transfer of Assets . On the
Closing Date, Purchaser shall pay by wire transfer of immediately available
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funds, and, in the event that Purchaser is unable to so pay,
Voxware shall pay on behalf of Purchaser:
(i) $4,800,000 to Seller to an account specified by
Seller prior to the Closing Date; and
(ii) $400,000 to the Escrow Agent pursuant to the
Escrow Agreement (the "Escrow Fund").
(b) At the Closing, Seller shall deliver to Purchaser such deeds, bills of
sale, endorsements, assignments and other instruments of sale, conveyance,
transfer and assignment, satisfactory in form and substance to Purchaser
and its counsel, as may be reasonably requested by Purchaser, in order to
convey to Purchaser good and marketable title to the Assets, free and clear
of all claims, charges, equities, liens, security interests and
encumbrances, except as permitted by this Agreement. Seller shall pay all
sales, transfer or stamp taxes, or similar charges, payable by reason of
the sale hereunder.
(c) At the Closing, Seller shall deliver to Purchaser copies of all source and
object code relating to recognition engines and related modules and copies
of such other proprietary Intellectual Property as may be reasonably
requested by Purchaser.
(d) At the Closing, Seller shall deliver to Purchaser all written consents
which are required under any Assumed Contract being assigned to Purchaser
hereunder.
Section 2.8. Allocation of Purchase Price . The Purchase Price shall be
allocated in its entirety among the Assets and agreed to in writing by the
parties prior to the Closing; it being understood and agreed that, at
Purchaser's option and expense, the value of any Asset of Seller,
including, without limitation, any Intellectual Property, may be determined
by an independent appraiser to be mutually agreed upon by Seller and
Purchaser. Seller and Purchaser shall file all information and tax returns
(and any amendments thereto) in a manner consistent with this Section 2.8.
If, contrary to the intent of the parties hereto as expressed in this
Section 2.8, any taxing authority makes or proposes an allocation different
from that contained in this Section 2.8, Seller and Purchaser shall
cooperate with each other in good faith to contest such taxing authority's
allocation (or proposed allocation); provided, however, that, after
consultation with the party adversely affected by such allocation (or
proposed allocation), another party hereto may file such protective claims
or returns as may reasonably be required to protect its interests.
Section 2.9. Charter Amendments . On the Closing Date, Seller shall deliver
to Purchaser copies of all such executed documents as may be required to
(i) change Seller's name on that date to another name bearing no similarity
to "Verbex Voice Systems, Inc.", including, without limitation, an
amendment to Seller's Restated Certificate of Incorporation and, if
required by law, an appropriate name change notice in each jurisdiction
where Seller is qualified to transact business; and (ii) amend Section
4(f)(vii) of Article Fourth of Seller's Restated Certificate of
Incorporation in a manner satisfactory to Purchaser. Seller hereby agrees
to file all such documents on the Closing Date.
III. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser under this Agreement to consummate the purchase
of the Assets at the Closing shall be subject to the satisfaction, at or prior
to the Closing, of all of the following conditions, to the reasonable
satisfaction of Purchaser (any of which may be waived in writing in whole or in
part by Purchaser):
Section 3.1. Representations and Warranties Accurate . All representations
and warranties of Seller contained in this Agreement
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(including the Schedules hereto), and all written information (other
than any projections and forecasts) delivered to Purchaser by Seller
on or prior to the Closing Date pursuant to this Agreement, (i) that
are qualified as to materiality shall be true in all respects on and
as of the Closing Date and (ii) that are not qualified as to
materiality shall be true in all material respects on and as of the
Closing Date, with the same force and effect as though such
representations and warranties were made, and such written information
was delivered, on and as of the Closing Date.
Section 3.2. Performance by Seller . Seller shall have performed and
complied in all material respects with all agreements, covenants and
conditions required by this Agreement to be performed and complied
with by Seller prior to or on the Closing Date.
Section 3.3. Certificate . Purchaser shall have received a
certificate, dated the Closing Date, signed by an authorized officer
of Seller, solely in his or her capacity as an officer of Seller,
certifying that the conditions set forth in Sections 3.1, 3.2 and 3.7
have been satisfied.
Section 3.4. Opinion of Counsel for Seller . Purchaser shall have
received from Connelly & Manfredi, L.L.C., counsel to Seller, a
written opinion, dated the Closing Date, substantially in the form
attached hereto as Exhibit 3.4.
Section 3.5. Legal Prohibition . On the Closing Date, no injunction or
order shall be in effect prohibiting consummation of the transactions
contemplated hereby or which would make the consummation of such
transactions unlawful and no action or proceeding shall have been
instituted and remain pending before a court, governmental body or
regulatory authority to restrain or prohibit the transactions
contemplated by this Agreement and no adverse decision shall have been
made by any such court, governmental body or regulatory authority
which constitutes, or could be reasonably anticipated to constitute, a
Material Adverse Change to the Business or materially increase the
liabilities of the Business. No Federal, state or local statute, rule
or regulation shall have been enacted the effect of which would be to
prohibit, restrict, impair or delay the consummation of the
transactions contemplated hereby or restrict or impair the ability of
Purchaser to own or conduct the Business.
Section 3.6. Permits, Waivers, Orders, Et c. Subject to Section 9.8,
all consents necessary for the assignment of those Assumed Contracts
set forth on Schedule 3.6 shall have been duly obtained and shall be
reasonably satisfactory to Purchaser and its counsel, and copies
thereof shall be delivered to the Purchaser at or prior to the
Closing.
Section 3.7. No Material Adverse Change . There shall have been no
Material Adverse Change in the Business, the Assets or Seller's
liabilities (including the Assumed Liabilities and the Excluded
Liabilities) from the Interim Balance Sheet Date to the Closing Date
not consented to by Purchaser in writing.
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Section 3.8. Financial Statements . Purchaser, at its own expense,
shall have received, at least three days prior to the Closing Date,
audited financial statements at and for the year ended December 31,
1998, together with a signed independent auditors opinion thereon.
1.16.
Section 3.9. Secretary's Certificate . Purchaser shall have received
a certificate, dated the Closing Date, signed by the Secretary of
Seller, certifying: (i) that attached thereto is a true and complete
copy of the Restated Certificate of Incorporation of Seller, which
has not been and will not be amended (except in accordance with
Section 2.9); (ii) that attached thereto is a true and complete copy
of the By-laws of Seller as in effect on the Closing Date; and (iii)
that attached thereto is a true and complete copy of all resolutions
adopted by the Board of Directors of Seller authorizing the
execution, delivery and performance of this Agreement and the Escrow
Agreement and the consummation of the transactions contemplated
hereby and thereby, that such resolutions are in full force and
effect as of the Closing Date and that such resolutions are all the
resolutions adopted in connection with the transactions contemplated
hereby.
Section 3.10. Closing Matters . All proceedings (including, without
limitation, the matters referred to in Section 2.7) to be taken by
the Seller in connection with the consummation of the transactions
contemplated hereby and all certificates, opinions, instruments and
other documents required to effect the transactions contemplated
hereby shall be reasonably satisfactory in form and substance to
Purchaser and its counsel.
Section 3.11. Supplemental Disclosure . If Seller shall have
supplemented or amended any Schedule pursuant to its obligations set
forth in Section 8.6 hereof, Purchaser shall not have given notice to
Seller that, as a result of information provided to Purchaser in
connection with any or all of such amendments or supplements which
result or could result in a Material Adverse Change, Purchaser has
determined not to proceed with the consummation of the transactions
contemplated hereby.
Section 3.12. Escrow Agreement . Seller and the Escrow Agent shall
have executed and delivered the Escrow Agreement, substantially in
the form attached hereto as Exhibit 3.12.
Section 3.13. UCC-3 Termination Statements . Seller shall have
delivered UCC-3 Termination Statements executed by Silicon Valley
Bank as necessary to terminate any and all liens on the Assets
existing immediately prior to the Closing.
Section 3.14. Non-Disclosure Agreements . Seller shall have delivered
non-disclosure agreements (in the form provided by Purchaser)
executed by each of Seller's engineers, executives and other key
employees, as determined by Purchaser.
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Section 3.15. Bulk Sales Notice . Purchaser shall have obtained a tax
clearance escrow letter from the New Jersey Division of Taxation
prior to the Closing which limits Purchaser's liability to a
specified amount, which amount shall be withheld from the amount
otherwise due to Seller in accordance with Section 2.7(a) and shall
be held by counsel for Purchaser in a non-interest bearing attorney
trust account until written confirmation from the New Jersey Division
of Taxation is received by counsel for Purchaser authorizing the
release of such amount from escrow.
IV. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligation of Seller under this Agreement to consummate the sale of the
Assets at the Closing shall be subject to the satisfaction, at or prior to the
Closing, of all of the following conditions, to the reasonable satisfaction of
Seller (any of which may be waived in writing in whole or in part by Seller):
Section 4.1. Representations and Warranties Accurate . All representations
and warranties of Purchaser contained in this Agreement, and all written
information delivered to Seller by Purchaser on or prior to the Closing
Date pursuant to this Agreement, (i) that are qualified as to materiality
shall be true in all respects on and as of the Closing Date and (ii) that
are not qualified as to materiality shall be true in all material respects
on and as of the Closing Date, with the same force and effect as though
such representations and warranties were made, and such written
information was delivered, on and as of the Closing Date.
Section 4.2. Performance by Purchaser . Purchaser shall have performed and
complied in all material respects with all agreements, covenants and
conditions required by this Agreement to be performed and complied with by
Purchaser prior to or on the Closing Date.
Section 4.3. Certificate . Seller shall have received a certificate, dated
the Closing Date, signed by an authorized officer of Purchaser, to the
effect that the conditions set forth in Sections 4.1 and 4.2 have been
satisfied.
Section 4.4. Legal Prohibition . On the Closing Date, no injunction or
order shall be in effect prohibiting consummation of the transactions
contemplated hereby or which would make the consummation of such
transactions unlawful and no action or proceeding shall have been
instituted and remain pending before a court, governmental body or
regulatory authority to restrain or prohibit the transactions contemplated
by this Agreement.
Section 4.5. Closing Matters . All proceedings to be taken by the
Purchaser in connection with the consummation of the transactions
contemplated hereby and all certificates, opinions, instruments and other
documents required to effect the transactions contemplated hereby shall be
reasonably satisfactory in form and substance to Seller and its counsel.
Section 4.6. Escrow Agreement . Purchaser and the Escrow Agent shall have
executed and delivered the Escrow Agreement, substantially in the form
attached hereto as Exhibit 3.12.
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V. INDEMNIFICATION
-- ---------------
Section 5.1. Survival of Representations and Warranties . All
------------------------------------------
representations and warranties contained in this Agreement shall survive
the Closing and shall remain in full force and effect until eighteen (18)
months after the Closing Date, regardless of any investigation made by
Purchaser or Seller or on their behalf, except as to any matters with
respect to which a bona fide written claim shall have been made or an
action at law or in equity shall have commenced before such date, in which
event survival shall continue (but only with respect to, and to the extent
of, such claim) until the final resolution of such claim or action,
including all applicable periods for appeal; provided, however, that the
representations and warranties relating to (i) environmental matters and
ERISA shall survive for the periods equal to the applicable statutes of
limitation relating thereto and (ii) Taxes shall survive until the latest
to occur of (x) three years from the date of the last filing of a return
or report of Taxes relating to the Assets or the Business and covering all
Taxes relating to all periods prior to the Closing Date, (y) the
expiration of the applicable statute of limitations, or (z) six months
following the ultimate disposition of any claim with respect to any Taxes
relating to the Assets or the Business.
Section 5.2. Seller's Indemnity. Seller shall indemnify and hold harmless
its Affiliates and their respective successors and assigns at all times
after the Closing Date against and in respect of:
(a) any damage, loss, cost, expense or liability (including reasonable
attorneys' fees) resulting to Purchaser from any false, misleading or
inaccurate representation, breach of warranty or nonfulfillment of any
agreement, covenant or condition by or on the part of Seller under
this Agreement or from any misrepresentation in or any omission from
any certificate, list, schedule or other written instrument to be
furnished to Purchaser hereunder;
(b) all liabilities and obligations of Seller (other than the Assumed
Liabilities) of any kind or nature whatsoever, whether accrued,
absolute, fixed, contingent, known or unknown, including, without
limitation, the Excluded Liabilities; and
(c) all claims, actions, suits, proceedings, demands, assessments,
judgments, costs and expenses incident to any of the items described
in subsections (a) or (b) above.
(d) This indemnity agreement in this Section 5.2 shall be in addition to
any liability which Seller may incur to Purchaser and shall not
foreclose any other rights or remedies Purchaser may have to enforce
the provisions of this Agreement, including, without limitation, any
action for fraud.
Section 5.3. Purchaser's Indemnity . Purchaser shall indemnify and hold
harmless Seller and its successors and assigns at all times after the
Closing Date against and in respect of:
(a) any damage, loss, cost, expense or liability (including reasonable
attorneys' fees) resulting to Seller from any false, misleading or
inaccurate representation, breach of warranty or nonfulfillment of any
agreement, covenant or condition by or on the part of Purchaser under
this Agreement or from any misrepresentation in or any omission from
any certificate, list, schedule or other instrument to be furnished to
Seller hereunder;
(b) all Assumed Liabilities; and
(c) all claims, actions, suits, proceedings, demands, assessments,
judgments, costs and expenses incident to any of the items described
in subsections (a) or (b) above;
(d) provided, however, that, if Purchaser is unable to fulfill its
obligations under this Article V for any reason whatsoever, Voxware
shall be liable for, and to the fullest extent of, such obligations of
Purchaser. This indemnity agreement in this Section 5.3 shall be in
addition to any liability which Purchaser may incur to
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Seller and shall not foreclose any other rights or remedies Seller may
have to enforce the provisions of this Agreement, including, without
limitation, any action for fraud.
Section 5.4. Limitation . Neither Seller nor Purchaser shall be
entitled to make any claim for indemnification under Section 5.2 or 5.3
with respect to the breach of any representation and warranty contained
herein after the date on which such representation and warranty ceases
to survive pursuant to Section 5.1.
Section 5.5. Subsequent Tax Liability Indemnification . If, subsequent
to the Closing Date, any liability for Taxes relating to the Assets or
the Business is imposed on Purchaser or its Affiliates with respect to
any period prior to the Closing Date for which Seller prepared and
filed any return or report of Taxes, then Seller shall indemnify and
hold Purchaser and its Affiliates harmless from and against, and shall
pay the full amount of such tax liability, including any interest,
additions to tax and penalties thereon, together with interest on such
additions to tax or penalties (as well as reasonable attorneys' or
other fees and disbursements of Purchaser incurred in determination
thereof or in connection therewith). Seller shall, at its sole expense
and in its reasonable discretion, either settle any tax claim that may
be the subject of indemnification under this Section 5.5 at such time
and on such terms as it shall deem appropriate or assume the entire
defense thereof, provided, however, that Seller shall in no event take
any position in such settlement or defense that subjects Purchaser to
any civil fraud or any civil or criminal penalty. Notwithstanding the
foregoing, Seller shall not consent, without the prior written consent
of Purchaser, which prior written consent shall not be unreasonably
withheld, to any change in the treatment of any item which would, in
any manner whatsoever, affect the tax liability of Purchaser for a
period subsequent to the Closing Date.
Section 5.6. Notice and Defense of Claims . Each party entitled to
indemnification under this Article V (the "Indemnified Party") shall
give notice to the party required to provide indemnification (the
"Indemnifying Party") promptly after such Indemnified Party has actual
knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party, at the Indemnifying Party's expense, to
assume the defense of any such claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval
shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such party's expense, and provided
further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its
obligations under this Article V unless such failure to give notice
materially prejudices the Indemnifying Party's ability to defend such
claim. The Indemnifying Party, in the defense of any such claim or
litigation, shall not, except with the consent of the Indemnified
Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to the Indemnified Party of a release from
all liability in respect to such claim or litigation. The Indemnified
Party shall furnish such information regarding itself or the claim in
question as the Indemnifying Party may reasonably request in writing
and as shall be reasonably required in connection with defense of such
claim and litigation resulting therefrom.
VI. REPRESENTATIONS AND WARRANTIES OF SELLER
--------------------
Seller represents, warrants and agrees that:
Section 6.1. Organization and Qualification . Seller is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Delaware, with corporate power and authority and all
licenses necessary to conduct the Business and to own, lease and
operate the properties and assets used in connection therewith and to
enter into and perform this Agreement and the transactions contemplated
hereby. Seller is in good standing as a foreign corporation and
licensed or qualified to transact business in each of Massachusetts,
New Jersey and Utah, which are the only jurisdictions where Seller
leases real property. Seller does not own any capital stock or other
proprietary interest, directly or indirectly, in any
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corporation, association, trust, partnership, joint venture or other
entity which conducts a business constituting any portion or aspect of
the Business.
Section 6.2. Due Authorization (a). Seller has all requisite corporate
power and authority to execute and deliver this Agreement and the
Escrow Agreement and to perform fully its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and
thereby. The execution and delivery by Seller of this Agreement, the
Escrow Agreement and the other documents contemplated hereby, the
performance by Seller of its obligations hereunder and thereunder, and
the transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action on the part of
Seller and its stockholders. This Agreement has been duly executed and
delivered by Seller, and this Agreement is, and each of the Escrow
Agreement and the other agreement contemplated hereby to which Seller
will be a party will be, upon execution and delivery thereof by Seller,
a legal, valid and binding obligation of Seller, enforceable against it
in accordance with its terms (except as the enforceability thereof may
be limited by any applicable bankruptcy, insolvency or other laws
affecting creditors' rights generally or by general principles of
equity, regardless of whether such enforceability is considered in
equity or at law).
(b) Seller has complete and unrestricted power and the unqualified right to
sell, convey, assign, transfer and deliver the Assets to Purchaser
(subject to any consents or waivers of third parties required in
connection with such sale, conveyance, assignment, transfer and
delivery of the Assets or any part thereof, all of which consent(s) or
waiver(s) have been duly obtained by Seller and are set forth on
Schedule 6.3), and the instruments of transfer, conveyance and
assignment to be executed and delivered by Seller to Purchaser at the
Closing will be valid and binding obligations of Seller, enforceable in
accordance with their respective terms, sufficient for purposes of
recordation and filing where permitted by law, sufficient to transfer,
convey and assign to Purchaser all right, title and interest of Seller
in and to the Assets and to vest in Purchaser the full right, power and
authority to conduct the Business as conducted by Seller.
Section 6.3. No Conflict . Except as set forth on Schedule 6.3, neither
the execution and delivery of this Agreement, the Escrow Agreement or
any of the other documents contemplated hereby by Seller nor the
consummation of the transactions contemplated hereby or thereby will
(a) conflict with, result in a breach or violation of or constitute (or
with notice or lapse of time or both constitute) a default under, (i)
the certificate of incorporation or by laws of Seller or (ii) to the
knowledge of Seller, any law, statute or regulation or (iii) any order,
judgment or decree or any instrument, contract or other agreement to
which Seller is a party or by which Seller (or any of the properties or
assets of Seller) is subject or bound; (b) result in the creation of,
or give any party the right to create, any lien, charge, option,
security interest or other encumbrance upon the Assets or the Business;
(c) terminate or modify, or give any third party the right to terminate
or modify, the provisions or terms of any Assumed Contract; or (d)
require Seller or, to the knowledge of Seller, Purchaser to obtain any
Permit or waiver from, to give any notification to, or to make any
filing with, any governmental body or authority or to obtain the
approval or consent of any other Person.
Section 6.4. Title to and Condition of Assets . Seller has, and, except
for the Excluded Assets as set forth in Schedule 2.2 hereto, upon
payment therefor Purchaser will have, good and marketable title to, or
valid and subsisting leasehold interests in or valid licenses to use,
all of the Assets, free and clear of any liens, charges, options,
security interests or other encumbrances of any nature, options to
purchase or lease, easements, restrictions, covenants, conditions, or
imperfections of title, except the lien of current Taxes not yet due
and payable or of Taxes the validity of which is being contested in
good faith by appropriate proceedings, so long as such contest does not
involve any real danger of the sale, foreclosure or loss of any Assets
which would cause a Material Adverse Change in the Business
(collectively, the "Permitted Encumbrances"). At the Closing, Seller
shall cause to be discharged all mechanics' or materialmen's liens of
which Seller has notice arising from any labor or materials furnished
to the real property prior to the time of Closing.
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(b) Seller owns no real property. Schedules 2.1(a) and 2.1(e) hereto
include a correct and complete list of all machinery, equipment,
computers and computer hardware, tools, supplies, leasehold
improvements, construction in progress, furniture, fixtures, vehicles
and other tangible personal property owned, leased or used in the
Business, except for items having a value of less than $100 but not
more than $50,000 in the aggregate, indicating with respect to all such
listed property whether such property is leased.
(c) Seller enjoys peaceful and undisturbed possession under the lease
relating to the Cambridge Facility, and such lease is valid and
enforceable in accordance with its terms, is in full force and effect,
and there is not under such lease any default by Seller or, to the
knowledge of Seller, by the lessor under such lease, or any condition,
event or act which, with the giving of notice or lapse of time, or
both, would constitute such a default. With respect to such lease,
Seller has not received any notice of any violation of any applicable
zoning ordinance, building code, use or occupancy restriction, or
violation of any thereof, or any condemnation action or proceeding with
respect thereto.
(d) The Assets constitute, in the aggregate, all the material assets
and property necessary to engage in the Business as currently engaged
in by Seller. To the knowledge of Seller, all the Tangible Assets are
located at the Cambridge Facility or at Seller's premises located in
Edison, New Jersey or are in storage at Acton Main Street Mini-Storage
located at One Main Street, Acton, Massachusetts. No person other than
Seller owns any equipment or other Tangible Assets or properties
situated at such premises, except for leased items disclosed in
Schedule 2.1(e) hereto.
(e) The Tangible Assets as of each of the date hereof and the Closing
Date are in reasonable operating condition and repair, having
consideration for their age and subject to normal wear, and are usable
in the regular and ordinary course of business. No portion of the lease
relating to the Cambridge Facility has suffered any material damage by
fire or other casualty which has not heretofore been completely
repaired and restored to reasonable operating condition as described
above.
Section 6.5. Financial Information (a). Seller has delivered to
Purchaser (i) true and complete copies of Seller's audited balance
sheets as of December 31, 1996 and 1997, and the related statements of
operations and cash flows (together with the auditors' reports thereon)
for each of the years ended December 31, 1996 and December 31, 1997,
together with notes to such financial statements (the "Audited
Financial Statements"), and (ii) true and complete copies of Seller's
unaudited balance sheets as at December 31, 1998 and the related
statements of operations and cash flows for the 12 months ended
December 31, 1998 (the "Unaudited Financial Statements"). The Audited
Financial Statements and Unaudited Financial Statements are herein
collectively referred to as the "Seller Financial Statements." The
balance sheet of Seller at December 31, 1998 is attached as Schedule
6.5(a) and is herein referred to as the "Interim Balance Sheet," and
December 31, 1998 is herein referred to as the "Interim Balance Sheet
Date."
(b) The Audited Financial Statements have been audited by KPMG Peat Marwick
LLP ("KPMG") and are accompanied by a report thereon containing
opinions of KPMG, consistent with those previously provided to
Purchaser. The Unaudited Financial Statements for the 12 months ended
December 31, 1998 present fairly the financial position of Seller as of
the Interim Balance Sheet Date, have been prepared in accordance with
generally accepted accounting principles, consistently applied (except
for those changes promulgated and required by accounting authority),
and show all material liabilities, absolute or contingent, of Seller
required to be recorded thereon in accordance with generally accepted
accounting principles as of the Interim Balance Sheet Date.
(c) The accounts receivable of Seller arising from the Business as set
forth on the Interim Balance Sheet, which have not been collected, or
arising since the date thereof are valid and genuine; have arisen
solely out of bona fide sales and deliveries of goods, performance of
services and other business transactions in the ordinary course of
business consistent with past practice; are not subject to valid
defenses, set-offs or counterclaims; and are collectible at the full
recorded amount thereof, which have not been collected (less, in the
case of accounts receivable appearing on the Interim Balance Sheet, the
recorded allowance for collection losses on the Interim Balance Sheet),
over the period of usual trade terms
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(by use of Seller's normal collection methods without resort to
litigation or reference to a collection agency). The allowance for
collection losses on the Interim Balance Sheet has been determined in
accordance with generally accepted accounting principles consistent
with past practice.
(d) All inventory of Seller used in the conduct of the Business, including,
without limitation, raw materials, work-in process and finished goods,
reflected on the Interim Balance Sheet or acquired since the date
thereof was acquired and has been maintained in the ordinary course of
the Business; is of good and merchantable quality; consists
substantially of a quality, quantity and condition usable, leasable or
saleable in the ordinary course of the Business; is valued at
reasonable amounts based on the ordinary course of business of Seller
during the past 12 months; and is not subject to any write-down or
write-off, except as set forth on Schedule 6.5(d). Seller is not under
any liability or obligation with respect to the return of inventory in
the possession of wholesalers, retailers or other customers. Seller has
not caused its inventory to be materially increased or decreased other
than in the ordinary course of business consistent with past practice.
(e) Seller does not have any liability or obligation, contingent or
absolute (individually or in the aggregate), other than (i) liabilities
disclosed in the Seller Financial Statements and (ii) liabilities which
have arisen after the Interim Balance Sheet Date in the ordinary course
of business and consistent with past practice which, individually or in
the aggregate, could not reasonably be expected to result in a Material
Adverse Change.
(f) Since the Interim Balance Sheet Date, Seller has not, with respect to
the ownership or operation of the Assets or the Assumed Liabilities a)
borrowed any amount or incurred or become subject to any liability
(absolute, accrued or contingent), except current liabilities incurred,
liabilities under contracts entered into, borrowings under banking
facilities disclosed in the Schedules hereto (including the Accounts
Receivable Note) and liabilities in respect of letters of credit issued
under such banking facilities, all of which were in the ordinary course
of business; (b) discharged or satisfied any lien or incurred or paid
any obligation or liability (absolute, accrued or contingent) other
than current liabilities shown on the Interim Balance Sheet and current
liabilities incurred since the Interim Balance Sheet Date in the
ordinary course of business; (c) failed to pay or discharge when due
any material liability or obligation (other than in the ordinary course
of business, consistent with past practice); (d) declared or made any
payment or distribution to its stockholders or purchased or redeemed
any capital stock or other securities; (e) mortgaged, pledged or
subjected to lien any of its assets, tangible or intangible, other than
liens of current taxes not yet due and payable; (f) sold, assigned or
transferred any of its tangible assets which would have been included
in the Assets if the Closing had been held on the Interim Balance Sheet
Date or on any date since then except for the sale of inventory in the
ordinary course of business, canceled any debt or claim, or waived any
right of substantial value whether or not in the ordinary course of
business; (g) sold, assigned, transferred or granted any license with
respect to any patent, trademark, tradename, service mark, copyright,
trade secret or other intangible asset or Intellectual Property; (h)
suffered any damage, destruction or loss, whether or not covered by
insurance, or suffered any repeated, recurring or prolonged shortage,
cessation or interruption of supplies or utility or other services
required to conduct the Business; (i) received notice or had knowledge
of any actual or threatened labor trouble, strike or other occurrence,
event or condition of any similar character which has had or could
reasonably be expected to have an adverse effect on its business,
operations, assets, properties, prospects or condition (financial or
otherwise); (j) suffered any Material Adverse Change in its relations
with, or any loss or threatened loss of, any of its suppliers,
customers or distributors disclosed pursuant to Section 6.17; (k) made
any material change in the manner of its business or operations; (l)
made any material change in any method of accounting or accounting
practice, except for any such change required by reason of a concurrent
change in generally accepted accounting principles or disclosed in the
Seller Financial Statements; or (m) entered into any commitment
(contingent or otherwise) to do any of the foregoing. Since the Interim
Balance Sheet Date, there has been no Material Adverse Change in the
Assets or liabilities or in the Business or condition, financial or
otherwise, of the Business, whether as a result of any legislative or
regulatory change, revocation of any license or right to do business,
fire, explosion, accident, casualty, labor trouble, flood,
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drought, riot, storm, condemnation or act of God or otherwise, and no
fact or condition exists or is contemplated or threatened which could
reasonably be anticipated to cause such a change in the future. There
has been no Material Adverse Change since the Interim Balance Sheet
Date in the amount of accounts receivable (or the allowance with
respect thereto) or accounts payable of Seller from that reflected in
the Interim Balance Sheet.
Section 6.6. Taxes . (i) Seller has filed on a timely basis (taking
into account any extensions received from the relevant taxing
authorities) all returns and reports pertaining to all U.S. federal,
state, local and foreign income, profits, unemployment compensation,
payroll, social security, franchise, unincorporated business, capital,
general corporate, sales, use, occupation, property, excise and any and
all other taxes (all such taxes, irrespective of the period for which
such taxes are payable or attributable, hereinafter referred to as
"Taxes") relating to the Assets or the Business that are or were
required to be filed with the appropriate taxing authorities in all
jurisdictions in which such returns and reports are or were required to
be filed, and all such returns and reports are true, correct and
complete in all material respects, (ii) all Taxes (including interest,
additions to tax and penalties thereon together with interest on such
additions to tax and penalties) relating to the Assets or the Business
that are due from or may be asserted against Seller (including deferred
taxes) in respect of or attributable to all periods ending on or before
the Closing Date have been fully paid, deposited or adequately provided
for on the books and financial statements of the Seller and the
Business, (iii) no issues have been raised (or are currently pending)
by any taxing authority in connection with any of the returns and
reports referred to in clause (i) which might be determined adversely
to the Seller and which could have a material adverse effect on the
Business, (iv) Seller has not given or been requested to give waivers
or extensions of any statute of limitations with respect to the payment
of Taxes relating to the Business, and (v) to the knowledge of Seller,
no tax liens which have not been satisfied or discharged by payment or
concession by the relevant taxing authority or as to which sufficient
reserves have not been established on the books and financial
statements of the Seller and the Business are in force as of the date
hereof with respect to any of the Assets or the Business.
Section 6.7. Contracts, Obligations and Commitments . Except as set
forth on Schedules 2.1(e) or 2.2 hereto, Seller has no existing
contract, obligation or commitment of any nature which is material to
the ownership or operation of the Assets or the Assumed Liabilities.
Each contract, agreement, arrangement, plan, lease, license or similar
instrument included in the Assets and set forth on Schedule 2.1(e)
(collectively, the "Assumed Contracts") is a valid and binding
obligation of Seller and, to the knowledge of Seller, the other parties
thereto, enforceable in accordance with its terms (except as the
enforceability thereof may be limited by any applicable bankruptcy,
insolvency or other laws affecting creditors' rights generally or by
general principles of equity, regardless of whether such enforceability
is considered in equity or at law), and is in full force and effect
(except for any Assumed Contracts which by their terms expire after the
date hereof or are terminated after the date hereof in accordance with
the terms thereof, provided, however, that Seller shall not terminate
any material Assumed Contract after the date hereof without the prior
written consent of Purchaser, which consent shall not be unreasonably
withheld or delayed), and neither Seller nor, to the knowledge of
Seller, any other party thereto has breached any material provision of,
nor is in default in any material respect under the terms of (and, to
the knowledge of Seller, no condition exists which, with the passage of
time, the giving of notice, or both, would result in a default under
the terms of), any of the Assumed Contracts. Except as set forth on
Schedule 6.7 hereto, each of the Assumed Contracts is validly
assignable to the Purchaser without the consent of any other party
thereto so that, after the assignment thereof to the Purchaser pursuant
to this Agreement, the Purchaser will be entitled to the full economic
and other benefits thereof. Seller shall give Purchaser written notice
of each Assumed Contract which is terminated after the date hereof.
Section 6.8. Litigation . Neither Seller, any Affiliate of Seller, nor
any director, officer, employee or agent of Seller (in their capacity
as such), is a party to any pending or, to the knowledge of Seller,
threatened action, suit, proceeding or investigation, at law or in
equity or otherwise in, before or by any court or governmental board,
commission, agency, department or office, or private arbitration
tribunal, nor does Seller know, after due inquiry, of any basis
therefor, (A) arising in connection with the conduct by
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Seller of the Business, (B) to restrain, prohibit or invalidate, or to
obtain damages or other relief from Seller, or any of its directors or
officers, or equitable or other relief in respect of this Agreement or
the transactions contemplated hereby, (C) which arises out of any
contract, agreement, letter of intent or arrangement alleged to have
been entered into or agreed to by Seller and which conflicts with this
Agreement or the transactions contemplated hereby, or gives rise to a
claim or right of any kind of any person as a result of the execution
of this Agreement or the consummation of the transactions contemplated
hereby, or (D) which, if successful, could adversely affect the right
of Purchaser after the Closing Date to own the Assets or, in the
reasonable judgment of Seller, to conduct the Business; and (ii) Seller
is not a party or subject to any order, ruling, judgment, decree or
stipulation which affects the Business, or which would prevent the
transactions contemplated by this Agreement. To the knowledge of Seller
after due inquiry, no facts exist, and no investigation has been
instituted by any governmental agency, which might result in any such
action or proceeding.
Section 6.9. Compliance with Law . The Business has been conducted, and
is now being conducted, in compliance in all material respects with all
applicable laws, rules, regulations and court or administrative orders
and processes (including, without limitation, any that relate to
consumer protection, health and safety, products and services,
proprietary rights, anti-competitive practices, collective bargaining,
ERISA, equal opportunity, improper payments and Environmental Laws).
Seller and, to the knowledge of Seller, its directors, officers and
employees (i) are not, and during the past five years were not, in
violation of, or not in compliance with, in any material respect all
such applicable laws, rules, regulations, orders and processes with
respect to the conduct of the Business; (ii) have not received any
notice from any governmental authority, and to the knowledge of Seller,
none is threatened, alleging that Seller has violated, or not complied
with, any of the above; and (iii) are not a party to any agreement or
instrument, or subject to any judgment, order or writ, or subject to
any rule, regulation, code or ordinance known to Seller, which
adversely affects, or might reasonably be expected to adversely affect,
the Business.
Section 6.10. Permits . Seller has no Permits in connection with the
ownership of the Assets or operation of the Business, and, to the
knowledge of Seller, its officers, directors and employees no Permits
are necessary to own the Assets and operate the Business.
Section 6.11. Brokers . Except for Mr. Duffield Meyercord (and/or his
assigns) and certain employees of Seller, neither Seller nor, to the
knowledge of Seller, any of its Affiliates has paid or become obligated
to pay any fee or commission to any broker, finder, investment banker
or other intermediary in connection with the transactions contemplated
by this Agreement.
Section 6.12 Intellectual Property . Seller in the conduct of the
Business did not and does not utilize any patent, trademark, tradename,
service mark, copyright, licensed technology, software or other
Intellectual Property except for those listed on Schedule 2.1(g).
Except as set forth on Schedule 2.1(g), Seller owns or is licensed
exclusively or otherwise has the exclusive right to use all the
Intellectual Property necessary to permit Purchaser to carry on the
Business. All licenses, if any, of Seller to use all Intellectual
Property necessary to permit Purchaser to carry on the Business as
conducted by Seller are in full force and effect and neither the Seller
nor, to the knowledge of Seller, any of the other parties to such
licenses are in breach in any material respect of any provision of, or
in default in any material respect under any of the terms of, such
licenses. Except as set forth on Schedule 2.1(g), Seller has not
granted any person any license or other right to use any of the
Intellectual Property necessary to permit Purchaser to carry on the
Business as conducted by Seller, whether requiring the payment of
royalties or not. To the knowledge of Seller, the Business or any
product or service marketed or sold by Seller, which utilizes any of
the Intellectual Property, does not infringe upon or unlawfully or
wrongfully use any patent, trademark, tradename, service mark,
copyright, trade secret or know-how owned or claimed by another, and to
the knowledge of Seller, no Person is infringing upon, or is in
violation of, any of Seller's Intellectual Property or rights thereto.
Schedule 2.1(g) contains a true and complete list of all patents,
trademarks and servicemarks (either registered, common law or
registration applied for), tradenames, copyrights and third party
licenses which are owned, used, registered in the name of or licensed
by Seller for use in the
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Business, or in which Seller otherwise has an interest. Except as shall
be set forth on Schedule 2.1(g), subsequent to the Closing, neither
Seller nor any of its current or former directors, officers or
employees shall own, have an interest in or have the right to use any
Intellectual Property utilized in the Business. Except as set forth on
Schedule 2.1(g), all licenses, trademarks, servicemarks, copyrights,
tradenames and other Intellectual Property which are necessary to the
conduct of the Business, as it presently exists or as heretofore
conducted, are owned, controlled or are usable on a royalty-free basis
by Seller, and will continue to be so owned, controlled or usable on a
royalty-free basis by Purchaser after the Closing Date. There is no
pending or, to the knowledge of Seller, threatened claim or litigation
against Seller contesting the right to use its Intellectual Property in
the conduct of the Business, asserting the misappropriation or misuse
of any thereof or asserting that Seller has violated or infringed the
rights of another party. This Agreement and the transactions
contemplated hereby will not in any manner affect Purchaser's rights
with respect to, or ability to use, the Intellectual Property necessary
to permit Purchaser to carry on the Business. Since July 9, 1993, the
Business has not been conducted under any corporate, trade or
fictitious name other than the names listed on Schedule 2.1(g) hereto.
Section 6.13. Plans and Agreements Relating to Employees (a). Except as
set forth on Schedule 6.13 hereto, there are no employee benefit plans,
contracts or arrangements (whether written, oral or otherwise) of any
type (including, without limitation, any personnel policies, deferred
compensation plans, incentive plans, bonus plans or arrangements, stock
option plans, stock purchase plans, golden parachute agreements,
severance pay plans, dependent care plans, cafeteria plans, employee
assistance programs, scholarship programs, employment contracts and
other similar plans, agreements and arrangements which are not so
described) which are currently in effect, which have been approved but
are not yet effective, or which were sponsored, maintained or
contributed to by Seller within six years prior to the date hereof, for
the benefit of current or former employees of the Seller (or
beneficiaries of such employees) who provide or provided services
primarily to or in connection with the Business. Each of such employee
benefit plans, contracts or arrangements is herein referred to as an
"Employee Plan." Each Employee Plan has been maintained and
administered in accordance with its terms and in compliance in all
material respects with the provisions of applicable law.
(b) Purchaser does not and will not assume the sponsorship of, the
responsibility for contributions to, or any liability or obligation in
connection with, any Employee Plan.
(c) Schedule 6.13 sets forth a complete and accurate list showing the
names, the rate of compensation (and the portions thereof attributable
to salary and bonuses, respectively) and location of all current
officers and employees of and consultants to the Business that
received, for the year ended December 31, 1998, or are expected to
receive, during the year ending December 31, 1999, annual base salary
or other compensation in excess of $5,000. There are no covenants,
agreements or restrictions to which the Business is a party or bound,
including but not limited to employee non-compete agreements,
prohibiting, limiting or in any way restricting any officer or employee
listed on Schedule 6.13 from engaging in any types of business activity
in any location. To the knowledge of Seller, no officer or employee
listed on Schedule 6.13, and no group of the Business' employees, has
any plans to terminate their employment.
Section 6.14. No Illegal or Improper Transactions . To the knowledge of
Seller, neither Seller nor any officer, director, employee, agent or
Affiliate of Seller has offered, paid or agreed to pay to any person or
entity (including any governmental official) or solicited, received or
agreed to receive from any such person or entity, directly or
indirectly, any money or anything of value for the purpose or with the
intent of (i) obtaining or maintaining business for the Business, (ii)
facilitating the purchase or sale of any product or service, or (iii)
avoiding the imposition of any fine or penalty, in any such case in any
manner which is in violation of any applicable ordinance, regulation or
law; and there have been no false or fictitious entries made in the
books or records of Seller.
Section 6.15. Related Transactions . To the knowledge of Seller, except
as set forth on Schedule 6.15, and except for compensation to employees
for services rendered, no stockholder or current or former
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director, officer or employee or any Affiliate or associate (as defined
in the rules promulgated under the Securities Act) of Seller, is
presently, or during the last three fiscal years has been, (a) a party
to any transaction with Seller with respect to the Business (including,
but not limited to, any contract, agreement or other arrangement
providing for the furnishing of services by, or rental of real or
personal property from, or otherwise requiring payments to, any such
director, officer, employee, Affiliate or associate), or (b) the direct
or indirect owner of an interest in any corporation, firm, association
or business organization which is a present (or potential) competitor,
supplier or customer of Seller with respect to the Business, nor does
any such person receive income from any source other than Seller which
relates to the business of, or should properly accrue to, Seller with
respect to the Business.
Section 6.16. No Product Liabilities; Product Warranties (a). Except as
has been or may be incurred in the ordinary course of business
(consistent with past practice), Seller has not incurred, nor does
Seller know of or have any reason to believe there is any basis for
alleging, any liability, damage, loss, cost or expense as a result of
any defect or other deficiency (whether of design, materials,
workmanship, labeling, instructions or otherwise) ("Product Liability")
with respect to any product sold or service rendered by Seller, whether
such Product Liability is incurred by reason of any express or implied
warranty (including, without limitation, any warranty of
merchantability or fitness), any doctrine of common law (tort, contract
or other), any statutory provision or otherwise and irrespective of
whether such Product Liability is covered by insurance.
(b) Seller has furnished Purchaser with all forms of warranties or
guarantees of Seller's products and services that are in effect or
proposed to be used by Seller in the conduct of the Business. Except as
has been or may be incurred in the ordinary course of business
(consistent with past practice), there are no pending or, to the
knowledge of Seller, threatened claims under any warranty or guaranty
against Seller. Seller did not make any payments or settlements in
respect of any such warranty or guaranty (including, without
limitation, any returns or allowances) in excess of $10,000 since
January 1, 1998.
Section 6.17. Suppliers and Customers (a). Schedule 6.17 lists (i) all
suppliers of the Business to which Seller made payments during the year
ended December 31, 1998, or expects to make payments during the year
ending December 31, 1999, in excess of five percent (5%) of Seller's
cost of sales as reflected on Seller's statement of operations for each
such year and (ii) all customers that paid Seller during the year ended
December 31, 1998 or that Seller expects will pay to it during the year
ending December 31, 1999, more than five percent (5%) of Seller's sales
revenues as reflected on Seller's statement of operations for each such
year.
(b) Seller has no information which might reasonably indicate that any of
the customers or suppliers of the Business listed on Schedule 6.17
intend to cease purchasing from, selling to, or dealing with, the
Business, nor has any information been brought to its attention which
might reasonably lead it to believe any such customer or supplier
intends to alter in any material respect the amount of such purchases,
sales or the extent of dealings with the Business or would alter in any
material respect such purchases, sales or dealings in the event of the
consummation of the transactions contemplated by this Agreement. Seller
has no information which might reasonably indicate, nor has any
information been brought to its attention which might reasonably lead
it to believe that, (i) any supplier will not be able to fulfill
outstanding or currently anticipated purchase orders placed by Seller,
or (ii) any customer will cancel outstanding or currently anticipated
purchase orders placed with Seller.
Section 6.18. Availability of Documents . Except as relates to any
Acquisition Transaction(s), Seller has made available to Purchaser
copies of all documents, including, without limitation, all agreements,
contracts, commitments, insurance policies, leases, plans, instruments,
undertakings authorizations, Permits, licenses, patents, trademarks,
tradenames, service marks, copyrights and applications therefor listed
in the Schedules hereto or referred to herein. Such copies are true and
complete and include all amendments, supplements and modifications
thereto or waivers currently in effect thereunder.
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Section 6.19. Disclosure . Except as relates to any Acquisition
Transaction(s), Seller has not failed to disclose to Purchaser any
material information adverse to the ownership and operation of the
Assets or the Assumed Liabilities, except as to matters affecting the
economy generally, and no information furnished (other than any
projections or forecasts) by or on behalf of Seller to Purchaser, taken
generally with other information furnished to Purchaser, contains any
untrue statement of a material fact or omits to state a material fact
necessary to make such statement, in the light of the circumstances
under which it was made, not misleading. All written information (other
than any projections or forecasts), in whatever form, furnished by
Seller to Purchaser was true and correct as of the date so furnished
and, except as the accuracy thereof is affected by the passage of time,
remains true and correct as of the date hereof.
VII. REPRESENTATIONS AND WARRANTIES OF VOXWARE AND PURCHASER
A. Purchaser hereby represents and warrants as follows:
Section 7.1. Organization . Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, with full corporate power and authority to own or lease its
properties and carry on its business as presently conducted. Purchaser
is licensed or qualified to transact business and is in good standing
as a foreign corporation in each jurisdiction where the character of
its business or the nature of its properties makes such qualification
or licensing necessary, except where the failure to be so licensed or
qualified would not have a material adverse affect on Purchaser.
Section 7.2. Due Authorization; No-Conflict (a). Purchaser has all
requisite corporate power and authority to execute and deliver this
Agreement and the Escrow Agreement and to perform fully its obligations
hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this
Agreement and the Escrow Agreement by Purchaser, the performance by
Purchaser of its obligations hereunder and thereunder, and the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of Purchaser.
This Agreement has been duly executed by Purchaser, and this Agreement
is, and the Escrow Agreement will be, upon execution and delivery
thereof by Purchaser, a legal, valid and binding obligation of
Purchaser, enforceable against it in accordance with its terms (except
as the enforceability thereof may be limited by any applicable
bankruptcy, insolvency or other laws affecting creditors' rights
generally or by general principles of equity, regardless of whether
such enforceability is considered in equity or at law).
(b) Except as set forth on Schedule 7.2, neither the execution and delivery
of this Agreement or the Escrow Agreement by Purchaser nor the
consummation of the transactions contemplated hereby or thereby by
Purchaser will (i) conflict with, result in a breach or violation of or
constitute (or with notice or lapse of time or both constitute) a
default under, (A) the certificate of incorporation or by-laws of
Purchaser or (B) any law, statute, regulation, order, judgment or
decree or any instrument, contract or other agreement to which
Purchaser is a party or by which it (or any of its properties or
assets) is subject or bound; (ii) result in the creation of, or give
any party the right to create, any lien, charge, encumbrance, security
interest or other adverse interest upon any property or asset of
Purchaser; (iii) terminate or modify, or give any third party the right
to terminate or modify, the provisions or terms of any agreement or
commitment to which Purchaser is a party or by which it (or any of its
properties or assets) is subject or bound which would have a material
adverse effect on the business of Purchaser; or (iv) require Purchaser
to obtain any authorization, consent, approval or waiver from, to give
notification to, or to make any filing (other than filing to qualify as
a foreign corporation where necessary) with, any governmental body or
authority, or to obtain the approval or consent of any other Person.
Section 7.3. Brokers . Except for Ladenburg Thalmann & Co. Inc.,
neither Purchaser nor any of its Affiliates has paid or become
obligated to pay any fee or commission to any broker, finder,
investment banker or other intermediary in connection with the
transactions contemplated by this Agreement.
B. Voxware hereby represents and warrants as follows:
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Section 7.4. Organization . Voxware is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, with full corporate power and authority to own or lease its
properties and carry on its business as presently conducted. Voxware
is licensed or qualified to transact business and is in good standing
as a foreign corporation in each jurisdiction where the character of
its business or the nature of its properties makes such qualification
or licensing necessary, except where the failure to be so licensed or
qualified would not have a material adverse affect on Voxware and its
subsidiaries taken as a whole.
Section 7.5. Due Authorization; No-Conflict (a). Voxware has all
requisite corporate power and authority to execute and deliver this
Agreement and to perform fully its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Voxware, the performance by Voxware of
its obligations hereunder, and the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action
on the part of Voxware. This Agreement has been duly executed by
Voxware, and this Agreement is a legal, valid and binding obligation of
Voxware, enforceable against it in accordance with its terms (except as
the enforceability thereof may be limited by any applicable bankruptcy,
insolvency or other laws affecting creditors' rights generally or by
general principles of equity, regardless of whether such enforceability
is considered in equity or at law).
(b) Except as set forth on Schedule 7.5, neither the execution and
delivery of this Agreement by Voxware nor the consummation of the
transactions contemplated hereby by Voxware will (i) conflict with,
result in a breach or violation of or constitute (or with notice or
lapse of time or both constitute) a default under, (A) the certificate
of incorporation or by-laws of Voxware or (B) any law, statute,
regulation, order, judgment or decree or any material instrument,
contract or other agreement to which Voxware is a party or by which it
(or any of its properties or assets) is subject or bound; (ii) result
in the creation of, or give any party the right to create, any lien,
charge, encumbrance, security interest or other adverse interest upon
any property or asset of Voxware; (iii) terminate or modify, or give
any third party the right to terminate or modify, the provisions or
terms of any agreement or commitment to which Voxware is a party or by
which it (or any of its properties or assets) is subject or bound
which would have a material adverse effect on the business of Voxware;
or (iv) require Voxware to obtain any authorization, consent, approval
or waiver from, to give notification to, or to make any filing (other
than filing to qualify as a foreign corporation where necessary) with,
any governmental body or authority, or to obtain the approval or
consent of any other Person.
Section 7.6. Brokers . Except for Ladenburg Thalmann & Co. Inc.,
neither Voxware nor any of its Affiliates has paid or become obligated
to pay any fee or commission to any broker, finder, investment banker
or other intermediary in connection with the transactions contemplated
by this Agreement.
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VIII. COVENANTS
Section 8.1. Conduct and Preservation of Business . Except as
contemplated by this Agreement, during the period from the date of
this Agreement to the Closing Date, Seller shall (i) conduct the
Business in the usual manner and not enter into any transactions
outside the ordinary course of business; (ii) use its best efforts to
maintain, preserve and protect the Assets and the Business, including,
without limitation, to preserve its relationship with its employees,
suppliers and customers and to preserve its goodwill; (iii) comply in
all material respects with all laws, ordinances, rules, regulations
and orders applicable to the Business or the Assets; (iv) not cause
nor permit to occur any of the events or occurrences described in
Section 6.5(f); (v) continue to maintain and service the physical
assets used in the conduct of the Business in the same manner as has
been its consistent past practice; and (vi) not take any action or
omit to take any action which act or omission would result in the
inaccuracy of any of its representations and warranties set forth
herein if such representations or warranties were to be made
immediately after the occurrence of such act or omission. Without
limiting the foregoing, until the Closing Date or termination of this
Agreement, Seller will not (a) change the compensation of any of its
officers or, except in the ordinary course of business, its employees
or consultants, or enter into any employment, severance or other
agreement with any of its officers, employees or consultants; (b)
enter into or engage in negotiations with, or solicit offers from, any
other party, directly or indirectly, relating to a possible
acquisition of Seller or the Business, whether by way of merger,
reorganization, purchase of shares of capital stock, purchase of
assets, management agreement, license or distribution agreement with
respect to any of Seller's products or otherwise (each, an
"Acquisition Transaction").
Section 8.2. Access to Information; Confidentiality . Between the date
of this Agreement and the Closing Date, except as relates to any
Acquisition Transaction(s), Seller will: (i) permit Purchaser's
respective authorized representatives and financing parties reasonable
access during normal business hours to all of the books, records, tax
returns, reports and other tax related materials, offices and other
facilities and properties of Seller and the Business; (ii) permit
Purchaser to make such inspections thereof as Purchaser may reasonably
request; (iii) furnish the Purchaser with such financial and operating
data and other information of Seller with respect to the Business as
Purchaser may from time to time reasonably request; (iv) cause its
management to provide necessary cooperation and assistance in
connection with the audit of Seller's 1998 financial statements,
including obtaining access to the work papers of Seller's independent
accountants; and (v) permit Purchaser and its representatives to
inspect all of Seller's source and object code and other Intellectual
Property; provided, however, that any such investigation shall be
conducted in such a manner as not to interfere unreasonably with the
operations of the Business. Each of Voxware, Purchaser and Seller will
hold, and shall cause their counsel, independent certified public
accountants, appraisers and investment bankers to hold in confidence
any confidential data or information made available to it by the other
in connection with this Agreement using the same standard of care to
protect such confidential data or information as is used to protect
its own confidential information. If the transactions contemplated by
this Agreement are not consummated, each of Purchaser and Seller
agrees that it shall return or cause to be returned to the other all
written materials and all copies thereof that were supplied to it by
the other and that contain any such confidential data or information.
Section 8.3. Filings and Authorizations . Each of Seller and
Purchaser, as promptly as practicable, (i) will make, or cause to be
made, all filings and submissions required under laws, rules and
regulations applicable to it, or to its subsidiaries and affiliates,
as may be required for it to consummate the transactions contemplated
hereby; (ii) will use their respective reasonable efforts to obtain,
or cause to be obtained, all Permits, if any, from all Persons and
governmental or public authorities or bodies necessary to be obtained
by each of them, or any of their respective subsidiaries or
Affiliates, in order for each of them, respectively, so to consummate
such transactions; and (iii) will use their respective best efforts to
take, or cause to be taken, all other actions necessary, proper or
advisable in order for each of them to fulfill their respective
obligations hereunder. In particular, Seller shall seek and use its
reasonable best efforts to obtain all consents necessary to any
assignment to Purchaser of the Assumed Contracts and the Intellectual
Property. It is understood that it shall be Purchaser's responsibility
to file any assignments, consents or other
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documents of transfer relating to the Intellectual Property. Seller
and Purchaser will coordinate and cooperate with one another in
exchanging information and supplying such reasonable assistance as
may be reasonably requested by each in connection with the foregoing.
Purchaser shall use its reasonable efforts to assist Seller in
obtaining all consents required under the Assumed Contracts and the
Intellectual Property as a result of this Agreement and the
transactions contemplated hereby.
Section 8.4. Public Announcements . Unless and to the extent required
by law, each party hereto will agree in advance prior to the issuance
by either of any press release or the making of any public statement
with respect to this Agreement and the transactions contemplated
hereby and shall not issue any such press release or make any such
public statement without the agreement of the other party. In the
event that either party is required to issue a press release or make
a public statement by law, it will notify the other party of the
contents thereof in advance of the issuance or making thereof.
Section 8.5. Hiring of Employees . Purchaser shall be permitted to
interview all employees of Seller engaged in the Business and discuss
with, and offer employment to, any of such employees. It is
understood and agreed, however, that Purchaser shall not be obligated
to offer employment to any of Seller's employees.
Section 8.6. Schedules . From time to time prior to the Closing,
Seller will in a timely manner supplement or amend its disclosure
schedules and the exhibits hereto with respect to any matter
hereafter arising which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in
such Schedules and Exhibits hereto. No supplement or amendment of a
Schedule or Exhibit made pursuant to this Section, which is not
accepted by Purchaser pursuant to Section 3.11, shall be deemed to
cure any breach of, affect or otherwise diminish any representation
or warranty made in this Agreement unless Purchaser specifically
agrees thereto in writing.
Section 8.7. Financial Statements (a). As soon as available and in
any event within 30 days after the end of each fiscal month of Seller
prior to the Closing Date, Seller shall deliver to Purchaser such of
its balance sheets and statements of operations as are prepared by it
in the ordinary course of business (all such financial statements
shall be covered by and conform to the representations and warranties
set forth in Section 6.5 hereof and shall be included in the term
"Seller Financial Statements" for purposes of this Agreement).
(b) Seller, at Purchaser's expense, shall provide Purchaser, as soon as
practicable and in any event no later than 30 days after Purchaser's
written request therefor, with such financial statements relating to
the Business as may be required by the securities laws in connection
with the preparation and filing of any registration statement or
periodic report by Purchaser pursuant to the Securities Act or the
Exchange Act, including with limitation unqualified opinions thereon
of independent public accountants and consents thereof as required by
the Securities Act or the Exchange Act or the rules and regulations
thereunder.
Section 8.8. Non-Solicitation by Voxware and Purchaser . In the event
that the Closing does not occur, prior to January 5, 2000, neither
Voxware nor Purchaser shall solicit business from Seller's current
customers in competition with Seller or, directly or indirectly,
solicit or offer employment to any person who is an employee of
Seller or who has terminated such employment without the consent of
Seller within 180 days of such solicitation or offer.
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IX. CERTAIN ACTIONS AFTER THE CLOSING
Section 9.1. Employee Benefits . Subject to any binding agreements
between Seller and any of its employee(s), Seller shall pay directly
to each employee of the Business that portion of all benefits
(including the arrangements, plans and programs set forth in Schedule
6.13) which has been accrued on behalf of that employee (or is
attributable to expenses properly incurred by that employee) as of the
Closing Date, and Purchaser shall assume no liability therefor, unless
specifically set forth on Schedule 2.3(b). No portion of the assets of
any plan, fund, program or arrangement, written or unwritten,
heretofore sponsored or maintained by Seller (and no amount
attributable to any such plan, fund, program or arrangement) shall be
transferred to Purchaser, and Purchaser shall not be required to
continue any such plan, fund, program or arrangement after the Closing
Date. The amounts payable on account of all benefit arrangements shall
be determined with reference to the date of the event by reason of
which such amounts become payable, without regard to conditions
subsequent, and Purchaser shall not be liable for any claim for
insurance, reimbursement or other benefits payable by reason of any
event which occurs prior to the Closing Date. All amounts payable
directly to employees, or to any fund, program, arrangement or plan
maintained by Seller therefor, shall be paid by Seller as soon as
practicable after the Closing Date to the extent that such payment is
not inconsistent with the terms of such fund, program, arrangement or
plan. All employees of Seller who are employed by Purchaser on or
after the Closing Date shall be new employees of Purchaser and any
prior employment by Seller of such employees shall not affect
entitlement to, or the amount of, salary or other cash compensation,
current or deferred, which Purchaser may make available to its
employees.
Section 9.2. Non-Solicitation by Seller . As of the Closing Date,
Purchaser shall offer employment to, and Seller shall use its best
efforts to assist Purchaser in employing as new employees of
Purchaser, all persons presently engaged in the Business who are
identified by Purchaser prior to the Closing Date and hired by
Purchaser immediately following the Closing (the "Retained
Employees"). Seller shall terminate effective as of the Closing Date
all employment agreements it has with any of the Retained Employees.
Until the first anniversary of the Closing Date, Seller will not
directly or indirectly solicit or offer employment to any Retained
Employee who terminates employment with Purchaser without the consent
of Purchaser within 180 days of such solicitation or offer.
Section 9.3. Maintenance of Books and Records . Except as otherwise
required by law, each of Seller and Purchaser shall preserve until the
fifth anniversary of the Closing Date all records possessed or to be
possessed by such party relating to any of the assets, liabilities or
business of the Business prior to the Closing Date. After the Closing
Date, where there is a legitimate purpose, such party shall provide
the other party with access, upon prior reasonable written request
specifying the need therefor, during regular business hours, to (i)
the officers and employees of such party and (ii) the books of account
and records of such party, but, in each case, only to the extent
relating to the assets, liabilities or business of the Business prior
to the Closing Date, and the other party and its representatives shall
have the right to make copies of such books and records; provided,
however, that the foregoing right of access shall not be exercisable
in such a manner as to interfere unreasonably with the normal
operations and business of such party; and further, provided, that, as
to so much of such information as constitutes trade secrets or
confidential business information of such party, the requesting party
and its officers, directors and representatives will use due care to
not disclose such information except (i) as required by law, (ii) with
the prior written consent of such party, which consent shall not be
unreasonably withheld, or (iii) where such information becomes
available to the public generally, or becomes generally known to
competitors of such party, through sources other than the requesting
party, its Affiliates or its officers, directors or representatives.
Section 9.4. Use of Name . From and after the Closing Date, Seller
will sign such consents and take such other action as Purchaser shall
reasonably request in order to permit Purchaser to use the name
"Verbex Voice Systems, Inc." and variants thereof. From and after the
Closing Date, Seller will not use the name "Verbex Voice Systems,
Inc." or any names similar thereto or variants thereof.
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Section 9.5. Non-Competition . Except as set forth on Schedule 9.5,
Seller agrees that neither it nor any of its officers, directors or
subsidiaries will, for a period of one year from the Closing Date,
directly or indirectly (i) own, operate or perform services (as
advisor, employee or otherwise) for any person, firm, corporation,
business or other organization or enterprise engaged in a business
that is competitive in any material way with the Business, or (ii)
interfere with, disrupt or attempt to disrupt the relationship
between the Purchaser and any of its lessors, lessees, licensors,
licensees, customers or suppliers.
Section 9.6. Payment of Liabilities; Accounts Receivable and
Inventory (a). Following the Closing Date, each of Purchaser and
Seller agrees to discharge, extinguish or cancel in accordance with
their terms the Assumed Liabilities and the Excluded Liabilities,
respectively.
(b) Purchaser shall credit any payments from customers, which are
received by Purchaser during the Initial Escrow Period, against those
outstanding accounts receivable (which are not disputed or contested)
for such customers which have been outstanding for the longest period
of time. In addition, Purchaser shall, during the Initial Escrow
Period, spend an aggregate of $500,000 for purposes of selling and
marketing efforts.
Section 9.7. Tax Returns Through Closing . Seller shall prepare and
file on a timely basis all reports and returns of Taxes relating to
the Assets or the Business with respect to all periods through and
including the Closing Date and shall pay or cause to be paid when due
all Taxes relating to the Assets or the Business for such periods,
including any interest, additions to tax or penalties thereon
together with interest on such additions to tax or penalties. Upon
request, Seller shall deliver to Purchaser copies of all historical
records relating to such Taxes. Seller shall be entitled to receive
any tax refund to which the Seller may be entitled in respect of any
period prior to, through and including the Closing Date.
Section 9.8. Purchaser to Act as Agent for Seller . This Agreement
shall not constitute an agreement to assign any contract right
included among the Assets if any attempted assignment of the same
without the consent of the other party thereto would constitute a
breach thereof or in any way adversely affect the rights of Seller
thereunder. If such consent is not obtained or if any attempted
assignment would be ineffective or would adversely affect Seller's
rights thereunder so that Purchaser would not in fact receive all
such rights, then Purchaser shall act as the agent for Seller in
order to obtain for Purchaser the benefits thereunder. Nothing herein
shall be deemed to make Purchaser Seller's agent in respect of the
Excluded Assets.
Section 9.9. Delivery of Property Received by Seller or Purchaser
After Closing. From and after the Closing, Purchaser shall have the
right and authority to collect, for the account of Purchaser, all
assets which shall be transferred or are intended to be transferred
to Purchaser as part of the Assets as provided in this Agreement, and
to endorse without recourse with the name of Seller any checks or
drafts received on account of any such assets. Seller agrees that it
will transfer or deliver to Purchaser, promptly after the receipt
thereof, any cash or other property which Seller receives after the
Closing Date in respect of any assets transferred or intended to be
transferred to Purchaser as part of the Assets under this Agreement.
Purchaser agrees that it will transfer or deliver to Seller, promptly
after receipt thereof, any cash or other property which Purchaser
receives after the Closing Date in respect of any assets not
transferred or intended to be transferred to Purchaser as part of the
Assets under this Agreement.
Section 9.10. Purchaser Appointed Attorney for Seller . Seller,
effective at the Closing Date, hereby constitutes and appoints
Purchaser, its successors and assigns, the true and lawful attorney
of Seller, in the name of either Purchaser or Seller (as Purchaser
shall determine in its sole discretion) but for the benefit of
Purchaser: (i) to institute and prosecute all proceedings which
Purchaser may deem proper in order to collect, assert or enforce any
claim, right or title of any kind in or to the Assets as provided for
in this Agreement; (ii) to defend or compromise any and all actions,
suits or proceedings in respect of any of the Assets, and to do all
such acts and things in relation thereto as Purchaser shall deem
advisable; and (iii) to take all action which Purchaser, its
successors or assigns may reasonably deem proper in order to provide
for Purchaser, its successors or assigns, the benefits under any of
the Assets where any required consent of
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another party to the sale or assignment thereof to Purchaser pursuant
to this Agreement shall not have been obtained. Seller acknowledges
that the foregoing powers are coupled with an interest and shall be
irrevocable. Purchaser shall be entitled to retain for its own
account any amounts collected pursuant to the foregoing powers,
including any amounts payable as interest in respect thereof.
Purchaser agrees to act in good faith in seeking to collect, assert
or enforce any claim against any third party in accordance with this
Section 9.10.
Section 9.11. Subrogation of Purchaser . In the event Purchaser shall
become liable for or suffer any damage with respect to any matter
which was covered by insurance maintained by Seller on or prior to
the Closing Date, Seller agrees that Purchaser shall be and hereby
is, to the extent permitted under such policies and to the extent
consistent with Article V hereof, subrogated to any rights of Seller
under such insurance coverage, and, in addition, Seller agrees to
promptly remit to Purchaser any insurance proceeds which they may
receive on account of any such liability or damage.
Section 9.12. Further Assurances . Seller from time to time after the
Closing, at Purchaser's request, will execute, acknowledge and
deliver to Purchaser such other instruments of conveyance and
transfer and will take such other actions and execute and deliver
such other documents, certifications and further assurances as
Purchaser may reasonably require in order to vest more effectively in
Purchaser, or to put Purchaser more fully in possession of, any of
the Assets, or to better enable Purchaser to complete, perform or
discharge any of the Assumed Liabilities. Each of the parties hereto
will cooperate with the other and execute and deliver to the other
such other instruments and documents and take such other actions as
may be reasonably requested from time to time by the other party
hereto as necessary to carry out, evidence and confirm the intended
purposes of this Agreement.
X. TERMINATION
Section 10.1 Termination Events . Subject to the provisions of
Section 10.2, this Agreement may, by written notice given at or prior
to the Closing in the manner hereinafter provided, be terminated and
abandoned:
(a) By any of Seller, Voxware or Purchaser if a material default or
breach shall be made by the other party with respect to the due and
timely performance of any of its covenants and agreements contained
herein, or with respect to the due compliance with any of the
representations and warranties contained in Article VI or VII, as the
case may be, and such default cannot be cured and has not been
waived;
(b) By written mutual consent of Seller and Purchaser;
(c) By either Seller or Purchaser if the Closing shall not have occurred,
other than through failure of such party to fulfill its obligations
hereunder, on or before March 2, 1999 or such later date as may be
agreed upon by the parties;
(d) By Purchaser if Seller amends or supplements any Schedule hereto in
accordance with Section 8.6 hereof and such amendment or supplement
constitutes a Material Adverse Change in the Business after the date
hereof; or
(e) By Purchaser, if the conditions set forth in Article III hereof shall
not have been met (or shall not, in the reasonable judgment of
Purchaser, be capable of being met), and Seller, if the conditions
set forth in Article IV hereof shall not have been met, in each case
by the day prior to the Closing
Section 10.2. Effect of Termination . In the event this Agreement is
terminated pursuant to Section 10.1, all further obligations of the
parties hereunder shall terminate, no party shall have any right
against the other party hereto, except as set forth in Sections 3.8,
8.7 and 8.8 and this Section 10.2, and each party
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shall bear its own costs and expenses, except that if this Agreement
is so terminated by one party because one or more of the conditions to
such party's obligations hereunder is not satisfied as a result of the
other party's failure to comply with its obligations under this
Agreement, it is expressly agreed and understood that the terminating
party's right to pursue all legal remedies for breach of contract or
otherwise, including, without limitation, damages relating thereto,
shall survive such termination unimpaired.
XI. MISCELLANEOUS
Section 11.1. Expenses . Except as provided in Sections 3.8 and 10.2,
each party to this Agreement shall pay its own Transaction Costs
relating to this Agreement, the negotiations leading up to this
Agreement and the transactions contemplated by this Agreement.
Section 11.2. Risk of Loss . The risk of loss or damage to any of the
Assets, transfer of which is contemplated hereby, shall remain with
Seller until the Closing, and the Seller shall maintain its insurance
policies covering the Assets and the Business through the Closing.
With respect to the Assets, if prior to the Closing, all or any part
of the Assets are destroyed or damaged by fire or the elements or by
any other cause, Seller shall within ten (10) days provide written
notice thereof to Purchaser and shall also provide Purchaser, together
with such notice, copies of all insurance then in force relating to
such Assets, whereupon Purchaser may, by written notice to Seller
within twenty (20) days after receipt of notice of the occurrence,
elect in writing not to purchase such Assets if such damage exceeds
$50,000 and Seller does not agree to repair, restore and replace such
Assets to Purchaser's reasonable satisfaction and in compliance with
all state licensing requirements and Laws within 60 days of the notice
of the casualty delivered to Purchaser. Purchaser's election to so
terminate may be exercised, however, if after Seller agrees to so
repair, restore and replace, Seller fails to effect such repair,
restoration and replacement within such 60 day period. Upon such
election, this Agreement shall wholly cease and terminate. If all or
any part of the Assets are so destroyed and Seller has not made the
required repairs or restoration but this Agreement is not so
terminated by Purchaser, this Agreement shall not be affected, but
Seller, at the Closing, shall assign, transfer and set over to
Purchaser all of Seller's right, title and interest in and to the
policies of insurance insuring against the loss and Seller's interest
in sums payable thereunder and Seller shall pay to Purchaser the
amount of any deductibles under such insurance policies and any
payments theretofore made on account of the destruction or damage.
Section 11.3. Amendment . This Agreement shall not be amended or
modified except by a writing duly executed by all the parties hereto.
Section 11.4. Entire Agreement . This Agreement, including the
Exhibits and Schedules hereto, the Escrow Agreement and the other
instruments, agreements and documents delivered pursuant to this
Agreement contain all of the terms, conditions and representations and
warranties agreed upon by the parties relating to the subject matter
of this Agreement and supersede all prior agreements, negotiations,
correspondence, undertakings and communications of the parties, oral
or written, respecting such subject matter.
Section 11.5. Headings . The headings contained in this Agreement are
intended solely for convenience and shall not affect the rights of the
parties to this Agreement.
Section 11.6. Notices . All notices, requests, demands and other
communications made in connection with this Agreement shall be in
writing and shall be deemed to have been duly given (a) on the date of
delivery, if delivered to the persons identified below, (b) seven
calendar days after mailing if mailed, with proper postage, by
certified or registered first-class mail, postage prepaid, return
receipt requested, addressed as follows:
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If to Seller: c/o Mr. Larry Dooling
48 Mile Drive
Chester, New Jersey 07930
Telecopy: ____________
Attention: Mr. Larry Dooling
With a copy to: Connelly & Manfredi, L.L.C.
336 Main Street
P.O. Box 25
Bedminster, New Jersey 07921
Telecopy: 908-781-6117
Attention: William R. Connelly, Esq.
If to Voxware Voxware, Inc.
or Purchaser: Verbex Acquisition Corporation
305 College Road East
Princeton, New Jersey 08540
Telecopy: (609) 514-4102
Attention: Ms. Bathsheba Malsheen
With a copy to: Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Telecopy: (212) 752-5958
Attention: Lawrence A. Spector, Esq.
(c) on the date of receipt if sent by telecopy, and confirmed in writing in
the manner set forth in (b) on or before the next day after the sending of
the telecopy or (d) one business day after delivery to a nationally
recognized overnight courier service marked for overnight delivery. Such
addresses and numbers may be changed, from time to time, by means of a
notice given in the manner provided in this Section 11.6.
Section 11.7. Severability . If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any
rule of law or public policy, all other conditions and provisions of
this Agreement shall nevertheless remain in full force and effect so
long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any
party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an
acceptable manner to the end that transactions contemplated hereby are
fulfilled to the extent possible.
Section 11.8. Waiver . Waiver of any term or condition of this
Agreement by any party shall only be effective if in writing and shall
not be construed as a waiver of any subsequent breach or failure of
the same term or condition, or a waiver of any other term or condition
of this Agreement.
Section 11.9. Governing Law . This Agreement shall be governed by and
construed in accordance with the law of the State of New Jersey,
without regard to the conflicts of laws principles thereof.
Section 11.10. Remedies . Any remedy chosen by the parties hereto
shall be cumulative and not exclusive and shall be in addition to any
other remedies which any party may have under this Agreement or
otherwise.
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Section 11.11. Third Parties . Except as specifically set forth or
referred to herein, nothing herein expressed or implied is intended
or shall be construed to confer upon or give to any person other than
the parties hereto and their successors or assigns any rights or
remedies under or by reason of this Agreement.
Section 11.12. Counterparts . This Agreement may be signed in two or
more counterparts with the same effect as if the signatures to each
counterpart were upon a single instrument, and all such counterparts
together shall be deemed an original of this Agreement.
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IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of
the date set forth above.
VOXWARE, INC.
By:
------------------------
Name: Bathsheba Malsheen
Title: President
Subscribed and sworn to before me
this _____ day of February, 1999:
- --------------------------------
Notary Public
VERBEX ACQUISITION CORPORATION
By:
---------------------------
Name: Bathsheba Malsheen
Title: President
Subscribed and sworn to before me
this _____ day of February, 1999:
- --------------------------------
Notary Public
VERBEX VOICE SYSTEMS, INC.
By:
---------------------------
Name: Larry Dooling
Title: President
Subscribed and sworn to before me
this _____ day of February, 1999:
- --------------------------------
Notary Public
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EXHIBIT 3.4
[Form of Opinion of Counsel to Seller]
1. Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with corporate power
and authority and all licenses necessary to conduct the Business and
to own, lease and operate the properties and assets used in connection
therewith and to enter into and perform the Acquisition Agreement and
the transactions contemplated thereby. Seller is in good standing as a
foreign corporation and licensed or qualified to transact business in
each of Massachusetts, New Jersey and Utah.
2.
3. Seller has all requisite corporate power and authority to execute and
deliver the Acquisition Agreement and the Escrow Agreement and to
perform fully its obligations thereunder and to consummate the
transactions contemplated thereby. The execution and delivery by
Seller of the Acquisition Agreement, the Escrow Agreement and the
other documents contemplated thereby, the performance by Seller of its
obligations thereunder, and the transactions contemplated thereby have
been duly and validly authorized by all necessary corporate action on
the part of Seller and its stockholders. The Acquisition Agreement and
the Escrow Agreement have been duly executed and delivered by Seller,
and the Acquisition Agreement is, and each of the Escrow Agreement and
the other agreements contemplated thereby to which Seller will be a
party will be, upon execution and delivery thereof by Seller, a legal,
valid and binding obligation of Seller, enforceable against it in
accordance with its terms (except as the enforce ability thereof may
be limited by any applicable bankruptcy, insolvency or other laws
affecting creditors' rights generally or by general principles of
equity, regardless of whether such enforce ability is considered in
equity or at law).
4.
5. Seller has complete and unrestricted power and the unqualified right
to sell, convey, assign, transfer and deliver the Assets to Purchaser
(subject to any consents or waivers of third parties required in
connection with such sale, conveyance, assignment, transfer and
delivery of the Assets or any part thereof, all of which consent(s) or
waiver(s) have been duly obtained by Seller and are set forth on
Schedule 6.3 to the Acquisition Agreement), and the instruments of
transfer, conveyance and assignment to be executed and delivered by
Seller to Purchaser at the Closing will be valid and binding
obligations of Seller, enforceable in accordance with their respective
terms, sufficient for purposes of recondition and filing where
permitted by law, sufficient to transfer, convey and assign to
Purchaser all right, title and interest of Seller in and to the Assets
and to vest in Purchaser the full right, power and authority to
conduct the Business as conducted by Seller.
6.
7. Except as set forth on Schedule 6.3 to the Acquisition Agreement,
neither the execution and delivery of the Acquisition Agreement, the
Escrow Agreement or any of the other documents contemplated thereby by
Seller nor the consummation of the transactions contemplated thereby
will (a) conflict with, result in a breach or violation of or
constitute (or with notice or lapse of time or both constitute) a
default under, (i) the certificate of incorporation or by laws of
Seller or (ii) any law, statute, regulation, order, judgment or decree
or, to our knowledge, any instrument, contract or other agreement] to
which Seller is a party or by which Seller (or any of the properties
or assets of Seller) is subject or bound; (b) to our knowledge, result
in the
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creation of, or give any party the right to create, any lien, charge,
option, security interest or other encumbrance upon the Assets or the
Business; or (c) require Seller or, to our knowledge, Purchaser to
obtain any Permit or waiver from, to give any notification to, or to
make any filing with, any governmental body or authority or to obtain
the approval or consent of any other Person.
8.
9. Except as set forth on Schedule 6.9 to the Acquisition Agreement, (i)
neither Seller, any Affiliate of Seller, nor any director, officer,
employee or agent of Seller (in their capacity as such), is a party to
any pending or, to our knowledge, threatened action, suit, proceeding
or investigation, at law or in equity or otherwise in, before or by
any court or governmental board, commission, agency, department or
office, or private arbitration tribunal, nor do we know, after due
inquiry, of any basis therefor, which, if successful, could adversely
affect the right of Purchaser after the Closing Date to own the Assets
or to conduct the Business, and (ii) to our knowledge, Seller is not a
party or subject to any order, ruling, judgment, decree or stipulation
which affects the Business, or which would prevent the transactions
contemplated by the Acquisition Agreement. To our knowledge after due
inquiry, no facts exist, and no investigation has been instituted by
any governmental agency, which might result in any such action or
proceeding.
10.
11. To our knowledge, Seller has no Permits in connection with the
ownership of the Assets or operation of the Business, and no Permits
are necessary to own the Assets and operate the Business.
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EXHIBIT 3.12
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of February __, 1999 among Verbex Acquisition
Corporation, a Delaware corporation ("Purchaser"), Verbex Voice Systems, Inc., a
Delaware corporation ("Seller"), and ____________________, a _________________,
as escrow agent (the "Escrow Agent").
WHEREAS, concurrently with the execution and delivery of this Agreement and
pursuant to an Acquisition Agreement dated as of February __, 1999 (the
"Acquisition Agreement"; capitalized terms not defined herein shall have the
meanings ascribed to them in the Acquisition Agreement) by and among Voxware,
Inc., Purchaser and Seller relating to Purchaser's acquisition of the Assets and
the Assumed Liabilities of Seller; and
WHEREAS, the Acquisition Agreement requires as a condition to the sale of
the Assets that Purchaser, Seller and the Escrow Agent enter into this Agreement
and that Purchaser deposit a portion of the Purchase Price with the Escrow Agent
in order to provide a fund for any subsequent adjustments of the Purchase Price
which may result in a return of a portion of such Purchase Price to the
Purchaser and for indemnity payments that Seller becomes obligated to make to
Purchaser or its officers, directors, employees, agents or Affiliates (together,
the "Indemnified Parties").
NOW, THEREFORE, Purchaser, Seller and the Escrow Agent hereby agree as
follows:
1. Appointment of the Escrow Agent; Deposit of Escrow Amount. Seller and
Purchaser hereby constitute and appoint the Escrow Agent as, and the Escrow
Agent hereby agrees to assume and perform the duties of, the escrow agent under
and pursuant to this Agreement. The Escrow Agent acknowledges receipt of an
executed copy of the Acquisition Agreement and of the amount of Four Hundred
Thousand dollars ($400,000) (the "Escrow Amount") from Purchaser as provided in
Section 2.7 of the Acquisition Agreement.
2. The Escrow Fund. The Escrow Amount and all earnings thereon (the Escrow
Amount and all such earnings being referred to herein together as the "Escrow
Fund") shall be held by the Escrow Agent as a trust fund in a separate account
maintained for the purpose, on the terms and subject to the conditions of this
Agreement. The Escrow Fund shall not be subject to lien or attachment by any
creditor of any party hereto and shall be used solely for the purpose set forth
in this Agreement. Amounts held in the Escrow Fund shall not be available to,
and shall not be used by, the Escrow Agent to set off any obligations of either
Purchaser or Seller owing to the Escrow Agent in any capacity.
3. Investment of the Escrow Fund; Taxes.
(a) The Escrow Agent shall invest and reinvest all cash funds held from
time to time as part of the Escrow Fund, in an interest-bearing account or such
other investments as Purchaser and Seller shall approve in writing.
(b) All taxes in respect of earnings on the Escrow Fund shall be the
obligation of the party to whom the Escrow Fund or any portion thereof shall be
paid.
4. Claims Against the Escrow Fund.
(a) Concurrently with the delivery of a notice of claim to Seller pursuant
to Section 5.6 of the Acquisition Agreement, Purchaser will deliver to the
Escrow Agent a certificate in substantially the form of Annex I attached hereto
(a "Certificate of Instruction"). No Certificate of Instruction may be delivered
by Purchaser after the
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close of business on the business day immediately preceding the Termination
Date. The Escrow Agent shall give written notice to Seller of its receipt of a
Certificate of Instruction not later than the second business day next following
receipt thereof, together with a copy of such Certificate of Instruction.
(b) If the Escrow Agent (i) shall not, within five (5) calendar days
following its receipt of a Certificate of Instruction (the "Objection Period"),
have received from Seller a certificate in substantially the form of Annex II
attached hereto (an "Objection Certificate") disputing Seller's obligation to
pay the Owed Amount referred to in such Certificate of Instruction, or (ii)
shall have received such an Objection Certificate within the Objection Period
and shall thereafter have received either (x) a certificate from Purchaser and
Seller substantially in the form of Annex III attached hereto (a "Resolution
Certificate") stating that Purchaser and Seller have agreed that the Owed Amount
referred to in such Certificate of Instruction (or a specified portion thereof)
is payable to one or more of the Indemnified Parties or (y) a copy of final
order of a Board of Arbitration (accompanied by a certificate of Purchaser
substantially in the form of Annex IV attached hereto (an "Arbitration
Certificate")) stating that the Owed Amount referred to in such Certificate of
Instruction (or a specified portion thereof) is payable to one or more of the
Indemnified Parties by Seller, then the Escrow Agent shall, on the second
business day next following (x) the expiration of the Objection Period or (y)
the Escrow Agent's receipt of a Resolution Certificate or an Arbitration
Certificate, as the case may be, pay over to Purchaser from the Escrow Fund, by
wire transfer of immediately available funds to a bank account of Purchaser's
designation, the amount set forth in said Certificate of Instruction or, if such
Resolution Certificate or Arbitration Certificate specifies that a lesser amount
than such Owed Amount is payable, such lesser amount (or the entire Escrow
Amount if it is less than the foregoing amounts).
(c) The Escrow Agent shall give written notice to Purchaser of its receipt
of an Objection Certificate not later than the second business day next
following receipt thereof, together with a copy of such Objection Certificate.
The Escrow Agent shall give written notice to Seller of its receipt of an
Arbitration Certificate not later than the second business day next following
receipt thereof, together with a copy of such Arbitration Certificate.
(d) Upon the payment by the Escrow Agent of the Owed Amount referred to in
a Certificate of Instruction, such Certificate of Instruction shall be deemed
canceled. Upon the receipt by the Escrow Agent of a Resolution Certificate or an
Arbitration Certificate and the payment by the Escrow Agent of the Owed Amount
referred to therein, the related Certificate of Instruction shall be deemed
canceled.
(e) Upon Purchaser's determination that it has no claim or has released its
claim with respect to an Owed Amount referred to in a Certificate of Instruction
(or a specified portion thereof), Purchaser will promptly deliver to the Escrow
Agent a certificate substantially in the form of Annex V attached hereto (a
"Purchaser Cancellation Certificate") canceling such Certificate of Instruction
(or such specified portion thereof, as the case may be), and such Certificate of
Instruction (or portion thereof) shall thereupon be deemed canceled. The Escrow
Agent shall give written notice to Seller of its receipt of a Purchaser
Cancellation Certificate not later than the second business day next following
receipt thereof, together with a copy of such Purchaser Cancellation
Certificate.
(f) Upon receipt of a final order of a Board of Arbitration stating that
none of the Owed Amount referred to in a Certificate of Instruction as to which
Seller delivered an Objection Certificate within the Objection Period is payable
to any Indemnified Party by Seller, Seller may deliver a copy of such order
(accompanied by a certificate of Seller substantially in the form of Annex VI
attached hereto (a "Seller Cancellation Certificate")) canceling such
Certificate of Instruction, and such Certificate of Instruction shall thereupon
be deemed canceled. The Escrow Agent shall give written notice to Purchaser of
its receipt of a Seller Cancellation Certificate not later than the second
business day next following receipt thereof, together with a copy of such Seller
Cancellation Certificate.
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5. Release of Escrow Fund. Following the Determination Date and the date
six months thereafter, as the case may be, in accordance with and pursuant to
Section 2.6(b) of the Acquisition Agreement, Seller and Purchaser shall deliver
to the Escrow Agent a joint notice with respect to the disbursement of the
Escrow Fund and the retention of the Retained Escrow Fund, if any. Within one
day of the Escrow agent's receipt of any such joint notice, the Escrow Agent
shall disburse the Escrow Fund in accordance with such joint notice, by wire
transfer of immediately available funds to the bank account(s) designated
therein, less the sum of any amounts designated in Certificates of Instruction
received by the Escrow Agent that have not been canceled in accordance with
paragraph (d), (e) or (f) of Section 4. This escrow shall terminate on the date
that the Escrow Agent receives a joint notice to disburse the entire balance of
the Escrow Fund (the "Termination Date"). The Escrow Agent shall not accept any
Certificates of Instruction after the Termination Date. At such time on or
following the Termination Date as all Certificates of Instruction received by
the Escrow Agent prior to the Termination Date have been canceled in accordance
with paragraph (d), (e) or (f) of Section 4, the Escrow Agent shall promptly pay
over to Seller the balance in the Escrow Fund, by wire transfer of immediately
available funds to a bank account of Seller's designation, and this Agreement
(other than Sections 6, 7 and 8) shall automatically terminate.
6. Duties and Obligations of the Escrow Agent. The duties and obligations
of the Escrow Agent shall be limited to and determined solely by the provisions
of this Agreement and the certificates delivered in accordance herewith, and the
Escrow Agent is not charged with knowledge of or any duties or responsibilities
in respect of any other agreement or document. In furtherance and not in
limitation of the foregoing:
(i) the Escrow Agent shall not be liable for any loss of interest
sustained as a result of investments made hereunder in accordance with the
terms hereof, including any liquidation of any investment of the Escrow
Fund prior to its maturity effected in order to make a payment required by
the terms of this Agreement;
(ii) the Escrow Agent shall be fully protected in relying in good
faith upon any written certification, notice, direction, request, waiver,
consent, receipt or other document that the Escrow Agent reasonably
believes to be genuine and duly authorized, executed and delivered;
(iii) the Escrow Agent shall not be liable for any error of judgment,
or for any act done or omitted by it, or for any mistake in fact or law, or
for anything that it may do or refrain from doing in connection herewith;
provided, however, that notwithstanding any other provision in this
Agreement, the Escrow Agent shall be liable for its willful misconduct or
gross negligence or breach of this Agreement;
(iv) the Escrow Agent may seek the advice of legal counsel selected
with reasonable care in the event of any dispute or question as to the
construction of any of the provisions of this Agreement or its duties
hereunder, and it shall incur no liability and shall be fully protected in
respect of any action taken, omitted or suffered by it in good faith in
accordance with the opinion of such counsel;
(v) in the event that the Escrow Agent shall in any instance, after
seeking the advice of legal counsel pursuant to the immediately preceding
clause, in good faith be uncertain as to its duties or rights hereunder, it
shall be entitled to refrain from taking any action in that instance and
its sole obligation, in addition to those of its duties hereunder as to
which there is no such uncertainty, shall be to keep safely all property
held in the Escrow Fund until it shall be directed otherwise in writing by
each of the parties hereto or by a final, nonappealable order of a court of
competent jurisdiction; provided, however, in the event that the Escrow
Agent has not received such written direction or court order within one
hundred eighty (180) calendar days after requesting the same, it shall have
the right to interplead Purchaser and Seller in any court of competent
jurisdiction and request that such court determine its rights and duties
hereunder; and
36
<PAGE>
Page
(vi) the Escrow Agent may execute any of its powers or
responsibilities hereunder and exercise any rights hereunder either
directly or by or through agents or attorneys selected with reasonable
care, nothing in this Agreement shall be deemed to impose upon the Escrow
Agent any duty to qualify to do business or to act as fiduciary or
otherwise in any jurisdiction other than the State of New Jersey and the
Escrow Agent shall not be responsible for and shall not be under a duty to
examine into or pass upon the validity, binding effect, execution or
sufficiency of this Agreement or of any agreement amendatory or
supplemental hereto.
7. Cooperation. Purchaser and Seller shall provide to the Escrow Agent all
instruments and documents within their respective powers to provide that are
necessary for the Escrow Agent to perform its duties and responsibilities
hereunder.
8. Fees and Expenses; Indemnity. Seller shall pay the fees of the Escrow
Agent for its services hereunder as and when billed by the Escrow Agent, and
Seller shall reimburse and indemnify the Escrow Agent for, and hold it harmless
against, any loss, damages, cost or expense, including but not limited to
reasonable attorneys' fees, reasonably incurred by the Escrow Agent in
connection with the Escrow Agent's performance of its duties and obligations
under this Agreement, as well as the reasonable costs and expenses of defending
against any claim or liability relating to this Agreement; provided that
notwithstanding the foregoing, Seller shall not be required to indemnify the
Escrow Agent for any such loss, liability, cost or expense arising as a result
of the Escrow Agent's willful misconduct or gross negligence or breach of this
Agreement.
9. Resignation and Removal of the Escrow Agent.
(a) The Escrow Agent may resign as such thirty (30) calendar days following
the giving of prior written notice thereof to Seller and Purchaser. In addition,
the Escrow Agent may be removed and replaced on a date designated in a written
instrument signed by Seller and Purchaser and delivered to the Escrow Agent.
Notwithstanding the foregoing, no such resignation or removal shall be effective
until a successor escrow agent has acknowledged its appointment as such as
provided in paragraph (c) below. In either event, upon the effective date of
such resignation or removal, the Escrow Agent shall deliver the property
comprising the Escrow Fund to such successor escrow agent, together with such
records maintained by the Escrow Agent in connection with its duties hereunder
and other information with respect to the Escrow Fund as such successor may
reasonably request.
(b) If a successor escrow agent shall not have acknowledged its appointment
as such as provided in paragraph (c) below, in the case of a resignation, prior
to the expiration of thirty (30) calendar days following the date of a notice of
resignation or, in the case of a removal, on the date designated for the Escrow
Agent's removal, as the case may be, because Seller and Purchaser are unable to
agree on a successor escrow agent, or for any other reason, the Escrow Agent may
select a successor escrow agent and any such resulting appointment shall be
binding upon all of the parties to this Agreement, provided that any such
successor selected by the Escrow Agent shall be a Permitted Bank referred to in
subclause (A) of clause (iii) of paragraph (a) of Section 3.
(c) Upon written acknowledgment by a successor escrow agent appointed in
accordance with the foregoing provisions of this Section 9 of its agreement to
serve as escrow agent hereunder and the receipt of the property then comprising
the Escrow Fund, the Escrow Agent shall be fully released and relieved of all
duties, responsibilities and obligations under this Agreement, subject to the
proviso contained in clause (iii) of Section 6, and such successor escrow agent
shall for all purposes hereof be the Escrow Agent.
10. Notices. All notices, requests and other communications hereunder must
be in writing and will be deemed to have been duly given if delivered personally
or by facsimile transmission or mailed (first class postage prepaid) to the
parties at the following addresses or facsimile numbers:
37
<PAGE>
Page
If to Purchaser, to:
Verbex Acquisition Corporation
305 College Road East
Princeton, New Jersey 08540
Facsimile No.: (609) 514-4102
Attn: Doron Gorshein, Esq.
with a copy to:
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Facsimile No.: (212) 752-5958
Attn: Lawrence Spector, Esq.
If to Seller, to:
c/o Mr. Larry Dooling
48 Mile Drive
Chester, New Jersey 07930
Telecopy: ____________
Attention: Mr. Larry Dooling
With a copy to:
Connelly & Manfredi, L.L.C.
336 Main Street
P.O. Box 25
Bedminster, New Jersey 07921
Telecopy: 908-781-6117
Attention: William R. Connelly, Esq.
If to the Escrow Agent, to:
[Name]
[Address]
Facsimile No.:
Attn:
with a copy to:
[Name]
[Address]
Facsimile No.:
Attn:
All notices, requests, demands and other communications made in connection with
this Agreement shall be in writing and shall be deemed to have been duly given
(a) on the date of delivery, if delivered to the persons identified above, (b)
seven calendar days after mailing if mailed, with proper postage, by certified
or registered first-class mail, postage prepaid, return receipt requested,
addressed as indicated above, (c) on the date of receipt if sent by telecopy,
and confirmed in writing in the manner set forth in (b) on or before the next
day after the sending of the telecopy or
38
<PAGE>
Page
(d) one business day after delivery to a nationally recognized overnight courier
service marked for overnight delivery. Such addresses and numbers may be
changed, from time to time, by means of a notice given in the manner provided in
this Section.
11. Amendments, etc. This Agreement may be amended or modified, and any of
the terms hereof may be waived, only by a written instrument duly executed by or
on behalf of Purchaser and Seller and, with respect to any amendment that would
adversely affect the Escrow Agent, the Escrow Agent. No waiver by any party of
any term or condition contained of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion.
12. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey applicable to a contract
executed and performed in such State, without giving effect to the conflicts of
laws principles thereof.
13. Business Day. For all purposes of this Agreement, the term "business
day" shall mean a day other than Saturday, Sunday or any day on which banks
located in the State of New Jersey are authorized or obligated to close.
14. Miscellaneous. This Agreement is binding upon and will inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. The headings used in this Agreement have been inserted for convenience
of reference only and do not define or limit the provisions hereof. This
Agreement may be executed in any number of counterparts, each of which will be
deemed an original, but all of which together will constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
VERBEX ACQUISITION CORPORATION
By:
---------------------------
Name:
Title:
VERBEX VOICE SYSTEMS, INC.
By:
---------------------------
Name:
Title:
[ESCROW AGENT]
By:
---------------------------
Name:
Title:
39
<PAGE>
Page
ANNEX I
CERTIFICATE OF INSTRUCTION
to
------------------------------,
as Escrow Agent
The undersigned, Verbex Acquisition Corporation, a Delaware corporation
("Purchaser"), pursuant to Section 4(a) of the Escrow Agreement dated as of
_____________, 1999 among Purchaser, Verbex Voice Systems, Inc., a Delaware
corporation ("Seller"), and you (terms defined in said Escrow Agreement have the
same meanings when used herein), hereby:
(a) certifies that (i) Purchaser has sent to Seller a notice of claim
pursuant to Article II or Article V of the Acquisition Agreement), a copy
of which is attached hereto, and (ii) the amount of $___________ (the "Owed
Amount") is payable to Purchaser by Seller pursuant to Article II or
Article V of the Acquisition Agreement by reason of the matter described in
such notice of claim; and
(b) instructs you to pay to Purchaser or another Indemnified Party
from the Escrow Fund the Owed Amount, by wire transfer of immediately
available funds to Purchaser's account at _________________,
__________________, _________, _________ (Account No.:_________), (i)
unless you receive an Objection Certificate from Seller prior to the
expiration of the Objection Period, within two business days following the
expiration of the Objection Period, or (ii) if you receive an Objection
Certificate within the Objection Period, within two business days following
your receipt of a Resolution Certificate or a Litigation Certificate.
PURCHASER
By:
---------------------------
Name:
Title:
Dated:________, ____
1
<PAGE>
Page
ANNEX II
OBJECTION CERTIFICATE
to
------------------------------,
as Escrow Agent
The undersigned, Verbex Voice Systems, Inc., a Delaware corporation
("Seller"), pursuant to Section 4(b) of the Escrow Agreement dated as of
__________, 1999 among Verbex Acquisition Corporation, a Delaware corporation
("Purchaser"), Seller and you (terms defined in said Escrow Agreement have the
same meanings when used herein), hereby:
(a) disputes that the Owed Amount referred to in the Certificate of
Instruction dated _________, ____ is payable to Purchaser by the
undersigned pursuant to Article II or Article V of the Acquisition;
(b) certifies that the undersigned has sent to Purchaser a written
statement dated ___________, ____ of the undersigned, a copy of which is
attached hereto, disputing its liability to Purchaser for the Owed Amount;
and
(c) objects to your making payment to Purchaser as provided in such
Certificate of Instruction.
VERBEX VOICE SYSTEMS, INC.
By:
---------------------------
Name:
Title:
Dated: _________, ____
1
<PAGE>
Page
ANNEX III
RESOLUTION CERTIFICATE
to
------------------------------------,
as Escrow Agent
The undersigned, Verbex Acquisition Corporation, a Delaware corporation
("Purchaser"), and Verbex Voice Systems, Inc., a Delaware corporation
("Seller"), pursuant to Section 4(b) of the Escrow Agreement dated as of
____________, 1999 among Purchaser, Seller and you (terms defined in said Escrow
Agreement have the same meanings when used herein), hereby:
(a) certify that (i) Purchaser and Seller have resolved their dispute as to the
matter described in the Certificate of Instruction dated __________, ____ and
the related Objection Certificate dated ___________, ____ and (ii) the final
Owed Amount with respect to the matter described in such Certificates is
$______________;
(b) instruct you to pay to Purchaser from the Escrow Fund the Owed Amount
referred to in clause (ii) of paragraph (a) above, by wire transfer of
immediately available funds to Purchaser's account at ____________________,
_________________, ________, ________ (Account No.: ___________), within two
business days of your receipt of this Certificate; and
(c) agree that the Owed Amount designated in such Certificate of Instruction, to
the extent, if any, it exceeds the Owed Amount referred to in clause (ii) of
paragraph (a) above, shall be deemed not payable to the Indemnified Parties and
such Certificate of Instruction is hereby canceled.
VERBEX ACQUISITION CORPORATION
By:
--------------------------------
Name:
Title:
VERBEX VOICE SYSTEMS, INC.
By:
--------------------------------
Name:
Title:
Dated:___________, ____
<PAGE>
Page
ANNEX IV
ARBITRATION CERTIFICATE
to
-----------------------------,
as Escrow Agent
The undersigned, Verbex Acquisition Corporation, a Delaware corporation
("Purchaser"), pursuant to Section 4(b) of the Escrow Agreement dated as of
____________, 1999 among Purchaser, Verbex Voice Systems, Inc., a Delaware
corporation ("Seller"), and you (terms defined in said Escrow Agreement have the
same meanings when used herein), hereby:
(a) certifies that (i) attached hereto is a final order of a Board of
Arbitration in accordance with Section [____] of the Acquisition Agreement
resolving the dispute between Purchaser and Seller as to the matter
described in the Certificate of Instruction dated ____________, ____ and
the related Objection Certificate dated ____________, ____ and (ii) the
final Owed Amount with respect to the matter described in such
Certificates, as provided in such order, is $______________;
(b) instructs you to pay to Purchaser from the Escrow Fund the Owed
Amount referred to in clause (ii) of paragraph (a) above, by wire transfer
of immediately available funds to Purchaser's account at
_____________________, ________________, _______, _______ (Account No.:
____________), within two business days of your receipt of this
Certificate; and
(c) agrees that the Owed Amount designated in such Certificate of
Instruction, to the extent, if any, it exceeds the Owed Amount referred to
in clause (ii) of paragraph (a) above, shall be deemed not payable to the
Indemnified Parties and such Certificate of Instruction is hereby canceled.
VERBEX ACQUISITION CORPORATION
By:
---------------------------
Name:
Title:
Dated: __________, ____
2
<PAGE>
Page
ANNEX V
PURCHASER CANCELLATION CERTIFICATE
to
----------------------------,
as Escrow Agent
The undersigned, Verbex Acquisition Corporation, a Delaware corporation
("Purchaser"), pursuant to Section 4(e) of the Escrow Agreement dated as of
____________, 1999 among Purchaser, Verbex Voice Systems, Inc., a Delaware
corporation ("Seller"), and you (terms defined in said Escrow Agreement have the
same meanings when used herein), hereby:
(a) certifies that (i) it hereby releases its claim against Seller
with respect to [all] [specify portion] of the Owed Amount designated in
the Certificate of Instruction dated _____________, ____ and (ii) as a
result the Owed Amount with respect to such Certificate of Instruction is
$__________; and
(b) agrees that such Certificate of Instruction is, to the extent
released as provided in clause (i) of paragraph (a) above, canceled.
VERBEX ACQUISITION CORPORATION
By:
---------------------------
Name:
Title:
Dated:__________, ____
3
<PAGE>
Page
ANNEX VI
SELLER CANCELLATION CERTIFICATE
to
-----------------------------,
as Escrow Agent
The undersigned, Verbex Voice Systems, Inc., a Delaware corporation
("Seller"), pursuant to Section 4(f) of the Escrow Agreement dated as of
____________, 1999 among Verbex Acquisition Corporation, a Delaware corporation
("Purchaser"), Seller and you (terms defined in said Escrow Agreement have the
same meanings when used herein), hereby certifies that (i) attached hereto is a
final order of a Board of Arbitration in accordance with Section [_____] of the
Acquisition Agreement resolving the dispute between Purchaser and Seller as to
the matter described in the Certificate of Instruction dated ____________, ____
and the related Objection Certificate dated ____________, ____ and (ii) as
provided in such order, there is no Owed Amount with respect to the matter
described in such Certificates.
VERBEX VOICE SYSTEMS, INC.
By:
---------------------------
Name:
Title:
Dated:________, ____
1
<PAGE>
SCHEDULES*
---------
Schedule 2.1 Interim Balance Sheet
Schedule 2.1(a) Tangible Assets
Schedule 2.1(e) Contracts
Schedule 2.1(g) Intellectual Property
Schedule 2.2 Excluded Assets
Schedule 2.3(b) Section 2.3(b) Liabilities
Schedule 2.6(b)(i) Inventory
Schedule 3.6 Consents
Schedule 6.3 Seller Conflicts
Schedule 6.5(d) Value of Inventory
Schedule 6.7 Contract Exceptions
Schedule 6.13 Plans and Agreements Relating to Employees
Schedule 6.15 Related Transactions
Schedule 6.17 Suppliers and Customers
Schedule 9.5 Non-Competition
- ---------
*These schedules have been omitted in accordance with the rules of the
Securities and Exchange Commission. The Company agrees to furnish suplementally
a copy of any omitted schedule to the Securities and Exchange Commission upon
request.
<PAGE>
EXHIBIT 10.1
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of February 1, 1999, by
and between Voxware, Inc. ("Borrower") and Silicon Valley Bank, a
California-chartered bank ("Lender") with a loan production office located at
Wellesley Office Park, 40 William Street, Suite 350, Wellesley, MA 02181, doing
business under the name "Silicon Valley East".
1. DESCRIPTION OF EXISTING OBLIGATIONS: Among other obligations which may be
-----------------------------------
owing by Borrower to Lender, Borrower has an obligation to Lender pursuant to,
among other documents executed by Borrower, a Promissory Note, dated October 18,
1996 in the original principal amount of Two Million and 00/100 Dollars
($2,000,000.00), as may be amended (the "Revolving Facility"), and a Master
Note, dated May 5, 1997 in the original principal amount of One Million Five
Hundred Thousand and 00/100 Dollars ($1,500,000.00) (the "Lease Facility"). The
Revolving Facility and the Lease Facility are sometimes referred to collectively
herein as the "Notes". The Notes, together with other promissory notes from
Borrower to Lender, are governed by the terms of a Letter Agreement, dated
October 18, 1996, between Borrower and Lender, as such agreement may be amended
from time to time (the "Loan Agreement"). Capitalized terms used but not
otherwise defined herein shall have the same meaning as in the Loan Agreement.
As of the date hereof, there is no amount outstanding under the Revolving
Facility.
Hereinafter, all obligations owing by Borrower to Lender shall be referred to as
the "Indebtedness."
2. DESCRIPTION OF COLLATERAL: As an accommodation to Borrower and for good and
-------------------------
valuable consideration, including, Lender's agreement to no longer require to
compliance with the existing financial covenants, Lender shall return to
Borrower the executed financing statements which Lender was holding and not
perfecting until an Event of Default occurred, provided, that Borrower shall
secure all outstanding Indebtedness with cash held at the offices of Lender in
an amount not less than 100% of the outstanding amount of all Indebtedness
Borrower owes to Lender. Borrower hereby acknowledges that Lender may place a
"hold" on any deposit account pledged as Collateral. Such grant of security
interest shall be pursuant to that certain Commercial Security Agreement, dated
May 5, 1997 (the "Security Agreement").
Hereinafter, the above-described security documents, together with all other
documents securing payment of the Indebtedness shall be referred to as the
"Security Documents". Hereinafter, the Security Documents, together with all
other documents evidencing or securing the Indebtedness shall be referred to as
the "Existing Loan Documents."
3. DESCRIPTION OF CHANGE IN TERMS.
------------------------------
A. Modification to Revolving Facility.
----------------------------------
1. Borrower will pay this loan in one payment of all outstanding
principal plus all accrued unpaid interest on March 30, 2000. In
addition, Borrower will pay regular monthly payments of accrued unpaid
interest, beginning February 28, 1999, and all subsequent interest
payments will be due on the same day of each month thereafter.
B. Modification to Loan Agreement.
------------------------------
1. The paragraph beginning with the words "Borrowings under the
Loans..." is hereby amended to read in its entirety, as follows:
Borrowings under the Loans shall be secured by a first security
interest in Borrower's cash, which shall be held in an account at
the offices of Lender in an amount not less than 100% of all
outstanding Indebtedness owing from Borrower to Lender. Borrower
hereby authorizes Lender to place a hold on any such amount
17
<PAGE>
(which shall remain in place until Borrower's repayment
obligations hereunder are satisfied in full, provided, however,
that the amount of such hold will decrease with the amount paid
toward the outstanding Indebtedness).
2. The paragraph beginning with the words "Funds shall be
advanced..." is hereby amended to read in its entirety as
follows:
Funds shall be advanced under the Revolving Facility according to
an Advance Rate, defined as follows: the lesser of (a)
$2,000,000.00 minus the face amount of all outstanding Letters of
Credit (including drawn but unreimbursed Letters of Credit) minus
the Foreign Exchange Reserve or (b) 100% of the cash pledged to
Lender.
3. The Financial Covenants are hereby deleted in their entirety,
accordingly, Borrower shall no longer be entitled to comply with
the Financial Covenants.
C. Modification(s) to Security Agreement.
-------------------------------------
1. The "Collateral" description is hereby amended to read, as
follows:
All cash held in an account with Lender in an amount not less
than 100% of the outstanding amount of all Indebtedness Borrower
owes to Lender, together with all renewals and proceeds of the
foregoing.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
------------------
necessary to reflect the changes described above.
5. PAYMENT OF LOAN FEE. Borrower shall pay to Lender a fee in the amount of One
-------------------
Thousand and 00/100 Dollars ($1,000.00) (the "Loan Fee") plus all out-of-pocket
expenses.
6. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
-----------------------
defenses against the obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
-------------------
existing Indebtedness, Lender is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Lender's agreement to modifications to the existing Indebtedness pursuant to
this Loan Modification Agreement in no way shall obligate Lender to make any
future modifications to the Indebtedness. Nothing in this Loan Modification
Agreement shall constitute a satisfaction of the Indebtedness. It is the
intention of Lender and Borrower to retain as liable parties all makers and
endorsers of Existing Loan Documents, unless the party is expressly released by
Lender in writing. No maker, endorser, or guarantor will be released by virtue
of this Loan Modification Agreement. The terms of this Paragraph apply not only
to this Loan Modification Agreement, but also to all subsequent loan
modification agreements.
8. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
------------------
properties, unconditionally, the non-exclusive jurisdiction of any state or
federal court of competent jurisdiction in the Commonwealth of Massachusetts in
any action, suit, or proceeding of any kind against it which arises out of or by
reason of this Loan Modification Agreement; provided, however, that if for any
reason Lender cannot avail itself of the courts of the Commonwealth of
Massachusetts, then venue shall lie in Santa Clara County, California.
9. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
----------------
only when it shall have been executed by Borrower and Lender (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Lender in California).
18
<PAGE>
10. COUNTERPARTS. This Loan Modification Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
11. CONDITIONS. The effectiveness of this Loan Modification Agreement is
----------
conditioned upon Borrower's payment of the Loan Fee.
This Loan Modification Agreement is executed as of the date first written
above.
19
<PAGE>
BORROWER:
VOXWARE, INC.
By: /s/ Nicholas Narlis
-----------------------------------
Name: Nicholas Narlis
Title: VP and CFO
LENDER:
SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST
By: /s/ Nancy Funkhouser
-----------------------------------
Name: Nancy Funkhouser
Title: Assistant Vice President
SILICON VALLEY BANK
By: /s/ Michelle D. Giannini
-----------------------------------
Name: Michelle D. Giannini
Title: Assistant Vice President
(Signed at Santa Clara County, CA)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from Voxware,
Inc. Financial Statements for the 3 and 6 months ended December 31, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1999 JUN-30-1999
<PERIOD-START> OCT-01-1998 JUL-01-1998
<PERIOD-END> DEC-31-1998 DEC-31-1998
<CASH> 6,370 6,370
<SECURITIES> 5,382 5,382
<RECEIVABLES> 1,421 1,421
<ALLOWANCES> 593 593
<INVENTORY> 0 0
<CURRENT-ASSETS> 12,967 12,967
<PP&E> 1,028 1,028
<DEPRECIATION> 679 679
<TOTAL-ASSETS> 13,442 13,442
<CURRENT-LIABILITIES> 1,147 1,147
<BONDS> 0 0
0 0
0 0
<COMMON> 13 13
<OTHER-SE> 11,988 11,988
<TOTAL-LIABILITY-AND-EQUITY> 13,442 13,442
<SALES> 712 1,263
<TOTAL-REVENUES> 712 1,263
<CGS> 0 0
<TOTAL-COSTS> 164 237
<OTHER-EXPENSES> 1,554 3,339
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (835) (1,958)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (835) (1,958)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (835) (1,958)
<EPS-PRIMARY> (0.06) (0.15)
<EPS-DILUTED> (0.06) (0.15)
</TABLE>
