Exhibit 10.1

 

 

 

AMENDED AND RESTATED ASSET PURCHASE AGREEMENT

 

BY AND BETWEEN

 

NEOWARE SYSTEMS, INC. AND

 

TELEVIDEO, INC.

 

 

October 5, 2005

 

 

 

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS

 

 

 

ARTICLE II PURCHASE AND SALE OF ASSETS

 

2.1

Purchase and Sale of Assets

 

2.2

Excluded Assets

 

2.3

Purchase Price

 

2.4

Payment of Purchase Price

 

2.5

Closing

 

2.6

Ad Valorem Tax Adjustment

 

2.7

Allocation of Purchase Price

 

2.8

Assumed Liabilities

 

2.9

Retained Liabilities

 

 

 

 

ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER

 

3.1

Organization and Good Standing

 

3.2

Authorization and Effect of Agreement

 

3.3

No Restrictions Against Sale of the Assets

 

3.4

Financial Statements; SEC Reports

 

3.5

Operation of the Business Since October 31, 2003

 

3.6

Title to Assets; Licenses

 

3.7

No Litigation

 

3.8

Income and Other Taxes

 

3.9

Employee Benefit Matters

 

3.10

Governmental Approvals

 

3.11

Assumed Contracts

 

3.12

Employee and Labor Matters

 

3.13

Principal Customers and Suppliers

 

3.14

Compliance with Law

 

3.15

Product Warranties

 

3.16

Intellectual Property

 

3.17 [a05-17477_1ex10d1.htm#aOperationoftheBusiness31]

Operation of the Business [a05-17477_1ex10d1.htm#aOperationoftheBusiness31]

 

3.18 [a05-17477_1ex10d1.htm#aEnvironmentalMatters32]

Environmental Matters [a05-17477_1ex10d1.htm#aEnvironmentalMatters32]

 

3.19 [a05-17477_1ex10d1.htm#aInsurance33]

Insurance [a05-17477_1ex10d1.htm#aInsurance33]

 

3.20 [a05-17477_1ex10d1.htm#aBrokersFees34]

Brokers’ Fees [a05-17477_1ex10d1.htm#aBrokersFees34]

 

3.21 [a05-17477_1ex10d1.htm#aDisclosure35]

Disclosure [a05-17477_1ex10d1.htm#aDisclosure35]

 

3.22 [a05-17477_1ex10d1.htm#aTransactionswithAffiliates36]

Transactions with Affiliates
[a05-17477_1ex10d1.htm#aTransactionswithAffiliates36]

 

3.23 [a05-17477_1ex10d1.htm#aNoLiquidationorWindingUpFairnesso37]

No Liquidation or Winding-Up; Fairness of Consideration
[a05-17477_1ex10d1.htm#aNoLiquidationorWindingUpFairnesso37]

 

3.24 [a05-17477_1ex10d1.htm#aNoUndisclosedLiabilities38]

No Undisclosed Liabilities [a05-17477_1ex10d1.htm#aNoUndisclosedLiabilities38]

 

3.25 [a05-17477_1ex10d1.htm#aApprovalandAdoptionRequirementsNoS39]

Approval and Adoption Requirements; No Sale of Substantially All the Assets
[a05-17477_1ex10d1.htm#aApprovalandAdoptionRequirementsNoS39]

 

 

--------------------------------------------------------------------------------

 

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER
[a05-17477_1ex10d1.htm#ArticleivRepresentationsAndWarran_041621]

 

4.1 [a05-17477_1ex10d1.htm#aOrganizationandGoodStanding2]

Organization and Good Standing
[a05-17477_1ex10d1.htm#aOrganizationandGoodStanding2]

 

4.2 [a05-17477_1ex10d1.htm#aExecutionandDelivery3]

Execution and Delivery [a05-17477_1ex10d1.htm#aExecutionandDelivery3]

 

4.3 [a05-17477_1ex10d1.htm#aNoConflicts4]

No Conflicts [a05-17477_1ex10d1.htm#aNoConflicts4]

 

4.4 [a05-17477_1ex10d1.htm#aCompliancewithLaw5]

Compliance with Law [a05-17477_1ex10d1.htm#aCompliancewithLaw5]

 

4.5 [a05-17477_1ex10d1.htm#aNoRestrictionsAgainstPurchaseofAsse6]

No Restrictions Against Purchase of Assets
[a05-17477_1ex10d1.htm#aNoRestrictionsAgainstPurchaseofAsse6]

 

 

 

 

ARTICLE V ADDITIONAL COVENANTS
[a05-17477_1ex10d1.htm#ArticlevAdditionalCovenants_041627]

 

5.1 [a05-17477_1ex10d1.htm#aCovenantsofSeller9]

Covenants of Seller [a05-17477_1ex10d1.htm#aCovenantsofSeller9]

 

5.2 [a05-17477_1ex10d1.htm#aCovenantsofPurchaser10]

Covenants of Purchaser [a05-17477_1ex10d1.htm#aCovenantsofPurchaser10]

 

5.3 [a05-17477_1ex10d1.htm#aExpenses11]

Expenses [a05-17477_1ex10d1.htm#aExpenses11]

 

5.4 [a05-17477_1ex10d1.htm#aFurtherAssurances12]

Further Assurances [a05-17477_1ex10d1.htm#aFurtherAssurances12]

 

5.5 [a05-17477_1ex10d1.htm#aInconsistentAction13]

Inconsistent Action [a05-17477_1ex10d1.htm#aInconsistentAction13]

 

5.6 [a05-17477_1ex10d1.htm#aEmployeeMatters14]

Employee Matters [a05-17477_1ex10d1.htm#aEmployeeMatters14]

 

5.7 [a05-17477_1ex10d1.htm#aAssignmentsConsents15]

Assignments; Consents [a05-17477_1ex10d1.htm#aAssignmentsConsents15]

 

5.8 [a05-17477_1ex10d1.htm#aSufficiencyofAssets16]

Sufficiency of Assets [a05-17477_1ex10d1.htm#aSufficiencyofAssets16]

 

 

 

 

ARTICLE VI CONDITIONS PRECEDENT TO CLOSING
[a05-17477_1ex10d1.htm#ArticleviConditionsPrecedentToClo_041641]

 

6.1 [a05-17477_1ex10d1.htm#aConditionsofPurchaser19]

Conditions of Purchaser [a05-17477_1ex10d1.htm#aConditionsofPurchaser19]

 

6.2 [a05-17477_1ex10d1.htm#aConditionsofSeller20]

Conditions of Seller [a05-17477_1ex10d1.htm#aConditionsofSeller20]

 

 

 

 

ARTICLE VII POST-CLOSING OBLIGATIONS
[a05-17477_1ex10d1.htm#ArticleviiPostclosingObligations_041650]

 

7.1 [a05-17477_1ex10d1.htm#aSellerAssumedWarrantyObligations23]

Seller-Assumed Warranty Obligations
[a05-17477_1ex10d1.htm#aSellerAssumedWarrantyObligations23]

 

7.2 [a05-17477_1ex10d1.htm#aSellerSupplyoftheProducts24]

Seller Supply of the Products
[a05-17477_1ex10d1.htm#aSellerSupplyoftheProducts24]

 

7.3 [a05-17477_1ex10d1.htm#aSellerAssumedSupportServicesObligati25]

Seller-Assumed Support Services Obligations
[a05-17477_1ex10d1.htm#aSellerAssumedSupportServicesObligati25]

 

7.4 [a05-17477_1ex10d1.htm#aContinuedOperationsNoBankruptcy26]

Continued Operations; No Bankruptcy
[a05-17477_1ex10d1.htm#aContinuedOperationsNoBankruptcy26]

 

7.5 [a05-17477_1ex10d1.htm#aProductReturns27]

Product Returns [a05-17477_1ex10d1.htm#aProductReturns27]

 

7.6 [a05-17477_1ex10d1.htm#aStockholderVote28]

Stockholder Vote [a05-17477_1ex10d1.htm#aStockholderVote28]

 

7.7 [a05-17477_1ex10d1.htm#aKoreaDistributorAgreement29]

Korea Distributor Agreement [a05-17477_1ex10d1.htm#aKoreaDistributorAgreement29]

 

 

 

 

ARTICLE VIII INDEMNIFICATION
[a05-17477_1ex10d1.htm#ArticleviiiIndemnification_041655]

 

8.1 [a05-17477_1ex10d1.htm#aSurvival32]

Survival [a05-17477_1ex10d1.htm#aSurvival32]

 

8.2 [a05-17477_1ex10d1.htm#aIndemnification33]

Indemnification [a05-17477_1ex10d1.htm#aIndemnification33]

 

8.3 [a05-17477_1ex10d1.htm#aProcedures34]

Procedures [a05-17477_1ex10d1.htm#aProcedures34]

 

8.4 [a05-17477_1ex10d1.htm#aIndemnificationExclusive35]

Indemnification Exclusive [a05-17477_1ex10d1.htm#aIndemnificationExclusive35]

 

8.5 [a05-17477_1ex10d1.htm#aLimitationonAmount36]

Limitation on Amount [a05-17477_1ex10d1.htm#aLimitationonAmount36]

 

 

 

 

ARTICLE IX REBATE AND MARKETING PROGRAMS
[a05-17477_1ex10d1.htm#ArticleixRebateAndMarketingProgra_041700]

 

9.1 [a05-17477_1ex10d1.htm#aListofPrograms39]

List of Programs [a05-17477_1ex10d1.htm#aListofPrograms39]

 

9.2 [a05-17477_1ex10d1.htm#aPayments40]

Payments [a05-17477_1ex10d1.htm#aPayments40]

 

9.3 [a05-17477_1ex10d1.htm#aMarketingRights41]

Marketing Rights [a05-17477_1ex10d1.htm#aMarketingRights41]

 

 

 

 

ARTICLE X GENERAL PROVISIONS
[a05-17477_1ex10d1.htm#ArticlexGeneralProvisions_041705]

 

10.1 [a05-17477_1ex10d1.htm#aNotices44]

Notices [a05-17477_1ex10d1.htm#aNotices44]

 

10.2 [a05-17477_1ex10d1.htm#aSeverability45]

Severability [a05-17477_1ex10d1.htm#aSeverability45]

 

 

ii

--------------------------------------------------------------------------------

 

10.3 [a05-17477_1ex10d1.htm#aEntireAgreement1]

Entire Agreement [a05-17477_1ex10d1.htm#aEntireAgreement1]

 

10.4 [a05-17477_1ex10d1.htm#aSuccessorsandAssigns2]

Successors and Assigns [a05-17477_1ex10d1.htm#aSuccessorsandAssigns2]

 

10.5 [a05-17477_1ex10d1.htm#aCounterparts3]

Counterparts [a05-17477_1ex10d1.htm#aCounterparts3]

 

10.6 [a05-17477_1ex10d1.htm#aRecitalsSchedulesExhibitsandAnnexe4]

Recitals, Schedules, Exhibits and Annexes
[a05-17477_1ex10d1.htm#aRecitalsSchedulesExhibitsandAnnexe4]

 

10.7 [a05-17477_1ex10d1.htm#aConstruction5]

Construction [a05-17477_1ex10d1.htm#aConstruction5]

 

10.8 [a05-17477_1ex10d1.htm#aGoverningLaw6]

Governing Law [a05-17477_1ex10d1.htm#aGoverningLaw6]

 

10.9 [a05-17477_1ex10d1.htm#aPassageofTitleandRiskofLoss7]

Passage of Title and Risk of Loss
[a05-17477_1ex10d1.htm#aPassageofTitleandRiskofLoss7]

 

10.10 [a05-17477_1ex10d1.htm#aBulkSales8]

Bulk Sales [a05-17477_1ex10d1.htm#aBulkSales8]

 

 

iii

--------------------------------------------------------------------------------

 

INDEX OF EXHIBITS

 

Exhibit A

 

Escrow Agreement

 

Exhibit B

 

Korea Distributor Agreement, as shall be agreed to by the parties

 

Exhibit C

 

License Agreement

 

Exhibit D

 

Noncompetition Agreements

 

Exhibit E [a05-17477_1ex10d1.htm#Exhibite_041951]

 

Transitional Services [a05-17477_1ex10d1.htm#Exhibite_041951]

 

Exhibit F

 

Transitional Supply and Trademark License Agreement

 

Exhibit G

 

Seller’s Opinion

 

Exhibit H [a05-17477_1ex10d1.htm#Exhibith_042000]

 

Warranties [a05-17477_1ex10d1.htm#Exhibith_042000]

 

Exhibit I

 

Opinion of Richards, Layton & Finger P.A.

 

 

iv

--------------------------------------------------------------------------------

 

AMENDED AND RESTATED ASSET PURCHASE AGREEMENT

 

THIS AMENDED AND RESTATED ASSET PURCHASE AGREEMENT (the “Agreement”) is entered
into as of October 5, 2005 by and between NEOWARE SYSTEMS, INC., a Delaware
corporation (“Purchaser”) and TELEVIDEO, INC., a Delaware corporation (“Seller”)
in order to amend and restate that certain Asset Purchase Agreement between
Purchaser and Seller, dated as of January 11, 2005 (the “Purchase Agreement”),
as amended by the First Amendment to Asset Purchase Agreement, dated as of
June 14, 2005 (the “First Amendment”).

 

RECITALS

 

A.            Seller is presently engaged in the business of designing,
developing, manufacturing, distributing and selling Windows and Linux-based thin
client devices (the “Products”) and general purpose terminal products.

 

B.            Seller desires to Transfer (as hereinafter defined) to Purchaser,
and Purchaser desires to purchase from Seller, all of the assets owned or held
for use by Seller or used by Seller in connection with Seller’s business of
designing, developing, manufacturing, distributing and selling the Windows and
Linux-based thin client devices (referred to herein as the “Business”), other
than the Excluded Assets (as hereinafter defined), on the terms and subject to
the conditions set forth in this Agreement.

 

C.            Seller desires to delegate to Purchaser, and Purchaser is willing
to assume from Seller, the Assumed Liabilities (as hereinafter defined), on the
terms and subject to the conditions set forth in this Agreement.

 

D.            Simultaneously with the execution of this Agreement, and as a
condition and inducement to Purchaser’s willingness to enter into this
Agreement, Dr. K. Philip Hwang and his spouse, C. Gemma Hwang (the “Principal
Stockholders”) are entering into an agreement (the “Stockholders’ Agreement”)
with Purchaser, pursuant to which each of the Principal Stockholders agrees,
among other things, to take certain actions in furtherance of the Transfer,
including the execution of an irrevocable proxy in accordance with Delaware Law
(as hereinafter defined) and, in certain circumstances, the indemnification of
Purchaser as specifically provided in the Stockholders’ Agreement.

 

E.             Seller and Purchaser desire to amend the Purchase Agreement, as
amended by the First Amendment.

 

F.             Seller and Purchaser entered into a reseller agreement (the
“Reseller Agreement”) simultaneously with the execution of the Purchase
Agreement pursuant to which Purchaser has been the exclusive reseller and sales
agent for Seller’s Products during the period commencing on the date of the
Purchase Agreement until the Closing.

 

--------------------------------------------------------------------------------

 

NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
the parties hereto hereby agree as follows:

 

ARTICLE I
DEFINITIONS

 

Unless otherwise defined herein or the context otherwise requires, the terms
defined in this Article I shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms of
any of the terms herein defined. Unless otherwise indicated, any reference
herein to a Section, Article, Exhibit or Schedule shall mean the applicable
section, article, exhibit or schedule of or to this Agreement. All accounting
terms used in this Agreement not defined in this Article I shall, except as
otherwise provided for herein, be construed in accordance with generally
accepted accounting principles, consistently applied.

 

“Action” shall mean any actual or threatened claim, action, suit, arbitration,
hearing, inquiry, proceeding, complaint, charge or investigation by or before
any Governmental Entity or arbitrator and any appeal from any of the foregoing.

 

“Affiliate” of a Person shall mean any Person that directly or indirectly
controls, is controlled by, or is under common control with, the indicated
Person.

 

“Agreement” shall mean this Asset Purchase Agreement, together with all
Schedules and Exhibits hereto.

 

“Ancillary Agreements” shall mean the Escrow Agreement, the License Agreement,
the Noncompetition Agreements, the Stockholders’ Agreement, the Reseller
Agreement and the Transitional Supply and Trademark License Agreement.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended.

 

“Damages” shall mean any and all losses, liabilities, obligations, costs,
expenses, damages or judgments of any kind or nature whatsoever (including
reasonable attorneys’, accountants’ and experts’ fees, disbursements of counsel,
and other costs and expenses incurred pursuing indemnification claims under
Article IX hereof).

 

“Delaware Law” shall mean the Delaware General Corporation Law.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.

 

“ERISA Affiliate” shall mean any Person which is (or at any relevant time was) a
member of a controlled group of corporations within the meaning of Code
Section 414(b), all trades or businesses under common control within the meaning
of Code Section 414(c), and all

 

2

--------------------------------------------------------------------------------

 

affiliated service groups within the meaning of Code Section 414(m), of which
Seller is (or at any relevant time was) a member.

 

“Escrow Agreement” shall mean the form of Escrow Agreement attached hereto as
Exhibit A.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934.

 

“Governmental Entity” shall mean any local, state, federal or foreign (i) court,
(ii) government or (iii) governmental department, commission, instrumentality,
board, agency or authority, including, without limitation, the IRS and other
taxing authorities.

 

“Knowledge” shall mean (a) knowledge of any of the senior management of Seller,
including Dr. K. Philip Hwang, Richard Kim, and Carmino Rosa, and (b) the
knowledge that any of such persons would be reasonably expected to have after
making inquiry of those persons employed by such party who would reasonably be
expected to have knowledge of the issue in question.

 

“Legal Requirement” shall mean any statute, law, ordinance, rule, regulation,
permit, order, writ, judgment, injunction, decree or award issued, enacted or
promulgated by any Governmental Entity or any arbitrator.

 

“License Agreement” shall mean the License Agreement in the form attached hereto
as Exhibit C.

 

“Lien” shall mean all liens (including judgment and mechanics’ liens, regardless
of whether liquidated), mortgages, assessments, security interests, easements,
claims, pledges, trusts (constructive or other), deeds of trust, options or
other charges, encumbrances or restrictions.

 

“Material Adverse Effect” shall mean any event, change or effect that is (or
could reasonably be expected to be) materially adverse to the Assets or the
Business or to Purchaser’s ability to continue to operate the Business as
operated prior to the Closing.

 

“Noncompetition Agreement” shall mean the Noncompetition Agreement in the form
attached hereto as Exhibit D.

 

“Ordinary Course” shall mean, when used with reference to Seller, the ordinary
and normal course of the operation of the Business, consistent with past
practices.

 

“Person” shall mean all natural persons, corporations, business trusts,
associations, companies, partnerships and joint ventures.

 

“Plan” shall mean any employee benefit plan within the meaning of
Section 3(3) of ERISA and any other written or oral employee plan (other than
arrangements merely involving the payment of wages) which are or at any time
have been established, maintained, or contributed

 

3

--------------------------------------------------------------------------------

 

to by Seller or any ERISA Affiliate for the benefit of current or former
employees, with respect to which Seller or an ERISA Affiliate has or may in the
future have any liability or obligation to contribute or make payments of any
kind.

 

“SEC” shall mean the United States Securities and Exchange Commission.

 

“Securities Act” shall mean the Securities Act of 1933.

 

“Seller Common Stock” shall mean Seller’s common stock, par value $0.01 per
share.

 

“Subsidiary of a Person” shall mean any corporation, partnership, limited
liability company, association or other business entity at least 50% of the
outstanding voting power of which is at the time owned or controlled directly or
indirectly by such Person or by one or more of such subsidiary entities, or
both.

 

“Tax” shall mean all taxes, including without limitation all Federal, state,
local or foreign income, gross receipts, license, payroll, unemployment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including, without limitation, taxes under Code Section 59A), customs duties,
capital stock, franchise, profits, withholding, social security (or similar),
employment, disability, real property, personal property, ad valorem, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated tax or other tax, assessment or charge of any kind whatsoever, and any
interest, fine, penalty or addition thereto, whether disputed or not.

 

“Tax Return” shall mean any return, declaration, report, claim for refund or
information, or statement relating to Taxes, and any exhibit, schedule,
attachment or amendment thereto.

 

“Transitional Services” shall mean the Transitional Services included in
Exhibit E.

 

“Transitional Supply and Trademark License Agreement” shall mean the
Transitional Supply and Trademark License Agreement in the form attached hereto
as Exhibit F.

 

ARTICLE II
PURCHASE AND SALE OF ASSETS

 

2.1           Purchase and Sale of Assets.  On the terms and subject to the
conditions hereof, at the Closing (as defined in Section 2.5), Seller will sell,
transfer, grant, convey, assign and deliver (“Transfer”) to Purchaser, and
Purchaser will purchase and accept from Seller, the rights, properties and
assets owned, held for use or used by Seller in connection with the operation or
conduct of the Business, including any technology under development, as of the
date hereof, or acquired by Seller in connection with the operation of the
Business between the date hereof and the Closing Date (as defined in
Section 2.5), or used by Seller in connection with the operation of the Business
including, but not limited to, the rights, properties and assets described in
this Section 2.1 (collectively the “Assets”):

 

4

--------------------------------------------------------------------------------

 

(a)           Personal Property.  The software, files, books, records, fixtures,
equipment, supplies, computers, printers and all other tangible personal
property owned or held by Seller in connection with the operation of the
Business, as of the date hereof or acquired by Seller in connection with the
operation of the Business between the date hereof and the Closing Date or used
by Seller in connection with the operation of the Business, including those
items listed or described on Schedule 2.1(a), except for property excluded under
Section 2.2 (collectively, the “Owned Tangible Personal Property”);

 

(b)           Contract Rights.  All rights and incidents of interest of Seller
existing as of the date hereof or acquired by Seller between the date hereof and
the Closing Date in, to or under all licenses, leases, agreements, customer
orders, contracts, written or verbal (including product warranty claims, rebates
and indemnity or other rights of action against any person arising out of acts,
omissions or occurrences before, at or after the Closing), prepaid items,
deposits and refunds relating to the Business, including those items listed on
Schedule 2.1(b) (collectively, the “Contracts”);

 

(c)           Intellectual Property.  The entire right, title and interest of
Seller existing as of the date hereof or acquired by Seller between the date
hereof and the Closing Date in connection with the operation of the Business or
used by Seller in connection with the operation of the Business in, to or under
(i) all United States, international and foreign patents and applications
therefor and all reissues, divisions, renewals, extensions, provisionals,
continuations and continuations-in-part thereof, (ii) all software, licenses,
inventions (whether patentable or not), invention disclosures, improvements,
trade secrets, proprietary information, know how, technology, technical data and
customer lists, and all documentation relating to any of the foregoing,
(iii) all copyrights, copyrights registrations and applications therefor, and
all other rights corresponding thereto throughout the world, (iv) all industrial
designs and any registrations and applications therefor, (v) all trade names,
logos, common law trademarks and service marks, trademark and service mark
registrations and applications therefor (except that the ownership of the
TeleVideo tradename shall be excluded, subject to a license to Purchaser
pursuant to the License Agreement), (vi) all databases and data collections and
all rights therein, (vii) Seller’s list of customer prospects pertaining to the
Business (including customer data base and contact information related to
historic sales of general purpose terminals by Seller and databases and contact
information of customer prospects maintained by Seller’s sales personnel),
(viii) all moral and economic rights of authors and inventors, however
denominated, and (ix) any similar or equivalent rights to any of the foregoing
(as applicable), including the items listed on Schedule 2.1(c) (collectively,
the “Intellectual Property”);

 

(d)           Governmental Licenses, Permits and Approvals.  To the extent
Transferable, all rights and incidents of interest of Seller existing as of the
date hereof or acquired by Seller between the date hereof and the Closing Date
in, to or under all licenses, permits and authorizations (collectively, the
“Approvals”) issued or requested to be issued by any Governmental Entity in
connection with the operation of the Business, including the Approvals listed or
described on Schedule 2.1(d);

 

5

--------------------------------------------------------------------------------

 

(e)           Books and Records.  All books, records, ledgers, files, documents,
correspondence, studies, reports and other documents of Seller relating to the
Business or the Assets; and

 

(f)            Goodwill.  The goodwill of the Business.

 

2.2           Excluded Assets.  Notwithstanding anything contained in this
Agreement to the contrary, the following rights, properties and assets
(collectively, the “Excluded Assets”) will not be included in the Assets:

 

(a)           Inventory.  All raw material, works-in-progress and finished goods
inventories relating to the Business.

 

(b)           Accounts Receivable.  All accounts receivable arising from the
conduct of the Business prior to the Closing.

 

(c)           The Televideo tradename, which shall be subject to a fully paid
license to Purchaser to use the name in connection with the Business in
accordance with the License Agreement.

 

(d)           Real Estate.

 

(e)           Certain personal property not directly related to the design or
manufacture of the Products, as listed or described on Schedule 2.2(e).

 

2.3           Purchase Price.  Purchaser will pay for the Assets a purchase
price in the amount of Three Million Three Hundred Fifty Thousand Dollars
($3,350,000), subject to adjustment as provided in Sections 2.4(b) and 2.6 (the
“Purchase Price”).

 

2.4           Payment of Purchase Price.

 

Closing Payment and Escrow.  At the Closing (as defined in Section 2.5):

 

(a)           Purchaser shall pay to Seller an amount equal to Three Million
Fifty Thousand Dollars ($3,050,000), subject to adjustment, as provided in
Sections 2.4(b) and 2.6 (the “Closing Payment”); and

 

(b)           Purchaser shall deposit into an escrow account (the “Escrow
Account”) Three Hundred Thousand Dollars ($300,000) (the “Escrow Amount”), to be
held and disbursed by Wachovia Bank (or if Wachovia Bank is unable to serve, by
another party appointed by the parties), as escrow agent (the “Escrow Agent”). 
The Escrow Amount shall be held by the Escrow Agent pursuant to the Escrow
Agreement.  The Escrow Amount, or a portion thereof, as set forth in the Escrow
Agreement, will be subject to set-off for any indemnification claims arising
during the twelve-month period commencing on the Closing Date (the “Escrow
Period”), and as otherwise provided herein and in the Escrow Agreement.

 

6

--------------------------------------------------------------------------------

 

The Escrow Agreement shall terminate at the close of business on the last day of
the Escrow Period (the “Escrow Termination Date”), unless there are any
unresolved indemnification or other claims or disputes on such date pursuant to
which Purchaser may be entitled to all or a portion of the Escrow Amount.  In
the event of any such unresolved claims or disputes, the Escrow Agreement will
continue in force, but any portion of the Escrow Amount which exceeds the amount
for which a claim has been made or a dispute exists shall be released to Seller,
except as provided in the Escrow Agreement.  Seller’s liability for the claims
identified in this Section 2.4(b), or any other claims of Purchaser hereunder,
shall not be limited to the Escrow Amount.

 

2.5           Closing.  The purchase and sale of the Assets and the consummation
of the other transactions contemplated by this Agreement (the “Closing”) shall
occur at 10:00 a.m., local time, on October 5, 2005 at the offices of Neoware or
at such other time or on such other date as shall be agreed by Seller and
Purchaser upon fulfillment of all conditions precedent to the Closing, such hour
and date being herein generally referred to as the “Closing Date.”  At the
Closing:

 

(a)           Seller shall deliver or cause to be delivered to Purchaser,
against payment by Purchaser to Seller of the Closing Payment:

 

(i)            all of the agreements, documents, certificates and instruments
required to be delivered by Seller pursuant to Section 6.1 hereof.

 

(b)           Purchaser shall deliver or cause to be delivered to Seller against
delivery of the agreements, documents, certificates and instruments required to
be delivered by Seller pursuant to Section 6.1:

 

(i)            a wire transfer of immediately available funds to an account
designated in writing by Seller in an amount representing the Closing Payment;
and

 

(ii)           all of the documents, if any, required to be delivered by
Purchaser pursuant to Section 7.2 hereof.

 

2.6           Ad Valorem Tax Adjustment.  All ad valorem Taxes imposed by any
taxing authority upon the Assets will be prorated between Seller and Purchaser
as of the Closing Date based on the most current available tax rates and
assessed values (such prorations to be adjusted when final rates and assessed
values are established).  All such Taxes attributable to the period up to the
Closing Date and which remain unpaid as of the Closing Date shall be deducted
from the Purchase Price.  All such Taxes, if any, attributable to the period
following the Closing Date and which have been paid by Seller prior to the
Closing Date shall be added to the Purchase Price.  All adjustments to the
Purchase Price will be calculated as of 11:59 p.m. on the Closing Date.

 

2.7           Allocation of Purchase Price.  The Purchase Price represents the
amount agreed upon by Purchaser and Seller to be the aggregate fair market value
of the Assets.  Purchaser and Seller have agreed that the Purchase Price will be
allocated based upon an appraisal to be obtained by Purchaser within sixty (60)
days following the Closing Date.  Purchaser and Seller

 

7

--------------------------------------------------------------------------------

 

will allocate the Purchase Price to the Assets in such manner consistently for
all purposes, including in connection with all federal, foreign, state, local
and other Tax Returns and reports prepared and filed by or for either of
Purchaser or Seller.

 

2.8           Assumed Liabilities.  On the terms and subject to the conditions
hereof, as of the Closing, Purchaser will assume only and thereafter in due
course pay, perform and discharge the following, and only the following,
liabilities and obligations of Seller (the “Assumed Liabilities”):

 

(a)           all liabilities and obligations of Seller arising under the terms
of the Contracts that are included in the Assets and listed or described on
Schedule 3.11(a) (the “Assumed Contracts”), but only to the extent such
liabilities and obligations arise after the Closing Date (and are not based on
events occurring on or prior to the Closing Date) under the terms of such
Assumed Contracts, provided, however, that Purchaser will not assume or be
responsible for any such liabilities or obligations which arise under or in
relation to any Plan or from any breach or default by Seller under any Contract,
all of which liabilities and obligations will constitute Retained Liabilities
(as defined in Section 2.9); and

 

(b)           such liabilities and obligations as are listed on Schedule 2.8(b).

 

2.9           Retained Liabilities.  Except as provided in Section 2.8, Seller
will retain, and Purchaser will not assume or be responsible or liable with
respect to, any liabilities or obligations of Seller or its Affiliates or their
respective predecessors-in-interest, whether or not arising out of or relating
to the operation of the Business or associated with or arising from any of the
Assets or any other rights, properties or assets used in or associated with the
Business at any time, and whether fixed or contingent, direct or indirect, or
known or unknown, including, but not limited to, liabilities relating to
warranties and service obligations relating to the operation of the Business by
the Seller, liabilities for Taxes relating to the sale of the Assets and
liabilities with respect to any of Seller’s employees (collectively the
“Retained Liabilities”).

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller hereby represents and warrants to, and covenants and agrees with,
Purchaser that as of the date hereof and as of the Closing Date:

 

3.1           Organization and Good Standing.

 

(a)           Each of Seller and its Subsidiaries has been duly organized and is
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation with full power and authority (corporate and other) to own and
lease its assets and properties and to conduct its business and the operation of
the Business as currently conducted.  Each of Seller and its Subsidiaries has
been duly qualified as a foreign corporation for the transaction of business and
is in good standing under the laws of each jurisdiction set forth on
Schedule 3.1(a), such jurisdictions comprising all jurisdictions in which Seller
or any of its Subsidiaries owns or leases

 

8

--------------------------------------------------------------------------------

 

any property, or conducts any business, so as to require such qualification,
except where any failure to qualify would not have a Material Adverse Effect, as
defined in Article I.

 

(b)           Except as set forth in Schedule 3.1(b), Seller has no Subsidiary
nor owns or controls, or has any other equity investment or other interest in,
directly or indirectly, any corporation, joint venture, partnership, association
or other entity.

 

3.2           Authorization and Effect of Agreement.  Seller has the requisite
corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements to which Seller is a party and to perform the transactions
contemplated hereby and thereby to be performed by Seller.  The execution and
delivery by Seller of this Agreement and the Ancillary Agreements and the
performance by Seller of the transactions contemplated hereby and thereby to be
performed by Seller has been duly authorized by all necessary action on the part
of Seller’s board of directors and, if applicable, holders of the Seller’s
indebtedness, and no vote of Seller’s stockholders is required.  This Agreement
has been duly executed and delivered by Seller, and this Agreement is, and the
Ancillary Agreements to which Seller is a party will be, when duly executed and
delivered by Seller, assuming the due execution and delivery of this Agreement
and the Ancillary Agreements to which Purchaser is a party by Purchaser, legal,
valid and binding obligations of Seller enforceable in accordance with their
respective terms.

 

3.3           No Restrictions Against Sale of the Assets.  Except as listed or
described on Schedule 3.3, the execution and delivery of this Agreement and the
Ancillary Agreement to which Seller is a party by Seller do not, and the
performance by Seller of the transactions contemplated hereby and thereby to be
performed by it will not, conflict with, or result in any violation of, or
constitute a default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, (a) the certificate of
incorporation or bylaws of Seller, (b) any Legal Requirement to which Seller or
any of the Assets is subject, (c) any Contract or other material agreement,
instrument or obligation of Seller, or (d) any licenses of Seller.  No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Person or Governmental Entity is required to be obtained or made by or
with respect to Seller under any Legal Requirement in connection with the
execution and delivery of this Agreement or the Ancillary Agreements by Seller
or the performance by Seller of the transactions contemplated hereby or thereby
to be performed by it, except as set forth on Schedule 3.3.

 

3.4           Financial Statements; SEC Reports.

 

(a)           (i) The audited balance sheets of Seller at October 31, 2003 and
2004, and the related audited statements of income, shareholders’ equity and
cash flows for the years then ended (the “Audited Financial Statements”)
included in Seller’s Annual Report on Form 10-K for the year ended October 31,
2004, and (ii) the unaudited balance sheets of Seller quarters ended January 31,
April 30 and July 31, 2005 (the balance sheet at July 31, 2005 referred to as
the “Interim Balance Sheet”), and the related statement of income for the
quarters then ended, included in Seller’s Quarterly Reports on Forms 10-Q for
the quarters ended January 31, April 30 (as amended), and July 31, 2005,
including, where available, in each case, the notes thereto (the

 

9

--------------------------------------------------------------------------------

 

financial statements described in clause (i) and (ii) above are collectively
referred to as the “Financial Statements”).

 

(b)           The Financial Statements fairly present, in all material respects,
the financial condition of the Seller and the Business as of the dates indicated
therein and the results of operations and changes in financial position of the
Seller and the Business for the periods specified therein, have been prepared in
conformity with generally accepted accounting principles (“GAAP”) applied on a
consistent basis during the periods covered thereby and prior periods (except in
each case as stated in the applicable footnotes or auditor’s report and except,
in the case of interim financial statements, for year end adjustments).

 

(c)           The Seller has no liabilities or obligations which would be
required under GAAP to be reflected on a balance sheet of the Seller as of the
date of this Agreement, except for liabilities and obligations (i) reflected or
reserved against in the Interim Balance Sheet, (ii) incurred or arising in the
ordinary course of business since October 31, 2004, (iii) incurred or arising
other than in the ordinary course of business since October 31, 2004 and not,
individually or in the aggregate, material, or (iv) described on
Schedule 3.4(c).

 

(d)           As of their respective dates, Seller’s annual reports on Form 10-K
for the fiscal years ended October 31, 2003 and 2004, and all quarterly reports
on Form 10-Q, current reports on Form 8-K, proxy statements and other forms and
reports filed with the SEC since November 1, 2003 (other than the financial
statements (including the notes thereto) filed as a part thereof or incorporated
by reference therein about which no representation is made hereby) (the “Seller
SEC Documents”), in so far as they relate to the Assets or the Business,
complied in all material respects with the requirements of the Exchange Act and
the Sarbanes-Oxley Act and the rules and regulations of the SEC promulgated
thereunder applicable to such Seller SEC Documents, and none of the Seller SEC
Documents when filed contained any untrue statement of a material fact or
omitted to state a material fact, in either case only in so far as such fact or
omission relates to the Assets or the Business, required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.  Seller has filed with the SEC all
reports and forms required to be filed by Seller with the SEC since November 1,
2003.

 

3.5           Operation of the Business Since October 31, 2004.  Except as
described on Schedule 3.5, since October 31, 2004 (the “Balance Sheet Date”),
Seller has conducted the operation of the Business in the Ordinary Course, and
no change has occurred which materially and adversely affects the Assets or the
condition (financial or otherwise), results of operations or prospects of the
Business, nor, to Seller’s knowledge, have any events occurred nor do there
exist any circumstances which might reasonably be expected to result, either
before or after the Closing Date, in any such change.

 

3.6           Title to Assets; Licenses.

 

(a)           Seller has, and immediately prior to the Closing will have, good,
marketable and exclusive title to all of the Assets reflected on the Balance
Sheet as owned by Seller and all of the Assets acquired by Seller since the
Balance Sheet Date, in each case free and

 

10

--------------------------------------------------------------------------------

 

clear of all Liens except as set forth on Schedule 3.6(a).  Seller has the valid
and enforceable power and unqualified right to use and Transfer to Purchaser,
the Assets.

 

(b)           Schedule 3.6(b) contains a list of all licenses relating to the
Business under which Seller is the licensee, together with (i) the nature of
each of the licensed Assets, (ii) the termination date of each such license,
(iii) the name of the licensor, (iv) all payments made or required to be made
for the fiscal year ended October 31, 2004, and (v) all prepaid payments made
thereunder.  All licenses pursuant to which Seller licenses from others property
are valid, subsisting in full force and effect in accordance with their
respective terms, and there is not, under any license, any existing default or
event of default (or event that, with notice or passage of time, or both, would
constitute a default, or would constitute a basis of force majeure or other
claim of excusable delay or nonperformance).  Seller has the valid and
enforceable right to use and Transfer to Purchaser Seller’s rights in and to the
licensed Assets.  True and complete copies of all licenses listed on
Schedule 3.6(b) have been delivered to Purchaser heretofore.  Except as set
forth on Schedule 3.6(b), no such license will require the consent of the
licensor to, or as a result of, the consummation of the transactions
contemplated by this Agreement.

 

(c)           The delivery to Purchaser at Closing of the instruments of
Transfer contemplated by this Agreement will vest in Purchaser good, marketable
and exclusive title to the Assets, free and clear of all Liens, except for Liens
listed or described on Schedule 3.6(a).

 

(d)           Except as set forth in Schedule 3.6(d), no Person, other than
Seller, has any rights or interests in the Assets or the Business.

 

(e)           The Assets include all of the assets, property and rights,
tangible or intangible, required by Purchaser to operate the Business, as
currently operated on a stand alone basis after the Closing and which are held
and used in or held for use in the operation of the Business by Seller.

 

3.7           No Litigation.  Except as set forth on Schedule 3.7, there is no
outstanding judgment, order, decree, award, stipulation or injunction of any
Governmental Entity or arbitrator against or Action pending or, to Seller’s
Knowledge, threatened, against Seller relating to or affecting the Business or
the Assets or affecting Seller’s ability to perform its obligations under this
Agreement or under any agreement or instrument contemplated by this Agreement. 
Any Action for defective or allegedly defective products or workmanship pending
or threatened against Seller, and the details of such Action, are described on
Schedule 3.7.

 

3.8           Income and Other Taxes.  Except as set forth on Schedule 3.8:

 

(a)           All Tax Returns required to be filed through and including the
date hereof in connection with the operations of the Business are true, complete
and correct in all respects and have been properly and timely filed.  Seller has
not requested any extension of time within which to file any Tax Return, which
Tax Return has not since been filed. No Liens have been imposed on or asserted
against any of the Assets as a result of or in connection with any failure to
pay any Taxes;

 

11

--------------------------------------------------------------------------------

 

(b)           All Taxes required to be paid or withheld and deposited through
and including the date hereof in connection with the Business have been duly and
timely paid or deposited by Seller. Seller has properly withheld or collected
all amounts required by law for income Taxes and employment Taxes relating to
its employees, creditors, independent contractors and other third parties, and
for sales Taxes on sales, and has properly and timely remitted such withheld or
collected amounts to the appropriate Governmental Entity. Seller has no
liabilities for any Taxes for any taxable period ending prior to or coincident
with the Closing Date; and

 

(c)           No Tax Return of Seller is currently being audited or is the
subject of other Action by any Governmental Entity. Seller has not received any
notice from any Governmental Entity of any pending examination or any proposed
deficiency, addition, assessment, demand for payment or adjustment relating to
or affecting Seller, the Business or the Assets and Seller has no reason to
believe that any Governmental Entity may assess (or threaten to assess) any
Taxes for any periods ending on or prior to the Closing Date.

 

3.9           Employee Benefit Matters.  Schedule 3.9 contains a complete list
of all Plans. Each Plan and related trust, annuity, or other funding agreement
complies and has been maintained in compliance with all applicable Legal
Requirements. Purchaser is not assuming, and shall not be subject to, any
liabilities or obligations to Seller’s employees as a result of the consummation
of the transactions contemplated by this Agreement. All contributions, premiums,
and other payments, including, without limitation, employer contributions and
employee salary reduction contributions, have been paid when due or accrued in
accordance with the past custom and practice of Seller and any ERISA Affiliate. 
There are no pending or, to Seller’s knowledge, threatened Actions (other than
routine claims for benefits) asserted or instituted against any Plan or the
assets of any Plan, or against Seller, or ERISA Affiliate, trustee,
administrator, or fiduciary of such Plan, and Seller has no knowledge of any
facts that could form the basis of any such Action. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will constitute a termination of employment or other event entitling any
Person to any additional or other benefits, or that would otherwise modify
benefits or the vesting of benefits, provided under any Plan.  No event has
occurred which could subject Seller or any ERISA Affiliate to any material
liability (i) under any Legal Requirement relating to any Plan, or
(ii) resulting from any obligation of Seller or an ERISA Affiliate to indemnify
any Person against liability incurred with respect to or in connection with any
Plan.

 

3.10         Governmental Approvals.

 

(a)           Seller possesses, and is operating in compliance with, all
approvals material to the operation of the Business (“Approvals”). 
Schedule 3.10(a) contains a true and complete list of all Approvals.  Each
Approval has been lawfully and validly issued, and no proceeding is pending or,
to Seller’s knowledge, threatened looking toward the revocation, suspension or
limitation of any Approval.  Each of the Approvals is in full force and effect,
and Seller is in compliance with all of the provisions of the Approvals.

 

(b)           Except as set forth on Schedule 3.10(b), each of the Approvals
(i) is assignable by Seller to Purchaser as contemplated by the Agreement and
(ii) will be Transferred

 

12

--------------------------------------------------------------------------------

 

to Purchaser by Seller’s delivery to Purchaser at Closing of the instruments of
Transfer contemplated by this Agreement and will thereafter remain in full force
and effect.  Except as set forth on Schedule 3.10(b), no notice to or consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity or other third party is required to be obtained or
made in connection with the Transfer to Purchaser of the Approvals.

 

(c)           The Approvals are all of the rights and authorizations required by
Legal Requirements for the operation of the Business.  All of the Approvals are
owned or held by Seller free and clear of all Liens or other encumbrances of any
nature whatsoever.

 

(d)           To Seller’s knowledge, Seller or Purchaser would be able to renew
all such Approvals by the terms thereof or in the ordinary course of business
without the need to comply with any special qualifications procedures or to pay
any amounts other than regular fees prescribed by law.

 

3.11         Assumed Contracts.

 

(a)           Schedule 3.11(a) contains a true and complete list and description
of all Assumed Contracts, other than the Plans. True and complete copies of all
such Assumed Contracts have been delivered to Purchaser heretofore.

 

(b)           Except as described in Schedule 3.11(b):

 

(i)            each Contract is legal, valid, binding, enforceable and in full
force and effect;

 

(ii)           no event or condition has occurred or become known to Seller or,
to Seller’s knowledge, is alleged to have occurred that constitutes or, with
notice or the passage of time, or both, would constitute a default or a basis of
force majeure or other claim of excusable delay, termination, nonperformance or
accelerated or increased rights by Seller or any other Person under any of the
Contracts;

 

(iii)          no person with whom Seller has a Contract is in default
thereunder or has failed to perform fully thereunder by reason of force majeure
or other claim of excusable delay, termination or nonperformance thereunder;

 

(iv)          none of the Contracts currently is in the process of
renegotiation, either in whole or in part;

 

(v)           no consent of any third party is required under any Contract as a
result of or in connection with, and the enforceability of any Contract will not
be affected in any manner by, the execution, delivery and performance of this
Agreement;

 

(vi)          no Contract has materially impaired or will materially impair the
ability of Seller to perform its obligations under this Agreement; and

 

13

--------------------------------------------------------------------------------

 

(vii)         no Assumed Contract which is a license contains any minimum
quantity commitments.

 

3.12         Employee and Labor Matters.

 

(a)           Schedule 3.12(a) contains a true and complete list of all labor,
collective bargaining, union and similar agreements under or by which Seller is
obligated, and true and complete copies of all such agreements have been
delivered to Purchaser heretofore.

 

(b)           Purchaser does not and will not have any responsibility for
retaining any person in the employ (or retaining any person as a consultant)
from and after the Closing or have any liability for any severance payments to
or similar arrangements with any such Person.

 

(c)           There is not occurring or, to Seller’s knowledge, threatened, any
strike, slow down, picket, work stoppage or other concerted action by any union
or other group of employees or other persons against Seller or its products.
Except for activities by the unions that are parties to any of the agreements
listed on Schedule 3.12(a) with respect to the existing members of such unions,
to Seller’s knowledge, no union or other labor organization has attempted to
organize any of the employees of Seller engaged in the Business.

 

(d)           Seller has complied with all Legal Requirements relating to
employment and labor, and, to Seller’s knowledge, no facts or circumstances
exist that could provide a reasonable basis for a claim of wrongful termination
by any current or former employee of Seller engaged in the Business.

 

(e)           Schedule 3.12(e) contains a complete list of all of the current
employees of Seller who are employed in connection with the Business
(“Employees”) and, for each Employee, his or her current title, current annual
base salary or wages and date of hire.  None of the Employees listed on
Schedule 3.12(e) is a member of any collective bargaining unit or is a party to
any employment agreement with Seller.

 

3.13         Principal Customers and Suppliers.

 

(a)           Schedule 3.13(a) contains a true and complete list of the name and
address of each customer that purchased in excess of 5% of Seller’s sales of
goods or services of the Business during the twelve months ended on October 31,
2004, and since that date no such customer has terminated its relationship with
or adversely curtailed its purchases from Seller or indicated (for any reason)
its intention so to terminate its relationship or curtail its purchases.

 

(b)           Schedule 3.13(b) contains a true and complete list of each
supplier from whom Seller purchased in excess of 5% of Seller’s purchases of
goods or services of the Business during the twelve months ended on October 31,
2004 and since that date no such supplier has terminated its relationship with
or adversely curtailed its accommodations, sales or services to Seller or
indicated (for any reason) its intention to terminate such relationship or
curtail its accommodations, sales or services.

 

14

--------------------------------------------------------------------------------

 

(c)           Except as set forth on Schedule 3.13(c), Seller is not involved in
any claim or controversy with any of the customers or suppliers who are listed
on Schedule 3.13(a) or 3.13(b).

 

3.14         Compliance with Law.  Through and including the date hereof, Seller
(i) has not violated or operated the Business in violation of, and has not used
the Assets in violation of, any Legal Requirement, (ii) to Seller’s knowledge,
has not been alleged to be in violation of any Legal Requirement, and (iii) has
not received any notice of any alleged violation of, or any citation for
noncompliance with, any Legal Requirement.

 

3.15         Product Warranties.  Except as set forth in Schedule 3.15,
(a) there are no warranties express or implied, written or oral, with respect to
the Business and (b) there are no pending or threatened claims with respect to
any such warranty, and Seller has no liability with respect to any such
warranty, whether known or unknown, absolute, accrued, contingent or otherwise
and whether due or to become due.

 

3.16         Intellectual Property.

 

(a)           Title.  Schedule 3.16(a) contains a complete and correct list of
all Intellectual Property that is owned by Seller and primarily related to, used
in, held for use in connection with, or necessary for the conduct of, or
otherwise material to the Business (the “Owned Intellectual Property”).  Seller
owns or has the right to use pursuant to license, sublicense, agreement or
permission all Intellectual Property, including all Intellectual Property
Rights, free and clear of any Liens (except as set forth on Schedule 3.6(a)) and
free from any requirement of any past, present or future royalty payments,
license fees, charges or other payments, or conditions or restrictions
whatsoever.  The Intellectual Property comprises all of the Intellectual
Property and Intellectual Property Rights used in and/or necessary to the
conduct and operation of the Business as now being conducted by Seller or as
currently contemplated to be conducted, including, but not limited to, all
Intellectual Property used by Gempack in connection with the Business.

 

(b)           Development.  Other than “shrink-wrap” and similar widely
available binary code and commercial end-user licenses, to the extent that any
Intellectual Property has been developed or created independently or jointly by
any Person other than Seller for which Seller has, directly or indirectly, paid,
Seller has a written agreement with such Person with respect thereto, and Seller
thereby has obtained ownership of, and is the exclusive owner of, all such
Intellectual Property and associated Intellectual Property Rights by operation
of law or by valid assignment.  None of the Intellectual Property was developed
by or on behalf of or using grants or any other subsidies of any governmental
entity.

 

(c)           Transfer.  Immediately after the Closing, Purchaser will own all
of the Owned Intellectual Property and will have a right to use all other
Intellectual Property, free and clear of any Liens (except as set forth on
Schedule 3.6(a)) and on the same terms and conditions as in effect prior to the
Closing.

 

15

--------------------------------------------------------------------------------

 

(d)           No Infringement.  The operation of the Business does not, and will
not, when conducted by Purchaser, infringe or otherwise conflict with any rights
of any Person in respect of any Intellectual Property.  Except as set forth on
Schedule 3.16(d), Seller has not received any notice from any Person claiming
that such operation or any act, product, technology or service of Seller
infringes or misappropriates the Intellectual Property of any Person (nor does
Seller have knowledge of any claims or any basis therefor).  There have been no
assertions to Seller by any Persons relating to the invalidity or
unenforceability of any Intellectual Property.  To Seller’s knowledge, none of
the Intellectual Property is being infringed or otherwise used or available for
use, by any other Person.

 

(e)           Licensing Arrangements.  Schedule 3.16(e) sets forth all
agreements, arrangements or laws (i) pursuant to which Seller has licensed
Intellectual Property to, or the use of Intellectual Property is otherwise
permitted (through non-assertion, settlement or similar agreements or otherwise)
by, any other Person and (ii) pursuant to which Seller has had Intellectual
Property licensed to it, or has otherwise been permitted to use Intellectual
Property (through non-assertion, settlement or similar agreements or
otherwise).  All of the agreements or arrangements set forth on
Schedule 3.16(e)(x) are in full force and effect in accordance with their terms
and no default exists thereunder by Seller, or to the knowledge of Seller after
due inquiry, by any other party thereto, (y) are free and clear of all Liens,
and (z) do not contain any change in control or other terms or conditions that
will become applicable or inapplicable as a result of the consummation of the
transactions contemplated by this Agreement.  The consummation of the
transactions contemplated by this Agreement will neither violate nor result in
the breach, modification, cancellation, termination or suspension of such
arrangements and agreements.  Seller has delivered to Purchaser true and
complete copies of all licenses and arrangements (including amendments) set
forth on Schedule 3.16(e).  All royalties, license fees, charges and other
amounts payable by, on behalf of, to, or for the account of, the Seller in
respect of any Intellectual Property are disclosed in the Financial Statements.

 

(f)            No Intellectual Property Litigation or Disputes.  No claim or
demand of any Person has been made nor is there any proceeding that is pending,
or to the knowledge of Seller after due inquiry, threatened, nor is there a
reasonable basis therefor, which (i) challenges the rights of Seller in respect
of any Intellectual Property, (ii) asserts that Seller is infringing or
otherwise in conflict with, or is, except as set forth in Schedule 3.16(f),
required to pay any royalty, license fee, charge or other amount with regard to,
any Intellectual Property, or (iii) claims that any default exists under any
agreement or arrangement listed on Schedule 3.16(f).  None of the Intellectual
Property is subject to any outstanding order, ruling, decree, judgment or
stipulation by or with any court, arbitrator, or administrative agency, or has
been the subject of any litigation within the last five years, whether or not
resolved in favor of Seller.  Except as set forth in Schedule 3.16(f), there are
no contracts, licenses or agreements between Seller and any other Person with
respect to the Intellectual Property under which there is any dispute regarding
the scope of such agreement or performances under such agreement, including with
respect to any payments to be made or received by Seller thereunder.

 

(g)           Due Registration, Etc.  To the extent deemed necessary or
appropriate by Seller, the Owned Intellectual Property has been duly registered
with, filed in or issued by, as the case may be, the United States Patent and
Trademark Office, United States Copyright Office or

 

16

--------------------------------------------------------------------------------

 

such other filing offices, domestic or foreign, and Seller has taken such other
reasonable steps to ensure full protection under any applicable laws or
regulations, and such registrations, filings, issuances and other actions remain
in full force and effect.  Seller has no knowledge of any necessary steps to
protect the Intellectual Property which have not been taken, which if not taken
would jeopardize Seller’s Rights to the Intellectual Property.  In each case in
which Seller has acquired any Intellectual Property related to the Business from
any Person, Seller has obtained a valid and enforceable assignment sufficient to
irrevocably transfer all rights in such Intellectual Property to Seller and, to
the maximum extent provided for by, and in accordance with, applicable laws and
regulations, Seller has recorded each such assignment with the relevant
governmental authorities, including the PTO, the U.S. Copyright Office, or
respective equivalents in any relevant foreign jurisdiction, as the case may be.

 

(h)           Use of Name and Mark.  Except as set forth in Schedule 3.16(h),
there are, and immediately after the Closing will be, no contractual restriction
or limitations pursuant to any orders, decisions, injunctions, judgments, awards
or decrees of any Governmental Authority on the Purchaser’s right to use the
names and marks identified in Schedule 3.16(a) in the conduct of the Business as
presently carried on by Seller or as such Business may be extended by Purchaser.

 

(i)            Protection of Information.  Seller has taken reasonable steps to
protect Seller’s rights in Seller’s confidential information and trade secrets
that it wishes to protect or any trade secrets or confidential information of
third parties provided to Seller relating to the Business, and, without limiting
the foregoing, Seller has and enforces a policy requiring each employee and
consultant engaged in the Business to execute a proprietary information/
confidentiality agreement substantially in the form provided to Seller and all
current and former employees and consultants of Seller engaged in the Business
have executed such an agreement.

 

(j)            Effect of Agreement.  Neither this Agreement nor the transactions
contemplated by this Agreement, including the assignment to Purchaser expressly,
by operation of law or otherwise of any contracts or agreements, will result in
(i) Purchaser or Seller granting to any third party any right to or with respect
to any Intellectual Property owned by, or licensed to, any of them
(ii) Purchaser being bound by, or subject to, any non-competition or other
material restriction on the operation or scope of its businesses or
(iii) Purchaser being obligated to pay any royalties or other material amounts
to any third party in excess of those payable by Seller with respect to the
Business, in the absence of this Agreement or the transactions contemplated
hereby.

 

(k)           Intellectual Property Licensed to Gempack.  All Intellectual
Property currently licensed by Seller to Gempack and used in the Business is
listed on Schedule 3.16(k).

 

3.17         Operation of the Business.  Except as set forth in Schedule 3.17,
(a) Seller has operated the Business only through Seller and not through any
other divisions or any direct or indirect subsidiary or affiliate of Seller and
(b) no part of the operation of the Business is operated by or through any
entity other than Seller.

 

17

--------------------------------------------------------------------------------

 

3.18         Environmental Matters.

 

(a)           Hazardous Material.  Except as would not result in material
liability to Seller, no underground storage tanks and no amount of any substance
that has been designated by any Governmental Entity or by applicable Legal
Requirement to be radioactive, toxic, hazardous or otherwise a danger to health
or the environment, including, without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding office and janitorial supplies,
(a “Hazardous Material”) are present, as a result of the actions of Seller or
any affiliate of Seller, or, to Seller’s knowledge, as a result of any actions
of any third Person or otherwise, in, on or under any property, including the
land and the improvements, ground water and surface water thereof, that Seller
has at any time owned, operated, occupied or leased in connection with the
operation of the Business.

 

(b)           Hazardous Materials Activities.  Except as would not result in a
material liability to Seller (in any individual case or in the aggregate)
(i) Seller has not transported, stored, used, manufactured, disposed of,
released or exposed its employees or others to Hazardous Materials in violation
of any Legal Requirement in effect on or before the Closing Date in connection
with the operation of the Business, and (ii) Seller has not disposed of,
transported, sold, used, released, exposed its employees or others to or
manufactured any product containing a Hazardous Material (collectively
“Hazardous Materials Activities”) in violation of any Legal Requirement
promulgated by any Governmental Entity in effect prior to or as of the date
hereof to prohibit, regulate or control Hazardous Materials or any Hazardous
Material Activity in connection with the operation of the Business.

 

(c)           Permits.  Seller currently holds all environmental approvals,
permits, licenses, clearances and consents (the “Seller Environmental Permits”)
necessary for the conduct of Seller’s Hazardous Material Activities and other
activities of the Business.

 

(d)           Environmental Liabilities.  No action, proceeding, revocation
proceeding, amendment procedure, writ or injunction is pending, and to Seller’s
knowledge, no action, proceeding, revocation proceeding, amendment procedure,
writ or injunction has been threatened by any Governmental Entity against Seller
in a writing delivered to Seller concerning any Seller Environmental Permit,
Hazardous Material or any Hazardous Materials Activity of Seller.  Seller knows
of no fact or circumstance which could involve Seller in any environmental
litigation or impose upon Seller any material environmental liability.

 

3.19         Insurance.  Schedule 3.19 contains a true and complete list of all
insurance policies and bonds and self insurance arrangements currently in force
that cover or purport to cover risks or losses to or associated with the
Business, the Assets, employees and agents relating to the Business and sets
forth, with respect to each such policy, bond and self insurance arrangement, a
description of the insured loss coverage, the expiration date and time of
coverage, the dollar limitations of coverage, a general description of each
deductible feature and principal exclusion and the premiums paid and to be paid
prior to expiration. The insurance policies, bonds

 

18

--------------------------------------------------------------------------------

 

and arrangements described on Schedule 3.19 (the “Policies”) provide such
coverage against such risk of loss and in such amounts as are customary for
corporations of established reputation engaged in the same or similar operations
as the Business.

 

3.20         Brokers’ Fees.  No broker, finder or similar agent has been
employed by or on behalf of Seller in connection with this Agreement or the
transactions contemplated hereby, and Seller has not entered into any agreement
or understanding of any kind with any person or entity for the payment of any
brokerage commission, finder’s fee or any similar compensation in connection
with this Agreement or the transactions contemplated hereby.

 

3.21         Disclosure.  No representation or warranty of Seller in this
Agreement and no information contained in any Schedule or other writing
delivered pursuant to this Agreement or at the Closing contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make any of them herein or therein, in light of the
circumstances in which it was made, not misleading.

 

3.22         Transactions with Affiliates.  Except as set forth on
Schedule 3.22, there are no written or oral contracts or agreements between
Seller and its Affiliates relating to the Business.

 

3.23         No Liquidation or Winding-Up; Fairness of Consideration.

 

(a)           No order has been made or petition presented, or resolution passed
for the winding-up or liquidation of Seller and there is not outstanding:
(i) any petition or order for the winding-up of Seller; (ii) any appointment of
a receiver over the whole or part of the undertaking of assets of Seller;
(iii) any petition or order for administration of Seller; (iv) any voluntary
arrangement between Seller and any of its creditors; (v) any distress or
execution or other process levied in respect of Seller which remains
undischarged; or (vi) any unfulfilled or unsatisfied judgment or court order
against Seller relating to the Business or the Assets.

 

(b)           There are no circumstances which would entitle any Person to
present a petition for the winding-up or administration of Seller or to appoint
a receiver over the whole or any part of the Assets of Seller.

 

(c)           Seller is not deemed unable to pay its debts within the meaning of
applicable law.

 

(d)           Neither the execution and delivery of this Agreement nor the
performance of the transactions contemplated hereby will result in a transfer
which is fraudulent under 6 Del. C. §§1304 or 1305.

 

(e)           The operations of Seller have not been terminated.

 

(f)            The consideration paid by Purchaser under this Agreement for the
Assets represents reasonably equivalent value for the Assets.  Seller is not
entering into this Agreement with the intent to defraud, delay or hinder its
creditors and the consummation of the transactions contemplated by this
Agreement will not have any such effect.

 

19

--------------------------------------------------------------------------------

 

3.24         No Undisclosed Liabilities.  Except (i) as set forth on
Schedule 3.24, (ii) as reflected in Seller’s audited financial statements for
the year ended October 31, 2003 and (iii) for liabilities incurred in the
ordinary and usual course of business and consistent with past practice since
October 31, 2003, the Business does not have any liability of any nature,
whether or not absolute, accrued, contingent or otherwise, whether known or
unknown, that individually or in the aggregate have had or are reasonably likely
to have, a Material Adverse Effect on the Business.

 

3.25         Approval and Adoption Requirements; No Sale of All or Substantially
All the Assets.  The only approval or consent necessary to approve this
Agreement, the Transfer and the other transactions contemplated hereby, under
Delaware Law, is the approval of Seller’s Board of Directors, and no other
corporate proceedings are necessary to approve this Agreement or to consummate
the transactions contemplated hereby.

 

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

Purchaser hereby represents and warrants to, and covenants and agrees with,
Seller that:

 

4.1           Organization and Good Standing.  Purchaser has been duly organized
and is existing as a corporation in good standing under the laws of the State of
Delaware with full corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby.

 

4.2           Execution and Delivery.  This Agreement and the Ancillary
Agreements have been duly authorized by all necessary corporate action on the
part of Purchaser, this Agreement has been duly executed and delivered by
Purchaser and the Ancillary Agreements when duly executed and delivered by
Purchaser, assuming the due execution and delivery by Seller, will be legal,
valid and binding agreements of Purchaser enforceable against Purchaser in
accordance with their respective terms.

 

4.3           No Conflicts.  The execution, delivery and performance of this
Agreement and the Ancillary Agreements by Purchaser and the consummation by
Purchaser of the transactions contemplated hereby will not conflict with or
result in the violation of the provisions of the Certificate of Incorporation or
Bylaws of Purchaser.

 

4.4           Compliance with Law.  Through and including the date hereof,
Purchaser (i) to Purchaser’s knowledge, has not been alleged to be in violation
of any Legal Requirement, and (ii) has not received any notice of any alleged
violation of, or any citation for noncompliance with, any Legal Requirement.

 

4.5           No Restrictions Against Purchase of Assets.  Except as listed or
described on Schedule 4.5, the execution and delivery of this Agreement and the
Ancillary Agreements by Purchaser do not and the performance by Seller of the
transactions contemplated hereby and thereby to be performed by it will not,
conflict with, or result in any violation of, or constitute a

 

20

--------------------------------------------------------------------------------

 

default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, (a) the certificate of incorporation or bylaws
of Purchaser, (b) any Legal Requirement to which Purchaser is subject, (c) any
material agreement of Purchaser, or (d) any material licenses of Purchaser.  No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required to be obtained or made by or
with respect to Purchaser under any Legal Requirement in connection with the
execution and delivery of this Agreement or the Ancillary Agreements by
Purchaser or the performance by Purchaser of the transactions contemplated
hereby and thereby to be performed by it.

 

ARTICLE V
ADDITIONAL COVENANTS

 

5.1           Covenants of Seller.  Seller agrees to:

 

(a)           use its best efforts to obtain (and to cooperate with Purchaser in
obtaining) any consent, authorization or approval of, or exemption by, any
Person required to be obtained or made by Seller in connection with the
transactions contemplated by this Agreement; and

 

(b)           use its best efforts to bring about the satisfaction of the
conditions precedent to Closing set forth in Article VI of this Agreement.

 

5.2           Covenants of Purchaser.  Purchaser agrees to use its best efforts
to bring about the satisfaction of the conditions precedent to Closing set forth
in Section 6.2 of this Agreement.

 

5.3           Expenses.  All costs and expenses (including, without limitation,
all legal fees and expenses and fees and expenses of any brokers, finders or
similar agents) incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring the same.

 

5.4           Further Assurances.

 

(a)           Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use its best efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable Legal Requirements, to consummate and make effective
the transactions contemplated by this Agreement.

 

(b)           If at any time after the Closing any further action is necessary
or desirable to carry out the purposes of this Agreement, Seller and Purchaser,
and the proper officers or directors of Seller and Purchaser, as the case may
be, shall take or cause to be taken all such necessary or convenient action and
execute, and deliver and file, or cause to be executed, delivered and filed, all
necessary or convenient documentation.

 

(c)           Without limiting the foregoing, Seller hereby agrees that it shall
use its best efforts and take any further action necessary or desirable in
accordance with all applicable

 

21

--------------------------------------------------------------------------------

 

laws to protect any and all trade secrets and confidential or proprietary
information related to the Business from disclosure or use by any current or
future employees.

 

5.5           Inconsistent Action.  Seller shall not take or cause or suffer to
be taken, any action that would cause any of the representations or warranties
of Seller in this Agreement to be untrue, incorrect, incomplete or misleading.

 

5.6           Employee Matters.

 

(a)           Seller acknowledges and agrees that after the Closing (a) except
as set forth on Schedule 5.6(a)(i), neither Purchaser nor Seller shall be
required to employ or retain any employee of Seller or any other Person, and
(b) Purchaser, in its sole and absolute discretion, may hire all, some, or none
of the Employees.  Seller agrees not to terminate the employment of any employee
who is listed on Schedule 5.6(a) for the period commencing on the date hereof
through the period ending ninety days after the Closing Date unless such
employee engages in willful or grossly negligent misconduct to the detriment of
Seller or the Business.  Seller shall not be required to maintain the employment
of any employee who does not desire to remain employed by Seller or Purchaser.

 

(b)           Except to the extent expressly included in Assumed Liabilities or
in another paragraph of this Section 5.6, Purchaser does not, and shall not,
assume or be responsible for any obligation or liability arising out of any
employment relationship of Seller, and without limiting the foregoing, Purchaser
shall have no liability or obligation in connection with current or former
employees or agents of Seller or any dependent or beneficiary of any of them by
reason of their relationship to Seller.  Without limiting the foregoing, Seller
shall remain liable for, and shall pay on or before the Closing, the following
in connection with current or former employees or agents of Seller (or any
dependent or beneficiary of them):

 

(i)            unpaid wages, salaries or other compensation;

 

(ii)           contributions to or payments under employee benefit plans,
programs, policies, arrangements or understandings;

 

(iii)          accrued, but unused, holiday, sick leave and severance pay, if
any;

 

(iv)          liabilities or obligations under any collective bargaining
agreement or bargaining relationship; or

 

(v)           claims, demands, administrative proceedings or suits arising out
of, or in connection with, alleged unlawful employment practices of Seller.

 

(c)           Seller shall remain responsible for all liabilities and
obligations in connection with claims for post-employment medical, vision and
dental benefits that may be required under IRC Section 4980B made by or in
respect of any employee of Seller whose employment terminated on or prior to the
Closing Date and any “qualified beneficiary” (within the meaning of IRC
Section 4980B) of any such employee who is receiving post-employment

 

22

--------------------------------------------------------------------------------

 

medical and dental benefits or whose “qualifying event” (within the meaning of
IRC Section 4980B) entitling such individual to such benefits occurred on or
before the Closing Date.

 

(d)           Seller shall be responsible for giving any notice that may be
required by the Worker Adjustment and Retraining Notification Act (“WARN”), or
any similar state or local statue or ordinance, as a result of the purchase of
the Business both as to (i) layoffs or facility closings ordered prior to the
Closing Date, including layoff of employees who are not employed or retained by
Purchaser, or (ii) decisions to layoff employees employed or retained by
Purchaser made within 90 days after the Closing Date.  Purchaser agrees to give
Seller notice of any decision to layoff employees employed or retained by
Purchaser made within 90 days after the Closing Date.

 

5.7           Assignments; Consents.  To the extent that the assignment of any
Contract, license or other agreement or arrangement or any claim, right or
benefit arising thereunder or resulting therefrom is not permitted without the
consent of a third party, this Agreement shall constitute Seller’s agreement to
obtain such consent, upon Purchaser’s request.  Upon Purchaser’s request, Seller
shall use its commercially reasonable efforts to obtain any such consent after
the Closing Date until such time as such consent has been obtained, and Seller
will cooperate with Purchaser in any lawful and economically feasible
arrangement to provide that Purchaser shall receive the interest of Seller in
the benefits under any such Contract, license or other agreement or arrangement,
including performance by Seller, as agent, if economically feasible, provided
that Purchaser shall undertake to pay or satisfy the corresponding liabilities
for the enjoyment of such benefit to the extent Purchaser would have been
responsible therefor hereunder if such consent or approval had been obtained. 
Nothing in this Section 5.7 shall be deemed a waiver by Purchaser of its right
to have received on or before the Closing an effective assignment of all of the
Assets nor shall this Section 5.7 be deemed to constitute an agreement to
exclude from Purchaser any of the Assets described under Section 2.1.

 

5.8           Sufficiency of Assets.  Following the Closing, if Purchaser
determines that Seller has failed to Transfer to Purchaser any assets,
properties or rights, tangible or intangible, except for the Excluded Assets,
necessary for Purchaser to operate the Business as currently operated, and to
produce, sell, distribute, maintain, design, enhance and license, and design and
develop derivatives of, the Products, or derivatives thereof, Seller shall
promptly take all actions as shall be necessary, or otherwise reasonably
requested by Purchaser, to transfer such assets, properties and rights to
Purchaser.

 

ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING

 

6.1           Conditions of Purchaser.  Notwithstanding any other provision of
this Agreement, the obligations of Purchaser to consummate the transactions
contemplated hereby shall be subject to the satisfaction, at or prior to the
Closing Date, of the following conditions:

 

(a)           There shall not be instituted and pending or threatened any Action
before any Governmental Entity (i) challenging or otherwise seeking to restrain
or prohibit the consummation of the transactions contemplated hereby or
(ii) seeking to prohibit the direct or

 

23

--------------------------------------------------------------------------------

 

indirect ownership or operation by Purchaser of all or a material portion of the
Business or Assets, or to compel Purchaser or Seller to dispose of or hold
separate all or a material portion of the Business or Assets of Seller or
Purchaser;

 

(b)           The representations and warranties of Seller in this Agreement
shall be true and correct as of the date of this Agreement and shall be true and
correct in all material respects (or in all respects in the case of any
representation or warranty subject to a materiality qualification) on and as of
the Closing Date with the same effect as if made on the Closing Date, except for
those representations and warranties which address matters only as of a
particular date (which shall be true and correct as of such date) and Seller
shall have complied with all covenants and agreements and satisfied all
conditions on Seller’s part in this Agreement or any Ancillary Agreement to be
performed or satisfied on or prior to the Closing Date, and Seller shall have
provided Purchaser with a certificate with respect to the foregoing signed by an
authorized officer of Seller;

 

(c)           Purchaser shall have received from counsel for Seller, a written
opinion dated the Closing Date and addressed to Purchaser, in substantially the
form attached as Exhibit G hereto;

 

(d)           Purchaser shall have received from the President of Seller a
certificate dated the Closing Date to the effect that the conditions set forth
in Section 6.1(b) have been satisfied and that Seller’s Board of Directors has
approved the Agreement, the Transfer and the other transactions contemplated
hereby;

 

(e)           Purchaser will have received such bills of sale, assignments,
certificates of title and other instruments of transfer (the “Transfer
Documents”) duly executed by Seller, in such forms and covering such matters as
Purchaser may reasonably request, Transferring the Assets to Purchaser;

 

(f)            Seller and Dr. K. Philip Hwang shall each have entered into and
delivered to Purchaser the Noncompetition Agreements;

 

(g)           Purchaser shall have concluded (through its representatives,
accountants, counsel and other experts) an investigation of the condition
(financial and other), results of operations, properties, assets, prospects and
operations of the Business and shall be satisfied, in its sole discretion, with
the results thereof;

 

(h)           All corporate and other proceedings and actions taken in
connection with the transactions contemplated hereby and all certificates,
opinions, agreements, instruments, releases and documents referenced herein or
incident to the transactions contemplated hereby shall be in form and substance
satisfactory to Purchaser and its counsel;

 

(i)            All consents and assignments from third parties, including from
any Governmental Entity or other Person, relating to the Contracts listed on
Schedule 2.1(a) or the

 

24

--------------------------------------------------------------------------------

 

conduct and operation of the Business as currently conducted and operated, shall
have been obtained;

 

(j)            No act, event or condition shall have occurred after the date
hereof which Purchaser determines has had or could have a Material Adverse
Effect on the Business or the Assets;

 

(k)           The Board of Directors of Seller shall have authorized and
approved this Agreement and the transactions contemplated hereby;

 

(l)            Seller, Purchaser and the Escrow Agent shall have entered into
the Escrow Agreement;

 

(m)          Seller and Purchaser shall have entered into the Transitional
Supply and Trademark License Agreement;

 

(n)           Seller and Purchaser shall have entered into the License
Agreement;

 

(o)           Seller and each of the key employees listed on
Schedule 5.6(a) shall have entered into legally binding and enforceable
non-disclosure agreements in a form satisfactory to Purchaser;

 

(p)           The Principal Stockholders and Purchaser shall have entered into
the Stockholders Agreement;

 

(q)           Gemma Hwang shall have amended and released her security interest
in all of the Assets, and shall have filed an amendment to the UCC Financing
Statements related thereto releasing the Assets from the collateral under such
filing;

 

(r)            Seller shall have received and delivered to Purchaser a written
opinion from Richards, Layton & Finger, P.A. with respect to the approval of
Seller’s Stockholders not being required under Section 271 of Delaware Law, in
the form attached hereto as Exhibit I.

 

6.2           Conditions of Seller.  Notwithstanding any other provision of this
Agreement, and except as set forth below, the obligations of Seller to
consummate the transactions contemplated hereby shall be subject to the
satisfaction, at or prior to the Closing, of the conditions set forth in
subsections (a), (l), (m), (n), (o), (q) and (r) of Section 6.1 of this
Agreement, and the condition that the representations and warranties of
Purchaser in this Agreement shall be true and correct as of the date of this
Agreement and the true and correct in all material respects (or in all respects
in the case of any representations or warranty subject to a materiality
qualification) on and as of the Closing Date with the same effect as if made on
the Closing Date and Purchaser shall have complied with all covenants and
agreements and satisfied all conditions on its part to be performed or satisfied
on or prior to the Closing Date, and Purchaser shall have provided Seller with a
certificate with respect to the foregoing signed by an authorized officer of
Purchaser.

 

25

--------------------------------------------------------------------------------

 

ARTICLE VII
POST-CLOSING OBLIGATIONS

 

7.1           Seller-Assumed Warranty Obligations.  Notwithstanding, and not in
limitation of, any other provision herein, Seller shall assume, commencing at
the Closing, all obligations and liabilities of any nature whatsoever arising
out of, relating to, or in connection with the matters set forth in this
Section 7.1.

 

(a)           Seller shall retain sole responsibility for, and shall bear the
cost of complying with, all warranties (the “Warranties”) in existence on the
Closing Date with respect to Products sold by Seller on or prior to the Closing
Date and for any product purchased by Purchaser from Seller under the
Transitional Supply and Trademark License Agreement until the expiration of such
Warranties (collectively, “Warranty Obligations”).

 

(b)           Exhibit H hereto sets forth the Warranties.

 

(c)           Seller agrees to provide all services required to correct, repair
or replace Products or parts thereof covered by the Warranties in accordance
with the terms of the Warranties.  Such services shall be consistent, in all
material respects, with the quality and manner of performance of similar
services provided by or made available to under the Warranties prior to the
Closing Date.  Seller shall use business practices, standards and internal
controls that are substantially the same as those used by Seller prior to the
Closing Date and consistent with past practices, with only such changes as are
agreed to between Seller and Purchaser, and shall maintain sufficient materials,
equipment and employees required to satisfy its Warranty Obligations hereunder,
including the continued employment of the person(s) who are designated in
Schedule 7.1 as essential to the performance of Seller’s obligations under this
Section 7.1.  Not in limitation of the foregoing, Seller shall repair or replace
and ship at least 95% of units of Products returned pursuant to the terms of the
Warranties in accordance with the following time schedule:

 

(i)            within 10 business days after receipt of the Products, for
Products that were in production in the 12 calendar month period prior to the
return; and

 

(ii)           within 10 business days after receipt of the Products, for
Products that were in production in the 13 to 36 calendar month period prior to
the return.

 

7.2           Seller Supply of the Products.  Pursuant to the terms and
conditions of the Transitional Supply Agreement, Purchaser will purchase
Seller’s existing inventory of its Products at such time that Purchaser makes
sales of such Products.

 

7.3           Seller-Assumed Support Services Obligations.  Notwithstanding any
other provision herein to the contrary, Seller shall assume, commencing on the
date hereof, all obligations and liabilities of any nature whatsoever arising
out of, relating to, or in connection with the matters set forth in this
Section 7.3.

 

26

--------------------------------------------------------------------------------

 

(a)           For the period that ends ninety days after the Closing Date,
Seller shall have the responsibility for and shall bear the cost of providing
engineering and technical support services, access to Seller’s key personnel and
documentation, introductions to vendors and customers and other similar support
(the “Transitional Services”) to assist Purchaser with respect to the
manufacturing, distribution and sales of the Products, as set forth in Exhibit E
hereto.  Services provided by Seller under this Section 7.3(a) shall be
consistent, in all material respects, with the quality and manner of performance
of similar services provided by or made available to support the Products in
connection with Seller’s operations prior to the Closing Date.  Seller shall use
business practices, standards and internal controls that are substantially the
same as those used by Seller prior to the Closing Date and consistent with past
practices, with only such changes as are agreed to between Seller and Purchaser.

 

(b)           Seller shall designate at least one contact person within Seller
who is knowledgeable and experienced in the design, workings, capabilities and
use of the Products who will be responsible for initially responding to
inquiries relating to the support services to be provided on behalf of
Purchaser.  Seller shall maintain sufficient materials, equipment and employees
to provide the Transitional Services under this Section 7.3, including the
continued employment of the person(s) who are designated in Schedule 7.3(b) as
essential to the Transitional Services being provided, and Seller shall perform
its services in a manner consistent with good business practices which are
customary in the industry.

 

(c)           Seller agrees that all Intellectual Property currently licensed by
Seller to Gempack, included in the Assets transferred hereunder free and clear
of all Liens, shall be delivered as part of the Transitional Services, and all
such license agreements shall be terminated and evidence of such termination
provided to Purchaser within the Transitional Services period.

 

7.4           Continued Operations; No Bankruptcy.  Seller intends to continue
its operations consistent with its past practices after the Closing Date, other
than as contemplated by this Agreement.  As of the date hereof and as of the
Closing Date, Seller does not intend or expect to file or seek relief under the
United States Bankruptcy Code or any other insolvency or similar law after the
Closing Date.  Seller intends to use its commercially reasonable best efforts to
discourage and avoid any involuntary petition by creditors or others to place
Seller in any bankruptcy case or proceeding under the United States Bankruptcy
Code or any other insolvency law or similar law.

 

7.5           Product Returns.  Seller agrees that it will accept for return and
for full credit, at any time upon a customer’s request, any and all units of
Products that are in the worldwide distribution channel on the Closing Date that
are subject to any rights of return from distribution customers.

 

7.6           Stockholder Vote.  In the event of a court order to the effect
that the approval of the stockholders of Seller is required under Section 271 of
Delaware Law to effect the Transfer of the Business, Seller shall promptly use
its best efforts to cause the Principal Stockholders to take any action required
under Delaware Law to give operative effect to the Stockholders’ Agreement.

 

27

--------------------------------------------------------------------------------

 

7.7           Korea Distributor Agreement.  Purchaser and Seller agree to use
their commercially reasonable efforts to negotiate and enter into a
non-exclusive distributor agreement within thirty days after the Closing.  The
agreement will contain terms similar to those contained in Purchaser’s standard
form of distributor agreement, and will provide Seller with the non-exclusive
right to distribute TeleVideo-branded products in Korea for a one-year period.

 

7.8           Stockholders’ Agreement Opinion.  Seller agrees that within seven
days after the Closing Date, Seller shall deliver to Purchaser a written opinion
of Richards, Layton & Finger, P.A. with respect to the enforceability under
Delaware Law of the Stockholders’ Agreement and the proxy, attached thereto.

 

7.9           Transfer of Shares subject to Stockholders’ Agreement.  Seller
agrees that it will not approve the transfer the Principal Stockholders’ shares
of Seller’s common stock that are subject to the transfer restrictions contained
in the Stockholders’ Agreement, in violation of such transfer restrictions.

 

ARTICLE VIII
INDEMNIFICATION

 

8.1           Survival.  Notwithstanding any investigation conducted at any time
with regard thereto by or on behalf of Purchaser, the representations and
warranties of Seller contained in this Agreement or in any Exhibit or
Schedule hereto shall survive the Closing and the consummation of the
transactions contemplated hereby (and any examination or investigation by or on
behalf of any party hereto); provided, however, that (i) the representations and
warranties contained in Sections 3.2 and 3.26 and the related claims for
indemnification, shall survive until the earliest of (x) the receipt of
stockholder approval of this Agreement, the Transfer and the other transactions
contemplated hereby in accordance with Section 271 of Delaware Law, (y)
October 5, 2008, if no action has been filed alleging that stockholder approval
is required pursuant to Section 271 of Delaware Law to effect the Transfer (a
“Section 271 Action”), and (z) the receipt of a non-appealable, final order of a
court to the effect that stockholder approval is not required under Section 271
of Delaware Law to effect the Transfer, if a Section 271 Action has been timely
filed by a stockholder; (ii) the representations and warranties contained in
Sections 3.3 and 3.6, and the related claims for indemnification, shall survive
until the fifth anniversary of the Closing Date; (iii) the representations and
warranties contained in Section 3.8, and the related claims for indemnification,
shall survive until sixty (60) days after the expiration of the applicable
statute of limitations, and (iv) all other representations and warranties, and
related claims for indemnification, shall survive until the third anniversary of
the Closing Date.  The termination of the representations and warranties
provided herein shall not affect the rights of a party in respect of any claim
made by Purchaser prior to the expiration of the applicable survival period. 
The agreements and covenants contained in this Agreement shall survive the
Closing Date indefinitely or in accordance with their terms, if any.

 

8.2           Indemnification.  Subject to the limitations in Section 8.5,
Seller covenants and agrees to defend, indemnify and hold harmless Purchaser and
each Person who controls Purchaser from and against any Damages arising out of
or resulting from: (i) any inaccuracy in or breach of any representation or
warranty made by Seller in this Agreement or in any writing

 

28

--------------------------------------------------------------------------------

 

delivered pursuant to this Agreement or at the Closing; (ii) the failure of
Seller to perform or observe fully any covenant, agreement or provision to be
performed or observed by Seller pursuant to this Agreement; (iii) Purchaser’s
waiver of any applicable bulk sales laws; or (iv) any claim arising out of any
oral or written agreement between Seller and DT Research, Inc. or its
affiliates.

 

8.3           Procedures.  If Purchaser seeks indemnification under this
Article VIII, it shall give notice (“Claim Notice”) to Seller of the basis of
the claim (the “Claim”) (i) within a reasonable time after discovery of the
facts and (ii) in any event, within the time periods set forth in Section 8.1,
provided that the failure to give such notice shall not relieve Seller of any
liability hereunder except to the extent that Seller is materially adversely
prejudiced by such failure.  Seller shall give notice to Purchaser within
fifteen (15) business days after receipt of the notice requested by this
Section 8.3 advising whether it (i) acknowledges its obligation to indemnify
Purchaser or (ii) disputes its obligation to indemnify Purchaser.  If Seller
acknowledges its indemnification obligation with respect to the Claim, and such
Claim is based upon an asserted liability or obligation to a person or entity
that is not a party to this Agreement (a “Third Party Claim”), Purchaser may, in
its sole discretion, control and conduct the defense of any such Third Party
Claim, including settlement, and take reasonable steps to defend such Third
Party Claim.  Notwithstanding the foregoing, Purchaser shall not agree to the
settlement or compromise of any Third Party Claim for money Damages without
Seller’s consent (which consent shall not be unreasonably withheld or delayed)
to the amount of any such settlement or compromise.  If such Claim is not a
Third Party Claim, Purchaser shall be entitled to immediate satisfaction of such
Claim.  If Purchaser does not notify Seller within fifteen (15) business days
following receipt of a Claim Notice that it elects to undertake the defense of
the Third Party Claim described therein, Seller shall have the right to control
and conduct the defense of such Claim, and take reasonable steps to defend such
Third Party Claim, on behalf of and for the account of Seller, provided that no
settlement or compromise may be effected without the consent of Purchaser (which
consent shall not be unreasonably withheld or delayed).  If Seller does not
notify Purchaser within fifteen (15) business days following receipt of notice
of a Claim that is not a Third Party Claim that it disputes such Claim, such
Claim shall be deemed a liability of Seller and Seller shall pay the amount of
the Claim on demand by Purchaser, or in the case of any notice in which the
amount of the Claim is estimated, on such later date when the amount of the
Claim is finally determined.  If Seller disputes the Claim in a timely manner as
set forth herein, Seller and Purchaser shall proceed in good faith to negotiate
a resolution of the dispute, or, if necessary, to final judgment or order of a
court of equity of competent jurisdiction determining the amount of the Damages
or by any other means elected by Purchaser.

 

8.4           Indemnification Exclusive.  Except as provided herein, the
foregoing indemnification provisions shall be the sole and exclusive remedy
after the Closing Date for money damages available to Purchaser for breach of
any representations, warranties or covenants contained herein, but shall not
limit any other remedy to which Purchaser may be entitled.  Nothing in this
Agreement shall be construed as limiting in any way the remedies that may be
available to Purchaser in the event of fraud relating to the representations,
warranties or covenants made by Seller in this Agreement.

 

29

--------------------------------------------------------------------------------

 

8.5           Limitation on Amount.  Seller shall not be liable for claims made
under this Article VIII until the aggregate amount of the Damages incurred by
Purchaser shall exceed $50,000, in which event the indemnification obligations
of Seller shall apply to the amount of all claims made under this Article VIII,
provided, however, that any amount recoverable by Purchaser from Seller in
accordance with Sections 2.6, 3.2, 3.26 or 7.6, shall not be subject to the
$50,000 threshold.

 

ARTICLE IX
REBATE AND MARKETING PROGRAMS

 

9.1           List of Programs.  Schedule 9.1 contains a true and complete list
and description of, and amounts that Purchaser may be contingently obligated to
pay under, all market development fund (“MDF”), marketing and rebate programs.
Purchaser shall assume no liability or obligations for any such claims under
Seller’s MDF, marketing or rebate programs except for the items specifically set
forth on Schedule 9.1.  In particular, but not in limitation of the foregoing,
Purchaser shall not assume any liability or obligations for Seller’s special
price quote (“SPQ”) program with regard to inventory of the Products in the
worldwide distribution channel and in transit to distributors worldwide on the
Closing Date.  Any claims arising under Seller’s SPQ program from customers will
be the sole responsibility of Seller.

 

9.2           Payments.  Seller agrees to pay to Purchaser, within thirty (30)
days of the date of invoice by Purchaser, the amounts of any and all claims made
to Purchaser arising under Seller’s MDF, marketing or rebate programs for which
Seller is responsible under Section 9.1, provided that Purchaser provides Seller
with a copy of the claim made to Purchaser, Seller reasonably concludes such
claim is a valid obligation of the Seller as determined in accordance with this
Article XI and Purchaser makes appropriate payments to the customer.

 

9.3           Marketing Rights.  Seller shall provide a prominent link, with the
content approved by Purchaser, from the main page of Seller’s website at
www.televideo.com, from the products page at www.televideo.com and such other
pages as Purchaser may reasonably request to Purchaser’s website at
www.neoware.com for a two (2)-year period commencing on the Closing Date.

 

ARTICLE X
GENERAL PROVISIONS

 

10.1         Notices.  All notices and other communications under or in
connection with this Agreement shall be in writing and shall be deemed given
(a) if delivered personally (including by overnight express or messenger), upon
delivery, (b) if delivered by registered or certified mail (return receipt
requested), upon the earlier of actual delivery or three days after being
mailed, or (c) if given by telecopy, upon confirmation of transmission by
telecopy, in each case to the parties at the following addresses:

 

30

--------------------------------------------------------------------------------

 

(a)           If to the Purchaser, addressed to:

 

Neoware Systems, Inc.

400 Feheley Drive

King of Prussia, Pennsylvania 19406

Attention:  Michael G. Kantrowitz, President and Chief Executive Officer

Facsimile:  (610) 275-5739

 

With a copy to:

 

McCausland Keen & Buckman

Radnor Court, Suite 160

259 N. Radnor-Chester Road

Radnor, Pennsylvania 19087

Attention:  Nancy D. Weisberg, Esquire

Facsimile:  (610) 341-1099

 

(b)           If to Seller, addressed to:

 

TeleVideo, Inc.

2345 Harris Way

San Jose, California 95131

Attn:  Richard Kim, Vice President

Facsimile:  (408) 955-7788

 

With a copy to:

 

O’Melveny & Myers

2765 Sand Hill Road

Menlo Park, California 94025

Attn: John Mills, Esquire

Facsimile: (650) 473-2601

 

10.2         Severability.  If any term or provision of this Agreement or the
application thereof to any circumstance shall, in any jurisdiction and to any
extent, be invalid or unenforceable, such term or provision shall be ineffective
as to such jurisdiction to the extent of such invalidity or unenforceability
without invalidating or rendering unenforceable such term or provision in any
other jurisdiction, the remaining terms and provisions of this Agreement or the
application of such terms and provisions to circumstances other than those as to
which it is held invalid or enforceable.

 

10.3         Entire Agreement.  This Agreement, including the annexes and
schedules attached hereto and other documents referred to herein, contains the
entire understanding of the parties hereto in respect of its subject matter and
supersedes all prior and contemporaneous agreements and understandings, oral and
written, between the parties with respect to such subject matter.

 

10.4         Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of Purchaser and Seller and their respective successors,
heirs and assigns; provided,

 

31

--------------------------------------------------------------------------------

 

however, that Seller shall not directly or indirectly transfer or assign any of
Seller’s rights or obligations hereunder in whole or in part without the prior
written consent of Purchaser.  Subject to the foregoing, this Agreement is not
intended to benefit, and shall not run to the benefit of or be enforceable by,
any other person or entity other than the parties hereto and their permitted
successors and assigns.

 

10.5         Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same Agreement.

 

10.6         Recitals, Schedules, Exhibits and Annexes.  The recitals,
schedules, exhibits and annexes to this Agreement are incorporated herein and,
by this reference, made a part hereof as if fully set forth at length herein.

 

10.7         Construction.

 

(a)           The article, section and subsection headings used herein are
inserted for reference purposes only and shall not in any way affect the meaning
or interpretation of this Agreement.

 

(b)           As used in this Agreement, the masculine, feminine or neuter
gender, and the singular or plural, shall be deemed to include the others
whenever and wherever the context so requires.

 

(c)           For the purposes of this Agreement, unless the context clearly
requires, “or” is not exclusive.

 

10.8         Governing Law.  This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the
Commonwealth of Pennsylvania.

 

10.9         Passage of Title and Risk of Loss.  Legal title, equitable title
and risk of loss with respect to the Assets will not pass to Purchaser until
such Assets are Transferred at the Closing, which transfer, once it has
occurred, will be deemed effective for tax, accounting and other computational
purposes as of 11:59 P.M. (Eastern Time) on the Closing Date.

 

10.10       Bulk Sales.  Purchaser hereby waives compliance by Seller with the
provisions of the bulk sales laws of any jurisdiction, if applicable, provided
that Seller agrees to indemnify Purchaser for claims of creditors of Seller with
respect to liabilities not expressly assumed by Purchaser pursuant to this
Agreement.

 

32

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement, or
has caused this Agreement to be executed on its behalf by a representative duly
authorized, all as of the date first above set forth.

 

 

 

NEOWARE SYSTEMS, INC.

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

TELEVIDEO, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

33

--------------------------------------------------------------------------------

 

Exhibit E

Transitional Services

 

Transitional Services shall include the following:

 

•                  Transfer of all documentation of Products and technology
acquired or licensed including source code

•                  Transfer all manufacturing, packaging, process, testing
documentation and instructions and any owned tooling.

•                  Provide vendor introductions and meetings and facilitate
transfer of relationship.

•                  Provide customer introductions and facilitate meetings and
transfer of relationship.

•                  Provide access to engineering, manufacturing, tech support
and customer data bases related to documentation, procedures, RMA, customer
(including general purpose terminals), engineering problem reports, etc.
including access in electronic and hard copy format.

•                  Provide any marketing materials which would be used to define
and describe current products.  This includes but is not limited to product
specifications, requirements, photographs, logos, illustrations or other
materials which would be used either to develop marketing materials or would be
the end marketing deliverables to support sales.

•                  All documentation of product certifications such as UL, CSA,
etc.

•                  Provide a software production environment for Purchaser to
build the images.  Provide pre-installed development environment including any
build automation or scripts, such that Purchaser can reproduce any production
image exactly by following Seller’s current release procedures.

•                  Provide any software enhancements that have been provided to
any vendor that are to be installed at time of manufacture.  Documentation must
describe exactly how to reproduce and/or modify the custom image.

•                  Provide a complete thin client system sufficient to continue
development and testing of thin client products.  Include ability to build the
final images from source code of all shipping products including, but not
limited to source code, management tools, build procedures and scripts, and
build computers.

•                  Provide all hardware and equipment dedicated to design,
manufacture and testing of thin client products.

•                  Provide complete software test procedures used to validate
software prior to release, including test scripts and manual test plans.  Also
provide documented results, including exceptions and anomalies, of testing all
software currently in production.

•                  Seller to provide training to Purchaser operations and
development teams on building and maintaining thin client S/W including
management system.

 

--------------------------------------------------------------------------------

 

•                  Provide any other support including access to employees,
documentation, third party providers, etc. necessary to enable a complete
transition of all technology, product, customers, etc acquired or licensed as
part of the transaction.

•                  Prior to the Closing, Seller will continue to be responsible
for supporting and fixing bugs in Thin Client software and management software.
Seller must provide any source code modifications which take place after initial
transfer of the source code.

 

2

--------------------------------------------------------------------------------

 

Exhibit H

 

Warranties

 

See attached.

 

--------------------------------------------------------------------------------