Exhibit 10.1

 

 

ASSET AND STOCK PURCHASE AGREEMENT

 

by and among

ELECTRO SWITCH CORP.

 

and

 

ESC WORLDWIDE, INC.

and

EMRISE ELECTRONICS CORPORATION

and

EMRISE CORPORATION

 

Dated March 20, 2009

 

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE I

DEFINITIONS

1

 

 

 

ARTICLE II

SALE AND PURCHASE TRANSACTIONS; CLOSING

14

2.1

Sale and Purchase of the Digitran Assets

14

2.2

Retained Assets

16

2.3

Assumption of Liabilities

17

2.4

Retained Liabilities

17

2.5

Assignability and Consents.

19

2.6

Sale and Purchase of XCEL Japan Shares

19

2.7

Purchase Price

19

2.8

Closing

21

2.9

Closing Obligations

21

2.10

Purchase Price Adjustment

24

2.11

Purchase Price Allocation

25

2.12

Buyers’ Representative

26

 

 

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

26

3.1

Organization and Good Standing

26

3.2

Authority; No Conflict

26

3.3

Capitalization; No Subsidiaries; Stockholder Claims Against XCEL Japan.

27

3.4

Financial Statements

28

3.5

Books and Records

29

3.6

Title to Assets; Encumbrances; Leases

29

3.7

Condition and Sufficiency of Facilities

31

3.8

Accounts Receivable

31

3.9

Inventory

31

3.10

No Undisclosed Liabilities

31

3.11

Taxes

32

3.12

No Material Adverse Change

32

3.13

Employee Benefits

32

3.14

Compliance with Legal Requirements; Governmental Authorizations

34

3.15

Legal Proceedings; Orders

36

3.16

Absence of Certain Changes and Events

37

3.17

Contracts; No Defaults

38

3.18

Insurance

39

3.19

Environmental Matters

41

3.20

Employees

42

3.21

Labor Relations; Compliance

43

3.22

Intellectual Property

44

3.23

Certain Payments

47

3.24

Customer / Supplier Relations

47

 

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Page

 

 

 

3.25

Product Warranty

47

3.26

Product Liability

48

3.27

Export Regulation

48

3.28

Disclosure

48

3.29

Brokers or Finders

48

3.30

No Insolvency

48

3.31

Intercompany Arrangements and Accounts

48

 

 

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYERS

49

4.1

Organization and Good Standing

49

4.2

Authority; No Conflict

49

4.3

Investment Intent

49

4.4

Certain Proceedings

49

4.5

Brokers or Finders

50

4.6

Bulk Transfer Laws

50

 

 

 

ARTICLE V

INDEMNIFICATION; REMEDIES

50

5.1

Survival; Right to Indemnification Not Affected by Knowledge

50

5.2

Indemnification and Payment of Damages by Seller and Parent

50

5.3

Indemnification and Payment of Damages by Buyers

52

5.4

Time Limitations

52

5.5

Limitations on Amount

52

5.6

Procedure For Indemnification—Third-Party Claims

53

5.7

Procedure For Indemnification—Other Claims

54

5.8

Sole Remedy

54

5.9

Insurance and Third Party Recoveries

54

5.10

Tax Benefit

54

 

 

 

ARTICLE VI

TAX MATTERS

55

6.1

Tax Returns

55

6.2

Transfer Taxes

55

 

 

 

ARTICLE VII

POST-CLOSING COVENANTS

56

7.1

Confidentiality

56

7.2

Maintenance of, and Access to, Records.

56

7.3

Non-Competition.

57

7.4

Accounts Receivable

59

7.5

Employee Matters.

59

7.6

Electronic Mail

59

7.7

Post Closing Governance

60

7.8

Environmental Report

60

7.9

Offsite Purchase Assets

60

7.10

Other Intellectual Property Rights

60

7.11

Transfer of Digitran Ltd

60

7.12

Accounts Payable

60

 

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Page

 

 

 

7.13

Reconciliation of Financed Equipment

61

7.14

Delivery of Documents Regarding XCEL Japan Shares

61

 

 

 

ARTICLE VIII

GENERAL PROVISIONS

61

8.1

Expenses

61

8.2

Public Announcements

61

8.3

Notices

61

8.4

Governing Law; Jurisdiction; Service of Process

62

8.5

Further Assurances

63

8.6

Waiver

63

8.7

Entire Agreement and Modification

63

8.8

Disclosure Schedule

63

8.9

Assignments, Successors, and No Third-Party Rights

63

8.10

Severability

64

8.11

Section Headings, Construction

64

8.12

Time of Essence

64

8.13

Specific Performance

64

8.14

Counterparts

64

 

 

EXHIBITS:

 

 

 

 

 

Exhibit 2.3

 

Form of Assignment and Assumption Agreement

Exhibit 2.9(a)(ii)

 

Form of Bill of Sale

Exhibit 2.9(a)(iv)

 

Form of Intellectual Property Assignment

Exhibit 2.9(a)(v)

 

Form of Domain Name Assignment

Exhibit 2.9(a)(vi)

 

Form of Transition Services Agreement

Exhibit 2.9(a)(xx)

 

Forms of Opinions of Seller’s Counsel

Exhibit 2.10

 

Sample Closing Net Value Calculation

 

 

SCHEDULES:

 

 

 

 

 

Schedule 1

 

Financed Equipment

Schedule 2.1(a)

 

Fixed Assets

Schedule 2.1(b)

 

Inventory

Schedule 2.1(c)

 

Other Tangible Personal Property

Schedule 2.1(d)

 

Advance Payments

Schedule 2.1(g)

 

Contracts

Schedule 2.1(h)

 

Intangible Rights

Schedule 2.1(j)

 

Unfilled Purchase Orders

Schedule 2.1(k)

 

Governmental Authorizations

Schedule 2.1(m)

 

Other Assets

Schedule 2.2(k)

 

Retained Assets

Schedule 2.5(a)

 

Required Consents

Schedule 2.9(a)(i)(B)

 

Offsite Assets

Schedule 4.2

 

Buyer Consents

Schedule 4.5

 

Buyer Brokers and Finders

 

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Schedule 7.5(b)

 

Continuing Employees

 

Schedule 7.12

 

Accounts Payable

 

 

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ASSET AND STOCK PURCHASE AGREEMENT

 

THIS ASSET AND STOCK PURCHASE AGREEMENT (the “Agreement”) is made as of
March 20, 2009, by and between Electro Switch Corp., a Delaware corporation
(“Buyer”), ESC Worldwide, Inc., a Massachusetts corporation (“Stock Buyer”),
EMRISE Electronics Corporation, a New Jersey corporation (“Seller”), and EMRISE
Corporation, a Delaware corporation (“Parent”).  Buyer, Stock Buyer, Seller and
Parent are referred to collectively as the “Parties,” and each individually as a
“Party.”

 

R E C I T A L S

 

A.                                   Digitran is a division of Seller, which is
in the business (the “Digitran Business”) of developing and manufacturing high
reliability electromechanical switch products (the “Products”) serving niche
applications in military, commercial aerospace and specialized industrial
markets.

 

B.                                     XCEL Japan Ltd., a corporation organized
under the laws of Japan (“XCEL Japan”), a wholly-owned subsidiary of Seller, is
in the business (collectively with the Digitran Business, the “Business”) of
serving as the sales and distribution entity for the Digitran Business in the
Asia Pacific market.

 

C.                                     Seller desires to sell to Buyer, and
Buyer desires to purchase from Seller, substantially all of the assets and
properties relating to the Digitran Business and in connection therewith Buyer
is willing to assume certain specified liabilities of Seller relating thereto,
all upon the terms and subject to the conditions set forth herein.

 

D.                                    Seller desires to sell, and Stock Buyer
desires to purchase, all of the Capital Equity (as defined below) of XCEL Japan
(the “XCEL Japan Shares”), for the consideration and on the terms set forth in
this Agreement.

 

E.                                      Parent is the parent of Seller and will
derive substantial direct and indirect benefits from the performance of this
Agreement and the transactions contemplated hereby.

 

NOW, THEREFORE, in consideration of the premises, representations, warranties
and the mutual covenants contained in this Agreement, and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties agree as follows:

 

ARTICLE I

DEFINITIONS

 

For purposes of this Agreement, the following terms have the meanings specified
or referred to in this Article I:

 

“Accounting Firm” shall have the meaning set forth in Section 2.7(b).

 

“Accounts Receivable” shall have the meaning set forth in Section 3.8.

 

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“Affiliate” means with respect to any particular Person any other Person
controlling, controlled by or under common control with such Person.

 

“Agreement” shall have the meaning set forth in the first paragraph of this
Agreement.

 

“Applicable Contract” means any Contract relating to the Business (a) under
which Seller or XCEL Japan has or may acquire any rights, (b) under which Seller
or XCEL Japan has or may become subject to any obligation or liability, or
(c) by which Seller, XCEL Japan or any of the Purchased Assets is or may become
bound.

 

“AQMD” means the South Coast Air Quality Management District.

 

“Arbitrator” shall have the meaning set forth in Section 6.1(d).

 

“Assignment and Assumption Agreement” shall have the meaning set forth in
Section 2.3.

 

“Assumed Liabilities” shall have the meaning set forth in Section 2.3.

 

“Benefit Plan” shall have the meaning set forth in Section 3.13(a).

 

“Bill of Sale” shall have the meaning set forth in Section 2.9(a)(ii).

 

“Business” shall have the meaning set forth in the recitals of this Agreement.

 

“Business Day” means any day that is not a Saturday, Sunday or other day on
which banks in the State of California are authorized or required to close.

 

“Business Financial Statements” shall have the meaning set forth in
Section 3.4(b).

 

“Business Leases” shall have the meaning set forth in Section 3.6(c).

 

“Business Leased Real Property” shall have the meaning set forth in
Section 3.6(c).

 

“Business Real Property Permits” shall have the meaning set forth in
Section 3.6(e).

 

“Buyer” shall have the meaning set forth in the first paragraph of this
Agreement.

 

“Buyers” means Buyer and Stock Buyer.

 

“Capital Equity” means any and all shares, interests, participations or other
equivalents (however designated) of equity of a corporation, and any and all
ownership interests in a Person (other than a corporation), including membership
interests, partnership interests, joint venture interests and beneficial
interests, and any and all warrants, options or other rights to purchase any of
the foregoing.

 

“Claim Date” shall have the meaning set forth in Section 5.4.

 

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“Closing” shall have the meaning set forth in Section 2.8.

 

“Closing Accounts Payable” shall have the meaning set forth in Section 7.12.

 

“Closing Cash Consideration” shall have the meaning set forth in Section 2.7.

 

“Closing Date” means the date and time as of which the Closing actually takes
place.

 

“Closing Net Asset Value” shall equal the sum of the following items on the
balance sheet of the Digitran Business as of the Closing Date calculated in
accordance with GAAP: (a) accounts receivable of the Digitran Business plus
(b) inventory of the Digitran Business plus (c) other current assets plus
(d) other intangibles (net) plus (e) property, plant and equipment (net) plus
(f) other assets.

 

“Closing Net Book Value” shall equal (a) total assets of XCEL Japan minus
(b) total liabilities of XCEL Japan as of the Closing Date calculated in
accordance with GAAP.

 

“Closing Net Value” shall have the meaning set forth in Section 2.10(a).

 

“Closing Statement” shall have the meaning set forth in Section 2.10(a).

 

“Company” shall have the meaning set forth in the first paragraph of this
Agreement.

 

“Company Improvements” shall have the meaning set forth in Section 3.6(g).

 

“Consent” means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).

 

“Contemplated Transactions” means all of the transactions contemplated by this
Agreement, including:

 

(a)                                  the sale of the Purchased Assets by Seller
to Buyer;

 

(b)                                 the sale of the XCEL Japan Shares by Seller
to Stock Buyer;

 

(c)                                  the execution, delivery, and performance of
the Transaction Documents;

 

(d)                                 the performance by Buyers, Parent and Seller
of their respective covenants and obligations under the Transaction Documents;

 

(e)                                  Buyer’s acquisition and ownership of the
Purchased Assets; and

 

(f)                                    Stock Buyer’s acquisition and ownership
of the XCEL Japan Shares.

 

“Continued Employees” shall have the meaning set forth in Section 7.5(b).

 

“Contract” means any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.

 

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“Copyrights” shall have the meaning set forth in the definition of Intellectual
Property Assets.

 

“Customer” shall have the meaning set forth in Section 2.1(i).

 

“Damages” shall have the meaning set forth in Section 5.2.

 

“Deductible” shall have the meaning set forth in Section 5.5.

 

“Deferred Cash Consideration” shall have the meaning set forth in
Section 2.7(b)(i).

 

“Digitran Balance Sheet” shall have the meaning set forth in Section 3.4(a).

 

 “Digitran Business” shall have the meaning set forth in the recitals of this
Agreement.

 

“Digitran Financial Statements” shall have the meaning set forth in
Section 3.4(a).

 

“Digitran Interim Financial Statements” shall have the meaning set forth in
Section 3.4(a).

 

“Digitran, Ltd.” means Digitran Ltd., a corporation organized under the laws of
the United Kingdom.

 

“Disclosure Schedule” means the disclosure schedule delivered by Seller to
Buyers concurrently with the execution and delivery of this Agreement.

 

“Domain Name Assignment” shall have the meaning set forth in Section 2.9(a)(v).

 

“Encumbrance” means any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or material restriction of any kind, including any material restriction
on use, voting, transfer, receipt of income, or exercise of any other attribute
of ownership.

 

“Environment” means soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.

 

“Environmental, Health, and Safety Liabilities” means any cost, damages, expense
(including reasonable attorneys fees), liability, obligation, or other
responsibility arising from or under Environmental Law or Occupational Safety
and Health Law and consisting of or relating to:

 

(a)                                  any environmental, health, or safety
matters or conditions (including, but not limited to, on-site or off-site
contamination, occupational safety and health, and regulation of chemical
substances or products);

 

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(b)                                 fines, penalties, judgments, awards,
settlements, legal or administrative proceedings, damages, losses, claims,
demands and response, investigative, remedial, or inspection costs and expenses
arising under Environmental Law or Occupational Safety and Health Law;

 

(c)                                  financial responsibility under
Environmental Law or Occupational Safety and Health Law for cleanup costs or
corrective action, including any investigation, cleanup, removal, containment,
or other remediation or response actions (“Cleanup”) required by applicable
Environmental Law or Occupational Safety and Health Law (whether or not such
Cleanup has been required or requested by any Governmental Body or any other
Person) and for any natural resource damages; or

 

(d)                                 any other compliance, corrective,
investigative, or remedial measures required under Environmental Law or
Occupational Safety and Health Law.

 

The terms “removal,” “remedial,” and “response action,” include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. § 9601 et seq., as amended
(“CERCLA”).

 

“Environmental Law” means any Legal Requirement that requires or relates to:

 

(a)                                  advising appropriate authorities,
employees, Governmental Bodies, and the public of intended or actual Release or
Threat of Release of pollutants or Hazardous Materials, violations of discharge
limits, or other prohibitions and of the commencements of activities, such as
resource extraction or construction, that could have significant impact on the
Environment;

 

(b)                                 preventing or reducing to acceptable levels
the Release of Hazardous Materials into the Environment;

 

(c)                                  reducing the quantities, preventing the
Release, or minimizing the hazardous characteristics of Hazardous Materials;

 

(d)                                 assuring that products are designed,
formulated, packaged, and used so that they do not present unreasonable risks to
human health or the Environment when used or disposed of;

 

(e)                                  protecting the Environment, natural
resources, species, or ecological amenities;

 

(f)                                    reducing to acceptable levels the risks
inherent in the transportation of Hazardous Materials;

 

(g)                                 cleaning up pollutants that have been
Released, preventing the Threat of Release, or paying the costs of such Cleanup
or prevention; or

 

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(h)                                 making responsible parties pay private
parties, or groups of them, for damages done to their health or the Environment,
or permitting self-appointed representatives of the public interest to recover
for injuries done to public assets.

 

“ERISA” means the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.

 

“ERISA Affiliate” means, with respect to Seller and XCEL Japan, any other person
that, together with Seller or XCEL Japan, would be treated as a single employer
under IRC § 414.

 

“Facilities” means any real property, leaseholds, or other interests currently
or formerly owned or operated by Seller or XCEL Japan relating to the Business
and any buildings, structures, or equipment (including motor vehicles) currently
or formerly owned or operated by Seller or XCEL Japan relating to the Business.

 

“Financed Equipment Amount” means the total amount owed by Seller for the
equipment loans and leases set forth on Schedule 1 attached hereto.

 

“GAAP” means generally accepted United States accounting principles.

 

“Governmental Authorization” means any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.

 

“Governmental Body” means any:

 

(a)                                  nation, state, county, city, town, village,
district, or other jurisdiction of any nature;

 

(b)                                 federal, state, local, municipal, foreign,
or other government;

 

(c)                                  governmental or quasi-governmental
authority of any nature (including any governmental agency, commission, branch,
department, official, or entity and any court or other tribunal);

 

(d)                                 multinational organization or body; or

 

(e)                                  body exercising, or entitled to exercise,
any administrative, executive, judicial, legislative, investigative, police,
regulatory, or taxing authority or power of any nature.

 

“Hazardous Activity” means the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, disposal, or use (including any withdrawal
or other use of groundwater) of Hazardous Materials in, on, under, about, or
from the Facilities or any part thereof into the Environment, and any other act,
business, operation, or thing that increases the danger, or risk of

 

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danger, or poses an unreasonable risk of harm to persons, or property or the
Environment on or off the Facilities, or that may affect the value of the
Facilities or Seller.

 

“Hazardous Materials” means any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, harmful,
hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution thereof,
and specifically including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.

 

“Indemnified Persons” shall have the meaning set forth in Section 5.2.

 

“Intellectual Property Assets” includes:

 

(a)                                  the names “Digitran” and “XCEL Japan,” all
fictional business names, trading names, registered and unregistered trademarks,
service marks, and applications (collectively, “Marks”);

 

(b)                                 all patents, patent applications, patent
rights and inventions and discoveries that may be patentable (collectively,
“Patents”) used by Seller or XCEL Japan in any manner in the Business or
otherwise necessary to the design, manufacture, sale or distribution of the
Products;

 

(c)                                  all copyrights in both published works and
unpublished works and all copyright registrations and applications and all
derivatives, translations, adaptations and combinations used by Seller in the
Business (collectively, “Copyrights”);

 

(d)                                 all rights in mask works (collectively,
“Rights in Mask Works”); and

 

(e)                                  all know-how, trade secrets, confidential
information, customer lists, software, technical information, data, process
technology, plans, drawings, and blueprints used by Seller in the Business and
all material knowledge and experience necessary for the operation of the
Business and the practical application of all technology and state of the art
industrial techniques necessary for the manufacture of the Products
(collectively, “Trade Secrets”) owned, used, or licensed by Seller as licensee
or licensor.

 

(f)                                    all goodwill, franchise, licenses,
permits, consents, and approvals and claims of infringement against third
parties owned or used by Seller in any manner in the Business or otherwise
necessary for the design, manufacture, sale or distribution of the Products;

 

(g)                                 all engineering and other specifications,
flow charts, system documentation or procedures, statements of principals of
operation, schematics and other technical documentation used by Seller in the
Business or otherwise necessary for the design, manufacture, marketing, sale or
distribution of the Products (“Technical Documentation”);

 

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(h)                                 all written agreements with Seller’s past
and present employees of the Business which assign the inventions, discoveries,
improvements and ideas to Seller and the inventions, improvements and ideas
related documents and work of authorship referred to in such agreements;

 

(i)                                     all nondisclosure contracts and/or
confidentiality agreements entered into between Seller and Persons in connection
with disclosure by Seller relating to the Products, the Intellectual Property
Assets or the Business.

 

“Intellectual Property Assignment” shall have the meaning set forth in
Section 2.9(a)(iv).

 

“Interim Business Balance Sheets” shall have the meaning set forth in
Section 3.4(b).

 

“Interim Business Financial Statements” shall have the meaning set forth in
Section 3.4(b).

 

“IRC” means the Internal Revenue Code of 1986, as amended, or any successor law,
and regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.

 

“IRS” means the United States Internal Revenue Service or any successor agency,
and, to the extent relevant, the United States Department of the Treasury.

 

“ITAR” shall have the meaning set forth in Section 3.27.

 

“Knowledge” means an individual will be deemed to have “Knowledge” of a
particular fact or other matter if:

 

(a)                                  such individual is actually aware of such
fact or other matter; or

 

(b)                                 a prudent individual reasonably would be
expected to discover or otherwise become aware of such fact or other matter in
the course of conducting a reasonable investigation concerning the existence of
such fact or other matter.

 

A Person (other than an individual) will be deemed to have “Knowledge” of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, or trustee of such Person (or in any
similar capacity) has, or at any time had, Knowledge of such fact or other
matter.

 

“Lease Assignment” shall have the meaning set forth in Section 2.9(a)(vi).

 

“Legal Requirement” means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.

 

“Liability” means any liability or obligation (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether

 

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liquidated or unliquidated, whether incurred or consequential and whether due or
to become due), including any liability for Taxes.

 

“Marks” shall have the meaning set forth in the definition of Intellectual
Property Assets.

 

“Material Interest” means direct or indirect beneficial ownership (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of voting
securities or other voting interests representing at least 10% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 10% of the outstanding equity securities or
equity interests in a Person.

 

“Multi-Employer Plan” has the meaning given in ERISA § 3(37)(A).

 

“Net Sales” means gross sales of the Business for fiscal year 2009 less returns
and allowances calculated in accordance with GAAP and the principles, policies
and practices that were used in preparing the Business Financial Statements.

 

“Net Sales Target” means $9,113,493; provided, however, that such amount shall
be reduced by $297,000 if the Distribution Agreement between the Digitran
Business and XPS is terminated prior to the end of fiscal year 2009 for any
reason other than (i) the termination of such relationship by Buyer due to
breach by XPS of any of its obligations under the Distribution Agreement or
(ii) the termination of such Distribution Agreement by XPS.

 

“Nonassignable Items” shall have the meaning set forth in Section 2.5(b).

 

“Notice of Disagreement” shall have the meaning set forth in Section 2.10(a).

 

“Occupational Safety and Health Law” means any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.

 

“Offsite Assets” shall have the meaning set forth in Section 2.9(a)(i)(B).

 

“Order” means any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.

 

“Ordinary Course of Business” means an action taken by a Person will be deemed
to have been taken in the “Ordinary Course of Business” only if:

 

(a)                                  such action is consistent with the past
practices of such Person and is taken in the ordinary course of the normal
day-to-day operations of such Person; and

 

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(b)                                 such action is similar in nature and
magnitude to actions customarily taken, without any authorization by the board
of directors (or by any Person or group of Persons exercising similar
authority), in the ordinary course of the normal day-to-day operations of other
Persons that are in the same line of business as such Person.

 

“Organizational Documents” means (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) the operating agreement and the certificate of formation of a
limited liability company; (e) any charter or similar document adopted or filed
in connection with the creation, formation, or organization of a Person; and
(f) any amendment to any of the foregoing.

 

“Owner” shall have the meaning set forth in the definition of Subsidiary.

 

“Parent” means EMRISE Corporation, a Delaware corporation and the parent of
Seller.

 

“Parties” shall have the meaning set forth in the first paragraph of this
Agreement.

 

“Patents” shall have the meaning set forth in the definition of Intellectual
Property Assets.

 

“PBGC” means the Pension Benefit Guaranty Corporation, or any successor thereto.

 

“Person” means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.

 

“Potential AQMD Permit Liability” means any Liabilities of Seller related to
failure to obtain a permit for the painting station used in the Digitran
Business from the AQMD.

 

“Potential BKK Environmental Liability” means any Liabilities of Seller related
to disposal of waste at the BKK Corporation Class I landfill.

 

“Potential Clean Room Liability” means any Liabilities of Seller related to
(i) failure to obtain a permit and/or landlord consent for build out of the
clean room in the Facility at 9654 Hermosa Avenue, Rancho Cucamonga, California,
and/or (ii) at the termination of the lease for such Facility, the removal of
such clean room such that it is returned to its condition at the commencement of
the lease.

 

“Potential Rent Dispute Liability” means any Liabilities of Seller for payment
of additional rent for the XCEL Japan Facilities relating to periods prior to
the Closing based upon the outcome of the ongoing rent dispute with the landlord
relating to the XCEL Japan Facilities.

 

“Potential Sierra Circuits Liability” means any Liabilities of Seller related to
penalties imposed for failure to purchase minimum quantities of printed circuit
boards pursuant to

 

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Section 6 of that certain Supply Agreement by and between Seller and Sierra
Circuits, Inc. dated July 24, 2008.

 

“Potential XCEL Japan Asbestos Liability” means any Liabilities of Seller
related to asbestos contamination at the XCEL Japan Facilities.

 

“Pre-Closing Straddle Period Taxes” shall have the meaning set forth in the
definition of Pre-Closing Taxes.

 

“Pre-Closing Taxes” means:

 

(I)                                     WITH RESPECT TO TAXES (OTHER THAN THOSE
ADDRESSED IN SECTION 6.2 (TRANSFER TAXES)) IMPOSED UPON XCEL JAPAN, OR FOR WHICH
XCEL JAPAN IS LIABLE, WITH RESPECT TO TAXABLE PERIODS ENDING PRIOR TO OR ON THE
CLOSING DATE, ALL TAXES DUE FOR SUCH TAXABLE PERIOD (REGARDLESS OF WHETHER SUCH
TAXES ARE DUE AND PAYABLE AT CLOSING); AND

 

(II)                                  WITH RESPECT TO TAXES (OTHER THAN THOSE
ADDRESSED IN SECTION 6.2 (TRANSFER TAXES)) IMPOSED UPON XCEL JAPAN, OR FOR WHICH
XCEL JAPAN IS LIABLE, WITH RESPECT TO TAXABLE PERIODS BEGINNING BEFORE AND
ENDING AFTER THE CLOSING DATE (EACH, A “STRADDLE PERIOD”), THE PORTION OF ANY
SUCH TAXES THAT IS ALLOCABLE TO THE PORTION OF THE STRADDLE PERIOD ENDING ON THE
CLOSING DATE (SUCH TAXES, THE “PRE-CLOSING STRADDLE PERIOD TAXES”), DETERMINED
IN ACCORDANCE WITH THE FOLLOWING:

 

(A)                              IN THE CASE OF TAXES THAT ARE EITHER (X) BASED
UPON OR RELATED TO INCOME, RECEIPTS OR SHAREHOLDERS’ EQUITY OR (Y) IMPOSED IN
CONNECTION WITH ANY SALE, TRANSFER OR ASSIGNMENT OR ANY DEEMED SALE, TRANSFER OR
ASSIGNMENT OF PROPERTY (REAL OR PERSONAL, TANGIBLE OR INTANGIBLE) (REGARDLESS OF
WHETHER SUCH TRANSACTION OCCUR BEFORE OR AFTER THE CLOSING DATE), PRE-CLOSING
PERIOD STRADDLE TAXES SHALL BE DEEMED EQUAL TO THE AMOUNT THAT WOULD BE PAYABLE
IF THE TAX YEAR ENDED ON THE CLOSING DATE.  FOR PURPOSES OF THIS CLAUSE (A), ANY
EXEMPTION, DEDUCTION, CREDIT OR OTHER ITEM THAT IS CALCULATED ON AN ANNUAL BASIS
SHALL BE ALLOCATED TO THE PORTION OF THE STRADDLE PERIOD ENDING ON THE CLOSING
DATE ON A PRO RATA BASIS DETERMINED BY MULTIPLYING THE ENTIRE AMOUNT OF SUCH
ITEM ALLOCATED TO THE STRADDLE PERIOD BY A FRACTION, THE NUMERATOR OF WHICH IS
THE NUMBER OF CALENDAR DAYS IN THE PORTION OF THE STRADDLE PERIOD ENDING ON THE
CLOSING DATE AND THE DENOMINATOR OF WHICH IS THE NUMBER OF CALENDAR DAYS IN THE
ENTIRE STRADDLE PERIOD.

 

(B)                                IN THE CASE OF TAXES (OTHER THAN THOSE
DESCRIBED IN CLAUSE (A) ABOVE) IMPOSED ON A PERIODIC BASIS WITH RESPECT TO
SELLER OR OTHERWISE MEASURED BY THE LEVEL OF ANY ITEM, PRE-CLOSING STRADDLE
PERIOD TAXES SHALL BE DEEMED TO EQUAL (X) THE AGGREGATE AMOUNT OF SUCH TAXES FOR
THE ENTIRE STRADDLE PERIOD (OR, IN THE CASE OF TAXES DETERMINED ON AN ARREARS
BASIS, THE AMOUNT OF SUCH TAXES FOR THE IMMEDIATELY PRECEDING TAX PERIOD)
MULTIPLIED BY (Y) A FRACTION, THE NUMERATOR OF WHICH IS THE NUMBER OF CALENDAR
DAYS IN THE PORTION OF THE STRADDLE PERIOD ENDING ON THE CLOSING DATE AND THE
DENOMINATOR OF WHICH IS THE NUMBER OF CALENDAR DAYS IN THE ENTIRE STRADDLE
PERIOD.

 

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“Proceeding” means any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.

 

“Products” shall have the meaning set forth in the recitals of this Agreement,
and shall include the underlying technologies, designed, sold or distributed by
Seller in connection with the Digitran Business and XCEL Japan, including,
without limitation, any such technology in development.

 

“Proprietary Rights Agreement” shall have the meaning set forth in
Section 3.20(b).

 

“Prorated Rent Amount” means $4,213.07.

 

“Purchase Price” shall have the meaning set forth in Section 2.7.

 

“Purchased Assets” shall have the meaning set forth in Section 2.1.

 

“Rancho Cucamonga Lease” shall have the meaning set forth in Section 2.1(g).

 

“Release” means any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, disposing, dumping, or other releasing into the Environment,
whether intentional or unintentional.

 

“Remaining Accounts Payable” shall have the meaning set forth in Section 7.12.

 

“Representative” means with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.

 

“Restricted Period” shall have the meaning set forth in Section 7.3(a).

 

“Restricted Territory” shall have the meaning set forth in Section 7.3(b).

 

“Retained Assets” shall have the meaning set forth in Section 2.2.

 

“Retained Liabilities” shall have the meaning set forth in Section 2.4.

 

“Rights in Mask Works” shall have the meaning set forth in the definition of
Intellectual Property Assets.

 

“Securities Act” means the Securities Act of 1933, as amended, or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.

 

“Seller” shall have the meaning set forth in the first paragraph of this
Agreement.

 

“Straddle Period” shall have the meaning set forth in the definition of
Pre-Closing Taxes.

 

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“Stock Buyer” shall have the meaning set forth in the first paragraph of this
Agreement.

 

“Subsidiary” means with respect to any Person (the “Owner”), any corporation or
other Person of which securities or other interests having the power to elect a
majority of that corporation’s or other Person’s board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries.

 

“Target Net Value” shall mean $2,990,537.

 

“Tax” means any tax (including any income tax, excise tax, capital gains tax,
value-added tax, sales tax, property tax, franchise tax, gross receipts tax,
license tax, payroll tax, employment tax, severance tax, stamp tax, occupation
tax, premium tax, windfall profits tax, environmental tax, capital stock tax,
profits, withholding tax, social security tax (or similar), unemployment,
disability, real property, personal property, transfer, registration,
alternative, or add on minimum or estimated tax, assessment, charge, levy, and
all other taxes and similar assessments, customs duties, charges and fees of any
kind whatsoever and any related charge or amount (including any fine, penalty,
interest, or addition to tax), imposed, assessed, or collected by or under the
authority of any Governmental Body or payable pursuant to any tax-sharing
agreement or any other Contract relating to the sharing or payment of any such
tax, levy, assessment, tariff, duty, deficiency, or fee.

 

“Tax Return” means any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment,  collection, or payment
of any Tax or in connection with the administration, implementation, or
enforcement of or compliance with any Legal Requirement relating to any Tax.

 

“Technical Documentation” shall have the meaning set forth in the definition of
Intellectual Property Assets.

 

“Threat of Release” means a substantial likelihood of a Release that may require
action in order to prevent or mitigate damage to the Environment that may result
from such Release.

 

“Threatened” means a claim, Proceeding, dispute, action, or other matter will be
deemed to have been “Threatened” if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.

 

“Trade Secrets” shall have the meaning set forth in the definition of
Intellectual Property Assets.

 

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“Transaction Costs” shall have the meaning set forth in Section 3.25.

 

“Transaction Documents” means this Agreement, the Assignment Assumption
Agreement, the Bill of Sale, the Intellectual Property Assignment, the Domain
Name Assignment, the Transition Services Agreement, the Lease Assignment, and
all other agreements, documents and instruments executed and delivered or to be
executed and delivered in connection with the execution and delivery of this
Agreement and the consummation of the Contemplated Transactions.

 

“Transfer Taxes” shall have the meaning set forth in Section 6.2.

 

“WARN Act” shall have the meaning set forth in Section 3.21(b).

 

“XCEL Japan” shall have the meaning set forth in the recitals of this Agreement.

 

“XCEL Japan Balance Sheet” shall have the meaning set forth in Section 3.4(b).

 

“XCEL Japan Financial Statements” shall have the meaning set forth in
Section 3.4(b).

 

“XCEL Japan Interim Financial Statements” shall have the meaning set forth in
Section 3.4(b).

 

“XCEL Japan Shares” shall have the meaning set forth in the recitals of this
Agreement.

 

“XPS” shall have the meaning set forth in Section 7.3(a)(i).

 

ARTICLE II

SALE AND PURCHASE TRANSACTIONS; CLOSING

 

2.1                                 SALE AND PURCHASE OF THE DIGITRAN ASSETS. 
AT THE CLOSING, SELLER AND PARENT SHALL SELL AND TRANSFER TO BUYER, AND BUYER
SHALL PURCHASE FROM SELLER AND PARENT, FREE AND CLEAR OF ALL ENCUMBRANCES, ALL
OF SELLER’S AND PARENT’S ASSETS, PROPERTIES AND BUSINESS AS A GOING CONCERN
RELATING TO THE DIGITRAN BUSINESS OF EVERY KIND, NATURE AND DESCRIPTION,
WHEREVER LOCATED AND WHETHER REAL, PERSONAL OR MIXED, TANGIBLE OR INTANGIBLE, IN
ELECTRONIC FORM OR OTHERWISE, AND WHETHER OR NOT HAVING ANY VALUE FOR ACCOUNTING
PURPOSES OR CARRIED OR REFLECTED ON OR SPECIFICALLY REFERRED TO IN ITS BOOKS OR
FINANCIAL STATEMENTS, EXCEPT THOSE ASSETS SPECIFICALLY EXCLUDED PURSUANT TO
SECTION 2.2.  THE PROPERTIES, BUSINESS, GOODWILL AND ASSETS OF SELLER AND PARENT
RELATING TO THE DIGITRAN BUSINESS TO BE SOLD AND TRANSFERRED TO BUYER HEREUNDER
(COLLECTIVELY, THE “PURCHASED ASSETS”) SHALL INCLUDE THE FOLLOWING:

 

(A)                                  ALL OF SELLER’S MACHINERY, EQUIPMENT,
COMPONENTS, PARTS, TOOLING, DIES, JIGS, SPARE PARTS, SUPPLIES AND MATERIALS
RELATING TO THE DIGITRAN BUSINESS WHEREVER LOCATED, INCLUDING THE ITEMS
SPECIFICALLY SET FORTH ON SCHEDULE 2.1(A);

 

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(B)                                 ALL OF SELLER’S INVENTORIES OF RAW
MATERIALS, WORK-IN-PROCESS, PARTS, SUBASSEMBLIES AND FINISHED GOODS RELATING TO
THE DIGITRAN BUSINESS, AND ALL PACKAGING AND ALL OTHER MATERIALS AND SUPPLIES TO
BE USED OR CONSUMED BY SELLER RELATING TO THE DIGITRAN BUSINESS IN THE
PRODUCTION OF FINISHED GOODS, WHEREVER LOCATED AND WHETHER OR NOT OBSOLETE OR
CARRIED ON SELLER’S BOOKS OF ACCOUNT, INCLUDING THE ITEMS SET FORTH ON
SCHEDULE 2.1(B);

 

(C)                                  ALL OF SELLER’S OTHER TANGIBLE PERSONAL
PROPERTY RELATING TO THE DIGITRAN BUSINESS, INCLUDING OFFICE FURNITURE, OFFICE
EQUIPMENT AND SUPPLIES, LEASEHOLD IMPROVEMENTS, VEHICLES, COMPUTERS AND ALL
RELATED EQUIPMENT, AND TELEPHONES AND ALL RELATED EQUIPMENT, INCLUDING THE ITEMS
SET FORTH ON SCHEDULE 2.1(C);

 

(D)                                 ALL OF SELLER’S ADVANCE PAYMENTS, RENTAL
DEPOSITS, PREPAID ITEMS, SURETY ACCOUNTS AND OTHER SIMILAR ASSETS, CLAIMS,
DEFERRED CHARGES, CREDITS AND CLAIMS FOR REFUND RELATING TO THE DIGITRAN
BUSINESS, INCLUDING THE ITEMS SET FORTH ON SCHEDULE 2.1(D), BUT EXCLUDING SUCH
ITEMS AS ARE ASSOCIATED PRIMARILY WITH RETAINED LIABILITIES;

 

(E)                                  ALL NOTES AND BILLED AND UNBILLED ACCOUNTS
RECEIVABLE AND OTHER RIGHTS TO PAYMENTS FROM CUSTOMERS OF THE DIGITRAN BUSINESS,
INCLUDING TRADE ACCOUNTS RECEIVABLE FROM GOODS SHIPPED, PRODUCTS SOLD OR
SERVICES RENDERED, VENDOR CREDITS, AND THE FULL BENEFIT TO ALL SECURITY FOR SUCH
ACCOUNTS OR RIGHTS TO PAYMENT, A LISTING OF WHICH IS SET FORTH ON
SCHEDULE 2.1(E);

 

(F)                                    ALL OF SELLER’S BOOKS, RECORDS, MANUALS,
DOCUMENTS, AND BOOKS OF ACCOUNT RELATING TO THE DIGITRAN BUSINESS, WHETHER
INSCRIBED ON TANGIBLE MEDIUM OR STORED IN ELECTRONIC OR OTHER MEDIUM, INCLUDING
SALES AND CREDIT REPORTS, CLIENT, CUSTOMER AND SUPPLIER LISTS, LITERATURE,
BROCHURES, ADVERTISING MATERIAL, MAINTENANCE RECORDS, SERVICE AND WARRANTY
RECORDS, REFERRAL SOURCES, RESEARCH AND DEVELOPMENT RECORDS, PRODUCTION RECORDS,
EQUIPMENT LOGS, OPERATING GUIDES AND MANUALS, FINANCIAL AND ACCOUNTING RECORDS,
CREATIVE MATERIALS, ADVERTISING MATERIALS, PROMOTIONAL MATERIALS, STUDIES,
REPORTS, CORRESPONDENCE AND OTHER SIMILAR DOCUMENTS, ALL RIGHTS TO RECEIVE AND
RETAIN MAIL AND OTHER COMMUNICATIONS RELATING TO THE DIGITRAN BUSINESS, AND,
SUBJECT TO LEGAL REQUIREMENTS, COPIES OF ALL PERSONNEL RECORDS;

 

(G)                                 ALL OF SELLER’S RIGHTS UNDER THE LEASE FOR
ITS FACILITY AT 9654 HERMOSA AVENUE, RANCHO CUCAMONGA, CALIFORNIA (THE “RANCHO
CUCAMONGA LEASE”), AND ALL OTHER CONTRACTS IDENTIFIED ON SCHEDULE 2.1(G);

 

(H)                                 ALL OF SELLER’S AND PARENT’S INTANGIBLE
RIGHTS AND PROPERTY RELATING TO THE DIGITRAN BUSINESS, INCLUDING GOODWILL AND
RIGHTS IN AND TO THE NAME “DIGITRAN,” ANY PRODUCT NAMES, AND IN ANY OTHER TRADE
NAME, TRADEMARK, FICTITIOUS NAME OR SERVICE MARK, OR ANY VARIANT OF ANY OF THEM,
AND ANY APPLICATIONS THEREFOR OR REGISTRATIONS THEREOF, AND ANY OTHER FORMS OF
INTELLECTUAL PROPERTY ASSETS, AND ALL RESEARCH RELATED TO THE DIGITRAN BUSINESS
CONDUCTED BY SELLER OR PARENT, ALL DEVELOPMENT FACILITIES AND INVENTIONS AND
WORK-IN-PROCESS A PART THEREOF, ALL RIGHTS TO SELLER’S AND PARENT’S SOFTWARE,
TELEPHONE NUMBERS, FACSIMILE NUMBERS, INTERNET SITES, INTERNET ADDRESSES
(EXCLUDING EMAIL ADDRESSES)

 

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AND DOMAIN NAMES THEREOF AND OTHER LISTINGS RELATED TO THE DIGITRAN BUSINESS,
INCLUDING THE ITEMS IDENTIFIED ON SCHEDULE 2.1(H);

 

(I)                                     ALL INFORMATION, DATA, LISTS AND
DOCUMENTS RELATED TO ALL PERSONS TO WHOM OR TO WHICH SELLER HAS SOLD OR
OTHERWISE FURNISHED PRODUCTS, DIRECTLY OR INDIRECTLY, AT ANY TIME (“CUSTOMER” OR
“CUSTOMERS”) INCLUDING RELATED INFORMATION AS TO THE UNIT AND DOLLAR VOLUME OF
SUCH SALES, THE TYPE OF PRODUCTS SO SOLD OR FURNISHED, THE METHOD OF
DISTRIBUTION AND OTHER RELEVANT MARKETING AND PRODUCT INFORMATION FOR EACH
CUSTOMER;

 

(J)                                     ALL UNFILLED PURCHASE AND SALE ORDERS
RELATING TO THE DIGITRAN BUSINESS SET FORTH ON SCHEDULE 2.1(J);

 

(K)                                  TO THE EXTENT PERMITTED BY LEGAL
REQUIREMENTS, ALL GOVERNMENTAL AUTHORIZATIONS RELATING TO THE DIGITRAN BUSINESS,
AND ALL PENDING APPLICATIONS FOR ISSUANCE OR RENEWAL THEREOF, INCLUDING THE
ITEMS IDENTIFIED ON SCHEDULE 2.1(K);

 

(L)                                     ALL OF SELLER’S RIGHTS TO THE DIGITRAN
BUSINESS, TO THE EXTENT NOT DESCRIBED ABOVE, ALL ASSETS THAT ARE EMPLOYED BY
SELLER SOLELY IN CONNECTION WITH THE DIGITRAN BUSINESS, AND ALL OF THE ASSETS TO
BE REFLECTED ON THE CLOSING STATEMENT;

 

(M)                               THE OTHER ASSETS, PROPERTIES, RIGHTS, TITLES
AND INTERESTS SPECIFICALLY LISTED ON SCHEDULE 2.1(M); AND

 

(N)                                 ALL OF SELLER’S CLAIMS, CAUSES OF ACTION AND
JUDGMENTS, ALL EXPRESS AND IMPLIED WARRANTIES, GUARANTEES, REFUNDS, CAUSES OF
ACTION, RIGHTS OF RECOVERY, RIGHTS OF SET-OFF AND RIGHTS OF RECOUPMENT OF EVERY
KIND AND NATURE AND ALL EXISTING AND INCHOATE CLAIMS, RIGHTS AND REMEDIES
RELATED TO ANY OF THE FOREGOING RELATING TO THE DIGITRAN BUSINESS.

 

2.2                                 RETAINED ASSETS.  SELLER SHALL RETAIN AND
THE PURCHASED ASSETS SHALL NOT INCLUDE THE FOLLOWING ASSETS RELATING TO THE
DIGITRAN BUSINESS (COLLECTIVELY, THE “RETAINED ASSETS”):

 

(A)                                  THE CONSIDERATION TO BE DELIVERED TO SELLER
PURSUANT TO, AND ALL OTHER RIGHTS UNDER, THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS;

 

(B)                                 SELLER’S OTHER RIGHTS HEREUNDER;

 

(C)                                  SELLER’S MINUTE BOOK, STOCK RECORDS AND
SEAL;

 

(D)                                 ANY RIGHT TO RECEIVE MAIL AND OTHER
COMMUNICATIONS ADDRESSED TO SELLER RELATING TO THE RETAINED ASSETS AND RETAINED
LIABILITIES;

 

(E)                                  ALL OF SELLER’S CASH, CASH IN BANKS, CASH
EQUIVALENTS, BANK AND MUTUAL FUND ACCOUNTS AND LOCKBOXES (OTHER THAN
POST-CLOSING PAYMENTS SENT TO SUCH LOCKBOXES IN PAYMENT OF THE ACCOUNTS
RECEIVABLE);

 

(F)                                    ALL TAX RETURNS OF SELLER;

 

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(G)                                 ALL EMAIL ADDRESSES OF SELLER AND ITS
AFFILIATES;

 

(H)                                 ALL PERSONNEL RECORDS THAT SELLER IS
REQUIRED BY LAW TO RETAIN IN ITS POSSESSION;

 

(I)                                     ALL CLAIMS FOR REFUND OF TAXES AND OTHER
GOVERNMENTAL CHARGES OF WHATEVER NATURE;

 

(J)                                     ALL RIGHTS IN CONNECTION WITH AND ASSETS
OF ANY BENEFIT PLAN;

 

(K)                                  SUBJECT TO SECTION 7.11, DIGITRAN, LTD.
(ONLY TO THE EXTENT NECESSARY TO MAINTAIN ITS CORPORATE CHARTER), AND

 

(L)                                     THE ASSETS SPECIFICALLY LISTED ON
SCHEDULE 2.2(L).

 

2.3                                 ASSUMPTION OF LIABILITIES.  BUYER SHALL
ASSUME, PAY, AND PERFORM IN ACCORDANCE WITH THEIR TERMS OR OTHERWISE SATISFY,
AFTER THE CLOSING DATE, ONLY THE FOLLOWING LIABILITIES (COLLECTIVELY, THE
“ASSUMED LIABILITIES”):

 

(A)                                  AT THE CLOSING, BUYER SHALL, PURSUANT TO AN
ASSIGNMENT AND ASSUMPTION AGREEMENT SUBSTANTIALLY IN THE FORM OF EXHIBIT 2.3
ATTACHED HERETO (THE “ASSIGNMENT AND ASSUMPTION AGREEMENT”), ASSUME AND AGREE TO
PERFORM, DEFEND, PAY OR DISCHARGE, WHEN DUE, ALL OF THE OBLIGATIONS AFTER THE
DATE OF THIS AGREEMENT ASSUMED BY BUYER PURSUANT TO THE CONTRACTS SOLD TO BUYER
UNDER SECTION 2.1, INCLUDING ANY FUTURE CHANGE IN TERMS OF SUCH CONTRACTS OF
WHICH BUYER IS INFORMED PRIOR TO THE CLOSING; PROVIDED, HOWEVER, THAT IN NO
EVENT SHALL BUYER ASSUME ANY PORTION OF THE POTENTIAL SIERRA CIRCUITS LIABILITY;
AND

 

(B)                                 AFTER THE CLOSING, BUYER SHALL PERFORM ALL
WARRANTY SERVICE RELATED TO PRODUCTS SOLD BY SELLER PRIOR TO CLOSING; PROVIDED,
HOWEVER, THAT SELLER SHALL REIMBURSE BUYER FOR ANY DIRECT LABOR, MATERIALS,
FREIGHT AND OUT-OF-POCKET COSTS AND EXPENSES INCURRED BY BUYER IN EXCESS OF
$37,500 FOR PROVIDING SUCH WARRANTY SERVICE.

 

2.4                                 RETAINED LIABILITIES.  NOTWITHSTANDING
ANYTHING CONTAINED IN THIS AGREEMENT TO THE CONTRARY AND REGARDLESS OF WHETHER
SUCH LIABILITY IS DISCLOSED HEREIN OR ON ANY SCHEDULE OR EXHIBIT HERETO, EXCEPT
FOR THE ASSUMED LIABILITIES, BUYER WILL NOT ASSUME OR BE LIABLE FOR ANY
LIABILITIES OF SELLER OR ANY OTHER PERSON, REGARDLESS OF WHETHER RELATING TO THE
DIGITRAN BUSINESS OR THE PURCHASED ASSETS, AND IN EACH CASE, WHETHER KNOWN OR
UNKNOWN, WHETHER ASSERTED OR UNASSERTED, WHETHER ABSOLUTE OR CONTINGENT, WHETHER
ACCRUED OR UNACCRUED, WHETHER LIQUIDATED OR UNLIQUIDATED AND WHETHER DUE OR TO
BECOME DUE (COLLECTIVELY, THE “RETAINED LIABILITIES”). SELLER SHALL RETAIN AND
SHALL BE RESPONSIBLE FOR PAYING AND SATISFYING THE RETAINED LIABILITIES
INCLUDING, BUT NOT LIMITED TO, THE FOLLOWING:

 

(A)                                  ALL LIABILITIES ARISING OUT OF THE
CONTRACTS TO BE TRANSFERRED TO BUYER AS SET FORTH IN SECTION 2.1(G) WHICH ARE
NOT ASSIGNED TO THE BUYER BECAUSE NECESSARY CONSENTS TO SUCH ASSIGNMENT HAVE NOT
BEEN OBTAINED; PROVIDED, HOWEVER, THAT BUYER SHALL BE RESPONSIBLE FOR PAYING AND
SATISFYING ALL SUCH LIABILITIES TO THE EXTENT THAT BUYER HAS RECEIVED THE
BENEFIT OF SUCH CONTRACTS NOTWITHSTANDING SUCH LACK OF ASSIGNMENT;

 

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(B)                                 ANY LIABILITY OF SELLER ARISING OUT OF A
BREACH OF ITS OBLIGATIONS UNDER THIS AGREEMENT;

 

(C)                                  SUBJECT TO SECTION 2.3(B), ANY LIABILITIES
IN CONNECTION WITH OR RELATING TO ACTIONS, SUITS, JUDGMENTS, LITIGATION,
ASSESSMENTS, PROCEEDINGS, INVESTIGATIONS OR CLAIMS RELATING TO PERIODS AND
ARISING OUT OF EVENTS OCCURRING PRIOR TO THE CLOSING DATE;

 

(D)                                 ALL LIABILITIES WHICH ARE (I) RELATED TO THE
OPERATION OF THE DIGITRAN BUSINESS BY SELLER PRIOR TO THE CLOSING OR
(II) ACCRUED IN ACCORDANCE WITH GAAP PRIOR TO THE CLOSING WITH RESPECT TO
(X) THE CONTRACTS OR (Y) AN OCCURRENCE RELATED TO THE DIGITRAN BUSINESS WHICH
OCCURRED PRIOR TO THE CLOSING;

 

(E)                                  ALL LIABILITIES OF SELLER ARISING OUT OF OR
IN CONNECTION WITH EMPLOYMENT RELATED CLAIMS FOR BENEFITS OF ANY KIND BY THE
EMPLOYEES OF THE DIGITRAN BUSINESS ARISING OUT OF ANY OCCURRENCE PRIOR TO THE
CLOSING INCLUDING, BUT NOT LIMITED TO, (I) ANY EARNED ACCOUNT, VACATION, HOLIDAY
PAY OR ANY OTHER FRINGE BENEFITS PROVIDED BY SELLER TO SUCH EMPLOYEES, (II) ANY
HEALTH, DISABILITY, BONUSES, COMPENSATION OR LIFE INSURANCE COVERAGE OR MEDICAL
BENEFITS PROVIDED BY SELLER TO SUCH EMPLOYEES, (III) ANY SEVERANCE PAY OR OTHER
TERMINATION BENEFITS DUE FROM SELLER TO SUCH EMPLOYEES AND (IV) OBLIGATIONS OF
SELLER SET FORTH IN SECTION 7.5;

 

(F)                                    ANY LIABILITIES CAUSED BY ANY PRODUCT
SHIPPED BY SELLER OR XCEL JAPAN IN THE OPERATION OF  THE DIGITRAN BUSINESS PRIOR
TO THE CLOSING, INCLUDING, BUT NOT LIMITED TO, LIABILITIES FOR DEATH, BODILY
INJURY OR PROPERTY DAMAGE, AND ANY LIABILITY FOR RECALLS OF ANY PRODUCTS
PRODUCED, SOLD OR DISTRIBUTED PRIOR TO THE CLOSING;

 

(G)                                 ALL LIABILITIES OF ANY UNFUNDED VESTED
BENEFIT LIABILITY TO ANY MULTI-EMPLOYER PENSION PLAN TO WHICH SELLER MADE
CONTRIBUTIONS;

 

(H)                                 ANY LIABILITY RELATED TO ANY BENEFIT PLAN OF
SELLER;

 

(I)                                     ANY LIABILITY ARISING OUT OF THE FAILURE
TO COMPLY WITH ANY APPLICABLE BULK TRANSFER LAW;

 

(J)                                     ANY ENVIRONMENTAL HEALTH AND SAFETY
LIABILITIES RELATED TO THE OPERATION OF THE DIGITRAN BUSINESS BY SELLER PRIOR TO
THE CLOSING;

 

(K)                                  THE POTENTIAL AQMD PERMIT LIABILITY;

 

(L)                                     THE POTENTIAL SIERRA CIRCUITS LIABILITY;

 

(M)                               THE POTENTIAL CLEAN ROOM LIABILITY;

 

(N)                                 THE POTENTIAL BKK ENVIRONMENTAL LIABILITY;
AND

 

(O)                                 ALL OTHER LIABILITIES OF SELLER RELATING TO
THE DIGITRAN BUSINESS NOT INCLUDED IN THE ASSUMED LIABILITIES.

 

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2.5                                 ASSIGNABILITY AND CONSENTS.

 

(A)                                  REQUIRED CONSENTS.  SCHEDULE 2.5(A) SETS
FORTH A LIST OF ALL PURCHASED ASSETS, INCLUDING CONTRACTS AND GOVERNMENTAL
AUTHORIZATIONS, WHICH ARE NON-ASSIGNABLE OR NON-TRANSFERABLE OR CANNOT BE
SUBLEASED TO BUYER WITHOUT THE CONSENT OF SOME OTHER PERSON.  SELLER HAS TAKEN
OR CAUSED TO BE TAKEN BY OTHERS, ALL COMMERCIALLY REASONABLE ACTIONS TO
(I) OBTAIN OR SATISFY ALL CONSENTS FROM ANY PERSONS NECESSARY TO AUTHORIZE,
APPROVE OR PERMIT THE FULL AND COMPLETE SALE, CONVEYANCE, ASSIGNMENT, SUBLEASE
OR TRANSFER OF THE PURCHASED ASSETS, (II) ENSURE THAT ANY CONTRACTS ASSIGNED TO
BUYER, AS CONTEMPLATED BY THIS AGREEMENT, ARE ASSIGNED ON THE SAME TERMS AS ARE
DISCLOSED ON THE SCHEDULES TO THIS AGREEMENT, AND (III) CONSUMMATE AND MAKE
EFFECTIVE THE CONTEMPLATED TRANSACTIONS.  IN ADDITION, SELLER AGREES TO TAKE, OR
CAUSE TO BE TAKEN, ALL COMMERCIALLY REASONABLE ACTIONS TO CONTINUE SUCH EFFORTS
AS MAY BE REQUIRED AFTER THE CLOSING DATE TO FACILITATE THE FULL AND EXPEDITIOUS
ASSIGNMENT, TRANSFER OF LEGAL TITLE, OR SUBLEASE, AS THE CASE MAY BE, OF THE
PURCHASED ASSETS.

 

(B)                                 NONASSIGNABLE ITEMS.  ANYTHING IN THIS
AGREEMENT TO THE CONTRARY NOTWITHSTANDING, THIS AGREEMENT SHALL NOT CONSTITUTE
AN AGREEMENT TO SELL, CONVEY, ASSIGN, SUBLEASE OR TRANSFER ANY PURCHASED ASSETS,
INCLUDING CONTRACTS AND GOVERNMENTAL AUTHORIZATIONS, IF AN ATTEMPTED SALE,
CONVEYANCE, ASSIGNMENT, SUBLEASE OR TRANSFER THEREOF, WITHOUT THE CONSENT OF
ANOTHER PERSON, WOULD CONSTITUTE A BREACH OF, OR IN ANY WAY AFFECT THE RIGHTS OF
EITHER SELLER OR BUYER WITH RESPECT TO, SUCH PURCHASED ASSETS (COLLECTIVELY, THE
“NONASSIGNABLE ITEMS”). SELLER SHALL USE ITS COMMERCIALLY REASONABLE EFFORTS
(AND BUYER SHALL COOPERATE IN ALL REASONABLE RESPECTS WITH SELLER) TO OBTAIN AND
SATISFY ALL CONSENTS AND TO RESOLVE ALL IMPRACTICALITIES OF SALE, CONVEYANCE,
ASSIGNMENT, SUBLEASE OR TRANSFER NECESSARY TO CONVEY TO BUYER ALL NONASSIGNABLE
ITEMS. IF ANY SUCH CONSENTS ARE NOT OBTAINED AND SATISFIED OR IF AN ATTEMPTED
SALE, CONVEYANCE, ASSIGNMENT, SUBLEASE OR TRANSFER WOULD BE INEFFECTIVE, SELLER
AND ITS AFFILIATES SHALL ENTER INTO SUCH ARRANGEMENTS (INCLUDING RELATED WRITTEN
AGREEMENTS) AS BUYER MAY REASONABLY REQUEST TO PROVIDE BUYER WITH THE BENEFIT OF
THE NONASSIGNABLE ITEMS.

 

2.6                                 SALE AND PURCHASE OF XCEL JAPAN SHARES. 
SUBJECT TO THE TERMS AND CONDITIONS OF THIS AGREEMENT, AT THE CLOSING, SELLER
WILL SELL AND TRANSFER THE XCEL JAPAN SHARES TO STOCK BUYER, AND STOCK BUYER
WILL PURCHASE THE XCEL JAPAN SHARES FROM SELLER.

 

2.7                                 PURCHASE PRICE.  SUBJECT TO SECTION 2.10,
THE PURCHASE PRICE (THE “PURCHASE PRICE”) FOR THE XCEL JAPAN SHARES AND
PURCHASED ASSETS WILL BE PAYABLE AT OR AFTER THE CLOSING, AS THE CASE MAY BE,
AND IN THE MANNER AS FURTHER DESCRIBED BELOW:

 

(A)                                  CASH AT CLOSING.  AT THE CLOSING, BUYER
WILL PAY TO SELLER BY WIRE TRANSFER IN IMMEDIATELY AVAILABLE FUNDS AN AMOUNT
EQUAL TO THE SUM OF (I) $11,500,000 (THE PORTION OF SUCH SUM AS IS ATTRIBUTABLE
TO THE PRICE OF THE XCEL JAPAN SHARES HAVING BEEN PROVIDED TO BUYER FROM STOCK
BUYER) PLUS (II) THE FINANCED EQUIPMENT AMOUNT (COLLECTIVELY, THE “CLOSING CASH
CONSIDERATION”) PLUS (III) THE PRORATED RENT AMOUNT MINUS (IV) THE AGGREGATE
AMOUNT OF THE CLOSING ACCOUNTS PAYABLE.

 

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(B)                                 DEFERRED PURCHASE PRICE.

 

(I)                                     IF NET SALES FOR FISCAL YEAR 2009 (WHICH
IS THE CALENDAR YEAR) EXCEED $6,835,120, BUYER SHALL PAY TO SELLER, IN
ACCORDANCE WITH THE PROCEDURES SET FORTH IN SECTION 2.7(B)(II), AN AMOUNT IN
CASH (THE “DEFERRED CASH CONSIDERATION”) EQUAL TO THE PRODUCT OF $500,000
MULTIPLIED BY A FRACTION, THE NUMERATOR OF WHICH IS NET SALES FOR FISCAL YEAR
2009 AND THE DENOMINATOR OF WHICH IS THE NET SALES TARGET; PROVIDED, HOWEVER,
THAT THE AMOUNT OF THE DEFERRED CASH CONSIDERATION SHALL NOT EXCEED $500,000.

 

(II)                                  WITHIN FORTY-FIVE (45) DAYS AFTER
DECEMBER 31, 2009, BUYER SHALL DELIVER TO SELLER A WRITTEN STATEMENT (THE
“PAYMENT STATEMENT”), INCLUDING SUPPORTING DOCUMENTATION, SETTING FORTH THE
AMOUNT OF NET SALES FOR FISCAL YEAR 2009.  THE PAYMENT STATEMENT SHALL BECOME
FINAL AND BINDING UPON BUYERS AND SELLER ON THE 15TH DAY FOLLOWING DELIVERY
THEREOF, UNLESS SELLER GIVES NOTICE OF DISAGREEMENT WITH THE PAYMENT STATEMENT
(A “DISPUTE NOTICE”) TO BUYER PRIOR TO SUCH DATE.  ANY DISPUTE NOTICE SHALL
SPECIFY IN REASONABLE DETAIL THE NATURE OF ANY DISAGREEMENT SO ASSERTED.  IF A
DISPUTE NOTICE IS RECEIVED BY BUYER IN A TIMELY MANNER, THEN THE PAYMENT
STATEMENT SHALL BECOME FINAL AND BINDING UPON BUYERS AND SELLER ON THE EARLIER
OF (I) THE DATE BUYER AND SELLER RESOLVE IN WRITING ANY DIFFERENCES THEY HAVE
WITH RESPECT TO THE MATTERS SPECIFIED IN THE DISPUTE NOTICE AND (II) THE DATE
ANY DISPUTED MATTERS ARE FINALLY RESOLVED IN WRITING BY THE ACCOUNTING FIRM.
 DURING THE 30-DAY PERIOD (THE “RESOLUTION PERIOD”) FOLLOWING THE DELIVERY OF A
DISPUTE NOTICE, BUYER AND SELLER SHALL USE THEIR COMMERCIALLY REASONABLE EFFORTS
AND SEEK IN GOOD FAITH TO RESOLVE IN WRITING ANY DIFFERENCES THAT THEY MAY HAVE
WITH RESPECT TO THE MATTERS SPECIFIED IN THE DISPUTE NOTICE.  AT THE END OF THE
RESOLUTION PERIOD, BUYER AND SELLER SHALL SUBMIT TO AN INDEPENDENT ACCOUNTING
FIRM (THE “ACCOUNTING FIRM”) FOR ARBITRATION, IN ACCORDANCE WITH THE STANDARDS
SET FORTH IN THIS SECTION 2.7(B), ONLY MATTERS THAT REMAIN IN DISPUTE AND WERE
PROPERLY INCLUDED IN THE NOTICE OF DISAGREEMENT IN ACCORDANCE WITH THIS
SECTION 2.7(B) AND ANY CLAIM OF CALCULATION-RELATED ERRORS.  THE ACCOUNTING FIRM
SHALL BE RSM MCGLADREY (WHICH THE PARTIES REPRESENT HAS NOT PROVIDED SERVICES TO
ANY OF THEM OR THEIR RESPECTIVE SUBSIDIARIES DURING THE PAST THREE YEARS) OR, IF
SUCH FIRM IS UNABLE OR UNWILLING TO ACT, SUCH OTHER INDEPENDENT PUBLIC
ACCOUNTING FIRM AS SHALL BE AGREED UPON BY BUYER AND SELLER IN WRITING.  BUYER
AND SELLER SHALL USE THEIR COMMERCIALLY REASONABLE EFFORTS TO CAUSE THE
ACCOUNTING FIRM TO RENDER A WRITTEN DECISION RESOLVING THE MATTERS SUBMITTED TO
THE ACCOUNTING FIRM WITHIN THIRTY (30) DAYS OF THEIR DELIVERY OF SUCH
SUBMISSION.  THE ACCOUNTING FIRM SHALL DETERMINE NET SALES FOR FISCAL YEAR 2009
PURSUANT TO THIS SECTION 2.7(B) IN ACCORDANCE WITH GAAP AND THE PRINCIPLES,
POLICIES AND PRACTICES THAT WERE USED IN PREPARING THE BUSINESS FINANCIAL
STATEMENTS; PROVIDED, HOWEVER, THAT NO ADJUSTMENT SHALL BE MADE BY THE
ACCOUNTING FIRM IN FAVOR OF SELLER WITH RESPECT TO ANY ITEM THAT WAS NOT
INCLUDED IN SELLER’S DISPUTE NOTICE.  THE ACCOUNTING FIRM’S DECISION SHALL BE
BASED SOLELY ON WRITTEN SUBMISSIONS BY BUYER AND SELLER AND THEIR RESPECTIVE
REPRESENTATIVES AND BY REFERENCE TO THE TERMS OF THIS

 

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AGREEMENT.  SELLER AND BUYER SHALL FURNISH OR CAUSE TO BE FURNISHED TO THE
ACCOUNTING FIRM SUCH WORK PAPERS AND OTHER DOCUMENTS AND INFORMATION RELATED TO
THE DISPUTED MATTERS AS THE ACCOUNTING FIRM MAY REQUEST AND ARE REASONABLY
AVAILABLE TO SELLER, BUYER OR THEIR RESPECTIVE AGENTS.  THE ACCOUNTING FIRM
SHALL ADDRESS ONLY THOSE ITEMS IN DISPUTE AND CALCULATION-RELATED ERRORS. 
JUDGMENT MAY BE ENTERED UPON THE DETERMINATION OF THE ACCOUNTING FIRM IN ANY
COURT HAVING JURISDICTION OVER THE PARTY AGAINST WHICH SUCH DETERMINATION IS TO
BE ENFORCED.  WITHIN THREE (3) BUSINESS DAYS OF THE PAYMENT STATEMENT BECOMING
FINAL AND BINDING, BUYER SHALL PAY TO SELLER THE DEFERRED CASH CONSIDERATION. 
THE FEES AND EXPENSES OF THE ACCOUNTING FIRM INCURRED PURSUANT TO THIS
SECTION 2.7(B) SHALL BE BORNE EQUALLY BY BUYER AND SELLER.

 

2.8                                 CLOSING.  THE PURCHASE AND SALE (THE
“CLOSING”) PROVIDED FOR IN THIS AGREEMENT WILL TAKE PLACE UPON EXECUTION AND
DELIVERY OF THIS AGREEMENT BY BOTH PARTIES.

 

2.9                                 CLOSING OBLIGATIONS.  AT THE CLOSING:

 

(A)                                  SELLER WILL DELIVER, OR CAUSE TO BE
DELIVERED, AS APPLICABLE, TO BUYER (OR THE STOCK BUYER, AS THE CASE MAY BE):

 

(I)                                     PHYSICAL POSSESSION AND/OR CONTROL OF
THE PURCHASED ASSETS IN ACCORDANCE WITH THE FOLLOWING:

 

(A)                              ALL PURCHASED ASSETS WHICH ARE TANGIBLE
PERSONAL PROPERTY AND LOCATED AT SELLER’S FACILITY SHALL BE TURNED OVER TO THE
BUYER; AND

 

(B)                                FOR ALL PURCHASED ASSETS LOCATED AT OR WITH A
SUPPLIER OR OUTSIDE MANUFACTURER (COLLECTIVELY, THE “OFFSITE ASSETS”), A LISTING
OF WHICH IS ATTACHED HERETO AS SCHEDULE 2.9(A)(I)(B), SELLER WILL TAKE ALL STEPS
REQUIRED TO PLACE BUYER IN CONTROL OF SUCH OFFSITE ASSETS AT CLOSING, INCLUDING
DELIVERING AT OR PRIOR TO THE CLOSING A LISTING OF ALL SUCH OFFSITE ASSETS;

 

(II)                                  A BILL OF SALE TRANSFERRING THE PURCHASED
ASSETS TO BUYER, FREE AND CLEAR OF ANY AND ALL ENCUMBRANCES WHATSOEVER IN THE
FORM OF EXHIBIT 2.9(A)(II) (THE “BILL OF SALE”), EXECUTED BY SELLER;

 

(III)                               THE ASSIGNMENT AND ASSUMPTION AGREEMENT,
EXECUTED BY SELLER;

 

(IV)                              AN INTELLECTUAL PROPERTY ASSIGNMENT IN THE
FORM OF EXHIBIT 2.9(A)(IV) (THE “INTELLECTUAL PROPERTY ASSIGNMENT”), EXECUTED BY
SELLER AND PARENT, AS APPLICABLE;

 

(V)                                 A DOMAIN NAME ASSIGNMENT IN THE FORM OF
EXHIBIT 2.9(A)(V) (THE “DOMAIN NAME ASSIGNMENT”), EXECUTED BY SELLER AND PARENT,
AS APPLICABLE;

 

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(VI)                              A TRANSITION SERVICES AGREEMENT IN THE FORM OF
EXHIBIT 2.9(A)(VI) (THE “TRANSITION SERVICES AGREEMENT”), EXECUTED BY SELLER;

 

(VII)                           COPIES OF ALL CONSENTS TO THE TRANSFER,
ASSIGNMENT OR SUBLEASE TO BUYER OF EACH PURCHASED ASSET, INCLUDING CONTRACTS AND
GOVERNMENTAL AUTHORIZATIONS THAT REQUIRE SUCH CONSENT;

 

(VIII)                        AN ASSIGNMENT AND ASSUMPTION AGREEMENT RELATING
THE RANCHO CUCAMONGA LEASE (THE “LEASE ASSIGNMENT”), EXECUTED BY SELLER WITH
WRITTEN CONSENT OF THE LANDLORD;

 

(IX)                                A REQUEST FOR ENTRY IN SHAREHOLDERS’
REGISTER, EXECUTED BY SELLER AND ADDRESSED TO XCEL JAPAN, THAT XCEL JAPAN EFFECT
AN ENTRY IN ITS SHAREHOLDERS’ REGISTER WITH RESPECT TO THE ACQUISITION DUE TO
TRANSFER TO STOCK BUYER, IN FORM APPROVED BY BUYERS’ COUNSEL PRIOR TO CLOSING;

 

(X)                                   THE RESIGNATIONS, DATED AS OF THE CLOSING
DATE, OF (A) CARMINE T. OLIVA AS A DIRECTOR OF XCEL JAPAN AND (B) GALLANT THEIN
AS THE STATUTORY AUDITOR OF XCEL JAPAN, AND SUCH DIRECTOR AND STATUTORY AUDITOR
SHALL REPRESENT THAT THEY HAVE NO CLAIMS AGAINST XCEL JAPAN;

 

(XI)                                A DULY EXECUTED ACCEPTANCE OF DIRECTORS AND
STATUTORY AUDITOR OF XCEL JAPAN AND DULY EXECUTED RESOLUTIONS OF THE BOARD OF
DIRECTORS OF XCEL JAPAN APPOINTING NEW REPRESENTATIVE DIRECTORS IN FORM
SUBMITTED BY BUYERS’ COUNSEL;

 

(XII)                             EVIDENCE (IN THE FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO BUYER) OF TERMINATION OF ALL AGREEMENTS REGARDING VOTING,
TRANSFER, RESTRICTIONS OR ENCUMBRANCES ON THE XCEL JAPAN SHARES, RIGHTS OF
REPURCHASE OR OTHER ARRANGEMENTS RELATED TO THE XCEL JAPAN SHARES THAT ARE IN
EFFECT PRIOR TO CLOSING;

 

(XIII)                          DULY EXECUTED SATISFACTIONS, TERMINATION
STATEMENTS AND/OR RELEASES, TO THE EXTENT REQUIRED, TO RELEASE ANY EXISTING
LIENS, CLAIMS OR ENCUMBRANCES;

 

(XIV)                         EVIDENCE (IN THE FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO BUYER) THAT SELLER’S INVESTMENT BANKERS, ATTORNEYS AND/OR OTHER
ADVISORS AND ANY OTHER SIMILAR AGENTS OR REPRESENTATIVES HAVE BEEN PAID IN FULL
PRIOR TO THE CLOSING AND/OR THAT SELLER HAS NO LIABILITY TO ANY SUCH PARTIES FOR
TRANSACTION  COSTS;

 

(XV)                            EVIDENCE (IN THE FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO BUYER) THAT THE EQUIPMENT LOANS AND LEASES SET FORTH ON
SCHEDULE 1 HAVE BEEN PAID IN FULL;

 

(XVI)                         EVIDENCE (IN THE FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO BUYER) THAT ALL INTERCOMPANY ACCOUNTS BETWEEN THE DIGITRAN
BUSINESS OR XCEL JAPAN, ON THE ONE HAND, AND PARENT OR ANY SUBSIDIARY OF PARENT,
ON THE OTHER HAND,

 

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HAVE BEEN SETTLED, EXCEPT FOR INTERCOMPANY ACCOUNTS BETWEEN THE DIGITRAN
BUSINESS AND XCEL JAPAN;

 

(XVII)                      CERTIFICATES OF SELLER’S LEGAL EXISTENCE AND
CORPORATE AND TAX GOOD STANDING FROM THE STATE OF NEW JERSEY AND THE STATE OF
CALIFORNIA AND FROM SUCH OTHER JURISDICTIONS WHERE SELLER’S ACTIVITIES REQUIRE
QUALIFICATION AS A FOREIGN CORPORATION IN CONNECTION WITH THE OPERATION OF THE
DIGITRAN BUSINESS;

 

(XVIII)                   A SECRETARY OR CLERK’S CERTIFICATE OF SELLER DATED AS
OF THE DATE OF THE CLOSING CERTIFYING AS TO THE INCUMBENCY AND SIGNATURE OF ANY
OFFICER OF SELLER EXECUTING ANY DOCUMENT BEING DELIVERED TO BUYER IN CONNECTION
WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND ATTACHED TO SUCH
CERTIFICATE SHALL BE CERTIFIED COPIES OF THE RESOLUTIONS OF THE BOARD OF
DIRECTORS OF SELLER AND PARENT, AUTHORIZING THE EXECUTION AND DELIVERY OF THIS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY.

 

(XIX)                           SUCH TAX WAIVERS FROM SUCH JURISDICTIONS AS ARE
CUSTOMARY FOR A TRANSACTION OF THIS TYPE;

 

(XX)                              OPINIONS FROM SELLER’S COUNSEL (BOTH UNITED
STATES AND JAPAN COUNSEL) IN THE FORMS SET FORTH ON EXHIBIT 2.9(A)(XX) ATTACHED
HERETO;

 

(XXI)                           SUCH OTHER DEEDS, BILLS OF SALE, ENDORSEMENTS,
ASSIGNMENTS, AFFIDAVITS AND OTHER GOOD AND SUFFICIENT INSTRUMENTS OF SALE,
ASSIGNMENT, CONVEYANCE AND TRANSFER INCLUDING, WITHOUT LIMITATION, INSTRUMENTS
NECESSARY FOR THE TRANSFER OF ANY VEHICLES INCLUDED IN THE PURCHASED ASSETS IN
FORM AND SUBSTANCE REASONABLY SATISFACTORY TO BUYER AND ITS COUNSEL, AS ARE
REQUIRED TO EFFECTIVELY VEST IN BUYER GOOD AND MARKETABLE TITLE IN AND TO ALL OF
THE PURCHASED ASSETS, FREE AND CLEAR OF ANY AND ALL ENCUMBRANCES;

 

(XXII)                        THE TRUE AND COMPLETE ORIGINAL CORPORATE RECORDS
AND BUSINESS AND FINANCIAL RECORDS, EMPLOYMENT RECORDS AND AGREEMENTS OF XCEL
JAPAN AND ALL REGULATORY APPROVALS, CONSENTS AND AUTHORIZATIONS ISSUED TO XCEL
JAPAN AND ALL DOCUMENTS RELATED TO XCEL JAPAN’S CORPORATE STRUCTURE AND
BUSINESS;

 

(XXIII)                     A SIDE LETTER AGREEMENT BY AND BETWEEN PARENT’S
SENIOR LENDER AND BUYER RELATING TO ACCESS TO ACCOUNTS RECEIVABLE IN THE
LOCKBOXES;

 

(XXIV)                    COPIES OF ALL DOCUMENTS (IN FORM APPROVED BY BUYERS’
COUNSEL) FILED BY XCEL JAPAN WITH THE LEGAL AFFAIRS BUREAU RELATING TO THE
CONVERSION OF XCEL JAPAN TO A “NON-SHARE CERTIFICATE ISSUING COMPANY” AND A
RECEIPT FROM THE LEGAL AFFAIRS BUREAU ACKNOWLEDGING THAT IT HAS RECEIVED  THESE
DOCUMENTS FOR FILING; AND

 

(XXV)                       AN AFFIDAVIT OF LOST CERTIFICATE WITH RESPECT TO THE
XCEL JAPAN SHARES WHICH PROVIDES INDEMNIFICATION TO BUYER; AND

 

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(XXVI)                    A CERTIFIED TRUE COPY OF COMMERCIAL REGISTER AND
CERTIFICATES OF TAX PAYMENT (“NOZEI-SHOMEISHO”) REGARDING XCEL JAPAN.

 

(B)                                 BUYER WILL DELIVER TO SELLER:

 

(I)                                     THE CLOSING CASH CONSIDERATION
(INCLUDING THE PORTION PROVIDED BY STOCK BUYER) BY WIRE TRANSFER AT THE ACCOUNT
SPECIFIED IN WRITING TO BUYER;

 

(II)                                  THE ASSIGNMENT AND ASSUMPTION AGREEMENT,
EXECUTED BY BUYER;

 

(III)                               THE INTELLECTUAL PROPERTY ASSIGNMENT,
EXECUTED BY BUYER;

 

(IV)                              THE DOMAIN NAME ASSIGNMENT, EXECUTED BY BUYER;

 

(V)                                 THE TRANSITION SERVICES AGREEMENT, EXECUTED
BY BUYER; AND

 

(VI)                              THE LEASE ASSIGNMENT, EXECUTED BY BUYER.

 

2.10                           PURCHASE PRICE ADJUSTMENT.  THE PURCHASE PRICE
SHALL BE ADJUSTED AFTER THE CLOSING AS FOLLOWS:

 

(A)                                  CLOSING STATEMENT.  WITHIN FORTY-FIVE (45)
DAYS AFTER THE CLOSING DATE, SELLER SHALL DELIVER TO BUYERS A STATEMENT (THE
“CLOSING STATEMENT”) SETTING FORTH (I) THE CLOSING NET ASSET VALUE, (II) THE
CLOSING NET BOOK VALUE, AND (III) THE SUM OF THE CLOSING NET ASSET VALUE AND THE
CLOSING NET BOOK VALUE (THE “CLOSING NET VALUE”).  FOR ILLUSTRATION PURPOSES
ONLY, A COMPUTATION OF THE CLOSING NET BOOK VALUE UTILIZING THE FIGURES FROM THE
INTERIM BUSINESS BALANCE SHEETS IS ATTACHED HERETO AS EXHIBIT 2.10.  THE CLOSING
STATEMENT SHALL BECOME FINAL AND BINDING UPON BUYERS AND SELLER ON THE 15TH DAY
FOLLOWING DELIVERY THEREOF, UNLESS BUYER GIVES NOTICE OF DISAGREEMENT WITH THE
CLOSING STATEMENT (A “NOTICE OF DISAGREEMENT”) TO SELLER PRIOR TO SUCH DATE.
 ANY NOTICE OF DISAGREEMENT SHALL (I) SPECIFY IN REASONABLE DETAIL THE NATURE OF
ANY DISAGREEMENT SO ASSERTED AND (II) ONLY INCLUDE DISAGREEMENTS BASED ON
MATHEMATICAL ERRORS OR BASED ON THE CLOSING NET ASSET VALUE OR CLOSING NET BOOK
VALUE NOT BEING CALCULATED PURSUANT TO THIS SECTION 2.10, WHICH REQUIRES THAT
THE CALCULATIONS BE IN ACCORDANCE WITH GAAP.  IF A NOTICE OF DISAGREEMENT IS
RECEIVED BY SELLER IN A TIMELY MANNER, THEN THE CLOSING STATEMENT (AS REVISED IN
ACCORDANCE WITH THIS SENTENCE) SHALL BECOME FINAL AND BINDING UPON BUYERS AND
SELLER ON THE EARLIER OF (A) THE DATE BUYERS AND SELLER RESOLVE IN WRITING ANY
DIFFERENCES THEY HAVE WITH RESPECT TO THE MATTERS SPECIFIED IN THE NOTICE OF
DISAGREEMENT AND (B) THE DATE ANY DISPUTED MATTERS ARE FINALLY RESOLVED IN
WRITING BY THE ACCOUNTING FIRM.  DURING THE 30-DAY PERIOD FOLLOWING THE DELIVERY
OF A NOTICE OF DISAGREEMENT, BUYERS AND SELLER SHALL SEEK IN GOOD FAITH TO
RESOLVE IN WRITING ANY DIFFERENCES THAT THEY MAY HAVE WITH RESPECT TO THE
MATTERS SPECIFIED IN THE NOTICE OF DISAGREEMENT.  AT THE END OF SUCH 30-DAY
PERIOD, BUYERS AND SELLER SHALL SUBMIT TO THE ACCOUNTING FIRM FOR ARBITRATION,
IN ACCORDANCE WITH THE STANDARDS SET FORTH IN THIS SECTION 2.10, ONLY MATTERS
THAT REMAIN IN DISPUTE AND WERE PROPERLY INCLUDED IN THE DISPUTE NOTICE IN
ACCORDANCE WITH THIS SECTION 2.10.  BUYERS AND SELLER SHALL USE THEIR
COMMERCIALLY REASONABLE EFFORTS TO CAUSE THE ACCOUNTING FIRM TO RENDER A WRITTEN

 

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DECISION RESOLVING THE MATTERS SUBMITTED TO THE ACCOUNTING FIRM WITHIN THIRTY
(30) DAYS OF THE RECEIPT OF SUCH SUBMISSION. THE ACCOUNTING FIRM SHALL DETERMINE
THE CLOSING NET ASSET VALUE AND THE CLOSING NET BOOK VALUE PURSUANT TO THIS
SECTION 2.10; PROVIDED, HOWEVER, THAT NO ADJUSTMENT SHALL BE MADE BY THE
ACCOUNTING FIRM IN FAVOR OF BUYERS WITH RESPECT TO ANY ITEM THAT WAS NOT
INCLUDED IN BUYER’S NOTICE OF DISAGREEMENT.  THE ACCOUNTING FIRM’S DECISION
SHALL BE BASED SOLELY ON WRITTEN SUBMISSIONS BY BUYERS AND SELLER AND THEIR
RESPECTIVE REPRESENTATIVES AND BY REFERENCE TO THE TERMS OF THIS AGREEMENT.
 SELLER AND BUYERS SHALL FURNISH OR CAUSE TO BE FURNISHED TO THE ACCOUNTING FIRM
SUCH WORK PAPERS AND OTHER DOCUMENTS AND INFORMATION RELATED TO THE DISPUTED
MATTERS AS THE ACCOUNTING FIRM MAY REQUEST AND ARE REASONABLY AVAILABLE TO
SELLER, BUYERS OR THEIR RESPECTIVE AGENTS.  THE ACCOUNTING FIRM SHALL ADDRESS
ONLY THOSE ITEMS IN DISPUTE AND CALCULATION-RELATED ERRORS.  JUDGMENT MAY BE
ENTERED UPON THE DETERMINATION OF THE ACCOUNTING FIRM IN ANY COURT HAVING
JURISDICTION OVER THE PARTY AGAINST WHICH SUCH DETERMINATION IS TO BE ENFORCED.
 THE FEES AND EXPENSES OF THE ACCOUNTING FIRM INCURRED PURSUANT TO THIS
SECTION 2.10 SHALL BE BORNE BY BUYERS AND SELLER EQUALLY.

 

(B)                                 INVENTORY RESERVE; PENSION OBLIGATION. 
PRIOR TO DELIVERY OF THE CLOSING STATEMENT, BUYER AND SELLER SHALL DETERMINE IF
THE INVENTORY RESERVE OF XCEL JAPAN IS ADEQUATE ASSUMING A MAXIMUM OF 18 MONTHS
ON HAND AT AN INDIVIDUAL UNIT LEVEL (BASED ON THE ORDER ACTIVITY DURING THE PAST
18 MONTHS IMMEDIATELY PRIOR TO THE CLOSING) ASSUMING ALL CURRENT OPEN ORDERS ARE
FILLED.  IF SUCH INVENTORY RESERVE IS NOT SUFFICIENT, BUYER AND SELLER SHALL
MUTUALLY AGREE UPON THE AMOUNT BY WHICH THE INVENTORY RESERVE SHALL BE INCREASED
AND INCREASE THE TARGET NET VALUE ACCORDINGLY.  PRIOR TO DELIVERY OF THE CLOSING
STATEMENT, THE TARGET NET VALUE SHALL BE INCREASED TO REFLECT AN ADJUSTMENT TO
THE PENSION OBLIGATION OF XCEL JAPAN TO ¥43,015,811, WHICH REFLECTS THE AGREED
UPON LIABILITY AS OF THE CLOSING.

 

(C)                                  PAYMENT OF ADJUSTMENT.  WITHIN THREE
(3) DAYS FOLLOWING THE DATE THAT THE CLOSING STATEMENT BECOMES FINAL AND BINDING
UPON BUYERS AND SELLER, IF THE CLOSING NET VALUE AS SET FORTH IN THE CLOSING
STATEMENT IS LESS THAN AN AMOUNT EQUAL TO THE TARGET NET VALUE, THEN SELLER
SHALL PAY TO BUYERS (IN SUCH PROPORTION AS DIRECTED BY THE BUYERS) AN AMOUNT
EQUAL TO THE TARGET NET VALUE MINUS THE CLOSING NET VALUE AND THE PURCHASE PRICE
SHALL BE REDUCED ACCORDINGLY.  IF THE CLOSING NET VALUE AS SET FORTH ON THE
CLOSING STATEMENT IS GREATER THAN THE TARGET NET VALUE, THEN BUYERS SHALL PAY TO
SELLER AN AMOUNT EQUAL TO THE CLOSING NET VALUE MINUS THE TARGET NET VALUE AND
THE PURCHASE PRICE SHALL BE INCREASED ACCORDINGLY.

 

2.11                           PURCHASE PRICE ALLOCATION.  THE PURCHASE PRICE
REPRESENTS THE AMOUNT AGREED UPON BY THE PARTIES TO BE THE AGGREGATE VALUE OF
THE PURCHASED ASSETS AND THE XCEL JAPAN SHARES. PROMPTLY AFTER CLOSING BUT IN NO
EVENT MORE THAN NINETY (90) DAYS AFTER THE CLOSING, THE PARTIES SHALL AGREE UPON
THE ALLOCATION OF THE PURCHASE PRICE AMONG THE PURCHASED ASSETS AND THE XCEL
JAPAN SHARES. IF BUYERS AND SELLER ARE NOT ABLE TO AGREE UPON THE ALLOCATION OF
THE PURCHASE PRICE AMONG THE PURCHASED ASSETS AND XCEL JAPAN SHARES, SUCH
ALLOCATION SHALL BE MADE BY A VALUATION FIRM MUTUALLY ACCEPTABLE TO BUYER AND
SELLER. EACH OF THE PARTIES SHALL REPORT THE PURCHASE AND SALE OF THE PURCHASED
ASSETS, INCLUDING, WITHOUT LIMITATION, IN ALL FEDERAL, FOREIGN, STATE, LOCAL AND
OTHER TAX RETURNS AND REPORTS PREPARED AND FILED BY OR FOR EITHER SELLER OR

 

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BUYER, INCLUDING BUT NOT LIMITED TO THEIR RESPECTIVE INTERNAL REVENUE SERVICE
FORMS 8594, IN ACCORDANCE WITH THE BASIS OF ALLOCATION DESCRIBED IN THIS
SECTION 2.11.

 

2.12                           BUYERS’ REPRESENTATIVE.  BUYER SHALL ACT AS THE
REPRESENTATIVE FOR BOTH BUYERS IN THE ADMINISTRATION OF THE PROVISIONS OF
SECTIONS 2.10 AND 2.11.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller represents and warrants to Buyers as follows:

 

3.1                                 ORGANIZATION AND GOOD STANDING.  SECTION 3.1
OF THE DISCLOSURE SCHEDULE CONTAINS A COMPLETE AND ACCURATE LIST FOR EACH OF
SELLER AND XCEL JAPAN:  ITS NAME, ITS JURISDICTION OF INCORPORATION, AND OTHER
JURISDICTIONS IN WHICH IT IS AUTHORIZED TO DO BUSINESS.  SELLER IS A CORPORATION
DULY INCORPORATED, VALIDLY EXISTING, AND IN GOOD STANDING UNDER THE LAWS OF ITS
JURISDICTION OF INCORPORATION, WITH FULL CORPORATE POWER AND AUTHORITY TO
CONDUCT ITS BUSINESS AS IT IS NOW BEING CONDUCTED, TO OWN OR USE THE PROPERTIES
AND ASSETS THAT IT PURPORTS TO OWN OR USE, AND TO PERFORM ALL ITS OBLIGATIONS
UNDER APPLICABLE CONTRACTS AND TO OPERATE THE DIGITRAN BUSINESS.  XCEL JAPAN IS
A CORPORATION DULY INCORPORATED UNDER THE LAWS OF ITS JURISDICTION OF
INCORPORATION, WITH FULL CORPORATE POWER AND AUTHORITY TO CONDUCT ITS BUSINESS
AS IT IS NOW BEING CONDUCTED, TO OWN OR USE THE PROPERTIES AND ASSETS THAT IT
PURPORTS TO OWN OR USE, AND TO PERFORM ALL ITS OBLIGATIONS UNDER APPLICABLE
CONTRACTS.  EACH OF SELLER (SOLELY AS IT RELATES TO THE DIGITRAN BUSINESS) AND
XCEL JAPAN IS DULY QUALIFIED TO DO BUSINESS AS A FOREIGN CORPORATION AND IS IN
GOOD STANDING UNDER THE LAWS OF EACH STATE OR OTHER JURISDICTION IN WHICH EITHER
THE OWNERSHIP OR USE OF THE PROPERTIES OWNED OR USED BY IT, OR THE NATURE OF THE
ACTIVITIES CONDUCTED BY IT, REQUIRES SUCH QUALIFICATION IN WHICH FAILURE TO SO
QUALIFY WOULD HAVE A MATERIAL ADVERSE EFFECT ON THE BUSINESS.  EACH OF SELLER
AND XCEL JAPAN HAS MADE AVAILABLE TO BUYER COPIES OF ITS ORGANIZATIONAL
DOCUMENTS, AS CURRENTLY IN EFFECT.

 

3.2                                 AUTHORITY; NO CONFLICT.

 

(A)                                  THIS AGREEMENT AND EACH OF THE OTHER
TRANSACTION DOCUMENTS TO WHICH SELLER OR XCEL JAPAN IS A PARTY CONSTITUTES THE
LEGAL, VALID, AND BINDING OBLIGATION OF SELLER OR XCEL JAPAN, AS APPLICABLE,
ENFORCEABLE AGAINST IT IN ACCORDANCE WITH ITS TERMS, EXCEPT TO THE EXTENT THAT
ENFORCEABILITY MAY BE LIMITED BY (I) APPLICABLE BANKRUPTCY, INSOLVENCY,
REORGANIZATION, RECEIVERSHIP, MORATORIUM AND OTHER SIMILAR LAWS RELATING TO OR
AFFECTING THE RIGHTS AND REMEDIES OF CREDITORS GENERALLY AND (II) GENERAL
PRINCIPLES OF EQUITY.  SELLER HAS THE ABSOLUTE AND UNRESTRICTED RIGHT, POWER,
AUTHORITY, AND CAPACITY TO EXECUTE AND DELIVER THIS AGREEMENT AND TO PERFORM ITS
OBLIGATIONS UNDER THIS AGREEMENT. THIS AGREEMENT HAS BEEN DULY AUTHORIZED BY
SELLER AND SELLER AND XCEL JAPAN HAVE TAKEN ALL ACTION REQUIRED BY LAW, ITS
RESPECTIVE CERTIFICATE OF INCORPORATION, BYLAWS OR ANY SIMILAR GOVERNING
INSTRUMENT OR OTHERWISE TO AUTHORIZE THE EXECUTION, DELIVERY AND PERFORMANCE OF
THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS.

 

(B)                                 EXCEPT AS SET FORTH IN SECTION 3.2 OF THE
DISCLOSURE SCHEDULE, NEITHER THE EXECUTION AND DELIVERY OF THIS AGREEMENT AND
THE OTHER TRANSACTION DOCUMENTS NOR THE

 

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CONSUMMATION OR PERFORMANCE OF ANY OF THE CONTEMPLATED TRANSACTIONS WILL,
DIRECTLY OR INDIRECTLY (WITH OR WITHOUT NOTICE OR LAPSE OF TIME):

 

(I)                                     CONTRAVENE, CONFLICT WITH, OR RESULT IN
A VIOLATION OF (A) ANY PROVISION OF THE ORGANIZATIONAL DOCUMENTS OF SELLER OR
XCEL JAPAN, OR (B) ANY RESOLUTION ADOPTED BY THE BOARD OF DIRECTORS OR THE
STOCKHOLDERS OF SELLER OR XCEL JAPAN;

 

(II)                                  CONTRAVENE, CONFLICT WITH, OR RESULT IN A
VIOLATION OF, OR GIVE ANY GOVERNMENTAL BODY OR OTHER PERSON THE RIGHT TO,
CHALLENGE ANY OF THE CONTEMPLATED TRANSACTIONS OR TO EXERCISE ANY REMEDY OR
OBTAIN ANY RELIEF UNDER, ANY LEGAL REQUIREMENT OR ANY ORDER TO WHICH SELLER,
XCEL JAPAN OR THE PURCHASED ASSETS MAY BE SUBJECT;

 

(III)                               CONTRAVENE, CONFLICT WITH, OR RESULT IN A
VIOLATION OF ANY OF THE TERMS OR REQUIREMENTS OF, OR GIVE ANY GOVERNMENTAL BODY
THE RIGHT TO REVOKE, WITHDRAW, SUSPEND, CANCEL, TERMINATE, OR MODIFY, ANY
GOVERNMENTAL AUTHORIZATION THAT IS HELD BY SELLER, XCEL JAPAN OR THAT OTHERWISE
RELATES TO THE BUSINESS OR THE PURCHASED ASSETS;

 

(IV)                              CONTRAVENE, CONFLICT WITH, OR RESULT IN A
VIOLATION OR BREACH OF ANY PROVISION OF, OR GIVE ANY PERSON THE RIGHT TO DECLARE
A DEFAULT OR EXERCISE ANY REMEDY UNDER, OR TO ACCELERATE THE MATURITY OR
PERFORMANCE OF, OR TO CANCEL, TERMINATE, OR MODIFY, ANY APPLICABLE CONTRACT; OR

 

(V)                                 RESULT IN THE IMPOSITION OR CREATION OF ANY
ENCUMBRANCE UPON OR WITH RESPECT TO ANY OF THE PURCHASED ASSETS.

 

(C)                                  EXCEPT AS SET FORTH IN SCHEDULE 2.5(A) AND
SECTION 3.2(C) OF THE DISCLOSURE SCHEDULE, NEITHER SELLER NOR XCEL JAPAN IS OR
WILL BE REQUIRED TO GIVE ANY NOTICE TO OR OBTAIN ANY CONSENT FROM ANY PERSON IN
CONNECTION WITH THE EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS OR THE CONSUMMATION OR PERFORMANCE OF ANY OF THE
CONTEMPLATED TRANSACTIONS.

 

3.3                                 CAPITALIZATION; NO SUBSIDIARIES; STOCKHOLDER
CLAIMS AGAINST XCEL JAPAN.

 

(A)                                  SELLER IS THE SOLE LEGAL, BENEFICIAL,
EQUITABLE AND RECORD OWNER OF ALL OF THE AUTHORIZED AND ISSUED OUTSTANDING
CAPITAL EQUITY OF XCEL JAPAN.  XCEL JAPAN DOES NOT HAVE OUTSTANDING ANY SHARES
OF CAPITAL EQUITY CONTAINING ANY PROFIT PARTICIPATION FEATURES, ANY STOCK
APPRECIATION RIGHTS OR PHANTOM STOCK PLAN.  XCEL JAPAN IS NOT SUBJECT TO ANY
OBLIGATION (CONTINGENT OR OTHERWISE) TO REPURCHASE OR OTHERWISE ACQUIRE OR
RETIRE ANY OF ITS CAPITAL EQUITY.  ALL OF THE XCEL JAPAN SHARES HAVE BEEN DULY
AUTHORIZED AND ARE VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE.  THERE ARE NO
OUTSTANDING OPTIONS, WARRANTS, CALLS, AGREEMENTS, SUBSCRIPTIONS, UNDERSTANDINGS,
CONVERSION OR OTHER RIGHTS (INCLUDING PREEMPTIVE RIGHTS, RIGHTS OF FIRST REFUSAL
AND PHANTOM STOCK RIGHTS), PROXY, VOTING, TRANSFER RESTRICTION OR STOCKHOLDER
AGREEMENTS OR AGREEMENTS OF ANY KIND FOR THE PURCHASE OR

 

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ACQUISITION FROM XCEL JAPAN FOR CAPITAL EQUITY OF XCEL JAPAN OR OBLIGATING XCEL
JAPAN TO ISSUE ANY ADDITIONAL CAPITAL EQUITY OR ANY OTHER SECURITIES CONVERTIBLE
INTO, EXCHANGEABLE FOR OR EVIDENCING THE RIGHT TO SUBSCRIBE FOR ANY CAPITAL
EQUITY OF XCEL JAPAN.  XCEL JAPAN DOES NOT OWN, OR HAVE ANY CONTRACT TO ACQUIRE,
ANY CAPITAL EQUITY OF ANY OTHER PERSON OR ANY DIRECT OR INDIRECT EQUITY OR
OWNERSHIP INTEREST IN ANY OTHER BUSINESS. THE XCEL JAPAN SHARES ARE NOT SUBJECT
TO ANY TRANSFER RESTRICTIONS OTHER THAN RESTRICTIONS ON TRANSFERABILITY
GENERALLY IMPOSED ON SECURITIES UNDER THE SECURITIES LAWS OF THE UNITED STATES
AND JAPAN. NO THIRD PARTY HAS ANY CLAIM OR RIGHT TO ANY OWNERSHIP INTEREST IN
XCEL JAPAN.

 

(B)                                 XCEL JAPAN DOES NOT DIRECTLY OR INDIRECTLY
OWN ANY CAPITAL EQUITY OF ANY OTHER CORPORATION OR HAVE ANY DIRECT OR INDIRECT
EQUITY OR OWNERSHIP IN ANY BUSINESS. XCEL JAPAN IS NOT SUBJECT TO ANY OBLIGATION
OR REQUIREMENT TO PROVIDE FUNDS OR TO MAKE ANY INVESTMENT IN THE FORM OF A LOAN,
CAPITAL CONTRIBUTION OR OTHERWISE IN ANY ENTITY.  EXCEPT FOR XCEL JAPAN, SELLER
DOES NOT OWN OR HAVE ANY DIRECT OR INDIRECT INTEREST OR CONTROL OVER ANY
CORPORATION, PARTNERSHIP, JOINT VENTURE OR ENTITY OF ANY KIND THAT OPERATES A
BUSINESS SIMILAR TO THE DIGITRAN BUSINESS OR WHICH PROVIDES ANY SUPPLIES OR
MANUFACTURES ANY PRODUCT OR PART THEREOF FOR THE DIGITRAN BUSINESS.

 

(C)                                  NO STOCKHOLDER OF XCEL JAPAN HAS ANY DIRECT
OR INDIRECT CLAIM AGAINST XCEL JAPAN AND XCEL JAPAN IS NOT DIRECTLY OR
INDIRECTLY OBLIGATED OR LIABLE TO ANY STOCKHOLDER.

 

(D)                                 DIGITRAN, LTD. CURRENTLY CONDUCTS NO
BUSINESS OPERATIONS.

 

3.4                                 FINANCIAL STATEMENTS.

 

(A)                                  SELLER HAS DELIVERED TO BUYERS: (I) THE
UNAUDITED BALANCE SHEETS OF THE DIGITRAN BUSINESS FOR THE FISCAL QUARTERS ENDED
MARCH 31, 2005 THROUGH SEPTEMBER 30, 2008, AND THE RELATED UNAUDITED STATEMENTS
OF INCOME FOR THE FISCAL QUARTERS THEN ENDED (COLLECTIVELY, THE “DIGITRAN
FINANCIAL STATEMENTS”), AND (II) AN UNAUDITED BALANCE SHEET OF THE DIGITRAN
BUSINESS AS OF DECEMBER 31, 2008 (THE “INTERIM DIGITRAN BALANCE SHEET”) AND THE
RELATED UNAUDITED STATEMENTS OF INCOME FOR THE TWELVE MONTHS THEN ENDED
(COLLECTIVELY, THE “INTERIM DIGITRAN FINANCIAL STATEMENTS”).  SUCH FINANCIAL
STATEMENTS FAIRLY PRESENT THE FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS
OF THE DIGITRAN BUSINESS AS OF THE RESPECTIVE DATES OF AND FOR THE PERIODS
REFERRED TO IN SUCH FINANCIAL STATEMENTS.

 

(B)                                 SELLER HAS DELIVERED TO BUYERS: (I) THE
UNAUDITED BALANCE SHEETS OF XCEL JAPAN FOR THE FISCAL QUARTERS ENDED MARCH 31,
2005 THROUGH SEPTEMBER 30, 2008, AND THE RELATED UNAUDITED STATEMENTS OF INCOME
FOR THE FISCAL QUARTERS THEN ENDED (COLLECTIVELY, THE “XCEL JAPAN FINANCIAL
STATEMENTS” AND COLLECTIVELY WITH THE DIGITRAN FINANCIAL STATEMENTS, THE
“BUSINESS FINANCIAL STATEMENTS”), AND (II) AN UNAUDITED BALANCE SHEET OF XCEL
JAPAN AS OF DECEMBER 31, 2008 (THE “INTERIM XCEL JAPAN BALANCE SHEET” AND
COLLECTIVELY WITH THE DIGITRAN BALANCE SHEET, THE “INTERIM BUSINESS BALANCE
SHEETS”) AND THE RELATED UNAUDITED STATEMENTS OF INCOME FOR THE TWELVE MONTHS
THEN ENDED (COLLECTIVELY, THE “INTERIM XCEL JAPAN FINANCIAL STATEMENTS” AND
COLLECTIVELY

 

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WITH THE DIGITRAN INTERIM FINANCIAL STATEMENTS, THE “INTERIM BUSINESS FINANCIAL
STATEMENTS”).  EXCEPT AS SET FORTH ON SECTION 3.4(B) OF THE DISCLOSURE SCHEDULE,
SUCH FINANCIAL STATEMENTS FAIRLY PRESENT THE FINANCIAL CONDITION AND THE RESULTS
OF OPERATIONS OF XCEL JAPAN AS OF THE RESPECTIVE DATES OF AND FOR THE PERIODS
REFERRED TO IN SUCH FINANCIAL STATEMENTS.

 

3.5                                 BOOKS AND RECORDS.  THE BOOKS OF ACCOUNT AND
OTHER RECORDS OF THE BUSINESS, ALL OF WHICH HAVE BEEN MADE AVAILABLE TO BUYERS,
ARE COMPLETE AND CORRECT AND HAVE BEEN MAINTAINED IN ACCORDANCE WITH SOUND
BUSINESS PRACTICES.

 

3.6                                 TITLE TO ASSETS; ENCUMBRANCES; LEASES.

 

(A)                                  NEITHER SELLER NOR XCEL JAPAN OWNS ANY REAL
PROPERTY.

 

(B)                                 EXCEPT AS SET FORTH IN SECTION 3.6(B) OF THE
DISCLOSURE SCHEDULE, SELLER HAS GOOD, MARKETABLE TITLE TO ALL OF THE PURCHASED
ASSETS AND THE PURCHASED ASSETS ARE FREE AND CLEAR OF ALL ENCUMBRANCES.  XCEL
JAPAN HAS GOOD, MARKETABLE TITLE TO ALL OF ITS ASSETS AND SUCH ASSETS ARE FREE
AND CLEAR OF ALL ENCUMBRANCES.

 

(C)                                  SECTION 3.6(C) OF THE DISCLOSURE SCHEDULE
SETS FORTH A LIST, WHICH IS CORRECT AND COMPLETE IN ALL MATERIAL RESPECTS, OF
ALL OF THE LEASES AND SUBLEASES (THE “BUSINESS LEASES”) AND EACH LEASED AND
SUBLEASED PARCEL OF REAL PROPERTY IN WHICH SELLER OR XCEL JAPAN IS A TENANT,
SUBTENANT, LANDLORD OR SUBLANDLORD AS OF THE DATE OF THIS AGREEMENT RELATING TO
THE BUSINESS (COLLECTIVELY, THE “BUSINESS LEASED REAL PROPERTY”). SELLER OR XCEL
JAPAN, AS APPLICABLE, HOLDS A VALID AND EXISTING LEASEHOLD OR SUBLEASEHOLD
INTEREST (AS APPLICABLE) IN THE BUSINESS LEASED REAL PROPERTY UNDER EACH OF THE
BUSINESS LEASES LISTED IN SECTION 3.6(C) OF THE DISCLOSURE SCHEDULE. SELLER HAS
MADE AVAILABLE TO BUYER TRUE, CORRECT AND COMPLETE COPIES OF EACH OF THE
BUSINESS LEASES, INCLUDING, WITHOUT LIMITATION, ALL AMENDMENTS, MODIFICATIONS,
SIDE AGREEMENTS, CONSENTS, SUBORDINATION AGREEMENTS AND GUARANTEES EXECUTED OR
OTHERWISE IN FORCE WITH RESPECT TO ANY BUSINESS LEASE. EXCEPT AS SET FORTH IN
SECTION 3.6(C) OF THE DISCLOSURE SCHEDULE, WITH RESPECT TO EACH BUSINESS LEASE:
(I) TO THE KNOWLEDGE OF SELLER, THE BUSINESS LEASE IS LEGAL, VALID, BINDING,
ENFORCEABLE AND IN FULL FORCE AND EFFECT TO THE EXTENT PERMITTED BY APPLICABLE
LEGAL REQUIREMENTS; (II) NEITHER SELLER OR XCEL JAPAN, AS APPLICABLE, NOR, TO
THE KNOWLEDGE OF SELLER, ANY OTHER PARTY TO THE BUSINESS LEASE, IS IN ANY
MATERIAL RESPECT IN BREACH OR DEFAULT UNDER THE BUSINESS LEASE, AND NO EVENT HAS
OCCURRED THAT, WITH NOTICE OR LAPSE OF TIME, WOULD CONSTITUTE A BREACH OR
DEFAULT IN ANY MATERIAL RESPECT BY SELLER OR XCEL JAPAN, AS APPLICABLE, OR
PERMIT TERMINATION, MODIFICATION OR ACCELERATION UNDER THE BUSINESS LEASE BY ANY
OTHER PARTY THERETO; (III) OTHER THAN THE EXECUTION OF THIS AGREEMENT BY SELLER,
NO EVENT HAS OCCURRED THAT WOULD CONSTITUTE OR PERMIT TERMINATION, MODIFICATION
OR ACCELERATION OF THE BUSINESS LEASE OR TRIGGER LIQUIDATED DAMAGES; (IV) SELLER
OR XCEL JAPAN, AS APPLICABLE, HAS PERFORMED ALL OF ITS OBLIGATIONS IN ALL
MATERIAL RESPECTS UNDER THE BUSINESS LEASE; (V) SELLER OR XCEL JAPAN, AS
APPLICABLE, HAS NOT, AND, TO THE KNOWLEDGE OF SELLER, NO THIRD PARTY HAS,
REPUDIATED ANY MATERIAL PROVISION OF THE BUSINESS LEASE; (VI) THERE ARE NO
DISPUTES, ORAL AGREEMENTS OR FORBEARANCE PROGRAMS IN EFFECT AS TO THE BUSINESS
LEASE THAT WOULD BE MATERIAL TO SELLER OR XCEL JAPAN; (VII) THE BUSINESS LEASE

 

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HAS NOT BEEN MODIFIED IN ANY RESPECT, EXCEPT TO THE EXTENT THAT SUCH
MODIFICATIONS ARE SET FORTH IN THE DOCUMENTS PREVIOUSLY MADE AVAILABLE TO BUYER
AND SET FORTH ON SECTION 3.6(C) OF THE DISCLOSURE SCHEDULE; AND (VIII) NEITHER
SELLER NOR XCEL JAPAN HAS ASSIGNED, TRANSFERRED, CONVEYED, MORTGAGED, DEEDED IN
TRUST OR ENCUMBERED ANY INTEREST IN THE BUSINESS LEASE.

 

(D)                                 ALL BUILDINGS AND OTHER IMPROVEMENTS
INCLUDED WITHIN THE BUSINESS LEASED REAL PROPERTY (THE “COMPANY IMPROVEMENTS”)
ARE, IN ALL MATERIAL RESPECTS, ADEQUATE TO OPERATE SUCH FACILITIES AS CURRENTLY
USED, AND, TO THE KNOWLEDGE OF SELLER, THERE ARE NO FACTS OR CONDITIONS
AFFECTING ANY OF SELLER IMPROVEMENTS THAT WOULD, INDIVIDUALLY OR IN THE
AGGREGATE, INTERFERE IN ANY SIGNIFICANT RESPECT WITH THE CURRENT USE, OCCUPANCY
OR OPERATION THEREOF. WITH RESPECT TO SELLER IMPROVEMENTS, SELLER OR XCEL JAPAN,
AS APPLICABLE, HAS ALL RIGHTS OF ACCESS THAT ARE REASONABLY NECESSARY FOR THE
OPERATION OF THE BUSINESS.

 

(E)                                  ALL REQUIRED OR APPROPRIATE CERTIFICATES OF
OCCUPANCY, PERMITS, LICENSES, FRANCHISES, APPROVALS AND AUTHORIZATIONS
(COLLECTIVELY, THE “BUSINESS REAL PROPERTY PERMITS”) OF ALL GOVERNMENT BODIES
HAVING JURISDICTION OVER THE BUSINESS LEASED REAL PROPERTY, THE ABSENCE OF WHICH
WOULD BE REASONABLY LIKELY TO CAUSE A MATERIAL ADVERSE EFFECT TO SELLER OR XCEL
JAPAN, HAVE BEEN LAWFULLY ISSUED TO SELLER OR XCEL JAPAN, AS APPLICABLE, TO
ENABLE THE BUSINESS LEASED REAL PROPERTY TO BE LAWFULLY OCCUPIED AND USED FOR
ALL OF THE PURPOSES FOR WHICH IT IS CURRENTLY OCCUPIED AND USED AND ARE, AS OF
THE DATE HEREOF, IN FULL FORCE AND EFFECT. NEITHER SELLER NOR XCEL JAPAN HAS
RECEIVED, OR BEEN INFORMED BY A THIRD PARTY OF THE RECEIPT BY IT OF, ANY NOTICE
THAT WOULD BE REASONABLY LIKELY TO CAUSE A MATERIAL ADVERSE EFFECT TO SELLER OR
XCEL JAPAN FROM ANY GOVERNMENT BODY HAVING JURISDICTION OVER THE BUSINESS LEASED
REAL PROPERTY THREATENING A SUSPENSION, REVOCATION, MODIFICATION OR CANCELLATION
OF ANY BUSINESS LEASED REAL PROPERTY PERMIT OR REQUIRING ANY REMEDIATION IN
CONNECTION WITH MAINTAINING ANY BUSINESS LEASED REAL PROPERTY PERMIT.

 

(F)                                    NO SUPPLIER, OUTSIDE MANUFACTURER OR
THIRD PARTY HAS ANY RIGHTS, TITLE OR INTEREST IN OR TO ANY MOLDS, DIES, TOOLING
OR SIMILAR PROPERTIES USED IN THE DIGITRAN BUSINESS, INCLUDING, BUT NOT LIMITED
TO, SUCH PROPERTIES WHICH MAY BE LOCATED WITH A SUPPLIER OR OUTSIDE
MANUFACTURER.

 

(G)                                 ALL OF THE PURCHASED ASSETS ARE SUFFICIENT
FOR THE OPERATION OF THE DIGITRAN BUSINESS AND ARE, SUBJECT TO NORMAL WEAR AND
TEAR AND DEPRECIATION, IN GOOD WORKING ORDER AND CONDITION EXCEPT AS SET FORTH
AT SECTION 3.6(G) OF THE DISCLOSURE SCHEDULE.  EXCEPT AS SET FORTH AT
SECTION 3.6(G) OF THE DISCLOSURE SCHEDULE, ALL OF THE PURCHASED ASSETS THAT ARE
TANGIBLE PERSONAL PROPERTY ARE LOCATED AT SELLER’S FACILITY.

 

(H)                                 EXCEPT AS SET FORTH AT SECTION 3.6(H) OF THE
DISCLOSURE SCHEDULE, THE PURCHASED ASSETS CONSTITUTE ALL ASSETS USED IN THE
CONDUCT OF THE DIGITRAN BUSINESS AS CURRENTLY CONDUCTED AND NECESSARY AND
SUFFICIENT FOR THE CONDUCT OF THE DIGITRAN BUSINESS.

 

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3.7                                 CONDITION AND SUFFICIENCY OF FACILITIES. 
THE FACILITIES OF THE BUSINESS ARE IN GOOD OPERATING CONDITION AND REPAIR
(SUBJECT TO ORDINARY WEAR AND TEAR), AND ARE ADEQUATE FOR THE USES TO WHICH THEY
ARE BEING PUT.  THE FACILITIES OF THE BUSINESS ARE SUFFICIENT FOR THE CONTINUED
CONDUCT OF THE BUSINESS AFTER THE CLOSING IN SUBSTANTIALLY THE SAME MANNER AS
CONDUCTED PRIOR TO THE CLOSING.

 

3.8                                 ACCOUNTS RECEIVABLE.  ALL ACCOUNTS
RECEIVABLE OF THE BUSINESS THAT ARE REFLECTED ON THE ACCOUNTING RECORDS OF THE
BUSINESS AS OF THE CLOSING DATE (COLLECTIVELY, THE “ACCOUNTS RECEIVABLE”)
REPRESENT OR WILL REPRESENT VALID OBLIGATIONS ARISING FROM SALES ACTUALLY MADE
OR SERVICES ACTUALLY PERFORMED IN THE ORDINARY COURSE OF BUSINESS.  UNLESS PAID
PRIOR TO THE CLOSING DATE, THE ACCOUNTS RECEIVABLE ARE OR WILL BE AS OF THE
CLOSING DATE CURRENT AND COLLECTIBLE, NET OF THE RESPECTIVE RESERVES SHOWN ON
THE ACCOUNTING RECORDS OF THE BUSINESS AS OF THE CLOSING DATE (WHICH RESERVES
ARE ADEQUATE AND CALCULATED CONSISTENT WITH PAST PRACTICE).  SUBJECT TO SUCH
RESERVES, EACH OF THE ACCOUNTS RECEIVABLE EITHER HAS BEEN OR WILL BE COLLECTED
IN FULL, WITHOUT ANY SETOFF, WITHIN TWO HUNDRED TEN (210) DAYS AFTER THE DAY ON
WHICH IT FIRST BECOMES DUE AND PAYABLE.  THERE IS NO CONTEST, CLAIM OR RIGHT OF
SETOFF, OTHER THAN RETURNS IN THE ORDINARY COURSE OF BUSINESS, UNDER ANY
CONTRACT WITH ANY OBLIGOR OF AN ACCOUNTS RECEIVABLE RELATING TO THE AMOUNT OR
VALIDITY OF SUCH ACCOUNTS RECEIVABLE.  SECTION 3.8 OF THE DISCLOSURE SCHEDULE
CONTAINS A COMPLETE AND ACCURATE LIST OF ALL ACCOUNTS RECEIVABLE AS OF THE DATE
OF THE INTERIM BUSINESS BALANCE SHEETS, WHICH LIST SETS FORTH THE AGING OF SUCH
ACCOUNTS RECEIVABLE.

 

3.9                                 INVENTORY.  ALL INVENTORY OF THE BUSINESS,
WHETHER OR NOT REFLECTED IN THE BUSINESS FINANCIAL STATEMENTS OR THE INTERIM
BUSINESS BALANCE SHEETS, CONSISTS OF A QUALITY AND QUANTITY USABLE AND SALABLE
IN THE ORDINARY COURSE OF BUSINESS, EXCEPT FOR OBSOLETE ITEMS AND ITEMS OF
BELOW-STANDARD QUALITY, ALL OF WHICH HAVE BEEN WRITTEN OFF OR WRITTEN DOWN TO
NET REALIZABLE VALUE IN THE BUSINESS FINANCIAL STATEMENTS OR THE INTERIM
BUSINESS BALANCE SHEETS OR ON THE ACCOUNTING RECORDS OF SELLER AS OF THE CLOSING
DATE, AS THE CASE MAY BE.  ALL INVENTORIES NOT WRITTEN OFF HAVE BEEN PRICED AT
THE LOWER OF COST OR MARKET.  THE QUANTITIES OF EACH ITEM OF INVENTORY (WHETHER
RAW MATERIALS, WORK-IN-PROCESS, OR FINISHED GOODS) ARE REASONABLE IN THE PRESENT
CIRCUMSTANCES OF THE BUSINESS, ALL CONSISTENT WITH PAST PRACTICES.  SECTION 3.9
OF THE DISCLOSURE SCHEDULE CONTAINS A LIST OF ALL INVENTORY OF THE DIGITRAN
BUSINESS AS OF MARCH 17, 2009 AND OF XCEL JAPAN AS OF FEBRUARY 28, 2009.  ALL
SUCH INVENTORY IS OWNED FREE AND CLEAR OF ANY ENCUMBRANCES.  NONE OF THE
INVENTORY REFLECTED IN THE FINANCIAL STATEMENTS HAS BEEN SOLD FOR AN AMOUNT LESS
THAN THE VALUE PLACED ON SUCH INVENTORY AS REFLECTED IN THE BUSINESS FINANCIAL
STATEMENTS OR THE INTERIM BUSINESS BALANCE SHEETS, AS APPLICABLE.  SELLER HAS
NOT OFFERED PRICE REDUCTIONS, DISCOUNTS OR ALLOWANCES ON SALES OF INVENTORY, OR
SOLD INVENTORY AT LESS THAN COST.

 

3.10                           NO UNDISCLOSED LIABILITIES.  THE BUSINESS HAS NO
LIABILITIES OR OBLIGATIONS OF ANY NATURE (WHETHER KNOWN OR UNKNOWN AND WHETHER
ABSOLUTE, ACCRUED, CONTINGENT, OR OTHERWISE) EXCEPT FOR LIABILITIES OR
OBLIGATIONS REFLECTED OR RESERVED AGAINST IN THE BUSINESS FINANCIAL STATEMENTS
OR, EXCEPT AS SET FORTH IN SECTION 3.10 OF THE DISCLOSURE SCHEDULE, THE INTERIM
BUSINESS BALANCE SHEETS, AND CURRENT LIABILITIES INCURRED IN THE ORDINARY COURSE
OF BUSINESS SINCE THE RESPECTIVE DATES THEREOF.

 

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3.11                           TAXES.

 

(A)                                  SELLER AND XCEL JAPAN (OR PARENT ON THEIR
BEHALF) HAVE FILED OR CAUSED TO BE FILED ON A TIMELY BASIS ALL TAX RETURNS THAT
ARE OR WERE REQUIRED TO BE FILED BY OR WITH RESPECT TO THE BUSINESS, PURSUANT TO
APPLICABLE LEGAL REQUIREMENTS.  SELLER AND XCEL JAPAN (OR PARENT ON THEIR
BEHALF) HAVE PAID, ALL TAXES WITH RESPECT TO THE BUSINESS THAT HAVE OR MAY HAVE
BECOME DUE PURSUANT TO THOSE TAX RETURNS OR OTHERWISE, OR PURSUANT TO ANY
ASSESSMENT RECEIVED BY SELLER OR XCEL JAPAN.

 

(B)                                 THE CHARGES, ACCRUALS, AND RESERVES WITH
RESPECT TO TAXES WITH RESPECT TO THE BUSINESS ON THE BOOKS OF EACH OF SELLER AND
XCEL JAPAN ARE ADEQUATE AND ARE AT LEAST EQUAL TO ITS LIABILITY FOR TAXES. 
THERE EXISTS NO PROPOSED TAX ASSESSMENT AGAINST SELLER OR XCEL JAPAN (OR PARENT
ON THEIR BEHALF) WITH RESPECT TO THE BUSINESS.  ALL TAXES WITH RESPECT TO THE
BUSINESS THAT EACH OF SELLER AND XCEL JAPAN (OR PARENT ON THEIR BEHALF) IS OR
WAS REQUIRED BY LEGAL REQUIREMENTS TO WITHHOLD OR COLLECT HAVE BEEN DULY
WITHHELD OR COLLECTED AND, TO THE EXTENT REQUIRED, HAVE BEEN PAID TO THE PROPER
GOVERNMENTAL BODY OR OTHER PERSON.

 

(C)                                  ALL TAX RETURNS WITH RESPECT TO THE
BUSINESS FILED BY EACH OF SELLER AND XCEL JAPAN (OR PARENT ON THEIR BEHALF) ARE
TRUE, CORRECT, AND COMPLETE.

 

(D)                                 NEITHER SELLER NOR XCEL JAPAN IS A PARTY TO,
BOUND BY, OR HAVE ANY OBLIGATION UNDER ANY TAX SHARING, TAX INDEMNITY OR SIMILAR
AGREEMENTS.

 

3.12                           NO MATERIAL ADVERSE CHANGE.  SINCE THE DATE OF
THE INTERIM BUSINESS BALANCE SHEETS, THERE HAS NOT BEEN ANY MATERIAL ADVERSE
CHANGE IN THE BUSINESS, OPERATIONS, PROPERTIES, PROSPECTS, ASSETS, OR CONDITION
OF THE BUSINESS, AND NO EVENT HAS OCCURRED OR CIRCUMSTANCE EXISTS THAT MAY
RESULT IN SUCH A MATERIAL ADVERSE CHANGE.

 

3.13                           EMPLOYEE BENEFITS.

 

(A)                                  SECTION 3.13(A) OF THE DISCLOSURE SCHEDULE
SETS FORTH A LIST OF EACH BENEFIT PLAN THAT COVERS ANY EMPLOYEE OF THE BUSINESS
BASED IN THE UNITED STATES (THE “U.S. BENEFIT PLANS”). “BENEFIT PLAN” MEANS ANY
OF THE FOLLOWING: AN “EMPLOYEE PENSION BENEFIT PLAN” (AS DEFINED IN
SECTION 3(2) OF ERISA), AN “EMPLOYEE WELFARE BENEFIT PLAN” (AS DEFINED IN
SECTION 3(1) OF ERISA), AND ANY OTHER PLAN, PROGRAM, ARRANGEMENT OR AGREEMENT
PROVIDING FOR SEVERANCE OR RETENTION BENEFITS, PROFIT-SHARING, FEES, BONUSES,
STOCK OPTIONS, STOCK APPRECIATION, STOCK PURCHASE OR OTHER STOCK-RELATED RIGHTS,
CURRENT COMPENSATION, INCENTIVE OR DEFERRED COMPENSATION, CHANGE-IN-CONTROL
BENEFITS, VACATION BENEFITS, INSURANCE, HEALTH OR MEDICAL BENEFITS, DENTAL
BENEFITS, EMPLOYEE ASSISTANCE PROGRAMS, DISABILITY BENEFITS, WORKERS’
COMPENSATION BENEFITS OR POST-EMPLOYMENT OR RETIREMENT BENEFITS AND ANY MATERIAL
FRINGE BENEFITS (EXCLUDING ANY PLANS, PROGRAMS OR ARRANGEMENTS MANDATED BY
APPLICABLE LEGAL REQUIREMENT) THAT IS SPONSORED, MAINTAINED OR CONTRIBUTED TO,
OR REQUIRED TO BE MAINTAINED OR CONTRIBUTED TO, OR WITH RESPECT TO WHICH
LIABILITY IS BORNE, BY SELLER OR ANY ERISA AFFILIATE OF SELLER FOR THE BENEFIT
OF ANY EMPLOYEE OF THE BUSINESS. SELLER HAS MADE AVAILABLE TO BUYER TRUE AND
COMPLETE COPIES OF

 

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THE U.S. BENEFIT PLANS (OR, TO THE EXTENT NO SUCH COPY EXISTS, A DESCRIPTION OF
THE MATERIAL TERMS), SUMMARY PLAN DESCRIPTIONS AND SUMMARIES OF MATERIAL
MODIFICATION FOR THE U.S. BENEFIT PLANS (IF APPLICABLE) AND THE MOST RECENT
INTERNAL REVENUE SERVICE DETERMINATION LETTER OR OPINION LETTER RELATED TO THE
U.S. BENEFIT PLANS (IF APPLICABLE). EXCEPT AS SET FORTH IN SECTION 3.13(A) OF
THE DISCLOSURE SCHEDULE, NO U.S. BENEFIT PLAN IS SPONSORED OR MAINTAINED BY
SELLER OR ANY ERISA AFFILIATE OF SELLER.

 

(B)                                 NEITHER SELLER NOR ANY ERISA AFFILIATE OF
SELLER HAS INCURRED ANY UNSATISFIED LIABILITY TO THE PBGC OR THE INTERNAL
REVENUE SERVICE UNDER TITLE IV OF ERISA OR SECTION 412 OF THE IRC OR SECTION 302
OF ERISA THAT COULD RESULT IN THE IMPOSITION OF ANY LIABILITY ON BUYER OR ANY OF
ITS ERISA AFFILIATES.

 

(C)                                  EACH U.S. BENEFIT PLAN WITH RESPECT TO
WHICH BUYER OR ANY AFFILIATE OF BUYER COULD HAVE ANY MATERIAL LIABILITY
HEREUNDER THAT COVERS ANY EMPLOYEE OF THE BUSINESS HAS BEEN AND IS BEING
ADMINISTERED IN ALL MATERIAL RESPECTS IN ACCORDANCE WITH ITS TERMS AND ERISA,
THE IRC AND ALL OTHER APPLICABLE LEGAL REQUIREMENTS. ALL THE U.S. BENEFIT PLANS
THAT ARE INTENDED TO BE QUALIFIED UNDER SECTION 401(A) OF THE IRC HAVE RECEIVED
DETERMINATION LETTERS FROM THE IRS TO THE EFFECT THAT SUCH U.S. BENEFIT PLANS
ARE QUALIFIED AND THE PLANS AND TRUSTS RELATED THERETO ARE EXEMPT FROM FEDERAL
INCOME TAXES UNDER SECTIONS 401(A) AND 501(A), RESPECTIVELY, OF THE IRC AND NO
CONDITION EXISTS AND NO EVENT HAS OCCURRED THAT WOULD REASONABLY BE EXPECTED TO
RESULT IN THE REVOCATION OF SUCH LETTERS.

 

(D)                                 NEITHER SELLER NOR ANY ERISA AFFILIATE OF
SELLER NOR ANY PERSON APPOINTED OR OTHERWISE DESIGNATED TO ACT ON BEHALF OF
SELLER OR ANY ERISA AFFILIATE OF SELLER HAS ENGAGED IN ANY TRANSACTIONS IN
CONNECTION WITH ANY U.S. BENEFIT PLAN THAT ARE REASONABLY EXPECTED TO RESULT IN
THE IMPOSITION OF MATERIAL PENALTIES PURSUANT TO SECTION 502(I) OF ERISA,
MATERIAL DAMAGES PURSUANT TO SECTION 409 OF ERISA OR A MATERIAL TAX PURSUANT TO
SECTION 4975(A) OF THE IRC THAT COULD RESULT IN THE IMPOSITION OF ANY MATERIAL
LIABILITY ON BUYER OR ANY OF ITS ERISA AFFILIATES.

 

(E)                                  NEITHER THE EXECUTION OF, NOR CONSUMMATION
OF, THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT WILL (EITHER ALONE OR UPON
THE OCCURRENCE OF ANY ADDITIONAL OR SUBSEQUENT EVENT) CONSTITUTE AN EVENT UNDER
ANY U.S. BENEFIT PLAN THAT WILL OR MAY RESULT IN ANY PAYMENT OR PROVISION OF,
ACCELERATION OF, VESTING OR INCREASE IN, ANY BENEFITS (WHETHER OF SEVERANCE PAY
OR OTHERWISE), WITH RESPECT TO ANY CURRENT OR FORMER EMPLOYEE, INDEPENDENT
CONTRACTOR, CONSULTANT, AGENT OR DIRECTOR OF SELLER OR ANY AFFILIATE OF SELLER,
OR ANY BENEFICIARY THEREOF, WITH RESPECT TO WHICH BUYER OR ITS AFFILIATES MAY
HAVE ANY OBLIGATIONS OR MATERIAL LIABILITY.

 

(F)                                    NO CLAIM, LITIGATION OR ADMINISTRATIVE OR
OTHER ACTION, PROCEEDING, AUDIT, EXAMINATION OR INVESTIGATION IS PENDING OR
ASSERTED, OR, TO THE KNOWLEDGE OF SELLER, THREATENED, ANTICIPATED OR EXPECTED TO
BE ASSERTED WITH RESPECT TO ANY U.S. BENEFIT PLAN OR THE ASSETS OF ANY SUCH PLAN
(OTHER THAN ROUTINE CLAIMS FOR BENEFITS ARISING IN THE ORDINARY COURSE) THAT
COULD RESULT IN THE IMPOSITION OF ANY MATERIAL LIABILITY ON BUYER OR ITS ERISA
AFFILIATES.

 

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(G)                                 NEITHER SELLER NOR ANY AFFILIATE OF SELLER
HAS EVER MAINTAINED ANY EMPLOYEE BENEFIT PLAN THAT HAS BEEN THE SUBJECT OF TITLE
IV OF ERISA (INCLUDING, BUT NOT LIMITED TO, ANY MULTI-EMPLOYER PLAN) OR HAS EVER
PROVIDED HEALTHCARE OR ANY OTHER NONPENSION BENEFITS TO ANY EMPLOYEES AFTER
THEIR EMPLOYMENT TERMINATED OTHER THAN AS REQUIRED BY ERISA, OR HAS EVER
PROMISED TO PROVIDE SUCH POST-TERMINATION BENEFITS.

 

(H)                                 SECTION 3.13(H) OF THE DISCLOSURE SCHEDULE
SETS FORTH A LIST OF EACH BENEFIT PLAN MAINTAINED, OR CONTRIBUTED TO, BY SELLER,
XCEL JAPAN OR THEIR RESPECTIVE AFFILIATES FOR THE BENEFIT OF EMPLOYEES OF THE
BUSINESS BASED OUTSIDE OF THE UNITED STATES (THE “FOREIGN BENEFIT PLANS”). EACH
FOREIGN BENEFIT PLAN WITH RESPECT TO WHICH BUYER OR ITS AFFILIATES COULD HAVE
ANY MATERIAL LIABILITY HAS BEEN OPERATED IN ALL MATERIAL RESPECTS IN COMPLIANCE
WITH ITS TERMS AND WITH APPLICABLE LEGAL REQUIREMENTS OF THE RELEVANT
JURISDICTION IN WHICH SUCH FOREIGN BENEFIT PLAN IS MAINTAINED. EACH FOREIGN
BENEFIT PLAN WITH RESPECT TO WHICH BUYER OR ITS AFFILIATES MAY HAVE ANY
OBLIGATIONS OR MATERIAL LIABILITY THAT IS INTENDED TO QUALIFY FOR FAVORABLE TAX
BENEFITS UNDER THE LEGAL REQUIREMENTS OF ANY JURISDICTION IS SO QUALIFIED, AND,
TO THE KNOWLEDGE OF SELLER, NO CONDITION EXISTS AND NO EVENT HAS OCCURRED THAT
WOULD REASONABLY BE EXPECTED TO RESULT IN THE LOSS OR REVOCATION OF SUCH STATUS.
ALL BENEFITS, CONTRIBUTIONS AND PREMIUMS RELATING TO EACH FOREIGN BENEFIT PLAN
WITH RESPECT TO WHICH BUYER OR ITS AFFILIATES MAY HAVE ANY OBLIGATIONS OR
MATERIAL LIABILITY HAVE BEEN TIMELY PAID OR MADE IN MATERIAL COMPLIANCE WITH ITS
TERMS AND WITH APPLICABLE LEGAL REQUIREMENTS AND ANY RELATED CONTRACT. SELLER
HAS MADE AVAILABLE TO BUYER TRUE AND COMPLETE COPIES OF THE FOREIGN BENEFIT
PLANS. THERE ARE NO PENDING PROMISED OR COMMITTED, WHETHER LEGALLY BINDING OR
NOT, UNDERTAKINGS TO CREATE OR TERMINATE ANY NEW FOREIGN BENEFIT PLAN OR TO MAKE
MATERIAL IMPROVEMENTS, INCREASES OR CHANGES TO ANY FOREIGN BENEFIT PLAN, NOR IS
THERE ANY PATTERN OF AD HOC BENEFIT INCREASES UNDER ANY FOREIGN BENEFIT PLAN
THAT MAY BE ENFORCEABLE AGAINST BUYER OR ITS AFFILIATES. NEITHER THE EXECUTION
OF, NOR CONSUMMATION OF, THE CONTEMPLATED TRANSACTIONS WILL (EITHER ALONE OR
UPON THE OCCURRENCE OF ANY ADDITIONAL OR SUBSEQUENT EVENT) CONSTITUTE AN EVENT
UNDER ANY FOREIGN BENEFIT PLAN THAT WILL OR MAY RESULT IN ANY PAYMENT OR
PROVISION OF, ACCELERATION OF, OR VESTING OR INCREASE IN, ANY BENEFITS (WHETHER
OF SEVERANCE PAY OR OTHERWISE), WITH RESPECT TO ANY CURRENT OR FORMER EMPLOYEE,
INDEPENDENT CONTRACTOR, CONSULTANT, AGENT OR DIRECTOR OF SELLER OR ANY AFFILIATE
THEREOF, OR ANY BENEFICIARY THEREOF, WITH RESPECT TO WHICH BUYER OR ITS
AFFILIATES MAY HAVE ANY OBLIGATIONS OR MATERIAL LIABILITY. NO CLAIM, LITIGATION
OR ADMINISTRATIVE OR OTHER ACTION, PROCEEDING, AUDIT, EXAMINATION OR
INVESTIGATION IS PENDING OR ASSERTED, OR, TO THE KNOWLEDGE OF SELLER,
THREATENED, ANTICIPATED OR EXPECTED TO BE ASSERTED WITH RESPECT TO ANY FOREIGN
BENEFIT PLAN OR THE ASSETS OF ANY SUCH PLAN (OTHER THAN ROUTINE CLAIMS FOR
BENEFITS ARISING IN THE ORDINARY COURSE) THAT COULD RESULT IN THE IMPOSITION OF
ANY MATERIAL LIABILITY ON BUYER OR ANY OF ITS AFFILIATES.

 

3.14                           COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS.

 

(A)                                  EXCEPT AS SET FORTH IN SECTION 3.14(A) OF
THE DISCLOSURE SCHEDULE:

 

(I)                                     EACH OF SELLER AND XCEL JAPAN IS, AND AT
ALL TIMES SINCE JANUARY 1, 2004 HAS BEEN, IN FULL COMPLIANCE WITH EACH LEGAL
REQUIREMENT THAT IS OR WAS

 

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APPLICABLE TO THE CONDUCT OR OPERATION OF THE BUSINESS OR THE OWNERSHIP OR USE
OF ANY OF THE PURCHASED ASSETS;

 

(II)                                  NO EVENT HAS OCCURRED OR CIRCUMSTANCE
EXISTS THAT (WITH OR WITHOUT NOTICE OR LAPSE OF TIME) (A) MAY CONSTITUTE OR
RESULT IN A VIOLATION BY SELLER OR XCEL JAPAN OF, OR A FAILURE ON THE PART OF
SELLER OR XCEL JAPAN TO COMPLY WITH, ANY LEGAL REQUIREMENT APPLICABLE TO THE
CONDUCT OR OPERATION OF THE BUSINESS, OR (B) MAY GIVE RISE TO ANY OBLIGATION ON
THE PART OF SELLER OR XCEL JAPAN TO UNDERTAKE, OR TO BEAR ALL OR ANY PORTION OF
THE COST OF, ANY REMEDIAL ACTION OF ANY NATURE WITH RESPECT TO THE BUSINESS; AND

 

(III)                               NEITHER SELLER NOR XCEL JAPAN HAS RECEIVED,
AT ANY TIME SINCE JANUARY 1, 2004, ANY NOTICE OR OTHER COMMUNICATION (WHETHER
ORAL OR WRITTEN) FROM ANY GOVERNMENTAL BODY OR ANY OTHER PERSON REGARDING
(A) ANY ACTUAL, ALLEGED, POSSIBLE, OR POTENTIAL VIOLATION OF, OR FAILURE TO
COMPLY WITH, ANY LEGAL REQUIREMENT APPLICABLE TO THE CONDUCT OR OPERATION OF THE
BUSINESS, OR (B) ANY ACTUAL, ALLEGED, POSSIBLE, OR POTENTIAL OBLIGATION ON THE
PART OF IT TO UNDERTAKE, OR TO BEAR ALL OR ANY PORTION OF THE COST OF, ANY
REMEDIAL ACTION OF ANY NATURE WITH RESPECT TO THE BUSINESS.

 

(B)                                 SECTION 3.14(B) OF THE DISCLOSURE SCHEDULE
CONTAINS A COMPLETE AND ACCURATE LIST OF EACH GOVERNMENTAL AUTHORIZATION THAT IS
HELD BY SELLER OR XCEL JAPAN RELATING TO THE BUSINESS OR THAT OTHERWISE RELATES
TO THE PURCHASED ASSETS.  EACH GOVERNMENTAL AUTHORIZATION LISTED OR REQUIRED TO
BE LISTED IN SECTION 3.14(B) OF THE DISCLOSURE SCHEDULE IS VALID AND IN FULL
FORCE AND EFFECT.  EXCEPT AS SET FORTH IN SECTION 3.14(B) OF THE DISCLOSURE
SCHEDULE:

 

(I)                                     EACH OF SELLER AND XCEL JAPAN IS, AND AT
ALL TIMES SINCE JANUARY 1, 2006 HAS BEEN, IN FULL COMPLIANCE WITH ALL OF THE
TERMS AND REQUIREMENTS OF EACH GOVERNMENTAL AUTHORIZATION IDENTIFIED OR REQUIRED
TO BE IDENTIFIED IN SECTION 3.14(B) OF THE DISCLOSURE SCHEDULE;

 

(II)                                  NO EVENT HAS OCCURRED OR CIRCUMSTANCE
EXISTS THAT MAY (WITH OR WITHOUT NOTICE OR LAPSE OF TIME) (A) CONSTITUTE OR
RESULT DIRECTLY OR INDIRECTLY IN A VIOLATION OF OR A FAILURE TO COMPLY WITH ANY
TERM OR REQUIREMENT OF ANY GOVERNMENTAL AUTHORIZATION LISTED OR REQUIRED TO BE
LISTED IN SECTION 3.14(B) OF THE DISCLOSURE SCHEDULE, OR (B) RESULT DIRECTLY OR
INDIRECTLY IN THE REVOCATION, WITHDRAWAL, SUSPENSION, CANCELLATION, OR
TERMINATION OF, OR ANY MODIFICATION TO, ANY GOVERNMENTAL AUTHORIZATION LISTED OR
REQUIRED TO BE LISTED IN SECTION 3.16(B) OF THE DISCLOSURE SCHEDULE;

 

(III)                               NEITHER SELLER NOR XCEL JAPAN HAS RECEIVED,
AT ANY TIME SINCE JANUARY 1, 2006, ANY NOTICE OR OTHER COMMUNICATION (WHETHER
ORAL OR WRITTEN) FROM ANY GOVERNMENTAL BODY OR ANY OTHER PERSON REGARDING
(A) ANY ACTUAL, ALLEGED, POSSIBLE, OR POTENTIAL VIOLATION OF OR FAILURE TO
COMPLY WITH ANY TERM OR REQUIREMENT OF ANY GOVERNMENTAL AUTHORIZATION, OR
(B) ANY ACTUAL, PROPOSED,

 

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POSSIBLE, OR POTENTIAL REVOCATION, WITHDRAWAL, SUSPENSION, CANCELLATION,
TERMINATION OF, OR MODIFICATION TO ANY GOVERNMENTAL AUTHORIZATION; AND

 

(IV)                              ALL APPLICATIONS REQUIRED TO HAVE BEEN FILED
FOR THE RENEWAL OF THE GOVERNMENTAL AUTHORIZATIONS LISTED OR REQUIRED TO BE
LISTED IN SECTION 3.14(B) OF THE DISCLOSURE SCHEDULE HAVE BEEN DULY FILED ON A
TIMELY BASIS WITH THE APPROPRIATE GOVERNMENTAL BODIES, AND ALL OTHER FILINGS
REQUIRED TO HAVE BEEN MADE WITH RESPECT TO SUCH GOVERNMENTAL AUTHORIZATIONS HAVE
BEEN DULY MADE ON A TIMELY BASIS WITH THE APPROPRIATE GOVERNMENTAL BODIES.

 

Except as set forth in Section 3.14(b) of the Disclosure Schedule, the
Governmental Authorizations listed in Section 3.14(b) of the Disclosure Schedule
collectively constitute all of the Governmental Authorizations necessary to
permit Seller and XCEL Japan to lawfully conduct and operate the Business in the
manner currently conducted and to permit Seller to own and use the Purchased
Assets in the manner in which it currently owns and uses the Purchased Assets.

 

3.15                           LEGAL PROCEEDINGS; ORDERS.

 

(A)                                  THERE IS NO PENDING PROCEEDING:

 

(I)                                     BY OR AGAINST SELLER OR XCEL JAPAN OR
THAT OTHERWISE RELATES TO OR MAY AFFECT THE BUSINESS OR THE PURCHASED ASSETS; OR

 

(II)                                  THAT CHALLENGES, OR THAT MAY HAVE THE
EFFECT OF PREVENTING, DELAYING, MAKING ILLEGAL, OR OTHERWISE INTERFERING WITH,
ANY OF THE CONTEMPLATED TRANSACTIONS.

 

Except as set forth on Section 3.15 of the Disclosure Schedule, to the Knowledge
of Seller, no such Proceeding has been Threatened, and no event has occurred or
circumstance exists that may give rise to or serve as a basis for the
commencement of any such Proceeding.

 

(B)                                 THERE IS NO ORDER TO WHICH SELLER (SOLELY
WITH RESPECT TO THE DIGITRAN BUSINESS), XCEL JAPAN, OR ANY OF THE PURCHASED
ASSETS, IS SUBJECT.

 

(C)                                  NO OFFICER, DIRECTOR, AGENT, OR EMPLOYEE OF
SELLER OR XCEL JAPAN IS SUBJECT TO ANY ORDER THAT PROHIBITS SUCH OFFICER,
DIRECTOR, AGENT, OR EMPLOYEE FROM ENGAGING IN OR CONTINUING ANY CONDUCT,
ACTIVITY, OR PRACTICE RELATING TO THE BUSINESS.

 

(D)                                 NO EVENT HAS OCCURRED OR CIRCUMSTANCE EXISTS
THAT MAY CONSTITUTE OR RESULT IN (WITH OR WITHOUT NOTICE OR LAPSE OF TIME) A
VIOLATION OF OR FAILURE TO COMPLY WITH ANY TERM OR REQUIREMENT OF ANY ORDER TO
WHICH THE BUSINESS OR THE PURCHASED ASSETS IS SUBJECT.

 

(E)                                  NEITHER SELLER NOR XCEL JAPAN HAS RECEIVED,
AT ANY TIME SINCE JANUARY 1, 2006, ANY NOTICE OR OTHER COMMUNICATION (WHETHER
ORAL OR WRITTEN) FROM ANY GOVERNMENTAL BODY OR ANY OTHER PERSON REGARDING ANY
ACTUAL, ALLEGED, POSSIBLE, OR

 

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POTENTIAL VIOLATION OF, OR FAILURE TO COMPLY WITH, ANY TERM OR REQUIREMENT OF
ANY ORDER TO WHICH SELLER (SOLELY WITH RESPECT TO THE DIGITRAN BUSINESS), XCEL
JAPAN OR ANY OF THE PURCHASED ASSETS IS OR HAS BEEN SUBJECT.

 

3.16                           ABSENCE OF CERTAIN CHANGES AND EVENTS.  EXCEPT AS
SET FORTH IN SECTION 3.16 OF THE DISCLOSURE SCHEDULE, SINCE THE DATE OF THE
INTERIM BUSINESS BALANCE SHEETS, THE BUSINESS HAS BEEN CONDUCTED ONLY IN THE
ORDINARY COURSE OF BUSINESS AND THERE HAS NOT BEEN ANY:

 

(A)                                  CHANGE IN XCEL JAPAN’S AUTHORIZED OR ISSUED
CAPITAL EQUITY; GRANT OF ANY STOCK OPTION OR RIGHT TO PURCHASE XCEL JAPAN’S
CAPITAL EQUITY; ISSUANCE BY XCEL JAPAN OF ANY SECURITY CONVERTIBLE INTO SUCH
CAPITAL EQUITY; PURCHASE, REDEMPTION, RETIREMENT, OR OTHER ACQUISITION BY SELLER
OR XCEL JAPAN OF ANY OF XCEL JAPAN’S CAPITAL EQUITY; OR DECLARATION OR PAYMENT
OF ANY DIVIDEND OR OTHER DISTRIBUTION OR PAYMENT IN RESPECT OF XCEL JAPAN’S
CAPITAL EQUITY;

 

(B)                                 AMENDMENT TO SELLER’S OR XCEL JAPAN’S
ORGANIZATIONAL DOCUMENTS;

 

(C)                                  PAYMENT OR INCREASE, DECREASE, OR CESSATION
BY IT OF ANY BONUSES, SALARIES, OR OTHER COMPENSATION TO ANY STOCKHOLDER,
DIRECTOR, OFFICER, OR (EXCEPT IN THE ORDINARY COURSE OF BUSINESS) EMPLOYEE OR
ENTRY INTO ANY EMPLOYMENT, SEVERANCE, CONSULTING, INDEPENDENT CONTRACTOR, OR
SIMILAR CONTRACT WITH ANY DIRECTOR, OFFICER, OR EMPLOYEE RELATING TO THE
BUSINESS;

 

(D)                                 ADOPTION OF, OR INCREASE, DECREASE, OR
CESSATION IN THE PAYMENTS TO OR BENEFITS UNDER, ANY PROFIT-SHARING, BONUS,
DEFERRED COMPENSATION, SAVINGS, INSURANCE, PENSION, RETIREMENT, OR OTHER
EMPLOYEE BENEFIT PLAN FOR OR WITH ANY EMPLOYEES OF THE BUSINESS;

 

(E)                                  DAMAGE TO OR DESTRUCTION OR LOSS OF ANY
PURCHASED ASSETS, WHETHER OR NOT COVERED BY INSURANCE;

 

(F)                                    ENTRY INTO, TERMINATION OF, OR RECEIPT OF
NOTICE OF TERMINATION OF (I) ANY LICENSE, DISTRIBUTORSHIP, DEALER, SALES
REPRESENTATIVE, JOINT VENTURE, CREDIT, OR SIMILAR AGREEMENT, OR (II) ANY
CONTRACT OR TRANSACTION INVOLVING A TOTAL REMAINING COMMITMENT BY OR TO IT;

 

(G)                                 SALE (OTHER THAN SALES OF INVENTORY IN THE
ORDINARY COURSE OF BUSINESS), LEASE, OR OTHER DISPOSITION OF ANY ASSET OR
PROPERTY OR MORTGAGE, PLEDGE, OR IMPOSITION OF ANY LIEN OR OTHER ENCUMBRANCE ON
ANY MATERIAL ASSETS OR PROPERTY, INCLUDING THE SALE, LEASE, OR OTHER DISPOSITION
OF ANY OF THE INTELLECTUAL PROPERTY ASSETS;

 

(H)                                 CANCELLATION OR WAIVER OF ANY CLAIMS OR
RIGHTS;

 

(I)                                     MATERIAL CHANGE IN ACCOUNTING METHODS
USED; OR

 

(J)                                     AGREEMENT, WHETHER ORAL OR WRITTEN, BY
IT TO DO ANY OF THE FOREGOING.

 

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3.17                           CONTRACTS; NO DEFAULTS.

 

(A)                                  SECTION 3.17(A) OF THE DISCLOSURE SCHEDULE
CONTAINS A COMPLETE AND ACCURATE LIST, AND SELLER HAS MADE AVAILABLE TO BUYER
TRUE AND COMPLETE COPIES, OF:

 

(I)                                     EACH APPLICABLE CONTRACT THAT INVOLVES
PERFORMANCE OF SERVICES OR DELIVERY OF GOODS OR MATERIALS TO THE BUSINESS OF AN
AMOUNT OR VALUE IN EXCESS OF $10,000;

 

(II)                                  EACH APPLICABLE CONTRACT THAT WAS NOT
ENTERED INTO IN THE ORDINARY COURSE OF BUSINESS;

 

(III)                               EACH LEASE, RENTAL OR OCCUPANCY AGREEMENT,
LICENSE, INSTALLMENT AND CONDITIONAL SALE AGREEMENT, AND OTHER APPLICABLE
CONTRACT AFFECTING THE OWNERSHIP OF, LEASING OF, TITLE TO, USE OF, OR ANY
LEASEHOLD OR OTHER INTEREST IN, ANY REAL OR PERSONAL PROPERTY;

 

(IV)                              EACH LICENSING AGREEMENT OR OTHER APPLICABLE
CONTRACT WITH RESPECT TO PATENTS, TRADEMARKS, COPYRIGHTS, OR OTHER INTELLECTUAL
PROPERTY, INCLUDING AGREEMENTS WITH CURRENT OR FORMER EMPLOYEES, CONSULTANTS, OR
CONTRACTORS REGARDING THE APPROPRIATION OR THE NONDISCLOSURE OF ANY OF THE
INTELLECTUAL PROPERTY ASSETS;

 

(V)                                 EACH JOINT VENTURE, PARTNERSHIP, AND OTHER
APPLICABLE CONTRACT (HOWEVER NAMED) INVOLVING A SHARING OF PROFITS, LOSSES,
COSTS, OR LIABILITIES BY THE BUSINESS WITH ANY OTHER PERSON;

 

(VI)                              EACH APPLICABLE CONTRACT CONTAINING COVENANTS
THAT IN ANY WAY PURPORT TO RESTRICT ITS (OR ANY OF ITS AFFILIATES’) BUSINESS
ACTIVITY OR LIMIT ITS (OR ANY OF ITS AFFILIATES’) FREEDOM TO ENGAGE IN ANY LINE
OF BUSINESS OR TO COMPETE WITH ANY PERSON;

 

(VII)                           EACH APPLICABLE CONTRACT PROVIDING FOR PAYMENTS
TO OR BY ANY PERSON BASED ON SALES, PURCHASES, OR PROFITS, OTHER THAN DIRECT
PAYMENTS FOR GOODS;

 

(VIII)                        EACH POWER OF ATTORNEY THAT IS CURRENTLY EFFECTIVE
AND OUTSTANDING;

 

(IX)                                EACH APPLICABLE CONTRACT ENTERED INTO OTHER
THAN IN THE ORDINARY COURSE OF BUSINESS THAT CONTAINS OR PROVIDES FOR AN EXPRESS
UNDERTAKING BY THE BUSINESS TO BE RESPONSIBLE FOR CONSEQUENTIAL DAMAGES;

 

(X)                                   EACH APPLICABLE CONTRACT FOR CAPITAL
EXPENDITURES;

 

(XI)                                EACH WRITTEN WARRANTY, GUARANTY, AND OR
OTHER SIMILAR UNDERTAKING WITH RESPECT TO CONTRACTUAL PERFORMANCE EXTENDED BY
THE BUSINESS OTHER THAN IN THE ORDINARY COURSE OF BUSINESS; AND

 

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(XII)                             EACH AMENDMENT, SUPPLEMENT, AND MODIFICATION
(WHETHER ORAL OR WRITTEN) IN RESPECT OF ANY OF THE FOREGOING.

 

(B)                                 NO OFFICER, DIRECTOR, AGENT, EMPLOYEE,
CONSULTANT, OR CONTRACTOR OF THE BUSINESS IS BOUND BY ANY CONTRACT THAT PURPORTS
TO LIMIT THE ABILITY OF SUCH OFFICER, DIRECTOR, AGENT, EMPLOYEE, CONSULTANT, OR
CONTRACTOR TO (A) ENGAGE IN OR CONTINUE ANY CONDUCT, ACTIVITY, OR PRACTICE
RELATING TO THE BUSINESS OF THE BUSINESS, OR (B) ASSIGN TO THE BUSINESS OR TO
ANY OTHER PERSON ANY RIGHTS TO ANY INVENTION, IMPROVEMENT, OR DISCOVERY.

 

(C)                                  EACH CONTRACT IDENTIFIED OR REQUIRED TO BE
IDENTIFIED IN SECTION 3.17(A) OF THE DISCLOSURE SCHEDULE IS IN FULL FORCE AND
EFFECT AND IS VALID AND ENFORCEABLE IN ACCORDANCE WITH ITS TERMS.

 

(D)                                 (I)                                     EACH
OF SELLER AND XCEL JAPAN IS, AND AT ALL TIMES SINCE JANUARY 1, 2004 HAS BEEN, IN
FULL COMPLIANCE WITH ALL APPLICABLE TERMS AND REQUIREMENTS OF EACH CONTRACT
RELATING TO THE BUSINESS UNDER WHICH IT HAS OR HAD ANY OBLIGATION OR LIABILITY
OR BY WHICH IT OR ANY OF THE ASSETS OWNED OR USED BY IT IS OR WAS BOUND;

 

(II)                                  TO THE KNOWLEDGE OF SELLER, EACH OTHER
PERSON THAT HAS OR HAD ANY OBLIGATION OR LIABILITY UNDER ANY CONTRACT RELATING
TO THE BUSINESS UNDER WHICH AND SELLER OR XCEL JAPAN HAS OR HAD ANY RIGHTS IS,
AND AT ALL TIMES SINCE JANUARY 1, 2004 HAS BEEN, IN FULL COMPLIANCE WITH ALL
APPLICABLE TERMS AND REQUIREMENTS OF SUCH CONTRACT;

 

(III)                               NO EVENT HAS OCCURRED OR CIRCUMSTANCE EXISTS
THAT (WITH OR WITHOUT NOTICE OR LAPSE OF TIME) MAY CONTRAVENE, CONFLICT WITH, OR
RESULT IN A VIOLATION OR BREACH OF, OR GIVE SELLER OR XCEL JAPAN OR, TO THE
KNOWLEDGE OF SELLER, OTHER PERSON, THE RIGHT TO DECLARE A DEFAULT OR EXERCISE
ANY REMEDY UNDER, OR TO ACCELERATE THE MATURITY OR PERFORMANCE OF, OR TO CANCEL,
TERMINATE, OR MODIFY, ANY APPLICABLE CONTRACT; AND

 

(IV)                              NEITHER SELLER NOR XCEL JAPAN HAS GIVEN TO OR
RECEIVED FROM ANY OTHER PERSON, AT ANY TIME SINCE JANUARY 1, 2004, ANY NOTICE OR
OTHER COMMUNICATION (WHETHER ORAL OR WRITTEN) REGARDING ANY ACTUAL, ALLEGED,
POSSIBLE, OR POTENTIAL VIOLATION OR BREACH OF, OR DEFAULT UNDER, ANY CONTRACT.

 

(E)                                  THERE ARE NO RENEGOTIATIONS OF, ATTEMPTS TO
RENEGOTIATE, OR OUTSTANDING RIGHTS TO RENEGOTIATE ANY MATERIAL AMOUNTS PAID OR
PAYABLE TO SELLER OR XCEL JAPAN UNDER CURRENT OR COMPLETED CONTRACTS WITH ANY
PERSON AND, TO THE KNOWLEDGE OF SELLER, NO SUCH PERSON HAS MADE WRITTEN DEMAND
FOR SUCH RENEGOTIATION.

 

3.18                           INSURANCE.

 

(A)                                  EACH OF SELLER AND XCEL JAPAN HAS MADE
AVAILABLE TO BUYERS TRUE AND COMPLETE COPIES OF ALL POLICIES OF INSURANCE
RELATING TO THE BUSINESS TO WHICH IT IS A PARTY OR UNDER WHICH IT, OR ANY OF ITS
DIRECTORS, IS OR HAS BEEN COVERED AT ANY TIME WITHIN THE ONE (1) YEAR PRECEDING
THE DATE OF THIS AGREEMENT.

 

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(B)                                 SECTION 3.18(B) OF THE DISCLOSURE SCHEDULE
DESCRIBES:

 

(I)                                     ANY SELF-INSURANCE ARRANGEMENT BY OR
AFFECTING EACH OF SELLER (SOLELY WITH RESPECT TO THE DIGITRAN BUSINESS) AND XCEL
JAPAN, INCLUDING ANY RESERVES ESTABLISHED THEREUNDER;

 

(II)                                  ANY CONTRACT OR ARRANGEMENT, OTHER THAN A
POLICY OF INSURANCE, FOR THE TRANSFER OR SHARING OF ANY RISK BY EACH OF SELLER
(SOLELY WITH RESPECT TO THE DIGITRAN BUSINESS) AND XCEL JAPAN; AND

 

(III)                               ALL OBLIGATIONS OF EACH OF SELLER (SOLELY
WITH RESPECT TO THE DIGITRAN BUSINESS) AND XCEL JAPAN TO THIRD PARTIES WITH
RESPECT TO INSURANCE (INCLUDING SUCH OBLIGATIONS UNDER LEASES AND SERVICE
AGREEMENTS) AND IDENTIFIES THE POLICY UNDER WHICH SUCH COVERAGE IS PROVIDED.

 

(C)                                  SECTION 3.18(C) OF THE DISCLOSURE SCHEDULE
SETS FORTH, BY YEAR, FOR THE CURRENT POLICY YEAR AND THE PRECEDING POLICY YEAR A
SUMMARY OF THE LOSS EXPERIENCE UNDER EACH POLICY.

 

(D)                                 EXCEPT AS SET FORTH ON SECTION 3.18(D) OF
THE DISCLOSURE SCHEDULE, ALL POLICIES RELATING TO THE BUSINESS TO WHICH EACH OF
SELLER AND XCEL JAPAN IS A PARTY OR THAT PROVIDE COVERAGE TO SELLER, XCEL JAPAN,
OR ANY DIRECTOR OR OFFICER OF EACH OF SELLER AND XCEL JAPAN:

 

(I)                                     ARE VALID, OUTSTANDING, AND ENFORCEABLE;

 

(II)                                  ARE ISSUED BY AN INSURER THAT IS
FINANCIALLY SOUND AND REPUTABLE;

 

(III)                               TAKEN TOGETHER, PROVIDE ADEQUATE INSURANCE
COVERAGE FOR THE ASSETS AND THE OPERATIONS OF EACH OF SELLER AND XCEL JAPAN FOR
ALL RISKS NORMALLY INSURED AGAINST BY A PERSON CARRYING ON THE SAME BUSINESS OR
BUSINESSES AS EACH OF SELLER AND XCEL JAPAN;

 

(IV)                              ARE SUFFICIENT FOR COMPLIANCE WITH ALL LEGAL
REQUIREMENTS AND CONTRACTS TO WHICH SELLER IS A PARTY OR BY WHICH IT IS BOUND;
AND

 

(V)                                 SOLELY WITH RESPECT TO XCEL JAPAN, WILL
CONTINUE IN FULL FORCE AND EFFECT FOLLOWING THE CONSUMMATION OF THE CONTEMPLATED
TRANSACTIONS.

 

(E)                                  NEITHER SELLER (SOLELY WITH RESPECT TO THE
DIGITRAN BUSINESS) NOR XCEL JAPAN HAS RECEIVED (I) ANY REFUSAL OF COVERAGE OR
ANY NOTICE THAT A DEFENSE WILL BE AFFORDED WITH RESERVATION OF RIGHTS, OR
(II) ANY NOTICE OF CANCELLATION OR ANY OTHER INDICATION THAT ANY INSURANCE
POLICY IS NO LONGER IN FULL FORCE OR EFFECT OR WILL NOT BE RENEWED OR THAT THE
ISSUER OF ANY POLICY IS NOT WILLING OR ABLE TO PERFORM ITS OBLIGATIONS
THEREUNDER.

 

(F)                                    EACH OF SELLER (SOLELY WITH RESPECT TO
THE DIGITRAN BUSINESS) AND XCEL JAPAN HAS PAID ALL PREMIUMS DUE, AND HAVE
OTHERWISE PERFORMED ALL OF ITS RESPECTIVE

 

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OBLIGATIONS, UNDER EACH POLICY TO WHICH IT IS A PARTY OR THAT PROVIDES COVERAGE
TO IT OR A DIRECTOR THEREOF.

 

(G)                                 EACH OF SELLER (SOLELY WITH RESPECT TO THE
DIGITRAN BUSINESS) AND XCEL JAPAN HAS GIVEN NOTICE TO THE INSURER OF ALL CLAIMS
THAT MAY BE INSURED THEREBY.

 

3.19                           ENVIRONMENTAL MATTERS.  EXCEPT AS SET FORTH IN
SECTION 3.19 OF THE DISCLOSURE SCHEDULE:

 

(A)                                  EACH OF SELLER (SOLELY WITH RESPECT TO THE
DIGITRAN BUSINESS) AND XCEL JAPAN IS, AND AT ALL TIMES HAS BEEN, IN FULL
COMPLIANCE WITH, AND HAS NOT BEEN AND IS NOT IN VIOLATION OF OR LIABLE UNDER,
ANY ENVIRONMENTAL LAW.  NEITHER SELLER (SOLELY WITH RESPECT TO THE DIGITRAN
BUSINESS) NOR XCEL JAPAN HAS ANY BASIS TO EXPECT, NOR HAS ANY OF THEM OR ANY
OTHER PERSON FOR WHOSE CONDUCT THEY ARE OR MAY BE HELD TO BE RESPONSIBLE
RECEIVED, ANY ACTUAL OR THREATENED ORDER, NOTICE, OR OTHER COMMUNICATION FROM
(I) ANY GOVERNMENTAL BODY OR PRIVATE CITIZEN ACTING IN THE PUBLIC INTEREST, OR
(II) THE CURRENT OR PRIOR OWNER OR OPERATOR OF ANY FACILITIES, OF ANY ACTUAL OR
POTENTIAL VIOLATION OR FAILURE TO COMPLY WITH ANY ENVIRONMENTAL LAW, OR OF ANY
ACTUAL OR THREATENED OBLIGATION TO UNDERTAKE OR BEAR THE COST OF ANY
ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES WITH RESPECT TO ANY OF THE
FACILITIES OR ANY OTHER PROPERTIES OR ASSETS (WHETHER REAL, PERSONAL, OR MIXED)
IN WHICH SELLER OR XCEL JAPAN HAS OR HAD AN INTEREST, OR WITH RESPECT TO ANY
PROPERTY OR FACILITY AT OR TO WHICH HAZARDOUS MATERIALS WERE GENERATED,
MANUFACTURED, REFINED, TRANSFERRED, IMPORTED, USED, RELEASED, OR PROCESSED BY
SELLER (SOLELY WITH RESPECT TO THE DIGITRAN BUSINESS), XCEL JAPAN, OR ANY OTHER
PERSON FOR WHOSE CONDUCT THEY ARE OR MAY BE HELD RESPONSIBLE, OR FROM WHICH
HAZARDOUS MATERIALS HAVE BEEN TRANSPORTED, TREATED, STORED, HANDLED,
TRANSFERRED, DISPOSED, RECYCLED, RECEIVED OR RELEASED.

 

(B)                                 THERE ARE NO PENDING OR, TO THE KNOWLEDGE OF
SELLER, THREATENED CLAIMS, ENCUMBRANCES, OR OTHER RESTRICTIONS OF ANY NATURE,
RESULTING FROM ANY ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES OR ARISING
UNDER OR PURSUANT TO ANY ENVIRONMENTAL LAW, WITH RESPECT TO OR AFFECTING ANY OF
THE FACILITIES OR ANY OTHER PROPERTIES AND ASSETS (WHETHER REAL, PERSONAL, OR
MIXED) IN WHICH SELLER (SOLELY WITH RESPECT TO THE DIGITRAN BUSINESS) OR XCEL
JAPAN HAS OR HAD AN INTEREST OR WITH RESPECT TO ANY PRODUCTS MANUFACTURED,
PRODUCED, SOLD OR DISTRIBUTED BY SELLER (SOLELY WITH RESPECT TO DIGITRAN
BUSINESS) OR XCEL JAPAN OR ANY PERSON FOR WHOSE CONDUCT THEY ARE OR MAY BE HELD
RESPONSIBLE.

 

(C)                                  NEITHER SELLER NOR XCEL JAPAN HAVE ANY
KNOWLEDGE OF ANY BASIS TO EXPECT, NOR HAS ANY OF THEM OR ANY OTHER PERSON FOR
WHOSE CONDUCT SELLER (SOLELY WITH RESPECT TO THE DIGITRAN BUSINESS) OR XCEL
JAPAN ARE OR MAY BE HELD RESPONSIBLE, RECEIVED ANY CITATION, DIRECTIVE, INQUIRY,
NOTICE, ORDER, SUMMONS, WARNING, OR OTHER COMMUNICATION THAT RELATES TO
HAZARDOUS ACTIVITY, HAZARDOUS MATERIALS, OR ANY ALLEGED, ACTUAL, OR POTENTIAL
VIOLATION OR FAILURE TO COMPLY WITH ANY ENVIRONMENTAL LAW, OR OF ANY ALLEGED,
ACTUAL, OR POTENTIAL OBLIGATION TO UNDERTAKE OR BEAR THE COST OF ANY
ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES WITH RESPECT TO ANY OF THE
FACILITIES OR ANY OTHER PROPERTIES OR ASSETS (WHETHER REAL, PERSONAL, OR MIXED)
IN WHICH SELLER (SOLELY WITH RESPECT TO THE DIGITRAN

 

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BUSINESS) OR XCEL JAPAN HAD AN INTEREST, OR WITH RESPECT TO ANY PROPERTY OR
FACILITY TO WHICH HAZARDOUS MATERIALS GENERATED, MANUFACTURED, REFINED,
TRANSFERRED, IMPORTED, USED, OR PROCESSED BY SELLER (SOLELY WITH RESPECT TO THE
DIGITRAN BUSINESS), XCEL JAPAN, OR ANY OTHER PERSON FOR WHOSE CONDUCT THEY ARE
OR MAY BE HELD RESPONSIBLE, HAVE BEEN TRANSPORTED, TREATED, STORED, HANDLED,
TRANSFERRED, DISPOSED, RECYCLED, RECEIVED OR RELEASED OR WITH RESPECT TO ANY
PRODUCT MANUFACTURED, PRODUCED, SOLD OR DISTRIBUTED BY SELLER OR XCEL JAPAN OR
ANY PERSON FOR WHOSE CONDUCT THEY ARE OR MAY BE HELD RESPONSIBLE.

 

(D)                                 NEITHER SELLER (SOLELY WITH RESPECT TO THE
DIGITRAN BUSINESS), XCEL JAPAN, NOR ANY OTHER PERSON FOR WHOSE CONDUCT THEY ARE
OR MAY BE HELD RESPONSIBLE, HAS ANY ENVIRONMENTAL, HEALTH, AND SAFETY
LIABILITIES WITH RESPECT TO THE FACILITIES OR, TO THE KNOWLEDGE OF SELLER, WITH
RESPECT TO ANY OTHER PROPERTIES AND ASSETS (WHETHER REAL, PERSONAL, OR MIXED) IN
WHICH SELLER (SOLELY WITH RESPECT TO THE DIGITRAN BUSINESS) OR XCEL JAPAN, HAS
OR HAD AN INTEREST OR ANY PRODUCT MANUFACTURED, PRODUCED, SOLD OR DISTRIBUTED BY
SELLER (SOLELY WITH RESPECT TO THE DIGITRAN BUSINESS) OR XCEL JAPAN OR ANY
PERSON FOR WHOSE CONDUCT THEY ARE OR MAY BE RESPONSIBLE.

 

(E)                                  THERE ARE NO HAZARDOUS MATERIALS PRESENT ON
OR IN THE ENVIRONMENT AT THE FACILITIES, INCLUDING ANY HAZARDOUS MATERIALS
CONTAINED IN BARRELS, ABOVE OR UNDERGROUND STORAGE TANKS, LANDFILLS, LAND
DEPOSITS, DUMPS, EQUIPMENT (WHETHER MOVEABLE OR FIXED) OR OTHER CONTAINERS,
EITHER TEMPORARY OR PERMANENT, OR DEPOSITED OR LOCATED IN LAND, WATER, SUMPS, OR
ANY OTHER PART OF THE FACILITIES OR SUCH ADJOINING PROPERTY, OR INCORPORATED
INTO ANY STRUCTURE THEREIN OR THEREON.  NEITHER SELLER (SOLELY WITH RESPECT TO
THE DIGITRAN BUSINESS) NOR XCEL JAPAN, NOR ANY OTHER PERSON FOR WHOSE CONDUCT
THEY ARE OR MAY BE HELD RESPONSIBLE, OR TO THE KNOWLEDGE OF SELLER, ANY OTHER
PERSON, HAS PERMITTED OR CONDUCTED, OR IS AWARE OF, ANY HAZARDOUS ACTIVITY
CONDUCTED WITH RESPECT TO THE FACILITIES OR ANY OTHER PROPERTIES OR ASSETS
(WHETHER REAL, PERSONAL, OR MIXED) IN WHICH SELLER (SOLELY WITH RESPECT TO THE
DIGITRAN BUSINESS) OR XCEL JAPAN HAS OR HAD AN INTEREST EXCEPT IN FULL
COMPLIANCE WITH ALL APPLICABLE ENVIRONMENTAL LAWS.

 

(F)                                    THERE HAS BEEN NO RELEASE OR THREAT OF
RELEASE, OF ANY HAZARDOUS MATERIALS AT OR FROM THE FACILITIES OR AT ANY OTHER
LOCATIONS WHERE ANY HAZARDOUS MATERIALS WERE GENERATED, MANUFACTURED, REFINED,
TRANSFERRED, TREATED, PRODUCED, IMPORTED, USED, DISPOSED, OR PROCESSED FROM OR
BY THE FACILITIES, OR FROM OR BY ANY OTHER PROPERTIES AND ASSETS (WHETHER REAL,
PERSONAL, OR MIXED) IN WHICH SELLER OR XCEL JAPAN HAS OR HAD AN INTEREST,
WHETHER BY SELLER (SOLELY WITH RESPECT TO THE DIGITRAN BUSINESS), XCEL JAPAN, OR
ANY OTHER PERSON.

 

3.20                           EMPLOYEES.

 

(A)                                  SECTION 3.20(A) OF THE DISCLOSURE SCHEDULE
CONTAINS A COMPLETE AND ACCURATE LIST OF THE FOLLOWING INFORMATION FOR EACH
CURRENT EMPLOYEE OR DIRECTOR OF THE BUSINESS, INCLUDING EACH EMPLOYEE ON
AUTHORIZED OR UNAUTHORIZED LEAVE OF ABSENCE OR LAYOFF STATUS:  EMPLOYER; NAME;
JOB TITLE; CURRENT COMPENSATION.  TO THE KNOWLEDGE OF SELLER, NO EMPLOYEE OF THE
BUSINESS INTENDS TO TERMINATE HIS OR HER EMPLOYMENT WITH THE BUSINESS.

 

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(B)                                 NO OFFER OF EMPLOYMENT HAS BEEN MADE BY THE
BUSINESS TO ANY INDIVIDUAL THAT HAS NOT YET BEEN ACCEPTED OR WHICH HAS BEEN
ACCEPTED BUT THE INDIVIDUAL’S EMPLOYMENT HAS NOT STARTED.

 

3.21                           LABOR RELATIONS; COMPLIANCE.

 

(A)                                  SINCE JANUARY 1, 2004, NEITHER SELLER NOR
XCEL JAPAN HAS BEEN OR IS A PARTY TO ANY COLLECTIVE BARGAINING AGREEMENT OR
OTHER LABOR CONTRACT RELATING TO THE BUSINESS, AND NO LABOR UNION OR EMPLOYEE
ORGANIZATION HAS BEEN CERTIFIED OR RECOGNIZED AS THE COLLECTIVE BARGAINING
REPRESENTATIVE OF ANY EMPLOYEE.

 

(B)                                 SINCE THE ENACTMENT OF THE WORKER ADJUSTMENT
AND RETRAINING NOTIFICATION ACT (THE “WARN ACT”) THE BUSINESS HAS NOT
EFFECTUATED (A) A “PLANT CLOSING” (AS DEFINED IN THE WARN ACT) AFFECTING ANY
SITE OF EMPLOYMENT OR ONE OR MORE FACILITIES OR OPERATING UNITS WITHIN ANY SITE
OF EMPLOYMENT OR FACILITY OF THE BUSINESS; OR, (B) A “MASS LAYOFF” (AS DEFINED
IN THE WARN ACT) AFFECTING ANY SITE OF EMPLOYMENT OR FACILITY OF THE BUSINESS;
NOR HAS THE BUSINESS BEEN AFFECTED BY ANY TRANSACTION OR ENGAGED IN LAYOFFS OR
EMPLOYMENT TERMINATIONS SUFFICIENT IN NUMBER TO TRIGGER APPLICATION OF ANY
SIMILAR STATE OR LOCAL LAW.

 

(C)                                  THERE HAS NOT BEEN, THERE IS NOT PRESENTLY
PENDING OR EXISTING, AND TO THE KNOWLEDGE OF SELLER THERE IS NOT THREATENED, ANY
OF THE FOLLOWING WITH RESPECT TO THE BUSINESS:

 

(I)                                     ANY FORMAL UNION ORGANIZING CAMPAIGNS OR
REPRESENTATION PROCEEDINGS;

 

(II)                                  ANY APPLICATION FOR CERTIFICATION OF A
COLLECTIVE BARGAINING AGENT;

 

(III)                               ANY STRIKE, SLOWDOWN, PICKETING, WORK
STOPPAGE, OR EMPLOYEE GRIEVANCE PROCESS; OR

 

(IV)                              ANY PROCEEDING INVOLVING AN ALLEGED VIOLATION
OF ANY LEGAL REQUIREMENT PERTAINING TO LABOR RELATIONS OR EMPLOYMENT MATTERS, OR
OTHER LABOR OR EMPLOYMENT DISPUTE OR CLAIM AGAINST OR AFFECTING THE BUSINESS OR
ITS PREMISES, INCLUDING ANY CHARGE OR COMPLAINT FILED BY AN EMPLOYEE OR UNION
WITH THE NATIONAL LABOR RELATIONS BOARD, THE EQUAL EMPLOYMENT OPPORTUNITY
COMMISSION, THE DEPARTMENT OF LABOR, THE DEPARTMENT OF JUSTICE, A STATE OR
FEDERAL COURT, OR ANY GOVERNMENTAL BODY.

 

(D)                                 TO THE KNOWLEDGE OF SELLER, NO EVENT HAS
OCCURRED OR CIRCUMSTANCE EXISTS THAT COULD PROVIDE THE BASIS FOR ANY WORK
STOPPAGE OR OTHER LABOR DISPUTE.  THERE IS NO LOCKOUT OF ANY EMPLOYEES BY THE
BUSINESS, AND NO SUCH ACTION IS CONTEMPLATED BY THE BUSINESS.

 

(E)                                  EACH OF SELLER (SOLELY WITH RESPECT TO THE
DIGITRAN BUSINESS) AND XCEL JAPAN HAS COMPLIED IN ALL MATERIAL RESPECTS WITH ALL
LEGAL REQUIREMENTS RELATING TO

 

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EMPLOYMENT, EQUAL EMPLOYMENT OPPORTUNITY, FAIR EMPLOYMENT PRACTICES,
NONDISCRIMINATION, IMMIGRATION, WAGES, HOURS, BENEFITS, WORKERS’ COMPENSATION,
UNEMPLOYMENT COMPENSATION, COLLECTIVE BARGAINING, THE PAYMENT AND WITHHOLDING OF
SOCIAL SECURITY AND SIMILAR TAXES, OCCUPATIONAL SAFETY AND HEALTH, AND PLANT
CLOSING OR MASS LAYOFF NOTICES.  NEITHER SELLER (SOLELY WITH RESPECT TO THE
DIGITRAN BUSINESS) NOR XCEL JAPAN IS LIABLE FOR THE PAYMENT OF ANY COMPENSATION,
DAMAGES, TAXES, FINES, PENALTIES, INTEREST, OR OTHER AMOUNTS, HOWEVER
DESIGNATED, FOR FAILURE TO COMPLY WITH ANY OF THE FOREGOING LEGAL REQUIREMENTS.

 

(F)                                    NEITHER SELLER (SOLELY WITH RESPECT TO
THE DIGITRAN BUSINESS) NOR XCEL JAPAN HAS FAILED TO PAY WHEN DUE ANY WAGES,
BONUSES, COMMISSIONS, BENEFITS, PENALTIES OR ASSESSMENTS OR OTHER MONIES THAT
ARE MATERIAL IN AMOUNT, OWED TO, OR ARISING OUT OF THE EMPLOYMENT OF OR ANY
RELATIONSHIP OR ARRANGEMENT WITH, ANY OFFICER, DIRECTOR, EMPLOYEE, SALES
REPRESENTATIVE, CONTRACTOR, CONSULTANT OR OTHER AGENT, EXCEPT WHERE SUCH FAILURE
TO PAY IS THE RESULT OF A BONA FIDE GOOD FAITH DISPUTE BY IT REGARDING THE
EXISTENCE OF OR AMOUNT OF SUCH PAYMENT OBLIGATION.

 

(G)                                 WITHIN THE FIVE (5) YEARS PRIOR TO THE
CLOSING DATE, THERE HAVE BEEN NO FILED OR, TO THE KNOWLEDGE OF SELLER,
THREATENED, CITATIONS, INVESTIGATIONS, AUDITS, ADMINISTRATIVE PROCEEDINGS,
CHARGES, OR COMPLAINTS OF VIOLATIONS OF ANY FEDERAL, STATE OR LOCAL EMPLOYMENT
LAWS WITH RESPECT TO THE BUSINESS.  THIS INCLUDES, WITHOUT LIMITATION, ANY
AUDITS OR INVESTIGATIONS CONDUCTED BY THE DEPARTMENT OF LABOR, THE EQUAL
EMPLOYMENT OPPORTUNITY COMMISSION, THE DEPARTMENT OF JUSTICE OR ANY OTHER
GOVERNMENTAL BODY, REGARDING COMPLIANCE WITH ANY OF THE FOLLOWING:

 

(I)                                     THE FAIR LABOR STANDARDS ACT OR ANY
OTHER WAGE AND HOUR LAWS;

 

(II)                                  TITLE VII, THE AGE DISCRIMINATION IN
EMPLOYMENT ACT, THE AMERICANS WITH DISABILITIES ACT, THE FAMILY AND MEDICAL
LEAVE ACT, OR ANY OTHER LAWS PROHIBITING EMPLOYMENT DISCRIMINATION; AND

 

(III)                               THE FAIR EMPLOYMENT & HOUSING ACT OR ANY
OTHER APPLICABLE STATE OR LOCAL LAWS GOVERNING EMPLOYMENT.

 

(H)                                 SELLER DOES NOT HAVE ANY KNOWLEDGE OF ANY
BASIS ON WHICH ANY CURRENT EMPLOYEE, AND ANY EMPLOYEE WHOSE EMPLOYMENT WITH THE
BUSINESS TERMINATED FOR ANY REASON DURING THE THREE YEARS PRIOR TO THE CLOSING
DATE, COULD CLAIM FAILURE TO PAY THE MINIMUM WAGE, OR FAILURE TO PAY OVERTIME
WAGES WHERE APPLICABLE, OR FAILURE TO PAY ALL WAGES WHEN DUE.

 

3.22                           INTELLECTUAL PROPERTY.

 

(A)                                  NEITHER SELLER (SOLELY WITH RESPECT TO THE
DIGITRAN BUSINESS), PARENT (SOLELY WITH RESPECT TO THE DIGITRAN BUSINESS) NOR
XCEL JAPAN IS A PARTY TO ANY CONTRACT RELATING TO THE INTELLECTUAL PROPERTY
ASSETS OR BY WHICH SELLER (SOLELY WITH RESPECT TO THE DIGITRAN BUSINESS), PARENT
(SOLELY WITH RESPECT TO THE DIGITRAN BUSINESS) OR XCEL JAPAN IS BOUND,

 

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EXCEPT FOR ANY LICENSE IMPLIED BY THE SALE OF A PRODUCT AND PERPETUAL, PAID-UP
LICENSES FOR COMMONLY AVAILABLE SOFTWARE PROGRAMS WITH A VALUE OF LESS THAN
$15,000 UNDER WHICH SELLER (SOLELY WITH RESPECT TO THE DIGITRAN BUSINESS),
PARENT (SOLELY WITH RESPECT TO THE DIGITRAN BUSINESS) OR XCEL JAPAN IS THE
LICENSEE.  THERE ARE NO OUTSTANDING AND, TO THE KNOWLEDGE OF SELLER, NO
THREATENED DISPUTES OR DISAGREEMENTS WITH RESPECT TO ANY SUCH CONTRACT.  ALL
SUCH CONTRACTS ARE IN FULL FORCE AND EFFECT, AND, TO THE KNOWLEDGE OF SELLER,
THERE IS NO DEFAULT BY ANY PARTY THERETO. EXCEPT AS SET FORTH ON
SECTION 3.22(A) OF THE DISCLOSURE SCHEDULE, ALL OF THE RIGHTS OF SELLER OR
PARENT UNDER SUCH CONTRACTS ARE FREELY ASSIGNABLE. SELLER OR PARENT, AS
APPLICABLE, HAS THE EXCLUSIVE RIGHT TO USE, DISTRIBUTE, TRANSFER AND BRING
INFRINGEMENT ACTIONS WITH RESPECT TO THE INTELLECTUAL PROPERTY ASSETS. EXCEPT AS
SET FORTH ON SECTION 3.22(A) OF THE DISCLOSURE SCHEDULE, NEITHER SELLER NOR
PARENT HAS LICENSED OR GRANTED TO ANYONE RIGHTS OF ANY NATURE WITH RESPECT TO
ANY OF THE INTELLECTUAL PROPERTY ASSETS.

 

(B)                                 NO CURRENT EMPLOYEE OF THE BUSINESS HAS
ENTERED INTO ANY CONTRACT THAT RESTRICTS OR LIMITS IN ANY WAY THE SCOPE OR TYPE
OF WORK IN WHICH THE EMPLOYEE MAY BE ENGAGED OR REQUIRES THE EMPLOYEE TO
TRANSFER, ASSIGN, OR DISCLOSE INFORMATION CONCERNING HIS WORK TO ANYONE OTHER
THAN SELLER OR XCEL JAPAN, AS APPLICABLE.

 

(C)                                  (I)                                    
SECTION 3.22(C) OF DISCLOSURE SCHEDULE CONTAINS A COMPLETE AND ACCURATE LIST AND
SUMMARY DESCRIPTION OF ALL PATENTS AND PENDING PATENT APPLICATIONS RELATING TO
THE BUSINESS.  SELLER, PARENT OR XCEL JAPAN IS THE OWNER OF ALL RIGHT, TITLE,
AND INTEREST IN AND TO EACH OF THE PATENTS, FREE AND CLEAR OF ALL ENCUMBRANCES.
IN EACH CASE WHERE A PATENT IS HELD BY SELLER, PARENT OR XCEL JAPAN BY
ASSIGNMENT, THE ASSIGNMENT HAS BEEN DULY RECORDED WITH THE UNITED STATES PATENT
AND TRADEMARK OFFICE.

 

(II)                                  ALL PATENTS THAT HAVE BEEN REGISTERED WITH
THE UNITED STATES PATENT AND TRADEMARK OFFICE OR THE TRADEMARK OFFICE OF ANY
OTHER APPLICABLE JURISDICTION ARE CURRENTLY IN COMPLIANCE WITH ALL FORMAL LEGAL
REQUIREMENTS (INCLUDING, WITHOUT LIMITATION, THE TIMELY POST-REGISTRATION FILING
OF AFFIDAVITS OF USE AND INCONTESTABILITY AND RENEWAL APPLICATIONS AND THE
PAYMENT OF FILING, EXAMINATION AND MAINTENANCE FEES), ARE VALID AND ENFORCEABLE.

 

(III)                               EXCEPT AS SET FORTH ON SECTION 3.22(C) OF
THE DISCLOSURE SCHEDULE, NO PATENT HAS BEEN OR IS NOW INVOLVED IN ANY
OPPOSITION, INVALIDATION, OR CANCELLATION AND, TO THE KNOWLEDGE OF SELLER, NO
SUCH ACTION IS THREATENED WITH THE RESPECT TO ANY OF THE PATENTS.

 

(IV)                              TO THE KNOWLEDGE OF SELLER, THERE IS NO
POTENTIALLY INTERFERING PATENT OR PATENT APPLICATION OF ANY THIRD PARTY.

 

(V)                                 NO PATENT IS INFRINGED OR, TO THE KNOWLEDGE
OF SELLER, HAS BEEN CHALLENGED OR THREATENED IN ANY WAY.  NONE OF THE PATENTS
USED BY THE BUSINESS INFRINGES OR IS ALLEGED TO INFRINGE ANY PATENT OF ANY THIRD
PARTY.

 

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(VI)                              ALL PRODUCTS AND MATERIALS CONTAINING A PATENT
BEAR THE PROPER FEDERAL REGISTRATION NOTICE WHERE PERMITTED BY LAW.

 

(D)                                 (I)                                    
SECTION 3.22(D) OF DISCLOSURE SCHEDULE CONTAINS A COMPLETE AND ACCURATE LIST AND
SUMMARY DESCRIPTION OF ALL MARKS RELATING TO THE BUSINESS.  SELLER, PARENT OR
XCEL JAPAN IS THE OWNER OF ALL RIGHT, TITLE, AND INTEREST IN AND TO EACH OF THE
MARKS, FREE AND CLEAR OF ALL LIENS, SECURITY INTERESTS, CHARGES, ENCUMBRANCES,
EQUITIES, AND OTHER ADVERSE CLAIMS.

 

(II)                                  EXCEPT AS SET FORTH ON SECTION 3.22(D) OF
THE DISCLOSURE SCHEDULE, ALL MARKS THAT HAVE BEEN REGISTERED WITH THE UNITED
STATES PATENT AND TRADEMARK OFFICE ARE CURRENTLY IN COMPLIANCE WITH ALL FORMAL
LEGAL REQUIREMENTS (INCLUDING THE TIMELY POST-REGISTRATION FILING OF AFFIDAVITS
OF USE AND INCONTESTABILITY AND RENEWAL APPLICATIONS), ARE VALID AND
ENFORCEABLE.

 

(III)                               NO MARK HAS BEEN OR IS NOW INVOLVED IN ANY
OPPOSITION, INVALIDATION, OR CANCELLATION AND, TO THE KNOWLEDGE OF SELLER, NO
SUCH ACTION IS THREATENED WITH THE RESPECT TO ANY OF THE MARKS. IN EACH CASE
WHERE A MARK IS HELD BY ASSIGNMENT, THE ASSIGNMENT HAS BEEN DULY RECORDED WITH
THE UNITED STATES PATENT AND TRADEMARK OFFICE AND ALL OTHER JURISDICTIONS OF
REGISTRATION.

 

(IV)                              TO THE KNOWLEDGE OF SELLER, THERE IS NO
POTENTIALLY INTERFERING TRADEMARK OR TRADEMARK APPLICATION OF ANY THIRD PARTY.

 

(V)                                 NO MARK IS INFRINGED OR, TO THE KNOWLEDGE OF
SELLER, HAS BEEN CHALLENGED OR THREATENED IN ANY WAY.  NONE OF THE MARKS USED BY
THE BUSINESS INFRINGES OR IS ALLEGED TO INFRINGE ANY TRADE NAME, TRADEMARK,
TRADE DRESS, LOGO, PACKAGING DESIGN OR SLOGAN OF ANY THIRD PARTY OR SERVICE MARK
OF ANY THIRD PARTY.

 

(VI)                              TO THE KNOWLEDGE OF SELLER THERE IS NO
TRADEMARK, TRADENAME, SERVICE MARK, TRADE DRESS, LOGO, PACKAGING DESIGN, SLOGAN
OR INTERNET DOMAIN NAME OF ANY THIRD PARTY WHICH INFRINGES ANY MARK.

 

(E)                                  ALL INTERNET DOMAIN NAMES OF SELLER OR XCEL
JAPAN USED IN THE BUSINESS ARE LISTED ON SECTION 3.22(E) OF THE DISCLOSURE
SCHEDULE. SUCH DOMAIN NAMES HAVE BEEN DULY REGISTERED THROUGH ICANN ACCREDITED
REGISTRAR THROUGH ITS REGISTRATION PROCEDURES AND ARE OPERATING ACTIVE DOMAIN
NAMES. SELLER HAS TAKEN ALL REASONABLE STEPS TO MAINTAIN AND ENFORCE SUCH DOMAIN
NAME REGISTRATIONS.

 

(F)                                    NEITHER SELLER NOR XCEL JAPAN HAS ANY
COPYRIGHTS RELATING TO THE BUSINESS.

 

(I)                                     EACH OF SELLER (SOLELY WITH RESPECT TO
THE DIGITRAN BUSINESS) AND XCEL JAPAN HAS TAKEN ALL REASONABLE PRECAUTIONS TO
PROTECT THE SECRECY, CONFIDENTIALITY, AND VALUE OF THEIR TRADE SECRETS. TO THE
KNOWLEDGE OF SELLER, NO THIRD PARTY HAS ASSERTED THAT THE USE BY SELLER OF ANY
TRADE SECRET VIOLATES THE RIGHTS OF ANY THIRD PARTY.

 

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(II)                                  EACH OF SELLER (SOLELY WITH RESPECT TO THE
DIGITRAN BUSINESS) AND XCEL JAPAN HAS GOOD TITLE AND AN ABSOLUTE (BUT NOT
NECESSARILY EXCLUSIVE) RIGHT TO USE ITS TRADE SECRETS.  THE TRADE SECRETS ARE
NOT PART OF THE PUBLIC KNOWLEDGE OR LITERATURE, AND, TO THE KNOWLEDGE OF SELLER,
HAVE NOT BEEN USED, DIVULGED, OR APPROPRIATED EITHER FOR THE BENEFIT OF ANY
PERSON (OTHER THAN SELLER OR XCEL JAPAN, AS APPLICABLE) OR TO THE DETRIMENT OF
THE BUSINESS.  NO TRADE SECRET IS SUBJECT TO ANY ADVERSE CLAIM OR HAS BEEN
CHALLENGED OR THREATENED IN ANY WAY.

 

(G)                                 TO THE KNOWLEDGE OF SELLER, THE INTELLECTUAL
PROPERTY ASSETS DESCRIBED IN THIS AGREEMENT CONSTITUTE THE ONLY INTELLECTUAL
PROPERTY ASSETS OR RIGHTS RELATED TO THE DIGITRAN BUSINESS.

 

3.23                           CERTAIN PAYMENTS.  SINCE JANUARY 1, 2004, NEITHER
SELLER (SOLELY WITH RESPECT TO THE DIGITRAN BUSINESS) NOR XCEL JAPAN NOR ANY
DIRECTOR, OFFICER, AGENT, OR EMPLOYEE OF THE BUSINESS, OR TO THE KNOWLEDGE OF
SELLER, ANY OTHER PERSON ASSOCIATED WITH OR ACTING FOR OR ON BEHALF OF THE
BUSINESS, HAS DIRECTLY OR INDIRECTLY (A) MADE ANY CONTRIBUTION, GIFT, BRIBE,
REBATE, PAYOFF, INFLUENCE PAYMENT, KICKBACK, OR OTHER PAYMENT TO ANY PERSON,
PRIVATE OR PUBLIC, REGARDLESS OF FORM, WHETHER IN MONEY, PROPERTY, OR SERVICES,
(I) TO OBTAIN FAVORABLE TREATMENT IN SECURING BUSINESS, (II) TO PAY FOR
FAVORABLE TREATMENT FOR BUSINESS SECURED, (III) TO OBTAIN SPECIAL CONCESSIONS,
OR FOR SPECIAL CONCESSIONS ALREADY OBTAINED, FOR OR IN RESPECT OF THE BUSINESS,
OR (IV) IN VIOLATION OF ANY LEGAL REQUIREMENT; OR (B) ESTABLISHED OR MAINTAINED
ANY FUND OR ASSET THAT HAS NOT BEEN RECORDED IN THE BOOKS AND RECORDS OF THE
BUSINESS.

 

3.24                           CUSTOMER / SUPPLIER RELATIONS.  EXCEPT AS SET
FORTH ON SECTION 3.24 OF THE DISCLOSURE SCHEDULE, TO THE KNOWLEDGE OF SELLER,
THERE EXISTS NO CONDITION OR STATE OF FACTS OR CIRCUMSTANCES INVOLVING THE
CUSTOMERS, SUPPLIERS, DISTRIBUTORS OR SALES REPRESENTATIVES OF THE BUSINESS THAT
SELLER CAN REASONABLY FORESEE COULD ADVERSELY AFFECT THE BUSINESS AFTER THE
CLOSING DATE. NEITHER SELLER NOR ANY AFFILIATE OF SELLER HAS ANY OWNERSHIP
INTEREST IN ANY CUSTOMER OR SUPPLIER OF THE BUSINESS.

 

3.25                           PRODUCT WARRANTY.  EXCEPT AS SET FORTH ON
SECTION 3.25 OF THE DISCLOSURE SCHEDULE, EACH PRODUCT MANUFACTURED, SOLD,
LEASED, OR DELIVERED BY THE BUSINESS HAS BEEN IN CONFORMITY WITH ALL APPLICABLE
MATERIAL CONTRACTUAL COMMITMENTS AND ALL EXPRESS AND IMPLIED WARRANTIES, AND THE
BUSINESS HAS NO LIABILITY (AND THERE IS NO BASIS FOR ANY PRESENT OR FUTURE
PROCEEDING AGAINST ANY OF THEM GIVING RISE TO ANY LIABILITY) IN EXCESS OF
$10,000 FOR REPLACEMENT OR REPAIR THEREOF OR OTHER DAMAGES IN CONNECTION
THEREWITH, SUBJECT ONLY TO THE RESERVE FOR PRODUCT WARRANTY CLAIMS SET FORTH ON
THE FACE OF THE INTERIM BUSINESS BALANCE SHEETS AS ADJUSTED FOR THE PASSAGE OF
TIME THROUGH THE CLOSING DATE IN ACCORDANCE WITH THE PAST CUSTOM AND PRACTICE OF
THE BUSINESS.  NO PRODUCT MANUFACTURED, SOLD, LEASED, OR DELIVERED BY THE
BUSINESS IS SUBJECT TO ANY GUARANTY, WARRANTY, OR OTHER INDEMNITY BEYOND THE
APPLICABLE STANDARD TERMS AND CONDITIONS OF SALE OR LEASE.  SECTION 3.25 OF THE
DISCLOSURE SCHEDULE INCLUDES COPIES OF THE STANDARD TERMS AND CONDITIONS OF SALE
OR LEASE FOR THE BUSINESS (CONTAINING APPLICABLE GUARANTY, WARRANTY, AND
INDEMNITY PROVISIONS).  SELLER HAS NO OBLIGATION TO ANY PERSON TO MAINTAIN,
MODIFY, IMPROVE OR UPGRADE ANY OF THE PRODUCTS. THE TECHNICAL DOCUMENTATION
INCLUDES ALL TECHNICAL DRAWINGS, PRODUCT SPECIFICATIONS, MANUFACTURING
INSTRUCTIONS, SCHEMATICS AND OTHER DESIGN AND

 

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MANUFACTURING DOCUMENTATION RELATED TO THE PRODUCTS THAT MAY BE NECESSARY TO
RENDER SUCH MATERIALS UNDERSTANDABLE AND USABLE.

 

3.26                           PRODUCT LIABILITY.  THE BUSINESS HAS NO LIABILITY
(AND THERE IS NO BASIS FOR ANY PRESENT OR FUTURE PROCEEDING AGAINST ANY THE
BUSINESS GIVING RISE TO ANY LIABILITY) ARISING OUT OF ANY INJURY TO INDIVIDUALS
OR PROPERTY AS A RESULT OF THE OWNERSHIP, POSSESSION, OR USE OF ANY PRODUCT
MANUFACTURED, SOLD, LEASED, OR DELIVERED BY THE BUSINESS.

 

3.27                           EXPORT REGULATION.  PARENT IS REGISTERED WITH THE
U.S. DEPARTMENT OF STATE OFFICE OF DEFENSE TRADE CONTROLS PURSUANT TO THE
INTERNATIONAL TRAFFIC IN ARMS REGULATIONS, TITLE 22, PARTS 120 THROUGH 130 OF
THE CODE OF FEDERAL REGULATIONS (“ITAR”) AND IS IN COMPLIANCE WITH SUCH
REGISTRATION AND THE ITAR.

 

3.28                           DISCLOSURE.  NO REPRESENTATION OR WARRANTY OF
SELLER IN THIS AGREEMENT AND NO STATEMENT IN THE DISCLOSURE SCHEDULE OMITS TO
STATE A MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS HEREIN OR THEREIN, IN
LIGHT OF THE CIRCUMSTANCES IN WHICH THEY WERE MADE, NOT MISLEADING.  THERE IS NO
FACT KNOWN TO SELLER THAT HAS SPECIFIC APPLICATION TO THE BUSINESS (OTHER THAN
GENERAL ECONOMIC OR INDUSTRY CONDITIONS) AND THAT MATERIALLY ADVERSELY AFFECTS
OR, MATERIALLY THREATENS, THE ASSETS, BUSINESS, PROSPECTS, FINANCIAL CONDITION,
OR RESULTS OF OPERATIONS OF THE BUSINESS THAT HAS NOT BEEN SET FORTH IN THIS
AGREEMENT OR THE DISCLOSURE SCHEDULE.

 

3.29                           BROKERS OR FINDERS.  EXCEPT AS SET FORTH ON
SECTION 3.29 OF THE DISCLOSURE SCHEDULE, NEITHER SELLER, XCEL JAPAN NOR THEIR
AGENTS HAVE INCURRED ANY LIABILITY, CONTINGENT OR OTHERWISE, FOR BROKERAGE OR
FINDERS’ FEES OR AGENTS’ COMMISSIONS OR OTHER SIMILAR PAYMENT IN CONNECTION WITH
THIS AGREEMENT.  AT THE CLOSING, NEITHER SELLER NOR XCEL JAPAN SHALL HAVE ANY
LIABILITY FOR OR SHALL HAVE PAID ANY COSTS, FEES OR EXPENSES INCURRED BY SELLER
OR XCEL JAPAN OR TO WHICH IT IS OBLIGATED TO PAY IN CONNECTION WITH THE
NEGOTIATION, EXECUTION, DELIVERY OF AND PERFORMANCE UNDER THIS AGREEMENT,
INCLUDING BUT NOT LIMITED TO, FEES AND COSTS OF PROFESSIONALS SUCH AS ATTORNEYS,
BANKERS, CONSULTANTS, ACCOUNTANTS AND FINANCIAL ADVISORS (THE “TRANSACTION
COSTS”).

 

3.30                           NO INSOLVENCY. SELLER IS NOT NOW AND WILL NOT BE
RENDERED INSOLVENT AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT. THE ASSETS OF SELLER REMAINING AFTER THE CLOSING (INCLUDING THE SALE
PROCEEDS) EXCEED SELLER’S LIABILITIES. SELLER IS NOT NOW AND IS NOT ABOUT TO
ENGAGE IN ANY BUSINESS OR TRANSACTION FOR WHICH SELLER’S REMAINING ASSETS AFTER
THE CLOSING WILL BE UNREASONABLY SMALL AND SELLER DOES NOT INTEND TO INCUR OR
BELIEVE THAT SELLER WILL INCUR DEBTS BEYOND ITS ABILITY TO PAY.

 

3.31                           INTERCOMPANY ARRANGEMENTS AND ACCOUNTS. EXCEPT AS
SET FORTH IN SECTION 3.31 OF THE DISCLOSURE SCHEDULE, SELLER HAS (I) TERMINATED
ALL CONTRACTS OR OTHER ARRANGEMENTS BETWEEN SELLER OR ITS AFFILIATES (OTHER THAN
XCEL JAPAN), ON THE ONE HAND, AND XCEL JAPAN, ON THE OTHER HAND, THAT WERE
ENTERED INTO ON OR PRIOR TO THE CLOSING AND (II) SETTLED ALL INTERCOMPANY
RECEIVABLES AND PAYABLES BETWEEN SELLER OR ITS AFFILIATES (OTHER THAN XCEL
JAPAN), ON THE ONE HAND, AND XCEL JAPAN, ON THE OTHER HAND, THAT WERE INCURRED
ON OR PRIOR TO THE CLOSING, IN EACH CASE WITHOUT FURTHER RECOURSE TO OR ANY
LIABILITY OF XCEL JAPAN.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYERS

 

Buyers jointly and severally represent and warrant to Seller as follows:

 

4.1                                 ORGANIZATION AND GOOD STANDING.  EACH OF
BUYER AND STOCK BUYER IS A CORPORATION DULY ORGANIZED, VALIDLY EXISTING, AND IN
GOOD STANDING UNDER THE LAWS OF ITS JURISDICTION OF INCORPORATION.

 

4.2                                 AUTHORITY; NO CONFLICT.

 

(A)                                  THIS AGREEMENT CONSTITUTES THE LEGAL,
VALID, AND BINDING OBLIGATION OF EACH OF BUYER AND STOCK BUYER, ENFORCEABLE
AGAINST IT IN ACCORDANCE WITH ITS TERMS.  EACH OF BUYER AND STOCK BUYER HAS THE
ABSOLUTE AND UNRESTRICTED RIGHT, POWER, AND AUTHORITY TO EXECUTE AND DELIVER
THIS AGREEMENT.

 

(B)                                 EXCEPT AS SET FORTH IN SCHEDULE 4.2, NEITHER
THE EXECUTION AND DELIVERY OF THIS AGREEMENT BY BUYER OR STOCK BUYER NOR THE
CONSUMMATION OR PERFORMANCE OF ANY OF THE CONTEMPLATED TRANSACTIONS BY EITHER
WILL GIVE ANY PERSON THE RIGHT TO PREVENT, DELAY, OR OTHERWISE INTERFERE WITH
ANY OF THE CONTEMPLATED TRANSACTIONS PURSUANT TO:

 

(I)                                     ANY PROVISION OF BUYER’S OR STOCK
BUYER’S ORGANIZATIONAL DOCUMENTS;

 

(II)                                  ANY RESOLUTION ADOPTED BY THE BOARD OF
DIRECTORS OR THE STOCKHOLDERS OF BUYER OR STOCK BUYER;

 

(III)                               ANY LEGAL REQUIREMENT OR ORDER TO WHICH
BUYER OR STOCK BUYER MAY BE SUBJECT; OR

 

(IV)                              ANY CONTRACT TO WHICH BUYER OR STOCK BUYER IS
A PARTY OR BY WHICH BUYER MAY BE BOUND.

 

Except as set forth in Schedule 4.2, Buyers are not and will not be required to
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.

 

4.3                                 INVESTMENT INTENT.  STOCK BUYER IS ACQUIRING
THE XCEL JAPAN SHARES FOR ITS OWN ACCOUNT AND NOT WITH A VIEW TO THEIR
DISTRIBUTION WITHIN THE MEANING OF SECTION 2(11) OF THE SECURITIES ACT.

 

4.4                                 CERTAIN PROCEEDINGS.  THERE IS NO PENDING
PROCEEDING THAT HAS BEEN COMMENCED AGAINST BUYER OR STOCK BUYER AND THAT
CHALLENGES, OR MAY HAVE THE EFFECT OF PREVENTING, DELAYING, MAKING ILLEGAL, OR
OTHERWISE INTERFERING WITH, ANY OF THE CONTEMPLATED TRANSACTIONS.  TO BUYERS’
KNOWLEDGE, NO SUCH PROCEEDING HAS BEEN THREATENED.

 

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4.5                                 BROKERS OR FINDERS.  EXCEPT AS SET FORTH IN
SCHEDULE 4.5, BUYER AND STOCK BUYER AND THEIR RESPECTIVE OFFICERS AND AGENTS
HAVE INCURRED NO LIABILITY, CONTINGENT OR OTHERWISE, FOR BROKERAGE OR FINDERS’
FEES OR AGENTS’ COMMISSIONS OR OTHER SIMILAR PAYMENT IN CONNECTION WITH THIS
AGREEMENT AND WILL INDEMNIFY AND HOLD SELLER HARMLESS FROM ANY SUCH PAYMENT
ALLEGED TO BE DUE BY OR THROUGH BUYER OR STOCK BUYER AS A RESULT OF THE ACTION
OF BUYER OR STOCK BUYER OR ITS OFFICERS OR AGENTS.

 

4.6                                 BULK TRANSFER LAWS. BUYER HEREBY WAIVES
COMPLIANCE BY SELLER AND ITS AFFILIATES WITH THE PROVISIONS OF ANY SO-CALLED
“BULK TRANSFER LAW” OF ANY JURISDICTION IN CONNECTION WITH THE SALE OF THE
PURCHASED ASSETS TO BUYER.

 

ARTICLE V

INDEMNIFICATION; REMEDIES

 

5.1                                 SURVIVAL; RIGHT TO INDEMNIFICATION NOT
AFFECTED BY KNOWLEDGE.

 

(A)                                  ALL REPRESENTATIONS, WARRANTIES, COVENANTS,
AND OBLIGATIONS IN THIS AGREEMENT, THE DISCLOSURE SCHEDULE, AND ANY OTHER
CERTIFICATE OR DOCUMENT DELIVERED PURSUANT TO THIS AGREEMENT WILL SURVIVE THE
CLOSING.  THE RIGHT TO INDEMNIFICATION, PAYMENT OF DAMAGES OR OTHER REMEDY BASED
ON SUCH REPRESENTATIONS, WARRANTIES, COVENANTS, AND OBLIGATIONS WILL NOT BE
AFFECTED BY ANY INVESTIGATION CONDUCTED WITH RESPECT TO, OR ANY KNOWLEDGE
ACQUIRED (OR CAPABLE OF BEING ACQUIRED) AT ANY TIME, WHETHER BEFORE OR AFTER THE
EXECUTION AND DELIVERY OF THIS AGREEMENT OR THE CLOSING DATE, WITH RESPECT TO
THE ACCURACY OR INACCURACY OF OR COMPLIANCE WITH, ANY SUCH REPRESENTATION,
WARRANTY, COVENANT, OR OBLIGATION.  THE WAIVER OF ANY CONDITION BASED ON THE
ACCURACY OF ANY REPRESENTATION OR WARRANTY, OR ON THE PERFORMANCE OF OR
COMPLIANCE WITH ANY COVENANT OR OBLIGATION, WILL NOT AFFECT THE RIGHT TO
INDEMNIFICATION, PAYMENT OF DAMAGES, OR OTHER REMEDY BASED ON SUCH
REPRESENTATIONS, WARRANTIES, COVENANTS, AND OBLIGATIONS.

 

(B)                                 NOTWITHSTANDING ANYTHING CONTAINED IN THIS
AGREEMENT, THE RIGHTS OF BUYERS, SELLER AND/OR THEIR RESPECTIVE AFFILIATES TO
INDEMNIFICATION, REIMBURSEMENT OR ANY OTHER REMEDY BASED UPON ANY
REPRESENTATIONS, WARRANTIES, COVENANTS AND OBLIGATIONS SET FORTH IN THE
AGREEMENT SHALL NOT BE AFFECTED BY ANY INVESTIGATION (INCLUDING ANY
ENVIRONMENTAL INVESTIGATION OR ASSESSMENT) CONDUCTED WITH RESPECT TO, OR ANY
KNOWLEDGE ACQUIRED (OR CAPABLE OF BEING ACQUIRED) AT ANY TIME, WHETHER BEFORE OR
AFTER THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR THE CLOSING DATE, WITH
RESPECT TO THE ACCURACY OR INACCURACY OF OR COMPLIANCE WITH ANY SUCH
REPRESENTATION, WARRANTY, COVENANT OR OBLIGATION.  THE WAIVER OF ANY CONDITION
REQUIRING THE ACCURACY OF ANY REPRESENTATION OR WARRANTY, OR ON THE PERFORMANCE
OF OR COMPLIANCE WITH ANY COVENANT OR OBLIGATION, WILL NOT AFFECT THE RIGHT TO
INDEMNIFICATION, REIMBURSEMENT OR OTHER REMEDY BASED UPON SUCH REPRESENTATIONS
OR WARRANTIES’ INACCURACY AND/OR COVENANTS OR OBLIGATIONS’ NON-PERFORMANCE
AND/OR NON-COMPLIANCE.  EACH OF THESE REPRESENTATIONS, WARRANTIES, COVENANTS
AND/OR OBLIGATIONS ARE MEANT AS CONTRACTUAL RIGHTS OF BUYER AND SELLER.

 

5.2                                 INDEMNIFICATION AND PAYMENT OF DAMAGES BY
SELLER AND PARENT.  SELLER AND PARENT SHALL JOINTLY AND SEVERALLY INDEMNIFY,
DEFEND AND HOLD HARMLESS BUYERS, XCEL JAPAN, AND

 

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THEIR RESPECTIVE REPRESENTATIVES, STOCKHOLDERS, CONTROLLING PERSONS, AND
AFFILIATES (COLLECTIVELY, THE “INDEMNIFIED PERSONS”) FOR, AND WILL PAY TO THE
INDEMNIFIED PERSONS THE AMOUNT OF, ANY LOSS, LIABILITY, CLAIM, DAMAGE (INCLUDING
INCIDENTAL AND CONSEQUENTIAL DAMAGES), EXPENSE (INCLUDING COSTS OF INVESTIGATION
AND DEFENSE AND REASONABLE ATTORNEYS’ FEES) OR DIMINUTION OF VALUE, WHETHER OR
NOT INVOLVING A THIRD-PARTY CLAIM (COLLECTIVELY, “DAMAGES”), ARISING, DIRECTLY
OR INDIRECTLY, FROM OR IN CONNECTION WITH:

 

(A)                                  ANY BREACH OF ANY REPRESENTATION OR
WARRANTY MADE BY SELLER OR PARENT IN THIS AGREEMENT, THE DISCLOSURE SCHEDULE, OR
ANY OTHER CERTIFICATE OR DOCUMENT DELIVERED BY SELLER PURSUANT TO THIS
AGREEMENT;

 

(B)                                 ANY BREACH BY SELLER OR PARENT OF ANY
COVENANT OR OBLIGATION OF SELLER OR PARENT IN THIS AGREEMENT;

 

(C)                                  THE OPERATION OF THE DIGITRAN BUSINESS BY
SELLER PRIOR TO THE CLOSING;

 

(D)                                 ANY CLAIM BY ANY PERSON FOR BROKERAGE OR
FINDER’S FEES OR COMMISSIONS OR SIMILAR PAYMENTS BASED UPON ANY AGREEMENT OR
UNDERSTANDING ALLEGED TO HAVE BEEN MADE BY SUCH PERSON WITH SELLER (OR ANY
PERSON ACTING ON ITS BEHALF) IN CONNECTION WITH ANY OF THE CONTEMPLATED
TRANSACTIONS;

 

(E)                                  THE FAILURE OF SELLER TO ASSUME, PAY,
PERFORM AND DISCHARGE THE RETAINED LIABILITIES;

 

(F)                                    ANY FAILURE TO COMPLY WITH THE LAWS OF
ANY JURISDICTION RELATING TO BULK TRANSFERS WHICH MAY BE APPLICABLE IN
CONNECTION WITH THE TRANSFER OF THE PURCHASED ASSETS TO BUYER;

 

(G)                                 ANY LIABILITIES CAUSED BY ANY PRODUCT SOLD
OR DISTRIBUTED BY XCEL JAPAN PRIOR TO THE CLOSING, INCLUDING BUT NOT LIMITED TO,
LIABILITIES FOR DEATH, BODILY INJURY OR PROPERTY DAMAGE, AND ANY LIABILITY FOR
RECALLS OF ANY PRODUCTS PRODUCED SOLD OR DISTRIBUTED PRIOR TO THE CLOSING;

 

(H)                                 ANY LIABILITIES ATTRIBUTABLE TO (I) ANY AND
ALL TAXES (OR THE NON-PAYMENT THEREOF) OF XCEL JAPAN FOR ALL PERIODS ENDING ON
OR BEFORE THE CLOSING DATE, OR (II) ANY AND ALL TAXES OF ANY PERSON IMPOSED ON
XCEL JAPAN AS A TRANSFEREE OR SUCCESSOR, BY CONTRACT OR PURSUANT TO ANY LEGAL
REQUIREMENT, WHICH TAXES RELATE TO AN EVENT OR TRANSACTION OCCURRING BEFORE THE
CLOSING;

 

(I)                                     THE POTENTIAL XCEL JAPAN ASBESTOS
LIABILITY;

 

(J)                                     THE POTENTIAL RENT DISPUTE LIABILITY;

 

(K)                                  THE POTENTIAL AQMD PERMIT LIABILITY;

 

(L)                                     THE POTENTIAL SIERRA CIRCUITS LIABILITY;

 

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(M)                               THE POTENTIAL CLEAN ROOM LIABILITY;

 

(N)                                 THE POTENTIAL BKK ENVIRONMENTAL LIABILITY;

 

(O)                                 NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
SECTION 7.7, ANY LIABILITIES RELATED TO ACTIONS TAKEN BY GALLANT THEIN SERVING
AS STATUTORY AUDITOR OF XCEL JAPAN PRIOR TO THE CLOSING;

 

(P)                                 ANY LIABILITIES RELATED TO ANY CLAIM FOR ANY
TAX OBLIGATIONS OF SELLER TO THE STATE OF NEW JERSEY NOW OR HEREAFTER DETERMINED
TO BE DUE TO THE STATE OF NEW JERSEY; AND

 

(Q)                                 THE LOST STOCK CERTIFICATE FOR THE XCEL
JAPAN SHARES.

 

5.3                                 INDEMNIFICATION AND PAYMENT OF DAMAGES BY
BUYERS.  BUYERS SHALL JOINTLY AND SEVERALLY INDEMNIFY AND HOLD HARMLESS SELLER,
AND WILL PAY TO SELLER THE AMOUNT OF ANY DAMAGES ARISING, DIRECTLY OR
INDIRECTLY, FROM OR IN CONNECTION WITH:

 

(A)                                  ANY BREACH OF ANY REPRESENTATION OR
WARRANTY MADE BY BUYERS IN THIS AGREEMENT OR IN ANY CERTIFICATE DELIVERED BY
BUYERS PURSUANT TO THIS AGREEMENT;

 

(B)                                 ANY BREACH BY BUYERS OF ANY COVENANT OR
OBLIGATION OF BUYERS IN THIS AGREEMENT;

 

(C)                                  THE OPERATION OF THE DIGITRAN BUSINESS BY
BUYER OR ANY AFFILIATE OF BUYER AFTER THE CLOSING;

 

(D)                                 ANY CLAIM BY ANY PERSON FOR BROKERAGE OR
FINDER’S FEES OR COMMISSIONS OR SIMILAR PAYMENTS BASED UPON ANY AGREEMENT OR
UNDERSTANDING ALLEGED TO HAVE BEEN MADE BY SUCH PERSON WITH BUYER (OR ANY PERSON
ACTING ON ITS BEHALF) IN CONNECTION WITH ANY OF THE CONTEMPLATED TRANSACTIONS.

 

5.4                                 TIME LIMITATIONS.  NOTWITHSTANDING ANYTHING
IN THIS AGREEMENT TO THE CONTRARY, NEITHER SELLER NOR PARENT WILL HAVE ANY
LIABILITY FOR INDEMNIFICATION WITH RESPECT TO THE MATTERS DESCRIBED IN CLAUSE
(A) OR (B) OF SECTION 5.2 AND BUYERS WILL HAVE NO LIABILITY FOR INDEMNIFICATION
WITH RESPECT TO THE MATTERS DESCRIBED IN CLAUSE (A) OR (B) OF SECTION 5.3,
UNLESS ON OR BEFORE THE DATE EIGHTEEN (18) MONTHS AFTER THE CLOSING DATE (THE
“CLAIM DATE”), SUCH PARTY NOTIFIES THE OTHER PARTY OF A CLAIM SPECIFYING THE
FACTUAL BASIS OF THAT CLAIM IN REASONABLE DETAIL TO THE EXTENT THEN KNOWN;
PROVIDED, HOWEVER, THAT ANY CLAIM WITH RESPECT TO SECTION 3.3 (CAPITALIZATION),
3.6 (TITLE TO ASSETS) OR 3.11 (TAXES), OR ANY CLAIM OF FRAUD OR INTENTIONAL
MISREPRESENTATION, MAY BE MADE AT ANY TIME UP TO THE EXPIRATION OF ALL
APPLICABLE STATUTES OF LIMITATION AND ANY CLAIM BASED ON A BREACH OF THE
COVENANTS SET FORTH AT SECTIONS 7.1, 7.3, 7.4 OR 7.6 MAY BE MADE AT ANY TIME.
THERE IS NO TIME LIMITATION ON ANY CLAIM FOR INDEMNIFICATION WITH RESPECT TO THE
MATTERS DESCRIBED AT CLAUSES (B) THROUGH (Q) OF SECTION 5.2.

 

5.5                                 LIMITATIONS ON AMOUNT.  NOTWITHSTANDING
ANYTHING IN THIS AGREEMENT TO THE CONTRARY, SELLER AND PARENT WILL HAVE NO
LIABILITY FOR INDEMNIFICATION WITH RESPECT TO THE MATTERS

 

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DESCRIBED IN CLAUSE (A) OF SECTION 5.2 AND BUYERS WILL HAVE NO LIABILITY FOR
INDEMNIFICATION WITH RESPECT TO THE MATTERS DESCRIBED IN CLAUSE (A) OF
SECTION 5.3 (SUBJECT IN BOTH CASES TO THE LIMITATIONS IN SECTION 5.4) UNTIL ALL
CLAIMS FOR INDEMNIFICATION BY SUCH PARTY EXCEED ONE HUNDRED THOUSAND DOLLARS
($100,000) (THE “DEDUCTIBLE”).  ONCE THE AGGREGATE CLAIMS FOR INDEMNIFICATION BY
SUCH PARTY UNDER CLAUSE (A) OF SECTION 5.2 AND SECTION (A) OF SECTION 5.3, AS
APPLICABLE, EXCEED THE DEDUCTIBLE, THEN SUCH PARTY SHALL BE ENTITLED TO RECOVER
ONLY THE AMOUNT OF SUCH CLAIMS IN EXCESS OF THE DEDUCTIBLE; PROVIDED, HOWEVER,
THAT EXCEPT AS PROVIDED IN THE FOLLOWING SENTENCE, THE AGGREGATE LIABILITY FOR
INDEMNITY CLAIMS UNDER CLAUSE (A) OF SECTION 5.2 OTHER THAN CLAIMS WITH RESPECT
TO SECTION 3.3 (CAPITALIZATION), 3.6 (TITLE TO ASSETS) OR 3.11 (TAXES) (WHICH
SHALL BE LIMITED TO THE PURCHASE PRICE) SHALL NOT EXCEED $4,500,000 (THE
“LIABILITY CAP”) AND SHALL NOT BE SUBJECT TO THE DEDUCTIBLE.  NOTWITHSTANDING
THE FOREGOING, ANY CLAIM FOR INDEMNIFICATION UNDER THIS AGREEMENT RELATING TO
FRAUD OR INTENTIONAL MISREPRESENTATION OR WITH RESPECT TO THE MATTERS SET FORTH
IN CLAUSES (B) THROUGH (Q) OF SECTION 5.2 OR CLAUSES (B) THROUGH (D) OF
SECTION 5.3, AS APPLICABLE, SHALL NOT BE SUBJECT TO THE DEDUCTIBLE OR THE
LIABILITY CAP.

 

5.6                                 PROCEDURE FOR INDEMNIFICATION—THIRD-PARTY
CLAIMS.

 

(A)                                  PROMPTLY AFTER RECEIPT BY AN INDEMNIFIED
PARTY UNDER ARTICLE V OF NOTICE OF THE COMMENCEMENT OF ANY PROCEEDING AGAINST
IT, SUCH INDEMNIFIED PARTY WILL, IF A CLAIM IS TO BE MADE AGAINST AN
INDEMNIFYING PARTY UNDER SUCH SECTION, GIVE NOTICE TO THE INDEMNIFYING PARTY OF
THE COMMENCEMENT OF SUCH CLAIM, BUT THE FAILURE TO NOTIFY THE INDEMNIFYING PARTY
WILL NOT RELIEVE THE INDEMNIFYING PARTY OF ANY LIABILITY THAT IT MAY HAVE TO ANY
INDEMNIFIED PARTY, EXCEPT TO THE EXTENT THAT THE INDEMNIFYING PARTY DEMONSTRATES
THAT THE DEFENSE OF SUCH ACTION IS PREJUDICED BY THE INDEMNIFYING PARTY’S
FAILURE TO GIVE SUCH NOTICE.

 

(B)                                 IF ANY PROCEEDING REFERRED TO IN
SECTION 5.6(A) IS BROUGHT AGAINST AN INDEMNIFIED PARTY AND IT GIVES NOTICE TO
THE INDEMNIFYING PARTY OF THE COMMENCEMENT OF SUCH PROCEEDING, THE INDEMNIFYING
PARTY WILL, UNLESS THE CLAIM INVOLVES TAXES, BE ENTITLED TO PARTICIPATE IN SUCH
PROCEEDING AND, TO THE EXTENT THAT IT WISHES (UNLESS (I) THE INDEMNIFYING PARTY
IS ALSO A PARTY TO SUCH PROCEEDING AND THE INDEMNIFIED PARTY DETERMINES IN GOOD
FAITH THAT JOINT REPRESENTATION WOULD BE INAPPROPRIATE, OR (II) THE INDEMNIFYING
PARTY FAILS TO PROVIDE REASONABLE ASSURANCE TO THE INDEMNIFIED PARTY OF ITS
FINANCIAL CAPACITY TO DEFEND SUCH PROCEEDING AND PROVIDE INDEMNIFICATION WITH
RESPECT TO SUCH PROCEEDING), TO ASSUME THE DEFENSE OF SUCH PROCEEDING WITH
COUNSEL SATISFACTORY TO THE INDEMNIFIED PARTY AND, AFTER NOTICE FROM THE
INDEMNIFYING PARTY TO THE INDEMNIFIED PARTY OF ITS ELECTION TO ASSUME THE
DEFENSE OF SUCH PROCEEDING, THE INDEMNIFYING PARTY WILL NOT, AS LONG AS IT
DILIGENTLY CONDUCTS SUCH DEFENSE, BE LIABLE TO THE INDEMNIFIED PARTY UNDER THIS
ARTICLE V FOR ANY FEES OF OTHER COUNSEL OR ANY OTHER EXPENSES WITH RESPECT TO
THE DEFENSE OF SUCH PROCEEDING, IN EACH CASE SUBSEQUENTLY INCURRED BY THE
INDEMNIFIED PARTY IN CONNECTION WITH THE DEFENSE OF SUCH PROCEEDING, OTHER THAN
REASONABLE COSTS OF INVESTIGATION.  IF THE INDEMNIFYING PARTY ASSUMES THE
DEFENSE OF A PROCEEDING, (I) IT WILL BE CONCLUSIVELY ESTABLISHED FOR PURPOSES OF
THIS AGREEMENT THAT THE CLAIMS MADE IN THAT PROCEEDING ARE WITHIN THE SCOPE OF
AND SUBJECT TO INDEMNIFICATION; (II) NO COMPROMISE OR SETTLEMENT OF SUCH CLAIMS
MAY BE EFFECTED BY THE INDEMNIFYING PARTY WITHOUT THE

 

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INDEMNIFIED PARTY’S CONSENT UNLESS (A) THERE IS NO FINDING OR ADMISSION OF ANY
VIOLATION OF LEGAL REQUIREMENTS OR ANY VIOLATION OF THE RIGHTS OF ANY PERSON AND
NO EFFECT ON ANY OTHER CLAIMS THAT MAY BE MADE AGAINST THE INDEMNIFIED PARTY,
AND (B) THE SOLE RELIEF PROVIDED IS MONETARY DAMAGES THAT ARE PAID IN FULL BY
THE INDEMNIFYING PARTY; AND (III) THE INDEMNIFIED PARTY WILL HAVE NO LIABILITY
WITH RESPECT TO ANY COMPROMISE OR SETTLEMENT OF SUCH CLAIMS EFFECTED WITHOUT ITS
CONSENT.  IF NOTICE IS GIVEN TO AN INDEMNIFYING PARTY OF THE COMMENCEMENT OF ANY
PROCEEDING AND THE INDEMNIFYING PARTY DOES NOT, WITHIN TEN DAYS AFTER THE
INDEMNIFIED PARTY’S NOTICE IS GIVEN, GIVE NOTICE TO THE INDEMNIFIED PARTY OF ITS
ELECTION TO ASSUME THE DEFENSE OF SUCH PROCEEDING, THE INDEMNIFYING PARTY WILL
BE BOUND BY ANY DETERMINATION MADE IN SUCH PROCEEDING OR ANY COMPROMISE OR
SETTLEMENT EFFECTED BY THE INDEMNIFIED PARTY.

 

(C)                                  NOTWITHSTANDING THE FOREGOING, IF AN
INDEMNIFIED PARTY DETERMINES IN GOOD FAITH THAT THERE IS A REASONABLE
PROBABILITY THAT A PROCEEDING MAY ADVERSELY AFFECT IT OR ITS AFFILIATES OTHER
THAN AS A RESULT OF MONETARY DAMAGES FOR WHICH IT WOULD BE ENTITLED TO
INDEMNIFICATION UNDER THIS AGREEMENT, THE INDEMNIFIED PARTY MAY, BY NOTICE TO
THE INDEMNIFYING PARTY, ASSUME THE EXCLUSIVE RIGHT TO DEFEND, COMPROMISE, OR
SETTLE SUCH PROCEEDING, BUT THE INDEMNIFYING PARTY WILL NOT BE BOUND BY ANY
DETERMINATION OF A PROCEEDING SO DEFENDED OR ANY COMPROMISE OR SETTLEMENT
EFFECTED WITHOUT ITS CONSENT (WHICH MAY NOT BE UNREASONABLY WITHHELD).

 

5.7                                 PROCEDURE FOR INDEMNIFICATION—OTHER CLAIMS. 
A CLAIM FOR INDEMNIFICATION FOR ANY MATTER NOT INVOLVING A THIRD-PARTY CLAIM MAY
BE ASSERTED BY NOTICE TO THE PARTY FROM WHOM INDEMNIFICATION IS SOUGHT.

 

5.8                                 SOLE REMEDY.  FROM AND AFTER THE CLOSING,
THE REMEDIES PROVIDED IN THIS ARTICLE V SHALL BE THE SOLE REMEDY OF THE
INDEMNIFIED PERSONS AND SELLER FOR ANY CLAIM ARISING OUT OF THIS AGREEMENT AND
THE CONTEMPLATED TRANSACTIONS OR ANY LAW OR LEGAL THEORY APPLICABLE THERETO,
INCLUDING THE BREACH OF ANY REPRESENTATION, WARRANTY OR COVENANT CONTAINED IN
THIS AGREEMENT AND SCHEDULES TO THIS AGREEMENT; PROVIDED, HOWEVER, THAT NOTHING
CONTAINED IN THIS AGREEMENT SHALL LIMIT OR IMPAIR ANY RIGHT THAT ANY INDEMNIFIED
PERSON OR SELLER MAY HAVE TO SUE AND OBTAIN EQUITABLE RELIEF, INCLUDING SPECIFIC
PERFORMANCE AND OTHER INJUNCTIVE RELIEF OR ANY RIGHT OR REMEDY THAT ANY
INDEMNIFIED PERSON OR SELLER MAY HAVE AGAINST SELLER OR BUYER ON ACCOUNT OF
FRAUD.

 

5.9                                 INSURANCE AND THIRD PARTY RECOVERIES.  ANY
DAMAGES FOR WHICH INDEMNIFICATION IS PROVIDED TO ANY INDEMNIFIED PERSON OR
SELLER UNDER THIS ARTICLE V SHALL BE NET OF ANY AMOUNTS ACTUALLY RECOVERED BY AN
INDEMNIFIED PERSON OR SELLER FROM THIRD PARTIES (INCLUDING AMOUNTS ACTUALLY
RECOVERED UNDER INSURANCE POLICIES) WITH RESPECT TO SUCH DAMAGES AFTER HAVING
SUBTRACTED FROM THE AMOUNTS SO RECOVERED THE COSTS INCURRED BY AN INDEMNIFIED
PERSON OR SELLER IN PURSUING SUCH RECOVERY.

 

5.10                           TAX BENEFIT.  THE PARTIES AGREE TO TREAT ANY
PAYMENT MADE PURSUANT TO THIS ARTICLE V AS AN ADJUSTMENT TO THE PURCHASE PRICE
FOR FEDERAL, STATE AND LOCAL INCOME TAX PURPOSES.  IN THE EVENT THAT AN
INDEMNIFIED PERSON OR SELLER RECEIVES A TAX BENEFIT IN RESPECT TO ANY DAMAGES
FOR WHICH AN INDEMNIFICATION PAYMENT WOULD BE MADE HEREUNDER, SUCH

 

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INDEMNIFICATION PAYMENT SHALL BE CALCULATED NET OF ANY SUCH TAX BENEFIT (AFTER
CONSIDERING ANY TAX DETRIMENT FROM RECEIPT OF SUCH INDEMNIFICATION PAYMENT).

 

ARTICLE VI

TAX MATTERS

 

6.1                                 TAX RETURNS.

 

(A)                                  SELLER SHALL CAUSE TO BE PREPARED AND FILE
OR CAUSE TO BE FILED ALL TAX RETURNS FOR XCEL JAPAN FOR ALL PERIODS ENDING ON OR
PRIOR TO THE CLOSING DATE WHICH ARE REQUIRED TO BE FILED AFTER THE CLOSING
DATE.  SELLER SHALL PERMIT STOCK BUYER TO REVIEW AND APPROVE EACH SUCH TAX
RETURN DESCRIBED IN THE PRECEDING SENTENCE PRIOR TO FILING, WHICH APPROVAL SHALL
NOT BE UNREASONABLY WITHHELD.

 

(B)                                 SELLER SHALL CAUSE TO BE PREPARED AND FILE
OR CAUSE TO BE FILED ALL TAX RETURNS OF XCEL JAPAN FOR STRADDLE PERIODS.  SELLER
SHALL PERMIT STOCK BUYER TO REVIEW AND APPROVE EACH SUCH TAX RETURN DESCRIBED IN
THE PRECEDING SENTENCE PRIOR TO FILING, WHICH APPROVAL SHALL NOT BE UNREASONABLY
WITHHELD.

 

(C)                                  STOCK BUYER AND SELLER SHALL COOPERATE WITH
EACH OTHER IN CONNECTION WITH THE FILING OF ANY TAX RETURNS AND ANY AUDIT,
LITIGATION OR OTHER PROCEEDING WITH RESPECT TO TAXES.  STOCK BUYER AND SELLER
AGREE (I) TO RETAIN ALL BOOKS AND RECORDS WITH RESPECT TO TAX MATTERS PERTINENT
TO EACH OF SELLER AND XCEL JAPAN RELATING TO THE BUSINESS AND TO ANY TAXABLE
PERIOD BEGINNING BEFORE THE CLOSING DATE UNTIL THE EXPIRATION OF THE STATUTE OF
LIMITATIONS (AND, TO THE EXTENT NOTIFIED BY SELLER OR STOCK BUYER, ANY
EXTENSIONS OF THE STATUTE OF LIMITATIONS) OF THE RESPECTIVE TAXABLE PERIODS, AND
TO ABIDE BY ALL RECORD RETENTION AGREEMENTS ENTERED INTO WITH ANY TAXING
AUTHORITY, OR (II) TO GIVE THE OTHER PARTY REASONABLE WRITTEN NOTICE PRIOR TO
TRANSFERRING, DESTROYING OR DISCARDING ANY SUCH BOOKS AND RECORDS AND, IF ANY OF
THE OTHER PARTY SO REQUESTS, STOCK BUYER OR SELLER, AS THE CASE MAY BE, SHALL
ALLOW THE OTHER PARTY TO TAKE POSSESSION OF SUCH BOOKS AND RECORDS.

 

(D)                                 TO THE EXTENT STOCK BUYER DOES NOT APPROVE A
TAX RETURN PURSUANT TO SECTION 6.1(A) OR 6.1(B) AND SELLER DOES NOT AGREE TO THE
CHANGES SUGGESTED BY STOCK BUYER, THE DISPUTE SHALL BE SUBMITTED TO RSM
MCGLADREY (OR ITS INTERNATIONAL AFFILIATES) (THE “ARBITRATOR”), WITHIN FIVE
(5) BUSINESS DAYS OF THE DATE ON WHICH SELLER DOES NOT AGREE TO MAKE SUCH
CHANGES.  THE ARBITRATOR SHALL RESOLVE ANY DISPUTED ITEMS WITHIN FIFTEEN (15)
BUSINESS DAYS OF HAVING THE ITEM REFERRED TO IT (AND IN ANY CASE AT LEAST THREE
BUSINESS DAYS PRIOR TO THE TIME IN WHICH SUCH TAX RETURN MUST BE FILED (TAKING
INTO ACCOUNTS ALL EXTENSIONS THAT ARE AVAILABLE WITHOUT INCURRING PENALTIES OR
ADDITIONAL TAXES)) PURSUANT TO SUCH PROCEDURES AS IT MAY REQUIRE.  THE PARTIES
SHALL PROMPTLY ACT TO IMPLEMENT THE DECISION OF THE ARBITRATOR.  THE COSTS, FEES
AND EXPENSES OF THE ARBITRATOR SHALL BE BORNE EQUALLY BY SELLER AND STOCK BUYER
UNLESS THE ARBITRATOR DETERMINES THAT A PARTY’S POSITION WAS UNREASONABLE OR NOT
IN GOOD FAITH.

 

6.2                                 TRANSFER TAXES.  ALL EXCISE, SALES, USE,
VALUE ADDED, TRANSFER (INCLUDING REAL PROPERTY TRANSFER), STAMP, DOCUMENTARY,
FILING, RECORDATION, REGISTRATION AND OTHER SIMILAR TAXES,

 

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TOGETHER WITH ANY INTEREST, ADDITIONS, FINES, COSTS OR PENALTIES THEREON AND ANY
INTEREST IN RESPECT OF ANY ADDITIONS, FINES, COSTS OR PENALTIES, RESULTING
DIRECTLY FROM THE ACQUISITION OR IMPOSED IN CONNECTION WITH THIS AGREEMENT AND
THE TRANSACTION CONTEMPLATED HEREBY (THE “TRANSFER TAXES”) SHALL BE PAID BY
ONE-HALF BY BUYER AND ONE-HALF BY SELLER.

 

ARTICLE VII

POST-CLOSING COVENANTS

 

7.1                                 CONFIDENTIALITY.  AFTER THE CLOSING, SELLER
SHALL, AND SHALL CAUSE ITS AFFILIATES, TO HOLD IN CONFIDENCE AND NOT USE ANY
CONFIDENTIAL INFORMATION THAT AFTER CLOSING IS IN THE POSSESSION OF SELLER OR
ITS AFFILIATES CONCERNING THE BUSINESS, THE PURCHASED ASSETS, BUYER OR ANY
AFFILIATE OF BUYER, OR ANY INFORMATION REGARDING THE TERMS OF THIS AGREEMENT OR
ANY OTHER TRANSACTION DOCUMENT.  SELLER SHALL NOT RELEASE OR DISCLOSE ANY SUCH
INFORMATION TO ANY PERSON OTHER THAN BUYER AND ITS AUTHORIZED REPRESENTATIVES.
NOTWITHSTANDING THE FOREGOING, THE CONFIDENTIALITY OBLIGATIONS OF THIS
SECTION 7.1 SHALL NOT APPLY TO INFORMATION (A) THAT SELLER OR ITS AFFILIATES IS
COMPELLED TO DISCLOSE BY JUDICIAL OR ADMINISTRATIVE PROCESS, OR, IN THE OPINION
OF COUNSEL, BY OTHER MANDATORY LEGAL REQUIREMENTS, (B) THAT HAS BEEN DISCLOSED
IN THE PUBLIC FILINGS OF PARENT MADE WITH THE SECURITIES AND EXCHANGE COMMISSION
AND STATE SECURITIES LAWS ADMINISTRATORS, OR (C) PROVIDED TO PROFESSIONAL
ADVISORS OF SELLER.  NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, EACH PARTY
(AND EACH EMPLOYEE, REPRESENTATIVE, OR OTHER AGENT OF EACH PARTY) MAY DISCLOSE
TO ANY AND ALL PERSONS, WITHOUT LIMITATION OF ANY KIND, THE TAX TREATMENT AND
TAX STRUCTURE OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND ALL
MATERIALS OF ANY KIND (INCLUDING OPINIONS AND OTHER TAX ANALYSES) THAT ARE
PROVIDED TO EACH PARTY RELATING TO SUCH TAX TREATMENT AND TAX STRUCTURE (AS SUCH
TERMS ARE DEFINED IN TREASURY REGULATION SECTION 1.6011-4(C)).

 

7.2                                 MAINTENANCE OF, AND ACCESS TO, RECORDS.

 

(A)                                  BY SELLER.  AFTER THE CLOSING, SELLER SHALL
PROVIDE BUYERS WITH ACCESS (WITH AN OPPORTUNITY TO MAKE COPIES), DURING NORMAL
BUSINESS HOURS, AND UPON REASONABLE NOTICE, TO ANY RECORDS RELATING TO THE
BUSINESS WHICH ARE RETAINED BY SELLER.  SELLER SHALL PRESERVE AND MAINTAIN ANY
BOOKS AND RECORDS RELATING TO THE BUSINESS AND RETAINED BY IT FOR AT LEAST FIVE
YEARS AFTER THE CLOSING DATE.

 

(B)                                 BY BUYER.  FROM AND AFTER THE CLOSING,
BUYERS SHALL, WHENEVER REASONABLY REQUESTED BY SELLER (INCLUDING REASONABLE
PRIOR NOTICE TO BUYERS) AND DURING NORMAL BUSINESS HOURS, PERMIT SELLER OR ITS
REPRESENTATIVES TO HAVE ACCESS TO SUCH BUSINESS RECORDS (INCLUDING WITHOUT
LIMITATION COMPUTER FILES) TURNED OVER TO BUYERS PURSUANT TO THIS AGREEMENT AS
MAY BE REQUIRED BY SELLER IN CONNECTION WITH THE CLOSING OF SELLER’S BOOKS, THE
PREPARATION OF SELLER’S AUDITED STATEMENT OF PURCHASED ASSETS AND ASSUMED
LIABILITIES AS OF THE CLOSING DATE, ANY AUDIT OR INVESTIGATION BY ANY
GOVERNMENTAL AUTHORITY, OR ANY MATTER RELATING TO INSURANCE COVERAGE OR THIRD
PARTY CLAIMS, IN EACH SUCH CASE TO THE EXTENT RELATING TO THE OPERATION OF THE
BUSINESS PRIOR TO THE CLOSING.  BUYER SHALL, UPON NOT LESS THAN TWO (2) BUSINESS
DAYS PRIOR NOTICE BY SELLER TO, AND THE AGREEMENT (NOT TO BE UNREASONABLY
WITHHELD OR DELAYED) BY BUYERS, ALLOW SELLER REASONABLE ACCESS TO FORMER
EMPLOYEES OF SELLER OR EMPLOYEES OF BUYERS THAT ARE NOT

 

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FORMER EMPLOYEES OF SELLER, FOR THE PURPOSE OF ASSISTING SELLER IN CONNECTION
WITH ANY OF THE FOREGOING MATTERS.  BUYERS SHALL USE COMMERCIALLY REASONABLE
EFFORTS TO PRESERVE AND MAINTAIN SELLER’S PAYROLL RECORDS FOR EACH FISCAL YEAR
UNTIL THE EXPIRATION OF THE STATUTE OF LIMITATIONS (AND ANY WAIVERS OR
EXTENSIONS THEREOF) FOR TAX PURPOSES RELATING TO SUCH YEAR, AND ALL OTHER
RECORDS RELATING TO THE BUSINESS WHICH ARE PART OF THE PURCHASED ASSETS FOR AT
LEAST FIVE YEARS AFTER THE CLOSING DATE.

 

7.3                                 NON-COMPETITION.

 

(A)                                  PERIOD AND CONDUCT.  AS FURTHER
CONSIDERATION FOR THE PURCHASE AND SALE OF THE PURCHASED ASSETS AND THE XCEL
JAPAN SHARES (INCLUDING THE GOODWILL OF THE BUSINESS AS A GOING CONCERN), DURING
THE PERIOD COMMENCING ON THE CLOSING DATE, AND ENDING ON THE DATE WHICH IS FIVE
(5) YEARS THEREAFTER (THE “RESTRICTED PERIOD”), SELLER, PARENT AND THEIR
AFFILIATES SHALL NOT, IN ANY RESTRICTED TERRITORY, DIRECTLY OR INDIRECTLY:

 

(I)                                     ENGAGE IN ANY BUSINESS, ACTIVITY, OR
ENTERPRISE COMPETITIVE WITH OR SUBSTANTIALLY SIMILAR TO THE BUSINESS, INCLUDING,
WITHOUT LIMITATION, IN THE MANUFACTURE, PRODUCTION, DESIGN, ENGINEERING,
IMPORTATION, PURCHASE, MARKETING, SALE, DISTRIBUTION, RESEARCH OR DEVELOPMENT OF
ANY PRODUCTS, OR ENGAGE OR INVEST IN, OWN, MANAGE, OPERATE, FINANCE, CONTROL,
SOLICIT BUSINESS RELATED TO, OR PARTICIPATE IN THE OWNERSHIP, MANAGEMENT,
OPERATION, FINANCING, OR CONTROL OF, BE EMPLOYED BY, LEND ITS NAME OR ANY
SIMILAR NAME, OR LEND ITS OR HIS CREDIT TO, OR RENDER SERVICES OR ADVICE TO, ANY
PERSON ENGAGED IN ANY BUSINESS, ACTIVITY OR ENTERPRISE COMPETITIVE WITH OR
SUBSTANTIALLY SIMILAR TO THE BUSINESS INCLUDING, WITHOUT LIMITATION, IN THE
MANUFACTURE, PRODUCTION, DESIGN, ENGINEERING, IMPORTATION, PURCHASE, MARKETING,
SALE, DISTRIBUTION, RESEARCH OR DEVELOPMENT OF ANY PRODUCTS; PROVIDED, HOWEVER,
THAT IF SELLER’S SUBSIDIARY, XCEL POWER SYSTEMS, LTD. (“XPS”), CEASES TO HAVE A
DISTRIBUTOR AGREEMENT WITH BUYER AND XPS IS REQUESTED TO SUPPLY PRODUCTS WHICH
INCLUDE THE PRODUCTS, XPS SHALL HAVE THE RIGHT TO DISTRIBUTE SUCH PRODUCTS AFTER
FIRST OFFERING TO BUYER THE OPPORTUNITY TO SUPPLY SUCH PRODUCTS.

 

(II)                                  RECRUIT OR SOLICIT ANY PERSON WHO HAS BEEN
AN EMPLOYEE, REPRESENTATIVE, CONSULTANT OR AGENT OF BUYER OR FORMER EMPLOYEE OF
SELLER HIRED BY BUYER, TO TERMINATE HIS OR HER EMPLOYMENT WITH BUYER; OR

 

(III)                               SOLICIT, CALL UPON, OR ATTEMPT TO
COMMUNICATE WITH ANY CUSTOMER, FORMER CUSTOMER, OR PROSPECTIVE CUSTOMER OF BUYER
OR THE BUSINESS FOR THE PURPOSES OF MANUFACTURE, PRODUCTION, DESIGN,
ENGINEERING, IMPORTATION, PURCHASE, MARKETING, SALE, DISTRIBUTION, RESEARCH OR
DEVELOPMENT OF ANY PRODUCTS.

 

(B)                                 RESTRICTED TERRITORY.  THE “RESTRICTED
TERRITORY” INCLUDES ANYWHERE IN THE WORLD IN WHICH SELLER OR XCEL JAPAN HAS
CONDUCTED ANY ASPECT OF THE BUSINESS, AND ANYWHERE IN THE WORLD IN WHICH BUYER
CONDUCTS ITS BUSINESS (INCLUDING, WITHOUT LIMITATION, THE BUSINESS) HEREAFTER.

 

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(C)                                  CONDUCT OF BUYER’S BUSINESS AND OPERATIONS
POST-CLOSING.  SELLER ACKNOWLEDGES THAT (I) AFTER THE CLOSING, BUYERS INTEND TO
CONDUCT BUYERS’ BUSINESSES (INCLUDING, WITHOUT LIMITATION, THE BUSINESS)
THROUGHOUT THE RESTRICTED TERRITORY, AMONG OTHER PLACES, (II) A VERY SUBSTANTIAL
PORTION OF THE VALUE OF THE PURCHASED ASSETS AND THE XCEL JAPAN SHARES IS THE
GOODWILL THAT SELLER HAS BUILT UP IN THE RESTRICTED TERRITORY AND THE ABILITY OF
BUYERS (AS SUCCESSOR TO THE BUSINESS) AND BUYERS’ AFFILIATES TO EXPAND BUYERS’
BUSINESS WITHIN THE RESTRICTED TERRITORY AND (III) THAT BUYERS WOULD NOT BE
PURCHASING THE PURCHASED ASSETS AND THE XCEL JAPAN SHARES BUT FOR SUCH GOODWILL
AND ABILITY TO EXPAND.

 

(D)                                 REMEDIES.  BECAUSE A BREACH, OR FAILURE TO
COMPLY WITH, THIS SECTION 7.3 WILL CAUSE IRREPARABLE INJURY TO BUYERS FOR WHICH
THERE IS NO ADEQUATE REMEDY AT LAW AND THE EXACT AMOUNT OF WHICH WILL BE
DIFFICULT TO ASCERTAIN, IF SELLER OR ANY OF ITS AFFILIATES SHOULD IN ANY WAY
BREACH, OR FAIL TO COMPLY WITH, THE TERMS OF THIS SECTION 7.3, BUYERS SHALL BE
ENTITLED TO AN INJUNCTION RESTRAINING SUCH PERSON(S) FROM ANY SUCH BREACH OR
FAILURE IN ADDITION TO MONETARY DAMAGES.  ALL REMEDIES EXPRESSLY PROVIDED FOR
HEREIN ARE CUMULATIVE OF ANY AND ALL OTHER REMEDIES NOW EXISTING AT LAW OR IN
EQUITY, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW.  BUYERS SHALL, IN ADDITION
TO THE REMEDIES HEREIN PROVIDED, BE ENTITLED TO AVAIL ITSELF OF ALL SUCH OTHER
REMEDIES AS MAY NOW OR HEREAFTER EXIST AT LAW OR IN EQUITY FOR COMPENSATION, AND
FOR THE SPECIFIC ENFORCEMENT OF THE COVENANTS CONTAINED HEREIN WITHOUT THE
NECESSITY OF PROVING ACTUAL DAMAGES.  RESORT TO ANY REMEDY PROVIDED FOR
HEREUNDER OR PROVIDED FOR BY LAW SHALL NOT PRECLUDE OR BAR THE CONCURRENT OR
SUBSEQUENT EMPLOYMENT OF ANY OTHER APPROPRIATE REMEDY OR REMEDIES, OR PRECLUDE
THE RECOVERY BY BUYERS OF MONETARY DAMAGES AND COMPENSATION.

 

(E)                                  SEVERABILITY.  IF ANY PROVISION OF THIS
SECTION 7.3 SHALL FINALLY BE JUDICIALLY DETERMINED TO BE INVALID, INEFFECTIVE OR
UNENFORCEABLE, SUCH DETERMINATION SHALL APPLY ONLY IN THE JURISDICTION IN WHICH
SUCH ADJUDICATION IS MADE AND EVERY OTHER PROVISION OF THIS SECTION 7.3 SHALL
REMAIN IN FULL FORCE AND EFFECT.  THE INVALID, INEFFECTIVE OR UNENFORCEABLE
PROVISION SHALL, WITHOUT FURTHER ACTION BY THE PARTIES, BE AUTOMATICALLY
AMENDED, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, TO EFFECT THE ORIGINAL
PURPOSE AND INTENT OF THE INVALID, INEFFECTIVE OR UNENFORCEABLE PROVISION (AND
IF SUCH PROVISION GOVERNS THE DURATION OF THE RESTRICTED PERIOD OR GEOGRAPHIC
SCOPE OF THE RESTRICTED TERRITORY, SUCH PROVISION SHALL BE AMENDED TO REDUCE
SUCH DURATION OR SCOPE, AS APPLICABLE, AS MINIMALLY AS POSSIBLE SO THAT SUCH
PROVISION IS VALID, EFFECTIVE AND ENFORCEABLE FOR THE LONGEST PERIOD OF TIME AND
FULLEST GEOGRAPHIC AREA AS IS ADJUDGED PERMISSIBLE FOR SUCH PROVISION TO BE
VALID, EFFECTIVE AND ENFORCEABLE); PROVIDED, HOWEVER, THAT SUCH AMENDMENT SHALL
APPLY ONLY WITH RESPECT TO THE OPERATION OF SUCH PROVISION IN THE PARTICULAR
JURISDICTION IN WHICH SUCH ADJUDICATION IS MADE.

 

(F)                                    ACKNOWLEDGEMENT.  SELLER ACKNOWLEDGES
THAT THE DURATION OF THE RESTRICTED PERIOD, THE GEOGRAPHIC SCOPE OF THE
RESTRICTED TERRITORY, AND THE SCOPE OF RESTRICTED ACTIVITIES DESCRIBED IN
SECTION 7.3(A) ARE REASONABLE AND NECESSARY TO PROTECT THE LEGITIMATE BUSINESS
INTERESTS OF BUYER IN VIEW OF THE NATURE OF THE BUSINESS, THE NATURE OF THE
BUSINESSES IN WHICH BUYERS ARE ENGAGED, AND THE NATURE OF THE CONTEMPLATED
TRANSACTIONS.

 

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7.4                                 ACCOUNTS RECEIVABLE.  AFTER THE CLOSING,
BUYER SHALL HAVE THE RIGHT AND AUTHORITY TO COLLECT ALL ACCOUNTS RECEIVABLE
PURCHASED HEREUNDER AS PURCHASED ASSETS AND OTHER ITEMS TRANSFERRED AND ASSIGNED
BY SELLER HEREUNDER AS PURCHASED ASSETS, AND TO ENDORSE IN THE NAME OF SELLER AS
BUYER’S PROPERTY ANY CHECKS RECEIVED ON ACCOUNTS RECEIVABLE OR OTHER ITEMS. IF
SELLER OR ANY OF ITS AFFILIATES RECEIVES ON OR AFTER THE CLOSING DATE ANY
PAYMENT RELATING TO ANY ACCOUNT RECEIVABLE, SUCH PAYMENT SHALL BE THE PROPERTY
OF, AND SHALL BE FORWARDED AND REMITTED TO, BUYER.  SELLER WILL PROMPTLY ENDORSE
AND DELIVER TO BUYER ANY CASH, CHECKS OR OTHER DOCUMENTS RECEIVED BY OR MADE
PAYABLE TO SELLER ON ACCOUNT OF ANY SUCH ACCOUNT RECEIVABLE.  SELLER SHALL
ADVISE BUYER (PROMPTLY FOLLOWING SELLER’S BECOMING AWARE THEREOF) OF ANY
COUNTERCLAIMS OR SET-OFFS THAT MAY ARISE SUBSEQUENT TO THE CLOSING DATE WITH
RESPECT TO ANY ACCOUNT RECEIVABLE.

 

7.5                                 EMPLOYEE MATTERS.

 

(A)                                  EMPLOYEE BENEFITS.  SELLER SHALL RETAIN ALL
LIABILITIES AND OBLIGATIONS IN RESPECT OF ITS PAST, PRESENT AND FUTURE EMPLOYEES
OF THE DIGITRAN BUSINESS (AND, AS APPLICABLE, THEIR SPOUSE AND DEPENDENTS) UNDER
BENEFIT PLANS AND LEGAL REQUIREMENTS. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, BUYER SHALL HAVE NO LIABILITY OR OBLIGATION WHATSOEVER UNDER BENEFIT
PLANS OF THE DIGITRAN BUSINESS.

 

(B)                                 CONTINUING EMPLOYEES.  SELLER SHALL
TERMINATE ALL EMPLOYEES EMPLOYED IN THE DIGITRAN BUSINESS AS OF THE CLOSING
DATE.  BUYER SHALL OFFER EMPLOYMENT FROM AND AFTER THE CLOSING DATE TO ALL
EMPLOYEES LISTED ON SCHEDULE 7.5(B) (COLLECTIVELY, THE “CONTINUED EMPLOYEES”) ON
TERMS, IN BUYER’S OPINION, REASONABLY SIMILAR TO THE CONDITIONS OF EACH SUCH
EMPLOYEE’S EMPLOYMENT IN THE BUSINESS IMMEDIATELY PRIOR TO THE CLOSING DATE,
SUBJECT TO THE CONTINUED EMPLOYEES OBTAINING INSURANCE COVERAGE THROUGH COBRA
UNTIL SUCH TIME AS BUYER INSTITUTES ITS OWN MEDICAL COVERAGE FOR SUCH CONTINUED
EMPLOYEES.  IN NO EVENT SHALL BUYER BE LIABLE OR RESPONSIBLE FOR PAYING OR
PROVIDING ANY SEVERANCE BENEFITS TO ANY EMPLOYEE OR FORMER EMPLOYEE OF SELLER.

 

(C)                                  WARN ACT COMPLIANCE.  IF SELLER TAKES ANY
ACTION THAT COULD BE CONSTRUED AS A “PLANT CLOSING” OR “MASS LAYOFF”, OR THAT
RESULTS IN ANY EMPLOYEE RETAINED OR EMPLOYED SUFFERING OR DEEMING TO HAVE
SUFFERED ANY “EMPLOYMENT LOSS”, AS THOSE TERMS ARE DEFINED IN THE WARN ACT,
SELLER SHALL BE SOLELY RESPONSIBLE FOR PROVIDING ANY NOTICE REQUIRED BY THE WARN
ACT AND FOR MAKING PAYMENTS, IF ANY, WHICH MAY BE REQUIRED UNDER THE WARN ACT
FOR FAILURE TO PROVIDE APPROPRIATE NOTICE.

 

(D)                                 PAYMENT OF WAGES.  ON OR PRIOR TO THE
CLOSING DATE, SELLER SHALL BE RESPONSIBLE FOR MAKING ALL PAYMENTS TO EMPLOYEES
REQUIRED UNDER ANY FEDERAL, STATE OR LOCAL WAGE AND HOUR LAW, INCLUDING WITHOUT
LIMITATION THE PAYMENT OF ACCRUED WAGES AND VACATION TIME.

 

7.6                                 ELECTRONIC MAIL.  UNTIL THE DATE THREE
(3) MONTHS AFTER THE CLOSING DATE, SELLER SHALL AUTOMATICALLY FORWARD TO BUYER
ANY ELECTRONIC MAIL MESSAGE RELATING TO THE BUSINESS WHICH IS SENT TO AN
ELECTRONIC MAIL ADDRESS ENDING IN “@EMRISE.COM.”

 

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7.7                                 POST CLOSING GOVERNANCE.  ON THE CLOSING
DATE, BUYER SHALL CAUSE XCEL JAPAN TO APPOINT AT LEAST THREE DIRECTORS AND AT
LEAST ONE STATUTORY AUDITOR OF XCEL JAPAN AND APPLY FOR OFFICIAL REGISTRATION TO
SUCH EFFECT IN A LEGAL AND APPROPRIATE MANNER PURSUANT TO THE COMPANIES ACT OF
JAPAN AND RELATED LEGAL REQUIREMENTS.  BUYER AND XCEL JAPAN SHALL WAIVE ANY
CLAIM OR RIGHT AGAINST RESIGNING DIRECTORS AND STATUTORY AUDITORS AND RELEASE
THEM FROM ANY LIABILITIES THAT MAY ARISE OR BE REVEALED AFTER THE CLOSING.

 

7.8                                 ENVIRONMENTAL REPORT. WITHIN SIXTY (60) DAYS
AFTER THE CLOSING, SELLER SHALL, AT SELLER’S EXPENSE, ARRANGE FOR THE COMPLETION
OF A PHASE I ENVIRONMENTAL REPORT RELATED TO THE FACILITY AT 9654 HERMOSA
AVENUE, RANCHO CUCAMONGA, CALIFORNIA, WHICH SHALL BE CONDUCTED BY AN
ENVIRONMENTAL FIRM REASONABLY SATISFACTORY TO BUYER. ANY ENVIRONMENTAL HEALTH
AND SAFETY LIABILITIES DISCLOSED IN SUCH REPORT SHALL BE RETAINED LIABILITIES.

 

7.9                                 OFFSITE PURCHASE ASSETS.  SELLER SHALL USE
COMMERCIALLY REASONABLE EFFORTS TO DELIVER WITHIN THIRTY (30) DAYS AFTER THE
CLOSING LETTERS SIGNED BY ANY SUPPLIER OR OUTSIDE MANUFACTURER WHICH IS IN
POSSESSION OF ANY OFFSITE ASSETS, INCLUDING ANY MOLDS, TOOLING, DIES OR SIMILAR
ASSETS, WHICH SHALL CERTIFY THAT SUCH SUPPLIER OR OUTSIDE MANUFACTURER HAS NO
OWNERSHIP INTEREST, RIGHT OR TITLE IN AND TO SUCH OFFSITE ASSETS.

 

7.10                           OTHER INTELLECTUAL PROPERTY RIGHTS.  TO THE
EXTENT NOT CONVEYED TO BUYER UNDER THE TERMS OF THIS AGREEMENT, SELLER AND
PARENT HEREBY GRANT TO BUYER A PERPETUAL, ASSIGNABLE, WORLDWIDE, FULLY PAID UP
LICENSE, INCLUDING THE RIGHT TO GRANT SUBLICENSES, UNDER ANY INTELLECTUAL
PROPERTY ASSET REQUIRED FOR THE OPERATION OF THE DIGITRAN BUSINESS WHICH IS NOT
SET FORTH UNDER THE TERMS OF THIS AGREEMENT OR ON ANY SCHEDULE TO THIS
AGREEMENT, WHETHER PERSONALLY HELD OR HEREAFTER ACQUIRED BY SELLER OR PARENT, AS
WELL AS UNDER ANY TRADEMARKS, TO OPERATE THE DIGITRAN BUSINESS, INCLUDING TO
DEVELOP, MAKE, HAVE MADE USE, SELL, IMPORT, COPY, PERFORM, DISPLAY, PREPARE
DERIVATIVE WORKS OF, MARKET, DISTRIBUTE AND OTHERWISE EXPLOIT PRODUCTS OR
SERVICES IN CONNECTION WITH THE OPERATION OF THE DIGITRAN BUSINESS. SELLER AND
PARENT HEREBY IRREVOCABLY COVENANT NOT TO SUE BUYER OR ITS CUSTOMERS,
SUBLICENSEES, ASSIGNEES OR DISTRIBUTORS FOR VIOLATION OF SELLER’S OR PARENT’S
INTELLECTUAL PROPERTY RIGHTS IN CONNECTION WITH ANY SUCH USE OR EXPLOITATION OF
THE PURCHASED ASSETS OR ANY PRODUCTS OR SERVICES THAT EMBODY OR ARE DERIVED FROM
THE PURCHASED ASSETS.

 

7.11                           TRANSFER OF DIGITRAN LTD.  IF BUYER SO REQUESTS
WITHIN NINETY (90) DAYS AFTER THE CLOSING, SELLER SHALL EXECUTE AND DELIVER TO
BUYER SUCH OTHER DOCUMENTS AND DO SUCH OTHER ACTS AND THINGS AS BUYER MAY
REQUEST IN ORDER TO TRANSFER DIGITRAN LTD. TO BUYER.

 

7.12                           ACCOUNTS PAYABLE.  PROMPTLY AFTER THE CLOSING,
BUYER SHALL PAY ON BEHALF OF SELLER THE ACCOUNTS PAYABLE SET FORTH ON SCHEDULE
7.12 ATTACHED HERETO DESIGNATED TO BE PAID AT CLOSING (THE “CLOSING ACCOUNTS
PAYABLE”).  UNTIL ALL OF THE ACCOUNTS PAYABLE SET FORTH ON SCHEDULE 7.12 OTHER
THAN THE CLOSING ACCOUNTS PAYABLE (THE “REMAINING ACCOUNTS PAYABLE”) ARE PAID IN
FULL, ON THE FIRST DAY OF EACH WEEK AFTER THE CLOSING BUYER SHALL PROVIDE TO
SELLER (I) A WRITTEN STATEMENT SUMMARIZING ALL REMAINING ACCOUNTS PAYABLE WHICH
WILL COME DUE DURING THE FOLLOWING WEEK; (II) COPIES OF INVOICES RELATED TO SUCH
REMAINING ACCOUNTS PAYABLE AND (III) A COPY OF THE ACCOUNTS PAYABLE AGING REPORT
ON WHICH THE REMAINING ACCOUNTS PAYABLE TO BE PAID ARE HIGHLIGHTED.  WITHIN TWO
(2) BUSINESS DAYS OF RECEIPT OF SUCH STATEMENT, SELLER SHALL PAY TO

 

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BUYER AN AMOUNT EQUAL TO THE AGGREGATE AMOUNT OF ALL REMAINING ACCOUNTS PAYABLE
ON SUCH REPORT WHICH COME DUE DURING THE FOLLOWING WEEK.  PROMPTLY UPON RECEIPT
OF SUCH AMOUNT, BUYER SHALL PAY ALL SUCH REMAINING ACCOUNTS PAYABLE ON BEHALF OF
SELLER.  NOTWITHSTANDING THE FOREGOING, SUCH REMAINING ACCOUNTS PAYABLE SHALL
REMAIN RETAINED LIABILITIES.

 

7.13                           RECONCILIATION OF FINANCED EQUIPMENT.  WITHIN TEN
(10) DAYS AFTER THE CLOSING, SELLER SHALL DETERMINE ALL AMOUNTS OWING ON THE
EQUIPMENT LOANS AND LEASES WHICH RELATE TO THE PERIOD PRIOR TO THE CLOSING,
INCLUDING BUT NOT LIMITED TO ANY PENALTIES, INTEREST AND PRINCIPAL, AND SHALL
REMIT SUCH AMOUNT TO BUYER.

 

7.14                           DELIVERY OF DOCUMENTS REGARDING XCEL JAPAN
SHARES.  SELLER REPRESENTS AND WARRANTS THAT IT HAS DELIVERED OR CAUSED TO BE
DELIVERED ALL DOCUMENTS FILED BY XCEL JAPAN WITH THE LEGAL AFFAIRS BUREAU
RELATING TO THE CONVERSION OF XCEL JAPAN TO A “NON-SHARE CERTIFICATE ISSUING
COMPANY” AND RECEIPT FROM THE LEGAL AFFAIRS BUREAU ACKNOWLEDGING THAT IT HAS
RECEIVED THESE DOCUMENTS FOR FILING.  TO THE EXTENT THAT ANY SUCH DOCUMENTS HAVE
NOT BEEN DELIVERED PRIOR TO THE CLOSING, SELLER SHALL USE ITS BEST EFFORTS TO
DELIVER SUCH DOCUMENTS TO BUYER PROMPTLY AFTER THE CLOSING.

 

ARTICLE VIII

GENERAL PROVISIONS

 

8.1                                 EXPENSES.  BUYERS AND SELLER SHALL BEAR AND
PAY ALL COSTS AND EXPENSES (INCLUDING LEGAL AND ACCOUNTANTS’ FEES AND EXPENSES
AND BROKER FEES) INCURRED BY SUCH PARTY IN CONNECTION WITH THIS AGREEMENT AND
THE CONTEMPLATED TRANSACTIONS.  IN THE EVENT OF TERMINATION OF THIS AGREEMENT,
THE OBLIGATION OF EACH PARTY TO PAY ITS OWN EXPENSES WILL BE SUBJECT TO ANY
RIGHTS OF SUCH PARTY ARISING FROM A BREACH OF THIS AGREEMENT BY ANOTHER PARTY.

 

8.2                                 PUBLIC ANNOUNCEMENTS.  WITHOUT THE PRIOR
WRITTEN CONSENT OF THE OTHER PARTY (WHICH SHALL NOT BE UNREASONABLY WITHHELD),
NEITHER BUYER NOR SELLER NOR ANY OF THEIR RESPECTIVE SUBSIDIARIES, AFFILIATES,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR SHAREHOLDERS SHALL, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE OTHER, MAKE ANY PUBLIC STATEMENT OR ANNOUNCEMENT OR ANY
RELEASE TO TRADE PUBLICATIONS OR THROUGH THE PRESS OR OTHERWISE, OR MAKE ANY
STATEMENT TO ANY THIRD PARTY WITH RESPECT TO THE CONTEMPLATED TRANSACTIONS
(INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO THE ENTERING INTO OF THIS
AGREEMENT AND THE TERMS HEREOF) EXCEPT AS MAY BE NECESSARY TO COMPLY WITH THE
REQUIREMENTS OF ANY LAW, GOVERNMENTAL ORDER OR REGULATION, STOCK EXCHANGE
RULE OR REGULATION OR LEGAL PROCEEDING, AND THEN ONLY AFTER NOTICE TO THE OTHER
PARTY; PROVIDED, HOWEVER, THAT EITHER PARTY MAY ISSUE A PRESS RELEASE WHICH
CONTAINS ONLY SUCH INFORMATION WHICH HAS BEEN INCLUDED IN A PRIOR PRESS RELEASE
ISSUED BY EITHER PARTY IN ACCORDANCE WITH THIS SECTION 8.2.

 

8.3                                 NOTICES.  ALL NOTICES, CONSENTS, WAIVERS,
AND OTHER COMMUNICATIONS UNDER THIS AGREEMENT MUST BE IN WRITING AND WILL BE
DEEMED TO HAVE BEEN DULY GIVEN WHEN (A) DELIVERED BY HAND (WITH WRITTEN
CONFIRMATION OF RECEIPT), (B) SENT BY FACSIMILE (WITH WRITTEN CONFIRMATION OF
RECEIPT), PROVIDED THAT A COPY IS MAILED BY REGISTERED MAIL, RETURN RECEIPT
REQUESTED, OR (C) WHEN RECEIVED BY THE ADDRESSEE, IF SENT BY A NATIONALLY
RECOGNIZED OVERNIGHT DELIVERY SERVICE (RECEIPT REQUESTED), IN EACH CASE TO THE
APPROPRIATE ADDRESSES AND FACSIMILE NUMBERS SET FORTH BELOW (OR TO

 

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SUCH OTHER ADDRESSES AND FACSIMILE NUMBERS AS A PARTY MAY DESIGNATE BY NOTICE TO
THE OTHER PARTIES):

 

Buyers:                                                                                                      
c/o Electro Switch Corp.
775-1 Pleasant Street
Weymouth, MA  02189-2301
Attention:  Robert M. Pineau
Phone:  (781) 335-1195
Fax:  (781) 335-1288

 

with a copy to (which does not constitute notice):

 

Ottenberg & Dunkless
101 Arch Street
Boston, MA  02110
Attention:  Robert Dunkless, Esq.
Phone:  (617) 342-8600
Fax:  (617) 342-7525

 

Seller:                                                                                                               
EMRISE Electronics Corporation
9485 Haven Avenue, Suite 100
Rancho Cucamonga, CA  91730
Attention:  Carmine T. Oliva
Telephone:  (909) 987-9220
Facsimile:  (909) 354-3568

 

with a copy to (which does not constitute notice):

 

Rutan & Tucker, LLP
611 Anton Boulevard, Suite 1400
Costa Mesa, CA 926126
Attention: Larry A. Cerutti, Esq.
Phone:  (714) 641-3450
Fax: (714) 556-9035

 

8.4                                 GOVERNING LAW; JURISDICTION; SERVICE OF
PROCESS.  THIS AGREEMENT WILL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.  ANY ACTION OR PROCEEDING SEEKING
TO ENFORCE ANY PROVISION OF, OR BASED ON ANY RIGHT ARISING OUT OF, THIS
AGREEMENT MAY BE BROUGHT AGAINST ANY OF THE PARTIES IN THE DELAWARE COURT OF
CHANCERY LOCATED IN NEW CASTLE COUNTY, OR, IF IT HAS OR CAN ACQUIRE
JURISDICTION, IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE,
AND EACH OF THE PARTIES CONSENTS TO THE JURISDICTION OF SUCH COURTS (AND OF THE
APPROPRIATE APPELLATE COURTS) IN ANY SUCH ACTION OR PROCEEDING AND WAIVES ANY
OBJECTION TO VENUE LAID THEREIN.  PROCESS IN ANY ACTION OR PROCEEDING REFERRED
TO IN THE PRECEDING SENTENCE MAY BE SERVED ON ANY PARTY ANYWHERE IN THE WORLD.

 

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8.5                                 FURTHER ASSURANCES.  THE PARTIES AGREE
(A) TO FURNISH UPON REQUEST TO EACH OTHER SUCH FURTHER INFORMATION, (B) TO
EXECUTE AND DELIVER TO EACH OTHER SUCH OTHER DOCUMENTS, AND (C) TO DO SUCH OTHER
ACTS AND THINGS, ALL AS THE OTHER PARTY MAY REASONABLY REQUEST FOR THE PURPOSE
OF CARRYING OUT THE INTENT OF THIS AGREEMENT AND THE DOCUMENTS REFERRED TO IN
THIS AGREEMENT.

 

8.6                                 WAIVER.  THE RIGHTS AND REMEDIES OF THE
PARTIES ARE CUMULATIVE AND NOT ALTERNATIVE.  NEITHER THE FAILURE NOR ANY DELAY
BY ANY PARTY IN EXERCISING ANY RIGHT, POWER, OR PRIVILEGE UNDER THIS AGREEMENT
OR THE DOCUMENTS REFERRED TO IN THIS AGREEMENT WILL OPERATE AS A WAIVER OF SUCH
RIGHT, POWER, OR PRIVILEGE, AND NO SINGLE OR PARTIAL EXERCISE OF ANY SUCH RIGHT,
POWER, OR PRIVILEGE WILL PRECLUDE ANY OTHER OR FURTHER EXERCISE OF SUCH RIGHT,
POWER, OR PRIVILEGE OR THE EXERCISE OF ANY OTHER RIGHT, POWER, OR PRIVILEGE.  TO
THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, (A) NO CLAIM OR RIGHT ARISING
OUT OF THIS AGREEMENT OR THE DOCUMENTS REFERRED TO IN THIS AGREEMENT CAN BE
DISCHARGED BY ONE PARTY, IN WHOLE OR IN PART, BY A WAIVER OR RENUNCIATION OF THE
CLAIM OR RIGHT UNLESS IN WRITING SIGNED BY THE OTHER PARTY; (B) NO WAIVER THAT
MAY BE GIVEN BY A PARTY WILL BE APPLICABLE EXCEPT IN THE SPECIFIC INSTANCE FOR
WHICH IT IS GIVEN; AND (C) NO NOTICE TO OR DEMAND ON ONE PARTY WILL BE DEEMED TO
BE A WAIVER OF ANY OBLIGATION OF SUCH PARTY OR OF THE RIGHT OF THE PARTY GIVING
SUCH NOTICE OR DEMAND TO TAKE FURTHER ACTION WITHOUT NOTICE OR DEMAND AS
PROVIDED IN THIS AGREEMENT OR THE DOCUMENTS REFERRED TO IN THIS AGREEMENT.

 

8.7                                 ENTIRE AGREEMENT AND MODIFICATION.  THIS
AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS BETWEEN THE PARTIES WITH RESPECT TO
ITS SUBJECT MATTER AND CONSTITUTES (ALONG WITH THE DOCUMENTS REFERRED TO IN THIS
AGREEMENT) A COMPLETE AND EXCLUSIVE STATEMENT OF THE TERMS OF THE AGREEMENT
BETWEEN THE PARTIES WITH RESPECT TO ITS SUBJECT MATTER.  THIS AGREEMENT MAY NOT
BE AMENDED EXCEPT BY A WRITTEN AGREEMENT EXECUTED BY THE PARTY TO BE CHARGED
WITH THE AMENDMENT.

 

8.8                                 DISCLOSURE SCHEDULE.

 

(A)                                  THE DISCLOSURES IN THE DISCLOSURE SCHEDULE,
AND THOSE IN ANY SUPPLEMENT THERETO, MUST RELATE ONLY TO THE REPRESENTATIONS AND
WARRANTIES IN THE SECTION OF THE AGREEMENT TO WHICH THEY EXPRESSLY RELATE AND
NOT TO ANY OTHER REPRESENTATION OR WARRANTY IN THIS AGREEMENT.

 

(B)                                 IN THE EVENT OF ANY INCONSISTENCY BETWEEN
THE STATEMENTS IN THE BODY OF THIS AGREEMENT AND THOSE IN THE DISCLOSURE
SCHEDULE (OTHER THAN AN EXCEPTION EXPRESSLY SET FORTH AS SUCH IN THE DISCLOSURE
SCHEDULE WITH RESPECT TO A SPECIFICALLY IDENTIFIED REPRESENTATION OR WARRANTY),
THE STATEMENTS IN THE BODY OF THIS AGREEMENT WILL CONTROL.

 

8.9                                 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY
RIGHTS.  NEITHER PARTY MAY ASSIGN ANY OF ITS RIGHTS UNDER THIS AGREEMENT WITHOUT
THE PRIOR CONSENT OF THE OTHER PARTIES, WHICH WILL NOT BE UNREASONABLY WITHHELD,
EXCEPT THAT BUYER MAY ASSIGN ANY OF ITS RIGHTS UNDER THIS AGREEMENT TO ANY
SUBSIDIARY OF BUYER.  SUBJECT TO THE PRECEDING SENTENCE, THIS AGREEMENT WILL
APPLY TO, BE BINDING IN ALL RESPECTS UPON, AND INURE TO THE BENEFIT OF THE
SUCCESSORS AND PERMITTED ASSIGNS OF THE PARTIES.  NOTHING EXPRESSED OR REFERRED
TO IN THIS AGREEMENT WILL BE CONSTRUED TO GIVE ANY PERSON OTHER THAN THE PARTIES
TO THIS AGREEMENT ANY LEGAL OR EQUITABLE RIGHT, REMEDY, OR CLAIM UNDER OR WITH
RESPECT TO THIS AGREEMENT OR ANY PROVISION OF THIS AGREEMENT.  THIS

 

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AGREEMENT AND ALL OF ITS PROVISIONS AND CONDITIONS ARE FOR THE SOLE AND
EXCLUSIVE BENEFIT OF THE PARTIES TO THIS AGREEMENT AND THEIR SUCCESSORS AND
ASSIGNS.

 

8.10                           SEVERABILITY.  IF ANY PROVISION OF THIS AGREEMENT
IS HELD INVALID OR UNENFORCEABLE BY ANY COURT OF COMPETENT JURISDICTION, THE
OTHER PROVISIONS OF THIS AGREEMENT WILL REMAIN IN FULL FORCE AND EFFECT.  ANY
PROVISION OF THIS AGREEMENT HELD INVALID OR UNENFORCEABLE ONLY IN PART OR DEGREE
WILL REMAIN IN FULL FORCE AND EFFECT TO THE EXTENT NOT HELD INVALID OR
UNENFORCEABLE.

 

8.11                           SECTION HEADINGS, CONSTRUCTION.  THE HEADINGS OF
ARTICLES AND SECTIONS IN THIS AGREEMENT ARE PROVIDED FOR CONVENIENCE ONLY AND
WILL NOT AFFECT ITS CONSTRUCTION OR INTERPRETATION.  ALL REFERENCES TO “ARTICLE”
OR “ARTICLES” AND “SECTION” OR “SECTIONS” REFER TO THE CORRESPONDING ARTICLE OR
ARTICLES AND SECTION OR SECTIONS OF THIS AGREEMENT.  ALL WORDS USED IN THIS
AGREEMENT WILL BE CONSTRUED TO BE OF SUCH GENDER OR NUMBER AS THE CIRCUMSTANCES
REQUIRE.  UNLESS OTHERWISE EXPRESSLY PROVIDED, THE WORD “INCLUDING” DOES NOT
LIMIT THE PRECEDING WORDS OR TERMS.

 

8.12                           TIME OF ESSENCE.  WITH REGARD TO ALL DATES AND
TIME PERIODS SET FORTH OR REFERRED TO IN THIS AGREEMENT, TIME IS OF THE ESSENCE.

 

8.13                           SPECIFIC PERFORMANCE.  ALL OF THE PARTIES
ACKNOWLEDGE AND AGREE THAT THE OTHER PARTY WOULD BE DAMAGED IRREPARABLY IN THE
EVENT ANY OF THE PROVISIONS OF THIS AGREEMENT ARE NOT PERFORMED IN ACCORDANCE
WITH THEIR SPECIFIC TERMS OR OTHERWISE ARE BREACHED.  ACCORDINGLY, ALL OF THE
PARTIES AGREE THAT THE OTHER PARTY SHALL BE ENTITLED TO AN INJUNCTION OR
INJUNCTIONS TO PREVENT BREACHES OF THE PROVISIONS OF THIS AGREEMENT AND TO
ENFORCE SPECIFICALLY THIS AGREEMENT AND THE TERMS AND PROVISIONS HEREOF IN ANY
ACTION INSTITUTED IN ANY COURT OF THE UNITED STATES OR ANY STATE THEREOF HAVING
JURISDICTION OVER THE PARTIES AND THE MATTER IN ADDITION TO ANY OTHER REMEDY.

 

8.14                           COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN
ONE OR MORE COUNTERPARTS, EACH OF WHICH WILL BE DEEMED TO BE AN ORIGINAL COPY OF
THIS AGREEMENT AND ALL OF WHICH, WHEN TAKEN TOGETHER, WILL BE DEEMED TO
CONSTITUTE ONE AND THE SAME AGREEMENT.  FACSIMILE SIGNATURES SHALL BE DEEMED
ORIGINAL SIGNATURES.

 

[Signature page follows.]

 

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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first written above.

 

BUYER:

ELECTRO SWITCH CORP., a Delaware corporation

 

 

 

 

 

By:

/s/ Robert M. Pineau

 

Name:

Robert M. Pineau

 

Its:

 

 

 

 

 

STOCK BUYER:

ESC WORLDWIDE, INC., a Massachusetts corporation

 

 

 

 

 

By:

/s/ Robert M. Pineau

 

Name:

Robert M. Pineau

 

Its:

 

 

 

 

 

SELLER:

EMRISE ELECTRONICS CORPORATION, a New Jersey corporation

 

 

 

 

 

By:

/s/ Carmine T. Oliva

 

Name:

Carmine T. Oliva

 

Its:

 

 

 

 

 

PARENT:

EMRISE CORPORATION, a Delaware corporation

 

 

 

 

 

By:

/s/ Carmine T. Oliva

 

Name:

Carmine T. Oliva

 

Its:

 

 

[Signature page to Asset and Stock Purchase Agreement]

 

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